Permit delay supports temporary regulatory taking claim

The North Carolina Court of Appeals held that the plaintiff sufficiently alleged a temporary regulatory taking based on the state’s prolonged refusal to process a stormwater permit, while affirming dismissal of related due process claims and denial of partial summary judgment.

The dispute arose after the plaintiff purchased land in Brunswick County that had previously been subject to a stormwater permit issued in 2001 for a residential subdivision. After the original developer abandoned part of the project, the plaintiff sought to develop the property into a new subdivision and applied for a stormwater permit through the state’s Express Review Program. The defendant, a state environmental agency, declined to process the application, asserting that the original permittee remained responsible and that unresolved compliance violations had to be addressed first. The agency required a multi-step process involving transfer and modification of the old permit and resolution of violations before it would review the plaintiff’s application.

The plaintiff challenged this approach in a contested case before the Office of Administrative Hearings. An administrative law judge ruled in the plaintiff’s favor, finding the defendant lacked authority to impose prior violations on the plaintiff and improperly withheld review of the permit application. The judge ordered the agency to process the application under the Express Review Program. After an untimely judicial review attempt was dismissed, the defendant ultimately issued a new permit.

The plaintiff then sued in superior court, asserting inverse condemnation, unconstitutional taking, and procedural and substantive due process claims. The trial court dismissed all claims and denied partial summary judgment. On appeal, the Court of Appeals reversed in part, concluding the plaintiff adequately alleged a temporary regulatory taking. The court reasoned that the defendant’s roughly two-year refusal to process the permit plausibly deprived the plaintiff of all economically viable use of the property, and that the claim was ripe because it challenged administrative inaction rather than a final land-use decision.

The court affirmed dismissal of the due process claims, finding the plaintiff received adequate procedural protections through the administrative process and failed to allege arbitrary or ultra vires conduct. It also rejected the plaintiff’s res judicata and collateral estoppel arguments, holding that the prior administrative proceeding did not adjudicate constitutional issues.

The 27 page opinion is LDI Shallotte 179 Holdings LLC v. State of North Carolina Department of Environmental Quality, Division of Energy Mineral, and Land Resources, Lawyers Weekly No. 011-016-26.