By Joel Ellinwood, AICP

A July 1, 2005 article posted on this blog termed the Supreme Court’s ruling in Lingle v. Chevron U.S.A., Inc. (2005) 544 U.S. 528 a “sea change” in 5th Amendment regulatory takings claim analysis by striking the “substantially advances a legitimate state interest” test. Now the fallout from Lingle from the Ninth Circuit makes it clear that the test survives to form the basis for 14th Amendment substantive due process challenges to land use regulations. However, the ultimate viability of such claims remains to be seen.

Crown Point Development, Inc. v. City of Sun Valley (9th Cir. 2007) 506 F.3d 851 affirms the theoretical existence of substantive due process claims in a land use proceeding. In Crown Point, the City of Sun Valley, Idaho, approved a phased residential development with a required minimum density. After building and selling the first three phases, the developer’s success became its nemesis. The homeowners living in the first three phases objected to the density of the fourth phase, causing the City Council to reduce the density, thus forcing the fifth phase to increase density to meet the prescribed minimum for the project as a whole. The homeowners so vociferously objected to the density of the fifth phase that the City denied the permit for that part of the project altogether. Protracted litigation in state court ensued, the state courts twice ordering the case remanded to the City for further findings. 

Having had its fill of frustration and the apparent absurdity of the City’s “damned if you do, damned if you don’t” legal position, Crown Point filed another action in federal court asserting a single claim – that the City’s action in denying the permit was so irrational that it violated fundamental due process of law guaranteed by the 14th Amendment, “. . . nor shall any state deprive any person of life, liberty or property without due process of law.”

Prior to Lingle substantive due process claims were understood to be subsumed in 5th Amendment takings claims, and no separate cause of action could be stated under the rule of Armendariz v. Penman (9th Cir. 1996) 75 F.3d 1311, 1321-24. The District Court dismissed Crown Point’s complaint on that basis. The Court of Appeal reversed, ruling that post-Lingle substantive due process claims are independent of takings analysis. Citing Lingle, the Court of Appeal explained that the issue in a takings case is compensation, whereas no money damages can remedy a regulation that is invalid because it does not rationally advance a legitimate governmental interest. Thus, the Court of Appeal reversed, reinstated the complaint, and remanded for further proceedings to better develop the record on the merits.

Litigants surviving the daunting gauntlet of federal jurisdiction standing, limitations periods and ripeness requirements to assert substantive due process claims still face the high threshold standard on the merits. As reiterated in another recent 9th Circuit case, Equity Lifestyle Properties, Inc. v. County of San Luis Obispo (2007) 505 F.3d 860:

[An] ordinance will survive a substantive due process challenge if it is ‘designed to accomplish an objective within the government’s police power, and if a rational relationship existed between the provisions and the purpose of the ordinances.’ This deferential inquiry does not focus on the ultimate effectiveness of the law, but on whether the enacting body could have rationally believed at the time of enactment that the law would promote its objective.  

Although the court could have dismissed the substantive due process claim as being time-barred, the Equity Lifestyle court took pains to dismiss the claim on the merits. It held that the plaintiff failed to distinguish both Supreme Court and Ninth Circuit cases holding that rent control ordinances are both within police power and are rationally related to the legitimate exercise of that power. In terms of California practice, Crown Point underscores the importance of the potential use of development agreements as an added measure of relief as against flawed municipal thinking.

Joel Ellinwood, AICP was formerly a senior associate with Abbott & Kindermann, LLP. For questions relating to this article or any other California land use, environmental and planning issues contact Abbott & Kindermann, LLP at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, nor the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.