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Federal Court Asked to Hear Long-Simmering Property Rights Case in New Hampshire

The case is being watched closely by the home building community, because federal courts routinely refuse to hear a developer’s takings claim against a local government if it hasn’t first been pursued at the state court level, but then refuse to hear the case because it has already been settled by the state courts.

The long-simmering lawsuit arose over an ordinance in the town of Fremont that placed a cap on the number of building permits that could be issued in a given year. The ordinance was used to deny developer Henry Torromeo and MDR Corporation the ability to develop five lots and 14 lots respectively. Both sets of plans had been approved by the planning board and recorded with the county; and Torromeo’s lots, approved in 1997 before the ordinance took effect, were vested under state law so that they were not required to comply with any subsequent changes in the town’s land use laws for a period of four years.

The New Hampshire courts eventually ruled that the Fremont ordinance was illegal. While a municipality has a legitimate interest in regulating and controlling growth, and a reasonable cap on permits may be an appropriate means to achieve that objective, the courts determined that in this case the cap was not supported by a validly enacted Capital Improvement Program. The state legislature requires CIPs to support any growth control ordinance.

As a result of the lawsuit, both developers received permits from Fremont in 2000, but neither received compensation for the damages they had sustained as the result of the illegal ordinance. They pursued further litigation for monetary relief, and the state’s Superior Court ruled that they were “entitled as a matter of law to recover damages for economic loss due to Fremont’s attempted enforcement of its invalid Growth Control Ordinance.”

Awards of $23,800 to Torromeo and $71,600 to MDR were granted by the court, but at the end of 2002 that decision was overturned by the New Hampshire Supreme Court.

Last November, the developers filed a federal civil rights claim in U.S. District Court in New Hampshire. The lawsuit was filed under Section 1983, which provides a possible remedy for property owners whose Constitutional rights have been violated.

“Considerations of fairness and justice are the thrust of any takings analysis,” the developers say in their motion. “It is neither fair nor just to require a takings plaintiff to ripen a federal constitutional claim through initial state court litigation, and then deny him federal court access on his federal claim because he initially litigated in state court.”

The town of Fremont has asked the federal court to dismiss the case.

NAHB’s legal staff has been working with the developers’ counsel on this case.

For more information about this case, e-mail Duane Desiderio or call him at 800-368-5242 x8146 or contact Jon Luther, x8329.

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