Catch-22 shenanigans give developer a Takings claim

This case arises in Town of Chester, Orange County, where I have my office. So that makes it interesting to me. What makes it interesting to you is that the Second Circuit uses the case to shed light on what makes a constitutional Takings case ripe for judicial review.

The case is Sherman v. Town of Chester, decided on March 16. Judge Straub opens the decision by summarizing what happened in the novel Catch-22, where the fighter pilot thinks he can return to civilian life before some sadistic Colonel keeps revising the requirements, forcing "Hungry Joe" to fly more missions. Sherman probably felt like the guy on Catch-22. He bought property in the town to build an elaborate development, but the town hit him with red tape, enacting a new zoning ordinance that required him to draft a new plan. The town then enacted new zoning rules again and again each year. The town kept raising other hurdles as well, i.e., announcing a moratorium on development, requiring Sherman to submit study after study and making pay more and more in consulting fees. He eventually sued under the Takings Clause without obtaining a final decision from the town on his development proposal.

Cases are ripe when the plaintiff has done all he could in the town or administrative process. Usually that means you get a final decision from the locals before you challenge it in court. The idea is that the experts get a chance to weigh in on the proposal before generalists in the court decide if they acted legally. In Takings claims, we normally require the plaintiff to exhaust all local and administrative remedies, i.e., it must issue a final decision. But that requirement clashes with the rule that exhaustion is not required when it would be futile. Judge Straub has fun with this decision, stating,

The Town will likely never put up a brick wall in between Sherman and the finish line. Rather, the finish line will always be moved just one step away until Sherman collapses. In essence, the Town engaged in a war of attrition with Sherman. Over ten years, Sherman was forced to spend over $5.5 million on top of the original $2.7 million purchase. As a result, he became financially exhausted to the point of facing foreclosure and possible personal bankruptcy. 

It would be futile -- a waste of time -- for Sherman to seek a final decision from the town. The application process would last forever. This means his case is ripe for judicial review.

Sherman also has a Takings case on the merits. The town effectively prevented him from making any economic use of his property. The town also interfered with plaintiff's reasonable financial expectations, as the property was zoned for residential use when he bought the property. And the town's behavior suffocated Sherman with red tape to prevent him from succeeding on his development. "The Town's conduct was unfair, unreasonable and in bad faith," the Second Circuit says.