Regulators Ruled Not Liable for Development Delays

SAN FRANCISCO —  In a victory for environmentalists and state and local governments, a divided California Supreme Court held Thursday that private property owners are not entitled to compensation for improper development delays caused by regulatory agencies.

The justices, examining a major property rights case, narrowly overturned lower court rulings that found the California Coastal Commission liable for an illegal, temporary “taking” of private property when the panel denied a building permit for hilltop land in Malibu.

A coalition of 75 cities and environmentalists had warned the court that regulatory agencies would face financial nightmares if developers could demand compensation for delays in project approvals. The California Chamber of Commerce and other industry groups countered that regulators should be financially responsible for improperly halting development and costing private landowners the temporary use of their property.

The 4-3 decision now ensures that regulatory agencies in California will be protected from such lawsuits as long as they acted in the public interest and had plausible reasons to believe that their actions were legal.

Calling the decision’s impact “huge” and “disastrous,” the attorney for the landowner in the case predicted that the ruling would “wreak havoc in developments throughout the state.”

“It is basically telling governmental agencies and bureaucrats that they can delay [building] applications with impunity if they come up with plausible arguments,” said the lawyer, Benjamin M. Reznik.

But John Echeverria, a Georgetown University law professor, defended the decision as being protective of the environment.

“An adverse ruling would have tilted the balance against the environment and in favor of developers by making it more dangerous for local officials to protect land and other natural resources,” said Echeverria, who represented several environmental groups as friends of the court.

The case stemmed from a dispute over 2.45 acres in Malibu that Peter and Bunte Bogart bought in 1990 from Mick Fleetwood of the rock group Fleetwood Mac. The couple received permission to build a house from Los Angeles County, which had previously approved a realignment of the parcel boundaries in exchange for obtaining some of the land for a road.

But the Bogarts also needed approval from the Coastal Commission and applied to build a 7,500-square-foot house on the property. Coastal Commission staff objected because the house would be seen from a scenic location that included a hiking trail to Escondido Falls.

The commission denied the permit, contending that previous realignment of property boundaries should have had its approval.

The Bogarts sued, and a trial court and a Court of Appeal held that the county, not the Coastal Commission, had authority over the lot configuration. The commission eventually approved a modified version of the development.

Citing recent U.S. Supreme Court rulings in favor of private property rights, the Bogarts again went to court to ask for compensation for the two years they had spent fighting the commission’s improper denial. The property owners said the delay constituted a temporary “taking,” or seizing, of private property barred by the U.S. Constitution. A trial court and a Court of Appeal agreed and held that the owners could collect damages and receive compensation for attorneys’ fees, a total of about $250,000.

But Justice Stanley Mosk, writing for the state Supreme Court majority, said the two-year postponement of the Malibu project “fell squarely into the category of a normal delay rather than a temporary taking.”

“The imposition of a development condition is not a constitutional violation merely because that condition is subsequently shown to have been erroneously imposed,” Mosk wrote.

He cautioned that governments could still be forced to pay compensation if they fabricated a legal dispute or arbitrarily slapped on development conditions simply to discourage building.

Chief Justice Ronald M. George, Joyce L. Kennard and Kathryn Mickle Werdegar joined Mosk. The court’s most conservative members, Justices Marvin Baxter, Ming W. Chin and Janice Rogers Brown, dissented.

“When a regulatory agency prohibits all use of a particular property, and the property owner is forced to sue the agency to get it to change its position, its stonewalling is not fairly characterized as a ‘normal delay’ in the permit approval process,” Chin said.

Brown charged that the court majority had engaged in “torturous logic” to “dodge” the result required by recent U.S. Supreme Court rulings in favor of property owners. The majority’s reasoning has made U.S. Supreme Court precedent “a dead letter” in California, she said.

“When the government denies all economically viable use of property, even temporarily,” Brown wrote, “. . . government must turn square corners--except in California.”

Reznik, the lawyer for the Bogarts, said he is considering an appeal to the U.S. Supreme Court. He called the ruling disastrous and charged that it created “a cover for overregulation” in the state.

Paul Campos, who represented several industry groups in the case, said the court had been “singularly hostile” to property owners who bring suit against government. “What the majority has done in this case is tell the U.S. Supreme Court that its opinions are null and void in California,” he said.

State Deputy Atty. Gen. Joseph Barbieri, who represented the Coastal Commission, said regulatory agencies will continue to be bound by strict timetables in considering development plans.

“This decision doesn’t lessen government’s obligation to act in good faith,” he said. “It simply recognizes the reality of modern land use. . . . Sometimes there are delays while we address complex issues.”

The Malibu house has yet to be built. The Bogarts ran into financial difficulties, and the project still must “go through the permitting process with the city of Malibu, which is not an easy task these days,” Reznik said.