Zito v. N.C. Coastal Res. Comm'n

• Decision Date: 09 August 2021
• Docket Number: No. 20-1408,20-1408
• Citation: 8 F.4th 281
• Parties: Michael ZITO ; Catherine Zito, Plaintiffs – Appellants, v. NORTH CAROLINA COASTAL RESOURCES COMMISSION, Defendant – Appellee. North Carolina Coastal Federation, Amicus Supporting Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

8 F.4th 281

Michael ZITO ; Catherine Zito, Plaintiffs – Appellants,

v. NORTH CAROLINA COASTAL RESOURCES COMMISSION, Defendant – Appellee.North Carolina Coastal Federation, Amicus Supporting Appellee.

No. 20-1408

United States Court of Appeals, Fourth Circuit.

Argued: May 4, 2021

Decided: August 9, 2021

ARGUED: J. David Breemer, PACIFIC LEGAL FOUNDATION, Sacramento, California, for Appellants. Ryan Y. Park, NORTH CAROLINA DEPARTMENT OF JUSTICE, Raleigh, North Carolina, for Appellees. ON BRIEF: Glenn E. Roper, North Highlands, Colorado, Erin E. Wilcox, PACIFIC LEGAL FOUNDATION, Sacramento, California, for Appellants. Joshua H. Stein, Attorney General, Sarah G. Boyce, Deputy Solicitor General, Mary Lucasse, Special Deputy Attorney General, Marc Bernstein, Special Deputy Attorney General, NORTH CAROLINA DEPARTMENT OF JUSTICE, Raleigh, North Carolina, for Appellee. Ramona H. McGee, Sierra B. Weaver, Elizabeth R. Rasheed, SOUTHERN ENVIRONMENTAL LAW CENTER, Chapel Hill, North Carolina, for Amicus North Curiae.

Before GREGORY, Chief Judge, MOTZ, and THACKER, Circuit Judges.

Affirmed by published opinion. Chief Judge Gregory wrote the opinion, in which Judge Motz and Judge Thacker joined.

GREGORY, Chief Judge:

This case asks whether a Fifth Amendment takings claim against the North Carolina Coastal Resources Commission (the "Commission") is barred by State sovereign immunity. When the Commission denied Plaintiffs Michael and Catherine Zito (the "Zitos") permission to rebuild their vacation home due to environmental regulations, the Zitos brought suit in federal court, claiming that the State deprived them of the value of their property and committed a taking under the Fifth Amendment. The district court granted the State's motion to dismiss for lack of subject matter jurisdiction due to the State's immunity from suit in federal court. We affirm the district court's dismissal.

I.

In 2008, the Zitos purchased a beachfront house and lot (the "Property") in South Nags Head, North Carolina. The Property is located on one of the State's barrier islands, a system of narrow islands that run along the State's coast. Between 2008 and 2016, the Zitos used the house as a vacation home and rental property. But on October 10, 2016, the house caught fire and burned to the ground. Following the fire, the Zitos sought to rebuild the house on the same lot.

Given its location, the Zitos’ Property is governed by North Carolina's Coastal Area Management Act ("CAMA"). Enacted in 1974, CAMA created the Commission to implement rules regulating land-use planning, development permits, and beach management and restoration along North Carolina's coasts. N.C. Gen. Stat. §§ 113A-103(2), -107, -110, -120, -134.11. One of CAMA's goals is "[t]o [e]nsure that the development or preservation of the ... coastal area proceeds in a manner consistent with the capability of the land and water for development, use, or preservation based on ecological considerations." Id. § 113A-102(b)(2).

To do so, CAMA requires coastal property development to be set back a certain distance from the vegetation line—the first line of natural vegetation which marks the boundary between the beach and more stable land. 15A N.C. Admin. Code 07H .0305(a)(5), .0306(a)(1). These set-back requirements protect property owners from coastal storms and encroaching waters while also preventing disturbance to the beaches and dunes that act as buffers for the property and environment further inland. See id. at .0306(a); Br. of N.C. Coastal Fed'n, as Amicus Curiae in Support of Appellee at 11–12. Under CAMA, buildings with less than 5,000 square feet must be set back a distance at least 60 feet or 30 times the local rate of erosion, whichever is farther. 15A N.C. Admin. Code 7H.0306(a)(5)(A). But buildings of less than 2,000 square feet built before June 1, 1979 fall under a grandfather provision, requiring the property to be set back only 60 feet from the line of vegetation. 15A N.C. Admin. Code 7H.0309(b).

Though the Zitos’ Property qualifies for the grandfather provision, it fails to satisfy the 60 feet set-back limit. Based on an October 2017 survey, the Property is currently set back only 12 feet from the vegetation line. In 2018, the coastline by the Property eroded at an average rate of six feet per year. The next year, the average rate of erosion climbed to seven feet per year. According to amicus curiae , coastal erosion and rising sea levels could cause the Property to be underwater by 2024. Br. of N.C. Coastal Fed'n, as Amicus Curiae in Support of Appellee at 7.¹

To enforce its set-back regulations, CAMA requires a permit for property development that will affect "any area of environmental concern," such as the barrier islands where the Property is located. N.C. Gen. Stat. § 113A-118(a). To acquire a minor permit—for the construction of a small residential building, such as a house² —individuals must apply to the local city or county; if the initial application is denied, applicants may seek administrative review or a variance from the Commission. Id. §§ 113A-118(b), -120.1, -121(b), -121.1; 15A N.C. Admin. Code 07J.0201.

The Zitos applied for a permit from the Town of Nags Head. The Town's local permit officer denied the application because the Property did not meet CAMA's set-back requirements. The Zitos then filed a petition for a variance with the Commission. After considering the petition at a public hearing, the Commission issued its Final Agency Decision denying the variance on December 27, 2018. When notifying the Zitos of the denial, the Commission also informed them of their right to appeal the decision in state superior court.

The Zitos filed suit in federal court, arguing that CAMA's restrictions amounted to an unconstitutional taking. The Commission filed a motion to dismiss for lack of subject matter jurisdiction, claiming that the suit was barred by State sovereign immunity. The district court agreed with the Commission. First, it found that the Commission qualifies as an arm of the State subject to the protections of sovereign immunity. Zito v. N.C. Coastal Res. Comm'n , 449 F. Supp. 3d 567, 577–79 (E.D.N.C. 2020). It then relied upon this Court's decision in Hutto , where we held that "the Eleventh Amendment bars Fifth Amendment taking claims against States in federal court where the State's courts remain open to adjudicate such claims." Id. at 576 (quoting Hutto v. S.C. Ret. Sys. , 773 F.3d 536, 552 (4th Cir. 2014) ). Determining that North Carolina's Constitution permits individuals to bring takings claims in state court, the district court concluded that Plaintiffs’ claims against the State were barred by sovereign immunity in federal court. Id. at 580–83. The Zitos appealed.

II.

A.

State sovereign immunity presents a question of law that we review de novo. See Hutto , 773 F.3d at 542. Because sovereign immunity is waivable, this Court treats it "akin to an affirmative defense," meaning that the defendant bears the burden of demonstrating that sovereign immunity applies. Id. at 543.

The Zitos do not dispute that the Commission is an arm of the State, such that sovereign immunity may apply. But they argue that the Fifth Amendment's Takings Clause overcomes State sovereign immunity.

The Eleventh Amendment states that "[t]he Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State." U.S. Const. amend. XI. While courts—including this one—frequently refer to States’ immunity from suit as "Eleventh Amendment immunity," see, e.g. , Hutto , 773 F.3d at 542, the phrase is "something of a misnomer, for the sovereign immunity of the States neither derives from, nor is limited by, the terms of the Eleventh Amendment." Alden v. Maine , 527 U.S. 706, 713, 119 S.Ct. 2240, 144 L.Ed.2d 636 (1999). Rather, "States’ immunity from suit is a fundamental aspect of the sovereignty which the States enjoyed before the ratification of the Constitution, and which they retain today ... except as altered by the plan of the [Constitutional] Convention or certain constitutional amendments." Id.

The Fifth Amendment provides that "private property [shall not] be taken for public use, without just compensation." U.S. Const. amend. V. The Zitos contend that because the Fifth Amendment's Takings Clause is self-executing—guaranteeing a remedy of just compensation—it reflects a Constitutional structure that exempts takings claims from the limitations of sovereign immunity.³ While the Takings Clause originally applied only to the federal government, Plaintiffs argue that its incorporation to the States in the Fourteenth Amendment abrogated the sovereign immunity of States as well.

However, this Court adopted a different reading of the Takings Clause and sovereign immunity in Hutto , 773 F.3d at 540. In Hutto , South Carolina public employees challenged a state law amending pension benefits and contributions for public employees who returned to work after retirement. Id. They argued that changes to the law amounted to a taking because the changes ended benefits and required the employees to make additional contributions. Addressing sovereign immunity, the plaintiffs in Hutto made the same claim the Zitos make here—that "sovereign immunity never bars a constitutional takings claim" due to the Takings Clause's guarantee of just compensation. Id. at 551.

This Court disagreed. We observed that the Supreme Court has recognized the surrender of State sovereign immunity in six contexts:

(1) when a State consents to suit; (2) when a case is brought by the United States or another State; (3) when Congress abrogates sovereign immunity pursuant to Section 5 of the Fourteenth Amendment or pursuant to the Bankruptcy Clause; (4) when a suit is brought against an entity that is not an arm of the State; (5) when a private party sues a state official in his

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