The opinion of the court was delivered by: OBERDORFER
Plaintiffs, a limited partnership and its partners, bring this action under 42 U.S.C. § 1983 on the ground that the District of Columbia has taken their property without just compensation. The undisputed facts are that in 1961 plaintiffs purchased in fee simple Lot 1 of Subdivision Square 2106 (hereinafter "Lot 1"). Known as Cathedral Mansions South, Lot 1 consisted of an apartment building and adjacent landscaped lawns. Cathedral Mansions South was built by local developer Harry Wardman in the early 1920s as part of his larger Cathedral Mansions project. Defendants assert, and plaintiffs do not contest, that Lot 1 was maintained by plaintiffs and their predecessors as a single taxable lot from 1922 until 1988. At that time, twenty-seven years after they purchased Lot 1, plaintiffs caused it to be subdivided and recorded as separate lots: Lot 106, which included the improvements on the original site, and eight smaller contiguous lots (Lots 107-114) carved out of the landscaped lawn.
In December 1988, following the subdivision, plaintiffs applied for building permits to construct one single-family townhouse on each of Lots 107-114. On February 14, 1989, plaintiffs' applications were referred to the United States Commission of Fine Arts ("Commission"), as a portion of Cathedral Mansions South faces the Zoological Park, a federal property protected by the Shipstead-Luce Act. See D.C. Code § 5-410 (1994) (effective May 16, 1930). The Commission ultimately recommended disapproval of the applications for reasons both practical and aesthetic. See Pls.' Mot. for Summ. J. Ex. B-4.
On March 2, 1989, while plaintiffs' permit applications were still pending, an application was filed with the District of Columbia Historic Preservation Review Board ("Board") to designate as an historic landmark the entire Cathedral Mansions complex, including Lots 106-114. Under D.C. Code § 5-1002(6)(B), properties for which historic landmark applications are pending are treated as landmarks for purposes of the Historic Landmark and Historic District Protection Act of 1978, D.C. Code § 5-1001 et seq. (the "Landmark Act"). Accordingly, on March 7, 1989, plaintiffs' applications were referred to the Board for review and recommendation.
On May 17, 1989, the Board acted on the landmark application, voting to designate Cathedral Mansions, including Lots 106-114, as an Historic Landmark in the District of Columbia Inventory of Historic Sites. It described the complex as containing three Georgian Revival style buildings
sited imaginatively to provide the greatest possible integration of living space with well-landscaped open space. Individual apartments were designed where possible to include multiple exposures with large areas of fenestration, sun rooms and French doors opening onto sheltered patios and balconies. Cathedral Mansions is designed in the context of Connecticut Avenue and nearby parkland including the National Zoo and the Rock Creek and Klingle Valley ravines. It contributes significantly to the unique open space character of Connecticut Avenue in which single family and multi-family residences complement each other and are integrated and enhanced through a continuity of designed and natural landscape.
Pls.' Mot. for Summ. J. Ex. B-5 at 1. In support of its landmark designation, the Board noted that Cathedral Mansions was "an early and fine example of a large apartment complex in a park-like setting" and a "notable work of Harry Wardman, one of the most prolific and influential developers of residential property in the history of the District of Columbia." Id. at 2.
In July 1989, the Board held a hearing on plaintiffs' building permit applications, and recommended that they be denied on grounds that the "construction of eight new townhouses on the open space is not consistent with the purposes of Section 2(b) of D.C. Law 2-144, Historic Landmark and Historic District Protection Act of 1978." Pls.' Mot. for Summ. J. Ex. A-12. Plaintiffs initially sought a hearing before the Mayor's Agent to review the Board's decision; however, their permit applications were dismissed without prejudice by the Mayor's Agent in an "Uncontested" Decision and Order of December 20, 1991.
In January 1992, plaintiffs once again submitted applications for permits to build townhouses on Lots 107-114. Upon referral, the Board again denied plaintiffs' applications as inconsistent with the landmark status of Cathedral Mansions. On March 8, 1993, the Mayor's Agent affirmed the Board's decision, and signed an order denying plaintiffs' building permit applications, concluding that the proposed construction was incompatible with the Cathedral Mansions landmark because it "would result in the destruction" of the lawn, which is "an integral part of the landmark."
Pls.' Mot. for Summ. J. Ex. B-1 at 12.
In the instant action, plaintiffs do not contest the decisions of the Board or the Mayor's Agent. Nor do they challenge the Historic Landmark and Historic District Protection Act itself. Rather, they assert, pursuant to Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 120 L. Ed. 2d 798, 112 S. Ct. 2886 (1992), that defendants have effected a "total taking" of their property -- or more specifically, of Lots 107-114 -- for which they are entitled to just compensation. Defendants assert that no taking has occurred because plaintiffs failed to exhaust their administrative remedies and because they have not been deprived of all economic benefit from the property. Pending are cross-motions for summary judgment.
Before a regulatory taking claim brought against a state entity is ripe for decision in federal court, the claimant must demonstrate that: (1) the responsible state agency has made a final decision as to "application of the [challenged] regulation to the property at issue"; and that (2) the claimant has "sought" compensation through available state procedures. See Suitum v. Tahoe Reg'l Planning Agency, 520 U.S. 725, 117 S. Ct. 1659, 1664-65, 137 L. Ed. 2d 980 (1997); Williamson County Reg'l Planning Comm'n v. Hamilton Bank of Johnson City, 473 U.S. 172, 194, 87 L. Ed. 2d 126, 105 S. Ct. 3108 (1985). Defendants, in effect, contend that plaintiffs satisfied neither prerequisite because they "elected to by-pass" procedures that would have permitted the Mayor's Agent to consider plaintiffs' claims of economic hardship prior to issuing his final order. See Defs.' Mot. for Summ. J. at 12. Defendants' contention is not supported by governing District of Columbia law.
The Landmark Act contains separate provisions concerning applications for "Demolitions," "Subdivisions," "Alterations," and "New construction" within an historic district or on the site of an historic landmark; at issue here is which of the latter two categories properly described plaintiffs' applications. When they sought review by the Mayor's Agent, plaintiffs invoked the provision governing "New construction", which applies to permits "to construct a building or structure in an historic district or on the site of an historic landmark." D.C. Code § 5-1007 (1994). Defendants argue that plaintiffs were equally entitled to invoke the procedures for "Alterations", D.C. Code § 5-1005, since construction of new townhouses on the landscaped lawn would inevitably "alter" the Cathedral Mansions historic landmark site.
Defs.' Reply at 4.
The distinction is more than semantic. Under D.C. Code § 5-1007, the Mayor's Agent was required to issue plaintiffs' building permits unless he found the proposed construction to be "incompatible" with the character of the landmark. Under D.C. Code § 5-1005, however, the Mayor's Agent could have issued the permits over the objections of the Board if he found the proposed alterations to be "necessary in the public interest," or if failure to issue the permits would result in "unreasonable economic hardship to the owner." The legislative history of the Landmark Act indicates that the "unreasonable economic hardship" test of § 5-1005 was "designed to embody the constitutional standard [for a taking] as defined by the United States Supreme Court." See Report of the Committee on Housing and Urban Development, Council of the District of Columbia, on Bill 2-367 (Law 2-144) (October 5, 1978) at 6, 11.
The administrative record in this case reflects considerable confusion among the parties as to whether plaintiffs' project was better described as an "alteration" or "new construction," and as to the applicable standard of review in either case. These issues, however, need not be resolved here. While defendants argue that plaintiffs could have elected to characterize their project as an alteration, they do not argue that plaintiffs were precluded from characterizing it as "new construction" and proceeding in accordance with § 5-1007. In fact, when the issue was raised by plaintiffs' representative at the first Board hearing in 1989, the Board Chairman stated: "It's our understanding that alterations pertain more to structure as opposed to the land, and so, the application is properly filed under new construction. So it didn't require that you request alteration or even demolition, for that matter." Historic Preservation Board Tr., 7/19/89, at 148-49.
When plaintiffs were informed by defendants of the Board's second "do not issue" recommendation, that notification characterized plaintiffs' project as "New construction." See Defs.' Reply Ex. C. Unsurprisingly, plaintiffs requested review by the Mayor's Agent pursuant to the regulations governing permits for new construction, rather than alteration. See Defs.' Reply Ex. B. Although plaintiffs were invited -- but ultimately declined -- to present evidence of "economic hardship" to the Mayor's Agent, as would have been appropriate in a proceeding under § 5-1005, see March 8, 1993 Decision & Order, Pls.' Mot. for Summ. J. Ex. B-1 at 12-13, this did not change the character of the proceeding, which was a review of a permit for new construction pursuant to § 5-1007. See District Intown Properties, Inc. v. District of Columbia Dep't of Consumer & Regulatory Affairs, 680 A.2d 1373 (D.C. 1996). Once the Mayor's Agent issued his final order denying their permits, plaintiffs exhausted their administrative remedies ...