It has been roughly a month since the U.S. Supreme Court issued its final opinions for the October 2023 term. The legal community is still sorting out the impact of this term’s consequential opinions. For the development community, three aspects of the term deserve special emphasis. First, the effect that overruling Chevron U.S.A., Inc. v. Natural Resources Defense Council will have (or not have) depending upon whether a federal or state regulator is at issue. Second, what the Sheetz v. County of El Dorado exaction decision established, and what exaction questions remain open. Third, the number of high-profile cases dismissed on standing grounds.

End of the Chevron Doctrine

Much has been written about the Court’s jettisoning of the Chevron doctrine. Under Chevron, federal courts deferred to plausible agency statutory interpretations when the statutes were ambiguous. Put another way, if a statute could reasonably be read several ways, the federal courts would adopt the agency’s view of the statute’s meaning. In Loper Bright Enterprises v. Raimondo, the Court overruled Chevron based upon its interpretation of the federal Administrative Procedure Act, known as the “APA.” From here on, federal courts must make their own determinations regarding correct statutory interpretation using the common tools of statutory interpretation. The decision will substantially level the playing field in litigation between federal agencies and regulated parties. However, the APA applies only to federal agencies (e.g., the federal Department of Housing and Urban Development, the federal Environmental Protection Agency, etc.). States have their own procedure acts applicable to state agencies. States may have adopted their own doctrines similar to Chevron under these state procedure acts. These state deference doctrines remain in effect unless and until revisited by state courts. Hence, depending on state law, the degree of deference accorded by state courts to state agencies may substantially exceed the deference given in federal courts to federal agencies.      

Sheetz v. El Dorado

The legality of local development exactions remains a hot topic at the Court. In Sheetz v. County of El Dorado, the Court definitively and unanimously resolved the question of whether development fees are exempt from review under the Takings Clause of the Fifth Amendment simply because they are adopted legislatively (such as by a fee schedule) rather than on an ad hoc basis. In an opinion written by Justice Barrett, the Court ruled that the Takings Clause applies to legislative as well as administrative permit conditions. In a particularly memorable line, Justice Barrett wrote that a permit condition requiring a landowner to pay for a party for members of a planning commission would amount to “an out-and-out plan of extortion.”

Sheetz leaves open several important questions, one of which is whether an exaction applicable to a class of properties is subject to the same “essential nexus” and “rough proportionality” test as an exaction applicable to only one property. The majority opinion did not address the issue. Justice Gorsuch offered a concurring opinion that the constitutional test must be the same, remarking that “whether the government owes just compensation for taking your property cannot depend on whether it has taken your neighbors’ property too.” Three members of the Court (Justices Kavanaugh, Kagan, and Jackson) appeared to have a different perspective, observing a “longstanding government practice” of using “reasonable formulas or schedules that assess the impact of classes of development.”  Especially after these dueling concurrences, it appears likely that the question will ultimately be decided by the Court.    

Standing Challenges

The Court dismissed several challenges to government action after finding the plaintiffs lacked standing. For example, in Murthy v. Missouri, the Court dismissed First Amendment claims brought by two states and five individuals after determining the plaintiffs could not prove causation between the conduct of federal government agencies and social media company restrictions. In Food and Drug Administration v. Alliance for Hippocratic Medicine, the Court dismissed a suit brought by individual physicians and medical associations challenging the FDA’s decision to relax restrictions applicable to drug use and distribution. The Court ruled, among other things, that the doctors had not demonstrated a concrete economic injury sufficient for standing purposes. These recent decisions underscore how important it is in litigation against the government to explain how specific government action causes the plaintiff particularized harm. In the development context, the plaintiff should demonstrate how the government action impacts their bottom line or future sales. Expert opinion evidence may be useful in establishing causation.