Builders seeking approval for proposed real estate developments must in almost all American localities navigate a complex series of required procedural steps, but for those who persevere and succeed in obtaining a permit, one eleventh-hour device can bring all those efforts to naught: the objector lawsuit. Easy to file but difficult to resolve, lawsuits by development opponents even when unsuccessful can delay projects by a year or more, playing havoc with cost and time estimates.
Why are these suits so simple to start? The American common law system sets a low bar for a plaintiff to establish a right to maintain a lawsuit — known as “standing” — in which the mere claim that an injury has occurred, or even may occur in the future, is sufficient to keep a case moving along. Recognizing plaintiffs’ interest in having their day in court and the prudential consideration of having claims decided on their merits, judges will rarely find an injury to be so minor, indirect or speculative that it’s not worth judicial attention.
While these considerations are important, they were not formulated with the expectation that they would be used to thwart individual exercise of property rights and the ordinary activities of civilized life. Some may recall the 1972 Supreme Court case of Sierra Club v. Morton, where the Court narrowly (4-3) decided that an environmental organization couldn’t rely upon alleged injuries to nature, rather than to the organization itself, to establish its right to sue to stop a planned ski resort, and which resulted in a dissent by Justice Douglas arguing for “conferral of standing upon environmental objects to sue for their own preservation.” The holding was quickly a moot point, as environmental organizations and other entities opposed to development recognized that they could recruit individual members who could allege some potential harm and obtain standing through those members’ interests.
By contrast, the traditional law of nuisance recognizes that ordinary economic activities generally do not give rise to a cause of action for damages or equitable relief even where some harm may exist. To appropriate a phrase from the Supreme Court in Pennsylvania Coal v. McMahon, the American economy “could hardly go on” if every land use decision provided grounds for a lawsuit that even if ultimately unsuccessful could cause proposed developments to grind to a halt for years at a time. If one of the principal reasons for establishing an impartial justice system was the assurance of economic predictability, whether through the enforcement of contracts or the prosecution of fraud, why should the courts’ accommodating posture toward claimants be abused to increase uncertainty and introduce unpredictability into an endeavor as essential as the construction of homes for American families?
Indulgent standing requirements reached a point of near-absurdity in recent years with a pair of cases out of Wisconsin and Montana. In Montana, a hastily-incorporated organization was excused from the standing requirement by a state court on the basis that the organization had simply alleged a constitutional claim against a state zoning law, while in Wisconsin, a lawsuit claiming a “failure to genuinely consider” the effects of a planned 28-story building on nearby property values was allowed to stand, ironically resulting in the demise of the $50 million project when interest rates rose during the pendency of the suit. In the interest of preventing a hypothetical loss of unrealized value to certain residential properties from a building which had not even been constructed, the Wisconsin court enabled the destruction of $45 million in taxable real estate value.
The courts are intended to be venues for the redress of harms, so where their actions result in a net increase in harm through the destruction of productive economic activity, something seems to be amiss. The Wisconsin case was so egregious that it prompted the state legislature to enact AB 266, a bill that reformed standing in the context of land use approvals to require a showing of “actual damages . . . that are personal to the person and distinct from damages that impact the public generally.” A showing that such damages were imminent would also suffice.
On November 5, 2024, a Wisconsin’s Court of Appeals threw out an objector lawsuit using AB 266, holding that allegations of a diminution of value (among other allegations) were not sufficient for standing. That decision, which has now been appealed to Wisconsin’s Supreme Court, would if upheld by decision or through rejection of the appeal present a genuine obstacle to objector lawsuits using speculative or generalized harms to obtain injunctive relief. It would also begin to return some degree of consistency to land use law, which has been plagued by what some refer to the “messiness or confusion,” particularly in the regulatory takings context.
For example, the US Supreme Court has held that a zoning law which merely causes a diminution of value is not subject to a takings claim at all. On the other hand, a plaintiff can use the same diminution of value as the basis for standing to challenge a law or action on procedural grounds, even where the law actually enhances property rights or the action is to approve a valuable building in which people will engage in safe, lawful and economically beneficial activity.
Moreover, rather than simply entitling the claimant to monetary compensation, the claimant’s lawsuit can result in an injunction against the entire law or project approval no matter how many months or years a local legislative body spent deliberating over it and forging political compromise and no matter how minor the claimed diminution might have been. Perversely, state actions which enhance property rights become more vulnerable to legal challenge than those which take them away. This state of affairs isn’t how the judiciary was intended to function, isn’t sensible and is increasingly economically unsustainable. but Wisconsin’s law has passed its first major test in trying to address it. Other states ought to take note of the law and the recent decision in considering their own legislative agendas for 2025 and beyond.