Monterey v. Del Monte Dunes: U.S. Supreme Court Decides Takings Case in Favor of Developer

A May 1999 U.S. Supreme Court decision, Monterey v. Del Monte Dunes, involved a proposed development project by Del Monte Dunes Corp. in the city of Monterey, California (the “City”). The City rejected a series of development proposals by Del Monte, each time imposing more rigorous demands on the proposed project. Del Monte ultimately brought a lawsuit claiming that denial of the opportunity to pursue any development constituted a regulatory taking of its property without compensation. The case was tried before a jury, which found for Del Monte and awarded damages of $1.45 million. The Court of Appeals affirmed the jury’s ruling, and the City sought review by the U.S. Supreme Court.

The City asked the Court to review three issues: (1) whether the issue of the City’s liability for Del Monte’s regulatory taking claim was properly submitted to the jury; (2) whether in affirming the trial court’s decision, the Court of Appeals applied a standard that improperly allowed the jury to second-guess the City’s land use policy and decision; and (3) whether the Court of Appeals correctly assumed that the “rough-proportionality” standard established by the Supreme Court in the case Dolan v. Tigard applies. The Court addressed those issues in reverse order, reserving most of its analysis for the issue relating to whether a party is entitled to a jury in a takings case.

First, with respect to application of the Dolan proportionality rule, the Court noted that the Court of Appeals stated that “even if the City had a legitimate interest in denying Del Monte’s development application, its action must be roughly proportional to furthering that interest.” The Court disagreed, concluding “we have not extended the rough-proportionality test of Dolan beyond the special context of exactions – land-use decisions conditioning approval of development on the dedication of property to public use . . .. The rule applied in Dolan . . . was not designed to address, and is not readily applicable to, the much different questions arising where, as here, the landowner’s challenge is based not on excessive exactions but on denial of development.” The Court did not elaborate on the reasons why the Dolan proportionality rule “is not readily applicable” in denial of development cases, nor the “much different questions” that arise in such cases. The Court held simply that it was unnecessary for the Court of Appeals to have discussed rough proportionality.

Second, the Court addressed the City’s claim that the regulatory takings analysis applied by the Court of Appeals improperly permitted the jury to second-guess public land use policy applied by local regulators. The City claimed that the regulatory takings standard applied by the trial court, as articulated in the instructions by the court to the jury, was incorrect. The Court rejected this argument for several reasons. First, it observed that the City itself had proposed the jury instructions adopted by the trial court, so it could not complain now about its own instructions.

More fundamentally, however, the Court noted that the property owner had not challenged the City’s zoning ordinances or policies as unreasonable, nor the authority of the City to impose conditions on its approval of the development. Rather, Del Monte challenged whether the City’s denial, or the conditions it had imposed on granting approval, were reasonably related to that denial and in furtherance of a legitimate public purpose. That is, the jury was asked only to consider whether the City’s denial of the final development proposal was reasonably related to the justifications proffered by the City and assumed by the court to be legitimate and substantial. The Court categorically rejected the City’s implicit suggestion that its land-use decisions should be immune from review under all circumstances.

Finally, the Court addressed at length the City’s claim that it was improper for the trial court to have submitted the issue of whether a regulatory taking had occurred to the jury, rather than reserving that issue as a matter of law for the trial court to resolve. Del Monte had brought its case pursuant to 42 U.S.C. §1983, which provides for suits seeking relief from violations of constitutional rights by states. The Court undertook an exhaustive review of the Seventh Amendment provisions that provide for the right of trial by jury “in suits at common law, where the value in controversy exceeds twenty dollars.” After extensive analysis of the application of the Seventh Amendment jury trial provisions to takings cases, it concluded that Del Monte's claims “sounded in tort and sought legal relief,” thereby making it an action at law, to which it was entitled to a jury.

The Court rejected the City’s analogy to condemnation proceedings, where it is well-recognized that no jury right exists, holding that the essence of such lawsuits is an admission of liability (the city’s obligation to pay damages/compensation for an unambiguous taking of property by condemnation) and a corresponding resolution of the appropriate amount of the compensation due.

Four Justices dissented from the portion of the opinion concluding that a right to jury trial exists. Instead, they asserted that the issues in a regulatory takings claim are essentially legal issues appropriate for resolution by the court, rather than a jury.

Monterey v. Del Monte Dunes, 526 U.S. 687 (1999).

Note: NAR and the California Association of REALTORS® both were parties to an amicus brief filed in this case on behalf of Del Monte Dunes. NAR's funding for this assistance was provided through its Legal Action Committee. For more information about funding assistance provided by NAR's Legal Action Committee, just click on the heading "Legal Action Funding" on the left-hand side of this page.