TBA Law Blog


Posted by: Josh McCreary on Nov 1, 2014

Journal Issue Date: Nov 2014

Journal Name: November 2014 - Vol. 50, No. 11

The Tennessee Supreme Court recently offered developers another arrow in their quiver by holding that Article I, Section 21 of the Tennessee Constitution encompasses regulatory takings. Governmental land use decisions are often subject to legal challenge. Decisions by governmental bodies related to subdivision plats, conditional uses and variances have traditionally been subject to review through a writ of certiorari. Zoning denials, on the other hand, are challenged by declaratory judgment. Separate from prayers that a governmental denial be reversed, damages for alleged due process violations have sometimes been claimed by aggrieved developers under both Tennessee and federal law. Under federal law, land use denials can also be the subject of a regulatory taking claim. Until now, it has remained unclear whether a regulatory taking claim was viable under the Tennessee Constitution. In Phillips v. Montgomery County, Tennessee, the Tennessee Supreme Court recently held that the Tennessee Constitution requires a government to compensate a property owner for a regulatory taking of private property.

Background

The facts giving rise to the Montgomery County case involved property owners who submitted a preliminary subdivision plat to the Clarksville-Montgomery County Regional Planning Commission. Despite that no members of the community opposed the plat, it was denied. As would be typical, the property owners initially filed a Petition for Writ of Certiorari in the Chancery Court for Montgomery County seeking a review of the plat denial. Thereafter, the property owners filed a separate suit against the Planning Commission and County asserting a regulatory taking claim under Article I, Section 21 of the Tennessee Constitution. This case reached the Tennessee Supreme Court.

The Tennessee Supreme Court Decision

In analyzing the propriety of a Tennessee takings claim, the Tennessee Supreme Court began by providing a summary of regulatory takings law under the United States Constitution. The federal “takings” clause is contained in the Fifth Amendment to the United States Constitution, which states that no person shall “be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.” The Fifth Amendment applies to States through the Fourteenth Amendment. The concept of regulatory takings emerged out of the seminal U.S. Supreme Court case of Pennsylvania Coal Co. v. Mahon. The Court in Pennsylvania Coal offered the vague holding that a taking occurs “if regulation goes too far.” While U.S. Supreme Court jurisprudence on regulatory takings has evolved over the years, more recent cases still rely, in part, on the general principles set out in older cases like Pennsylvania Coal and Penn Central Trans. Co. v. New York.

Turning to whether the Tennessee Constitution allows for regulatory takings, the Tennessee Supreme Court noted that an “overwhelming majority” of states with constitutional provisions similar to the federal takings clause have interpreted those provisions as encompassing regulatory takings. However, whether the Tennessee Constitution encompassed regulatory takings remained an issue of first impression. As a rule, the Tennessee Supreme Court will not interpret a state constitutional provision differently than a similar federal constitutional provision “unless there is sufficient textual or historical differences, or other grounds for doing so.” For that reason, much of the Court’s analysis involved a comparison of the language in the federal Fifth Amendment to Article I, Section 21 of the Tennessee Constitution. The Court relied, in part, on the “textual similarities” between the federal takings clause and the Tennessee Constitution. At the same time, the Court could not identify a historical basis for differentiating the two. Based on this comparative, the Tennessee Supreme Court held that, like the Fifth Amendment, Article I, Section 21 of the Tennessee Constitution also encompasses regulatory takings.

The Law of Regulatory Takings

Given that a regulatory takings claim may be alleged under the Tennessee Constitution, the next question is under what circumstances such a claim is viable. Since the Montgomery County Court found the Tennessee Constitution to encompass regulatory takings “like the takings clause of the United States Constitution,” federal jurisprudence on regulatory takings should create a guidepost.

Under federal law, there are generally two categories of regulatory action that are considered “per se takings” for Fifth Amendment purposes. One such category is that “when government requires an owner to suffer permanent physical invasion of her property — however minor — it must provide just compensation.” Likewise, a “per se” regulatory taking occurs where regulations “completely deprive an owner of all economically beneficial use of her property.”

Other than the two recognized “per se” regulatory takings, there is no set formula for evaluating other regulatory takings claims. Despite the lack of agreed upon elements, the following factors have been identified in evaluating such claims: (i) the economic impact of the regulation; (ii) the extent to which the regulation has interfered with distinct investment backed expectations; and (iii) the character of the governmental action. Even with recognized factors for consideration, the U.S. Supreme Court has acknowledged the uncertainty in the law and that “our regulatory takings jurisprudence cannot be characterized as unified.”

The Future of Regulatory Takings in Tennessee

With the above framework in mind, it is difficult to know when, if ever, the denial of a land use application may amount to a regulatory taking under the Tennessee Constitution. The U.S. Supreme Court said the issue of regulatory takings “has proved to be a problem of considerable difficulty.” Despite the federal guideposts, Tennessee Courts may likewise have difficulty with the development of a “‘set formula’ for determining when ‘justice and fairness’ requires that economic injuries … be compensated by the government.” It is noteworthy, however, that the facts giving rise to Montgomery County included the denial of a preliminary subdivision plat. Admittedly, the Tennessee Supreme Court did not decide whether the denial amounted to a regulatory taking, but it was in this context that the Court chose to adopt regulatory takings claims as being within the parameters of the state constitution. This suggests that landowners whose land use applications are denied could have a damages claim arising from an alleged unlawful regulatory taking. It likewise serves as a warning to governmental entities that too much regulation may result in an unlawful taking and damages and that land use applications should be viewed with heightened sensitivity.


Josh A. McCreary Josh A. McCreary is a member of Cope, Hudson, Reed & McCreary PLLC, a general practice firm in Murfreesboro. He has extensive experience representing businesses, individuals, and governmental entities in a wide variety of complex and general legal matters, including land use, business and civil litigation, health care, and probate matters. He received his law degree magna cum laude from the University of Tennessee in 1998 where he also served on the Tennessee Law Review.