Koontz: A Valuable Weapon Against Government Sponsored Extortion

The U.S. Supreme Court decided a case which bolsters the rights of property owners against government agencies who impose “extortionate” demands or development fees. The opinion was issued on June 25, 2013 in the case of Koontz v. St. Johns River Water Management District.[1]

Definition of an Unconstitutional Taking.

In Koontz, the Court applied the doctrine of “unconstitutional conditions” established in the Court’s previous Nollan and Dolan opinions.[2] Under those opinions, where an agency demands a dedication of property for public use (for example, by requiring an easement for public access), the demand must (1) have a logical connection to the development and (2) be reasonable in view of the increased public costs imposed by the development. If the demand violates these requirements, then the agency has overstepped its bounds and may be liable to the owner for damages caused by for an unconstitutional “taking” of property.

Before Koontz, a developer usually accepted the permit condition and then would sue the agency and try to prove that the demand was unconstitutional taking. In Koontz, however, the owner refused the agency’s demand and his permit was denied. The agency offered a second demand, payment for the agency to improve some off-site marshland. The owner refused the second demand and sued for an unconstitutional taking of his property.

The Key Holdings of Koontz.

The Supreme Court ruled in Koontz’s favor and clarified two important points:

1. An owner can make a claim even though the agency denies the permit.

2. An owner can make a claim where the agency demands money from the agency rather than a dedication of property.

Anti-Extortion Rule. The opinion in Koontz states the Court is [m]indful of the special vulnerability of land use permit applicants to extortionate demands for money . The power of government agencies is virtually unchecked, especially against small businesses and family owned projects. The Koontz decision gives valuable leverage to smaller developers (who often lack sophistication or unlimited resources) to fight against government sponsored extortion.

For questions relating to this article or for assistance with a real property matter, please contact the business litigation attorneys at White and Bright.

[1] Koontz v. St. Johns River Water Management District, No. 11-1447 (U.S. June 25, 2013).

[2] Nollan v. California Coastal Com’n (1987) 483 U.S. 825 and Dolan v. City of Tigard (1994) 512 U.S. 374.