Takings law and eminent domain

Takings law refers to government appropriation of private property for public purposes through eminent domain condemnation and regulatory takings, known as inverse condemnation. In the twenty-first century, takings law and eminent domain have become increasingly complex, and courts must grapple with how far governments can go in taking private property to achieve public purposes, which include natural resource conservation.

Background

Governments are able to take full or partial title to, or permanently or temporarily occupy or control, private property for a public purpose by exercising the power of eminent domain, but this power is not unlimited. As early as the Magna Carta, private property owners in democratic societies enjoyed a bundle of property interests that were protected from unreasonable governmental interference. These protections appeared in the Fifth Amendment to the US Constitution and in many state constitutions. One protection requires the government to compensate property owners financially for lost property rights when exercising the power of eminent domain.

In addition to appropriating property outright through condemnation and eminent domain taking, the government can affect private property rights through its police powers, such as zoning, subdivision regulations, and wetlands laws. The police powers allow the government to enact and impose laws, ordinances, and regulations that limit the use of private property without just compensation, so long as these restrictions protect the public health, safety, and welfare. Historically, as the US Supreme Court explained in the case of Village of Euclid v. Ambler Realty Co. (1926), police power restrictions may diminish the value of private property and are not considered “takings,” as long as they fall short of actual expropriation and there is no physical invasion of the property. However, during the twentieth century, governments adopted and imposed more innovative regulations in order to preserve communities, protect the environment, and limit growth. Because some of these regulations seriously infringed on private property owners’ ability to use and enjoy their property, courts began to rule in inverse condemnation cases that the governmental regulations amount to a taking of private property rights for a public purpose without a formal governmental condemnation and that just compensation should be paid.

Provisions

One of the pivotal US Supreme Court cases concerning takings law is Pennsylvania Coal v. Mahon (1922). The Court ruled that a regulation could impose a burden on a property owner that was onerous and comparable to the burden the property owner would face if eminent domain had been used. However, the court went on to state that a government regulation may no longer be deemed a legitimate exercise of the police power if it “goes too far.” The Mahon case applied a “beneficial use” standard in making its determination that the regulation in question destroyed previously existing beneficial rights, such that it became commercially impractical to continue mining coal. Although the Mahon decision determined that the regulation was a taking in violation of the Fifth Amendment, it did not require just compensation, as would have been required under an actual eminent domain taking, but instead granted equitable relief that prohibited the government from continuing to impose the law as written.

The question of when a regulatory taking has occurred—and whether it is onerous to the property owner—has been a gray area in takings law. Several Supreme Court cases illustrate how determinations have been made. One of the earliest cases was Nectow v. City of Cambridge (1928). The Supreme Court, in applying the Fifth Amendment takings clause to the city of Cambridge through the Fourteenth Amendment, ruled that when no practical use of property remains after imposition of a land-use regulation there is an unconstitutional infringement of property rights or a taking. The Court applied an economic value test in Penn Central Transportation Co. v. City of New York (1978) in which it decided that although a landmark regulation applied to the Penn Central building may have thwarted the developer’s maximum profit, the building still had economic value as offices and was not a regulatory taking. In Kaiser Aetna v. United States (1979), the Court stated that fundamental rights associated with property ownership could not be dismissed and ruled that a requirement for property owners to provide public access to a private pond took away their property rights and constituted a taking.

Nearly fifty years after the Mahon decision, property owners began to seek monetary relief or just compensation in regulatory takings cases. Although both federal and state courts had ruled in many of the earlier cases that there had been regulatory takings, none of the decisions required just compensation. The Supreme Court entered the monetary relief debate, as to whether the appropriate remedy in regulatory takings cases was just compensation or invalidation and rescission of the unconstitutional regulation, in the case of Agins v. City of Tiburon (1980). Moreover, the Agins decision adopted a new standard to determine if imposition of a land-use regulation resulted in a taking. The Court ruled that there was a taking in the Agins case because the regulation in question did not “substantially advance legitimate state interests.” The Court ordered invalidation of the offending regulation on the basis it did not want to “chill” government experimentation with innovative land-use regulations because of legal action threats. In addition, the Court was reluctant to impose a monetary requirement on a local government that might be lacking fiscal resources to pay just compensation.

In the Supreme Court case of San Diego Gas & Elec. Co. v. City of San Diego (1981) four dissenters and one justice who concurred with portions of the dissent set forth a basic rule that would be applied in later regulatory taking cases, requiring governments to pay just compensation for the takings. The Court dismissed the San Diego Gas case for lack of jurisdiction, but the five justices stated that, although the government could rescind an unconstitutional regulation, it should compensate the private property owner for any damages incurred during the period that the regulation was in effect, thus establishing the concept of a compensable temporary taking. Moreover, the justices averred that if the regulation was not rescinded, thus resulting in a permanent regulatory taking, the government should pay compensation just as it would for an eminent domain taking.

In Nollan v. California Coastal Commission (1987) the Supreme Court ruled that an exaction—a requirement imposed on a landowner to provide a public access easement as a condition of receiving a rebuilding permit—was not related to a legitimate public purpose. The Court admonished the Commission for its overreaching regulation and stated that if it wanted to carry out its policy of making beaches publicly accessible through easements, it should exercise its eminent domain powers and pay just compensation. This was the first case in which the Supreme Court stated explicitly that just compensation was an appropriate remedy in a regulatory takings case that would result in a permanent restriction on private-property rights.

Two additional cases soon followed Nollan, and the Court continued to express its changed view regarding the appropriate remedy in a regulatory takings case. In 1988, the South Carolina legislature passed the Beachfront Management Act to limit construction within critical coast-dune system areas that included David H. Lucas’s property. Lucas sued the commission and claimed that the restrictions denied him any “economically viable use of his land,” and thus made him deserving of compensation. Although Lucas won $1.2 million in compensation in a trial court, the South Carolina Supreme Court, on appeal, ruled that because the act was established to prevent serious public harm, the restrictions were not a regulatory taking. Lucas appealed to the US Supreme Court, which ruled that regulations restricting “all economically viable use” form a discrete category of takings that always require compensation.

A case that had greater impact on regulations affecting natural resources was Dolan v. City of Tigard (1994). The Dolans petitioned for a building permit to increase the size of their business and parking. The city granted the permit but imposed an exaction that part of the Dolans’ property be dedicated to flood control and a pedestrian walkway. The Dolans sued, forcing the issue of whether government must demonstrate that the restrictions it was enforcing were directly related to the problems they were supposed to address. The Court, ruling in favor of the Dolans, indicated that government must show that the restrictions actually correct the problems created by development. This ruling created a criterion for regulatory takings that was much more stringent than had been applied in the previous thirty years.

As courts continued to struggle with making regulatory takings determinations, the Supreme Court in Lingle v. Chevron U.S.A. (2005) modified the “substantially advances” test it had applied in past cases beginning with Agins. The Hawaii Supreme Court had applied the Agins standard in the Lingle case and ruled that a gas station rent-control law constituted an unconstitutional taking. The US Supreme Court stated that the appropriate standard was no longer the “substantially advances” theory, but that takings should be considered based on several tests, including an actual physical invasion, a Penn Central standard based on investment-backed expectations, a total regulatory taking as in Lucas, or exactions as required in Nollan and Dolan.

Again in 2005, the Supreme Court added another complication to takings and eminent domain law when it issued a controversial decision in the case of Kelo v. City of New London and ruled that government could use eminent domain powers to take private property for sale to a private developer as part of an urban renewal program. Susette Kelo and other private property owners refused to sell their property to the city of New London for an urban renewal and economic revitalization project. When the city exercised eminent domain and took the private owners’ properties, the owners sued the city and claimed that the takings clause was violated because the sale of private property to a private developer did not constitute “public use” under the Fifth Amendment. The Supreme Court was split 5-4 in its decision, but the majority ruled that the city’s actions served a public purpose, and that the city was not attempting to benefit the private developers but, rather, the entire citizenry through implementation of its economic development plan, which would generate increased employment, tax revenues, and enhanced aesthetics. Although the condemned property was not developed for public use per se, the majority stated that the city’s plan for economic rejuvenation deserved deference. While the four dissenting justices strongly disagreed that taking private property for private economic development comported with the meaning of the “public use” component of the takings clause, a new term in the takings lexicon was born—“economic development taking.”

Impact on Resource Use

The changes in takings law and eminent domain in the United States have a global impact. The decisions in the Dolan and Lucas cases have direct ramifications for and management, because many land-use restrictions are intended to promote improved environmental quality. At a time when environmental protection and conservation have become significant global issues, governing bodies in the United States face the dilemma of deciding whether to protect natural resources through strict regulations or forgo such restrictions to avoid costly litigation that does not necessarily have a predictable outcome.

Moreover, takings law and eminent domain continue to become more complex for those involved in making land-use planning decisions, as evidenced by the Kelo decision. The Kelo decision did not result in the city’s planned urban revitalization, as the private developer was not financially able to go forward with the development. In response to the Kelo decision, President George W. Bush issued an executive order in 2006 applicable to the federal government, and Congress proposed legislation applicable to states, using federal funds that limited the use of eminent domain by disallowing economic development takings that would transfer condemned property to private parties who might gain economically through such a transfer. In addition, in response to the Kelo decision, several states have made constitutional amendments and passed laws that place limits on the power of eminent domain and prohibit its use for private economic development. State courts have also decided economic development takings cases under state constitutional law in favor of the private property owners and against the private developers, including the Ohio Supreme Court decision in City of Norwood v. Horney (2005).

To further complicate matters with respect to takings law, the case of Stop the Beach Renourishment v. Florida was argued before the US Supreme Court on December 2, 2009. At issue was whether Florida’s plans to restore beaches along shorelines, which would result in changing the boundaries of private property, violated due process or amounted to a taking. Based on its Beach and Shore Preservation Act, the state of Florida planned to restore eroded beaches damaged by hurricanes by adding new sand to create public beaches. A Florida trial court held that the creation of the public beaches through restoration constituted an unconstitutional taking that required just compensation, as it prevented the private property owners from maintaining their own private beachfronts and took their rights to accreted land—land that is gradually deposited by natural forces onto the private property. The Florida Supreme Court reversed the trial court and ruled that private property owners do not have property rights in accreted land and that the state could restore the beaches, thus modifying private property lines. The private property owners in the Stop the Beach Renourishment case requested the US Supreme Court rule that the Florida Supreme Court made an uncompensated judicial taking of private property. If the US Supreme Court rules in favor of the private owners, thus deciding that the judicial branch of government can make judicial takings, courts may be more reluctant to uphold local and state decisions that attempt to preserve and restore natural resources.

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