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story.lead_photo.caption U.S. District Judge Timothy L. Brooks is shown in this file photo.

FAYETTEVILLE -- A lawsuit alleging the city of Elkins improperly took property from two banks when it stopped issuing building permits for a subdivision, is headed back to state court after two years before a federal judge.

U.S. District Judge Timothy L. Brooks issued an order and opinion this week saying it appeared the sides had swapped positions, leaving him without jurisdiction. Issues of state law in the case should be handled in Washington County Circuit Court, he said.


Generally means the power of a court to hear and render a decision in a given situation. There are different categories of jurisdiction. Pendent jurisdiction is the authority of a federal district court to hear state claims when they share a common factual basis with federal claims.


Two banks claim in the lawsuit Elkins owes them more than $525,000 for improperly prohibiting them from selling lots. That figure doesn't include interest, costs or attorney fees.

First State Bank and Pinnacle Bank, now known as Central Bank, sued the city in federal court in April 2017. The suit claims the city didn't have authority to implement a moratorium on sales from Stokenbury Farms Subdivision in November 2016 because it was a city of the second class at the time. It became a city of the first class in November 2017.

Elkins says it shouldn't have to pay damages to the banks because it did nothing to permanently hurt property values in the troubled subdivision.

The banks say they want just compensation because the moratorium constituted an unlawful taking of their property and a violation of due process.

The subdivision had drainage issues when the moratorium was ordered, but they have since been rectified.

The city argues it was legally using police powers by issuing a temporary moratorium to protect people and property in the city from flooding, stagnant water, and mosquito and snake infestations related to nonfunctioning retention ponds in the subdivision.

The city further argues the action didn't permanently harm the value of lots in the subdivision because the moratorium was lifted as soon as the ponds were repaired and functioning again.

The banks contend the moratorium was illegal and cost them at least 20 percent of the value of the lots in the subdivision, according to the suit.

In his order Thursday, Brooks said federal claims in the lawsuit are not ripe because the banks have not exhausted the available state court remedies for seeking just compensation and have not been denied in a state court inverse condemnation action.

"The state of Arkansas has not yet decided whether Elkins' actions constituted a taking, and if so, what amount of just compensation would be due First State Bank," Brooks wrote.

Brooks noted that, over the last two years, the sides have changed their positions on whether the claims should be heard in state or federal court. Elkins first asked that the case be moved from state court to federal court while the bank wanted the case to remain in state court. Elkins now says jurisdiction should be in state court while the banks argued the case had come too far down the federal path to turn back now.

"Along the way, all concerned -- certainly including this court -- have endeavored to pursue a prudent and judicially efficient path forward," Brook wrote. "Unfortunately, and with much regret in hindsight, the court now concludes that it is without jurisdiction and therefore the journey in this forum must end."

NW News on 05/18/2019

Print Headline: Elkins case headed back to state court

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