Top NC court temporarily blocks takings ruling against DEQ

The North Carolina Supreme Court has granted state environmental regulators’ request for a temporary stay in a case involving claims of the unconstitutional taking of a developer’s property in Brunswick County.

The high court issued an order Tuesday granting the stay without comment.

The North Carolina Department of Environmental Quality’s lawyers argued in a court filing Friday that the case could open the door for additional lawsuits. Plaintiffs could allege unconstitutional takings any time a government agency denies a permit or renders an unfavorable zoning decision, according to the agency.

The dispute stems from plaintiff LDI Shallotte’s 2021 purchase of property for a planned subdivision. State environmental regulators had issued “notices of violation” involving the property back in 2004 and 2005. Those violations never had been resolved.

The prior violations blocked LDI from pursuing an express review for a required stormwater permit, DEQ lawyers explained. After the developer and DEQ were unable to resolve the issue, LDI filed a petition with the Office of Administrative Hearings in April 2022.

By November 2022, an administrative law judge ruled for the developer and against DEQ. The ALJ determined that environmental regulators should have processed LDI’s permit application. The administrative judge “also found that the Department’s actions constituted an unconstitutional taking of LDI’s property” and awarded the developer more than $109,000 in attorney’s fees.

DEQ eventually awarded the permit in August 2023. Shortly afterward, LDI filed suit against the agency. The complaint featured “claims for inverse condemnation, unconstitutional taking, declaratory judgment, denial of substantive due process, and denial of procedural due process.”

A trial judge dismissed LDI’s complaint in February 2024, but the North Carolina Court of Appeals issued a decision in January reviving the portion of the lawsuit focusing on the alleged unconstitutional taking. Appellate judges ruled that the case should head back to a trial court to address the taking claim.

“In this case the Court of Appeals held that LDI had adequately pleaded a claim for an unconstitutional taking, despite the fact that the Department never denied LDI’s requested permit and despite the fact that LDI received the permit after review in the Office of Administrative Hearings,” DEQ’s lawyers wrote Friday while requesting a temporary stay. “To hold that a taking occurs in this context is to create a potential takings claim any time there is a permit denial or unfavorable zoning decision, even where other options exist to remedy the decision. This would open the door to additional litigation and risk for agencies and municipalities throughout the State of North Carolina.”

“The Court of Appeals’ decision is in conflict with analogous cases in the zoning context, which have held that no taking occurs if a party has the opportunity to petition for a variance from the applicable zoning law and is ultimately successful in obtaining such a variance, either before the zoning authority or in court,” the court filing continued.

“The decision of the Court of Appeals is also in conflict with takings decisions from the United States Supreme Court, which have found that ordinary delays in receiving permits or development approval are not takings,” DEQ’s lawyers argued. “In fact, the United States Supreme Court has held that a blanket 32-month development moratorium was not a taking where development was ultimately allowed to proceed.”

“While a delay lasting for many years and where no administrative remedies are available to obtain a final decision from the agency might rise to the level of a taking in certain circumstances, such is not the case here,” the court filing continued. “LDI was able to petition for its stormwater permit in the Office of Administrative Hearings and received a final decision in its favor.”

DEQ “intends to seek this Court’s review of the erroneous decision below,” its lawyers explained.

“Top NC court temporarily blocks takings ruling against DEQ” was originally published on www.carolinajournal.com.