On February 21, 2006, the Oregon Supreme Court overturned a lower court decision that had found Measure 37 unconstitutional. Measure 37 is Oregon's controversial initiative that, put simply, requires local governments to compensate landowners for a loss in property value attributable to the enforcement of a land use regulation, and if the government does not wish to pay the compensation it can essentially waive the imposition of the regulation.
The case challenging Measure 37, Hector MacPherson, et al. v. Oregon Dept. of Administrative Services, resulted in a ruling by Marion County Judge Mary Mertens James that Measure 37 violated the Oregon and federal Constitutions by, among other things, setting up preferential treatment for persons who owned property long enough that it predates the enactment of some of Oregon's land use regulations, by improperly requiring the government to pay citizens for the enforcement of legitimate powers ("plenary" power), and by depriving property owners of compensation for the potential devaluation of their property from development on neighboring property caused by rights asserted under Measure 37.
The Oregon Supreme Court rejected all of the Plaintiffs' arguments, but the ruling leaves unanswered many questions about the implementation and ultimate effect of Measure 37.
No Unconstitutional Abdication of "Plenary" Power
The Oregon Supreme Court characterized the lower court's rationale as Measure 37 "required the government either to ‘pay to govern,' if it wished to enforce a particular land use regulation, or to refrain from enforcing the regulation in some manner." The Supreme Court then took issue with that approach, saying: "In our view, the trial court misunderstood the nature of the plenary legislative power. In Oregon, the Legislative Assembly and the people, acting through the initiative or referendum processes, share in exercising legislative power. See Or Const, Art IV, §§ 1(1), (2)(a), (3)(a) (vesting in both bodies the power to propose, enact, and reject laws). Respecting the nature of that power, this court previously has explained that "[p]lenary power in the legislature, for all purposes of civil government, is the rule, and a prohibition to exercise a particular power is an exception. It, therefore, is competent for the legislature to enact any law not forbidden by the constitution or delegated to the federal government or prohibited by the constitution of the United States. . . .
Not only have plaintiffs failed to ground their argument in the Oregon Constitution, but the premise of their argument is also mistaken. Contrary to the assumption underlying their argument, Oregon's legislative bodies have not divested themselves of the right to enact new land use regulations in the future. Nothing in Measure 37 forbids the Legislative Assembly or the people from enacting new land use statutes, from repealing all land use statutes, or from amending or repealing Measure 37 itself. Simply stated, Measure 37 is an exercise of the plenary power, not a limitation on it."
No Constitutional Problem in Pre-owners vs. Post-owners
The Plaintiffs and the lower court found that Measure 37 essentially set up classes of property ownership and discriminated against one of the classes. The Oregon Supreme Court acknowledged it was "true that, before the adoption of Measure 37, certain property owners had acquired their property prior to the enactment of certain relevant land use regulations, while others had acquired their property after the enactment of certain relevant land use regulations." The Court found, however, that an initiative (or the legislature) can under the right circumstances enact laws that benefit a class of persons. The Court gave the following example: ". . . plaintiffs' theory would mean that the legislature would be precluded from enacting a law benefiting, for example, Vietnam veterans or Gulf War veterans, both closed classes. Here, the postowners' inability to 'bring themselves within' the class of preowners does not render Measure 37 invalid. We conclude that Measure 37 does not offend Article I, section 20, as plaintiffs contend."
No Unconstitutional "Suspension" of Laws
The Supreme Court pointed out that the Constitutional provision Plaintiffs relied on that prohibits "suspension" of laws has remained unchanged since its adoption in 1859, so the Court then reviewed some mid-19th Century dictionary definitions of "suspension," including "to interrupt; to intermit; to cause to cease for time"; "to stay, to delay; to hinder from proceeding for a time"; or "to cause to cease for a time from operation or effect." Noah Webster, 1 An American Dictionary of the English Language, s.v. "suspend" (Johnson 1828)..."
With that definition in mind, the Court then found that Measure 37 "does not 'cause to cease for a time,' 'delay,' or 'interrupt' any land use regulation. Instead, it authorizes a governing body to 'modify, remove, or not ... apply' certain such regulations in specific situations. The measure is, in effect, an amendment of the land use regulations in those particulars. No law is 'suspended'; all laws not amended remain in effect."
No Violation of the Separation of Powers
The Supreme Court rejected the lower court's separation of powers holding to the extent that it "explicitly relied on its earlier conclusions that Measure 37 impermissibly intruded on the legislature's plenary power" which the Supreme Court already found to be incorrect. The Supreme Court went on to point out that separation of powers is not absolute in Oregon, and that "the 'governing bodies' in question are comprised of local city or county officials. Such bodies are not solely legislative, executive, or judicial. As this court has explained, 'members [of local general-purpose governing bodies] are politically elected to positions that do not separate legislative from executive and judicial power on the state or federal model; characteristically they combine lawmaking with administration that is sometimes executive and sometimes adjudicative.'"
No Unconstitutional Waiver of Sovereign Immunity
The Court simply found that: "Nothing in Article IV, section 24, or, so far as we are aware, in any other state constitutional provision, forbids the state from deciding that it will compensate property owners for the economic consequences of the state's land use regulations, including waiving the state's sovereign immunity to permit those owners to assert their claims in court."
No Constitutional Problem with Compensating Landowners
The Supreme Court rejected Plaintiffs' argument that because Measure 37 "allows claimants to demand payment for the economic impact of a regulatory scheme that did not rise to the level of a taking under the Fifth Amendment to the United States Constitution; such an allowance would be 'reverse extortion.'" The Supreme Court said that while "neither the state nor the federal constitution requires compensation to individuals who suffer any loss in property value as a consequence of land use regulation, . . .it is equally true that neither constitution forbids requiring such compensation in the manner provided for in Measure 37. The people, in exercising their initiative power, were free to enact Measure 37 in furtherance of policy objectives such as compensating landowners for a diminution in property value resulting from certain land use regulations or otherwise relieving landowners from some of the financial burden of certain land use regulations. Neither policy is irrational; no one seriously can assert that Measure 37 is not reasonably related to those policy objectives."
Many questions remain about how Measure 37 will work
Constitutional challenges to Measure 37 are obviously dead for the moment. However, before this lawsuit there was much uncertainty about aspects of Measure 37 that this case does nothing to rectify. Just to name a few, local governments are obviously still very concerned about how they will pay for legitimate Measure 37 claims and if they cannot, what the impact of developing the property may be on neighboring landowners or to whatever the local government believes is appropriate development for that area. Questions also remain about the enforcement of regulations that may have an environmental protection aspect – in addition to purely land use – and where that line will be drawn in individual cases; and significant uncertainty revolves around exactly who can qualify as a "family member" – and therefore triggering rights under Measure 37, when property has been transferred since the land use regulation was enacted, by estate transfer for example.
Most people who are familiar with Measure 37 and its history believe that the immediate future, in the wake of the MacPherson ruling, will look very similar to what has occurred since that case was originally filed: local jurisdictions will continue to implement rules and regulations to deal with Measure 37 and continue to process claims, while some claimants whose claims have not produced the desired result will press their case in the courts, where clarification on some of these lingering questions will eventually be found.
Property owners who believe they may have Measure 37 claims are wise to consult counsel before proceeding with a claim, as the chances of success in the end may well turn on exactly how the claim is presented in the beginning. The fate of property owners who believe their property will be devalued by a neighbor's successful Measure 37 claim is less clear, since Measure 37 itself contains no provision for compensation on that basis. However, in the MacPherson decision the Oregon Supreme Court noted that "nothing in Measure 37" denies the rights of neighboring property owners "who may wish to challenge particular governmental actions that may harm individual property interests." Furthermore, the Supreme Court said that Measure 37 does not prohibit local jurisdictions from setting up procedures designed to ensure that the rights of neighboring property owners are not harmed by a Measure 37 claim."
Bullivant Houser Bailey's Real Estate and Development Group will continue to monitor the implementation of Measure 37 as it unfolds, and is currently representing Measure 37 claimants. If you have any questions about Measure 37 or believe you either have a claim or will be unacceptably impacted by the granting of a neighbor's Measure 37 claims, you are invited to call John Junkin at 503-499-4613, Mark Stermitz at 503-499-4461 or Chip Lazenby at 503-499-4488.