Last week marked the close of a major legal dispute under Maine law regarding the applicability of retroactive laws to development projects already under construction. The issue in the case was one of fundamental fairness: if a person obtains a valid permit under existing law and then in good faith expends significant sums building a project based on that permit, can the permit later be taken away based on newly enacted requirements? The case, NECEC Transmission LLC v. Bureau of Parks and Lands, provided a definitive answer—under the Maine Constitution, due process prevents such an outcome.
Full disclosure: this author, together with colleagues at Pierce Atwood including John Aromando, Sara Murphy, and Jared des Rosiers, obtained this first-of-its-kind ruling on vested rights.
The retroactive law at issue was a citizen initiative adopted in 2021 that purported to bar completion of the New England Clean Energy Connect (or “NECEC”) project, a billion dollar utility corridor running from the Canadian border to Lewiston, Maine. The project had already obtained a final permit from the Maine Public Utilities Commission and construction had been underway for almost a year when the initiative was adopted. The initiative changed some of the permitting requirements for transmission line projects such as the NECEC and made those changes retroactive to the NECEC permit. This raised the question whether, under the doctrine of “vested rights,” principles of due process prevent a lawmaking body (whether the Legislature or the people) from changing the rules governing issuance of a permit after-the-fact when a developer had already begun construction pursuant to that permit. The developer of the NECEC project brought suit after enactment of the initiative, arguing that the Maine Constitution prevents the application of retroactive laws to projects that are already underway. The Law Court agreed: under the Maine Constitution, vested rights do protect developers from retroactive changes in law.
Reviewing the Business Court’s denial of the developer’s preliminary injunction motion, the Law Court rejected the State’s argument that the doctrine of vested rights was a purely common law municipal doctrine that places no limit on retroactive state laws. As the Court wrote, “the protection of vested rights has been rooted in the Maine Constitution since Maine became a state.” Surveying its prior precedent, the Law Court observed that it had on multiple occasions stated that the State has no constitutional power to apply a law retroactively if doing so would impair vested rights. Relying on these cases, the Court concluded that “vested rights are properly viewed as arising from the Maine Constitution’s due process clause.” Importantly, the Law Court went on to make clear that this due process principle does not depend on a rational basis test: “If the effect of the retroactive legislation is to abrogate vested rights, the rationale and basis for the legislation become irrelevant.”
Having established that vested rights are protected by the Due Process Clause, the Court then took up the question of when a person acquires “a cognizable property right that the Maine Constitution protects from being impaired by retroactive legislation.” The Court concluded that, in the context of major development projects, vested rights exist if (1) the developer has a final permit that is not subject to further judicial review, (2) a new law would retroactively impair that permit, and (3) the developer “undertook substantial good-faith expenditures on the activity within the scope of the affected permit prior to the enactment of the retroactive legislation.” The last factor requires proof that significant, visible construction has occurred, and substantial expenditures have been made, in reliance on the permit, before the law changed, “according to a schedule that was not created or expedited for the purpose of generating a vested rights claim.”
On remand to the Business Court to decide the application of the vested rights doctrine to the NECEC Project, the Pierce Atwood litigation team obtained a unanimous jury verdict that the developer of the NECEC had satisfied this standard and, accordingly, had “obtained vested rights to continue the work authorized by” the permit issued by the PUC. That final judgment was not appealed.
The significance of the case is hard to overstate. Until the Law Court’s ruling, it remained subject to debate whether the vested rights doctrine was grounded in the Due Process Clause of Maine’s Constitution. If not, vested rights would apply to municipal ordinances only, and there would be no protections against retroactive changes to state law for developers in Maine. Now, however, the Law Court has made it clear that the State does not have untrammeled authority to revoke lawful permits after-the-fact. Further, the Law Court has provided guidance regarding exactly when rights “vest,” so as to create a protectable property interest. The existence of these protections provide substantial assurance to developers that they can rely on Maine’s regulatory framework to move forward with development projects in good faith based on lawfully-issued permits.