Did the government’s disclosure of its plan to acquire property in 2028 constitute a taking?

Regulatory Taking

NDOT v. Eighth Jud. Dist. Ct. (Nev. Supreme Ct. – June 25, 2015)

The issues is whether the district court erred by determining that Nevada’s Department of Transportation (NDOT) owed just compensation for taking Ad America’s property in conjunction with Project Neon, a freeway improvement plan, based on NDOT’s and the City of Las Vegas’ precondemnation activities. Specifically, did a taking occur under either the United States or Nevada Constitutions because NDOT publicly disclosed its plan to acquire Ad America’s property to comply with federal law, the City independently acquired property that was previously a part of Project Neon, and the City rendered land-use application decisions conditioned on coordination with NDOT for purposes of Project Neon.

Project Neon

NDOT is the lead agency for Project Neon, a six-phase, 20- to 25-year freeway improvement project for the Interstate Highway 15 (I-15) corridor between Sahara Avenue and the U.S. Route 95/I-15 interchange in Las Vegas. With an estimated cost of between $1.3 and $1.8 billion dollars, the completion of Project Neon depends primarily on funding from the Federal Highway Association (FHWA). To procure this funding, NDOT complied with the National Environmental Policy Act (NEPA) by performing an environmental assessment of Project Neon between 2003 and 2009. NEPA required NDOT to publicly release all reasonable development alternatives it was considering for public comment. Each of these alternatives included the commercial rental property owned by Ad America.

Based on the results of the environmental assessment, NEPA also required NDOT to complete an environmental impact statement (EIS). In 2011, after the approval of the EIS, FHWA allocated $203 million to NDOT for Phase 1 of Project Neon. Notably, at that time, NDOT did not anticipate acquiring Ad America’s property for another 17 years during Phase 5, assuming funding was available.

To reduce the impacts associated with Project Neon, NDOT coordinated efforts with the City of Las Vegas and other agencies. Anticipating the development of an arterial improvement (the MLK Connector) that was no longer a part of Project Neon, the City amended its Master Plan to allow for certain road widening and, on October 24, 2007, purchased a tract of land from a private party. Additionally, the City approved 19 land-use applications for development rights of properties in proximity to Project Neon.

Ad America

Ad America acquired its property between 2004 and 2005, planning to redevelop existing business space into higher-end commercial offices with multilevel parking. To that end, Ad America hired a surveyor and architect, the latter having drafted a preliminary design. Ad America then retained a political consultant to obtain necessary development permits. After speaking with members of the City Planning Department and one City Council member, the consultant opined that there was a de facto moratorium on development in the path of Project Neon. Based on this opinion, Ad America chose not to submit development applications for its property.

In October 2007, Ad America began informing its tenants that its property would be acquired for Project Neon. Although Ad America’s net rental income remained steady from 2007 to 2010, it decreased by approximately 37 percent in 2011. Ad America had not had its property appraised or attempted to sell it. As of August 2012, Ad America could no longer meet its mortgage commitments.

Procedural History

Ad America filed an inverse condemnation action against NDOT in the District Court of Clark County, Nevada, seeking precondemnation damages for alleged economic harm and just compensation for the alleged taking of its property. Thereafter, NDOT filed a motion in the district court for a determination that the valuation date for purposes of the inverse condemnation action was May 3, 2011, the date Ad America served its summons and complaint. Ad America filed an opposition to that motion and included a countermotion to set a valuation date of October 24, 2007, the date it alleged that the acquisition of property for Project Neon began. NDOT interpreted Ad America’s countermotion to include a motion for summary judgment on the takings issue and filed an opposition to Ad America’s countermotion proposing the valuation date and a countermotion for summary judgment on the takings issue.

Ultimately, the district court granted Ad America’s summary judgment requests and denied NDOT’s summary judgment requests. In its order, the district court attributed the City of Las Vegas’ actions, including its purchase of property and land-use decisions, to NDOT and determined that NDOT committed a taking of Ad America’s property on October 24, 2007. At the time of this decision, it was undisputed that NDOT had not physically occupied Ad America’s property, passed any regulation or rule affecting Ad America’s property, or taken any formal steps to commence eminent domain proceedings against Ad America’s property. In a writ petition, NDOT requested that the Nevada Supreme Court order the district court to grant summary judgment and dismissal in NDOT’s favor.

In its petition, NDOT argued that there was no taking here because there was no physical ouster, regulatory taking, or unlawful exaction. NDOT also contended that it cannot be held liable for the City’s actions. According to NDOT, concluding that there has been a taking in these circumstances is unjustifiably speculative given the contingencies of both federal funding and continued need for Ad America’s property in 2028 when Phase 5 of Project Neon begins.

In response, Ad America contended that NDOT committed a taking of its property. Specifically, Ad America asserted that there was a de facto moratorium on development in Project Neon’s path, Project Neon had moved from the planning to acquisition stage, and Ad America suffered substantial impacts. According to Ad America, it had been rendered an involuntary and indentured trustee of its property due to the effects of Project Neon.


The parties agreed that NDOT did not appropriate or physically invade Ad America’s property. The Nevada Supreme Court explained that no unlawful exaction was possible because Ad America did not submit any land-use application. Moreover, the only government regulation identified by the parties—the City’s amendment to its General Plan—did not cause Ad America to suffer a permanent physical invasion of its property and, as evidenced by Ad America’s stream of rental income and the continuing presence of commercial tenants, did not completely deprive Ad America of all economically beneficial use of its property. Accordingly, the Court considered both regulatory and nonregulatory factual inquiries to decide whether actions attributable to NDOT amount to a taking.

Regulatory Analysis (Penn Central Analysis)

The Court explained that generally, courts only consider ripe regulatory takings claims, and a claim that the application of government regulations effects a taking of a property interest is not ripe until the government entity charged with implementing the regulations has reached a final decision regarding the application of the regulations to the property at issue. But when exhausting available remedies, including the filing of a land-use permit application, is futile, a matter is deemed ripe for review.

Applying the general exhaustion rule, the Court determined Ad America’s regulatory takings claim was unripe for review for a failure to file any land-use application with the City. And although Ad America contended that exhaustion was futile because there was a de facto moratorium on developing property within Project Neon’s path, the record did not support this contention. The opinion of Ad America’s political consultant, which was based on alleged statements from only one of seven City Council members, was insufficient to establish the existence of such a moratorium. This was especially true given the context in which that opinion was provided, where the City had approved 19 land-use applications in proximity to Project Neon juxtaposed with having tabled a single entity’s 3 applications for special-use permits.

The Court reasoned that even if it ignored the requirement of administrative exhaustion, Ad America still could not establish that the City’s amendment to its General Plan constituted a regulatory taking. Three factors guide ad hoc analyses of potential regulatory takings. See Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104 (1978). These factors are (1) the economic impact of the regulation on the claimant, (2) the extent to which the regulation has interfered with distinct investment-backed expectations, and (3) the character of the governmental action. Here, the record did not support the proposition that the amendment had an economic impact on Ad America. Additionally, because the road-widening amendment had no demonstrated nexus to Ad America’s property, any impact on Ad America’s investment-backed expectations to develop its property would be negligible. Finally, given the need to widen specific streets to ensure adequate access to private property and construction areas during Project Neon, the character of the government action was more akin to adjusting the benefits and burdens of economic life to promote the common good than to a physical invasion. Therefore the Court concluded that the regulation’s impact on Ad America’s property did not constitute a regulatory taking.

The Court further reasoned that even assuming that these factors favored a conclusion that Ad America’s property was taken by the City’s amendment to its Master Plan, NDOT was not directly or vicariously liable for the City’s actions forming the basis of the hypothetical taking. There was no compensable taking in such circumstances unless the government’s actions on the intermediate third party have a direct and substantial impact on the plaintiff asserting the takings claim. And despite Ad America’s efforts to portray NDOT as a grand puppet master dictating the City’s actions, the record did not support such a portrayal. Thus, the Court determined that a City’s decision to amend its Master Plan in a coordinated effort to support both its residents’ needs and the needs for a construction project that will benefit its residents does not satisfy the aforementioned legal standard.

Nonregulatory Analysis

The U.S. Court of Appeals for the Federal Circuit has recognized that even where no government regulation is at issue, a taking occurs if the government has taken steps that directly and substantially interfere with an owner’s property rights to the extent of rendering the property unusable or valueless to the owner. Stueve Bros. Farms, LLC v. United States, 737 F.3d 750 (Fed. Cir. 2013). This standard, however, only applies in extreme cases.

The Court explained that the circumstances in this case did not constitute an extreme case. For example, Ad America’s property was not anticipated to be needed for Project Neon until 2028, if at all. At the date that Ad America alleged that a taking occurred, October 24, 2007, NDOT had not acquired a single parcel of property for Project Neon, and did not for another three years. And, even then, it acquired properties slotted for Phase 1 of the project, not Phase 5.

In addition, NDOT had not created a contractual obligation or option with a private party guaranteeing future rights to Ad America’s property. Instead, the only meaningful action NDOT had taken as of the alleged date of taking was continuing to produce its environmental assessment as required by NEPA, which it did not complete until 2009. Furthermore, based on the results of the environmental assessment, NEPA required additional compliance in the form of an environmental impact statement, which NDOT did not complete until the middle of 2010. The Court explained that only at this point was it possible to reasonably conclude that Ad America’s property would likely be needed in the future-18 years later.

Even further, the loss of Ad America’s tenants was theoretically influenced by Ad America highlighting NDOT’s anticipated need of the property, as explained in Ad America’s owner’s affidavit, magnifying the effect of any generalized knowledge that the tenants might have had. Additionally, the reason there was public knowledge of Project Neon’s anticipated need for Ad America’s property was because NEPA required disclosure of the plans and the opportunity for public comment. Making NDOT’s compliance with federal law a basis for compensation to Ad America in these circumstances would undermine long-term public projects by requiring comprehensive funding for all acquisitions at the planning stage, which would, in turn, unreasonably expedite the need for acquired property to be put to use.

The Court also noted that the record’s minimal empirical evidence undermined Ad America’s position. The decrease in Ad America’s rental income in 2011 did not render the property unusable or valueless to Ad America. Ad America provided no evidence of fair market values or rental charges for similarly situated properties with which to determine any real decrease in the fair market value or economic use of the property. Thus, based on its nonregulatory analysis, the Court concluded that NDOT did not take Ad America’s property within the meaning of the Fifth Amendment of the U.S. Constitution.


Based on its analysis, the Court concluded that the undisputed material facts, as a matter of law, did not demonstrate that NDOT committed a taking of Ad America’s property warranting just compensation. Therefore, the Court granted NDOT’s writ petition. Summary judgment in favor of NDOT was warranted, but summary judgment in favor of Ad America was not.

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