Crown Point Development v. City of Sun Valley

• Decision Date: 01 November 2007
• Docket Number: No. 06-35189.,06-35189.
• Citation: 506 F.3d 851
• Parties: CROWN POINT DEVELOPMENT, INC., Plaintiff-Appellant, v. CITY OF SUN VALLEY; Jon C. Thorson, in his official capacity as Mayor of Sun Valley and in his private capacity; Ann Agnew; Blair Boand; Kevin Laird; Lud Renick, in their official capacities as members of the Sun Valley City Counsel and in their individual and private capacities, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

506 F.3d 851

CROWN POINT DEVELOPMENT, INC., Plaintiff-Appellant, v. CITY OF SUN VALLEY; Jon C. Thorson, in his official capacity as Mayor of Sun Valley and in his private capacity; Ann Agnew; Blair Boand; Kevin Laird; Lud Renick, in their official capacities as members of the Sun Valley City Counsel and in their individual and private capacities, Defendants-Appellees.

No. 06-35189.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted October 19, 2007.

Filed November 1, 2007.

J. David Breemer, Pacific Legal Foundation, Sacramento, CA, for the appellant.

James J. Davis, Boise, ID, for the appellees.

Appeal from the United States District Court for the District of Idaho, Edward J. Lodge, District Judge, Presiding. D.C. No. CV-05-00492-EJL.

Before: D.W. NELSON, C. ARLEN BEAM,^* and PAMELA ANN RYMER, Circuit Judges.

RYMER, Circuit Judge:

This appeal requires us to decide whether a developer may state a claim for relief based on the allegedly arbitrary and irrational denial of a permit application. The district court said not, relying on our decision in Armendariz v. Penman, 75 F.3d 1311 (9th Cir.1996) (en banc), which held that the Fifth Amendment's Takings Clause subsumes or "preempts" substantive due process claims. Accordingly, it dismissed the complaint by Crown Point Development, LLC (Crown Point) against the City of Sun Valley and members of the City Council.

Crown Point appeals, arguing that it may proceed despite Armendariz, because the United States Supreme Court ruled 14453 in Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 532, 125 S.Ct. 2074, 161 L.Ed.2d 876 (2005), that a property owner's challenge to a regulation that does not substantially advance legitimate interests is grounded in due process, not the Takings Clause. We agree that Armendariz has been undermined to the limited extent that a claim for wholly illegitimate land use regulation is not foreclosed. However, the record is undeveloped on this point. Having clarified that Armendariz does not block the way altogether, we leave it to the district court on remand to flesh out the parameters of Crown Point's claim. We also leave questions of a stay, or abstention, for the district court's consideration.

I

According to its complaint, Crown Point is the developer of Crown Ranch, a 9.76 acre residential subdivision in Sun Valley, Idaho. The project has proceeded over a number of years and in five separate phases. Crown Ranch is zoned RM-2 which carries a minimum density requirement of four units per gross acre. To meet this standard, Crown Point was required to build 39 total units on the property.

It built 26 units during Phases 1 through 4. Originally, it planned to construct eight units in Phase 4 and 11 units in Phase 5. However, Sun Valley required Crown Point to reduce the number of units in Phase 4 from eight to six in order to receive approval. This meant that Crown Point had to propose constructing 13 town-house units for Phase 5 in order to satisfy the minimum density requirement.

The Sun Valley Planning and Zoning Commission requested revisions, which Crown Point made, and the Commission approved the amended application. But a current Crown Ranch resident and the Crown Ranch Homeowners Association, being dissatisfied with the overall density of Phase 5, appealed to the City Council. When the Council denied the application, Crown Point sought judicial review in state court, which remanded for new Findings of Fact and Conclusions of Law. Another round of litigation ensued with respect to the new findings, with the Idaho district court eventually concluding that the City Council's denial of Crown Point's application was arbitrary and capricious. The Idaho Supreme Court reversed that ruling because the trial court had improperly expanded the administrative record, but again remanded because the revised findings of fact were still insufficient. Crown Point Dev., Inc. v. City of Sun Valley, 144 Idaho 72, 156 P.3d 573, 579 (2007).

Meanwhile, Crown Point filed this action pursuant to 42 U.S.C. § 1983. It alleges a single, substantive due process claim. Crown Point's theory is that the City Council arbitrarily interfered with its property rights by denying the application for Phase 5 without any evidence in support and under circumstances forced by the City Council's own prior actions.

Sun Valley moved to dismiss on the footing that well-settled law in this circuit does not allow substantive due process claims pursuant to the Fourteenth Amendment when the interest at stake is real property, citing Armendariz, 75 F.3d at 1326. The district court agreed that Armendariz controlled, granted the motion, and declined to rule on the City's alternative motion to stay proceedings.

Regrettably, Crown Point did not assist the district court — as it should have done — by arguing there as it does here that Lingle's repudiation of the "substantially advances" takings formula undercuts Armendariz. Still, it did argue that certain substantive due process rights continue despite Armendariz, and are not subsumed in the Takings Clause. This is the same argument now made, albeit supported by different authorities and reasoning. Although a discretionary call and a somewhat close one, we are hard-pressed to accept Sun Valley's position that Crown Point waived the argument that Lingle modifies the reach of Armendariz. Where "the question presented is one of law, we consider it in light of `all relevant authority,' regardless of whether such authority was properly presented in the district court." Ballaris v. Wacker Siltronic Corp., 370 F.3d 901, 908 (9th Cir.2004) (quoting Elder v. Holloway, 510 U.S. 510, 516, 114 S.Ct. 1019, 127 L.Ed.2d 344 (1994)). Therefore, we reach the merits of Crown Point's Lingle-based argument.

II

In Armendariz, a group of low-income property owners brought a § 1983 action challenging the City of San Bernardino's allegedly overzealous enforcement of housing code provisions in order to drive the tenants out of a high-crime area and to allow a commercial developer to acquire the property "on the cheap." We held that the right which the property owners sought to vindicate originated in the Fifth Amendment Takings Clause rather than in substantive due process, thus the claim failed in light of Graham v. Connor, 490 U.S. 386, 109 S.Ct. 1865, 104 L.Ed.2d 443 (1989), and Albright v. Oliver, 510 U.S. 266, 114 S.Ct. 807, 127 L.Ed.2d 114 (1994). Graham held that claims of excessive force brought under § 1983 must be analyzed under the more specific Fourth or Eighth Amendments rather than under the more subjective standard of substantive due process; Albright reaffirmed the Graham rule where the plaintiff alleged that the defendants violated his substantive due process rights by initiating a criminal prosecution without probable cause.

More to the point here, in Macri v. King County, 126 F.3d 1125, 1129 (9th Cir.1997), we held that a claim arising out of an application to subdivide property which the owners alleged was denied without substantially advancing a legitimate public purpose was actually a takings claim, not a claim lying solely in substantive due process. This was because the Supreme Court had repeatedly recognized — in Agins v. City of Tiburon, 447 U.S. 255, 260, 100 S.Ct. 2138, 65 L.Ed.2d 106 (1980), Nollan v. California Coastal Comm'n, 483 U.S. 825, 107 S.Ct. 3141, 97 L.Ed.2d 677 (1987), and Dolan v. City of Tigard, 512 U.S. 374, 383-85, 114 S.Ct. 2309, 129 L.Ed.2d 304 (1994) — that "a land use restriction that does not `substantially advance legitimate state interests' or `denies an owner economically viable use of his land' effects a taking." Macri, 126 F.3d at 1129 (quoting Agins). In other words, our pre-Lingle view was that a regulation that does not "substantially advance legitimate state interests" is a taking under Agins, and if it is a taking, then it follows from Armendariz that the Fifth Amendment's Taking Clause is the specific textual source of protection against such conduct.¹

However, this understanding of the Agins' "substantially advances" language — i.e., that it is a "stand-alone regulatory takings test" — was rejected by the Supreme Court in Lingle. 544 U.S. at 540, 125 S.Ct. 2074. The Court concluded "that this formula prescribes an inquiry in the nature of a due process, not a takings, test, and that it has no proper place in our takings jurisprudence." Id. As the Court explained, the "substantially advances" test "does not help to identify those regulations whose effects are functionally comparable to government appropriation or invasion of private property; it is tethered neither to the text of the Takings Clause nor to the basic justification for allowing regulatory actions to be challenged under the Clause." Id. at 542, 125 S.Ct. 2074.

In this, Lingle pulls the rug out from under our rationale for totally precluding substantive due process claims based on arbitrary or unreasonable conduct. As the Court made clear, there is no specific textual source in the Fifth Amendment for protecting a property owner from conduct that furthers no legitimate government purpose. Thus, the Graham rationale no longer applies to claims that a municipality's actions were arbitrary and unreasonable, lacking any substantial relation to the public health, safety, or general welfare.

Sun Valley posits that Crown Point's claim nevertheless remains controlled by the Takings Clause and Armendariz's preemption analysis because the claim involves a deprivation of property whether or not the City's action effected a taking. While a plausible view, yet another supervening decision, County of Sacramento v. Lewis, 523 U.S. 833, 118 S.Ct. 1708, 140 L.Ed.2d 1043 (1998), suggests otherwise. In Lewis, the estate of a passenger who was accidentally struck by a deputy sheriff at the end of a high speed chase brought a due process claim under § 1983. The Court rejected the County's argument that the due process claim...