Constitutional – Temporary Regulatory Taking – Stormwater Permit

Plaintiff sufficiently alleged a temporary regulatory taking when the state delayed processing its stormwater permit.

We reversed the dismissal of the temporary regulatory takings claim, affirmed dismissal of due process claims, denied partial summary judgment, and remanded.

A dispute arose after Plaintiff purchased land in Brunswick County previously subject to a stormwater permit issued to Don Owen in 2001 for a residential subdivision called Owendon Plantation. After Owen abandoned development of part of the property, Plaintiff sought to develop it into a new subdivision, Summers Walk, and applied for a stormwater permit under the Express Review Program. Defendant State of North Carolina Department of Environmental Quality, Division of Energy Mineral, and Land Resources initially excluded Plaintiff from the program, citing Owen as the current permittee and existing compliance violations, and recommended a multi-step process requiring transfer and modification of the original permit and resolution of Owen’s violations. Plaintiff’s permit applications were delayed or returned, as Defendant insisted on compliance with these preconditions.

Plaintiff petitioned the Office of Administrative Hearings (OAH) for a contested case hearing, arguing Defendant’s actions were improper. An Administrative Law Judge (ALJ) ruled in Plaintiff’s favor, concluding Defendant lacked authority to impose the prior notices of violation on Plaintiff, improperly withheld review of its permit application, and failed to exercise its discretion to modify or revoke the original permit. The ALJ ordered Defendant to process Plaintiff’s permit under the Express Review Program. Defendant’s untimely petition for judicial review was dismissed, and it eventually issued a new stormwater permit to Plaintiff.

Plaintiff then filed suit in superior court asserting claims for inverse condemnation, unconstitutional taking, and procedural and substantive due process violations. Defendant moved to dismiss, and Plaintiff sought partial summary judgment, arguing the ALJ’s prior decision should have preclusive effect under res judicata and collateral estoppel. The trial court dismissed all claims and denied partial summary judgment, finding the ALJ lacked authority to decide constitutional matters, and that Plaintiff failed to state claims upon which relief could be granted.

On appeal, we affirmed in part and reversed in part, holding that Plaintiff adequately alleged an unconstitutional temporary regulatory taking, as Defendant’s prolonged refusal to process Plaintiff’s permit deprived it of all economically viable use of the property for roughly two years. The court distinguished this case from prior regulatory takings cases requiring a “final decision,” noting Plaintiff challenged administrative inaction rather than a land-use regulation, making the takings claim ripe. Conversely, the court affirmed dismissal of Plaintiff’s due process claims, finding it received constitutionally adequate procedural review through the contested case hearing, and that Plaintiff failed to show Defendant acted arbitrarily or beyond its powers to support a substantive due process claim.

Finally, we rejected Plaintiff’s argument for summary judgment based on res judicata and collateral estoppel, noting that while the ALJ proceeding was quasi-judicial, the ALJ did not adjudicate constitutional claims, and administrative findings do not automatically preclude subsequent litigation on separate legal theories.

Affirmed in part, reversed in part, and remanded.

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, 27 pp.) (Jeff Carpenter, J.) Appealed from Brunswick County Superior Court (Jason C. Disbrow, J.) Shipman & Wright, LLP, by Gary K. Shipman and Thomas R. Harvey, III, for Plaintiff-Appellant. Attorney General Jeff Jackson, by Special Deputy Attorney General T. Hill Davis, III, and Assistant Attorney General Carolyn A McLain, for Defendant-Appellee. North Carolina Court of Appeals