Mutschler, et. al. v. City of Phoenix – 2/14/2006

February 22, 2006

Arizona Court of Appeals Division One Clarifies That the “Nuisance Exception” to Regulatory Takings Applies to Partial Takings.

In 1998, the City of Phoenix passed an Ordinance rendering the operation of a live sex act business illegal. The Ordinance was upheld as constitutional in an action brought by Guys and Dolls, a sex act business, challenging it as an unconstitutional Fifth Amendment Taking. In 2002, the City of Phoenix conducted a raid on several “swingers clubs,” including Guys and Dolls, and arrested one of its owners. Guys and Dolls again sued the City of Phoenix, alleging that, because of the raid and arrest, it experienced a huge economic downturn that required it to close business, and arguing that the City’s actions thus constituted an unconstitutional as-applied taking. The lower court granted summary judgment in favor of the City of Phoenix, in part because Guys and Dolls could not establish that the City’s actions constituted a partial taking under the Penn-Central partial takings analysis.

On appeal, Division One affirmed the trial court’s ruling but held that the court need not have conducted an analysis under the Penn-Central test for as-applied partial takings because Guys and Dolls failed to establish the threshold question of whether the act condemned by the Ordinance was use of property akin to a public nuisance that could ever be compensated under the Fifth Amendment. The Court held that the “nuisance exception” to a takings analysis—e.g., that a regulation does not result in a compensable taking if the state can demonstrate that the regulation only bans conduct that constitutes a public nuisance pursuant to background principles of nuisance and property law—applies equally to all takings claims, including partial regulatory takings that would otherwise be analyzed under the Penn-Central test. Finding that the City’s actions could have been justified in a common-law action for public nuisance and that Guys and Dolls could have been abated as a public health hazard, the Court found that no regulatory taking had occurred.

Opinion By Judge Hall, Judges Kessler and Timmer concurring.