New York Law Review

Tag: Regulatory Taking

  • Consumers Union of U.S., Inc. v. State, 5 N.Y.3d 327 (2005): State Power to Redirect Assets of Converting Non-Profit Insurer

    5 N.Y.3d 327 (2005)

    When a non-profit health insurer converts to a for-profit entity, the state has broad authority to direct the use of the conversion proceeds, provided the designated uses are reasonably consistent with the insurer’s historic mission of promoting affordable and accessible health care.

    Summary

    This case addresses the legal challenge to New York legislation authorizing Empire Blue Cross and Blue Shield’s conversion from a not-for-profit to a for-profit corporation. The legislation directed a substantial portion of Empire’s assets to public health and charitable purposes. The plaintiffs, Empire subscribers and related organizations, argued that the legislation violated due process, contract clauses, and constituted an unlawful taking of private property by diverting assets from Empire’s original charitable mission. The New York Court of Appeals upheld the legislation, finding that the state’s actions were within its authority to regulate non-profit conversions and that the designated asset uses aligned with Empire’s historic mission.

    Facts

    Empire began as a non-profit providing affordable hospital care to workers. Over time, it faced financial challenges due to community rating, open enrollment policies, and competition from commercial insurers. The New York legislature provided subsidies and favorable treatment to Empire over the years. Ultimately, Empire proposed converting to a for-profit entity to raise capital. The proposed conversion involved transferring assets to for-profit subsidiaries and using the proceeds for a charitable foundation. The Attorney General raised concerns, leading to legislative action culminating in Chapter 1 of the Laws of 2002, which authorized the conversion but directed 95% of the assets to a public asset fund managed by state appointees, and 5% to a charitable organization.

    Procedural History

    Subscribers and related organizations sued, alleging Chapter 1 was unconstitutional. The Supreme Court initially dismissed the complaint but later found a potential violation related to exclusive privileges. The Appellate Division affirmed. The Court of Appeals granted leave to appeal, certifying the question of whether the Appellate Division’s decision was properly made.

    Issue(s)

    1. Whether Chapter 1 of the Laws of 2002, authorizing Empire’s conversion and directing the use of its assets, constitutes an unconstitutional taking of private property under the state and federal constitutions?

    2. Whether Chapter 1 violates the Due Process Clause of the state and federal constitutions by depriving Empire of property rights without adequate procedural safeguards?

    3. Whether Chapter 1 violates the Contract Clause of the federal constitution and the due process clause of the state constitution by impairing contractual obligations?

    4. Whether Chapter 1 violates Article III, Section 17 of the New York Constitution by granting an exclusive privilege to Empire?

    Holding

    1. No, because Chapter 1 does not constitute an unconstitutional taking, as the legislation serves legitimate public purposes aligned with Empire’s historic mission and does not unduly interfere with Empire’s investment-backed expectations.

    2. No, because Chapter 1 provides sufficient process through public hearings, the Superintendent’s review, and the opportunity for judicial review.

    3. No, because Empire’s certificate of incorporation does not create a contract protected by the Contract Clause, and Chapter 1 does not impair any essential contractual attribute.

    4. No, because Chapter 1 does not grant Empire an exclusive privilege, as it does not prevent other entities from seeking similar conversions.

    Court’s Reasoning

    The Court reasoned that the plaintiffs lacked a cognizable property interest in the assets of Empire beyond their status as subscribers. However, due to the Attorney General’s conflict of interest and the Board’s statutory immunity, the subscribers had standing to protect Empire’s not-for-profit assets. The Court found that Chapter 1 did not effect an illegal taking because it did not compel Empire to convert, and the dedication of assets to health care worker recruitment and retention and public health programs aligned with Empire’s historic mission. The Court determined that the legislation did not violate due process, as it provided adequate procedural safeguards, including public hearings and judicial review. It also found that the legislation did not violate the Contract Clause because Empire’s certificate of incorporation was not a contract protected by the clause. Finally, the Court held that Chapter 1 did not violate the Exclusive Privileges Clause, as it did not grant Empire a monopoly. Key to the Court’s reasoning was the determination that the uses of the conversion proceeds were consistent with Empire’s mission of promoting affordable and accessible health care, even though the proceeds were directed to public programs rather than a private charitable foundation. The dissenting opinions argued that the legislation constituted an unlawful taking and violated the directors’ fiduciary duties.

  • Smith v. Town of Mendon, 4 N.Y.3d 1 (2004): Conditioning Site Plan Approval on Conservation Restriction

    4 N.Y.3d 1 (2004)

    A municipality does not commit an unconstitutional taking when it conditions site plan approval on the landowner’s acceptance of a development restriction consistent with the municipality’s pre-existing conservation policy, especially when the restriction does not deprive the landowner of all economically viable use of the property.

    Summary

    The Smiths sought to build a home on their property, which contained environmentally sensitive areas subject to town regulations (EPODs). The town conditioned site plan approval on the Smiths granting a conservation restriction on the EPOD portions, mirroring the existing EPOD regulations. The Smiths argued this was an unconstitutional taking. The court held it was not a taking, because the restriction advanced a legitimate government interest (environmental preservation) and did not deprive the Smiths of all economically viable use of their land, as they could still build a home and retained the right to exclude others. The conservation restriction was not an exaction requiring heightened scrutiny under Dolan because it did not involve a dedication of property for public use.

    Facts

    Paul and Janet Smith owned a 9.7-acre lot in the Town of Mendon, which included environmentally sensitive parcels along Honeyoe Creek. The lot fell within the creek’s 100-year floodplain, was near a protected agricultural district, and contained a woodlot and steep slopes. Significant portions were classified as environmental protection overlay districts (EPODs), which imposed use restrictions. The EPODs limited construction, land clearing, sewage disposal, stormwater discharge, and excavation. Property owners could seek development permits within EPODs by showing their activities would not destabilize the soil or cause erosion, and that there was no reasonable alternative.

    Procedural History

    The Smiths applied for site plan approval to construct a single-family home. The Planning Board approved the plan, conditioning it on the Smiths filing a conservation restriction on the EPOD portions of their property. The Smiths rejected the restriction and commenced a lawsuit, arguing an unconstitutional taking. The Supreme Court applied Dolan and found no taking. The Appellate Division affirmed, finding no exaction and a reasonable relationship to the town’s objectives. The Smiths appealed to the New York Court of Appeals.

    Issue(s)

    Whether a municipality commits an unconstitutional taking when it conditions site plan approval on the landowner’s acceptance of a development restriction consistent with the municipality’s pre-existing conservation policy, which does not require dedication of property for public use.

    Holding

    No, because the conservation restriction substantially advanced a legitimate government purpose (environmental preservation) and did not deprive the Smiths of all economically viable use of their property. It was not an exaction subject to heightened scrutiny under Dolan since it did not involve dedicating property for public use.

    Court’s Reasoning

    The court distinguished this case from regulatory takings requiring heightened scrutiny under Nollan and Dolan. Those cases involved exactions, defined as “land-use decisions conditioning approval of development on the dedication of property to public use.” Here, the conservation restriction did not require dedicating property to public use; the Smiths retained the right to exclude others from their property. The court stated, “There is no such dedication of ‘property’ here.”

    Because no exaction occurred, the court applied the standard from Agins v. City of Tiburon, asking whether the restriction substantially advanced a legitimate government interest and whether it deprived the landowner of economically viable use of their property. The court found the restriction advanced environmental preservation, a legitimate government interest. It also found the restriction did not deny the Smiths economically viable use because they could still build a home on the property, making it “a valuable, marketable asset.” The court emphasized, “a modest environmental advancement at a negligible cost to the landowner does not amount to a regulatory taking.” The court held that the town’s action was a valid exercise of its police powers and did not force the landowners to bear a burden that should be borne by the public as a whole. The court also noted that the conservation restriction was consistent with the State’s commitment to protecting critical natural resources.

    The dissent argued that the conservation restriction advanced the Town’s interests only marginally and therefore constituted a taking under Agins. The majority rejected this argument, stating that ensuring perpetual protection for open spaces from land-use battles was a significant governmental interest.

  • Bonnie Briar Syndicate, Inc. v. Town of Mamaroneck, 94 N.Y.2d 440 (2000): Standard for Regulatory Taking Claims

    Bonnie Briar Syndicate, Inc. v. Town of Mamaroneck, 94 N.Y.2d 440 (2000)

    A zoning regulation constitutes a taking if it does not substantially advance legitimate state interests, and the appropriate standard for determining whether a zoning regulation substantially advances legitimate state interests (when no exaction is involved) is whether the action bears a reasonable relationship to achieving a legitimate objective.

    Summary

    Bonnie Briar Syndicate sued the Town of Mamaroneck, alleging that a zoning change from residential to recreational use constituted a regulatory taking. The Town rezoned Bonnie Briar’s golf course property to preserve open space, recreational opportunities, and mitigate flooding. Bonnie Briar argued the rezoning didn’t substantially advance these interests, as less restrictive options existed. The court held that the “essential nexus” standard from exaction cases like *Nollan* and *Dolan* doesn’t apply to general zoning regulations. The appropriate standard is whether the regulation bears a reasonable relationship to legitimate objectives. Because the rezoning bore a reasonable relation to legitimate objectives, no taking occurred.

    Facts

    Bonnie Briar owned a 150-acre property leased as a private golf course since 1921. In 1994, the Town of Mamaroneck rezoned the property from residential to recreational use. The Town had been studying diminishing open spaces since the 1960s, with multiple plans recommending the golf course remain as such. A study highlighted the land’s role in flood control as part of the Sheldrake River floodplain. Bonnie Briar submitted a plan for 71 residential lots before the rezoning.

    Procedural History

    Bonnie Briar sued, claiming an unconstitutional taking. The Supreme Court initially dismissed the cause of action alleging an insufficiently close relationship between the Town’s goals and zoning ordinance, which the Appellate Division affirmed. The Supreme Court then denied summary judgment for the remaining causes of action concerning an alleged economic taking, but the Appellate Division reversed, granting summary judgment to the Town and declaring the law constitutional. The New York Court of Appeals then heard the case.

    Issue(s)

    Whether the change in zoning of plaintiff’s property from residential to recreational use, constituted a regulatory taking under the Fifth and Fourteenth Amendments to the United States Constitution because the zoning regulation did not substantially advance legitimate state interests.

    Holding

    No, because the zoning regulation bears a reasonable relationship to the legitimate objectives of preserving open space, providing recreational opportunities, and mitigating flooding.

    Court’s Reasoning

    The court applied the *Agins* standard, which asks whether the zoning law substantially advances legitimate state interests and whether it denies an owner economically viable use of their land. Bonnie Briar only pursued the first prong. Bonnie Briar argued that the “close causal nexus” standard from *Seawall* and *Manocherian* applied, requiring a tight fit between the Town’s objectives and the law. The court rejected this, clarifying that the heightened scrutiny of *Nollan* and *Dolan* (essential nexus and rough proportionality) applies only to exaction cases, not general zoning regulations.

    The court cited *City of Monterey v. Del Monte Dunes* as reaffirming that the *Agins* standard applies to regulatory takings that do not involve an exaction. In *Del Monte Dunes*, the Supreme Court held that where the landowner’s challenge is based on denial of development, the rough-proportionality test of *Dolan* is inapposite. The court reasoned that because the *Dolan* test does not apply, the ‘essential nexus’ test from *Nollan* also does not apply because the Supreme Court limited its application to cases involving exactions.

    “[T]he regulatory actions of the city or any agency substantially advance a legitimate public purpose if the action bears a reasonable relationship to that objective.”

    The court concluded that because the rezoning bore a reasonable relation to the Town’s legitimate objectives, no taking occurred. The fact that less restrictive options existed was irrelevant, as long as the chosen method substantially advances the public interest. The court deferred to the zoning board’s judgment and emphasized that it’s not the court’s role to determine if a regulation is more stringent than necessary. The court emphasized that the zoning districts were shifted in response to years of study and documentation regarding recurrent flooding problems and concerns.

  • Gazza v. New York State Dept. of Envtl. Conservation, 89 N.Y.2d 603 (1997): Subsequent Purchasers and Regulatory Takings Claims

    89 N.Y.2d 603 (1997)

    A subsequent purchaser of property may bring a regulatory takings claim, but such a claim will only succeed if the regulation denies the owner economically viable use of the property.

    Summary

    Gazza sought to build a single-family home on his property, but his application was denied due to tidal wetlands regulations. He claimed the denial constituted a taking without just compensation. The New York Court of Appeals held that while a subsequent purchaser can bring a takings claim, Gazza failed to prove the regulation deprived his property of all economic value. The court reasoned that Gazza was aware of the regulations when he purchased the land, but that did not automatically bar his claim. However, because he could not demonstrate that the property retained no economic value, his takings claim failed.

    Facts

    Gazza purchased a parcel of land in 1988. The land was designated as tidal wetlands and subject to regulations under the Tidal Wetlands Act. Gazza applied to the Department of Environmental Conservation (DEC) for permission to build a single-family home on the property. The DEC denied the permit, citing the regulations protecting tidal wetlands. Gazza then filed suit, claiming the denial of the permit constituted a taking of his property without just compensation.

    Procedural History

    Gazza initially sued in Supreme Court, which ruled against him. The Appellate Division affirmed. The New York Court of Appeals granted leave to appeal to consider whether a subsequent purchaser can bring a regulatory takings claim and whether Gazza had established a taking.

    Issue(s)

    1. Whether a subsequent purchaser of property, who takes title with knowledge of pre-existing regulations restricting the use of the property, is automatically barred from bringing a regulatory takings claim.

    2. Whether the denial of a permit to build on the property constituted a regulatory taking requiring just compensation.

    Holding

    1. No, because a subsequent purchaser is not automatically barred from bringing a regulatory takings claim; the timing of the purchase is a factor to be considered.

    2. No, because Gazza failed to demonstrate that the denial of the permit deprived his property of all economically viable use.

    Court’s Reasoning

    The court acknowledged the split of authority on whether a subsequent purchaser can bring a takings claim. The court rejected a per se rule barring such claims, reasoning that it would unduly restrict the alienability of property. The court stated that while knowledge of the regulation is a factor in determining whether a taking occurred, it is not dispositive. The court emphasized the importance of analyzing whether the regulation denies the owner economically viable use of the property. Quoting from prior precedent, the court stated: “a subsequent purchaser may attack previously enacted regulations that affect the purchased property as beyond government’s legitimate police power”. The court found that Gazza failed to meet his burden of proving that the DEC’s denial deprived the property of all economic value. He did not demonstrate that the property was unsuitable for other uses or that it had no remaining market value. Therefore, his takings claim failed. Judge Wesley concurred, agreeing with the result but disagreeing with the majority’s view that a subsequent purchaser’s claim should be treated differently.

  • Anello v. Zoning Bd. of Appeals, 89 N.Y.2d 535 (1997): Subsequent Purchasers and Regulatory Takings Claims

    89 N.Y.2d 535 (1997)

    A subsequent purchaser of property is generally prevented from asserting a regulatory takings claim based on regulations that were in effect at the time of purchase, especially when the property is also subject to restrictive covenants.

    Summary

    This case concerns whether a property owner, Anello, who purchased land already subject to wetlands regulations and restrictive covenants, could claim a regulatory taking. The New York Court of Appeals held that Anello could not claim a taking. The court reasoned that the regulations were in place when she bought the property, and the prior owner had already encumbered the property with covenants that limited its use and value. Therefore, Anello did not have the unrestricted development rights in her “bundle” of property rights when she acquired the land, precluding her takings claim.

    Facts

    A prior owner of the property filed covenants that substantially restricted the use and value of the property, in exchange for the right to subdivide and develop what was then a larger parcel. Later, Anello purchased the property. At the time of purchase, the property was subject to both the existing wetlands regulations and the previously filed restrictive covenants.

    Procedural History

    The Supreme Court determined that the Town did not need to compensate Anello as if she retained the unrestricted right to develop the parcel. The New York Court of Appeals affirmed this decision.

    Issue(s)

    Whether a claimant is prevented from claiming a regulatory taking of her property based on regulations already in place at the time she took title, when the property is also subject to restrictive covenants filed by a former owner substantially restricting its value and use.

    Holding

    No, because the claimant took title subject to covenants filed by the former owner of the property, which substantially restrict the value and use of the property, and because the wetlands regulations were already in effect when the claimant purchased the property.

    Court’s Reasoning

    The court reasoned that the wetlands regulations did not deprive the claimant of any interest in the property that had not already been encumbered by the former owner through the covenants. By purchasing the property with pre-existing restrictions, the claimant never possessed the unrestricted right to develop the parcel. The court essentially adopted the principle that a purchaser cannot claim a taking based on regulations already in place when they bought the property, because the purchase price presumably reflected the restrictions. Wesley, J., concurring, stated that, even if the property should be valued for single-family residences, that valuation is “a consequence of the covenants entered into by the former owner in exchange for the right to subdivide and develop what was then a larger parcel.” The court, in effect, decided that the restrictions already ran with the land, meaning the current owner took title to land that already had those restrictions in place.

  • Manocherian v. Lenox Hill Hospital, 84 N.Y.2d 385 (1994): Regulatory Takings and Substantial State Interest

    84 N.Y.2d 385 (1994)

    A statute requiring landlords to offer renewal leases to not-for-profit hospitals for employee housing constitutes an unconstitutional regulatory taking if it does not substantially advance a legitimate state interest.

    Summary

    The case concerns a challenge to a New York law (Chapter 940) that required landlords to offer renewal leases to not-for-profit hospitals for apartments used to house their employees. The landlords argued this was an unconstitutional taking of their property. The New York Court of Appeals held that the law was unconstitutional because it did not substantially advance a legitimate state interest. The court reasoned that the law primarily benefited the hospital, not the general public, and therefore placed an unfair burden on the landlords. The decision highlights the importance of a close connection between a regulation and a legitimate state interest when private property rights are at stake.

    Facts

    Plaintiffs owned an apartment building and leased several units to Lenox Hill Hospital for employee housing. New York enacted Chapter 940, requiring landlords to offer renewal leases to not-for-profit hospitals for employee housing, effectively granting the hospital long-term control over the apartments. Plaintiffs sued, arguing Chapter 940 was an unconstitutional taking of their property.

    Procedural History

    The Supreme Court dismissed the complaint, upholding the law. The Appellate Division affirmed, leading to an appeal to the New York Court of Appeals. The Court of Appeals reversed the lower courts, declaring Chapter 940 unconstitutional and remanding the case for further proceedings.

    Issue(s)

    Whether Chapter 940 of the Laws of 1984 constitutes an unconstitutional taking of private property by requiring landlords to offer renewal leases to not-for-profit hospitals for employee housing.

    Holding

    No, because Chapter 940 does not substantially advance a legitimate state interest and therefore places an unjustifiable burden on the property owners.

    Court’s Reasoning

    The Court of Appeals applied the two-pronged test established in Seawall Assocs. v City of New York, asking whether the regulation (1) denies an owner economically viable use of their property, or (2) fails to substantially advance legitimate state interests. The Court focused on the second prong. The Court found that Chapter 940 primarily benefited Lenox Hill Hospital by providing subsidized housing for its employees, rather than addressing a broader public need related to the housing shortage. The court noted that the law contradicted the Rent Stabilization Law’s goals of occupant protection and eventual market redemption. The Court emphasized that the preservation of this Manhattan Upper East Side housing enclave for this privileged entity’s benefit, albeit one engaged in a laudable and necessary eleemosynary health service function, cannot masquerade as general welfare legislation.

    The Court distinguished this situation from legitimate exercises of the state’s police power, emphasizing that a law must not force some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole. “That law, in the unusual development and circumstances of this case, must meet the constitutional safeguards on its own merits, not as an augmentation or complement to some generalized State interest found elsewhere in organic law or other statutes.” The court found no close causal nexus between the law and the goals of the Rent Stabilization Law and Emergency Tenant Protection Act, which seek to ameliorate the emergency housing shortage. “This has little to do with a general State housing concern warranting chapter 940’s intervention. Rather, it sharply contradicts that indispensable legislative threshold and constitutional prerequisite.” Because the statute did not substantially advance a legitimate state interest warranting the indeterminate and unjustifiable burden draped disproportionately on the particular owners’ shoulders, it constituted an unconstitutional taking.

  • Matter of Birnbaum v. State, 73 N.Y.2d 638 (1989): Government Regulation Requiring Continued Business Operation Is Not a Taking

    Matter of Birnbaum v. State, 73 N.Y.2d 638 (1989)

    A state regulation requiring a business, particularly one in a pervasively regulated industry like nursing homes, to continue operating for a reasonable period to allow for alternative arrangements does not automatically constitute a taking under the Fifth Amendment.

    Summary

    The New York Court of Appeals held that the State’s action of requiring a nursing home to remain open until alternative arrangements could be made for patients did not constitute a “taking” of property requiring compensation. The nursing home owners sought to close the facility due to unprofitability, but the state intervened to prevent immediate closure, citing regulations requiring notice and approval. The court reasoned that the nursing home industry is heavily regulated, and the state’s action was a reasonable measure to prevent a public emergency, not an unconstitutional taking.

    Facts

    Bernard Birnbaum operated Abbott Manor Nursing Home. After his death, his executors (respondents) found the nursing home unprofitable due to insufficient Medicaid reimbursement rates. They attempted to increase reimbursement rates, sell the facility, or find a receiver, but were unsuccessful. Respondents notified relatives of Medicaid patients of the imminent closure of the nursing home.

    Procedural History

    The State sought and obtained a temporary restraining order to prevent the nursing home’s closure. The Supreme Court appointed coreceivers to operate the facility and held the State responsible for operating costs. The Appellate Division determined the Court of Claims had sole jurisdiction regarding compensation. The Court of Claims later granted summary judgment to respondents, finding a “taking.” The Appellate Division affirmed. The New York Court of Appeals reversed.

    Issue(s)

    Whether the State’s action of requiring a nursing home to remain open and operating until reasonable alternative arrangements could be made for the continued care of the patients constituted a “taking” of property under the Fifth and Fourteenth Amendments of the U.S. Constitution and Article 1, Section 7 of the New York Constitution.

    Holding

    No, because the State’s actions, preventing the precipitous closing of a nursing home in contravention of the regulations of the Department of Health, did not constitute a “taking” of property under the Federal or State Constitutions.

    Court’s Reasoning

    The court reasoned that the nursing home industry is subject to extensive state regulation to control costs and ensure adequate provision of facilities. Regulations prevent nursing homes from discontinuing operation without 90 days’ notice and the Commissioner of Health’s approval. The court applied factors used to determine if a taking has occurred: the economic impact of the government’s action, its frustration of reasonable investment-backed expectations, and the action’s public purpose. Citing Penn Central Transp. Co. v New York City, 438 U.S. 104 (1978). The court cited Justice Holmes stating that a person “cannot be compelled to carry on even a branch of business at a loss, much less the whole business”. However, the court emphasized the narrowness of that rule, and that a person’s right to cease operations is not a per se taking in a pervasively regulated industry with administrative procedures for terminating service. The court held that a business “may be made to suffer interim reasonable losses, without compensation, for a reasonable period of time during which solutions accommodating the public and private interests can be devised.” The State conferred upon the owners the exclusive right to operate a nursing home because the public interest required exclusivity. Therefore, the State may enforce the obligation that there not be immediate termination of nursing home services, because such use of the property threatens imminent injury to the public. “Long ago it was recognized that ‘all property in this country is held under the implied obligation that the owner’s use of it shall not be injurious to the community’ “, citing Keystone Bituminous Coal Assn. v DeBenedictis, 480 U.S. 470 (1987).

  • Wedinger v. Goldberger, 71 N.Y.2d 428 (1988): Extent of DEC Jurisdiction Under the Freshwater Wetlands Act

    Wedinger v. Goldberger, 71 N.Y.2d 428 (1988)

    The New York State Department of Environmental Conservation (DEC) has continuing jurisdiction under the Freshwater Wetlands Act to identify and map potential freshwater wetlands at least up to and including the promulgation of a final map.

    Summary

    This case addresses whether the DEC’s failure to designate certain properties on a tentative map exempts those properties from DEC jurisdiction and regulation under the Freshwater Wetlands Act. The Court of Appeals held that the DEC’s jurisdiction extends throughout the mapping process, including the period before a final map is promulgated. The Court reasoned that restricting DEC’s jurisdiction to only mapped areas would frustrate the intent of the Act, which is to protect and preserve freshwater wetlands. The Court also addressed the appellants’ claims that the tentative designation of their properties as wetlands constituted a taking without just compensation, finding that the requirement to obtain a permit did not constitute a taking.

    Facts

    Several individuals and corporations purchased land in the Bloeser’s Pond area of Staten Island in 1984. These properties were not designated as freshwater wetlands on the 1981 tentative map issued by the DEC.
    In 1985, the DEC began studying the Bloeser’s Pond area for possible freshwater wetland designation. The DEC discovered that the area qualified as a wetland based on its acreage.
    The DEC notified the landowners that their lands were tentatively identified as freshwater wetlands and that they needed to apply for a permit before developing the land.
    The landowners, instead of seeking permits, challenged the DEC’s jurisdiction over their properties.

    Procedural History

    The landowners initiated Article 78 proceedings challenging the DEC’s attempt to regulate their properties.
    The Supreme Court, Richmond County, granted the petitions, holding that the DEC lacked jurisdiction over the properties.
    The Appellate Division unanimously reversed the Supreme Court’s decision and dismissed the petitions, upholding the DEC’s jurisdiction.
    The case then went to the New York Court of Appeals.

    Issue(s)

    Whether the DEC’s failure to designate the appellants’ properties on a 1981 tentative map exempts those properties from DEC jurisdiction and regulation under the Freshwater Wetlands Act, when subsequent tentative and final maps included the properties.
    Whether the tentative designation of the appellants’ properties as wetlands constitutes a deprivation of property without just compensation.

    Holding

    1. No, because the DEC has continuing jurisdiction under the Freshwater Wetlands Act to identify and map potential freshwater wetlands at least up to and including the promulgation of a final map.
    2. No, because the tentative designation as a wetland does not prohibit development but merely requires that those holding property interests obtain an administrative permit. Further, the landowners failed to exhaust their administrative remedies by seeking a permit before bringing suit.

    Court’s Reasoning

    The Court reasoned that the statutory scheme of the Freshwater Wetlands Act, particularly ECL 24-0703 (5), contemplates DEC jurisdiction during the entire evolving period up to and including final mapping. To hold otherwise would frustrate the intent and purpose of the legislation.
    The Court cited Matter of Tri Cities Indus. Park v Commissioner of Dept. of Envtl. Conservation, 76 AD2d 232, 235-236, stating, “The plain language of this subdivision [ECL 24-0703 (5)] proscribes activity on said lands prior to promulgation of a final wetland map unless a permit has been issued. This clear language, together with the express public policy and intent of the legislation as declared in ECL 24-0103, confers jurisdiction in DEC for the entire period between the effective date of the act and promulgation of a final map. To hold otherwise would frustrate the clear intent and purpose of the legislation”.
    Regarding the taking claim, the Court distinguished French Investing Co. v City of New York, 39 NY2d 587, where a zoning ordinance directly converted private lands into public domain. In contrast, the Freshwater Wetlands Act merely requires landowners to obtain a permit before engaging in certain activities. The Court also emphasized that a taking can only be established after a permit has been sought and denied, and the owner has demonstrated that no permissible use would allow a reasonable return on the property.
    The Court referenced Spears v Berle, 48 NY2d 254, reiterating that a landowner bears a “heavy burden of proof” to establish a taking.
    The court also rejected the landowner’s reliance on First English Evangelical Lutheran Church v. County of Los Angeles because the landowners had not first established that a taking had occurred by seeking a permit.

  • de St. Aubin v. Flacke, 68 N.Y.2d 66 (1986): Burden of Proof in Wetlands Taking Claims

    de St. Aubin v. Flacke, 68 N.Y.2d 66 (1986)

    In a regulatory taking claim involving tidal wetlands restrictions, the landowner bears the burden of proving that the regulation prevents any reasonable economic use of the property, including demonstrating that there is no reasonable probability of obtaining a variance or zoning change that would permit such use.

    Summary

    Petitioners, landowners of tidal wetlands, were denied a permit to develop their property due to environmental regulations. They claimed this denial constituted a taking without just compensation. The New York Court of Appeals held that while the claim was ripe for review, the lower courts erred by placing the burden on the state to prove a reasonable probability of rezoning. The court clarified that the landowner bears the burden of proving that the regulation prevents any reasonable economic use of the property, including demonstrating that there is no reasonable probability of obtaining a variance or zoning change.

    Facts

    Petitioners owned 103 acres of land, 81 of which were designated as tidal wetlands by the Commissioner of Environmental Conservation. They sought a permit to fill the wetlands and build 607 single-family residences. The permit was denied. The Town of Hempstead had zoned the properties as Residence B, permitting only single-family dwellings on lots of at least 6,000 square feet. Prior to the Tidal Wetlands Act, petitioners’ application to rezone the property for multifamily development had been denied. After the denial of the wetlands permit, the state proposed alternative development plans involving smaller lot sizes or cluster zoning of the uplands.

    Procedural History

    Petitioners filed suit challenging the permit denial and claiming a taking. Special Term upheld the permit denial but found a taking, ordering the state to either grant the permit or commence condemnation proceedings. The Appellate Division affirmed this decision. The New York Court of Appeals granted leave to appeal.

    Issue(s)

    1. Whether petitioners’ claims, instituted before petitioners had sought and been denied a variance or rezoning of the properties by the Hempstead Town Board, are ripe for judicial review?
    2. Whether the courts below erred in placing the burden on respondent to prove that there existed a reasonable probability that petitioners could obtain a rezoning of the subject parcels?
    3. Whether petitioners had that burden, does the evidence in the record support their claim?

    Holding

    1. Yes, the matter is ripe for review, because the Commissioner’s decision was final.
    2. Yes, the courts below erroneously shifted to respondent the burden of proving that there was a reasonable probability of rezoning.
    3. No, because the burden of proof should have been on petitioners, and the record doesn’t conclusively establish they met it.

    Court’s Reasoning

    The Court of Appeals reasoned that while ripeness generally requires a final decision from all relevant regulatory bodies, it would be impractical to force the landowners to seek relief from every conceivable agency. The court acknowledged the difficulty that landowners face when regulated by both state and local governments. However, to succeed on a taking claim, a landowner must prove that the regulation deprives them of any reasonable economic use of the property. This includes showing that there is no reasonable probability of obtaining a variance or zoning change from the town that would allow such use. The court emphasized the heavy burden on the landowner to overcome the presumption of constitutionality. The court found that the lower courts erred by placing the burden of proof on the State to show that a zoning change was likely. The burden is on the landowner to demonstrate that no reasonable use is possible, including showing the improbability of a zoning change. The court noted that the landowners conceded that one request for cluster zoning (after a change in zoning laws) was granted for a parcel only five miles from the parcel in question. The court also said that the landowner could wait until the state condemned the land and then petition for a zoning variance, which could allow the landowner to potentially “profit from the condemnation of the wetlands and still retain the full potential value of the uplands.” The court remanded the case for a new hearing with the burden of proof properly placed on the petitioners. As the court stated, “If the courts were forced to look to the property as it is, rather than as it could be [landowners] could frustrate any land use restrictions”.

  • Eaton v. Town of Islip, 43 N.Y.2d 879 (1978): Zoning Ordinance Resulting in Confiscation Requires Compensation

    Eaton v. Town of Islip, 43 N.Y.2d 879 (1978)

    A zoning ordinance that deprives a property owner of all practical use of their land is confiscatory and requires just compensation under the Due Process Clauses of the Federal and State Constitutions.

    Summary

    Eaton sought to rebuild her house, which was destroyed by a storm, but was denied a building permit due to a town ordinance restricting construction in the “Dune District” to pedestrian dune crossings or fences. Eaton challenged the ordinance as unconstitutional, arguing it deprived her of all practical use of her property. The New York Court of Appeals affirmed the lower courts’ rulings, holding that the ordinance, as applied to Eaton’s property, was confiscatory because it deprived her of any reasonable use without just compensation, violating due process.

    Facts

    In 1958, Eaton’s house was built on her property. On February 6, 1978, a violent storm washed the house out to sea. Eaton applied for a building permit to rebuild, but was denied because of Section 68-59.1 of the Town Code of Islip (the “Dune District” ordinance). The ordinance restricted construction in the Dune District to “an elevated pedestrian dune crossing or a fence of a type approved by the Town of Islip which is designed to hold or increase the dune”.

    Procedural History

    Eaton initiated an action challenging the denial of the permit. Both the lower courts found the ordinance unconstitutional as applied to Eaton’s property. The Town of Islip appealed to the New York Court of Appeals.

    Issue(s)

    Whether the Town of Islip’s Dune District ordinance, as applied to Eaton’s property, deprived Eaton of all practical use of her property, thereby constituting a confiscatory taking requiring just compensation under the Due Process Clauses of the Federal and State Constitutions.

    Holding

    Yes, because the ordinance restricted construction to uses that deprived Eaton of all practical use of her property, rendering the restriction confiscatory and requiring just compensation.

    Court’s Reasoning

    The court found that the Town failed to provide sufficient evidence to dispute the lower courts’ determination that the ordinance deprived Eaton of all practical use of her property. The court emphasized that the permissible uses under the ordinance (pedestrian dune crossing or a specific type of fence) did not allow Eaton to use the property in a way to which it was reasonably adapted. The court stated, “The restriction is, therefore, confiscatory and thus would work such a substantial deprivation of plaintiff’s use of her property, without just compensation, as to violate the due process clauses of our Federal and State.Constitutions.” The court distinguished the town’s right to regulate land for public safety (ecology, safeguarding life and property) from its obligation to provide just compensation when such regulation amounts to a taking. The court acknowledged the town’s valid interest in preserving the ecology of the dunes, stating: “The issue is not whether the town may constitutionally so restrict plaintiff’s land ‘to preserve the ecology of the dunes and grasses and by doing so to safeguard life and property’, but whether it can do so without according plaintiff just compensation. We agree that it cannot.” The court dismissed the argument that a prior offer from the federal government to purchase the property negated the confiscatory effect of the ordinance because the narrowly restricted uses remained.