When changes to local laws impair property rights, a recent Supreme Court decision means owners can consider bypassing state courts and going directly to federal courts with their just compensation claims. However, questions remain.

Why should property owners care about a legal dispute involving a local ordinance in rural Pennsylvania requiring that cemeteries on private property be open to the general public?  Because last month the U.S. Supreme Court issued a groundbreaking decision about this dispute that will have broad ramifications. 

In Knick v. Township of Scott, Pennsylvania, Rose Mary Knick owned a 90-acre rural property with a small family cemetery. Scott Township passed an ordinance requiring that private properties with cemeteries be open to the general public during daylight hours.  

After a township officer found grave markers on Knick’s property, the township notified her that she violated the ordinance by denying public access. Knick sued the township in state court, seeking declaratory and injunctive relief, and claiming that the ordinance operated as a government taking of her property. She did not seek compensation for the alleged taking. The township withdrew the violation notice, whereupon the state court declined to rule on Knick’s lawsuit. 

Knick sued the township in federal court, claiming that the ordinance violated her civil rights under a federal civil rights statute and the “Takings Clause” of the Fifth Amendment to the U.S. Constitution. The Takings Clause prohibits government takings of private property for public use without paying “just compensation” to the property owner.  

Knick’s federal lawsuit was a longshot. In its 1985 decision in Williamson County Regional Planning Comm’n v. Hamilton Bank of Johnson City, the Supreme Court ruled that property owners cannot sue local governments in federal court for Takings Clause violations, until state courts have denied their claims for just compensation. To make matters worse for Knick, the Supreme Court’s 2005 decision in San Remo Hotel, L.P. v. San Francisco held that state court rulings on property owners’ just compensation claims generally precluded subsequent suits in federal court.  

A Surprising Supreme Court Decision 

As expected, the federal district court and the Third Circuit Court of Appeals ruled against Knick, reiterating the Williamson County rule requiring Knick to first seek just compensation in state court before suing in federal court. The Supreme Court agreed to hear Knick’s case.  

In a surprising 5-4 decision authored by Chief Justice John Roberts, the Supreme Court overruled its 1985 Williamson County decision. Four justices from the court’s so-called conservative wing, Justices Clarence Thomas, Samuel Alito, Neil Gorsuch and Brett Kavanaugh, joined the chief justice’s opinion.  

The court noted that the Williamson County and San Remo Hotel decisions conspired to create a catch-22 where a plaintiff “cannot go to federal court without going to state court first; but if he goes to state court and loses, his claim will be barred in federal court.”  

The court decided to eliminate this quandary by overruling Williamson County, so that property owners can file just compensation suits against state or local governments in federal court at the time of the taking, without first suing in state court. The court vacated the Third Circuit Court of Appeals’ judgment against Knick, and remanded the case for further proceedings.  

The court’s so-called liberal wing – Justices Ruth Bader Ginsburg, Stephen Breyer, Elena Kagan and Sonia Sotomayor – dissented. The dissenting justices would have preserved Williamson County, and continued requiring property owners to first seek just compensation in state court. The dissenters feared that the majority’s decision would open a Pandora’s box of just compensation lawsuits in federal courts arising from changes in land-use laws. As to the catch-22 problem raised in the majority opinion, the dissenters maintained that Congress should fix the problem instead of the courts.  

Christopher R. Vaccaro

Big Changes for Litigation Strategies 

The Knick decision will transform litigation strategies for just compensation claims against local governments. When changes to local laws impair property rights, owners can consider bypassing state courts and going directly to federal courts with their just compensation claims. However, questions remain in cases involving loss of development rights when zoning and other land-use laws become more restrictive. Increased land-use restrictions can diminish property values, but they often allow for variances, waivers and similar relief for affected property owners. 

Will federal courts determine that takings occur when land-use laws become effective, or not until aggrieved property owners have sought variances or other relief through local administrative and judicial procedures? Will exhaustion of available administrative and judicial procedures be a prerequisite to filing just compensation claims in federal courts? The Knick decision does not directly address these questions, which are certain to arise. 

Christopher R. Vaccaro is a partner at Andover-based Dalton & Finegold. His email address is cvaccaro@dfllp.com. 

Supreme Court Opens Federal Doors to ‘Takings’ Plaintiffs

by Christopher R. Vaccaro time to read: 3 min