San Diego Developer Strikes Out on “Disguised Taking” Claim

In Dryden Oaks, LLC v. San Diego County Regional Airport Authority et al.(D068161, filed 9/26/17, publication order 10/19/17), the California Court of Appeal, Fourth Appellate District held that the County of San Diego (County) and the San Diego Regional Airport Authority (Authority) were entitled to summary judgment on a developer’s “disguised taking” theory of inverse condemnation.

In 2001, the developer purchased two large lots (designated Lot 24 and Lot 25) adjacent to the end of a runway at the Palomar Airport in Carlsbad. Plaintiff obtained the necessary permits from the City of Carlsbad and successfully completed construction of an industrial building on Lot 24 in 2005. However, the plaintiff never began development of Lot 25 and the building permit for the property expired in 2012. The developer was then unable to renew the building permit because the Authority had adopted the Airport Land Use Compatibility Plan (ALUCP) in the interim period, which reclassified the Lots as part of a Runway Protection Zone (RPZ). The developer received a letter explaining that “despite the earlier approval the proposed development was no longer feasible because the ALUCP was more restrictive than the prior compatibility plan and the application’s proposed use of ‘research and development’ was not permissible.”

Plaintiff filed suit against the Authority and the County of San Diego alleging several counts of inverse condemnation under a regulatory takings theory that “the adoption of the ALUCP … was effected to allow the County to acquire the properties for an airport expansion.” The trial court granted summary judgment in favor of the Authority and the County.

On appeal, the developer argued that even if the County and the Authority did meet their burden, it showed the existence of a triable issue of fact as to whether the 2010 ALUCP constituted a “disguised taking” that obligated the County and the Authority to provide compensation. The Court of Appeal rejected the “disguised regulatory taking” theory because Plaintiff did not make any claim that any act of the Authority or County “could be construed as a physical invasion of his property.” The court concluded the adoption of the ALUCP was neither a physical invasion nor the denial of any economically beneficial use of his property.

The court noted the developer failed to show the ALUCP was a sufficiently final land use determination to support the plaintiff’s inverse condemnation claims, concluding the Authority’s airport compatibility plans may be overruled by local agencies that have responsibility for ultimate zoning determinations. The court further expressed doubt the developer had sued the correct public entity. As such, it affirmed the lower court’s ruling in favor of the defendants.

Dryden Oaks, LLC is a cautionary reminder that every owner or developer of property is affected by environmental and land use laws and regulations. While, as here, regulation can hinder development or result in financial loss, experience and understanding translate to a competitive advantage in the marketplace. At Haight, we help our owner and developer clients navigate the complexities of project planning, permitting, and building with strategic focus on harmonizing their goals with the evolving business and policy landscape.

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October 23, 2017