Eminent Domain Report

A May 14 decision by the Ninth Circuit Court of Appeals clarifies the rules regarding when a plaintiff may sue for inverse condemnation in federal court.  In Adams Bros. Farming v. County of Santa Barbara No. 09-55315 (May 14, 2010), the Court rejected an inverse condemnation claim brought against the County, where the County allegedly effected a taking by improperly designating part of the owner's property as wetlands. 

The case involves a long, fairly tortured history that dates back to the late 1990's, when the County (apparently erroneously) designated about 95 acres of "Rancho Meadows" as a wetland.  In 2000, the owner sued the County in state court, claiming that the designation (1) constituted a taking, (2) violated the owner's due process rights, and (3) violated the Equal Protection Clause.  The court dismissed as unripe the takings claims, and after a trip up to the Court of Appeal, the case went to trial in 2004 on the due process and equal protection claims. 

The jury awarded the property owner $5.4 million, but the Court of Appeal reversed, holding that the owner lacked standing to pursue the due process and equal projection claims because it did not own the property at the time the wetlands designation occurred. 

Having lost on appeal in state court, the owner sued in federal court, claiming, again, that the designation qualified as a taking.  The Ninth Circuit rejected the trial court's conclusion that the takings claim was not ripe, but went on to conclude that the claim was barred under principles of res judicata, notwithstanding the fact that the state court never reached the merits of the takings claim. 

The holding arose from the fact that res judicata applies whenever the issue litigated in the prior action involves the same "primary right."  In other words, it did not matter that the state court found the takings claim unripe; what mattered was that the due process and equal projection claims (which were fully litigated) arose from the same fundamental claim as the County's designation of the property as a wetland:

The damages that Adam Bros. now seeks to obtain in federal court are identical to those it sought in state court.  For purposes of res judicata, it is irrelevant that Adam Bros. attempts to recover under different legal theories.

The silver lining for the owner:  though the state court reversed the $5.4 million damages award, it upheld injunctive and declaratory relief, invalidating the County's wetlands determination.