Don't take your time with takings claims.

As you hopefully know, the government can’t just take your property on a whim.  Under both the Oregon and U.S. Constitutions, the government must compensate you for a taking.  So, if the government doesn’t compensate you, you can sue.  But is there a time limit?  If so, when does it start?

Those are the questions addressed by Walton v. Neskowin Regional Sanitary Authority, 372 Or. 331 (2024).  It’s also a question that was clearly raised with an eye towards U.S. Supreme Court review.  So, if you want to brush up on a case that might be decided by the Supreme Court in 2025, now’s your chance. 

Background

In 2017, the plaintiffs brought an inverse condemnation claim against the defendant for sewer lines that had been installed on the plaintiffs’ property.  Normally, when the government wants to take someone’s property, it initiates condemnation proceedings (which we’ve all heard about).  When the government takes property without a condemnation proceeding, you can bring an inverse condemnation proceeding to seek compensation.  Plaintiffs in Walton sought compensation under the Fifth Amendment of the U.S. Constitution (the Takings Clause) and Article I, section 18 of the Oregon Constitution (the state analogue).

The government moved for summary judgment on the grounds that the plaintiffs had long missed the deadline per the statute of limitations.  The sewer lines had been installed in 1995, and ORS 12.080(3) establishes a six-year statute of limitations on claims involving interference with or injury to property.  This would indicate that the deadline to file suit for the sewer line was 2001—i.e., 16 years before the suit was filed. 

Plaintiffs made three arguments in response.  First, they argued that a claim for compensation under the takings clause can’t be limited by a statute of limitations because it’s a constitutional claim.  Second, they argued that, even if some takings claims can be limited, physical occupation claims (like this one) can’t be.  Third, they argued that, even if there is a statute of limitations, it shouldn’t trigger until a party asks for compensation and is then denied compensation. 

The Oregon Supreme Court rejected all three arguments.

Analysis

Starting with the general validity of statutes of limitations for takings claims, the court rejected plaintiffs’ arguments on three grounds.  First, the Oregon Supreme Court and the United States Supreme Court have applied statutes of limitations to taking claims.  Second, the Indiana Supreme Court also came to this conclusion before the Oregon Constitution was adopted.  This is relevant because the Oregon Constitution was modeled after Indiana, so pre-ratification decisions in Indiana inform the interpretation of the Oregon Constitution.  Third, the Oregon Supreme Court has previously held that property owners seeking compensation for a taking must comply with other statutory procedures in doing so.    

The court then considered whether physical occupation takings are different from regulatory takings for statute of limitations purposes.  A physical occupation occurs when the government physically occupies property (like it did here, with a sewage line).  In contrast, a regulatory taking is more abstract, like a regulatory restriction of a property right or the reduction of property value.  The court made short shrift of this argument, because the cases cited in the previous section involved physical occupation takings.  So, the court didn’t see any reason to distinguish between physical occupation and regulatory takings.

Lastly, the court considered when the statute of limitations began to run.  According to the plaintiffs, it began when the government refused a demand for compensation.  Plaintiffs reasoned that, because the government can take property before paying compensation, the act of taking is not adverse until compensation is requested and denied.  The court disagreed with this as well.  Under the Oregon Constitution, a physical occupation is itself a substantial interference and therefore necessarily adverse.  So, the statute of limitations begins to run as soon as property is occupied. 

This conclusion was even more obvious to the court under the Fifth Amendment because the Fifth Amendment does not provide that the government can take property before paying for it.  Further still, the U.S. Supreme Court recently held in Knick v. Township of Scott, 588 U.S. 180 (2019), that a property owner may bring suit as soon as property is taken without compensation. 

In this last section, the court also distinguished a recent U.S. Supreme Court case—Cedar Point  Nursery  v.  Hassid,  594  U.S. 139, (2021)—in which the petitioners challenged a taking under a 1975 regulation.  According to the plaintiffs, this case proves that it was not the taking that triggered the claim, but the refusal to provide compensation.  The Oregon Supreme Court decided otherwise, reasoning that Cedar Point Nursery did not cite Knick or abrogate Knick in any way, meaning that Knick was still binding on the timing question.  Further, Cedar Point Nursery did not involve a claim for just compensation based on past interference because it simply involved declaratory and injunctive relief.  As such, the court concluded that it did not speak to when a statute of limitations begins to run. 

Takeaways

1. In footnote 11, the court left open the possibility that a takings claim could be subject to the discovery rule—i.e., that the statute of limitations may not begin to run until the plaintiff becomes aware of the taking.  The court didn’t decide the issue because it wasn’t pertinent to this suit, but a future plaintiff who was unaware of the taking may be able to avoid the six-year statute of limitations on this basis.  If the court does adopt a discovery rule, it’ll be interesting to see whether the property owner had to be the owner of the property at the time of the taking.  For example, if the government had installed this sewage line without anyone’s knowledge, and the plaintiffs later sold the property, could the later buyer then bring a takings claim once they discovered the sewage line?  On the one hand, if nobody knew about the taking, then presumably it wasn’t priced into the amount they paid for the property.  On the other hand, the just compensation would seemingly be owed only to the party who owned the property at the time it was taken.  Only time will tell how this shakes out.

2. Plaintiffs are represented by Pacific Legal Foundation, who have recently brought numerous cases to the U.S. Supreme Court involving property rights (including a whopping three cases just last term).  There’s a virtually certain chance that they plan to seek review at the U.S. Supreme Court, and given their track record, there’s a higher likelihood than usual that the Court will grant certiorari.  So, this ruling may soon be under review.

3. If this case does make its way the U.S. Supreme Court, I’m not sure the attempt to distinguish Cedar Point will stick (and it’s worth mentioning that Cedar Point was also litigated by Pacific Legal Foundation).  The distinction identified by the Oregon Supreme Court was that Cedar Point involved declaratory/injunctive relief—i.e., an injunction prohibiting the government from enforcing the regulation, given the lack of compensation—not a claim seeking compensation.  But it’s not clear why the relief sought would change the statute of limitations for a takings claim.  If the claim arises when the taking occurs, then that should set the limit for litigating the claim.  Would the plaintiffs in Walton be permitted to bring suit for an injunction to remove the sewage line, on the basis that there was no compensation?  Cedar Point would suggest they could, but that seems far more extreme than merely receiving compensation.  I could foresee the U.S. Supreme Court coming to this same conclusion.