Crown Point Development v. City of Sun Valley

Citation: Not availableDocket: 06-35189

Court: Court of Appeals for the Ninth Circuit; November 1, 2007; Federal Appellate Court

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The case involves Crown Point Development, Inc. (Crown Point) appealing a decision from the United States District Court for the District of Idaho regarding the denial of a permit application by the City of Sun Valley and its officials. The district court dismissed Crown Point's complaint, citing the precedent set in Armendariz v. Penman, which ruled that substantive due process claims are preempted by the Fifth Amendment's Takings Clause. Crown Point contends that the U.S. Supreme Court's ruling in Lingle v. Chevron U.S.A. Inc. allows for due process claims when land use regulations do not serve legitimate interests, thus challenging the applicability of Armendariz.

The Ninth Circuit acknowledges that Armendariz may not completely preclude claims based on illegitimate land use regulation but notes the record is insufficiently developed to assess Crown Point's specific claims. The court remands the case to the district court to explore the details of Crown Point's claim further, along with considerations for a stay or abstention.

Crown Point is developing the Crown Ranch, a 9.76-acre residential subdivision in Sun Valley, which is subject to a minimum density requirement of four units per gross acre. After constructing 26 units, Crown Point sought to build additional units in Phase 4 and Phase 5 but faced restrictions imposed by the City Council. Following an appeal from local residents, the City Council denied Crown Point’s application. Subsequent judicial reviews found the denial arbitrary and capricious, but higher courts reversed due to procedural issues, leading to the current litigation under 42 U.S.C. 1983, alleging a substantive due process violation.

Crown Point asserts that the City Council improperly infringed upon its property rights by denying its application for Phase 5 without supporting evidence and under conditions stemming from the Council's previous actions. Sun Valley moved to dismiss the claim, arguing that established law in this circuit prohibits substantive due process claims under the Fourteenth Amendment when real property interests are involved, referencing the case Armendariz, 75 F.3d at 1326. The district court accepted this argument, granted the dismissal, and did not address the City’s request to stay proceedings. Crown Point failed to effectively argue that Lingle's rejection of the "substantially advances" takings test undermines Armendariz, although it maintained that certain substantive due process rights exist independently of the Takings Clause. The court found it difficult to accept Sun Valley's claim that Crown Point had waived this argument, indicating it would consider legal questions based on all relevant authority regardless of how they were presented in the lower court. The discussion references Armendariz, where property owners challenged the City of San Bernardino's enforcement of housing codes intended to displace tenants for commercial development, concluding that their claims were rooted in the Fifth Amendment Takings Clause rather than substantive due process. This conclusion aligns with prior cases, such as Graham and Albright, which specify that claims of excessive force must refer to the more specific amendments rather than substantive due process. Additionally, in Macri v. King County, it was determined that a denial of a property subdivision application without advancing a legitimate public purpose constituted a takings claim. The Supreme Court's ruling in Lingle, which rejected the notion of a "stand-alone regulatory takings test" under the "substantially advances" language from Agins, marked a significant shift in this legal analysis.

The Court determined that the 'substantially advances' test is inappropriate for takings jurisprudence and is instead more aligned with due process inquiries. It stated that this test does not effectively identify regulations akin to government appropriation or invasion of property and lacks textual support in the Takings Clause. The ruling undermines the rationale for dismissing substantive due process claims based on arbitrary government conduct, as the Fifth Amendment does not explicitly protect property owners from actions that do not serve a legitimate government interest. Sun Valley argues that Crown Point’s claim is still governed by the Takings Clause since it involves property deprivation, but this view is challenged by County of Sacramento v. Lewis, which clarifies that due process claims are not automatically subsumed by other constitutional provisions. The Lewis case established that claims must be analyzed under the appropriate constitutional standard if covered by a specific provision. Applying this to land use, the Fifth Amendment allows due process challenges only if the alleged conduct falls under the Takings Clause. Lingle outlines three circumstances that typically constitute a taking: permanent physical invasions, total deprivation of economically beneficial use, and cases meeting the Penn Central factors. If a complaint aligns with these categories, it must be analyzed under the Fifth Amendment; otherwise, due process claims remain permissible. Lingle also indicates that a regulation failing to serve a legitimate governmental purpose could be deemed arbitrary enough to violate the Due Process Clause, affirming the potential for due process claims against irrational regulations.

Lingle and Lewis have changed the interpretation of Armendariz, allowing for substantive due process challenges to land use regulations rather than imposing a blanket prohibition. Miller v. Gammie allows circuit courts to deviate from precedent when a Supreme Court ruling renders previous reasoning irreconcilable. Recent cases illustrate this shift: in Spoklie v. Montana, a takings claim based on a 'substantially advances' theory was dismissed under Lingle, and a substantive due process claim was also dismissed because the state's actions were not deemed arbitrary or unreasonable. In Equity Lifestyle Properties, Inc. v. County of San Luis Obispo, the court upheld a municipal rent control ordinance, affirming that the Takings Clause does not preclude due process claims; if government actions are impermissible, compensation cannot remedy the violation. The court now explicitly states that the Fifth Amendment does not automatically dismiss claims regarding land use actions lacking a substantial relation to public welfare. Therefore, the district court's dismissal of Crown Point’s claim based solely on Armendariz is reversed. The court refrains from further elaboration on the specifics of the claim, leaving it to the district court to assess the merits, ripeness, and procedural issues upon remand. The ruling concludes with a reversal and remand for further proceedings.