Tien Fu Hsu v. County of Clark

OPINION

In this appeal, we determine whether this court should adopt equitable exceptions to the law of the case doctrine. We also revisit the prior decision we issued in the first appeal of this airspace takings case, given our intervening decision in McCarran International Airport v. Sisolak 2 which set forth a new scheme for analyzing airspace takings claims. We conclude that, in some instances, equitable considerations justify a departure from the doctrine that the principles set forth in a first appeal are the law of the case on all subsequent proceedings. Accordingly, when this court issues an intervening decision that constitutes a change in controlling law, courts may depart from the decided law of the case and apply the new rule of law. Thus, applying the rule of law set forth in Sisolak to this case, we conclude that appellants properly established a claim for a per se regulatory taking of airspace and are entitled to appropriate just compensation.

FACTS AND PROCEDURAL HISTORY

This matter involves a novel takings issue raised during a suit for inverse condemnation.

In 1981 and 1990, Clark County passed two ordinances that placed “transition zone” height restrictions on property surrounding McCarran International Airport, including a strip of land owned by appellants. In 1995, appellants (the landowners) counterclaimed against the County in an eminent domain action, contending that these restrictions inversely condemned an avigation easement over their property without compensation and in violation of the Nevada and United States Constitutions. On a motion for summary judgment, the district court ruled that the ordinances enlarging transition zones over the property constituted a per se physical taking of the landowners’ property as a matter of law. In support of its holding, the district court specifically concluded that the transition zone height restrictions preserved the right of aircraft to fly through the airspace and that aircraft actually utilized *628 the airspace. The matter proceeded to a jury trial on the sole issue of just compensation and resulted in a substantial jury verdict.

On appeal, this court, sitting en banc as a five-justice court, 3 reversed the district court in an unpublished order, concluding that the district court erred in determining that a per se physical taking occurred. 4 In this, we determined that the height restrictions created by the ordinances did not involve a physical ouster, but rather regulated use of the property. From this, we reasoned that the takings issue should have been decided under the regulatory takings principles set forth in Penn Central Transportation Co. v. New York City 5 Concluding that the landowners had not exhausted their administrative remedies, as required by Penn Central, we reversed and remanded to give the landowners that opportunity.

On remand, the district court directed the landowners to submit a proposed development plan to the County by January 1, 2006, and stated that it would dismiss the landowners’ claims if they had not submitted a plan or otherwise begun to exhaust their administrative remedies by this date. However, rather than submitting a development plan for approval, the landowners sold the subject property, causing the district court to dismiss the case without prejudice on December 6, 2005. 6 The landowners then filed the present appeal to this court.

During the pendency of the landowners’ current appeal, this court issued a published opinion in McCarran International Airport v. Sisolak. 7 In Sisolak, under facts similar to this case, this court concluded that county “runway approach zone” height restrictions constituted a permanent physical invasion of the landowner’s airspace and determined that Sisolak’s inverse condemnation claims were properly analyzed as a “per se regulatory taking,” 8 as *629 defined in Loretto v. Teleprompter Manhattan CATV Corp. 9 Because the height restrictions constituted a per se taking, this court further concluded that Sisolak’s claims did not fall within the ambit of Penn Central, indicating that Sisolak was not required to exhaust his administrative remedies before bringing suit. This court accordingly affirmed the district court’s inverse condemnation award.

The landowners now argue that, because the facts in this case are similar to those in Sisolak, they are entitled to the benefit of this court’s Sisolak decision, indicating that we should revisit our prior decision in Hsu I, and reinstate the original judgment of the district court. In this, they seek our clarification of the scope of the “law of the case” doctrine.

DISCUSSION

The doctrine of the law of the case provides that the law or ruling of a first appeal must be followed in all subsequent proceedings, both in the lower court and on any later appeal. 10 Thus, under a general application of this doctrine, our decision in Hsu I would remain the law of the case and could not be revisited in this appeal. Nonetheless, the landowners contend that we should adopt equitable exceptions to the established law of the case doctrine and re-analyze our holding in Hsu I in light of our decision in Sisolak. The landowners further argue that application of Sisolak requires this court to reinstate the district court’s initial judgment, including its finding of liability, the award of just compensation, and attorney fees and prejudgment interest.

We agree that in some instances, equitable considerations justify a departure from the law of the case doctrine. Accordingly, we take this opportunity to establish that when this court issues an intervening decision that constitutes a change in controlling law, courts subject to the previously decided law of the case may depart from it and apply the new rule of law. Following our general discussion of the law of the case doctrine, we analyze the landowners’ claims in light of our decision in Sisolak and conclude that the transition zone height restrictions imposed by the County effectuated a per se regulatory taking of the landowners’ airspace. Finally, we assess the impact of Sisolak on the calculation of just compensation and determine that the County is entitled to a new trial to determine the proper compensation due.

Law of the case doctrine

Under the law of the case doctrine, “[wjhen an appellate court states a principle or rule of law necessary to a decision, the prin *630 ciple or rule becomes the law of the case and must be followed throughout its subsequent progress, both in the lower court and upon subsequent appeal.” 11 The law of the case doctrine “is designed to ensure judicial consistency and to prevent the reconsideration, during the course of a single continuous lawsuit, of those decisions which are intended to put a particular matter to rest.” 12 The law of the case doctrine, therefore, serves important policy considerations, including judicial consistency, finality, and protection of the court’s integrity. 13

However, the law of the case doctrine is not a jurisdictional rule. 14 Rather, as observed by the United States Supreme Court, it “merely expresses the practice of courts generally to refuse to reopen what has been decided[:] [it is] not a limit to their power.” 15 Accordingly, the United States Supreme Court has concluded that “[u]nder law of the case doctrine, as now most commonly understood, it is not improper for a court to depart from a prior holding if convinced that it is clearly erroneous and would work a manifest injustice.” 16 Based on statements such as these, federal courts have adopted three specific exceptions to the law of the case doctrine, concluding that a court may revisit a prior ruling when (1) subsequent proceedings produce substantially new or different evidence, (2) there has been an intervening change in controlling law, or (3) the prior decision was clearly erroneous and would result in manifest injustice if enforced. 17 Nevertheless, as the United States Supreme Court has noted, absent those “extraordinary *631 circumstances,” a court “should be loathe” to revisit its prior decisions. 18

In addition to the federal courts, many state courts have also adopted these three exceptions to the law of the case doctrine. 19 While the remaining states have not clearly embraced all of these specific exceptions, most recognize that a court is not absolutely bound by the law of the case and embrace at least one or more of these exceptions, or allow departure from prior decisions if enforcement of the previous decision would cause an unjust result. 20 Although this court has never explicitly adopted any formal exceptions to the law of the case doctrine, in Clem v. State, we implicitly acknowledged the possibility of exceptions to the law of the case, stating that “[w]e will depart from our prior holdings only where we determine that they are so clearly erroneous that continued adherence to them would work a manifest injustice.” 21 Similarly, in Leslie v. Warden, we actually revisited our decision *632 upholding a death penalty sentence when we determined that failure to do so “would amount to a fundamental miscarriage of justice.’ ’ 22

Given that a majority of states in this country have adopted at least one or more exceptions to the law of the case doctrine, and the federal courts have adopted all three exceptions, we take this opportunity to hold that, as indicated by the federal courts, when the controlling law of this state is substantively changed during the pendency of a remanded matter at trial or on appeal, courts of this state may apply that change to do substantial justice. In other words, “the doctrine of the law of the case should not apply where, in the interval between two appeals of a case, there has been a change in the law by ... a judicial ruling entitled to deference.” 23

For the purposes of this exception, a judicial ruling entitled to deference includes a decision by the highest court of this state. 24 An example of a change in controlling law by way of a state supreme court decision occurred in Brezinka v. Bystrom Brothers, Inc., in which the Minnesota Supreme Court explained that:

This court is the final authority on legal questions arising under our state’s Workers’ Compensation Act. Here, before finality had been achieved in [this case], our court in a different case ruled on the controlling principle of law. Consequently, the compensation judge did not err in following [the intervening supreme court] ruling even though by so doing he disregarded the law of the case as [previously] determined . . . , 25

Similarly, in this case, in the interval between the landowners’ first appeal and the current appeal, we issued an opinion in Sisolak, a substantially similar matter, which represented a major change in law controlling Nevada’s airspace takings jurisprudence. Therefore, *633 based on this change in controlling law, we conclude that it is appropriate to reassess the landowners’ claims based upon the new rules set forth in Sisolak. 26

Effect of Sisolak

The landowners contend that application of the rules set forth in Sisolak indicates that the County’s enactment of the transition zone height restrictions surrounding McCarran Airport constituted a per se regulatory taking of the landowners’ airspace. In this, they argue that this court should reinstate the original district court judgment’s liability determination and award of just compensation, as well as the district court award of attorney fees and prejudgment interest. 27 While we agree that the County’s actions amount to a per se regulatory taking under Sisolak, we conclude that a new trial is necessary to determine the amount of just compensation due.

*634 Liability determination

As discussed above, in Sisolak, Steve Sisolak brought inverse condemnation proceedings against the County in response to the enactment of height restrictions that placed Sisolak’s property in the “runway approach zone” and “departure critical area” of McCarran Airport. While neither Sisolak nor the County could provide the exact number of planes utilizing Sisolak’s airspace, an employee of McCarran Airport testified that “it was ‘more likely than not’ that, on occasion, aircraft flew over Sisolak’s property at altitudes lower than 500 feet.’ ’ 28

On appeal, this court determined that Sisolak had a protected property interest in the use of his airspace up to 500 feet. 29 With respect to the taking of this airspace, we observed that a per se regulatory taking occurs whenever a regulation authorizes a permanent physical invasion or results in the complete deprivation of all economically viable use of a piece of property. 30 To constitute a permanent physical invasion, the regulation must actually grant the government physical possession of the property and not simply forbid certain uses of private space. 31 Beyond the two categories of permanent physical invasion and deprivation of all economically viable use, this court reiterated that all other takings are governed by the framework established in Penn Central Transportation Co. v. New York City. 32

Unlike Hsu I, this court in Sisolak determined that Sisolak’s claims did not fall within the ambit of Penn Central. 33 Rather, a majority of this court held that the regulations were a per se regulatory taking, as the ordinances constituted a permanent physical invasion of Sisolak’s airspace. 34 Although this court acknowledged that the ordinances did not directly authorize the physical invasion of Sisolak’s airspace, and “the airplanes flying over Sisolak’s property are not constantly occupying the airspace in a temporal sense,” this court reasoned that “the invasion is nevertheless permanent because the right to fly through the airspace is preserved *635 by the Ordinances and expected to continue into the future.” 35 Because the ordinances constituted a per se regulatory taking, the court further concluded that Sisolak was not required to exhaust his administrative remedies before bringing his claims for inverse condemnation. 36 This court accordingly affirmed the district court’s inverse condemnation award. 37

While the transition zone height restrictions at issue in this case are not as restrictive as those at issue in Sisolak, we nonetheless conclude that application of the rule set forth in Sisolak clearly indicates that the County’s enactment of the transition zone height restrictions constituted a per se regulatory taking of the Hsu landowners’ airspace. As indicated above, in Sisolak this court essentially determined that when airport regulations preserve the right to fly through a landowner’s airspace, and planes actually make use of this airspace, this constitutes a permanent physical invasion of property and is properly categorized as a “per se regulatory taking.” 38 In this case, the district court determined that, like the height restrictions in Sisolak, the transition zone height restrictions enacted by the County preserved the right of aircraft to fly through the airspace at altitudes lower than 500 feet, and that aircraft actually utilized the airspace. Therefore, as in Sisolak, we conclude that these transition zone height restrictions constitute a per se regulatory taking of the landowners’ airspace. 39 Due to the “per se” nature of this taking, we further conclude that the landowners were not required to apply for a variance or otherwise exhaust their administrative remedies prior to bringing suit. Accordingly, we vacate the district court’s dismissal order and instruct the court to enter an order finding the County liable for a per se regulatory taking. 40

Just compensation, attorney fees, and prejudgment interest

In addition to vacating the dismissal order and establishing liability for a per se regulatory taking, the landowners further argue *636 that this court should reinstate the original district court judgment’s award of just compensation and reinstate or increase the award of attorney fees and prejudgment interest. We disagree. At the original trial in this case, the district court specifically excluded all testimony related to whether the landowners may have been able to obtain a variance from the transition zone height restrictions. While the decision in Sisolak confirmed that such evidence is irrelevant in analyzing whether or not a taking occurred, evidence related to potential variances is pertinent in determining the amount of just compensation due. 41 This court specifically stated that

[a] 1 though evidence regarding variance procedures is irrelevant to establish whether a property owner is entitled to compensation for a regulatory per se taking, such evidence is still relevant in calculating the amount of compensation due. Evidence of future changes affecting the property, such as variances or zoning ordinances, is admissible to determine the amount of compensation due if the change is reasonably probable. 42

Thus, we conclude that the district court erred in rejecting evidence regarding the landowners’ ability to obtain a variance during the damages phase of trial. We therefore remand this matter to the district court for a new trial on the issue of just compensation, in accordance with the guidance set forth by this court in Sisolak. We leave the determination of the admissibility and scope of any specific evidence to the district court’s sound discretion under Sisolak.

As indicated in Sisolak, as successful property owners in an inverse condemnation action, the landowners are also entitled to recover “ ‘reasonable attorney . . . fees, actually incurred’ ” under the plain terms of the federal Uniform Relocation Assistance and Real Property Acquisition Policies Act (Relocation Act). 43 Although this court has indicated that attorney fees awarded pursuant to Nevada law may be based on either a “lodestar” amount or a contingency fee, 44 fees awarded pursuant to the Relocation Act must be calculated using “lodestar” analysis. 45 Thus, on remand, *637 we instruct the district court to award the landowners reasonable attorney fees based upon traditional lodestar analysis. Therefore, as explained in prior decisions of both this court and the federal courts, the district court must first ‘ ‘multiply the number of hours reasonably spent on the case by a reasonable hourly rate.” 46 Following determination of this “lodestar” amount, we leave it to the sound discretion of the district court to adjust this fee award based upon

(1) the time and work required; (2) the difficulty of the issue; (3) the skill required to perform the service; (4) the amount of time taken away from other work; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) the time limitations imposed on the attorney by the case; (8) the amount of money involved and the results obtained; (9) the reputation, experience, and ability of the attorney; (10) the lack of desirability of the case; (11) the length of acquaintanceship w'ith the client; and (12) awards in similar cases. 47

Finally, we note that Sisolak provides that a prevailing party in an inverse condemnation action is entitled to prejudgment interest from the date of taking until the entry of judgment. 48 Here, it appears that the parties stipulated to a November 20, 1995, date of taking and value. Accordingly, we further remand this case for the calculation and award of prejudgment interest from the stipulated date of taking.

CONCLUSION

The doctrine of law of the case generally provides that the law or ruling of a first appeal must be followed in all subsequent proceedings, both in the lower court and on any later appeal. However, when this court issues an intervening decision that constitutes a change in controlling law, courts subject to a previous decision may *638 depart from the law of the case and apply the new rule of law. In this case, the rule recently set forth by this court in McCarran International Airport v. Sisolak clearly indicates that the height restrictions imposed by the County effectuated a per se regulatory taking of the landowners’ airspace. Therefore, we vacate the district court’s dismissal order and instruct the court to enter an order finding the County liable for a per se regulatory taking. We remand this matter for a new trial on the issue of just compensation, in accordance with the guidelines set forth in both Sisolak and this opinion. 49