1) The Takings Clause a) Taking Property (1) Federal and state governments have power to take private property for public use (eminent domain) (2) An exercise of the eminent domain satisfies the “public use” requirement if it is rationally related to a conceivable public purpose. Hawaii Housing Authority v. Midkiff (1983) (3) Example: Interest income generated by funds held in an Interest on Lawyers Trust Account (IOLTA) program used by Texas to provide legal services to the poor, is the “private property” of the owner of the principal. A well-established common law rule states that “interest follows principal.” Therefore, the interest is the property of the owner of the principal even though its economic value may be minimal. In remanding, the Court expressed no view on whether public use of the interest income is a “taking” requiring “just compensation.” Phillips v. Washington Legal Foundation (1998) (4) "Private property" is generally defined by looking to rules and understandings stemming from an independent source such as state law. b) Constitutional Text (1) The Fifth Amendment provides that private property is not to be taken by the federal government without just compensation. The Fourteenth Amendment Due Process Clause has been held to impose a similar obligation on the states. (2) A principal purpose of the Takings Clause is “to bar government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.” Armstrong v. United States (1960) c) What Is a "Taking?" i) Regulatory Takings (a) The concept of taking goes beyond the formal condemnation of property to invalidate any regulation which goes too far. Pennsylvania Coal Co. v. Mahon (1922) (b) The mere fact that that property values are diminished by government regulation does not create a compensable taking of property ii) Reasonable Regulation (a) If government regulation reasonably advances legitimate public interests and merely diminishes the value of the property, no taking has occurred. Factors to be considered include: (i) Economic impact (ii) Investment backed expectations (iii)Character of the government action *Penn Central 438 U.S. 104 (1978) (b) Cases: (i) A municipal zoning ordinance, enacted after plaintiff’s purchase of land, which limits the uses of the land is not a “taking” without just compensation in violation of the Fifth and Fourteenth Amendments. The ordinance, as interpreted, did not bar all residential uses. The ordinance substantially advanced the public’s interest in avoiding the ill effects of urbanization by controlling land development. Plaintiffs share in the benefits and burdens of the controls. The ordinance neither prevents economically viable uses of the land nor extinguishes fundamental attributes of ownership. There has been no denial of “justice and fairness” Agins v. City of Tiburon, (1980) (ii) A Pennsylvania statute prohibiting mining of 50% of the coal beneath certain pre-existing public buildings, dwellings, and cemeteries in order to prevent damage to these structures does not constitute a state “taking” for which the owner is entitled to compensation. The owners of the mining rights are not denied economically viable use of their property. The court deferred to the legislature’s finding that mining damage posed a significant threat to the common welfare. The prohibition was a legitimate exercise of state police power, narrowly tailored to its significant and legitimate purposes. Keystone Bituminous Coal Association v. DeBenedictis (1987) (iii) A federal statute providing for a deduction from awards received by claimants from the Iran-United States Claims Tribunal does not violate the Fifth Amendment Takings clause. The change was imposed in order to compensate the United Sates government for costs arising from the arbitration of claims and the maintenance of a Security Account for payment of awards. Since the fee was reasonable as reimbursement of the costs incurred and the claimant benefited from the Tribunal’s existence and functions, the charge was a reasonable “user fee” rather than a “taking” of property requiring just compensation. United States v. Sperry Corp. (1989) (iv) Eastern Enterprises v. Apfel (1998) 1. The Court held 5-4 that the federal Coal Act of 1992 establishing a mechanism for funding health care benefits for retired mine workers and their dependents is unconstitutional as applied. Eastern Enterprises was obligated to pay premiums for over 1000 former employees even though it had left the coal industry in 1965. Four justices concluded that the Act violated the Takings Clause, even though no identified property was involved. The economic regulation imposes a severe retroactive liability on a limited class of parties that could not have anticipated the liability and the extent of the liability is substantially disproportionate to the parties’ experience. The economic burden is substantial, requiring Eastern to pay $50-100 million. It substantially interferes with Eastern’s investment-backed expectations, operating retroactively based on the company’s activities 30 to 50 years ago. The Government’s solution to the problem of funding miners’ retirement benefits is unusual and unrelated to any employer commitments. 2. Justice Kennedy, concurring, rejected this Takings Clause analysis but concluded that the Act violated economic substantive due process. The retroactive nature of the liability, reaching back 35 years, makes this one of the rare cases where the Act’s remedy bears no legitimate relation to the Government interest. The dissent argued that Eastern’s knowing participation in the coal industry, where health benefits for retirees was a constant source of controversy, made the retroactive liability fair and reasonable. d) Categorical (Per Se) Takings i) If the government physically invades the property on a permanent basis, there is a taking. No specific inquiry into the public interest is required. ii) A “confiscatory taking”, where the regulation “denies all economically beneficial or productive use of land”, is a compensable taking. Just compensation must be paid unless the state can show that the state law of property or nuisance had previously limited the ownership of the property. Lucas v. South Carolina Coastal Council (1992) iii) More Cases: (1) A New York statute which requires owners of rental housing units to permit the installation of cable TV equipment on their property constitutes a state “taking” for which the owner is entitled to just compensation under the Fifth Amendment. Since the cable equipment is affixed to the building, there is a physical occupation which deprives the owner of his rights to possession, use, and disposition of his property. No balancing of interests is required. Requiring the property owner to install equipment such as smoke alarms, which would be owned by the property owner is distinguished. Loretto v. Teleprompter Manhatten CATV Corp. (1982) (2) A city ordinance limiting rent increases for mobile homes does not constitute a compensable taking. The Court rejected the argument that the ordinance had the effect of giving mobile home renters the right of indefinite occupancy of land owned by others at below the market rent, thereby resulting in a taking of the owners’ property. A physical taking occurs only where the government “requires the landowner to submit the to the physical occupation of his land.” Here, the owners voluntarily rented their land and could evict its tenants with 6 to 12 month notice. Yee v. City of Escondido (1992) (3) State regulations banning housing construction on a coastal island to preserve the state’s beaches deprived a private property owner of all economically beneficial uses of property and thus could result in a confiscatory taking, requiring compensation regardless of the public interest. The regulation would not be a taking if the state can show its restrictions are innate in the owner’s title by being part of the state’s property or nuisance law. Lucas v. South Carolina Coastal Council (1992) (a) Different ideas of nuisance: Scalia (common law—building a house is not a nuisance); Restatement (concept of nuisance changes over time); Kennedy (CL nuisance too narrow for regulations) (b) Applies only to real property, not personal property (4) Property owner acquired wetlands property after dissolution of his corporation. Before his acquisition, Rhode Island Coastal Resources Management Council began to greatly limit development of wetlands property to protect the state’s coastal properties. Developer sought a permit to fill the wetlands area and develop it into a private beach club. His request was repeatedly denied for failure of the proposal to meet the exception for development—a compelling public purpose. Owner filed suit for denial of all economically viable use of his land (under Lucas), damages $3.1 million. Palazzolo v. Rhode Island (2001) (a) Problems: (i) Owner could build a house on portion of land for $200,000 (not denied all economic value) (ii) Person purchasing land after regulation imposed has no reasonable investment backed expectation under Penn Central (b) Holding: (i) A takings claim challenging application of land-use regulations is not ripe unless the agency charged with implementing the regulations has reached a final decision regarding their application to the property at issue. (ii) Owner’s acquisition of title after the regulation’s effective date does not bar his takings claim. Future generations, too, have a right to challenge unreasonable limitations on the use and value of land. (c) O’Connor concurring: Use Penn Central analysis, determine at the time of the regulation what the reasonable investment backed expectation was to determine if taking occurs (should not allow a windfall) (d) Scalia concurring: So what if there is a windfall? Real estate developers should get it before the state; if developer is smart and buys land under regulation inexpensively and thereafter gets regulation ruled unconstitutional, later development to the fullest potential is fine e) Conditional Takings (Exactions) i) In determining whether government imposition of a condition (exaction) as a price of land development is a taking, two questions are asked: (1) Whether there is an "essential nexus" between the legitimate state interest and the condition (exaction), and [Nollan] (2) Whether the government has made sufficient individualized findings establishing that the exaction has a rough proportionality to the impact of the proposed development. [Dolan] ii) Cases: (1) Government imposition of conditions on a person seeking to use or develop property are limited by the Takings Clause. Under the unconstitutional conditions doctrine, 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 public use—in exchange for a discretionary benefit conferred by the government where the property sought has little or no relationship to the benefit. Dolan v. City of Tigard (1994) (a) A taking of property occurs where a city conditions approval of a business owner’s application to expand her store and pave her parking lot upon dedication of land for a public greenway along a creek and a pedestrian bicycle pathway. (b) There is the “essential nexus” between dedication of land for a greenway which will minimize flooding and the pathway dedication to reduce traffic congestion (Nollan test) (c) However, the city’s findings did not establish the requisite reasonable relationship (no rough proportionality); owner has right to determine who comes on her property and when (d) Rough Proportionality Test (i) How great a burden is the exaction on the landowner in proportion to impact of owner’s development? (ii) No precise mathematical calculation is required (iii)There must be an individualized determination (iv) Burden of producing evidence of a proportional relationship on the city (2) A state requirement that an ocean-front property owner grant a public easement across his property for beach users as a condition of securing a permit to rebuild a residence on the property is a compensable taking. Assuming that the state might have denied the permit if it reasonably determined that the proposed development would impair legitimate state interests, conditioning of the permit would be allowed only if it served the same governmental purpose as the ban. If it did not serve that objective, it would be a reasonable regulation of land use rather than a compensable taking. Nollan v. California Coastal Commission (1987) (3) The Court did not extend the Dolan rough proportionality test beyond exactions— land-use decisions conditioning approval of development on the dedication of property to public use—in a case where the city’s repeated denials of permission to develop an ocean-front parcel was challenged as a regulatory taking. Rough proportionality test does not apply to a landowner’s challenge to denial of development. City of Monterey v. Del Monte Dunes (1999) f) Remedies for Takings i) Temporary Takings (1) First English Evangelical Lutheran Church of Glendale v. County of Los Angeles (1987) (a) Once a court determines that a taking has occurred, the government can amend the regulation, withdrawal the invalidated regulation, or exercise its power of eminent domain (b) Where the government’s activities have already worked a taking of all use of property, no subsequent action by the government can relieve it of the duty to provide compensation for the period during which the taking was effective (2) Tahoe-Sierra Preservation Council v. Tahoe Regional Planning Agency (2002) (a) A temporary moratorium was placed on development in the Lake Tahoe area to allow for review of new development regulations (b) Arguments (i) Developers say it is a temporary taking for which they deserve compensation (ii) Government says this taking is different because developers knew at the outset that it would only be temporary (c) Holding: The temporary moratorium was not a per se regulatory taking. While a permanent deprivation of all use of property is a taking under Lucas, a temporary restriction causing a diminution in value is not because the property will recover value when the prohibition is lifted. Court concluded that fairness and justice would not be better served by adopting a categorical rule that any deprivation of all economic use, no matter how brief, constitutes a compensable temporary taking. Moratoria are an essential tool of successful land use regulation. While a moratorium lasting more than one year should be viewed with special skepticism, the restriction’s duration is but one factor for the Court to consider in appraising regulatory takings claims. ii) Ground Rules for Just Compensation (1) United States v. Miller (1943) (a) Owner’s loss and not the taker’s gain is the measure of compensation (b) Fair market value is “what a willing buyer would pay in cash to a willing seller” (2) Where fair market value can be determined it is the normal measure of recovery, United States ex rel. T.V.A. v. Powelson (1943)