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(Updated September 25, 2006)

H.R. 4772
Private Property Rights Implementation Act of 2006

Floor Situation

The House is scheduled to consider H.R. 4772, pursuant to a rule, on Friday, September 29, 2006. 

On Wednesday, September 27, 2006, the Rules Committee granted a closed rule that:

Summary

The Private Property Rights Implementation Act of 2005 amends the federal judicial code to provide that, whenever a district court exercises jurisdiction in civil rights cases in which the operative facts concern the uses of real property, it shall not abstain from exercising such jurisdiction, or relinquish it to a state court, if the party seeking redress does not allege a violation of a state law, right, or privilege, and no parallel proceeding is pending in state court that arises out of the same operative facts as the district court proceeding.

The bill declares that in an action in which operative facts concern the uses of real property, the district court shall exercise jurisdiction even if the party seeking redress does not pursue judicial remedies provided by a state or territory. The legislation provides for referral of an unsettled question of state law to the state's highest appellate court. Prohibits the district court from certifying a question of state law unless it is necessary to resolve the merits of the injured party's federal claim, and such question is patently unclear.

H.R. 4772 declares that any claim or action to redress the deprivation of a property right or privilege secured by the Constitution shall be ripe for adjudication by the district courts upon a final decision rendered by any person acting under color of any law, regulation, custom, or usage of any state or U.S. territory that causes actual and concrete injury to the party seeking redress.

The Private Property Rights Implementation Act of 2005 declares that any claim founded upon a property right or privilege secured by the Constitution, but allegedly infringed or taken by the United States, shall be ripe for adjudication upon a final decision rendered by the United States which causes actual and concrete injury to the party seeking redress.

The bill amends the Revised Statutes of the United States with respect to certain Constitutional property rights claims, and requires a federal agency, whenever it takes action limiting the use of private property that may be affected by the amendments made by this Act, to give notice to the owners of that property explaining their rights and the procedures for obtaining any compensation that may be due to them under such amendments.

Section-by-Section Breakdown

Section 2. Jurisdiction in Civil Rights Cases Concerning Real Property.

This section prevents a federal court from refusing to hear a case in which only federal claims are alleged. If a matter of state law is unresolved, then the federal district court may certify the question of state law to the highest appellate court of that state. After the state appellate court resolves the question certified to it, the federal district court shall proceed with resolving the merits of the federal claim.

This provision addresses abstention, the legal principle under which courts relinquish their jurisdiction over a case and refuse to hear it. Abstention is one of the primary jurisdictional hurdles that currently prevent nearly all property owners from having their federal Fifth Amendment taking claims heard in federal court. This provision of H.R. 4772 states that abstention can not be exercised by a federal court in a takings case where no state law claim is alleged, and where there is no pending state court proceeding addressing the same claims. Moreover, to address any concerns about federal courts’ entangling themselves with state law issues, this section allows a federal judge to have unresolved questions concerning state law answered by the state courts through a certification procedure if doing so is factually necessary to resolve the federal constitutional property rights claim. This ensures that federal courts do not decide state law issues, while ensuring property owners have access to federal court to defend their Fifth Amendment rights.

This section also allows a property owner whose constitutional rights may have been violated the same access to federal court that other claimants alleging a violation of their constitutional rights (such as freedom of speech and religion) have. Accordingly, under this section, a property owner raising solely federal claims can have his or her case decided in federal court without first pursuing a litigation detour in state court on the same issues. If an individual claims that his constitutional right to free speech was violated, he can take that claim directly to federal court. The same goes for alleged infringements of other constitutional rights, like the rights to privacy and the free exercise of religion, and all such claims can be brought immediately in federal court. However, property owners with a Fifth Amendment claim have been treated differently and unfairly by courts. Unlike other constitutional cases, the federal courts require that property owners with takings and due process claims litigate their case in state court first. This unfair situation derives from the Supreme Court’s Williamson County (1985) decision, which the lower federal courts have interpreted as requiring property owners to pursue, and exhaust, all available remedies for just compensation in state court, before the property owner can file suit in federal court on a Fifth Amendment claim. Moreover, the Supreme Court’s decision in San Remo (2005)
confirmed that once a takings case is brought to state court and decided there, the property owner is forever
precluded from a review of the case in federal court, thereby placing property owners who want to file a
constitutional takings claim in federal court in an untenable Catch-22.

Section two of the bill also clarifies when a constitutional takings claim is “ripe” and therefore ready for federal adjudication. Current case law requires, among other factors, a “final decision” to be rendered before a constitutional takings claim is ripe, because exactly what a “final decision” is is unclear under current law. Under the terms of the bill, a final agency decision exists after a property owner goes through three steps: (1) the property owner submits and is denied a “meaningful application” to use property that is consistent with local land use and zoning requirements; (2) the property owner then applies for but is denied a waiver from applicable land use requirements that caused the initial application to be rejected; and (3) after the waiver is denied, the property owner then pursues but is denied an administrative appeal on the waiver. Therefore, under the bill, only after land use reviews at the application, waiver, and administrative appeal levels would a property owner have a “ripe” federal constitutional claim for adjudication by a federal court. Finally, section two includes an explanation of “futility.” This provision reflects current case law of the Supreme Court and states that a property owner shall not be required to apply for an appeal or waiver if no such appeal or waiver is available, if the appeal or waiver cannot provide the relief requested, or if the application would be futile.

Section 3. United States as a Defendant.

This section closely mirrors section 2 but applies to takings claims against the United States. This section applies only to suits against the federal government involving $10,000 or less. Under federal law, these cases are tried in federal district court.

Section 4. Jurisdiction of Court of Federal Claims.

Section 4 is identical to section 3, except it applies to suits against the federal government involving more than $10,000. Under federal law, these cases are heard in the Court of Federal Claims.

Section 5. Clarification for Certain Constitutional Property Rights Claims.

Section 5 clarifies the rights of property owners raising certain types of constitutional claims.

Subsection 1 of Section 5 clarifies that conditions or exactions that are imposed upon a property owner in order to receive a permit must be roughly proportional to the impact the development might have. This would apply to all kinds of exactions, regardless of whether the exaction stems from a legislative or regulatory requirement.

 Property owners and business owners may constitutionally be required to cover the government’s costs that areincurred due to development or expansion of a business. For example, exactions may be imposed on developers to pay for expanding schools to accommodate children who will be living in the new development. Also, a business owner who is seeking permission to expand the business may be required to pay for the costs of installing a stop light if the expansion will result in an increase in traffic, and the increase in traffic merits a stop light. However, sometimes the conditions imposed on a development plan amount to nothing more than
extortion. Occasionally, a government will try to palm-off on a property owner a condition for approval that has nothing to do with the project at hand or has no relationship to the extent of the project’s impact. For example, a developer cannot be required to build a new school for children who already live in the town and likewise should not be required to pay for a road that will not be used by residents of the subdivision under construction, and the business owner should not be required to build a library or fund art exhibits in exchange for receiving approval to expand her store. Property owners should have the right in federal court to defend themselves against unreasonable exactions or impact fees that amount to extortion. The Supreme Court in the Nollan (1987) and Dolan (1994) cases affirmed these principles, but this subsection clarifies that these principles apply to both regulatory and legislatively-imposed exactions, and extortionate conditions in any form, whether they encompass the compelled give-away of land, the payment of disproportionate fees, or some other demanded condition that has no nexus to the project or its impact on public resources.

Subsection 2 of Section 5 clarifies the so-called “denominator question” in cases concerning subdivided lots by requiring that federal courts look at the impact of a takings claim on each individual lot that is recognized as a separate independent property unit under state law. If a government approves subdividing a property into lots, the property owner is often required to pay higher property taxes on each of the newly-created lots. On occasion, the government will later impose restrictions on some of the lots that deprive the property owner of all use of that particular lot. In challenging such an action as an unconstitutional taking, courts frequently look at the entire swath of owned property. In doing so, the courts almost always rule that as long as the property owner can still develop some of the lots in a larger subdivision, it is not a taking. In this scenario, the property owner is now saddled with unusable lots on which he or she is paying a higher property tax burden. It is unjust for cities to both receive the higher tax revenue on individual lots and also deny the property owner the use of that lot. If the government wants to receive the monetary benefit of taxing each individual lot as a separate unit, then it should also have the responsibility of paying compensation when it takes each individual lot and renders it unusable by regulation. The proper remedy is for the courts to look at each individual lot rather than the entire subdivision, and that is what this section of H.R. 4772 requires. This means that a property owner may have a valid constitutional takings claim if any single lot is rendered unusable due to government actions.

Subsection 3 of Section 5 clarifies that the standard for due process claims in a takings case is an “arbitrary and capricious” standard. This section of H.R. 4772 provides hat the appropriate question in a due process case in land use matters is whether the government had no rational basis for its decision and it made an “arbitrary and capricious” decision. (Proving that a government made an arbitrary and capricious decision on a land use matter remains an extremely high standard, and only a small number of land use cases will meet it.)

Section 6. Duty of Notice to Owners.
This section requires a federal agency to provide notice to property owners explaining their rights and the procedures for obtaining any compensation that may be due to them whenever that agency takes an action impacting their private property.

Section 7. Severability and Effective Date.

This section makes the provisions of this act severable should any provision be found unconstitutional. This section also provides that the amendments made by this act become effective when it is signed into law.


Background

On March 16, 2000, the House passed H.R. 2372 - Private Property Rights Implementation Act of 2000, by a recorded vote of 226 - 182 (Roll no. 55). This legislation is substantially similar to H.R. 4772.  

Under current law, property owners are now blocked from raising a federal Fifth Amendment takings claim in federal court. The Supreme Court’s decision in Williamson County v. Hamilton Bank, 473 U.S. 172 (1985), requires property owners to pursue, and exhaust, all available remedies for just compensation in state court before the property owner can file suit in federal court under the Fifth Amendment. In San Remo Hotel v. City and County of San Francisco, 125 S.Ct. 2491 (2005), the Supreme Court recently confirmed and did not modify prior lower court case law that held that once a property owner tries their case in state court, and loses, the doctrines of res judicata and claim preclusion allow federal courts to dismiss the claims on the grounds they were already decided by the state court. The combination of these two rules means that those with federal property rights claims are effectively shut out of federal court on their federal takings claims, setting them unfairly apart from those asserting any other kind of federal right, such as First Amendment free speech and freedom of religion rights, who nearly universally enjoy the right to have their federal claims heard in federal court in the first instance.

Legislative History

H.R. 4772 was introduced by Rep. Chabot (OH) on February 16, 2005. The bill was ordered to be reported from the Judiciary Committee, by voice vote, on July 12, 2006.  House Report 109-658 was filed on September 14, 2006.

On Monday, September 25, 2006, H.R. 4772 was considered by the House under suspension of the rules. On Tuesday, September 26, 2006, the bill failed by a recorded vote of 234-172 (Roll no. 447).

For additional information or questions, please contact the Judiciary Committee at 5-3951.