With the Washington State Supreme Court’s recent decision in Church of the Divine Earth v. Tacoma, permit applicants challenging a jurisdiction’s decision may have a new approach to arguing a damages claim under RCW 64.40.020(1). In that case, the Supreme Court confirmed that RCW 64.40.020(1), which allows for permit applicants to seek damages for agency action that is arbitrary, capricious, unlawful, or in excess of lawful authority, requires an objective standard, that a reasonable person looking at the facts of the case would know or should know that its action was unlawful.
Given this confirmation—and in many ways, a change in prior understanding—of the standard of review applicable to the statute, Church of the Divine Earth could have significant repercussions for future land use appeals.
Generally, in a Land Use Petition Act (RCW 36.70C) appeal, appellants will often request damages as part of the relief, which may be based on lost profits, delay in permitting and development, or loss of property value. Often, damages claims under RCW 64.40.020(1) are easily denied because the appellant can rarely demonstrate that the City knew or should have known of its unlawful action. Absent that prime evidence of the agency acknowledging its intent to break the law, an appellant has little to present in favor of its position.
Practice note: Successfully winning an appeal under the Land Use Petition Act, RCW 36.70C, does not necessarily mean that one has proven that the jurisdiction was unlawful for the purposes of a damage claim under RCW 64.40.020. While closely related, the standards are different.
However, now, under this clear objective “reasonable person” standard, appellants can apply a much broader approach to demonstrating their damages claims under RCW 64.40.020(1).
For example, taking the facts of the Church of the Divine Earth case, to demonstrate that a City’s condition on a development was unconstitutional, an appellant could introduce evidence such as an affidavit of staff from a similarly situated City that states they are educated on Nollan and Dolan analysis. One could submit evidence that the City’s legal counsel or City manager presents training on these legal concepts every year.
Effectively, with a clear objective standard of review, the appellant is less restricted in how it demonstrates its damages claim. It allows the court, and the parties, to build and review a complete record illustrating the circumstances surrounding the City’s action.
This approach is far different from the previously understood “subjective” standard approach under RCW 64.40.020(1). In that case, the City’s “reasonable belief” prevailed, unless otherwise contradicted. Again, without the smoking gun evidence, the City’s affidavits of its staff or decisionmakers stating their reasonable beliefs on the application of the law would suffice. The subjective standard of review leaves little room for a damages claim in the first place.
Although Church of the Divine Earth appears to be a negative decision for agencies and local jurisdictions making permit decisions, ultimately, the agency can rebut evidence seeking to demonstrate that a reasonable person would conclude the agency knew or should have known its action was unlawful.
For instance, the fact that similarly situated City staff knows about Nollan and Dolan does not necessarily mean a reasonable person would know in this particular instance that the City was violative of those principles. The City could present evidence and argument to the contrary, for example, that application of Nollan and Dolan is highly fact-dependent, and it varies case-by-case. It would be eminently reasonable for one to conclude that this particular condition is not violative of the constitution, while another individual concludes that it is violative. In that case, the City would prevail because reasonable minds disagree on whether the action was unlawful.
Ultimately, Church of the Divine Earth clarifies the scope of RCW 64.40.020(1), which is to provide a mechanism for a permit applicant to recover damages in very limited circumstances—when the agency action was arbitrary, capricious, unlawful, or made in excess of its authority. Reviewing this question under an objective “reasonable person” standard, as opposed to the subjective “what did the City reasonably believe” standard, allows for a more robust, thorough legal analysis of the question presented. Ideally, agencies should not be acting unlawfully, nor should agencies be liable for action that a “reasonable person” would find to be not unlawful. RCW 64.40.020(1) only allows for that check-and-balance if the court reviews the claim under an objective lens.
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