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LLC v. State

United States District Court, D. Hawaii

June 13, 2017



          Susan Oki Mollway, United States District Judge


         Before the court is Defendant[1] State of Hawaii's motion to dismiss Plaintiff DW Aina Le'a Development, LLC's Complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Motion to Dismiss, ECF No. 5. This court dismisses DW's federal and state takings claims as time-barred.


         This case concerns the classification of over 1, 000 acres of land in South Kohala on Hawaii Island. Complaint, ECF No. 1-2, PageID # 9. In 1989, the State's Land Use Commission reclassified the land from agricultural to urban to allow the development of almost 2, 000 homes, with facilities and amenities, as part of a residential community. Id. The reclassification was subject to various conditions, including a condition that a certain percentage of the housing units be affordable. Id.

         From 1990 until 2008, the Land Use Commission amended and revised the original order's affordable housing condition several times, working with various successor landowners and developers, including DW. Id., PageID #s 9-11. In 2008, the Commission issued an order to show cause why the land should not revert back to an agricultural classification because of the developer's alleged failure to timely comply with certain conditions. Id., PageID # 11. On April 25, 2011, after several years of proceedings and DW's acquisition of development rights for the land, the Commission ordered the land reverted from its urban classification back to its original agricultural use. Id., PageID #s 11-21.

         The landowners and developers, including DW, sought judicial review of the Commission's decision. Id., PageID # 21. The Hawaii Supreme Court ultimately consolidated the cases and held that the Land Use Commission “erred in reverting the land without complying with the requirements of HRS § 205-4 because the land owners had substantially commenced use of the land in accordance with the representations they had made to the Commission.” DW Aina Lea Dev., LLC v. Bridge Aina Lea, LLC., 134 Haw. 187, 190, 339 P.3d 685, 688 (2014). The court observed that, by the time the land was reverted to agricultural use, DW “had substantially commenced use of the land in accordance with [its] representations” to the Commission and had spent more than $20 million on the project. Id. at 191, 339 P.3d at 689.

         On February 23, 2017, DW filed its Complaint in the First Circuit Court for the State of Hawaii seeking just compensation from the State for the alleged regulatory taking. Complaint, ECF No. 1-2. The State removed the case to federal court and then filed the present motion to dismiss. Notice of Removal, ECF No. 1; Motion to Dismiss, ECF No. 5. A hearing was held on May 15, 2017. See ECF No. 15.


         Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, the court's review is generally limited to the contents of a complaint. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001); Campanelli v. Bockrath, 100 F.3d 1476, 1479 (9th Cir. 1996). If matters outside the pleadings are considered, the Rule 12(b)(6) motion is treated as one for summary judgment. See Keams v. Tempe Tech. Inst., Inc., 110 F.3d 44, 46 (9th Cir. 1997); Anderson v. Angelone, 86 F.3d 932, 934 (9th Cir. 1996). However, the court may take judicial notice of and consider matters of public record without converting a Rule 12(b)(6) motion to dismiss into a motion for summary judgment. See Emrich v. Touche Ross & Co., 846 F.2d 1190, 1198 (9th Cir. 1988).

         On a Rule 12(b)(6) motion to dismiss, all allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party. WMX Techs., Inc. v. Miller, 197 F.3d 367, 372 (9th Cir. 1999). However, conclusory allegations of law, unwarranted deductions of fact, and unreasonable inferences are insufficient to defeat a motion to dismiss. Sprewell, 266 F.3d at 988; In re Syntex Corp. Sec. Litig., 95 F.3d 922, 926 (9th Cir. 1996). Dismissal under Rule 12(b)(6) may be based on either: (1) lack of a cognizable legal theory, or (2) insufficient facts under a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988) (citing Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 533-34 (9th Cir. 1984)).

         To survive a Rule 12(b)(6) motion to dismiss, “[f]actual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted); accord Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (“[T]he pleading standard Rule 8 announces does not require ‘detailed factual allegations, ' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.”). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the ‘grounds' of his ‘entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (internal citations omitted). The complaint must provide “enough facts to state a claim to relief that is plausible on its face.” Id. at 570. “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.

         IV. ANALYSIS.

         DW seeks monetary damages from the State for the alleged taking of property without payment of just compensation in violation of Article I, section 20 of the Hawaii constitution, as well as the Fifth Amendment to the United States Constitution. Complaint, ECF No. 1-2, PageID # 25. The State seeks dismissal of the “takings-inverse condemnation” claims, arguing that they are barred by the applicable statutes of limitations. Memorandum in Support of Motion to Dismiss, ECF No. 5-1, PageID #s 40-41.

         A. This Court Has Subject Matter Jurisdiction Over the Federal Takings Claim.

         This court first considers whether the federal takings claim is ripe for review. Ripeness “is drawn both from Article III limitations on judicial power and from prudential reasons for refusing to exercise jurisdiction.” Reno v. Catholic Soc. Servs., Inc., 509 U.S. 43, 57 n.18 (1993); Portman v. Cty. of Santa Clara, 995 F.2d 898, 902 (9th Cir. 1993) (“The ripeness inquiry contains both a constitutional and a prudential component.”). Article III ripeness is jurisdictional, while “[p]rudential considerations of ripeness are discretionary.” Thomas v. Anchorage Equal Rights Comm'n, 220 F.3d 1134, 1142 (9th Cir. 2000) (en banc).

         Under Williamson County Regional Planning Commission v. Hamilton Bank, 473 U.S. 172 (1985), a federal regulatory takings claim does not ripen until two prongs are satisfied. Under the first prong, a plaintiff must establish that “the government entity charged with implementing the regulations has reached a final decision regarding the application of the regulations to the property at issue.” Id. at 186. Under the second prong, a plaintiff must show that “the owner has unsuccessfully attempted to obtain just compensation through the procedures provided by the State for obtaining such compensation.” Id. at 195.

         This court recently opined in a related case on whether a federal takings claim is ripe for judicial review under Williamson County when a case is removed to federal court. In that related case, the plaintiff had filed a complaint in state court seeking, among other things, just compensation for the alleged regulatory taking relating to the reversion of the land in issue here to agricultural use. Bridge Aina Le'a, LLC v. Haw. Land Use Comm'n, 125 F.Supp.3d 1051, 1054-55, 1057 (D. Haw. Aug. 25, 2015). The defendants removed the case to federal court before a determination of just compensation had occurred in state court. Id. at 1057. In addressing a motion to dismiss brought by the defendants in that case, this court wrote:

To the extent any Defendant is found liable to Bridge for a taking, no determination of just compensation has yet occurred such that Bridge could claim that any compensation is inadequate. The absence of such a determination does not necessarily mean that this court is barred from considering Bridge's takings claims. The Supreme Court has referred to the Williamson County state exhaustion requirement as prudential rather than jurisdictional. See Suitum v. Tahoe Reg'l Planning Agency, 520 U.S. 725, 733 (1997); see also Guggenheim v. City of Goleta, 638 F.3d 1111, 1117-18 (9th Cir. 2010). Although the Ninth Circuit treats ripeness as implicating both Article III and prudential considerations, see Guatay Christian Fellowship v. Cnty. of San Diego, 670 F.3d 957, 980 (9th Cir. 2011), it has recognized that the Williamson County ripeness requirements are discretionary when the case “raises only prudential concerns, ” as is the case here. Adam Bros. Farming v. Cnty. of Santa Barbara, 604 F.3d 1142, 1148 (9th Cir. 2010). This court has the discretion to consider Bridge's takings claim if warranted by “the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration.” Thomas v. Anchorage Equal Rights Comm'n, 220 F.3d 1134, 1141-42 (9th Cir. 2000).
This court notes that Bridge's takings claims have been pending in this court for years. See Yamagiwa v. City of Half Moon Bay, 523 F.Supp.2d 1036, 1109 (N.D. Cal. 2007) (finding hardship when parties had litigated case for two years and decision would soon issue). Both parties point to Defendants' removal of this case in addressing Bridge's federal takings claims. See ECF No. 88, PageID #s 1172-73; ECF No. 89, PageID # 1182. Although other circuits have determined that the Williamson County state exhaustion requirement does not apply to cases that have been removed to federal court, see Sherman v. Town of Chester, 752 F.3d 554, 564 (2d Cir. 2014); Sansotta v. Town of Nags Head, 724 F.3d 533, 545-47 (4th Cir. 2013), it does not appear that the Ninth Circuit has opined on the matter. Cf. Alpine Vill. Co. v. City of McCall, No. 1:11-CV-00287-BLW, 2011 WL 3758118, at *2-3 (D. Idaho Aug. 25, 2011) (applying state exhaustion requirement in removed case). This court does not decide this issue here.

Id. at 1061 n.3.

         In a separate but related order addressing the defendants' motion for summary judgment, this court applied the second prong of Williamson County, concluding:

Under Williamson, Bridge's takings claims ripened on June 7, 2011, when Bridge satisfied the second prong by availing itself of state procedures for seeking just compensation. On that date, Bridge filed its Complaint in state court, which included its state and federal takings claims.
The first prong of Williamson was earlier satisfied on April 25, 2011, when the LUC entered an order adopting the proposed findings of fact, conclusions of law, and decision and order reverting the land to its agricultural use classification.

Bridge Aina Le'a, LLC v. Haw. Land Use Comm'n, Civ. No. 11-00414 SOM-BMK, 2016 WL 797567, at *7 (D. Haw. Feb. 29, 2016).

         The State did not specifically raise the issue of ripeness in its moving papers in the present case, and this court, noting that DW had not been a party to the earlier related case, offered the parties a chance to address any potential jurisdictional issues. Both DW and the State took the position that there was no jurisdictional bar to this court's proceeding, and asked this court to go forward with the hearing.

         This court has satisfied itself that it has subject matter jurisdiction over this case and that the federal takings claim is ripe for review.

         No determination has occurred with respect to what, if any, just compensation DW is entitled to. As this court has previously opined on the issue of ripeness, “The absence of such a determination does not necessarily mean that this court is barred from considering [DW's] takings claims.” See Bridge Aina Le'a, LLC, 125 F.Supp.3d at 1061 n.3. The Williamson County state exhaustion requirement raises prudential concerns and does not implicate this court's Article III subject matter jurisdiction. See Suitum v. Tahoe Reg'l Planning Agency, 520 U.S. 725, 734 n.7 (1997) (describing Williamson County requirements as “prudential hurdles” distinct from Article III jurisdictional requirements). This court therefore may exercise its discretion to ...

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