I. Basic Due Process Takings Principles
A. Analysis of Types of Zoning Claims
A Brief Description of the Six Categories of Federal Zoning Claims
- Just compensation takings claim. A plaintiff claims that the zoning applied to its land constitutes a taking of its property without just compensation in contravention of the Fifth Amendment, the remedy sought being just compensation. Penn. Coal Co. v. Mahon, 260 U.S. 393 (1922); Penn. Cent. Transp. Co. v. City of New York, 438 U.S. 104 (1978).
- Due process/just compensation takings claim. A plaintiff claims that the zoning applied to its property goes too far and destroys the value of its property to such an extent that it amounts to a taking by eminent domain without due process of law. The remedy usually sought is invalidation of the zoning regulation. Nollan v. Cal. Coastal Comm’n, 483 U.S. 825, 834 (1987).
- Arbitrary and capricious substantive due process claim. A plaintiff claims that the zoning regulation is arbitrary and capricious in that it does not bear a substantial relation to the public health, safety, morals or general welfare. Two subcategories may be identified: (a) facial and (b) as applied. Per the Tenth Circuit, see Norton v. Village of Corrales, 103 F.3d 928, 933 (10th Cir. 1996), the Supreme Court has narrowed the scope of substantive due process protection in the zoning context so that such a claim can survive only if the alleged purpose behind the state action has no conceivable rational relationship to the exercise of the state’s traditional police power through zoning. In short, the doctrine of substantive due process is a constitutionally imposed limitation, which is intended only to prevent the government from abusing its power, or employing it as an instrument of oppression. Id. at 932; see also Corn v. City of Lauderdale Lakes, 997 F.2d 1369, 1374 (11th Cir.1993) (“First, it must be determined whether there has been a deprivation of a federal constitutionally protected interest, and secondly, whether the deprivation, if any, is the result of an abuse of governmental power sufficient to raise an ordinary tort to the stature of a constitutional violation.”) (cert. denied, 511 U.S. 1018 (1994)).
- Equal protection claim. A plaintiff claims that the zoning regulation is directed at a suspect class, invokes strict scrutiny, or results in mere economic discrimination. Village of Euclid v. Ambler Realty Co., 272 U.S. 365 (1926); Village of Bell Terre v. Boraas, 416 U.S. 1 (1994); Village of Willowbrook v. Olech, 528 U.S. 562 (2000).
- Procedural due process claim. A plaintiff claims deprivation of procedural due process. Nasierowski Bros. Inv. Co. v. City of Sterling Heights, 949 F.2d 890, 893 (6th Cir.1991); Harris v. County of Riverside, 904 F.2d 497 (9th Cir. 1989); Moreland Properties, LLC v. City of Thornton, 559 F.Supp.2d 1133 (D. Colo. 2008). Note that “[a]ctions that violate state law are properly challenged in state courts…[t]he legality of a zoning decision under applicable state law is not determinative of whether the decision violated federal substantive law.” Sylvia Dev. Corp. v. Calvert County, 48 F.3d 810, 829 (4th Cir. 1995); Norton, 103 F.3d 928.
- First Amendment claim. A plaintiff claims that a First Amendment right such as freedom of speech or religion is violated by the zoning ordinance. Young v. American Mini Theatres, Inc., 427 U.S. 50 (1976).
Application of Federal Claims to States
Each of the claims set out above apply to the states through the incorporation of the Due Process Clause of the Fourteenth Amendment. 42 U.S.C. §1983 is a vehicle with which to enforce the Fourteenth Amendment. 42 U.S.C. §1983 provides that:
Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State … subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress.
42 U.S.C. §1983 entitles a plaintiff to attorney fees in the event it succeeds on the merits.
The Many Meanings of Substantive Due Process
Although the term “substantive due process” is used in a variety of contexts in modern constitutional discussion, it is possible to state a general definition:
“The doctrine that governmental deprivations of life, liberty or property are subject to limitations regardless of the adequacy of the procedures employed has come to be known as substantive due process.”
Some of the many contexts in which the term “substantive due process” is used are:
- Application of one of the rights enumerated in the United States Constitution, such as the First Amendment, to a state.
- Application of an unenumerated right in the United States Constitution to a state, such as the right to live together as a family.
- An action of state or local government that “shocks the conscience” of the federal court may violate substantive due process. “[A]pplying the “shock the conscience” test in an area other than excessive force … is problematic.”
- The right not to be subject to “arbitrary or capricious” action by a state either by legislative or administrative action is commonly referred to as a “substantive due process right.” The United States Supreme Court has explicitly observed that citizens have a substantive due process right not to be subjected to arbitrary or irrational zoning decisions. Village of Arlington Heights v. Metropolitan Hous. Dev. Corp., 429 U.S. 252, 263 (1977).
Procedural Due Process Compared with Substantive Due Process
The Fourteenth Amendment states that no state shall “deprive any person of … property[ ] without due process of law.” U.S. CONST. amend. XIV, § 1. “Procedural due process ensures the state will not deprive a party of property without engaging fair procedures to reach a decision, while substantive due process ensures the state will not deprive a party of property for an arbitrary reason regardless of the procedures used to reach that decision.” Hyde Park Co. v. Santa Fe City Council, 226 F.3d 1207, 1210 (10th Cir. 2000). To establish a procedural due process violation, a plaintiff must first establish that it has been deprived of a constitutionally protected property interest. See Boutwell v. Keating, 399 F.3d 1203, 1211 (10th Cir. 2005). “To prevail on either a procedural or substantive due process claim, a plaintiff must first establish that a defendant’s actions deprived plaintiff of a protectible property interest.” Id.
B. Principles Applicable to Federal Zoning Claims
The difference between the finality requirements for a regulatory takings claim under the Fifth and Fourteenth Amendments is best illustrated by Nasierowski: The district court’s rejection of Nasierowski’s procedural due process claim for failure to exhaust his administrative remedies was premised upon the Supreme Court’s decision in Williamson County Regional Planning Comm’n v. Hamilton Bank, 473 U.S. 172 (1985). In Williamson, the Court resolved that a regulatory taking claim under the Fifth and Fourteenth amendments is not ripe for adjudication until the aggrieved landowner has “obtained a final decision regarding how it will be allowed to develop its property.” Id. at 190. Thus, a takings claim cannot be adjudicated in federal court until the plaintiff has failed in his or her efforts to obtain a use variance from the appropriate local regulatory body.
A §1983 claim is ripe once the plaintiff can show “that the state deprived him of his property, and that the state refused to compensate him for his loss.” Miller v. Campbell County, 945 F.2d 348, 352 (10th Cir. 1991).
Strict Property Rights Test
The Tenth Circuit imposes a strict property right test similar to the Second Circuit. If that test is met, it will consider whether the zoning was arbitrary and capricious. See Jacobs, Visconsi & Jacobs, Co. v. City of Lawrence, 927 F.2d 1111 (10th Cir.1991). see also RRI Realty Corp. v. Incorporated Village of Southampton, 870 F.2d 911, 915-18 (2nd Cir. 1989), cert. denied, 493 U.S. 893 (1989).
Protectible Property Interests
“The Supreme Court has stated that property interests are not created by the Constitution, but by existing rules or understandings that stem from independent sources, ‘such as state law-rules or understandings that secure certain benefits and that support claims of entitlement to those benefits.’” Darr v. Town of Telluride, 495 F.3d 1243, 1251 (10th Cir. 2007) (quoting Bd. of Regents v. Roth, 408 U.S. 564, 577 (1972)) Moreover, “[t]o create a property interest, the state-law rule or understanding must give the recipient ‘a legitimate claim of entitlement to [the benefit].’ ” Id. (quoting Roth, 408 U.S. at 577). “[C]onstitutionally protected property interests are created and defined by statute, ordinance, contract, implied contract and rules and understandings developed by state officials.” Nichols v. Bd. of County Comm’rs, 506 F.3d 962, 970 (10th Cir. 2007) (citation and internal quotation marks omitted).
C. Applicable Standard of Review
Where zoning legislation is subjected to substantive due process attack, the scope of review by the federal court is the same as for any other legislation–even more deferential than for state administrative action. This may be discerned from a statement by the Unite States Supreme Court:
“The power of local governments to zone and control land use is undoubtedly broad and its proper exercise is an essential aspect of achieving a satisfactory quality of life in both urban and rural communities. But the zoning power is not infinite and unchallengeable; it ‘must be exercised within constitutional limits.’ … Accordingly, it is subject to judicial review; and as is most often the case, the standard of review is determined by the nature of the right assertedly threatened or violated rather than by the power being exercised or the specific limitation imposed….
“Where property interests are adversely affected by zoning, the courts generally have emphasized the breadth of municipal power to control land use and have sustained the regulation if it is rationally related to legitimate state concerns and does not deprive the owner of economically viable use of his property….
“Beyond that, as is true of other ordinances, when a zoning law infringes upon a protected liberty, it must be narrowly drawn and must further a sufficiently substantial government interest.”
In the absence of a fundamental constitutional right, due process challenges to statutes are reviewed pursuant to the rational basis standard of review. Village of Hoffman Estates v. Flipside, Hoffman Estates, Inc., 455 U.S. 489, 494-97 (1982). Under the rational basis standard of review, “a presumption of constitutionality attaches to a statute, and the burden is on the party challenging the statute to establish beyond a reasonable doubt that the statutory proscription lacks a rational relationship to a legitimate governmental interest.” Ferguson v. People, 824 P.2d 803, 808 (Colo. 1992).
II. Procedural Due Process Case Study: Moreland Properties, LLC v. City of Thornton, 559 F. Supp.2d 1133 (D. Colo. 2008).
Moreland Properties is a civil rights case. Plaintiff Moreland Properties, LLC, (“Moreland Properties”) alleged that Defendant City of Thornton (“Thornton”) violated its Fourteenth Amendment right to procedural due process by enacting an ordinance that deprived it of certain uses of its land without providing adequate process.
A. Factual Background
- Thornton City Code and Procedures for Changing Zoning Classifications. On June 20, 1967 Thornton adopted a home rule charter pursuant to article XX, section six of the Colorado Constitution. The Charter required that, in all legislative matters coming before it, the City Council shall act only by ordinance, resolution, or motion, and recited that a majority of the members of the Council in office shall be a quorum for the transaction of Council business.
- Thornton 1993 Annexation and Zoning of the Disputed Property In 1993, Thornton enacted an ordinance approving the annexation of approximately twenty acres of property generally located at the southeast corner of 144th Avenue and I-25 in Adams County. That same ordinance approved “regional commercial” zoning for the property which, under the Code, includes “auto service center” and “vehicle display, sales, and service” as permitted uses, and “vehicle display, sales and service” as permitted uses by right. A permitted use by right under the Code is a use that does not require a specific use permit or a temporary use permit.
- Moreland’s 1999 Purchase of a Portion of the Disputed Property. In 1999, Moreland Properties purchased a portion of the property annexed in 1993. Moreland Properties purchased the property because its zoning classification allowed automobile dealerships and auto sales as permitted uses by right. Prior to Moreland Properties’ purchase of the property, a representative and agent of Moreland Properties confirmed that the property’s zoning classification allowed automobile dealerships and automobile sales as permitted uses by right by reviewing the Code and by speaking with somebody in Thornton’s planning department. A real estate transfer declaration Moreland Properties filed with Adams County stated that the sale was “contingent upon the preapproval and exclusive right to a dealership point by the manufacturer.”
- Thornton’s Adoption of the North Washington Subarea Plan. In 2001, Thornton and the City of Westminster contracted with land use and urban design consultants to prepare a study of the I-25 corridor in the area bounded by Huron Street to the west, Washington Street to the east, 148th Avenue to the north, and 120 Avenue to the south. Thornton proceeded to approve seven ordinances that rezoned seven properties in the NW Subarea-totaling 373 acres-to “regional commercial.” The NW Subarea Plan did not change the zoning district classification of Moreland Properties’ property, and the documents that led to the creation of the NW Subarea Plan nowhere mentioned automobile dealerships.
Between Moreland Properties’ 1999 purchase of the property and Thornton’s 2005 adoption of the NW Subarea Plan, Moreland Properties never submitted an application for development of the property to Thornton.
- Moreland Properties’ 2005 Efforts to Sell the Property to CarMax. During the summer of 2005, Moreland Properties received an inquiry from CarMax Auto Superstores (“CarMax”) regarding purchase of the property for construction of an automobile sales center, and the two parties began negotiating a purchase agreement. On February 23, 2006, CarMax had a pre-application meeting with some of Thornton’s employees to discuss its proposed automobile sales and service center on Moreland’s property. At the February 23, 2006, pre-application meeting, one of Thornton’s project managers advised CarMax that development of the property would require a collector roadway to be built through the property to connect from an underpass at the interchange between I-25 and 144th Avenue to Grant Street.
On February 28, 2006, CarMax notified Moreland Properties that it was terminating the purchase agreement. CarMax’s termination of the purchase agreement caused Moreland Properties to lose both a $50,000 deposit made by CarMax and the $5,955,795 sale of the property to CarMax.
- Thornton’s March-April 2006 Adoption of the “Overlay Zone”.In March-April of 2006, Thornton drafted Ordinance 2944. The ordinance created an “overlay zone” over the NW Subarea. The object of the proposed ordinance was to eliminate vehicle display, sales, and services as permitted uses within the “regional commercial” and “industrial” zoning districts, and the ordinance would have applied across the entire city of Thornton, an area encompassing approximately thirty-nine square miles. Eight properties within the NW Subarea were zoned “regional commercial,” and Thornton’s zoning expert acknowledged that Ordinance 2944’s restriction on the selling of cars affected eight property owners.
- Moreland’s May and August 2006 Attempts to Develop the Property. After Ordinance 2944 was adopted, Moreland Properties contacted Thornton to schedule a pre-application meeting to discuss proposed development of its property as a single automobile dealership. That same day, one of Thornton’s planning technicians sent Moreland Properties a letter informing it that a pre-application meeting scheduled for June 1, 2006, was cancelled because the overlay zone rendered Moreland Properties’ proposed development “a prohibited use.”
B. Procedural History
After discovery, Moreland Properties filed an amended complaint, alleging that Thornton deprived it of its Fourteenth Amendment right to procedural due process when: (1) on February 23, 2006, its employees informed CarMax that Thornton’s plans called for a collector roadway to be built through Moreland’s property; (2) the Council enacted Ordinance 2944 without compliance with the notice and hearing requirements of the Code pertaining to zoning classification changes; and (3) on May 23, 2006, its employees advised Moreland that its intended development of the property was prohibited by Ordinance 2944.
On December 6, 2007, Thornton moved for summary judgment, essentially arguing that: (1) Moreland did not have a protected property interest in the zoning of its land; (2) Moreland could not establish that Thornton had an official policy or custom to deprive it of its due process rights; and (3) Ordinance 2944 was not “ultra vires and void” because the Code did not require personal notice prior to amendment of the development code.
On December 6, 2007, Moreland moved for summary judgment as to liability only under F.R.C.P 56(d)(2), essentially arguing that: (1) it had a protected property interest in the zoning classification of its land; (2) the alleged due process violation was caused by a custom or policy of Thornton; and (3) it received inadequate process with respect to the enactment of Ordinance 2944 both under the Code and under constitutional standards.
C. Evaluation of Claims
- Moreland’s Protected Property Interest in the Zoning Classification of Its Land
Moreland Properties brought its procedural due process claim under 42 U.S.C. § 1983 (“section 1983”), which provides a remedy for constitutional violations committed by individuals acting under color of state law.
The Fourteenth Amendment states that no state shall “deprive any person of … property[ ] without due process of law.” “Procedural due process ensures the state will not deprive a party of property without engaging fair procedures to reach a decision….”
“The Supreme Court has stated that property interests are not created by the Constitution, but by existing rules or understandings that stem from independent sources, ‘such as state law-rules or understandings that secure certain benefits and that support claims of entitlement to those benefits.’
Both parties cited Eason v. Board of County Commissioners, 70 P.3d 600 (Colo. App. 2003), for the proposition that “ ‘Colorado law recognizes a protected property interest in a zoning classification when a specifically permitted use becomes securely vested by the landowner’s substantial actions taken in reliance, to his or her detriment, on representations and affirmative actions by the government.’ ”
In Eason, the Colorado Court of Appeals found that a landowner’s specifically permitted zoning use securely vested when the defendant’s land use department told him by letter that his proposed use of the land was permitted under applicable zoning ordinances, and, in reliance upon this assertion, he: (1) paid $1,000 for a building permit; (2) purchased and installed over one-hundred semi-trailers on his land; and (3) began operating a self-storage business.
Moreland Properties contended that it had a protected property interest in the zoning classification of its land because it: (1) purchased the land because of its zoning classification; (2) negotiated with CarMax for sale of the land under both parties’ assumption that automobile dealerships and automobile sales were permitted uses; (3) entered into real estate listing contracts with Mr. Von Engeln from 1999 to 2001 and from 2004 to 2006 to sell the land according to its zoning classification; (4) refrained to its detriment from selling the land from 2002 to 2004 while waiting for the interchange between I-25 and 144th Avenue to be built and thus to increase the value of its land; and (5) took actions in preparation of its cancelled pre-application meeting in May 2006.
The court found that Moreland Properties relied upon the “regional commercial” zoning classification-and upon the availability of “auto service center” and “vehicle display, sales, and service” as permitted uses, and “vehicle display, sales and service” as permitted uses by right-when it purchased the its property in 1999. Further, the Court found that Moreland Properties detrimentally relied upon the zoning classification of its land.
- Thornton’s Policy or Custom Causing Plaintiff Alleged Procedural Due Process Violation
The Court held that Section 1983 liability cannot be predicated upon respondeat superior. Brammer-Hoelter v. Twin Peaks Charter Acad., 492 F.3d 1192, 1211 (10th Cir.2007). Instead, to establish municipal liability, a plaintiff must show: (1) the existence of a municipal policy or custom depriving it of a constitutional or statutory right; and (2) a direct causal link between the policy or custom and the injury alleged.
While Moreland did not allege any “officially adopted policy statement, ordinance, regulation, or decision officially adopted and promulgated by [Thornton’s] officers” to deprive it of its due process rights, the court found that Moreland sufficiently proved one or more “single decision[s] by policymakers” that were independently sufficient to create section 1983 liability. Specifically, the court found that Moreland demonstrated an adequate basis of municipal liability on the basis of policy by pointing to the March-April 2006 passage of Ordinance 2944.
- Whether Thornton Provided Adequate Process in Connection with the Passage of Ordinance 2944
To prove its due process claim, Moreland was required to prove that: (1) the passage of Ordinance 2944 amounted to a deprivation of its protected property interest; and (2) the deprivation occurred without due process of law.
The court found that Moreland was deprived of a protected property interest because prior to enactment of Ordinance 2944, Moreland Properties was permitted to construct an auto dealership by right on its property. However, after the enactment of Ordinance 2944, Moreland Properties was not allowed to construct an auto park on its property and instead such an auto park must go through Thornton’s Planned Development process that entailed a rezoning of the property.
Lastly, the court found that the deprivation of Moreland Properties’ protected property interest occurred without due process of law. The court found that Moreland Properties’ interest in the maintenance of its permitted uses and permitted uses by right under the “regional commercial” zoning classification was significant, and that Moreland relied upon the classification when it purchased the property. Therefore, the court held that Thornton’s failure to adequately apprise Moreland Properties that Ordinance 2944 might deprive it of its protected property interest in the zoning classification of its land constituted a due process violation and established Thornton’s liability on Moreland Properties’ section 1983 claim.
III. Substantive Due Process Case Study: MLC Automotive, LLC v. Town of Southern Pines, 532 F.3d 269 (4th Cir. 2008)
A. Factual Background
The plaintiff owned and operated automobile dealerships throughout North Carolina, and in 2000 began researching the possibility of developing an automobile park (the “Auto Park”). In December 2004, the plaintiff began incurring expenditures in anticipation of building on the property, and in January 2005, one of the plaintiff’s engineers met with the Town Planning Director to confirm that the property was zoned “GB” and that the Auto Park was a permitted use as a matter of right in the GB zone.
Thereafter, the Town decided to rezone the property. The Town Manager testified that, prior to that decision, he was instructed to “find the best way to stop [the Auto Park].”
B. Procedural History
The court granted summary judgment in favor of the Town on the plaintiff’s substantive due process claim and declined to exercise supplemental jurisdiction over the plaintiff’s four state law claims. The plaintiff appealed to the 4th Circuit.
C. Evaluation of Claims
The 4th Circuit explained that in order to establish a violation of substantive due process, the plaintiff must “demonstrate (1) that they had property or a property interest; (2) that the state deprived them of this property or property interest; and (3) that the state’s action falls so far beyond the outer limits of legitimate governmental action that no process could cure the deficiency.” Sylvia Dev. Corp. v. Calvert County, 48 F.3d 810, 827 (4th Cir.1995). And in the context of a zoning action involving property, it must be clear that the state’s action “has no foundation in reason and is a mere arbitrary or irrational exercise of power having no substantial relation to the public health, the public morals, the public safety or the public welfare in its proper sense.” Nectow v. City of Cambridge, 277 U.S. 183, 187-88 (1928). The 4th circuit explained that in making its determination it could consider, among other factors, whether: (1) the zoning decision is tainted with fundamental procedural irregularity; (2) the action is targeted at a single party; and (3) the action deviates from or is inconsistent with regular practice.
The 4th Circuit held that summary judgment was not appropriate with respect to the plaintiff’s substantive due process claim. The court found that plaintiff’s evidence established that the zoning decision was procedurally irregular in that it occurred without any reference to the comprehensive plan; the plaintiff was singled out for treatment; and the zoning was made without any studies and at the behest of a citizen petition, the first such petition in the Town since at least 1989.
Lastly, the court refused to state whether the plaintiff accrued a vested right in the zoning of his property. The court explained that “rooted in the ‘due process of law’ and the ‘law of the land’ clauses of the federal and state constitutions,” North Carolina courts have recognized “[t]he ‘vested rights’ doctrine … as a constitutional limitation on the state’s exercise of its police power to restrict an individual’s use of private property by the enactment of zoning ordinances.” Godfrey v. Zoning Bd. of Adjustment, 317 N.C. 51, 344 (1986). However, the court did not state whether the plaintiff’s actions constituted a protectible vested right in the zoning of his property.