A BRIEF HISTORY OF THE TAKINGS CLAUSE
(c) Edward J. Sullivan
The "Takings Clause" of the U.S. Constitution states simply "nor shall private property be taken for public use, without just compensation." However, in the last quarter century, that clause has taken on a prominent role in constitutional jurisprudence, particularly with respect to the limits of state and local regulatory power. Any discussion of the Takings Clause should begin with the history that led to its enactment and the way case law has developed.
The Takings Clause found its genesis in Section 39 of the Magna Carta, which declared that land would not be taken without some form of due process: "No freemen shall be taken or imprisoned or disseised or exiled or in any way destroyed, nor will we go upon him nor send upon him, except by the lawful judgment of his peers or by the law of the land." King John I, who signed that document, almost immediately denounced this undertaking to his barons. However, that promise eventually made its way into the coronation oaths taken by kings and, in England at least, became a protection against confiscation of lands without some form of a hearing.
That was not to say there were not battles between the kings and queens on the one hand and, on the other hand, the barons and Church and, after the Renaissance, a rising middle class. Those who opposed the powers of the monarchy to seize land found three formidable legal, and political, writers who provided theories based on natural law or English common law interpretation to support their position. Each of those writers was influential in the development of American law in general, and constitutional law in particular.
Sir Edward Coke (1552-1634), Lord Chief Justice of England, wrote decisions in cases coming before him and treatises on the development of the common law. Coke also published works opposing the powers of the King. Although his work was not always historically accurate, it was put forth with passion and rhetorical brilliance. The common strand of his work was that the common law was a long-recognized tradition of rights against which even the powers of the King must bow. He authored the Petition of Right, which set up specific rights, of alleged ancient provenance, against the powers of the King. He compiled the law in the form of reports on cases that he had heard and those he read and prepared a full volume series called the Institutes of the Laws of England, which set out his views on the role of the common law as protecting ancient rights against royal power.
Sir William Blackstone (1723-1780) wrote a four-volume series entitled the "Commentaries on the Laws of England," which was used as a foundation for legal education in England and the American colonies. The Commentaries sought to provide an introduction to English law in an easily understandable way. Like Coke, Blackstone stressed the continuity of the common law, as well as its position as a bulwark against royal powers.
The third writer of this trio is John Locke (1632-1704), a philosopher and political thinker. He is famous for the Two Treatises on Government, written, in part, to justify the "Glorious Revolution" of 1688, in which a Catholic king was overthrown and the Protestant ascendancy returned to England with the support of the middle class. His view was that sovereignty did not reside in the state, but rather in the people, who had the right to overthrow government. Locke’s view of natural law provided for natural rights, including property rights, which did not depend on royal authority.
The writings of Coke, Blackstone, and Locke, in addition to the Bible, served as a standard reference for enlightened English colonialists, and these English authors influenced the Declaration of Independence, which asserted a natural right against royal absolutism. The Declaration of Independence, in particular, reflected Locke's view that the monarchy could be restrained or overthrown if it violated ancient or natural rights.
II. The Bill of Rights
After the adoption of the American Constitution, there was fear, particularly by the anti-Federalists led by Jefferson, that the federal government would be too powerful. Jefferson agitated for the adoption of the Bill of Rights, the first ten amendments to the federal Constitution. One of these Amendments, the Fifth, provided that no person shall "be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation." Jefferson's views probably came from his reading of Coke, Blackstone, Locke, and enlightenment philosophers, and reflected similar provisions in certain earlier post-Revolutionary War state constitutions.
The Fifth Amendment, as originally written, was only a restriction against the federal government. As was held in the opinion of Chief Justice Marshall in Barron v. Mayor and City Council of Baltimore, 32 U.S. 243 (1833), the prohibitions of the Bill of Rights did not apply to the States. While there were some limits on the powers of the States before 1865, it was not until the Civil War that the federal Constitution limited the powers of the state (and thus local) governments against their own citizens through the passage of the Thirteenth, Fourteenth, and Fifteenth Amendments.
The Fourteenth Amendment imposed restrictions on States through the broadly worded Equal Protection, Due Process, and Privileges and Immunities Clauses. The Slaughterhouse Cases, 83 U.S. 36 (1873) quickly eviscerated the Privileges and Immunities Clause. The Equal Protection Clause developed its own jurisprudence as to similar treatment of similar situations and was especially useful in ending state-sponsored racial segregation in Brown v. Board of Education, 394 U.S. 294 (1955). The Due Process Clause, evolved along at least three lines.
III. Procedural and Substantive Due Process
One of those lines was procedural and was developed to assure that hearings and other governmental decision-making processes were conducted fairly. This review of the processes of government is known as "procedural due process." A second line of cases extended the limits on the federal government in the Bill of Rights to state and local government action using the Due Process Clause. For approximately 100 years after the passage of the post-Civil War amendments, Due Process Clause litigation resulted in "incorporation" of some of the limitations on the federal government in the Bill of Rights to state and local actions as well. The Supreme Court applied the Takings Clause of the Fifth Amendment to the States through the Fourteenth Amendment Due Process Clause in Chicago Burlington and Quincy R.R. v. City of Chicago, 166 U.S. 226 (1897).
A third line of cases emerged, commencing with Mugler v. Kansas, 123 U.S. 623 (1887), in which the U.S. Supreme Court, through Justice John Marshall Harlan, indicated that that Court could review, through the Due Process Clause, the substance of legislation. The ability to review both the substance, as well as the procedure, of legislation came to be known as "substantive due process." This third strand of the Due Process Clause allowed judges to "second-guess" state and local legislative decisions and reigned supreme for the period 1887 through approximately 1940. Under substantive due process, a court could determine whether the ends and means of legislation were appropriate and whether or not the legislation was "unduly oppressive" to regulated parties. To many critics, substantive due process allowed judges to substitute their own views on political and social matters in the guise of constitutional interpretation. Substantive due process generally became unimportant after the clash between the U.S. Supreme Court and Franklin Delano Roosevelt’s administration when certain New Deal measures were declared unconstitutional and the President threatened to "pack" the Supreme Court. The packing effort was unsuccessful; however, President Roosevelt was able to appoint seven justices to the Supreme Court in approximately two years. With some notable exceptions, particularly in the privacy and abortion areas, substantive due process is not a major factor in federal constitutional adjudication today; however, substantive due process is certainly a factor in judicial review of land use decisions in many states. A brief survey of the relevant precedents explains this divergence. For the fifty years following Mugler v. Kansas 123 U.S. 623 (1887), substantive due process formed a living and breathing part of Supreme Court jurisprudence. This ended, however, with United States v. Carolene Products Co. 304 U.S. 144 (1938). In the now famous footnote four of Justice Stone’s opinion in Carolene, the Court severely limited judicial review to economic and social regulation, but added that certain types of legislation might not merit deference with respect to constitutional validity. In the context of judicial review of land use decisions, however, the use of pre-Carolene precedent, in the form of four zoning cases decided in the 1920s and grounded in substantive due process, continued to breathe life into this otherwise discredited doctrine, as the United States Supreme Court did not consider another land use case until 1974.
IV. Pennsylvania Coal
It was to be a quarter century after incorporation of the Takings Clause of the Fifth Amendment that the U.S. Supreme Court began working out its application to state and local government actions. In 1922, the U.S. Supreme Court decided Pennsylvania Coal v. Mahon, 260 U.S. 393 (1922). This case involved a regulation enacted by the Pennsylvania legislature to prohibit mining of coal under streets, houses, and places of public assembly. The coal company held mineral rights to many properties in northeast Pennsylvania and had sold the surface rights to others. The coal company argued that a taking had occurred under these regulations because it was unable to mine the coal. The U.S. Supreme Court agreed and said that, while property may be regulated, if the regulation goes "too far", it constitutes a compensable taking. No compensation was ordered in that case, and the law was deemed invalid. The analysis of the court in Pennsylvania Coal was along the lines of substantive due process. No later cases discussed this case, or its reasoning, for many years after the decision.
V. The First Zoning Cases
At about the same time as Pennsylvania Coal, the U.S. Supreme Court took four cases involving the new land use regulatory technique called "zoning". Two of these cases were important. In Village of Euclid v. Ambler Realty Co., 272 U.S. 365 (1926), the Court upheld a general zoning ordinance against various substantive due process challenges. However, the Court found a zoning ordinance invalid as applied in a particular situation in Nectow v. City of Cambridge, 277 U.S. 183 (1928). Both of these cases were substantive due process cases and used a substantive due process analysis. For almost 50 years, the U.S. Supreme Court did not take a land use regulatory case, but, in the meantime, abandoned its substantive due process analysis. The irony was that all four land use cases that were decided between 1926 and 1928 undertook a substantive due process, rather than a Takings Clause, analysis.
VI. The Penn Central "Factors"
In 1978, in Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978), the U.S. Supreme Court applied the Pennsylvania Coal takings analysis to determine whether a local government had gone "too far" and identified three factors as of particular significance in determining whether a taking had occurred. Of primary importance is "the economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations". In addition, the "character of the governmental action" – for instance whether it amounts to a physical invasion or merely affects property interests through "some public program adjusting the benefits and burdens of economic life to promote the common good" – may be relevant in discerning whether a taking has occurred.
VII. The Agins "Tests"
Three years later in Agins v. City of Tiburon, 447 U.S. 255 (1980), the Court established a two-part disjunctive test to determine whether a regulation amounted to a taking. The first part was whether or not the regulation "substantially advanced a legitimate state interest," and the second was whether the regulation "denied an owner economically viable use of land." Until recently, both the three-factor Penn Central test and the two-prong alternative test of Agins stood as part of U.S. Supreme Court jurisprudence.
A. The "First Prong" of Agins: "Substantially Advances a Legitimate State Interest"
Without disturbing Nollanand Dolan, the Supreme Court in 2005 clarified significantly its takings jurisprudence, by eliminating the "substantially advances" inquiry as a test in its own right. In Lingle v. Chevron USA Inc., 125 S. Ct. 2074 (2005), the Court finally made plain that whether a regulation "substantially advances" a legitimate state interest is not a constitutional test for the purposes of the Takings Clause of the Fifth Amendment.
Chevron often bought or leased property from a third party, built a gas station then leased the facility to an operator, charging a monthly rent based on a margin on the sale of fuel and other products, in addition to requiring the operator to buy all its products from the company at a price the company set unilaterally. The Hawai’i legislature decided it would benefit both dealers and consumers to set a rent limitation at no greater than 15% of gross profits from fuel sales and 15% of profits from other sales. Chevron sued under the takings and due process clauses. The trial court found it would lose rent on some operations, but gain on others.
The Supreme Court unanimously held that Agins’ " substantially advance[s] " formula is not an appropriate test for determining whether a regulation effects a Fifth Amendment taking.
B. The "Second Prong" of Agins : "All Economically Beneficial Use"
Lucas and Loretto
Based on the second limb of Agins, a plaintiff might allege a Lucas-type "total regulatory taking". In Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992), the Court held that where regulations completely deprive an owner of "all economically beneficial use" of his property, the government must pay just compensation – except to the extent that "background principles of nuisance and property law" independently restrict the owner’s intended use.
The other clear case of per se taking is that of a "physical" taking. Where the government requires an owner to suffer a permanent physical invasion of her property, however minor, it must provide just compensation. Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982) and Kaiser Aetna v United States, 444 U.S. 164 (1979). This is so whether the invasion is by government itself or by a private person authorized by government.
VIII. The Applicable Analysis: Agins or Penn Central
In Palazzolo v. State of Rhode Island, 533 U.S. 606 (2001), the plaintiff alleged that the state Coastal Resources Management Council's denial of his application to fill 18 acres of coastal wetlands constituted a taking of his land without compensation under the federal and state constitutions. The plaintiff and others owned, through a corporation, certain land that was subdivided into 80 lots, much of the land being coastal wetlands and marshlands. The corporation was dissolved, and the plaintiff succeeded to its assets. Between 1962 and 1985, he unsuccessfully sought fill permits. After denial of a 1985 application, the plaintiff filed an inverse condemnation action, seeking $3,150,000. The trial court found no taking and the plaintiff appealed.
Stating that it would review questions of law on a de novo basis, the Rhode Island Supreme Court determined that the plaintiff's case was not "ripe" under Williamson County Regional Planning Commission v. Hamilton Bank, 473 U.S. 172 (1985), as he had never applied for a subdivision, although he had applied for a number of fill and related permits. Its ripeness holding notwithstanding, the court chose to discuss the plaintiff's taking claim on the basis of deprivation of all economically viable use of the property. The court’s finding regarding the value of the one homesite on the property was sufficient to avoid a successful takings claim on the basis of no viable economic use of the property. Further, the court anticipated and rejected an argument under Penn Central that the plaintiff had reasonable investment-backed expectations in the property. It stated that the plaintiff must take the burdens as well as the benefits of the corporate form and refused to relate back the corporation’s holding of the property to the time before the regulations limiting wetland fills were adopted. It did however intimate that the matter might have been analyzed differently had the claim been advanced on a physical takings ground.
The U.S. Supreme Court did not find a taking, but instead sent the case back to the Rhode Island courts, reversing the Rhode Island Supreme Court’s holding that the claim was not ripe under federal law and that a Penn Central analysis must be applied. Further, the Supreme Court held that where the enactment of a regulation predates the claimant’s acquisition of the property, a takings claim is not automatically barred. It did however affirm that the landowner had failed to establish a deprivation of all economic value of his property. The Court refused Palazzolo’s invitation to revisit the "whole parcel" rule, which it found had not been properly presented. On remand, the Rhode Island trial court found no taking.
In Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 535 U.S. 302 (2002), the plaintiff landowner organization and its 2,000 members sought damages for alleged takings because of a 32-month moratorium on development in the Lake Tahoe Basin, initiated by the defendant agency (created by an interstate compact). The district court found no Penn Central taking, chiefly because there were no individualized facts to support any of the property owners’ claims. However, it felt that although there was some value to the land during the moratorium, the landowners in the basin were deprived of all viable economic use during that period, and compensation was required for that loss under Lucas.
The Ninth Circuit based its takings analysis on three dimensions: the physical (size and shape of the property), the functional (use or disposition of the property), and the temporal (relating to the duration of the regulation at issue), and rejected the plaintiff’s contention that any temporal denial of all use constituted a taking. In rendering its decision, the Ninth Circuit distinguished Lucas, which denied all use for the foreseeable future, concluding that the three Penn Central factors served the purpose of establishing that test. The majority noted that while First English Evangelical Church v. Los Angeles County, 482 U.S. 304 (1987) established a rule regarding the remedy for a taking, it did not provide guidance as to when such a taking occurred.
The U.S. Supreme Court granted certiorari and affirmed. The majority upheld the moratorium, rejecting the plaintiff’s contention that it deprived the land of all viable economic use. The opinion, authored by Justice Stevens, characterized the plaintiff’s attack as a facial one, so that the plaintiff must show that the "mere enactment" of the regulation effected a taking and the three Penn Central factors need not be weighed. The Court used the Ninth Circuit’s three-dimensional analysis so as to prevent too-narrow a weighing of property interests in determining whether all viable economic use were deprived. It noted that it had upheld restrictions which allowed use of some, but not all, portions of land, and indicated that these restrictions would not normally cause a taking.
IX. Exactions – Nollan and Dolan
With regard to conditions involving dedication or transfer of property interests, the U.S. Supreme Court used the first prong of Agins in Nollan v. California Coastal Commission, 43 U.S. 825 (1987), and Dolan v. City of Tigard, 512 U.S. 374 (1994), to require that there be a "nexus" between the anticipated effects of a land use and the real property exaction. The Court required that there be an individualized determination, at least in quasi-judicial cases, with the burden being on the government, to show that there was a "rough proportionality" between the impacts of the land use proposal and the real property exaction.
While the Court certainly drew upon the language of Aginsin these cases, the Court in Linglenoted that in neither case did it actually rely upon the "substantially advances" test. "Both Nollanand Dolan involved Fifth Amendment takings challenges to adjudicative land-use exactions – specifically, government demands that a landowner dedicate an easement allowing public access to her property as a condition of obtaining a development permit." Moreover, "Nollanand Dolan both involved dedications of property so onerous that, outside the exactions context, they would be deemed per se physical takings."
The Court also said that such cases involve a special application of the doctrine of "unconstitutional conditions", which provides that "the government may not require a person to give up a constitutional right – here the right to receive just compensation when property is taken for a public use – in exchange for a discretionary benefit conferred by the government where the benefit has little or no relationship to the property."
In Lingle, the Supreme Court reaffirmed that a plaintiff seeking to challenge a government regulation as an uncompensated taking of private property may proceed only under one of four theories, each well established in Supreme Court jurisprudence. A "physical" taking and a Lucas-type "total regulatory taking" are both categories of regulatory action that generally will be deemed per se takings for the purposes of the Fifth Amendment. Outside of these two relatively narrow categories, regulatory takings challenges are governed by the standards set forth in Penn Central. Although each standard has given rise to its own problems, these standards have served as the principal guidelines for resolving such claims. Thus in both Tahoe-Sierra and in Palazzolo, the Court defaulted to the three-prong Penn Central analysis having found no per se taking. Additionally, as a final form of regulatory challenge, a plaintiff may allege an uncompensated taking where a land-use exaction violates the standards set out in Nollanand Dolan.
Accepting that "our regulatory takings jurisprudence cannot be characterized as unified", the Lingle Court went on to suggest that the inquiries represented by Loretto, Lucasand Penn Centralhave a common touchstone:
"Each aims to identify regulatory actions that are functionally equivalent to the classic taking in which government directly appropriates private property or ousts the owner from his domain. Accordingly, each of these tests focuses directly upon the severity of the burden that government imposes upon private property rights."
XI. "Public Use" – Kelo
The government’s power of eminent domain authorizes it to take private property for "public use," provided always that displaced property owners receive fair market value in compensation. Courts generally have assumed ‘public use’ should be defined broadly: public ownership, use by the public, or public benefit or advantage. In Kelo v. City of New London, 125 S. Ct. 2655 (June 23, 2005), the question arose as to whether the use of eminent domain solely for economic development purposes is a valid public use.
The City of New London created an economic development corporation to redevelop a former military facility and the surrounding area, turning much of the site into a research facility and associated uses owned by private parties. The City adopted a plan with the objectives of providing 1000 new jobs, increasing tax and other revenues, and transforming the City’s status from an economically depressed area. The development corporation sought to use the power of eminent domain to implement the plan. Nine landowners declined voluntary sale of their property, contending their lands were not blighted and the purpose of the acquisitions was solely for economic development. These landowners brought a state court action challenging forthcoming condemnation actions as violating the Public Use clauses of the Connecticut and federal constitutions as well as state statutory law.
In a 5-4 opinion, upholding the decision of the Connecticut Supreme Court, the actions were found to be both constitutional and consistent with state law. The Court was careful to emphasize, however, the importance of linking eminent domain to a community’s comprehensive plan. Thus, determining factors in the decision were the "comprehensive character" of the city’s plan, and the "thorough deliberation that preceded [the plan’s] adoption."
The majority affirmed Berman v. Parker, 348 U.S. 26 (1954) and Midkiff v. Hawai'i Housing Authority, 467 U.S. 229 (1984), adopting their analysis of the Public Use Clause. However, Justice O’Connor’s dissenting opinion distinguished Berman and Midkiff, because their purposes were public. Her dissent would categorically isolate public land acquisitions for economic development from other ostensive and recognized Public Use takings, thus asserting that a judicial mind can separate "good" from "bad" exercises of eminent domain. Justice Thomas also dissented, finding that "public use" required a public entity to retain the property acquired through eminent domain. If Justice Thomas’ dissent is correct however, then not only are Berman and Midkiff, as well as most other Public Use cases since 1896 incorrectly decided, but the picking and choosing of legitimate objects of the Public Use Clause in the O’Connor dissent is also incorrect. These opinions are notable, if only because of potential changes in the membership of the court.
The Supreme Court has also distinguished "facial" takings claims, which are rarely found, and involve the invalidity of a general ordinance or regulation in which its every application would be invalid, from "as applied" takings claims in which a taking may be found in the application of an ordinance or regulation to a single property. In an "as applied" situation, the property owner must demonstrate a final decision showing the level of use to which a parcel of land may be put. That may mean that property owners must seek zoning variances or other forms of relief before the court will find that property has been "taken" by regulation. In addition, no taking claim becomes ripe until a State fails to provide adequate compensation. Williamson County Regional Planning Commission v. Hamilton Bank, 473 U.S. 172 (1985).
In San Remo Hotel, LP v. City and County of San Francisco 125 S. Ct. 2491 (June 20, 2005), the Field brothers argued that they had no realistic chance of their federal claim ever being heard by a federal court on the merits. The plaintiffs originally filed a state court action, and then stayed it pending resolution of their federal court takings challenges, inter alia on facial and as applied takings grounds. The defendant obtained summary judgment in the federal district court. The plaintiffs appealed to the Ninth Circuit but asked that the court abstain on the federal claims so that the state courts could resolve them. The Ninth Circuit abstained on the facial, but not the as applied, takings claim, and affirmed the district court’s adverse decision against the plaintiffs. The district court had found that the as applied claim was not ripe as the plaintiffs had not sought compensation in state courts but suggested the plaintiffs reserve their federal claims in state court. They tried to do just that but also raised other takings claims, which they ultimately lost in the California Supreme Court. It held that the claims were construed consistently with federal takings jurisprudence, and found that California courts interpret the similar wording of its state constitutional provisions on takings consistently with the federal takings clause. The Court found the fee to be imposed legislatively and thus not subject to the heightened scrutiny of Nollan and Dolan, having passed a "reasonable relationship" test.
The plaintiffs returned to the federal district court, amending their original complaint to include various takings arguments. The Ninth Circuit ultimately confirmed the federal district court’s finding that both the statute of limitations and issue preclusion doctrines barred most of the new claims, as the California Supreme Court had interpreted the California takings clause co-extensively with the Fifth Amendment.
The court also found no inherent right to litigate these federal claims in a federal forum. Moreover, it said it could not create exemptions to federal statutory law by judicial fiat, especially where comity and finality interests dictated otherwise. Finally, it said that the plaintiffs had overstated the requirements of Williamson County – which never required that facial claims be presented to state courts first, so that those claims could have been raised in federal court or, alternatively, the plaintiffs could have reserved them and litigated them in state court.
For those claims requiring ripening, the court said Williamson County did not prevent federal claims being presented to state courts so that one may join both a claim for compensation under state law and simultaneously claim that, if compensation were denied, it would violate the Fifth Amendment, so as to avoid piecemeal litigation. Although this decision was unanimous, there remains an issue over the viability of the second prong of Williamson County that must be resolved in some future case i.e. whether there is a right to have a federal takings claim resolved by federal court de novo.
While every regulation of property diminishes the owner’s freedom in some respect, not every regulation can be deemed a taking. Takings law is confusing and has developed in a sporadic and contradictory way. Historically, politically, and socially, the arbitrary deprivation of title to property has always touched a raw nerve. Yet the reduction of property value by regulation through general government action has not been as much a subject of concern, except in the "per se" situations already described. Law, particularly constitutional law, develops incrementally. Interpretation of the Takings Clause, as it applies to regulation of the use of land, is slow to develop and sometimes changes course. The twists and turns of its development over the next quarter century of the Takings Clause can be expected to replicate the erratic course of the last 25 years.