MICHAEL ZITO, and CATHERINE ZITO, Plaintiffs, v. NORTH CAROLINA COASTAL RESOURCES COMMISSION, Defendant.
No. 2:19-CV-11-D
IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA NORTHERN DIVISION
March 27, 2020
JAMES C. DEVER III
On March 6, 2019, Michael and Catherine Zito (“the Zitos,” or “plaintiffs“) filed a complaint against the North Carolina Coastal Resources Commission (“the Commission“) alleging a taking of private property without just compensation in violation of the Fifth Amendment of the United States Constitution. See Compl. [D.E. 1] ¶¶ 63-78.1 The Zitos seek declaratory relief, damages, just compensation, reasonable attorney fees and costs, and all other appropriate relief. See id. at 13. On August 9, 2019, the North Carolina Coastal Federation (“the Federation“) moved to intervene as a matter of right under
to the Commission‘s motion to dismiss [D.E. 42].
As explained below, Hutto v. South Carolina Retirement System, 773 F.3d 536, 542-43 (4th Cir. 2014), requires this court to hold that the Eleventh Amendment bars the Zitos’ Fifth Amendment takings claim. If the Zitos are to obtain rеlief on this claim, they first must get such relief from the United States Court of Appeals for the Fourth Circuit sitting en banc or from the United States Supreme Court. Thus, the court grants the Commission‘s motion to dismiss [D.E. 36] and dismisses the complaint without prejudice for lack of subject-matter jurisdiction. The court denies as moot the Federation‘s motion to intervene [D.E. 24] and the Zitos’ motion to clarify the status of the stipulated administrative facts [D.E. 46].
I.
The Zitos are residents of Timonium, Maryland and own a beachfront lot at 10224 East Seagull Drive in South Nags Head, North Carolina (“the property“). See id. at ¶¶ 11-12. The Zitos bought the beachfront lot in 2008 for $438,500 and the lоt contained a 1,700 square foot home built in 1982. See id. at ¶¶ 12-13. On October 10, 2016, a fire destroyed the Zitos’ home on the property. See id. at ¶ 18. On July 31, 2017, the Zitos sought to rebuild their home, with a total floor area of 1,792 on a 32’ x 28’ footprint, and submitted a North Carolina Coastal Area Management Act (“CAMA“) Minor Permit application to the Town of Nags Head‘s CAMA Local Permit Officer (“LPO“) See id. at ¶¶ 20, 26-27.
CAMA governs development of North Carolina‘s ocean areas and establishes various rules and regulations. See id. at ¶¶ 20-22. These rules and regulations include set-back requirements for
The Zitos’ property falls within the AEC. See id. at ¶ 29. The AEC official erosion rate is 6 feet per year, which, when multiplied by 30 as required by CAMA, results in a standard setback line of 180 feet from the first line of stable vegetation. See id.;
After the denial, the Zitos filed a variance petition with the Commission. See Compl. ¶¶ 25, 34. On November 27, 2018, the Commission considered the variance petition at a public hearing. See id. at ¶ 35. On December 27, 2018, the Commission denied the variance and issued a “Final Agency Decision.” See id. at ¶ 36; Ex. D [D.E. 1-5]. In its “Final Agency Decision,” the Commission concluded that the Zitos failed to demonstrate the requisite hardship to qualify for a
On May 9, 2019, the Commission moved to dismiss the complaint, asserting three grounds for dismissal: (1) under
On June 21, 2019, the Supreme Court decided Knick v. Township of Scott, 139 S. Ct. 2162 (2019). In Knick, the Court overruled Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, 473 U.S. 172 (1985), a case that had formed a core part of the Commission‘s motion to dismiss. See Knick, 139 S. Ct. at 2167-68; [D.E. 14] 9-17. In Knick, the Court removed Williamson County‘s state-litigation requirement and held that a “property owner has suffered a violation of his Fifth Amendment rights when the government takes his property without just compensation, and therefore may bring his claim in federal court under [section] 1983 at that time.” Knick, 139 S. Ct. at 2168. On June 26, 2019, this court denied the Commission‘s motion to dismiss and motion for leave to file a supplemental memorandum in light of Knick [D.E. 19]. See [D.E. 20, 21]. On July 10, 2019, the Commission answered the complaint [D.E. 22], and on August 20, 2019, amended its answer [D.E. 39].
On August 20, 2019, the Commission moved, for a second time, to dismiss for lack of jurisdiction [D.E. 36] and filed a supporting memorandum with three arguments [D.E. 38]. First,
On September 6, 2019, the Zitos responded in opposition [D.E. 42]. They argued that the Fifth Amendment‘s Just Compensation Clause is self-executing, that it is binding on the states through the Fourteenth Amendment, and that the Eleventh Amendment does not bar claims against states under the Just Compensation Clause in federal court. See id. at 7-10. The Zitos also argued that, even if the Just Compensation Clause is not self-executing, they cannot bring a takings claim in North Carolina state court and thus the Eleventh Amendment should not apply. See id. at 12-16. On September 20, 2019, the Commission replied and argued that Hutto remains binding precedent, that North Carolina state courts remain open for the Zitos to assert their takings claim, and that the court should not accept wholesale the Zitos’ statement of facts concerning the administrative and statutory scheme. See [D.E. 44].
II.
A.
The Fifth Amendment Takings Clause applies to the States through the Fourteenth Amendment. See, e.g., Murr v. Wisconsin, 137 S. Ct. 1933, 1942 (2017); Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 536 (2005). It provides that private рroperty shall not “be taken for public use, without just compensation.”
“The paradigmatic taking requiring just compensation is a direct government appropriation or physical invasion of private property.” Lingle, 544 U.S. at 537. For example, when the govеrnment uses its eminent domain power to condemn a person‘s land for some public purpose (such as to build a road or a military base), the government has “taken” that land and must pay just compensation for it. See, e.g., Ark. Game & Fish Comm‘n v. United States, 568 U.S. 23, 31-32 (2012); Stop the Beach Renourishment, Inc. v. Fla. Dep‘t of Env‘t Prot., 560 U.S. 702, 713-15 (2010); Lingle, 544 U.S. at 537; Tahoe-Sierra, 535 U.S. at 321-22.
A taking also occurs when instead of appropriating or invading private property, the government undertakes “regulatory actions that are functionally equivalent to the classic taking.” Lingle, 544 U.S. at 539; see Murr, 137 S. Ct. at 1942-43; Horne v. Dep‘t of Agric., 135 S. Ct. 2419, 2427 (2015). “[N]o magic formula enables a court to judge, in every case, whether a given government interference with prоperty is a taking.” Ark. Game & Fish Comm‘n, 568 U.S. at 31; see Stop the Beach Renourishment, Inc., 560 U.S. at 713. Nonetheless, the Supreme Court has identified two situations in which a regulation will, per se, constitute a taking. First, a regulation is a taking if it authorizes a “permanent physical occupation” of property. Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 426 (1982); see, e.g., Ark. Game & Fish Comm‘n, 568 U.S. at 32. Second, a regulation is a taking if it requires a property owner to sacrifice all economically beneficial use of the property, unless the regulation does no more than enforce limits that “inhere in the title
Regulations that fit neither per se rule are evaluated using the multi-factor balancing test in Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104 (1978). See Horne, 135 S. Ct. at 2427; Ark. Game & Fish Comm‘n, 568 U.S. at 31-32; Lingle, 544 U.S. at 538-39. The so-called “Penn Central factors” include (1) the regulation‘s economic impact on the claimant, (2) the extent to which the regulation interferes with the claimant‘s reasonable, investment-backed expectations, and (3) the character of the government‘s action. See Murr, 137 S. Ct. at 1943; Lingle, 544 U.S. at 538-39; Penn Cent., 438 U.S. at 124. A regulatory taking (just like a “classic taking“) can be either permanent or temporary. See Tahoe-Sierra, 535 U.S. at 322-23; Lucas, 505 U.S. at 1030 & n.17; First English, 482 U.S. at 318-19; Sansotta v. Town of Nags Head, 97 F. Supp. 3d 713, 729-30 (E.D.N.C. 2014).
B.
The Eleventh Amendment states, in full: “The Judicial power of the United States shall not be construed to extend to any suit in lаw 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.”
A
The Zitos argue that the Eleventh Amendment offers states, and their related entities, no protection against a Fifth Amendment takings claim in federal court. See [D.E. 42] 7-11. Specifically, the Zitos contend that given “the automatically-effective nature of the damages remedy in the Just Compensation Clause, the imposition of that Clause on the states through the Fourteenth Amendment was the sole congressional action needed to open states to takings claims seeking damages.” [D.E. 42] 10-11. In order to distinguish Hutto and to support their argument, the Zitos cite footnote 9 in First English, 482 U.S. at 316 n.9. The Zitos then contend: (1) “the Hutto panel was not presented with thе full, Fourteenth Amendment-based argument against sovereign immunity“; and (2) the Hutto panel did not “consider the Supreme Court‘s decision in First English.” [D.E. 42] 11.
This court cannot ignore binding Fourth Circuit precedent, even if the Zitos offer a persuasive rationale to consider doing so. Just as a court of appeals cannot overrule the Supreme Court, a district court cannot overrule a court of appeals. See Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477, 484 (1989) (“If a precedent of [the Supreme] Court has direct application in a case, yet appears to rest on reasons rejected in some other line of decisions, the Court of Appeals should follow the case which directly controls, leaving to [the Supreme] Court the prerogative of overruling its own decisions.“). Hutto controls the disposition of this case, and this court must follow it until either the Fourth Circuit sitting en banc or the Supreme Court instructs otherwise. See
Alternatively, the Zitos underrate Hutto‘s analysis and overrate the strength of footnote nine in First English. As for Hutto, the Fourth Circuit provided a tight analogy from Supreme Court precedent to support its holding. See Hutto, 773 F.3d at 551-52. Just as states can invoke sovereign immunity for tax disputes in federal court so long as a state forum remains open, so too states can invoke sovereign immunity for takings claims in federal court so long as a state forum remains open. See id.; Reich v. Collins, 513 U.S. 106, 110 (1994) (“[T]he sovereign immunity [that] states enjoy in federal court, under the Eleventh Amendment, does generally bar tax refund claims from being brought in that forum,” but state courts must hear suits to recover taxes unlawfully extracted in violation of federal law notwithstanding the “sovereign immunity [that] [s]tates traditionally enjoy in their own courts.“);3 cf. Alden v. Maine, 527 U.S. 706, 740 (1999) (holding that Congress, under
Article I of the Constitution, cannot subject nonconsenting states to private suits for damages in state
As for footnote nine in First English, footnote nine cannot bear the weight that the Zitos place on it. See First English, 482 U.S. at 316 n.9. First, footnоte nine is dicta in that the Court was responding not to a principal argument of the parties, but rather to the United States’ amicus brief. See id. Second, footnote nine was not essential to deciding First English. See id. Indeed, First English did not concern the Eleventh Amendment or even mention it. Rather, in First English, the Supreme Court reversed the California First District Court of Appeal and held that a landowner who claimed that his property has been “taken” in violation of the Fifth and Fourteenth Amendments by a “land-use regulation may recover damages for the time before it is finally determined that the regulation constitutes a ‘taking’ of his property.” Id. at 306-07. In addition, the Hutto panel analyzed Seven Up and DLX to explain the significance of a state-court remedy to the Eleventh Amendment‘s self-executing nature and discussed Reich and Alden to support its holding. See Hutto, 773 F.3d at 551-53; Seven Up, 523 F.3d 954-956; DLX, 381 F.3d at 526-28. Although the
III.
A.
Because the Commission is asserting sovereign immunity, it bears the burden of proving such immunity. See Hutto, 773 F.3d at 542-43. The Eleventh Amendment protects not only states, but also “state agents and state instrumentalities,’ or in other words, arms of the state.” Lane v. Anderson, 660 F. App‘x 185, 195 (4th Cir. 2016) (per curiam) (unpublished) (quoting Regents of the Univ. of Cal. v. Doe, 519 U.S. 425, 429 (1997)). “The purpose of the arm-of-state inquiry is to distinguish arms or alter egos of the state from mere political subdivisions of [the] State such as counties or municipalities, which, though created by the state, operate independently and do not share the state‘s immunity.” U.S. ex rel. Oberg v. Pa. Higher Educ. Assistance Agency, 804 F.3d 646, 651 (4th Cir. 2015) (alteration in original) (quotation omitted); see Kitchen v. Upshaw, 286 F.3d 179, 184 (4th Cir. 2002). Tо determine whether a state-created entity is an “arm of the state,” the court considers four, non-exclusive factors:
- whether any judgment against the entity as defendant will be paid by the State or whether any recovery by the entity as plaintiff will inure to the benefit of the State;
- the degree of autonomy exercised by the entity, including such circumstances as who appoints the entity‘s directors or officers, who funds the entity, and whether the State retains a veto over the entity‘s actions;
- whether the entity is involved with state concerns as distinct from non-state concerns, including local concerns; and
- how the entity is treated under state law, such as whether the entity‘s relationship with the State is sufficiently close to make the entity an arm of the State.
S.C. Dep‘t of Disabilities & Special Needs v. Hoover Universal, Inc., 535 F.3d 300, 303 (4th Cir. 2008)
As for the first factor concerning responsibility for judgments, the finances of the Commission and North Carolina are intertwined. The Commission, along with the DCM and larger CAMA programs, “receive[s] funding from the North Carolina General Assembly (‘NCGA‘), federal grants and appropriations, and permit revenue,” which become state funds when deposited in State Treasury accounts. Davis Dec. [D.E. 14-2] ¶ 10; see
As for the second factor concerning autonomy, the Commission is not autonomous. In analyzing autonomy, the court considers “the degree of autonomy exercised by the entity, including such circumstances as who appoints the entity‘s directors or officers, who funds the entity, and whether the State retains a veto over the entity‘s actions.” Oberg, 804 F.3d at 668 (quotation omitted). Both the appointment аnd funding considerations reveal that the Commission lacks autonomy. Either the Governor or the NCGA appoints its directors, see
As for the third factor concerning statewide concern, the Commission regulates the coastal areas of North Carolina and thereby affects areas of state-wide importance. See Adams v. N.C. Dep‘t of Nat. & Econ. Res., 295 N.C. 683, 691-93, 249 S.E.2d 402, 407-08 (1978); Oberg, 804 F.3d at 674. As for the fourth factor concerning the entity‘s treatment under state law, North Carolina treats the Commission as if it were part of the state in several ways. For example, the NCGA created the Commission. See
Because the Commission has proven that it is an arm of the state and has sovereign immunity under the Eleventh Amendment, the burden shifts to the Zitos to prove that the Commission has waived its sovereign immunity, or that the Commission‘s sovereign immunity has been abrogated. See Williams v. Big Picture Loans, LLC, 929 F.3d 170, 177 (4th Cir. 2019) (“Once a defendant has [proven that it is an arm of the state], the burden to prove that immunity has been abrogated or waived would then fall to the plaintiff.“). As for waiver, the Zitos have alleged no facts to demonstrate that the Commission has clearly and unequivocally waived immunity to a federal takings claims in federal court. See, e.g., Port Auth. Trans-Hudson Corp. v. Feeney, 495 U.S. 299, 305-06 (1990); Atascadero State Hosp. v. Scanlon, 473 U.S. 234, 241 (1985), superseded by statute,
North Carolina also provides a forum to adjudicate the Zitos’ takings claim. Under Hutto, a state court must remain available to hear a takings claim in order for a state to enjoy sovereign immunity in federal court. See Hutto, 773 F.3d at 551-552. Here, the Zitos can seek reliеf under both the state statutory scheme and the North Carolina Constitution. As for the state statutory scheme,
The Zitos construe the eminent domain and exclusivity portions of
The court rejects the Zitos’ argument. The Zitos misconstrue the term “exclusive” in
As for other remedies, although the Zitos correctly note that
The Zitos’ takings claim cannot be remedied fully under
C.
This case raises two significant issues concerning the effect of Hutto. First, Hutto‘s state-court remedy requirement is in tension with the Supreme Court‘s reasoning in Knick. Second, Hutto concerned a federal takings claim in federal court, but did not mention litigating a federal takings claim in state court. As for Hutto‘s tension with Knick, the Court in Knick removed the state-litigation requirement that had forced litigants to file their takings claims under state law in state court before pursuing a takings claim in federal court. See Knick, 139 S. Ct. at 2167-68. Hutto, however, still forces litigants who wish to pursue a takings claim under the Fifth Amendment into state courts. See Hutto, 773 F.3d at 551-52.
Of course, the Court in Knick did not consider sovereign immunity under the Eleventh Amendment because Knick involved a suit between a private property owner and a locality that was not entitled to sovereign immunity under the Eleventh Amendment. See Knick, 139 S. Ct. at 2167-71; Bay Point Properties, Inc. v. Miss. Transp. Comm‘n, 937 F.3d 454, 456-57 (5th Cir. 2019), petition for cert. filed, No. 19-798 (2019); Williams v. Utah Dep‘t of Corr., 928 F.3d 1209, 1214 (10th Cir. 2019). But in reiterating the self-executing nature of the Just Compensation Clause, the Court in Knick foreshadows the day when the Court will have to address the interplay between the Fifth Amendment‘s Just Compensation Clause and the Eleventh Amendment. Cf. Knick, 139 S. Ct. at 2171; Lumbard v. City of Ann Arbor, 913 F.3d 585, 591 (6th Cir. 2019) (Kethledge, J., concurring) (“But the Takings Clause does not say that private property shall not ‘be taken for public use, without just compensation, and without remedy in state court.’ Instead the Clause says that private property shall not ‘be taken for public use, without just compensation’ period.“), cert. deniеd,
As for litigating a federal takings claim in state court, Hutto does not foreclose a state forum for a federal takings claim. See Hutto, 773 F.3d at 552 (“[W]e conclude that the Eleventh Amendment bars Fifth Amendment taking claims against States in federal court when the State‘s courts remain open to adjudicate such claims.” (emphasis omitted)). State courts can hear federal constitutional claims just like federal courts. See, e.g., Yellow Freight Sys., Inc. v. Donnelly, 494 U.S. 820, 823 (1990); Tafflin v. Levitt, 493 U.S. 455, 458-59 (1990); Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 477-78 (1981). Whether the Commission successfully can invoke sovereign immunity for a federal takings claim in state court is a different question for a different court on a different day. Cf. Howlett v. Rose, 496 U.S. 356, 367-81 (1990) (holding that a state court cannot use state law sovereign immunity to decline jurisdiction over an action for money damages under
IV.
In sum, the court GRANTS the Commission‘s motion to dismiss [D.E. 36] and DISMISSES the complaint WITHOUT PREJUDICE for lack of subject-matter jurisdiction. The court DENIES as moot the Federation‘s motion to intervene [D.E. 24] and the Zitos’ motion to clarify the stipulated administrative facts [D.E. 46].
SO ORDERED. This 27 day of March 2020.
JAMES C. DEVER III
United States District Judge