The U.S. Supreme Court handed the Washington Legal Foundation a victory when it ruled that a state may not regulate property into uselessness without paying compensation, simply because the owner acquired the property after the regulation became effective.
Voting 5-4, the Court’s opinion contained three key holdings. First, it held that an owner need not submit his constitutional claim for “just compensation” for endless rounds of bureaucratic review in order for that claim to be “ripe” for adjudication. Second, it stoutly rejected the so-called notice rule, which would preclude a regulatory takings claim when the owner acquires property “with notice” of an existing regulation.” Third, because the Court found that the regulation had not imposed a total confiscation on the property owner, it remanded the case to the Rhode Island Supreme Court to determine whether the regulation imposed a partial taking for which compensation is due.
This case arose from Anthony Palazzolo’s repeated efforts to develop his land. For more than 40 years Mr. Palazzolo has tried to develop his coastal property, which lies in Westerly, Rhode Island. The state government blocked those efforts by denying him permission to build, because it deemed most of his property wetlands. Mr. Palazzolo then took his case to court, claiming that the state’s denial of permission had the effect of “taking” his property without “just compensation,” in violation of the Fifth Amendment to the Constitution. The Rhode Island Supreme Court denied his claim, finding that he lacked “reasonable investment backed expectations” in developing property that he acquired after the wetlands regulation was enacted.
In its brief filed with the Supreme Court, WLF had argued that the Court should consider revisiting a major part of its Takings Clause jurisprudence. In particular, WLF urged the Court to largely abandon its reliance on a property owner’s “reasonable investment backed expectations,” in determining whether a taking occurred. WLF showed that inquiring into an owner’s “reasonable investment backed expectations” has bred uncertainty, incoherence, and unfairness in regulatory takings decisions. WLF also pointed out that the phrase “reasonable investment backed expectations” has little relation to the words of the Fifth Amendment. Those words say, “nor shall private property be taken for public use, without just compensation.” The word “expectations” includes both more and less than the more precise term “private property.” And there is no warrant in the language of the Fifth Amendment, WLF maintained, for narrowing the range of constitutional protection by adding the words “investment backed.” For these reasons, WLF urged the Court to disregard Mr. Palazzolo’s expectations, reasonable, investment backed, or otherwise, when deciding whether acquiring property after the enactment of a regulation always bars an owner’s constitutional claim for “just compensation.”
“The Constitution requires government agencies to fairly compensate any owner whose property is taken due to regulation,” said Shawn Gunnarson, WLF’s Senior Counsel for Litigation Affairs. “The Supreme Court has thankfully determined that a legislature cannot wipe out this important constitutional protection, simply by passing a confiscatory regulation and then refusing to honor a claim for compensation if property was acquired thereafter.”
The Washington Legal Foundation is a public interest law and policy center with supporters in all 50 states. It devotes a significant portion of its resources to defending and promoting the principles of free enterprise and individual rights.
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For further information, contact WLF Senior Counsel for Litigation Affairs Shawn Gunnarson at (202) 588-0302.