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Karen White, An Individual, and Elkhorn, LLC, A Florida Limited Case v. Valley County

September 30, 2011


The opinion of the court was delivered by: Honorable Edward J. Lodge U. S. District Judge



Before the Court are Defendant Valley County's Motion for Summary Judgment (Dkt. 47), Motion for Rule 11 Sanctions (Dkt. 55) and Motion for Reconsideration (Dkt. 125). Chief United States Magistrate Judge Candy W. Dale issued two Report and Recommendations in this case (Dkt. 86 and 115). Objections and supplemental filings have been allowed by the Court to narrow the factual and legal issues presented. Having fully reviewed the record, the Court finds that the facts and legal arguments are adequately presented in the briefs and record. Accordingly, in the interest of avoiding further delay, and because the Court conclusively finds that the decisional process would not be significantly aided by oral argument, this matter shall be decided on the record before this Court without oral argument.


1. Plaintiffs Claims and Request for Relief

Karen White ("White") and Elkhorn, LLC ("Elkhorn") brought this action on October, 1, 2009, against Valley County claiming that a fee imposed by the county as a condition for approval of their proposed development violated Idaho state law and deprived Plaintiffs of due process under both the federal and state constitutions.

Pursuant to the Second Amended Complaint, Dkt. 41, Plaintiffs seek the Court to enter a declaratory judgment that: 1) finds Valley County did not enact a valid impact fee ordinance required by the Idaho Development Impact Fees Act ("IDIFA"), Idaho code § 67-8201 et seq.; 2) finds the use of required development agreements is illegal; 3) enjoins Valley County from conditioning approvals of land use applications upon the developer entering a RDA or any similar agreement to collect monies for the proportionate share of road improvement costs attributable to traffic generated by their development; 4) declares White and/or Elkhorn do not have to pay monies for its proportionate share of road improvement costs attributable to traffic generated by Phase II of White Cloud Subdivision; 5) declares the RDA entered into by White and Valley County on Phase I rescinded and refund monies paid by White in an amount of $166,496; 6) declares Valley County's use of RDAs to collect monies from developers an unauthorized tax and order Valley County to return the monies paid by White on Phase I in the amount of $166,496; and 7) awards costs and fees incurred in this action and any other relief the court deems just and proper.

2. Pending Motions.

Valley County has moved for summary judgment, arguing: (1) White lacks standing because she transferred her interest in the development to Elkhorn; (2) diversity jurisdiction is lacking; (3) Plaintiffs have failed to state a claim because the alleged constitutional violations were not brought under 42 U.S.C. § 1983; (4) even if the Court were to construe Plaintiffs' suit as a § 1983 action, Plaintiffs' claims would nonetheless be barred by the two-year statute of limitations applicable to § 1983 actions; (5) Plaintiffs' state law claims are barred by the statute of limitations; and (6) even if the state law claims are not barred by the statute of limitations, they nonetheless fail because White voluntarily paid the impact fee and did not challenge the fee through administrative or state court proceedings. Valley County also seeks Rule 11 sanctions based on the contention that Plaintiffs continue to pursue claims that are either incognizable under the law or that have otherwise been shown to be procedurally barred--either through the statue of limitations or exhaustion rules applicable to inverse condemnations actions.

The Court granted Plaintiffs' second motion for a preliminary injunction regarding Phase II requesting an extension of time to seek final plat approval. Defendant has filed a motion for reconsideration of the Court's order on that motion.

3. Report and Recommendations

In the Report and Recommendation dated February 14, 2011, Dkt. 86, Judge Dale recommended the motion for summary judgment be granted in part and denied in part and the motion for Rule 11 sanctions be denied. Specifically, Judge Dale recommended the Plaintiffs' federal claims be dismissed and their state claims be allowed to proceed due to factual disputes. Since the Report and Recommendation was issued additional facts and supporting documents have been submitted by the parties that were not properly before Judge Dale, but that can be considered by this Court in ruling on the motion for summary judgment. Both parties have filed numerous objections to the Report and Recommendation.

4. Timeline of Events

In 2005, Plaintiff Karen White ("White") and her father, E.T. Usher ("Usher") (who is not a party to this action), were the developers of White Cloud Subdivision ("White Cloud") in Valley County. The subdivision included a preliminary plat for 80 lots on 210 acres and was approved on May 12, 2005. Dkt. 91-6. Phase I of the development included only 44 lots. All land within Valley County's jurisdiction is zoned multiple use, pursuant to the Valley County's Land Use Development Ordinance. Within the district, various uses are listed as "allowed" while others are listed as "conditional" necessitating a conditional use permit ("CUP").

When Valley County began to experience an increase in development, it initiated what it called a Capital Improvements Program ("CIP"). The CIP is described in the Valley County Master Transportation Plan as follows:

Capital Improvement Program Process and Purpose Valley County has developed and adopted a Capital

Improvement Program (CIP). The following description of the CIP is provided by Valley County: "In 2005, the Valley County Commissioners initiated a Road Development Agreement (RDA) process to require new developments to pay a fee to mitigate the impacts of their developments on the roads and bridges in Valley County. The RDA process replaced the Capital Contribution Agreements that were used by Valley County for larger developments that needed infrastructure improvements. The RDA requires all developers to pay a fee based on the number of trips their developments generate. Developers are, in effect, required to pay for the roadway capacity their developments use. The fee must be paid at the time of final plat. Credit is given for ROW required from the development and any in-lieu-of contributions, such as construction materials or developer sponsored construction of portions of roads and bridges.["]

Pl.s' Statement of Material Facts in Dispute, at 2 (Dkt. 62) (quoting Valley County Master Transportation Plan (Dkt. 64, Att. 5)) (bolding and underlining in original).

It is undisputed that Valley County did not adopt an impact fee ordinance or administrative procedures involved with the impact fee process as required by the IDIFA, Idaho Code §§ 67-8201 et seq. The IDIFA prohibits certain impact fees unless imposed pursuant to an ordinance in compliance with the statute. Valley County concedes it did not enact an IDIFA-compliant ordinance, because, at the time, it believed in good faith that none was required. Recent lawsuits involving other municipalities have successfully challenged impact and housing fees as being illegal taxes since the contested ordinances were not in compliance with state statutes and the municipalities were therefore exceeding their authority in requiring certain fees from developers. See Mountain Central Board of Realtors, Inc. v. City of McCall, Civil Case No. CV 2006-490-C, Memorandum Decision and Order Granting Plaintiff's Motion for Summary Judgment dated February 9, 2008; Cove Springs Development, Inc. v. Blaine County, Civil Case No. CV2008-02, Order on Summary Judgment on Counts 2 and 3 dated June 3, 2008. The Court notes Defendants have not moved for summary judgment on the issue of whether the impact fees under the RDAs are a legal tax, but seek to have the case dismissed on other legal arguments.

In response to the pending litigation, Valley County passed a resolution in March of 2011, providing in part:

In order to avoid litigation costs and uncertainty, the Board of County Commissioners will no longer into Road Development Agreements calling for the payment of fees or other contributions for off-site road improvements until such time as the County adopts an IDIFA-compliant ordinance, unless the permit holder voluntarily and expressly waives any objection thereto. . . .

If no IDIFA-compliant impact fee ordinance has been enacted at the time of the negotiation, the County will seek other ways to meet its obligation to ensure that adequate public services are available to serve the new development. This could include conditions respecting the sequence and timing of development so as to ensure that development occur on a schedule consistent with the availability of public services. Absent an IDIFA-compliant ordinance, the new Road Development Ordinance, as in the past will contain no requirements for payments or contributions by the permit holder unless such requirements are expressly and voluntarily agreed to by the permit holder.

Valley Count represents it is in the process of drafting an IDIFA-compliant impact fee ordinance.

The CUP for Phase I of White Cloud was approved by Valley County on May 24, 2005. Dkt. 48-1. The CUP included as a condition that a Development Agreement shall be required with the Board of County Commissioners. Id.

To satisfy the Development Agreement requirement in CUP for Phase I in 2005, White entered into a Road Development Agreement ("RDA") with Valley County.

It appears negotiations on the RDA began sometime in the late spring or summer of 2005 as the county has provided evidence that a draft RDA was sent to the engineering firm working on the White Cloud development, Secesh Engineering, in August 2005. The final RDA was provided to Scott Findlay, Project Manager for White Cloud on or about June 24, 2006. White signed the RDA on June 26, 2006. White paid the required fees under the RDA of $166,496 on July 21, 2006. Valley County executed the RDA on July 24, 2006 and the RDA was recorded on July 26, 2006.

The final RDA differed from the draft RDA in that it only covered the 44 lots being developed in Phase I and eliminated an offset for a dedicated roadway right of way. See Dkt. Nos. 48-2 and 104-1. The RDA states: "The developer agrees to pay Valley County their proportionate share of roadway costs for a total cash payment of $166,496 due at the time of Final Plat approval." Pl.s' Compl., Attachment 2, Dkt. 1.

The RDA further states "[the intent of the recordation [of the RDA] will be to document the official aspect of the contractual obligation set forth in this Agreement." Id.

Phase I of White Cloud subdivision was completed.

On May 12, 2006, Usher granted a Warranty Deed to Elkhorn, LLC ("Elkhorn"), a Florida limited liability company, for his interest in the White Cloud subdivision real property. White assigned her interests in Phase II to Elkhorn. White filed an affidavit indicating she did not assign her interests in Phase I to Elkhorn. Dkt. 65. White and her husband are members of the Elkhorn limited liability company and reside in Florida. White is also the manager of Elkhorn. Accordingly, the sole developer for Phase II is Elkhorn.

Elkhorn has initiated the land use permitting process for Phase II of the White Cloud development, and represents that all of the conditions contained in the CUP for the remaining 36 lots have been satisfied with the exception that Elkhorn has not entered into a RDA with Valley County.A Development Agreement was again required as a condition of the CUP.

The CUP required a final plat for Phase II needed to be recorded by July 9, 2009. After this litigation was filed, the Valley County agreed to an extension to record the final plat until August 1, 2011 by Valley County. Recently, this Court granted a Preliminary Injunction related to the expiration of the deadline to record a final plat for Phase II based on the ongoing litigation.

Valley County maintains White voluntarily agreed to pay the RDA monies. White denies that the payment was voluntary since it was required in order to get the final plat approval. It is undisputed White and Usher did not file an appeal of the CUP or final plat approval for Phase I after she paid the RDA fee of $166,496. Nor did White or Usher file an inverse condemnation claim in state court regarding the monies paid under the RDA in Phase I. As to Phase II, Elkhorn has not filed an appeal of the CUP and has not recorded a final plat. Nor has Elkhorn entered an RDA for Phase II.

It is undisputed that White was involved in the development of another subdivision in Valley County called "Elkhorn Subdivision" in 2003 that also required a RDA and the payment of monies for impact fees under a CIP. The payment of monies under the Elkhorn Subdivision RDA are not at issue in this case as any claim regarding that subdivision would be outside the applicable statute of limitations.

It appears undisputed by the parties that the RDA monies paid by White for Phase I were used by Valley County to complete capital investments for roads in the vicinity of the White Cloud development. See Exhibit A to RDA, Dkt. 48-2. It is unclear if any of the monies were used for roads not in the vicinity of the White Cloud development.


1. Standard of Review for Objections to Report and Recommendations

Pursuant to 28 U.S.C. § 636(b)(1)(C), this Court "may accept, reject, or modify, in whole or in part, the findings and recommendations made by the magistrate judge." Moreover, this Court "shall make a de novo determination of those portions of the report which objection is made." Id. In United States v. Reyna-Tapia, 328 F.3d 1114, ...

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