Alicia stated that the permissibility of the smoke shop ultimately depends on the city’s comprehensive plan, zoning map and code of ordinances. Alicia noted that if the smoke shop is found to be in violation of these regulations, a municipal officer can issue fines and potentially force the business to leave.

To watch the interview, please click here.

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On Oct. 7, 2022, Florida’s Second District Court of Appeal issued an opinion that focuses on the threshold question in all regulatory takings cases: does the plaintiff own property protected by the takings clauses of the Florida and U.S. Constitutions? The answer is usually clear in cases concerning tangible property—houses, cars, artwork, land, etc. It is usually undisputed that, if government appropriates or destroys those things, the takings clause will require compensation. However, there isn’t always a clear-cut answer in cases that concern nontraditional, intangible property interests, including rights that attach to tangible property.

When analyzing whether intangible property interests are protected by the takings clause, the vague, general answer that most cases provide is that constitutionally protected property interests are created and defined by existing rules or understandings that stem from an independent source, such as state law. Very few Florida appellate cases have explored what this means exactly. This new Second District opinion—Hillsborough County v. Gulf Coast Transportation—takes a deep dive into that question and helps to clarify this otherwise amorphous concept of what constitutes a constitutionally protected property interest. Most importantly, it creates a bright line rule—the Legislature can eliminate property that exists solely by virtue of legislation without paying compensation under the takings clause. In other words, the Legislature can destroy property that it creates without consequence. The majority decision drew a vigorous dissent.

The plaintiffs in the Gulf Coast case were a number of taxicab companies operating in Hillsborough County. The taxicab companies sued the county and the state of Florida for the repeal of state legislation that previously granted the taxicab companies permits for the operation of their taxicabs. These permits were known as “medallions.” The analysis in the Second District opinion focused, in part, on the history of taxicab operations in the county to determine whether the medallions constituted a protected property interest.

In 1976, the Florida Legislature enacted a special law that created a taxicab commission in Hillsborough County. The taxicab commission was given the power to regulate taxis, including issuing licenses, requiring background checks, setting fees, etc. There were changes to the special act throughout the years, but the commission’s powers remained largely the same. The most significant changes came in 2012 when the legislature passed a new special act concerning the commission—Chapter 2012-247. The new act stated, among other things, that the taxicab medallions issued by the commission are “the private property of the holder.” It further authorized medallion holders to sell, lease and otherwise transfer the medallions, subject to commission approval and rules. The 2012 special act additionally recognized the existing limits on the number of medallions that could be issued, which already existed under the commission’s adopted rules.

The 2012 special act, therefore, seemingly gave the taxicab medallions every semblance of property that is protected by the takings clause. It defined the medallions as “private property” and created a market for the medallions by allowing their transfer and acknowledging their scarcity. These are both attributes of land, which is unequivocally property protected by the takings clause.

In 2017, however, the state legislature repealed all prior special acts concerning the commission that were still in effect, including the 2012 legislation, and dissolved the commission. The 2017 legislation did not address the status of existing medallion holders. However, because it dissolved the commission, which was the entity that issued the medallions and enacted the rules that made the medallions valuable, the medallions were thereafter worthless. The 2017 legislation also failed to specify whether the existing holders of the now worthless medallions would be compensated for their loss.

Once the commission was dissolved, Hillsborough County was authorized to regulate taxicabs and chose only to require those wanting to operate a taxicab to obtain a certificate and permit from the county tax collector. The new county regulations did not recognize the previously issued medallions, did not maintain the scarcity of the previously issued medallions, and did not preserve the medallion holders’ rights to transfer the medallions. The taxicab companies that operated under the previous 2012 special act could still operate, but now their permits to operate were no longer the valuable medallions that they used to hold.

The taxicab companies operating in Hillsborough County concluded that their existing medallions were now worthless. The companies filed an inverse condemnation action against the state and the county for the taking of their medallions without compensation. The county prevailed on a motion for summary judgment claiming that it could not be responsible for a taking, because it did not pass the legislation that eliminated the medallions. In the same order that granted the county’s motion for summary judgment, the trial court denied the state’s motion to dismiss, which argued that the taxicab companies failed to state a claim because the medallions were not “property” protected by the takings clause. The Second District affirmed the judgment entered in favor of the county, and reversed the decision to deny the state’s motion to dismiss. The Second District found that the taxicab companies did not have a protected property interest in the medallions, despite the explicit statement in the 2012 special act that the medallions constituted “private property,” and despite the fact that the special act gave the medallions qualities consistent with ownership of private property.

This holding may seem perplexing to those that are not familiar with the takings clause and its history. How could a medallion that is specifically identified as private property and that has the attributes of a protected property interest not be considered a compensable property interest under the takings clause? The Second District’s holding, however, followed existing law when it held that the labels given to a thing are unimportant. The question of what constitutes a protected property interest turns, instead, on whether the thing is recognized as “property” independent of the law that regulates it. By way of explanation, the court provided the example of trade secrets. It explained that the value of trade secret information’ “was obtained or generated by the companies, independent of any law protecting them as trade secrets.”

Because the medallions in this case were created by legislation and did not exist independent of that legislation, the Legislature could also terminate that interest without owing compensation under the takings clause.

The holding in this case is remarkable for several reasons. First and foremost, this holding does something that is rarely done in takings cases: it creates a bright line rule. A property interest created by legislation, that would not exist absent that regulation, is not “taken” when it is regulated out of existence. In other words, the Legislature can destroy property interests it created without paying just compensation.

Second, the decision reminds practitioners to ask the important preliminary question in every takings clause case, no matter how obvious the answer may seem: is the claim based on the taking of a compensable property interest? Finally, the majority opinion and the dissent explain how property interests have been traditionally defined, thus giving more guidance for future cases in which this issue is bound to arise.

The opinion is currently not final, and the taxicab companies moved for rehearing on Nov. 18, 2022. Perhaps our understanding of property interest will change once more upon reconsideration.

Alicia Gonzalez is a partner at Weiss Serota Helfman Cole + Bierman and represents private and public sector clients in litigation involving real property and local governments.

Read the original article published in the Daily Business Review here.

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The first COVID-19 infection in the United States was confirmed on Jan. 20, 2020. Shortly thereafter came a downward spiral for businesses and property owners alike when government regulations essentially shut down our entire society due to a virus. With this unprecedented and unique situation came novel legal issues in all areas of the law—particularly in the area of government takings. Government-mandated shutdowns of businesses and eviction stays on landlords raised the question: How far can government regulation go in such exigent circumstances without resulting in a compensable taking? Florida’s first appellate decision on this issue was released this month, and it is anticipated that it will not be the last of its kind given the various contexts in which these issues can be raised.

In Orlando Bar Group v. Desantis, 5D21-1248, 2022 WL 1814256, at *1 (Fla. 5th DCA June 3, 2022), the plaintiffs were a group of bar owners that were severely restricted in alcohol sales during the pandemic due to state and local emergency orders. The plaintiffs claimed that the temporary closure of their bars, and later restrictions on operations of their bars, constituted governmental takings and entitled them to compensation. The defendants, which consisted of the governor, the Florida Department of Business and Professional Regulation (DBPR), and Orange County, moved to dismiss the claim for failure to state a claim. The trial court granted the motion to dismiss with prejudice, and the plaintiffs appealed. On review, the Fifth District Court of Appeal affirmed the dismissal.

Although the plaintiffs pleaded every applicable iteration of a taking, none prevailed. The plaintiffs first attempted to claim that the COVID regulations amounted to a physical appropriation of their properties by interfering with their right to permit others to enter on their properties. Regulations that permit a physical appropriation of property—that allow third parties to enter the property without permission—are considered per se takings. The appellate court agreed with the trial court, however, that there was no per se taking because the COVID regulations did just the opposite. Namely, the regulations prohibited any physical entry onto the owners’ properties by any third parties, thus not fitting into the existing per se takings framework.

The plaintiffs also attempted to plead a categorical taking, claiming that the regulations denied them of all economically beneficial uses of their properties even though the prohibitions were only temporary. Generally, if a property owner is able to show that they have been deprived of all economically beneficial uses (100% of all value in the property), a taking has occurred. The appellate court found that, although the regulations had a significant economic impact on the plaintiffs’ businesses, the plaintiffs did not adequately plead a categorical taking because the regulations were only temporary. The sale of alcohol was only prohibited for seventeen days, after which the businesses were permitted incrementally to return to limited sales and operations. Within six months, the plaintiffs’ businesses completely reopened. The appellate court found that this cannot, as a matter of law, amount to a deprivation of all economically beneficial uses. Notably, it is unclear how this claim would have turned out if any of the businesses had, in fact, been forced to permanently close their doors due to the significant economic impacts of the COVID regulations.

Finally, the plaintiffs claimed that the regulations amounted to a regulatory taking under Penn Central v. New York City, 438 U.S. 104 (1978) balancing test, which considers the economic impact of the regulation, the regulation’s interference with investment-backed expectations, and the character of the government action, and balances these factors to determine if the government action results in a taking. The appellate court ultimately concluded that there was no taking. focusing predominantly on the plaintiffs’ investment-backed expectations and the character of the government action. The COVID regulations concerned the sale of alcohol, which is a highly regulated industry, and the plaintiffs should have expected that they will sometimes be severely regulated. Moreover, the restrictions amounted to an exercise of government police powers in an effort to limit the spread of what the appellate court described as a “then poorly understood, highly contagious and deadly virus.” In line with other COVID decisions throughout the country, the Fifth District found this was a compelling enough government interest that it weighed against a finding the plaintiffs’ properties had been taken.

Although this is the first appellate COVID takings decision in Florida, it is certainly anticipated that it will not be the last. A survey of cases throughout the country reveals that the context in which takings law can be applied to address issues raised by COVID regulations are varied, and surprisingly do not always involve a claim against the regulating government entity.

In one case, a tenant terminated its leases under the lease’s eminent domain termination clause, alleging that COVID restrictions resulted in a taking thus permitting the termination. In another instance, a landlord that was prohibited by COVID regulations from evicting its tenant tried to claim that the restrictions resulted in a taking of its property. And, in yet another case, a taxpayer claimed that the IRS’s automatic application of the taxpayer’s income tax refund to partially offset the taxpayer’s defaulted federal student loans was an illegal exaction (which is, in essence, a taking) because the Coronavirus Aid, Relief, and Economic Security (CARES) Act temporarily suspended such collection actions. In all cases, the judicial result was the same— there was no taking. The reasoning for the decisions varied drastically. Some courts followed the Fifth District’s approach in Orlando Bar Group, applied the traditional takings tests, and found that no taking occurred. Other courts relied on the “doctrine of necessity,” pursuant to which in exigent circumstances, the government may destroy private property with immunity when doing so could save the property and lives of others.

Although courts have thus far found that challenged COVID regulations have not resulted in a taking, there must be a line that cannot be crossed, even with respect to COVID regulations, and it will be interesting to see where Florida appellate courts draw that line. Much like the rampant virus, this issue may evolve with time.

Alicia Gonzalez is a partner at Weiss Serota Helfman Cole + Bierman and represents private and public sector clients in litigation involving real property and local governments.

To read the original article in the Daily Business Review, click here.

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The developer, F.P. Development LLC, purchased property within the Township after the ordinance had been enacted.  The property was bisected by a county drainage ditch that had become clogged with fallen trees and other debris. The county was advised of the clogged ditch but refused to clear it.  The developer then proceeded to hire a tree company to clear the ditch and remove an additional 159 trees from the property without a permit.  The Township discovered the unpermitted removal and advised the developer that in order to comply with the ordinance, it either had to plant 187 new trees or pay $47,898 to the Township’s tree fund. The developer instead sued in federal court claiming that the ordinance imposed an unconstitutional condition (among other things).

The litigants agreed that the ordinance had an essential nexus to a legitimate public purpose (one of the two elements in an unconstitutional conditions claim).  Thus, the only remaining issue was whether the condition (that the developer replant 187 trees or pay $47,898 to the tree fund) is roughly proportionate to the impacts of the developer’s removal of 145 trees.  The Township had the burden of proving rough proportionality, but the Sixth Circuit ruled that it failed to meet that burden.  The court noted that the Township failed to meet its burden because, rather than proving rough proportionality, the Township assumed the validity of its ordinance. The court emphasized that in most cases, “the government generally satisfies the nexus and rough proportionality test with ease” by introducing just some evidence demonstrating the proportionality of the condition. In other words, the bar is low — just meet it.

The message from this case is important and clear:  governments cannot assume the validity of their methodology in unconstitutional conditions cases.  They must take the burden of proving rough proportionality seriously, even though the relationship of the permit condition to the development impacts seems intuitive.  In this case – they want to allow property owners to remove trees, but you obligate them to replace the trees or pay for the trees’ respective monetary value.  That seems fair, right? Sure, but you still have to prove it!

Particularly with ordinances of general applicability, such as the one at issue in the case, where an ordinance has a set formula that applies to everyone across the board, governments often overlook the issue of proving rough proportionality because the ordinance does not require an individualized determination when it is being applied.  It seems, therefore, counterintuitive to have to prove such an individualized determination in a lawsuit. However, to meet the burden in unconstitutional conditions cases, governments must take on this task regardless of whether the ordinance, itself, requires it.  Ideally, the methodology developed when drafting the ordinance will be backed up by the same type of evidence that will prove rough proportionality, although, this is rarely the case.

[1]           F.P. Dev., LLC v. Charter Twp. of Canton, Michigan, 16 F.4th 198 (6th Cir. 2021)

Notably, the Sixth Circuit hinted that there may be an argument that the unconstitutional conditions test does not even apply to the Township’s ordinance, but the litigants did not raise it.  The court seems to be alluding to the fact that the ordinance is a law that is generally applicable to everyone, across the board, in the same way.  In contrast, the U.S. Supreme Court in Dolan indicated that the unconstitutional conditions doctrine applies only when there is an individualized determination that is imposed on a case-by-case basis at the discretion of government staff. Dolan v. City of Tigard, 512 U.S. 374, 391 n. 8 (1994).

There are several important take-aways from the Sixth Circuit’s decision:

1. When enacting laws of general applicability, governments should bear in mind that they may be subject to an unconstitutional condition challenge, so they should be prepared to meet the rough proportionality standard. In other words, in coming up with the general formula that will apply to everyone, justify that formula with evidence that the conditions will be roughly proportionate to the impacts from the development.
2. If a government is being sued based on a permit condition that was imposed by a law that applies equally to everyone, the government should assert that as a defense to an unconstitutional conditions claim. While some property owners argue that this is not well-settled law, there is authority for the proposition in Dolan.
3. Even if a government can assert the law’s uniform application as a defense, it should attempt to meet its burden of showing rough proportionality through expert testimony.

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It’s easy to write off the question by responding “Of course the government can interfere with private property rights when confronted with an emergency. It is within the government’s police power to take these measures.”  But remember, it has been long recognized that regulation of property that “goes too far” will result in a taking – thus our regulatory takings jurisprudence. The “police power” justification, by itself, is not conclusive.

The more thoughtful response is that the current situation is unprecedented.  When else has a global pandemic required a mass, multi-national quarantine and societal shutdowns?  Moreover, the shutdowns are not direct physical destruction of or encroachment upon property, such as when government demolishes an unsafe structure.  Instead, the shutdowns are regulatory. Thus, their impact on property rights is more abstract.

Because the current circumstances are unprecedented and novel, and because governments must react quickly with limited information on the actual impacts of the pandemic on public health, two legal concepts can be used by government to defend its actions against takings claims:  necessity and nuisance.

“Necessity” has been long used to validate government action that destroys private property, without having to pay for the destroyed property, when an emergency requires such action to prevent imminent public danger.  This makes sense.  Most of us don’t want the government worrying about liability that it might incur in taking actions that are absolutely necessary to avoid public disaster. A useful example of necessity prevailing over the right of compensation is when government preemptively burns private property to create a firebreak in order to combat a wildfire.  Generally speaking, the owners of said properties are not entitled to compensation under the necessity exception.

“Nuisance” recognizes that property owners are rarely entitled to compensation for an impact to their property rights caused by government action when that action is taken to prevent or abate a public nuisance.  This is so because property owners do not have a right to use their property in a manner that is harmful to others.  Nuisance prevention or abatement by the government cannot, therefore, “take” a property right because it never existed.  The government may, for example, prohibit use of property that would result in pollution of groundwater without paying any compensation to the owner for that restriction.

When applied to the current COVID-19 pandemic, it’s easy to see how the question of whether government-imposed shutdowns will result in a compensable taking is likely to turn in favor of the government.  The government shutdowns, which may have interfered with private property rights, are designed to prevent further spread of a pandemic (an imminent public harm), so they likely will be deemed necessary.  Similarly, a virus that is spreading exponentially likely constitutes a nuisance, and the government enjoys wide latitude to restrict uses of property to prevent or abate a public nuisance.

That being said, do not take the existence of these defenses to mean that government may always act without consequence under every circumstance that is labeled an emergency.  A basic tenant of our democracy is that we don’t (and shouldn’t) blindly trust our government.  The question of whether a compensable taking has occurred will and should turn on the evidence showing the necessity of the government restrictions or the nuisance the restrictions were meant to ameliorate.

The post Taking Your Temperature: Property Rights During the COVID-19 Pandemic appeared first on Weiss Serota Helfman Cole + Bierman.

First, a government can only take your property if it will be used for a public purpose. This means roads, parks, utilities, and other truly public purposes. Although Florida used to, in limited situations, permit takings where government planned on giving the property to a private developer (usually the justification was that it was promoting “community redevelopment”), Florida no longer permits takings for that purpose. In fact, the circumstances under which any private party can control newly created public property that was acquired through eminent domain are extremely limited. Given that the property must be used for a public purpose, those who are eminent domain squeamish can rest easy knowing that governments must first demonstrate a noble and real public purpose before acting. Those who are anxious about eminent domain should start to warm up to it (if they like the roads they drive on and the parks their children play in).

Second, the government must prove that it needs the specific property it is trying to take in order to accomplish the public purpose. It cannot choose property on a whim. The government must prove that it looked at alternatives, and the designated property was a reasonable one for a number of reasons.

Third, and often most important, the government must pay full compensation to the owner of the property. “Full compensation” includes most (if not all) of the damages that are caused by the taking. It also includes the property owner’s attorneys’ fees, the cost of getting experts to testify on one’s behalf, and moving costs, among other things.

So the next time you meet an eminent domain attorney (at least in Florida), please look her in the eye, shake her hand, and say, “Your area of specialization is tolerable; thanks for being on my side.”

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