Chris Kieser is an attorney at Pacific Legal Foundation, where he litigates cases involving property rights. Anastasia Boden is a senior attorney at Pacific Legal Foundation and co-host of Dissed, a podcast about Supreme Court dissents. PLF filed an amicus brief urging the Court to grant certiorari in the case discussed below.
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Justice Thomas recently echoed calls from many property rights advocates to reconsider the Supreme Court’s often confusing “regulatory takings” doctrine. His opinion should increase momentum for advocates attempting to convince the Court to modify or overrule its seminal 1978 decision in Penn Central Transportation Co. v. City of New York.
Some background: The Fifth Amendment provides essential limitations on the government’s power to interfere with private property rights. It states that the government may only take property for “public use,” and even then it must pay “just compensation.” That seemingly simple language contemplates a typical use of the eminent domain power, where the government condemns private land in order to put it to some public use, like a park or a road. During the 20th century, however, government increasingly abrogated property rights by regulation rather than by eminent domain, and in 1922 the Supreme Court recognized this fact by requiring compensation for regulations that go “too far.”
Just how far is “too far” is a question courts are still answering. In Penn Central, the Supreme Court attempted to come up with a test for the occasion. Courts were to consider all relevant factors, but particularly the regulation’s economic impact, its effect on the property owner’s “investment-backed expectations,” and the “character” of the government action. While the Penn Central multi-factor test was aimed at providing guidance to the courts on when a regulation requires compensation, the subjective factors have proven too subjective to be useful. As a result, some courts have found no taking even where 90% of the property’s value is lost through regulation, and different courts have come to opposite conclusions on remarkably similar facts.
Enter Hawaiian developer Bridge Aina Le’a. In 1999, it acquired about 1000 acres of rocky lava flow land that was zoned for urban use. The previous owner had convinced the state Land Use Commission to change the zoning from agricultural use so it could develop a mixed-residential housing community on the land. In exchange for the re-zoning, the owner had agreed to make 60% of the nearly 3000 proposed units “affordable.” Bridge acquired the land before any development had occurred, and soon successfully petitioned the Commission to reduce the affordable housing set-aside. The Commission set a deadline for construction of the affordable units, but two years before the deadline arrived, it issued Bridge an order to show cause why it shouldn’t revert the land to agricultural use. Bridge told the Commission that it had a deal in place to sell the land to another developer who would build the units quickly, but when the deal fell through, Bridge was stuck with the land, and the Commission ultimately ordered reversion in 2010.
The reversion to agricultural use crippled the land’s value because, well, it turns out there is no agricultural use for rocky lava flow land. Bridge pursued a federal takings case against the Land Commission and introduced uncontroverted evidence at trial that the reversion order reduced the value of the land by about 83 percent—although its effect was ultimately temporary because the Hawaii Supreme Court eventually invalidated the reversion order on state law grounds. The jury found a taking under Penn Central, but the Ninth Circuit reversed on appeal, holding that no reasonable jury could have found a taking under Penn Central. The Supreme Court declined to grant cert, but as Justice Thomas observed in his dissent from the denial of Bridge’s petition, “[t]hese starkly different outcomes based on the application of the same law indicate that we have still not provided courts with a ‘workable standard.’” He’s right.
The lack of such a standard has real consequences. As Justice Thomas observed, it is really hard to win a regulatory takings claim. While the Court has carved out a narrow per se rule for regulations that deprive a property owner of all economically beneficial use of his land, Justice Thomas noted an empirical study demonstrating that property owners were rarely successful under this standard. Indeed, over a 25 year period, just 27 out of 1700 property owners won cases under this theory. The lack of a bright line rule for burdensome—and even confiscatory—use restrictions heightens the urgency of dealing with Penn Central’s problems. If property owners are to have a fair chance to recover for regulatory takings, the Supreme Court must follow Justice Thomas’ advice and clarify the law so that lower courts may predictably apply it. Because as he eloquently puts it, “[a] know-it-when-you-see-it test is no good if one court sees it and another does not.”