A Boy Named Hsu Kicks Ass in Vegas

For sheer up-and-down drama and a great insight into how cases are decided it’s hard to beat the Nevada Supreme Court’s opinion in Hsu  v. County of Clark, No. 46461. When Clark County created a “transition zone” height limitation over Hsu’s property adjoining the McCarran Airport in Las Vegas, it effectively eliminated the land’s utility for development under its existing zoning. In the ensuing litigation, Hsu contended that the County inversely condemned an avigation easement over his land by permitting physical entry by low-flying aircraft approaching the airport. The trial court agreed with Hsu’s argument that this was a categorical taking, and awarded $12,601,618.44 as compensation, plus $7,941,564.83 in interest, plus $1,332,500 in attorneys’ fees, and $231,990.86 in costs. But on appeal, the Nevada Supreme Court reversed in an unpublished “order” (it sure looked like an opinion to us, but what do we know?), holding that au contraire, this was only a possible regulatory taking that had to be judged under the Penn Central three-factor balancing test, and – here came the real bad news for Hsu – a taking claim like that could not be pursued in court unless Hsu first applied for development entitlements and was turned down.

 

On remand, the trial court gave Hsu until January 1, 2006, to do so. Hsu sold the property instead, retaining the right to appeal the dismissal of his case. But while all this was going on two things happened: first, there was a change in the Nevada Supreme Court personnel, and second, the Court decided McCarran International Airport v. Sisolak (Nev. 2006) 137 P.3d 1110 in which it reversed itself and held that the pertinent regulation like that in the Hsu case was a per se taking after all because it involved physical invasion of the subject property by low-flying aircraft. Hsu then argued that inasmuch as his case was not yet final he too should receive the benefit of the new rule laid down in Sisolak. However morally appealing that argument, Hsu faced the obstacle of the law-of-the-case rule under which the holding in an earlier appeal is binding in later litigation in the same case, even when it is erroneous. So the issue was whether this fell within an exception to the law-of-the-case rule. The Court’s answer was “Yes.”

 

After canvassing the law in other jurisdictions, the Court held that the law-of-the-case rule is not jurisdictional and that there are three exceptions to it: (1) when subsequent proceedings in the case produce substantially new or different evidence, (2) where there has been an intervening change in the law, and (3) the prior decision was clearly erroneous. Hsu’s case qualified under the second exception. So the case was remanded for a new trial but with a twist: though the availability of administrative remedies is irrelevant in per se taking cases in the determination of liability, it is relevant to the calculation of damages (presumably because the market would consider it) so it would have to be considered on remand in the new trial.

 

Full disclosure: Michael Berger of Manatt, Phelps and Phillips and your faithful servant represented Hsu in his first appeal, and they are pleased to see their substantive arguments vindicated if only posthumously, so to speak. As the sages might put it, a win is a win.

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