Supreme Court Should Take and Reverse Fifth Circuit Decision that Creates a Catch-22 for Takings Claims Against State Governments

The badly flawed ruling defies the Supreme Court's landmark 2019 decision forbidding such Catch-22 traps.

In its important decision in Knick v. Township of Scott (2019), the the Supreme Court reversed Williamson County Regional Planning Commission v. Hamilton Bank, a 1985 decision that made it almost impossible to bring takings cases against state and local governments in federal courts. Under Williamson County, a property owner who claimed the government has taken his property and therefore owed "just compensation" under the Fifth Amendment, could not file a case in federal court until he or she first secured a "final decision" from the relevant state regulatory agency and "exhausted" all possible state court remedies in state court. At that point, it was still usually impossible to bring a federal claim, because procedural rules preclude federal courts from reviewing most final decisions by state courts. In a forceful opinion for the Court, Chief Justice John Roberts denounced this "Catch-22" and emphasized that "[a] property owner has an actionable Fifth Amendment takings claim when the government takes his property without paying for it." The owner does not have to first go to state court.

Access to federal court is crucial to protecting constitutional rights against violation by state and local governments. In some situations, state courts will not adequately protect those rights, and may even be part of the same political coalition as the state or local officials who violated those rights in the first place (a problem particularly likely to arise in the many states where judges are elected).

Unfortunately, a recent decision by the US Court of Appeals for the Fifth Circuit (which covers the states of Texas, Louisiana, and Mississippi) goes against the principles outlined in Knick and threatens to create a new Catch-22 keeping takings claims out of federal court.

In Devillier v. Texas, decided in November, a Fifth Circuit panel ruled that federal courts have no jurisdiction to hear takings claims against state governments because the Fifth Amendment doesn't create such jurisdiction, and there is no federal statute establishing it either. Here is the entirety of the opinion (minus footnotes):

The State of Texas appeals the district court's decision that Plaintiffs' federal Taking Clause claims against the State may proceed in federal court. Because we hold that the Fifth Amendment Takings Clause as applied to the [S]tates through the Fourteenth Amendment does not provide a right of action for takings claims against a [S]tate, we VACATE the district court's decision and REMAND for further proceedings. The Supreme Court of Texas recognizes takings claims under the federal and state constitutions, with differing remedies and constraints turning on the character and nature of the taking; nothing in this description of Texas law is intended to replace its role as the sole determinant of Texas state law. As such, this Court lacks jurisdiction to review these claims.

[the text above is slightly modified from the court's original decision, as explained here (pg. 25)].

What the court says is simply false. The Fifth Amendment does indeed create a "direct cause of action" against state governments, no less than other provisions of the Bill of Rights do. Nothing in the text or original meaning of the Constitution suggests otherwise. In the footnotes, the panel cites Azul–Pacifico, Inc. v. City of Los Angeles, a 1992 Ninth Circuit reaching a similar conclusion. But Azul-Pacifico, a very short opinion that offers almost no analysis supporting its position, was decided prior to Knick, at a time when Williamson County was still in force and it was therefore permissible for courts to disfavor takings claims relative to other constitutional rights claims. Knick decisively rejected such theories, and the Fifth Circuit erred egregiously in failing even to cite Knick in its opinion.

Even worse, the Fifth Circuit ruling creates precisely the kind of Catch-22 that Knick forbids. Indeed, it may be even worse! This case ended up in federal court in the first place, because—after the plaintiffs initially filed in state court—the state of Texas removed the case to federal court under 28 U.S. Code Section 1441, which allows defendants to remove to federal court "any civil action brought in a State court of which the district courts of the United States have original jurisdiction."

Under the approach adopted here by the Fifth Circuit, takings claims against state governments cannot be brought in federal court. And if they are instead brought in state court, the defendant state can remove them to federal court and then force their dismissal! As Judge Andrew Oldham puts it in his dissent from the Fifth Circuit's March 23 denial of the plaintiffs' petition for an en banc rehearing (which, if granted, would have had the entire Fifth Circuit reconsider the panel decision), "[t]he panel decision renders federal takings claims non-cognizable in state or federal court."

This is actually even worse than the Williamson County regime, under which takings claims could at least be litigated in state court (though some lower courts did permit the kinds of removal shenanigans the Fifth Circuit blessed here). The federal district court ruling that the Fifth Circuit reversed effectively highlighted this dangerous implication of ruling in favor of the state, and specifically cited Knick, as well:

In considering the State's argument, it is important to think for a moment about the dramatic implications of such a rule. Under the State's view, it can take property from a private citizen without paying just compensation and the private citizen would be left without a remedy. Take an example. Person A owns a 20-acre vacant parcel. While Person A is on a five-year trip around the world, the State commandeers the property, constructs a state office building on the property, and utilizes the building on the property—all without the permission of the property owner. When Person A returns home, the State tears down the building and returns the property to its original vacant state. This is a classic taking for which Person A is clearly entitled to be compensated. See Knick v. Township of Scott, 139 S.Ct. 2162, 2167 (2019) ("A property owner has an actionable Fifth Amendment takings claim when the government takes his property without paying for it.")…. But not so fast. Amazingly, the State maintains that Person A would have no federal constitutional remedy against the State because a Fifth Amendment takings claim can never be brought against a State under [42 USC] § 1983. This thinking eviscerates hundreds of years of Constitutional law in one fell swoop, and flies in the face of commonsense. It is pretzel logic.

There is not, as the State suggests, some sort of "state exception" that excludes state governments from the reach of the Fifth Amendment's Takings Clause. The complete opposite is true. "Historically, the United States Supreme Court has consistently applied the Takings Clause to the states, and in so doing recognized, at least tacitly, the right of a citizen to sue the state under the Takings Clause for just compensation." Manning v. Mining & Minerals Div. of the Energy, Minerals & Nat. Res. Dep't, 144 P.3d 87, 90 (N.M. 2006) (citing Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg'l Plan. Agency, 535 U.S. 302, 306-09 (2002); Palazzolo v. Rhode Island, 533 U.S. 606, 614-15 (2001); Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1027-30 (1992)).

The plaintiffs have petitioned the Supreme Court to take the case. The Court should do exactly that. The justices need not even do much work, if they don't want to. They can just summarily reverse the Fifth Circuit, and endorse, by reference, the reasoning of the district court (technically, a magistrate judge's recommendation, which the district judge then adopted). If the Supreme Court lets this egregious decision stand, three state governments ruling over a total of some 36 million people, will be free to seize private property and then refuse to pay compensation, without fear of having their actions challenged in either state or federal court.

Two of the judges on the panel, Higginbotham and Higginson, filed concurring opinions to the Fifth Circuit's denial of rehearing en banc, in which they defend the panel decision in much more detail than the ruling itself did. Judge Higginbotham argues that the reasoning of Knick only applies to cases brought under 42 U.S.C. Section 1983, which applies to  cases brought against "persons" who deprive the plaintiffs of their constitutional rights  (previous precedent holds, wrongly in my view, that local governments qualify as "persons" under Section 1983, but states do not). But Knick clearly makes the more general point that takings claims deserve access to federal court on par with other constitutional rights ("A property owner has an actionable Fifth Amendment takings claim when the government takes his property without paying for it") and bars the creation of "Catch-22" rules that block such access. A Catch-22 rule that blocks access to both state and federal courts, as the Fifth Circuit decision does, is even more egregious, and even more obviously at odds with Knick.

Judge Higginbotham also advances various arguments to the effect that it is desirable to confine most takings cases to state courts, because of the latter's special expertise in property law issues. These types of arguments were rejected by the Supreme Court in Knick, and for good reason. I criticize them in some detail in my article on Knick (also available here).

Judge Higginson argues that the special circumstances of the incorporation of the Takings Clause against state governments justify the kind of double standard created by the panel ruling. He argues that, even if the Takings Clause, generally, was incorporated against state governments, the right to a damages remedy for "compensation" was not, and therefore can only exist if Congress enacts a specific statute requiring it. But this makes no sense. The right to "just compensation" is right there in the Takings Clause, and there is zero evidence that the Fourteenth Amendment somehow incorporates the rest of the Fifth Amendment against the states, but excluded this part.

Judge Oldham's dissent offers additional (mostly well-taken) criticisms of Judge Higginbotham's and Judge Higginson's opinions. He also outlines various procedural flaws of the original panel opinion. Among other things, the latter was surely wrong to dispense with so an important issue in such a cursory way.

The Oldham dissent does have a few flaws of its own. For example, Judge Oldham endorses the common, but fallacious, view that the Supreme Court incorporated the Takings Clause against the states in Chicago, Burlington & Quincy Railroad Company v. Chicago (1897). For reasons discussed in Chapter 2 of my book The Grasping Hand, this isn't true. In reality, this was just one of a number of late-19th century cases where the Supreme Court allowed property owners to bring takings cases against states and localities under the Due Process Clause of the Fourteenth Amendment.

Regardless, Judge Oldham and the district court are surely right about the bottom line, and the Supreme Court would do well to adopt the main elements of their reasoning.

NOTE: The plaintiffs in this case are now represented by the Institute for Justice, a public interest law firm with which I have longstanding ties, and for which I have written pro-bono amicus briefs in other property rights cases. But I do not have any involvement in this case. Back in 2001-2002, I clerked for Judge Jerry E. Smith, who is one of four Fifth Circuit judges who joined Judge Oldham's dissent from the denial of rehearing en banc. The litigation of this case began long after my clerkship ended.