by Melanie Thwing

Interstate Companies, Inc v. City of Bloomington
(Minnesota Court of Appeals, November 9, 2010)

The Galarneau’s own two separate properties in Bloomington, Minnesota. These properties are leased to Interstate, Inc. and are used for office space, service repairs and other various things. These properties are located next to the Minnesota-St. Paul International Airport, and close to the Mall of America and the light rail line.

The airport itself has specific areas zoned as “safety zones,” which regulate buildings and building height to insure the safety of the airport as well as individuals. Originally the Galarneau’s buildings were zoned in Safety Zone C, which is not as restrictive as others. However, in 2004 construction of a new airport runway was proposed and the Joint Airport Zoning Board adopted a new zoning ordinance. This ordinance re-assigned the Galarneau’s property to Safety Zone B, which is more restrictive. Further, the buildings currently occupied by Interstate, Inc now fall only 2,500 feet from the completed runway, which causes disruptions in business operations.

The true effect of the new zoning ordinance was felt in 2005, after the appellants sought to build a hotel on their property. The permit was denied because the new structure would violate height restrictions. The Galarneau’s brought two issues to the district court: 1.) Whether the zoning amendment to reclassify the property to Safety Zone B was regulatory taking, 2.) Whether the Minnesota Airport Commission’s (MAC) use of its property amounted to an inverse condemnation or a taking through deprivation of practical enjoyment of the Galarneau’s property.  The district court granted summary judgment in favor of MAC, and the Galarneau’s appealed to the Minnesota Court of Appeals

Under the first issue, both the United States and Minnesota Constitutions explicitly state that no private property can be taken without just compensation. Further, the Minnesota Constitution specifies property cannot be taken, destroyed or damaged without compensation. Precedent in Penn Central states the Court must look at the economic impact of the zoning ordinance for the individuals.  Following the Penn Central precedent, under  McShane v. City of Fairbault the Minnesota needs to examine if there was a substantial decline in market value because of an ordinance to benefit, “a specific public or governmental enterprise.” If so, then compensation is required. Although at the district court hearing a market study was presented which showed a significant lose in market value, the district court rejected it.

Further, under Penn Central the court must look at the investment-backed expectations of the Galarneaus. This would be the primary expectation of Galarneaus regarding the use of their property when the property was first purchased. The Galarneaus argue that because of the high level of residential and industrial use when the property was bought they expected to develop along these same lines. The Court of Appeals states that there was a reasonably different expectation when the property was located in the original safety zone.

Finally under Penn Central the court must decide whether the new regulations place a burden on only a few landowners. McShane explains that enterprise regulations are placed specifically for the government enterprise, which gives benefit to the general public, but burdens on a few individuals. If, in fact, the burden is falling on a few landowners the Supreme Court of Minnesota held that the public has then essentially acquired a free easement. The Court of Appeals ultimately found that there was a large decline in market values,

Considering the questions raised under the Penn Central analysis, the Court of Appeals found the district court’s summary judgment inappropriate.

On the second claim, the appellants argue that the district court erred in finding that MAC’s use of the property could not be a taking through deprivation of practical enjoyment. For this claim to hold true, there must be a substantial invasion of property rights and measurable lowering of market value. The district court held that the appellants failed to prove substantial invasion, even though they turned in records of noise, disruption to telephone calls, and employee fears from low flying air-crafts. According to the Court of Appeals it was inappropriate for the district court to grant summary judgment on this issue because disputed questions of fact existed. 

The Court of Appeals reversed the district court’ summary judgment on both claims, and remanded the case back to the district court.