Property Rights Foundation of America®
Founded 1994

Supreme Court Unlocks the Door for Property Owners

Jonathan Wood
Environmental Attorney
Pacific Legal Foundation, Arlington, Virginia

Twentieth Annual National Conference on
Private Property Rights
October 22, 2016
The Century House, Latham, N.Y

 

Thank you and thank you to the Property Rights Foundation for having me. Whenever I'm speaking on a Saturday afternoon I would think it's important to try to be a voice for optimism because it's getting it's getting late in the day and you're spending your weekend here and you might as well leave on a happy note and today will be no exception. It's, of course, true that those of us who believe in property rights face an uphill battle and we've lots of challenges to work on but we have also had a great deal, a great number of successes and we should celebrate those and appreciate those and recognize that they give us the opportunities to accomplish the future things that we're going to accomplish. And so, my remarks today are going to focus on a couple of recent Supreme Court victories that Pacific Legal Foundation [PLF] has had and how they might open the door for more successes.

I think it's particularly useful for this group in the wake of the comment by Robert Brace. In the video you kept hearing how absurd it was that he found himself in that situation and he couldn't go to court. He couldn't have his case heard. Well, one of PLF's recent Supreme Court victories has made that a thing of the past. In 2012, we won a case called Sackett in which we represented an Idaho family who had been accused of violating the Clean Water Act by trying to build a house on their lot in the middle of a residential subdivision. The Corps [of Engineers] and EPA officials claim that there had once been a wetland there and their work to try to build their dream home was a crime. Like the Braces they were threatened with tens of thousands of dollars in fines for every single day and said, basically, "Do whatever we say and give up your property or else." Well, they, too, were the sorts of heroes that were willing to stand up for the rule of law and for their rights and came to Pacific Legal Foundation and asked us for help. And we said, "Of course, this is wrong. You have to be able to go to court and challenge agencies when they try to take away your property like this." We brought the lawsuit and then fortunately the lower courts did what every other lower court that had ever looked at the issue, they said "No." When agencies issue these — they're called compliance orders against you — your only options are to do whatever they tell you or wait and let those fines grow every single day. And eventually they'll sue you. And then you'll have your day in court when you have hundreds of millions of dollars of potential fines hanging over your head.

My colleague Damien Schiff, who argued the case, summed it up perfectly as the Sword of Damocles. The EPA officials knew they had you. They had so much power over you that they were fine waving, because they knew at some point you'd have to give in. We brought that case all the way up to the Supreme Court arguing the simple position that whenever you're threatened this way, whenever your property rights are restricted in this way, you should be entitled to have your day in court. And I'm happy to say that the Supreme Court agreed with us and issued a decision that was unanimous, 9-0, that property owners, because of the Constitution's concern for property rights, property owners have to be able to go to court and challenge aggressive bureaucrats when they threaten them this way. And I think the unanimous nature of that decision is powerful because it shows that even the loss of a good friend of property rights like Justice Scalia, doesn't mean that the work is done or that it's now hopeless. When we bring the right cases, when we put facts before the court, even those that aren't normally thought of as into property rights will come out the right way. And I think the Sackett case is a perfect example of that. As I mentioned, they were a couple who had a lot in the middle of a residential subdivision. All of their neighbors had had a chance to build their home and all they wanted to do was build a home for their family and EPA put them through the wringer. As I said it was $37,000 for every single day. They went bankrupt during this process because they couldn't get mortgages on their home or get any financing because they had this ever-escalating fine. And, essentially EPA set out to destroy this family. They never gave up and ultimately they were vindicated.

Our most recent win builds on that by making it so that you don't have to go to that terrible situation in order to have your day in court. The Braces and the Sacketts both were facing imposition of fines being threatened against them and potentially imposed because of things they'd done in the past. Well, there is a way to get this sort of review before you act. That's what our most recent Supreme Court victory dealt with. You can go to the Corps and ask them to come out and look at your property and tell you whether or not you have wetlands on your property that is subject to federal regulation. And for decades the Corps had done this but insisted that whatever they said you couldn't argue your case. If you disagreed with it, you just had to accept it. If you went forward… If they say you had a wetland, you disagreed, but you went forward anyway, you'd suddenly face even more significant punishment because now you knew you were violating the law when you went forward and ended your project even though you believed and contended that it wasn't a wetland subject to regulation and you had no opportunity to challenge that.

Well, our most recent win was in a case called Hawkes in which we represented a peat mining company that was one of the most successful companies in the country. They provided the peat that not only was used to create golf courses buy also Yankee Stadium. And just about any other major purchaser of peat went to this company because of the quality of their work. In order to keep their business afloat they needed to find new areas where they could mine their peat. And, sensitive to the potential for environmental concerns, they went to the Corps first and said, "We have this lot. We'd like to mine it but we don't want to violate the law, so, please come and look at it and tell us whether or not it's regulable under the Clean Water Act. We don't think it is because it's hundreds of miles away from the nearest navigable water and it's silly to think that it might be but we'd rather not run the risk. So, please come and look at it." The Corps came out, took a look at it, and told the company's employees that they should start looking for other jobs because the Corps was never going to let this property be worked and they were just going to determine that it was a wetland.

Well, the company appealed that within the agency and the hearing officer, who almost always rubber stamps decisions by Corps officials, said, "No, you didn't bother doing any of the work to prove your case, you just declared it a wetland without actually showing that it has any connection to anything, or that the work would cause any harm." And so, it sent it back to the officials. It said, "If you want to do this you have to do it right." The bureaucrats, that as you all know are unelected and unaccountable, thought they didn't have to follow that and reissued the exact same decision declaring this a wetland without any more work, without any evidence. And the Hawkes company said, "This isn't fair. Our business is being threatened and you're basing it on a decision that is completely arbitrary and unsupported by the facts. What can we do? Can we sue you?" And EPA and the Corps had the gall to say, "No." Even though the Sackett case has just been won they said, "That's different because we were threatening them with fines and you're not there yet. So, your only options are to go forward and wait for us to start threatening you or give in. Try to get a permit, though we're never going to give that to you, so, you really shouldn't even bother doing that. But just walk away and abandon the property." Well, they weren't willing to give up so easily. They went to court and, like as with the Sacketts and many other property owners, the lower courts all said, "No." They differed to the agencies and went out of the way to say that it doesn't matter how bad the facts are, how bad the work of the agencies are, courts just don't want to look at it. And there, too, once again, we got the case up to the Supreme Court. And once again, it was a unanimous decision from the court, providing that property owners have to be able to have their day in court and put the agencies to the task of proving that they have the authority to do this to people.

One of the things that was most interesting about that is that it was cited last year so it was in the new court that has eight members and is sharply divided on partisan lines, and yet, once again, it was unanimous. Perhaps the most interesting aspect of it is that there was actually some infighting amongst the justices that are most commonly thought of as the liberal justices. Justice Kagan, who previously worked for the Obama Administration, and is very friendly towards federal agencies, tried to write an opinion to limit the decision saying, "We're going to limit the decision based on this one fact and if any other case came up that didn't have this one fact we wouldn't come out the same way." And Justice Ginsburg, who has often been thought of as the least concerned about property rights came in and said, "Absolutely not. It's not fair to limit the rights of property owners in that way. If an agency is coming in and making a final decision that has such severe impacts on property owners, they have to be able to go to court." And the impacts are significant as the Brace's story tells us. If your property is declared to have wetlands, you're likely never going to be able to do anything with it. And if you want to you're going to have to run the gauntlet and it's going to cost tens, if not hundreds, of thousands of dollars. It's gong to take you years. And if at any point any of these bureaucrats decide they don't like what you've done, they have an incredible power to threaten you with incredible fines, threat of imprisonment, and basically they have you over a barrel. They can try to take your property from you.

Since these two recent victories guaranteeing property owners a right to go to court, we're starting to see a change in that consistently the agencies are being challenged. There are many heroes like the Braces and like the Sacketts and the Hawkes Company, that are willing to stand up for their rights and say, "No, we're not just going to back down. We're going to take the agencies to court." And consistently the agencies have, when sued, thrown up their hands and tried to walk away and said, "Okay, no, we're wrong. Clearly you've sued us and we can't defend our actions." Which makes you want to ask what were they doing before when no court was ever willing to look at it. They must have just thought, "Well, we can do whatever we want and it doesn't really matter what the facts show." Well, now it does matter.

One of the cases that I won earlier this year is a perfect demonstration of how this access to courts that we now have has been a sea change. I represented a small Wyoming property owner who had built a pond on his property in order to provide safe and reliable access to water for a few horses and cattle that he had. Previously, the only source of water was a creek that had very high sides and when the animals would go down in the winter during the snow it would be quite treacherous. And, actually, he had a neighbor whose horse fell in, broke a leg and wasn't able to get back out. He didn't want that to happen to his animals. So, he built a pond. First, he did everything right. He went to the state and the local government and said, "Okay, what permits do I need? How should I design this to be as beneficial as possible?" And the pond was incredibly successful. It wasn't just a source of water for his animals, it was also an environmental benefit to everyone. It created wetlands. It provided habitat for fish and wildlife including a bald eagle and moose. It actually cleaned the water that passed through it with no negative environmental consequences. Well, that didn't stop the Corps and the EPA of saying, "You didn't come to us for a permit first. Like the Braces, even though the statute expressly says that this stuff is exempt and doesn't require a permit, we think you violated the statute and if you don't rip out the pond, eliminating all of the environmental benefits, we're going to fine you $37,500 a day." Now, this was a small property owner with a wife and four kids to raise. He was a welder by trade. The idea that he could face fines that grew at a rate of about a million dollars a month was unbelievable. And he did what most people would do. He tried to negotiate with the government saying, "You're being unreasonable. If there is something I can do to make the property and the farm more environmentally beneficial, I'd love to. But you can't just threaten me like this. You can't do this to me." The agency stretched it out for a year and a half. It would never give him an answer. Finally, he got in contact with PLF and we brought a lawsuit on his behalf. It was in a few months that EPA was asking, "Let's settle this. Let's get out of this." And essentially, completely walked away and gave Andy Johnson's family everything they'd been asking for. The pond got to stay in place. There were no fines. He didn't have to get a permit.

Essentially, it was a complete win and the only thing that changed from when the negotiations weren't going anywhere and when the case was over is that he finally sued them. It shouldn't take that to get bureaucrats to act reasonably but it's a good thing that now that's an option for so many property owners. I think that's where the future is bright for us. In that I think there's an opportunity to expand the options for property owners to get into court and have their cases heard. Those two cases provide a great access in federal courts against federal agencies. The next step is we'll be going after what's called the Williamson County doctrine. That's what prevents most property owners from getting into federal court when states take away their property and restrict their property. The fact that states know they'll never have to answer in a federal court has made them extremely brazen in how little regard they give to property owners.

We're arguing a case right now in Supreme Court that I think that demonstrates that. We represent a family who owns a summer home in Wisconsin that they've used for a vacation home and for recreation for decades. They also own the parcel next door that they bought as an investment. Now that the mother and father that originally bought the house and raised the family has passed on the kids would like to sell the lot in order to restore this cabin that meant so much to them growing up. Well, the State of Wisconsin told them they can't. They have a rule that says that when you own two properties right next door to each other they get merged and you only get to build on them as if they're one. Now, if anyone else owned the property next door they could sell it. They could build on it. They could do whatever they wanted. But because these people owned these two lots, they've completely lost that investment and had no rights. The Wisconsin state courts, of course, rubber-stamped it because the alternative was making Wisconsin pay for what they had done. Well, now we're in the U.S. Supreme Court trying to get vindication for them but ultimately cases like that should have been in federal court in the first place because you can't expect a state court to order a state to pay people for the restrictions they've put on property. You need a fair adjudication in federal court. We're starting to see some progress on that front. Williamson County is less and less relied upon by courts. I fact, a district of Oregon case from last week actually recognizes that fact and said that federal courts don't have to follow Williamson County. We can hear these cases it's up to us to decide whether or not to do so. We should only refuse to hear them sparingly when there's a really good reason. I think that's a very important bit of progress and something we need to build upon and, hopefully, we'll find a property owner who can be the next Sackett or the next Hawkes to finally get rid of this Williamson County doctrine.

So, I know you're running low on time so I tried to rush my remarks a little bit to save some time for the next speaker. So, if there are any questions until Carol gets back, I'll take them. Yes?

Audience member: Basically, you were asking the court for an advisory opinion that would be binding on the court.

Mr. Wood: Yes. And the statute expressively says and the regulations say that they have to give these and that they are binding so if they tell you you don't have any wetlands on your property they can't sue you later.

Audience member: Right, regulations that do not provide for judicial review.

Mr. Wood: They didn't address that specifically. What the regulations say is that this is a final agency action, which under the administrative procedure act is the term of art to say that you get judicial review. But even though the regulations said that explicitly the Corps… as we were hearing earlier, government lawyers are in the business of getting cases thrown out of court. And so, even though this was built right into the regulations the DOJ attorneys insisted that you can't challenge it no matter what. And they'd succeeded for decades until the Supreme Court unanimously overturned it.

Audience member: When the regs don't even pronounce the right for judicial review you have to go through APA. Here you had the express statement in the regulations for judicial review and still the Department of Justice fought that.

Mr. Wood: That's right. But one of the other benefits of the Hawkes decision is that because it was under the APA it applies in many other circumstances. It's not just the Corps under the Clean Water Act, but anytime an agency issues a decision that's final, that's binding on them or you, that restricts your property, you should have a right to judicial review under that decision.

Audience member: Can I ask one more question?

Mr. Wood: Sure.

Audience member: On the Wisconsin rule where you have adjacent lots, under what authority do they say they can aggregate it?

Mr. Wood: They passed an ordinance a decade or maybe two ago just declaring that they had this ability. And so, essentially, they destroyed a lot of property rights and didn't bother to tell anybody.

Audience member: It's not a piercing of the corporate veil type of issue and if you had different owners of adjacent lots, would that work out in that case?

Mr. Wood: Under the rule that Wisconsin is arguing if it's different owners you can develop it but the moment two people own neighboring lots you can destroy their property rights, destroy any option they might have to develop it and you never have to pay them a dime.

A question over here? Yes?

Audience member: I'm wondering if you folks have given thought to legislative corrections? What we've listened to here, case after case, is a bureaucrat or agency that loves the feel of its heel on someone else's neck. And it's so obvious that that's what's happening here. There should be consequences. Not just in terms of the agency paying off your legal fees if you win but they should… somehow the people who abuse the power of government to do this to innocent citizens should themselves be fined or maybe even jail sentences. I mean, when it goes on for twenty years, you're screwing with these people for twenty years, how is that different from organized crime? So, I'm wondering… you have organizations like ALEC [American Legislative Exchange Council] which develop model legislation for states. You have champions of property rights, there are a few of them in the U.S. Congress. Have you guys been thinking about a way to make it more costly for people in the agencies to engage in this kind of abuse?

Mr. Wood: So, unfortunately, the short answer is our IRS status doesn't allow to engage in lobbying so we don't, as PLF, go out and advocate for legislative change. But I think you're right. There needs to be a better system to hold bureaucrats accountable and even the playing field. Today, the bureaucrats can use your tax money to go after you for decades and when they're proven wrong they don't owe you a thing. You don't get a refund. You don't get any sort of relief. You're just finally left alone. And so, it takes a lot for property owners who are willing to bear the years and tens of hundreds of thousands of dollars. I think it was [William Perry] Pendley earlier pointed out that there's this gross unfairness that if you're an environmental group and you go and challenge what the government's doing, they almost always pay your attorney fees. If you're representing a property owner they almost never do. It's just a clearly stilted playing field which explains why you don't get legislative change. For instance, I have an op-ed from The Hill yesterday challenging some of the Endangered Species Act [ESA]. Anytime you suggest reform to the ESA environmental groups come out of the woodworks saying that you're gutting the act. It doesn't matter what the reform is — how small, how big, how reasonable or what have you — it's automatically labeled as gutting the Endangered Species Act. And they completely shut down debate. The reason why is because most of these groups benefit from the status quo. They're the ones that get paid their attorneys' fees when they sue the government to get the policies they want enacted. So, we definitely need something to level the playing field and it can't happen through litigation, it has to be through political reform.

Yes?

Audience member: Getting back to that private property, why weren't they grandfathered in?

Mr. Wood: The answer is that there is no grandfathering policy. If you own two parcels, it doesn't matter. You lost the ability to build on it overnight, essentially. Since they had these two parcels and one was developed under the ordinance and Wisconsin Supreme Court accepted this, the state could completely take away their right to use, sell, or do anything with the neighboring parcel and didn't have to pay anything.

Audience member: Even though they were separate deeds?

Mr. Wood: Yes. Even as a matter of state law. There are separate deeds. They are separate lots. They have been paying taxes on the lot next door for decades. In every other respect these are recognized legal lots and legal titles, except the State of Wisconsin has bizarrely held that one of them can be completely taken away and that's not a taking of private property for public use. I think that's outrageous and so, hopefully, we'll be able to add this as our next unanimous Supreme Court win. But you never know. Yes?

Audience member: Is the answer to some of these questions civil RICO? [Racketeer Influenced and Corrupt Organizations]

Mr. Wood: The answer to… unfortunately, whenever RICO comes up the answer is almost always "no." That's not what RICO was designed to do. Although it's usually thrown around as a rhetorical thing that obviously this is a conspiracy. These people are defiling someone's rights but it'd extremely difficult to approve a RICO claim. There are very limited circumstances in which they can be brought. I'm not aware of any successful property-based RICO claim.

Audience member: Civil RICO.

Mr. Wood: Yes. Civil RICO. The standards are harder for civil RICO claim. But I'm not aware of any time that's been successfully used. Most people are, I think, somewhat concerned about how far you go with that. So, expanding RICO claims might, for instance, come back to bite us when the other side decides they're going to use it as a tool. Pacific Legal Foundation, I know, I am, in particular, concerned about expanding RICO because the types of damages and penalties you could get if you expanded that would be destructive to both sides, really. Yes?

Robert Brace: I don't believe I had a chance to really emphasize on the fact on my takings claim to Judge Allegra. He did not say there wasn't a taking. He said that it wasn't a taking, yet. And they were supposed to put this property back to '84 because he indicated the Third Circuit was wrong. No, they won't recognize this. This is frustrating to go thirty years and it's been ten years since that happened. Four years ago it finally, finally, got them to say, "Okay, we're going to put it back to '84." They started and then here comes the fish commission and here comes the Corps of Engineers and they said, "No, we made a mistake." So, this is part of this fines that they're throwing out there. But the thing that I'm trying to bring up to par here, or whatever, how in the world can you go to court and have these decisions and now they're saying, "Sue me?" They don't care. Why and how can they just defy another federal judge's orders? But there's what frustrates me so bad. To think that, you know, there's been a mistake. It's been proven it was a mistake because the Third Circuit did themselves rule law and without the facts. It's a proven fact. Here they are still hammering away at me and my family, as other people and, again, I guess what I'm trying to say is, on a case-by-case basis it's crazy. We've got a Fifth Amendment, you know. We shouldn't have to be going to court. We're ruining our lives, ruining this country. It's so frustrating because here I am, my attorney says, "I don't know what to tell you Bob. We can't make them do anything. We're going to have to sue again." That's why I'm trying to emphasize to everybody the importance of what I think. Here's a case where, like you were saying, they don't care what they do to you, me, or whoever. I don't know. I told our attorney, when there's nothing happened and I've proven my innocence twice. The farmer proved again. That's what that DVD that I have here on the eco-strategy that came out here again. Proved me right. Everything has been proven. But how can they not be held liable in some way on that?

Mr. Wood: The answer is until we change the law, until Congress finally does something about it, the best we can do is hold them accountable in the public.

Mr. Brace: I talked to Mr. Thompson this last week. He says as soon as the elections are over with he going to be starting on this — getting rid of that Third Circuit decision. Because as I said here before, that's killing us. But there again, so many people don't understand that that is the law. The Third Circuit set the law. And they can do it without trying to explain.

Mr. Wood: And we continue to work to try to get that decision overturned by bringing similar cases. You're probably aware of some of them in circuits across the country and we try to get to the Supreme Court. I think it's still noteworthy that we're making progress. As more of these cases get into court judges are becoming aware this is a real problem and the bureaucrats are being embarrassed. I think the reason why they back down in the Johnson case, as mentioned earlier, is that even the liberal New York Times ran an article supporting us on its front page. When you get these stories out there and people actually hear what's happening, they respond and they care. And so, even if we can't hold the bureaucrats accountable financially or in another sense, we can in the media and we can with the public. I think there's reason for hope and reason for optimism even though it might not always look like it.

Carol LaGrasse: I think it's wonderful what you reported. Thank you very much.

Mr. Wood: Thank you.

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