Law and Economics

Law and Economics Economics 395: Fall 2009 Martin K. Perry Study Questions on the Cases Covered by the Midterm Monday, October 19, 2009 Private Nuisance Cases (1) Bove v. Donner-Hanna Coke Corp. (1932) This case concerns the legal criterion for a private nuisance. What are the two dimensions of establishing a private nuisance are discussed in paragraphs 5-10 of the Appellate Division decision. Which one of these two dimensions is more important for this case and our other cases. This case involves whether the coke plant owned by Donner-Hanna Coke Corp. is or is not a private nuisance. The fact pattern in this case is a nice illustration of the underlying economic problem that private nuisance attempts to address. What is that problem? Why is there is no discussion of a remedy in the decision? What would be the traditional remedy for a private nuisance, an injunction or money damages? The main discussion in this case concerns what facts are important or determinative for finding or not finding a private nuisance. For example, which of following facts was most important for the decision of the Appellate Court? Who moved to the area first? Who benefits from being located next to whom? Is the plant using the best abatement technology? How annoying is the dust and odor, and to whom? What are the other neighboring uses? Why are these neighboring uses located here? How valuable is the plant versus the residences? What is the zoning for the area? Did the town approve the construction of the plant? The trial court opinion is useful for providing more detail about the facts, but the Appellate Court opinion provides the final decision about which of these factors is more or less determinative. For the Appellate Court, which of these factors was more important than the others in determining the existence of a private nuisance? Finally, if the property rights were clearly defined with the traditional remedy, would the Coase Theorem result in the efficient or best use in this case? Why or why not? (2) Boomer v. Atlantic Cement Co. (1968) This case concerns the remedy for a private nuisance. All the courts agree that the cement plant owned by Atlantic Cement is a private nuisance. From the discussion in Bove, why is the cement plant a private nuisance? What is the larger economic problem? Is the Court able to solve this larger problem? The question in this case is whether to award the plaintiffs the traditional remedy for a private nuisance or some other remedy. What is the traditional remedy for private nuisance? What would be the implications of the traditional remedy for the operations of the plant? Does the New York Court of Appeals order the traditional remedy or not? In order to understand this question, you need to understand the alternative remedies being considered by the Court. What is the difference between temporary and permanent damages? What is the legal problem caused by temporary damages? From reading the remand opinion of the trial court, why are permanent damages difficult for the trial courts to implement? Alternatively, the Court could order some type of injunctive remedy. For example, the Court could order a delayed injunction that would not take effect until some future date. Such a remedy would give Atlantic Cement time to do what? Or the Court could order an injunction contingent on Atlantic Cement not paying money damages to the plaintiffs. How would such a remedy resolve the dispute? The dissenting judge advocates a different remedy than the majority of the Court. What is the remedy advocated by the dissenting judge and how does it differ from the remedy ordered by Court. If the Court ordered one of these non-traditional remedies, you should know how the Court justifies this new remedy. Finally, if the property rights were clearly defined with the traditional remedy, would the Coase Theorem result in the efficient or best use in this case? Why or why not? (3) Spur Industries v. Del E. Webb Development Co. (1972) This case again concerns the remedy for a private nuisance. Who were the original plaintiffs and why? The Supreme Court of Arizona accepts the trial courts decision that feedlot owned by Spur Industries is a private and public nuisance to the neighboring residents. From the discussion in Bove, why is the feedlot a private nuisance? Was the feedlot always a private nuisance in the past? What is the difference between a private and public nuisance? The issue in the case is what remedy to order and for the benefit of whom? Why is the case complicated by the fact that Webb is the developer of the retirement communities where the residents live near Spur’s feedlot? Did the Court order the traditional remedy for private nuisance? If yes, why is this the appropriate remedy? If not, what remedy did the Court order? Why was this non-traditional remedy more appropriate? Did the residents of Webb’s retirement communities receive damages as a result of the nuisance? Did Webb receive damages for the lost value of his undeveloped property? Was Spur able to continue operating its feedlot at the location. If not, did Spur receive any compensation for closing or moving its feedlot? Once you answer these questions, you will understand why the remedy in this case is different from the traditional remedy for a private nuisance. How does the Court justify this non-traditional remedy? Finally, if the property rights were clearly defined with the traditional remedy, would the Coase Theorem result in the efficient or best use in this case? Why or why not? (4) Rose v. Chaikin (1982) This is an interesting New Jersey case that provides a nice complement with the case of Bove and a transition into zoning. Chaikin built a windmill on his property to produce electricity for his home. The windmill was near the property line with Rose. Why did Rose claim that the windmill was a private nuisance? What did court decide? What factors were relevant for determining whether the windmill was or was not a private nuisance? Were these factors similar to the factors identified in the case of Bove? What facts distinguished this case from the facts in Bove? What was the role of the zoning ordinance in the court’s decision as to whether the windmill was or was not a private nuisance? Zoning Cases (5) Ambler Realty v. Village of Euclid, Ohio (1926) This case introduces zoning ordinances which are now common in nearly all municipalities. What is the difference between this early cumulative zoning ordinance and the modern exclusive zoning ordinance? In what sense, can zoning resolve the economic problem of conflicting land uses? What is the source of power for municipalities to enact zoning ordinances? How was the property of Ambler Realty zoned, and what remedy did Ambler seek? Obviously, the U.S. Supreme Court upheld the zoning ordinance against a challenge under the Due Process Clause of the 5th and 14th Amendments. What is substantive due process, as opposed to procedural due process? The “rational basis test” is the standard for evaluating whether statutes or regulations are Constitutional exercises of legislative power under substantive due process. What are the two parts of the “rational basis test” (RBT)? What is the difference between challenging a stature or regulation “on its face” or “as applied to the plaintiff’s property”? The Court applied the RBT test the validity of the Euclid zoning ordinance. What did the Court decide? Were both parts of the RBT test satisfied? Why or why not? Which part of the RBT did the Court focus on primarily and why? Note that the trial court is a little confused about whether this case is based on the Due Process Clause or the Just Compensation Clause. From the subsequent cases on regulatory takings, what was the nature of that confusion? (6) Nectow v. City of Cambridge, Massachusetts (1927) One year after the case of Ambler Realty, the Supreme Court decided this case in which Nectow challenged the zoning of his land in Cambridge on the corner of Henry and Brookline Streets. What are the interesting features of the zoning and other uses in the neighborhood of Nectow’s property? On what basis did Nectow challenge the Cambridge zoning ordinance? Is this the same or a different basis on which Ambler Realty challenged the zoning ordinance of Euclid? What did the Massachusetts Supreme Court decide and why? What did the U.S. Supreme Court then decide on appeal? How did the Court apply the “rational basis test” in this case? Did the decision in Ambler Realty determine the Court’s decision in this case? Why or why not? What are the similarities or differences in the two cases? What role did the findings of the “master” for the trial court play in the decision of the U.S. Supreme Court? Exclusionary Zoning – Mount Laurel Cases and Statutes (7) Mount Laurel I (1975) In this case, the New Jersey Supreme Court created the new obligation on “developing” municipalities in New Jersey to provide their “fair share of the regional need for low and moderate income housing”. Why is this a negative obligation not to do certain types of zoning, and a positive obligation to do other types of zoning? In what ways have Mount Laurel and other municipalities in New Jersey used their zoning ordinances to exclude low and moderate income housing? The concurring opinion by Judge Pashman provides a nice discussion of these ways. What were the justifications that Mt. Laurel offered for its zoning? Did the Court’s view any of these justifications as compelling or valid? Did Mount Laurel’s zoning ordinance have exclusive zones or cumulative zones? How does the type of zoning matter for the development of low and moderate income housing? What is a PUD? Did Mount Laurel use its PUDs to provide low and moderate income housing? Did Mount Laurel’s zoning ordinance violate some provision of the U.S. Constitution or a federal statute? Why or why not? If not, what was the legal device used by the Court to create this new obligation? As a remedy, the trial court invalidated the entire zoning ordinance, and ordered Mount Laurel to rewrite a new ordinance. What remedy did the N.J. Supreme Court order? Did Mount Laurel comply with that remedy? Why or why not? For the answer to this last question, see the discussion at the end of the case Mount Laurel II. (8) Mount Laurel II (1983) This case arises from the appeals from of a group of municipalities including Mount Laurel. After Mount Laurel I, why did various plaintiffs re-challenge the zoning ordinances of Mount Laurel and other municipalities? What did the New Jersey Supreme Court decide in this case? In particular, in what ways did the Court expand on the Mount Laurel obligation to other municipalities? In what ways did the Court create new procedures for implementing the obligation? And in what ways, did the Court impose some new remedies? The Court also recommended and validated several “affirmative measures” by which municipalities could satisfy their Mount Laurel obligation. What did the Court mean by the use of “subsidies”? What did the Court mean by use of “density bonuses”? What did the Court mean by use of “mandatory set-asides”? In order to provide stronger incentives for municipalities to comply with their Mount Laurel obligations, the Court validated the use of the “builder’s remedy” by the trial courts. What did the Court mean by the “builder’s remedy”? In what type of lawsuit would a “builder’s remedy” arise as the remedy for the plaintiff? Why were municipalities fearful of the “builder’s remedy”? (9) New Jersey Fair Housing Act (1985 and 2008 Amendments) In 1985, the New Jersey legislature to adopt the Fair Housing Act. What was one important reason why municipalities lobbied the state legislature to adopt this Act? The Act creates the Council of Affordable Housing [Section 305] with the duty to define the Mount Laurel obligations [Section 307]. What are the duties of the Council? The Act also creates some new procedural obligations for municipalities [Sections 309-311]. In particular, what must be included in the “housing element”? A municipality can obtain “substantive certification” of its housing element from the Council [Sections 313-314]. If so, what are the implications of that certification for the municipality [Section 317]? The most important and controversial innovation in the Act was the creation of “regional contribution agreements” (RCAs) [Section 312]. How do RCAs work and how would they satisfy part of the Mount Laurel obligation for what types of municipalities? Even though RCAs required approval by the Council, they became very controversial, so an amendment to the Act in July 2008 ended the future use of RCAs [Last paragraph of Section 312]. Why were RCAs controversial? The amendments also allowed municipalities to collect “development fees” [Section 329.2]. From whom would “development fees” be collected? How are the “development fees” suppose to be used by the municipalities? Eminent Domain Cases (10) Berman v. Parker (1954) In its role as the legislature of the District of Columbia, Congress adopted the District of Columbia Redevelopment Act of 1945 which created a Redevelopment Land Agency to condemn and redevelop a blighted area in the District of Columbia. Who was the plaintiff? Did the plaintiff challenge the Act “on its face” or “as applied” to his property? Would the plaintiff have been paid just compensation after condemnation? Some of the land will be retained by public agencies, but some will be sold or leased to private developers. Does the plaintiff argue that his land will be sold to a private developer, thereby violating the “public use” language of the Just Compensation Clause? If not, what is the nature of the plaintiff’s argument? What test does the U.S. Supreme Court use to evaluate the plaintiff’s argument? How is this case similar to Nectow? What was the Court’s decision? In particular, did it uphold the Act and the condemnation of plaintiff’s property. What justifications did the Court use for its decision? In particular, how did the Court handle the fact that the plaintiff’s property was not blighted? What is the lesson for the use of eminent domain to redevelop blighted areas? (11) Poletown Neighborhood Council v. City of Detroit (1981) This case decided by the Michigan Supreme Court clearly raises the issue of public use versus private use of land obtained by eminent domain. The Detroit Economic Development Corporation planned to condemn some land. How was the land going to be used subsequently? In what sense what this use of the land a public or a private use? Who were the plaintiffs? Would they receive just compensation for their land? What is the nature of their challenge to the use of eminent domain? The majority and the dissent have a disagreement about the meaning of the “public use” language in the Just Compensation Clause of the Michigan Constitution. What is the majority’s interpretation of term “public use”? What is the resulting restriction on the use of eminent domain my municipalities in Michigan? What is the dissent’s interpretation? How would the dissent’s interpretation limit the use of eminent domain? What does the majority decide about the Constitutionality of the use of eminent domain in this case? What are their justifications for that decision? In particular, how do they handle that there may be some public benefit and some private benefit from the use of eminent domain to resell land? How does the dissent disagree with the majority opinion? As I mentioned in class, this case was overturned in a very recent decision by the Michigan. In that decision, the Michigan Supreme Court effectively adopted the three justifications for the use of eminent domain identified by Justice O’Connor in her dissenting opinion in the Kelo case. What does that mean? (12) Kelo v. City of New London, Connecticut (2005) This case is the most recent and most important decision by the U.S. Supreme Court on the “public use” language in the Just Compensation Clause. The economic development of this waterfront area of New London involved the use or eminent domain and resale of some of the land to a variety of private developers and owners. Was this waterfront area blighted? Why would that matter legally for the use of eminent domain? How did the municipality justify the use of eminent domain in this case? Who were the plaintiffs? On what basis, did they challenge the use of eminent domain? Would the plaintiffs have been paid just compensation for their land? What did the Connecticut Supreme Court decide? The case was then appealed to the U.S. Supreme Court. Does the majority of the U.S. Supreme Court think that economic development is a legitimate state interest with a public purpose? Does the majority decide that eminent domain can or cannot be used for economic development in this case? In other words, how does the majority of the Court interpret the “public use” language in the Just Compensation Clause of the U.S. Constitution? In the end, what test does the majority of the Court use to evaluate the use of eminent domain in this case? What is the key argument that justifies the use of eminent domain of the plaintiff’s properties for this development project? The dissenting opinion written by Justice O’Connor argues that there should be only three categories of situations in which eminent domain can be used. What are the first two categories? What is the third category? How is this third category different from the first two? What important Supreme Court case is included in this category? Would the facts in this case fit into any of her three categories? Why or why not? Relative to the majority’s decision, would these categories narrow or expand the legitimate uses of eminent domain? Why or why not? Justice Thomas writes a lone dissenting opinion. What is his argument for the legitimate use of eminent domain? Relative to the majority’s decision and O’Connor’s dissenting opinion, would the adoption of his view narrow or expand the legitimate uses of eminent domain? (13) Vineland Construction v. Pennsauken (2007) This is a recent case from New Jersey involving the redevelopment of land in Pennsauken along the Delaware River. What is the redevelopment plan? Is the land included in the plan blighted in some sense? Would the plan violate the “public use” language of the Just Compensation Clause in the U.S Constitution, or in the New Jersey Constitution? Who is the plaintiff? What does the plaintiff want under the plan? Would the plaintiff be paid just compensation if his land is condemned? Does the plaintiff challenge the plan as violating the “public use” language of the Just Compensation Clause? Why or why not? If not, how does the plaintiff challenge the use of eminent domain on his property? What is the decision of the appellate court? What is the basis for their decision? What test do they apply? Regulatory Takings Cases (14) Penn Central Transportation v. New York City (1978) The Landmarks Preservation Law of New York City created a Commission to designate landmarks and historic districts and to preserve them. The Commission was given the power to designate landmarks and to deny any plans that would alter the exterior of the landmark. The zoning ordinance and the landmarks ordinance allowed the unused development rights of the landmark property to be used to expand other neighboring properties owned by the owner of the landmark property. Grand Central Station was designated as a landmark and Penn Central’s proposal to build a 55 story tower over the Terminal was denied by the Commission. Thus, the question in this case was whether this was a “regulatory taking”. What is a “regulatory taking”? How is a “regulatory taking” different from eminent domain? Does the municipality intend to pay just compensation for the lost value from its land use regulations such as zoning? What is the primary remedy sought by Penn Central in this lawsuit? For example, is just compensation the primary remedy sought by Penn Central? What did the New York Court of Appeals decide in this case, and what reasons did it give for that decision? The case was then appealed by whom to the U.S. Supreme Court? What did the U.S. Supreme decide in this case? In particular, is the landmark designation of the Grand Central Terminal a “regulatory taking” requiring just compensation by New York City? If not, why not? Does the Court have a formula for determining when a “regulatory taking” has occurred? What are the factors that the Court would consider in determining whether a “regulatory taking” has occurred? How does the Court apply the “rational basis test” to reach its decision? What was the relevance of the transferable development rights? What was the relevance of the fact that Penn Central did not propose an alternative plan? Penn Central made a number of arguments why the landmark designation was a “regulatory taking”. What were the arguments about the “air rights” and what was the Court’s response to these arguments [paragraphs 30-31 and 38]? What were the arguments about “spot zoning” in the Commission’s designation of landmarks and what was the Court’s response to these arguments [paragraphs 33-34]? Justice Rehnquist wrote a dissenting opinion that was joined by two other justices. What would these justices have decided instead? What were their reasons? (15) Lucas v. South Carolina Coastal Commission (1992) South Carolina adopted a Coastal Zone Management Act which created and empowered the Coastal Council to limit development along the coast. What were the justifications for this Act and the Council’s limitations on coastal development? The plaintiff Lucas owned coastal land on the Isle of Palms. What was the implication of the Council’s regulations for the use of Lucas’s land? Lucas does not challenge the constitutionality of the Act, but instead argues that the regulations are a “regulatory taking” of his property, requiring just compensation. What did the South Carolina Supreme Court decide? In their decision, does the Act satisfy the “rational basis test”? Note the discussion of how development will result in “harmful uses”. The case was appealed to the U.S. Supreme Court. Does the U.S. Supreme Court adopt the same standard as it did in the Penn Central case for determining whether a “regulatory taking” has occurred or not? Is there a formula for determining whether a “regulatory taking” has or has not occurred? What are the two categories of “regulatory takings”? Does this case fit into one of those two categories? Are there any problems in identifying the cases which belong in the second category? The U.S. Supreme Court remands the case to the South Carolina Supreme Court with instructions on how to determine whether a “regulatory taking” has occurred or not. What does the Court indicate how the issue should be determined? Should Lucas be encouraged by this decision? Why or why not? What is the reaction of the U.S. Supreme Court to the discussion of the South Carolina Supreme Court about development causing “harmful uses”? In particular, would the planned use (as opposed to the current use) of the land be relevant for determining whether a “regulatory taking” has occurred? Why or why not? (16) Gardner v. New Jersey Pinelands Commission (1991) The New Jersey Pinelands Protection Act created the New Jersey Pinelands Commision and empowered the Commission to restrict development in designated areas. This case raises the same issue of whether the New Jersey Pinelands Commission has restricted the uses for Gardner’s land to the point of a “regulatory taking”, requiring just compensation. In its role as a state zoning agency for the Pinelands, what restrictions are imposed on the use of land in the “protection areas” allowing agricultural uses, as opposed to land in the “preservation areas” which must be left in their natural state. Gardner’s land is included in the “protection area”. What does Gardner want to do with her land in the future? Does Gardner challenge the Act “on its face”? Does the New Jersey Supreme Court hold that the zoning in this “protection area” is a “regulatory taking” or not? Is the reason for this decision consistent with the two previous decisions by the U.S. Supreme Court? The regulations make a provision for cluster homes located together, but each owning an additional 40 acres in the same development and that 40 acres restricted to farming. This raises an issue similar to an issue in the Penn Central case. What is that issue? What is the development-rights transfer program? Finally, what is the issue about the “deed restriction”?