In Lockaway Storage v. County of Alameda (2013) ___ Cal.App.4th ___ (Case No. A130874), the First District Court of Appeal held that Alameda County’s application of a voter-approved growth control initiative resulted in a compensable temporary regulatory taking entitling the property owner to nearly $1 million in damages and over $725,000 in attorneys’ fees.

Background

Lockaway is a general partnership that develops, owns, and operates storage facilities.  It has owned a parcel of land in Alameda County since 2000.  In 1999 the County approved a conditional use permit for the property authorizing a storage facility at the site. The CUP required that it be implemented within three years of its issuance, or it would expire on September 22, 2002.  When Lockaway purchased the property in May 2000, it assumed the rights and obligations of the seller in the CUP.

In November 2000, Alameda County voters enacted Measure D. Among other things, Measure D prohibits the development of a storage facility in the area of Lockaway’s property, except by public vote and explicitly states that no use permit which is inconsistent with the measure can be approved or granted. Notwithstanding that proscription, other sections of Measure D limit its application.  Section 22, for example, is a grandfather clause that explains the ordinance does not affect existing parcels, development, structures, and uses that are legal at the time the ordinance became effective, provided the development had received all discretionary approvals and permits.

Lockaway continued to pursue its plan to develop the property even after Measure D became effective.  Towards the end of the planning phase, Lockaway received assurances from the County that the CUP would be formally implemented before the September 22, 2002 deadline.  On August 30, 2002, however, the County informed Lockaway that unless it obtained a new CUP, it could not proceed with the project after the 1999 CUP terminated. Lockaway, therefore, applied for a new CUP on September 3, 2002, but the County did not issue a building permit for the project prior to the September 22 deadline.

At a September 23, 2002 hearing to consider Lockaway’s application for a new CUP, the County took the position that Measure D barred to the project because Lockaway had not obtained a building permit and commenced construction prior to Measure D’s September 22, 2000 effective date. Lockaway argued that its right to complete the project was unaffected by Measure D because the 1999 CUP was grandfathered in and was implemented before it expired.  The County ultimately determined that the project was subject to Measure D and all work on the project stopped.

Lockaway sued the County for inverse condemnation and civil rights violations. The superior court issued a writ of mandate authorizing the project to proceed.  Although it initially resisted complying with the writ, the County ultimately acquiesced and issued the necessary approvals in August 2005.  During the damages phase of the trial, the superior court determined that the County was liable for a temporary regulatory taking and awarded Lockaway $989,640.96.  The court also awarded Lockaway attorney fees totaling $728,015.50. The County appealed.

Lockaway’s Project Was Unaffected by Measure D

The court held that the Lockaway project was unaffected by Measure D because it fit squarely within the grandfathering exemption. When Lockaway purchased the property in May 2000, the County had already issued all discretionary approvals for the project. Subsequent permits were not discretionary, but rather, ministerial in nature.  Moreover, the court held that the County had waived this argument by conceding it the trial level.

The County’s Actions Effectuated a Regulatory Taking

Applying the three-factor test articulated by the U.S. Supreme Court in Penn Central Transportation Corporation v. New York City, the court held that the County’s temporary suspension of the project amounted to a constitutional taking under the Fifth Amendment.  First, the court held that the County’s action unreasonably impaired the value and use of the property.  Although there were other uses that would have been consistent with Measure D, requiring Lockaway to pursue some different authorized use other than a storage facility would have deprived Lockaway of the return on investment that it reasonably expected from its intended use.  Moreover, by the time County first told Lockaway that Measure D would stop the project, Lockaway was already fully committed to developing the storage facility and would have incurred substantial loss to convert the property to another use. Thus, the court held that the County’s regulatory action unreasonably impaired both the value and use of the Lockaway Property.

Second, the court held that Lockaway had a reasonable investment-backed expectation that its project could proceed because Lockaway purchased the property only after the County expressly confirmed that it could rely on the 1999 CUP. County staff even worked with Lockaway for a few years before the County changed its position once the September 22, 2002 expiration date had passed.

The third Penn Central factor required the court to consider the character of the County’s action.  The court held that the County’s “regulatory about face” was manifestly unreasonable because it deprived Lockaway of a meaningful opportunity to attempt to protect its property rights.   According to the court, the County should have taken action to shut down the project when Measure D took effect, rather than encouraging Lockaway to continue development. The court also took issue with the County’s refusal to even consider whether the grandfathering section of Measure D exempted the project. The court further held that, under these facts, the County’s decision to abandon the approvals for the Lockaway project could not be justified as a “mere” consequence of a public program. The court, therefore, had no problem finding that a compensable temporary regulatory taking had occurred, and upheld the trial court’s damages award.

Award of Attorney Fees Was within the Scope of the Trial Court’s Discretion

Lastly, the County argued that even if the judgment was affirmed, the award of attorneys’ fees to Lockaway should be reversed because the fee award included compensation for work attributable to civil rights causes of action on which Lockaway did not prevail. The court disagreed. It held that the trial court had discretion to award fees incurred with respect to the civil rights cause of action because they were relevant to the inverse condemnation claim. It was clear that the degree of interconnection between the various causes of action was a key consideration for the trial court in awarding fees.  Although the trial court did not explicitly state that it was awarding fees for the civil rights claims based on their relevance to the inverse condemnation claim, the court had no difficulty in concluding that such a finding was implied. The court, therefore, upheld the nearly $1 million attorneys’ fee award in its entirety.