Opinion
1:22-cv-01468-CL
04-27-2023
KOGAP Enterprises, Inc., an Oregon Corporation Plaintiff, v. CITY OF MEDFORD, Defendant.
FINDINGS AND RECOMMENDATION
MARK D. CLARKE, UNITED STATES MAGISTRATE JUDGE
Plaintiff KOGAP Enterprises Inc., (“KOGAP”) brings this cause of action against the defendant, the City of Medford (“the City”), alleging an unconstitutional taking under state and federal law, arising out of a series of land use proceedings. The case comes before the Court on the defendant's Motion to Dismiss (#9). The Motion should be GRANTED in PART and DENIED in PART.
Facts in this section are as alleged in the Amended Complaint (#6) and are assumed to be true for the purposes of this motion and Order, unless specifically disputed. The Court does not assume the legal claims contained the Amended Complaint to be true.
Plaintiff is an Oregon corporation and owner of various parcels of real property, including a parcel known as the Stewart Meadows Village Planned Unit Development (“PUD”). Amend. Compl. ¶ 1-2. In 2017, Plaintiff secured a PUD Revision Approval for Stewart Meadows Village from the City of Medford, under the terms of which all street dedications required of Plaintiff were (A) Garfield Street, which required a right-of-way width of 100 feet, and (B) Anton Drive, which required a right-of-way width of 63 feet. Id. at ¶ 2. The 2017 Approval specified that those required street sections improvements were completed and stated:
No additional right-of-way is required*** no additional public improvements are required except as noted under Section A(4), Transportation System.
In 2019, Plaintiff sought a land division approval for various parcels within the PUD. The City then sought to impose a new condition requiring that Meyers Lane south of Garfield Street connect to Anton Drive, requiring a crossing of Hansen Creek, all of which Plaintiff was required to install, including land dedication, street improvements, and bridge crossing. Id. at ¶ 4. Plaintiff registered objections to this “improper condition.” Plaintiff asserts that, upon objections being registered, the Medford City Attorney's Office found and recommended to its governing body that such “imposition of the connectivity conditions required by public works would most likely not survive a legal challenge.” Id.
In 2022, Plaintiff made an application for changes to its PUD plan, including a tentative plat for 151 -lot subdivision, and a Zone Change Request to change an approximate 5-acre tract of land from light industrial (I-L) to community commercial (CC), and to change the zooming on approximately 5-acre tract of land from CC to I-L. Id. at ¶¶ 2, 5. Plaintiff asserts that the City again sought to impose the “improper condition” as part of its approval of the 2022 PUD plan. Id. at ¶ 5. The City proposed to reimburse Plaintiff $150,000 towards its estimated $300,000 cost for the bridge crossing. Id. at ¶ 9. The Medford Planning Commission upheld the decision, and Plaintiff appealed to the Medford City Council, which also upheld the decision on August 18, 2022. Id. at ¶ 7.
Plaintiff alleges the following claims:
1, That the City's 2022 findings, decision, and order imposing the “improper condition” is an impermissible exaction, resulting in an unconstitutional taking of land and improvements under O.R.S. 197.796.
2. That the decision results in an unconstitutional taking under the Fifth and Fourteenth Amendments of the United States Constitution.
3. That the decision also results in an unconstitutional taking under Oregon Constitution Article 1, Section 118.
4. That the 2017 PUD Revision Approval was final and binding and precludes the City of Medford's 2022 findings and decision such that Plaintiff is entitled to a declaratory judgment permanently enjoining enforcement of the 2022 findings and decision.
5. That the City's 2017 Approval implicitly or explicitly promised that no further exactions would be required by Plaintiff, and Plaintiff justifiably relied on that promise to its detriment. The City should be estopped from imposing the 2022 “improper condition.”
The prayer for relief includes a request to award plaintiff “just compensation in the amount to be set by the jury's verdict based on the evidence adduced at trial currently in the estimated amount of $2,500,000 plus pre- and post-judgment interest at the legal rate of 9% until paid,” among other relief? Amend. Compl. Prayer ¶ 1.
LEGAL STANDARD
To survive a motion to dismiss under the federal pleading standards, the complaint must include a short and plain statement of the claim and “contain sufficient factual matter, accepted as true, to ‘state a claim for relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard ... asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. The court is not required to accept legal conclusions, unsupported by alleged facts, as true. Id.
DISCUSSION
The City of Medford moves pursuant to Rule 12(b)(6), to dismiss for failure to state a claim for relief Plaintiffs fourth claim (declaratory judgment - preclusion), fifth claim (estoppel), the allegation that the $150,000 bond towards bridge construction constitutes an “exaction” for takings purposes, and the allegation asserting the right to pre-judgment interest.
I. The City's Motion to Dismiss should be GRANTED in part and DENIED in part.
For the reasons below, the City's Motion should be granted as to the Plaintiffs fourth and fifth claims for relief; these claims should be dismissed. The Motion should be denied as to the allegations regarding the bond towards bridge construction and the right to pre-judgment interest.
1) Plaintiffs fourth claim for relief, declaratory judgment - preclusion, should be dismissed.
Plaintiffs fourth claim for relief asserts that the 2017 PUD Revision Approval was final and binding, and it precludes the City of Medford's 2022 findings and decision such that Plaintiff is entitled to declaratory judgment enjoining enforcement of the 2022 findings and decision.
The Oregon Court of Appeals has held that land use decisions have preclusive effect, once the final decision has been made, for the specific application and land use action at issue. Doney v. Clatsop Cnty, 142 Or.App. 497 (1996). In Doney, the land use decision in question was the approval of an apartment development, granted by the City. The court determined that, once the city's decision was final, the local county could not later attempt to deny road access permits that were ancillary to the execution of the development that had already been approved. Id. “The city made the decision to permit the development that plaintiffs applied for; the city could and did consider standards and conditions pertaining to traffic and roads in its approval of the development; and the county could have appeared in the city proceedings and could have appealed the city's decision to LUBA.” Id. at 502.
However, the court in Doney did not explain what an “ancillary” proceeding is for the purposes of such a preclusive effect. See Griffin Oak Property Investments, LLC v. City of Rockaway Beach, 318 Or.App. 777, 794 (2022). The court clarified in Griffin Oak that courts should apply the preclusion principle “in a situation, like the one in Doney, where a land-use decision authorizes a project, and a second decision is required to implement... the earlier approval.” Id. The court noted that it had “never applied the preclusion principle from Doney in a situation... involving a distinct application for a new land-use decision or a limited land use decision that is filed long after the originally approved project is complete.” Id. In sum, the preclusion principle applies to any final land-use decision, as well as any ancillary decisions, which include decisions that are required to implement the earlier final decision.
Here, Plaintiff does not properly allege that the 2022 decision is ancillary to the 2017 Approval such that the preclusion principle would apply. To the contrary, the allegations in the Amended Complaint state that the 2022 decision is based on Plaintiff's 2022 application for changes to the 2017 PUD plan. As the City pointed out, Plaintiff is free to build the project consistent with the 2017 Approval, which did not require additional right of way or public improvements. Plaintiff may prefer to implement the project under the terms of the 2022 application, but the allegations do not indicate that such terms are required in order to implement the 2017 Plan. Thus, the 2022 application and decision is not ancillary to the 2017 Approval, and the preclusion principle does not apply. This claim should be dismissed.
2) Plaintiffs fifth claim for relief - estoppel - should be dismissed.
Plaintiffs fifth claim asserts that the City's 2017 Approval implicitly or explicitly promised that no further exactions would be required by Plaintiff, and Plaintiff justifiably relied on that promise to its detriment. Thus, the City should be estopped from imposing the 2022 “improper condition.”
The elements of promissory estoppel are: “(1) a promise (2) which the promisor, as a reasonable person, could foresee would induce conduct of the kind which occurred, (3) actual reliance on the promise, (4) resulting in a substantial change in position.” Neiss v. Ehlers, 135 Or.App. 218, 223, 899 P.2d 700, 703-04 (1995).
This claim is a creative twist on the fourth claim for relief, but, as alleged, it fails for a similar reason. Plaintiff does not properly allege that the City imposed the “improper condition” upon the terms of the 2017 Approval. To the contrary, the factual allegations in the Amended Complaint assert that Plaintiff submitted an application for changes to its 2017 PUD plan, resulting in the 2022 decision, and it was upon this decision that the City imposed the “improper condition.” Plaintiffs assertion in the briefing that “Plaintiff reasonably relied on the 2017 Approval to its detriment and would be damaged if Defendant is permitted to change the terms of this Approval,” is contradictory to the allegations that indicate that Plaintiff was the one attempting to change the terms of the 2017 Approval. The City is certainly bound to the terms of the 2017 Approval, which is why the preclusive effect applies to that decision and any ancillary decision, as discussed in the previous section. Put another way, when Plaintiff submitted the 2022 application for changes to the Plan, it was no longer relying on the terms of the 2017 Approval. Thus, the elements of estoppel cannot be met. This claim should be dismissed.
3) Plaintiff has sufficiently alleged that the bond was an exaction.
The unconstitutional conditions doctrine forbids the government from requiring a person to give up a constitutional right - here the right to receive just compensation when property is taken for a public use - in exchange for a discretionary benefit conferred by the government where the benefit sought has little or no relationship to the property. Dolan v. City of Tigard, 512 U.S. 374, 385 (1994); see also Nollan v. California Coastal Comm'n, 483 U.S. 825, 837 (1987). Caselaw recognizes that land-use permit applicants may be vulnerable to such “coercion... because the government often has broad discretion to deny a permit that is worth far more than property it would like to take.” Koontz v. St. Johns River Water Mgmt. Dist., 570 U.S. 595, 605 (2013). Under such circumstances, applicants may be unduly pressured to exchange constitutional rights for sought-after permit approval. Recognizing the imbalance of power between permit applicants and the government, as well as the resulting risks posed to applicants' constitutional rights, the Supreme Court determined in Nollan, 483 U.S. at 837 and Dolan, 512 U.S. at 391, that while the government may condition land-use permit approvals to mitigate the impacts of proposed development, it may not leverage its legitimate interest in mitigation to pursue governmental ends that lack an essential nexus and rough proportionality to those impacts. Koontz, 570 U.S. at 606. Precedent thus requires that the government provide “some sort of individualized determination” to meet that requirement. Dolan, 512 U.S. at 391. The Supreme Court has held that “the government's demand for property from a land-use permit applicant must satisfy the requirements of Nollan and Dolan even when the government denies the permit and even when its demand is for money.” Koontz, 570 U.S. at 619.
The City asserts that Koontz is a physical takings case, not a monetary exaction case, and it argues that the case at bar falls under the precedent of San Remo Hotel, LP v. S.F. City and County, in which the Court noted that the 9th Circuit has generally “rejected the applicability of Nollan/Dolan to monetary exactions.” 464 F.3d 1088, 1097 (9th Cir. 2004). However, in the portion of San Remo quoted by the City, the Court was reviewing a California Supreme Court case, in which monetary fees were imposed by an ordinance that applied across the board according to a set formula. The Court compared the California Court's analysis to its own in Commercial Builders of N Cal. v. Sacramento, 941 F.2d 872 (9th Cir.1991), cert, denied, 504 U.S. 931 (1992), in which the City of Sacramento found that nonresidential development created a need for low income housing in the city, and enacted an ordinance which conditioned the issuance of nonresidential building permits on the payment of a fee, calculated according to a formula, into a fund designed to assist in financing low-income housing. Id. at 1097, citing Commercial Builders, 941 F.2d at 873. The 9th Circuit affirmed, finding the ordinance was reasonably related to legitimate public purposes. Id. The Court also specifically rejected the contention that Nollan materially changed the level of scrutiny to be applied to the ordinance. Id. at 1097, citing Commercial Builders, 941 F.2d at 873. Id. at 874. Therefore, in such instances, when the city acts legislatively, the Court reasoned that heightened scrutiny is not necessary, and Nollan/Dolan does not apply. Id. By contrast, heightened scrutiny is necessary when the city's action is isolated and discretionary, because there is more danger that the city will improperly leverage its power against a single landowner. Id.
Here, Plaintiff has alleged that the City has imposed an improper condition as a requirement for approval of the 2022 Application, which not only “requires Plaintiff to dedicate land to [the City] for the Anton Drive / Myers Lane connection, but also requires Plaintiff to make valuable improvements thereon all at Plaintiff's expense save and except [the City's] proposal that it reimburse Plaintiff $150,000 towards its estimated $300,000 cost for the bridge crossing.” Amend. Compl. ¶. The City moves to dismiss these allegations, but the City has not explained how imposition of the cost-sharing bond for future bridge construction was the type of legislative function or ordinance that applied across the board according to a set formula, and not a discretionary action imposed in this specific case. For this reason, the City's motion should be denied. The City may raise this issue at summary judgment should the facts support the distinction above.
4) Plaintiff may allege pre-judgment interest as to the cost-sharing bond exaction.
The general rule is that pre-judgment interest is not awarded in tort actions because damages are not ascertainable until the judgment is entered. Bain v. Tri-County Metropolitan Transportation Dist., 1997 WL 136516, * Pg. 4 (Or. Dist 1997? citing Erickson Air-Crane Co., V. United Techs. Corp., 87 Or.App. 577, 582, rev denied, 304 Or 680 (1987). In Oregon, this general rule makes sense because, in an action at law, a party must specifically plead a foundation for prejudgment interest. Lithia Lumber Co. v. Lamb, 250 Or. 444, 447, 443 P.2d 647 (1968). To do so, that party must (1) request prejudgment interest in the prayer and (2) plead facts sufficient to state a claim for prejudgment interest Shepherd v. Hub Lumber Co., 273 Or. 331, 349, 541 P.2d 439 (1975). Those facts supporting a party's claim for prejudgment interest must be stated in the body of the party's complaint. See Laursen v. Morris, 103 Or.App. 538, 547, 799 P.2d 648 (1990), rev. den., 311 Or. 150, 806 P.2d 128 (1991) (“[W]ith respect to stating a claim for prejudgment interest, the prayer is not part of the statement of the claim. Only if the facts pleaded are sufficient to state a claim for it may prejudgment interest be awarded.”). Such facts include the amount the plaintiff claimed it was due, exclusive of interest, and the dates during which it was deprived of that amount. Tasaki v. Moriarty, 233 Or.App. 51, 55, 225 P.3d 68, 70 (2009) citing Emmert v. No Problem Harry, Inc., 222 Or.App. 151, 158, 192 P.3d 844, 849 (2008).
Here, the body of Plaintiff s Amended Complaint alleges that “just compensation is, at a minimum, the value of the land as of the date of defendant's final order; the costs of installing the improvements; and severance damages by virtue of the unauthorized exaction, which has caused harm to the remainder of plaintiffs landholdings.” ¶ 11. Plaintiffs prayer for relief includes “just compensation in the amount to be set by the jury's verdict based on the evidence adduce at trial currently in the estimated amount of $2,500,000 plus pre- and post-judgment interest at the legal rate of 9% until paid.” .
The City argues that Plaintiffs claims are akin to constitutional tort claims, thus there is no legal basis for alleging pre-judgment interest. However, in the Reply brief, the City takes the position that prejudgment interest may be alleged “if based only on the requested monetary exaction of $150,000.” The Court agrees with this assessment. Plaintiff has not laid the proper foundation for the foil prayer for relief of $2,500,000, and it is unlikely that such a foundation could be laid for the constitutional tort-type claims, because damages may not be ascertainable until judgment is entered. To the extent that Plaintiff believes that such a foundation could be laid, Plaintiff may move to amend the complaint to do so.
RECOMMENDATION
The City's Motion (#9) should be GRANTED in part and DENIED in part. Plaintiffs fourth and fifth claims for relief should be dismissed, and the prayer for prejudgment interest is construed to apply to the $150,000 bond amount only. Dismissal should be without prejudice. If Plaintiff believes that any of these claims could be replead, such that a plausible claim for relief could be sufficiently alleged, it may file a motion for leave to amend.
SCHEDULING
This Findings and Recommendation will be referred to a district judge. Objections, if any, are due no later than fourteen (14) days after the date this recommendation is entered. If objections are filed, any response is due within fourteen (14) days after the date the objections are filed. See FED. R. CIV. P. 72, 6.
Parties are advised that the failure to file objections within the specified time may waive the right to appeal the District Court's order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).