Eric Bregman, Esq. (www.ericbregman.com), a prominent land use attorney in Long Island’s East End, sent me the decision handed down by the Eleventh Circuit on June 21, 2021, South Grand View Development Company, Inc. v City of Alabaster, Alabama 1F. 4th 1299.
The facts are relatively simple. The plaintiff purchased 547 acres of land in the City of Alabaster for $1.65 million. The masterplan for development was submitted to and approved by the City. Most of the development was completed by 2008 but the 142-acre portion of land at issue, Section 16, was one of the last phases of the development. Sector 16 was zoned predominantly for R-4 and R-7 with a small portion as R-2.
On December 5, 2011, the City rezoned Sector 16 for R-2 lots only.
SGV filed suit against the City pursuant to 42 U.S.C. Secs. 1983, 1985(3) and 1988, alleging that the City had violated its rights under the Fifth Amendment because the rezoning “constitute(d) an unlawful taking of its property without just compensation therefor” and under the Fifth and Fourteenth Amendments for denial of procedural and substantive due process for the same taking.
Testimony at the trial established that R-4 and R-7 are ‘highly coveted” zoning designations for a builder. By contrast, building R-2s was not economically feasible because it would require greater expenditures, would result in half the number of lots and would not result in marketable homes. The jury found that before the rezoning the fair market value of Sector 16 was $3,532,849 and after the taking, the value of the property was $500,000.
The City made several arguments on appeal. First, that the just compensation claim was not ripe. Second, that evidence tending to show the City acted in an arbitrary and capricious manner was irrelevant. Third, the value of SGV’s property was irrelevant. Fourth, evidence about how much would have been paid for hypothetical R-4 lots was irrelevant. Finally, that the District Court should have not precluded evidence that after the zoning SGV lost much of its property due to foreclosure.
The Court found that the case was ripe for trial. The 11th Circuit held that a zoning ordinance was itself a final decision on the merits. The City passed an ordinance that targeted precisely and only Sector 16 over SGV’s objection and without means of relief under Alabama law.
The Court disagreed with the City’s argument regarding why and how the zoning ordinance was passed was irrelevant. The Court noted that specific motive evidence of the City’s motivation was relevant under the Penn Central Factors.
The Court held that Lingle v Chevron U.S.A, Inc., 544 U.S. 528 (2005) changed the rule that the fact finder must examine whether the City’s action was “reasonably necessary to the effectuation of a substantial public purpose.” Now, for just compensation claims, the “character of the government action” is another way to examine the severity of the government interference with property rights.
The City objected on appeal of evidence of the desire to purchase lots in the prior zoning. The Court would have none of it, “[a] favorable zoning designation, and interest from a potential buyer are factors indicating a reasonable purchase price.”
Thus, the Court was committing “sound and just trial practice” in admitting evidence of a sale, or at least interest in a sale.
The jury award of $3.5 million was affirmed.