The U.S. Court of Appeals for the First Circuit has ruled that the developer of a coastal residential subdivision in Narragansett, Rhode Island, did not have grounds to file a federal takings claim after the state halted the project when an American Indian archeological site was discovered. Downing/Salt Pond Partners, L.P. v. Rhode Island, No. 10-1484 (1st cir. 5/23/11). Between 1992 and 2007, the plaintiff built homes on 26 of 79 lots in the subdivision, installed community infrastructure such as roads and a sewer line, and began the improvements necessary to build on the remaining lots.

In 2007, the Rhode Island Preservation and Heritage Commission (HPHC) concluded that the land should be preserved to benefit the public and not developed at all because of artifacts discovered at the development site. After the plaintiff resumed construction, the Rhode Island Coastal Resources Management Council (CRMC) issued a cease and desist order. On August 24, 2009, plaintiff filed a complaint in federal court alleging that the state, CRMC and HPHC had taken its property for public purposes without just compensation and denied it substantive and procedural due process. The complaint sought damages as well as injunctive relief. The state moved to dismiss for lack of subject matter jurisdiction, arguing that plaintiff was required under state precedent to seek compensation in state court. The district court granted defendant’s motion to dismiss and plaintiff appealed.

A First Circuit three-judge panel, which included retired U.S. Supreme Court Justice David Souter sitting by designation, affirmed the district court, ruling that long-standing precedent dictates that a party must first attempt to obtain compensation from the state, if such an option is available, before filing a federal takings claim. Rhode Island has a state law requiring a property owner to sue to obtain compensation for alleged “inverse condemnation.”