by Gary Taylor
Michigan Court of Appeals, September 7, 2023
In this 37-page opinion, 20 pages of which were dedicated to simply listing all the litigants, the Michigan Court of Appeals addressed the question of whether plaintiffs’ adequately stated a claim in their pleadings for inverse condemnation against the Michigan Department of Environment, Great Lakes, and Energy (DEGLE) for the failure of the Edenville Dam in 2020. Plaintiffs’ alleged that the actions of DEGLE in the years prior contributed to the failure. The court’s opinion simply dealt with the adequacy of plaintiffs’ pleadings, but provides
The Edenville dam was built in 1924 to hold back water from the Tittabawassee and Tobacco Rivers for hydroelectric power. Boyce Hydro Power, LLC (Boyce) purchased the dam in 2004 and acquired a license from the Federal Energy Regulatory Commission (FERC) to operate the dam to generate hydroelectric power. FERC made repeated requests of Boyce to ubgrade the dam because it was not structurally adequate and its spillway capacity was inadequate in the event of a “Probable Maximum Flood,” defined as the flood that may be expected from the most severe combination of critical meteorologic and hydrologic conditions reasonably possible in the drainage basin in question. After years of unaddressed regulatory violations, FERC revoked Boyce’s federal license in September 2018, at which point the dam fell under the oversight of DEGLE and the Michigan Department of Natural Resources (DNR). Within days experts conducted a cursory inspection and found the Edenville dam to be in fair structural condition, but that inspection was not intended to determine whether the dam met safety standards. A group called Four Lakes Task Force petitioned the circuit court to establish a legal water level for the lake formed by the dam (Wixom Lake), and the court set the lake level at that previously required by FERC. Despite the establishment of this level, and the rejection by DEGLE of a request by Boyce to draw down the lake level, Boyce lowered the lake level anyway. in April 2020, DEGLE issued Boyce a permit to restore the lake to its previous level, and conditioned the permit on Boyce maintaining high water levels even though, as plaintiffs’ alleged, Michigan regulators knew about the dam’s inadequate spillway, overall deterioration, and need for repairs. Then on May 19, 2020 the Edenville dam failed, resulting in the failure of the Sanford dam and damage to two other dams, forcing the evacuation of thousands of residents, and resulting in devastating flooding and property damage to nearby residents.
We will jump straight to the discussion concerning inverse condemnation. Citing previous precedent, the Court of Appeals stated that “a plaintiff alleging a de facto taking or inverse condemnation must establish (1) that the government’s actions were a substantial cause of the decline of the property’s value, and (2) that the government abused its powers in affirmative actions directly aimed at the property.” Although the state departments challenged element (1) on summary disposition, they did not renew that argument on appeal.
Affirmative actions directed at plaintiffs’ properties. The court looked at several past cases to determine what constitutes “affirmative actions” in this context. Common among these cases was a holding that “inaction and omissions by the state” could not sustain a takings claim. For example, the court in 2004 found the state did not take “affirmative action” when a fire that spread from an abandoned house that the state acquired through tax delinquency proceedings damaged a neighboring property. “At most, the state failed to abate a fire-hazard nuisance.” The court concluded, however, that in the present case the plaintiffs’ sufficiently pleaded affirmative actions taken by the state that were aimed directly at plaintiffs’ properties. First, plaintiffs’ alleged that the state knew about the dams inability to withstand significant rainfall and that its deteriorated condition posed a danger to downstream owners. Second, plaintiffs’ alleged that the state actively prevented repair efforts and threatened enforcement action if the lake levels were drawn down. Finally plaintiffs’ claimed that the state concealed risks posed by the dam and acted to raised the lake to dangerous levels in disregard of those risks in order to improve environmental conditions in the lake. If proven at trial, these allegations would constitute affirmative actions; they would demonstrate “more than mere regulatory actions such as issuing or denying a permit.” Contrary to the state’s assertion that Boyce was responsible for raising lake levels, the court found that the state’s action in authorizing and requiring Boyce to raise lake levels was, if proven true, sufficient affirmative action to sustain a taking claim.
Public use. The state agencies also argued that plaintiffs’ inverse condemnation claims fail because the state did not put plaintiffs’ property to a public use. In contrast, plaintiffs alleged that defendants exercised control over the Edenville Dam so much so that their use of the dam constituted a public use. The court determined the relevant question to be “whether defendants took plaintiffs’ property by controlling the operation of the dam for a public use, not whether plaintiffs’ property—once taken—would be put to a public use.” If proven to be true at trial, by pressuring Boyce to keep water levels high to protect aquatic life, prioritizing that interest at the expense of the safety of people and property, the state agencies through their operational control of the dam, put the dam to a public use in their pursuit of environmental protection. When allegations are made that the government—acting along with a privately owned dam operator—took affirmative steps that caused the dam to fail and damaged downstream property owners, Michigan’s takings clause provides a remedy.