Restricting Development Impact Fees to Actual Impact

“Exactions” are demands made on property developers by local permitting authorities in exchange for permission to develop. Prior Supreme Court regulatory taking jurisprudence has restricted “exactions” to demands that are “roughly proportional” to the allegedly adverse impact of the proposed development on a legitimate public purpose. Impact fees are a common type of exaction. A number of local governments assert that impact fees do not need to be “roughly proportional” to the adverse impact of the development so long as the fees are “neutrally” applied by statute or regulation.  

Rogers Machinery previously housed its national and regional offices in one building on its property in Tigard, Oregon. It then sought permission for a new building for its regional offices. The administrative hearing officer found that the new building would have no impact on traffic (because no new personnel would be hired for the regional office). The county and municipality charged a “traffic impact fee” based solely on the square footage of the new regional office. The Oregon Court of Appeals upheld the impact fee because it was “neutral” and statutory in nature. Rogers Machinery filed a petition for certiorari in the United States Supreme Court. NELF filed a supportive amicus brief arguing that non-proportional impact fees are a common barrier to development throughout the United States, illustrated by Boston’s “linkage fees.”  

Agencia La Esperanza requested to build a self-storage facility in Orange County, California. Orange County assessed an impact fee based solely on the square footage of the proposed building. Agencia produced evidence that self-storage facilities generate significantly fewer vehicle trips per square foot on a daily basis than retail offices and other uses permitted in the area. Nevertheless, the California Court of Appeal upheld the non-proportional traffic impact fee because of the county applied the fees “neutrally.” Agencia then filed a petition for certiorari in the United States Supreme Court. NELF filed a supportive amicus brief similar to its filing in Rogers Machinery, emphasizing the split in state and federal courts that have addressed “neutral” non-proportional impact fees.  

On March 10, 2003 the Supreme Court denied certiorari in both cases.

Reducing Penalties on Employers in Good Faith Disputes with Employees

Plaintiff Bisbing was employed as an emergency physician with the Maine Medical Center (“MMC”) and left voluntarily in 2000. He claimed that MMC owed him eight weeks of accrued vacation time. MMC countered that Bisbing, like all other MMC emergency doctors, worked an irregular schedule that had allowed ample vacation time. A jury found for Bisbing, and the presiding judge assessed treble damages and attorneys’ fees against MMC, in accordance with the Maine delayed wage statute. MMC appealed the award of treble damages and fees to the Maine Supreme Judicial Court, asserting that the statute contained an implicit good-faith defense against such relief. 

NELF filed an amicus brief supporting MMC, arguing that Maine case law limiting common-law punitive damages to egregious circumstances should apply to statutory multiple damages. An implied good-faith defense should prevent the imposition of a severe penalty on employers that have genuine factual disputes with employees about past due wages.  

On April 10, 2003 the Supreme Judicial Court issued its opinion upholding the lower court ruling. The court recognized that the “effect of the statute is harsh.” Nevertheless, it indicated that any remedy lay with the legislature because the plain words of the Maine delayed wage statute (unlike most other state delayed wage statutes) require multiple damages and attorneys’ fees without regard to the good faith nature of the employer’s defense.

Abrogation of the Statutory Cap on Charitable Tort Liability As a Discovery Sanction

This case raised the issue whether the judiciary has the power to abrogate the statutory cap on tort liability for a charitable organization as a discovery sanction against that organization. Plaintiff Dylan Keene was born at BWH in 1986. Just hours after his birth, while he was under the care of BWH, Dylan developed neonatal sepsis and meningitis, resulting in profound brain damage. In 1995, the plaintiff filed a complaint of medical malpractice against BWH and sought the production of documents and information pertaining to his neonatal treatment and care. BWH was unable to produce a portion of the requested information, despite a court order to do so. BWH had apparently lost certain records years before the plaintiff filed suit. The Superior Court then defaulted BWH, struck the charitable cap as a discovery sanction, and awarded the plaintiff approximately $4.1 million in damages. BWH appealed from the judgment. The Appeals Court affirmed the judgment, concluding that the charitable cap was an affirmative defense, and therefore that the trial judge had the discretion to strike this defense under his broad discovery powers. 

The SJC granted further appellate review. NELF filed an amicus brief on BWH’s behalf, arguing that the trial court had no authority to abrogate the charitable cap, because the cap is not a waivable affirmative defense but is instead a mandatory statutory limitation on liability that courts must apply to any judgment against a charitable organization acting in furtherance of its charitable purpose.  

On April 22, 2003 the SJC affirmed the judgment only insofar as it imposed liability, concluding that the hospital had spoliated the lost evidence and was deserving of a default judgment. However, the SJC vacated the damages award and instead awarded Dylan only $20,000, the maximum amount allowed under the charitable cap. The SJC adopted NELF’s position that a court should have no discretion to abrogate a statutory cap on charitable liability and held that the charitable cap is a “legislatively mandated limit on the amount of civil damages that can be recovered from a charitable corporation that causes harm by committing a tort in the performance of its charitable purpose . . . .” 

Retroactive Invalidity of State Permitting Process

Maine has a permit-by-rule process that permits the construction of docks that meet specifications set out in the rule. The only procedural requirement is notification of the Department of Environmental Protection.  A landowner built a dock under the authority of the permit-by-rule. A Maine superior court held that the regulation authorizing the permit-by-rule process was void as ultra vires.  The court also held that the rule was arbitrary and capricious because it had a purpose in addition to protecting the environment, that of saving agency time and money. The court further held that the permit itself was invalid because it was based on the unlawful rule.  

While there were a number of issues on appeal, NELF’s brief focused on two.  First, NELF argued that the court erred, as a matter of law, in declaring the permit invalid.  Both the United States Supreme Court and the Maine Law Court have held that judicial invalidation of a statute or regulation does not automatically invalidate action taking under that statute or regulation.  Those precedents require that a court consider the rights that may have become vested and the protection of reliance interests. Second, NELF made the policy argument that permit-by-rule provisions are not arbitrary and capricious merely because one purpose behind them is saving money and staff time and streamlining the process for applicants. NELF pointed to well-established federal permit-by-rule processes and to analogous programs in other states, and argued that regulatory agencies act appropriately, responsibly, and reasonably when they act to conserve limited agency resources, focus enforcement activity, and streamline the regulatory process through a permit by rule.  

On April 29, 2003 the Maine SJC upheld the rule, finding that it was neither ultra vires nor arbitrary and capricious.  Since the rule and permit were valid, the SJC did not reach the retroactivity issue.

Expansion of Consumer Protection Act to Rate Setting

The plaintiff Hanlon damaged his car in an accident and had it towed to New England Body Works, a repair shop.  The repair shop prominently posted its service and storage rates.  By the time the plaintiff’s insurer, Commonwealth, declared the car “totaled,” it had accrued several thousand dollars in storage and service charges.  New England Body Works asserted its statutory lien over the vehicle and refused to release it to Commonwealth until Commonwealth paid the charges in full. Hanlon sued Commonwealth when it deducted those charges from the insurance proceeds, and New England Body Works was joined as a third-party defendant.  The district court held that New England Body Works violated Mass. Gen. L. c. 93A by “overcharging,” despite evidence that the charges were similar to prices for similar services in neighboring businesses.  The court determined its own level of “appropriate” charges and awarded treble damages and attorneys fees.  The court also found that the owner’s legitimate use of statutory garage keeper’s lien was “extortion,” and an abuse of an uneven balance of power between the garage and consumers or their insurers.  

Vigoritio appealed, and NELF filed an amicus brief in support.  NELF argued that New England Body Works’ legitimate exercise of statutory rights could not violate c. 93A absent special unconscionable circumstances, not present here.  Furthermore, NELF argued, c. 93A does not regulate market prices, and public policy favors a market solution to any imbalances in power between garage keepers and their customers, putting more responsibility on consumers to make fiscally appropriate choices.  In February the Appellate Division issued an opinion agreeing with NELF that Commonwealth failed to provide sufficient evidence that the free-market, arm’s-length contract storage rate was excessive. Nevertheless, the Appellate Division agreed with Commonwealth that Vigorito’s insistence on the statutory bond and replevin method to contest charges could be considered a violation of Chapter 93A and allowed treble damages on Vigorito’s other alleged overcharges unrelated to the contract storage rate.

Whether a Town Validly Exercised Its Right of First Refusal to Purchase Land Taxed As Agricultural

A Massachusetts law, Mass. Gen. L. c. 61A, permits land used for agriculture or horticulture to be valued at that use rather than its highest and best use, resulting in a lower tax rate.  Parallel provisions apply to forest, open space, and recreational land.  When that land is converted to residential or commercial use, the municipality has an option to purchase the land at full and fair market value.  If the change in use is in connection with a proposed sale, the municipality has a right of first refusal to meet a bona fide offer to purchase the land.  The statute provides that the municipality’s 120-day option period commences when the owner gives notice of intent to convert.  This case arose out of the Town of Sudbury’s attempt to exercise these rights.  The 70 acres in question had been used, classified, and taxed as agricultural land for a number of years.  In July, 1999 the owner sold the property to defendant Scott for $1.3 million.  At the sale Scott signed an agreement verifying that he was purchasing the land for agricultural uses, and filed an affidavit to that effect with the Board of Assessors of Sudbury.  In November, 1999 Brendon Homes made an offer to Scott purchase 24 acres for $3 million.  Scott and Brendon Homes signed a purchase and sale agreement in late November, and Scott gave notice to the Town of Sudbury of his intention to sell that parcel for residential use, as required by statute.  The Town gave notice that it intended to exercise its first refusal option to meet the bona fide offer.  However, the Town instead offered to purchase the entire property for $1.3 million, the price at which Scott had purchased it.  The Town maintained that the parties had formed an intent to convert the property to residential use when the owner sold the land to Scott.  Scott rejected the offer as untimely and non-responsive, and the Town sued. The Land Court found in favor of Scott. However, the Land Court rejected the argument that signing a purchase and sale agreement and giving notice triggered the Town’s option period.  Rather, the Land Court made a fact-specific inquiry into the pre-purchase due diligence actions of the parties to determine their intent.  

The Town appealed, the SJC accepted direct appellate review, and NELF filed an amicus brief in support of Brendon Homes.  NELF argued that the Land Court reached the right result with the wrong rationale.  NELF urged the SJC to adopt the certain and predictable rule that a landowner’s duty to notify a municipality of his intent to sell for residential or commercial use is triggered when he signs a purchase and sale agreement, in order to provide a fixed date from which the city or town’s 120-day exercise period could be counted and to provide a date certain for the end of the option period.  NELF argued that the Land Court’s inquiry into state of mind is unworkable as a practical matter and invites litigation.  

A deeply divided SJC ruled on May 1, 2003 in favor of the Town, holding that it was error to grant summary judgment for Scott when there was a material issue of fact regarding Scott’s intent when he purchased the 75-acre parcel.  The majority reasoned away the plain language of the statute, which refers to an “intent to sell” and places the notice obligation on the seller, not the buyer.  In a vigorous dissent in which Justices Marshall and Sosman concurred, Justice Cordy argued that the majority opinion was at odds with the statutory language and “will cast a troubling shadow overt the sale of agricultural land.”