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Governmental inaction can constitute a property ‘taking’, Md. high court says

The Courts of Appeal building in Annapolis. (The Daily Record File)

The Courts of Appeal building in Annapolis. (The Daily Record File)

Maryland property owners can seek compensation from the state when the value of their land declines due to the government’s failure to act to protect it as required by statute, the state’s top court has ruled.

Such governmental inaction is the practical equivalent to the government lawfully and affirmatively condemning a person’s property for a public purpose, such as the construction of a needed hospital or road, the Court of Appeals said in its 4-3 decision.

In those cases in which the government asserts eminent domain, the state and federal constitutions require the government to pay “just compensation” to the property owner. Compensation is likewise owed in cases of “inverse condemnation” in which property owners lose land value due to the government’s failure to act, as required by statute, the court added in a first-of-its-kind case for the state.

Friday’s decision enables Gail B. Litz, the former owner of a 140-acre Goldsboro campground, to pursue her lawsuit seeking financial compensation from the state for its alleged inaction in preventing septic runoff from draining into a lake where camp customers enjoyed swimming, fishing and boating. The unchecked environmental damage essentially destroyed the campground’s business and resulted in the land’s foreclosure and sale to Provident State Bank for $364,000 in 2010, Litz alleges in her revived inverse condemnation claim.

Judge Glenn T. Harrell Jr., in writing for the high-court’s majority, noted that condemnation, or “taking,” generally applies to governmental action, not inaction. But an examination of similar court cases from California and Florida found that a governmental “taking” must be interpreted more broadly, he stated.

In its decision, the high court cited the Maryland Constitution’s Takings Clause but noted it mirrors the scope of the federal Constitution’s provision, thus preserving the possibility of an appeal by the state to the U.S. Supreme Court.

“Upon this review, it seems appropriate (and, in this case, fair and equitable at the pleading stage of litigation) to recognize an inverse condemnation claim based on alleged ‘inaction’ when one or more of the [government] defendants has an affirmative duty to act under the circumstances,” wrote Harrell, a retired judge sitting by special assignment. “Therefore, we hold, as a matter of Maryland law, that an inverse condemnation claim is pleaded adequately where a plaintiff alleges a taking caused by a governmental entity’s or entities’ failure to act, in the face of an affirmative duty to act.”

Taking ‘essential’

Litz’s attorney, G. Macy Nelson, hailed the high court for recognizing that government’s inaction in protecting property can be as constitutionally devastating to owners as its actions with regard to the taking of land for public use.

“Government has a role in society and they can’t just sit back,” said Nelson, of The Law Office of G. Macy Nelson LLC in Towson. “They dropped the ball totally and unequivocally.”

Maryland Attorney General Brian E. Frosh’s office is reviewing the decision, David Nitkin, a spokesman for Frosh, stated in an email message Monday.

Writing in dissent, Judge Shirley M. Watts said compensation is owed only if the government affirmatively acts, such as through a condemnation proceeding, or when the relevant statute provides for a private cause of action and damages. The law at issue in Litz’s case, Maryland’s Environmental Article, contains no such private right to sue, Watts said.

Permitting recovery for governmental inaction is “essentially the equivalent of creating a private right of action anytime that a plaintiff’s property decreases in value as a result of a governmental entity’s noncompliance with a statute – even if nothing in the statute’s language or legislative history indicates that the General Assembly intended to create a private right of action,” Watts wrote.

“Simply stated, I would hold that an affirmative action by a governmental entity – i.e., a ‘taking’ – is essential to a claim of inverse condemnation,” Watts added. “Alleging an omission or inaction by the governmental entity is insufficient to state a claim for inverse condemnation. By holding otherwise, the majority greatly expands the definition of inverse condemnation, the consequences of which are yet to be seen.”

The Caroline County Circuit Court had dismissed Litz’s inverse condemnation claim in September 2010. The intermediate Court of Special Appeals upheld the dismissal in an unreported opinion in 2014, stating that the government’s alleged “discretionary inaction” does not constitute a “taking.”

Litz then sought review by the Court of Appeals.

Harrell was joined in the majority opinion by Chief Judge Mary Ellen Barbera and Judges Clayton Greene Jr. and Sally D. Adkins.

Judges Lynne A. Battaglia and Robert N. McDonald joined Watts’ dissent.

The case is Gail B. Litz v. Maryland Department of the Environment et al., No. 23 September Term 2015.