Missed opportunity in takings decision

Land use attorneys, land use regulators, and courts are painfully aware that there are few bright lines in takings law, particularly under the jurisprudence of the U.S Supreme Court. Thus, the question of what constitutes a "taking" for purposes of the Fifth Amendment's takings clause --"nor shall private property be taken for public use, without just compensation"--remains a problem of considerable difficulty.

For example, the first time the Supreme Court established that the takings clause applies to regulations as well as physical invasions, in Pennsylvania Coal v. Mahon, in 1922, the court simply said "while property may be regulated to a certain extent, if regulation goes too far, it will be recognized as a taking."

The Supreme Court was silent on the subject for more than 50 years when, in Penn Central Transportation Co. v. New York City, in 1978, the court created an ad hoc balancing test for regulatory takings cases that considers several relevant factors: (1) the character of the governmental action; (2) the economic impact of the regulation; and (3) the owner's distinct investment backed expectations. Unfortunately, Penn Central provided almost no guidance for how these factors are to be weighed in practice, and no single factor is treated as dispositive.

Penn Central also established the confusing and difficult-to-apply "parcel as a whole" rule. Under that rule, in deciding whether a particular governmental action has effected a taking, the "Court focuses rather both on the character of the action and on the nature and extent of the interference with rights in the parcel as a whole." The "parcel as a whole" is generally referred to as the denominator of the takings fraction by which the courts evaluate the severity of the economic impact.

In Murr v. Wisconsin, 2017 DJDAR 6029 (June 23, 2017), the court missed a golden opportunity to provide clear guidance on how to identify the relevant property interest at stake in regulatory takings cases. The facts were relatively straightforward.

The Murr parents purchased a lot on the St. Croix River in 1960 and built a cabin on it. They purchased the adjacent lot, three years later, for investment purposes. After the river was designated a federal "wild and scenic river," in 1968, the state and county adopted a regulation that prohibited the individual development of adjacent, substandard lots held in common ownership. The Murr parents transferred one lot to their children in 1994, and then transferred the second lot to them in 1995. As a result of the transfer, the regulations allowed the Murr children to retain their existing cabin or replace it with a new one on the two lots. But they could not separately develop or sell the investment lot, which was treated as merged with the developed lot. In 2004, the Murr children sought a variance to allow the separate development or sale of the lots. The county denied that request, and the Murr children filed a lawsuit alleging a violation of the takings clause.

The Murr case sought an answer to the fundamental question, in a regulatory taking case, whether the "parcel as a whole" concept establishes a rule that two legally distinct, but commonly owned contiguous parcels, must be combined for takings analysis purposes. The state of Wisconsin argued for a rule that would tie the definition of the parcel to state law, considering the two parcels merged under the challenged regulations because they were in common ownership. The landowners argued for a rule that the lot lines define the relevant parcel.

The issue is important in the area of takings law because defining the relevant parcel narrowly will tend to increase the impact of the regulation at issue, making it more likely to constitute a taking. Defining the relevant parcel more broadly will tend to do the opposite, however, reducing the severity of a regulation's impact on the "parcel as a whole" and making it less likely to constitute a taking.

Rather than providing the guidance this area of law needs, the Supreme Court rejected the straightforward approaches both parties suggested and embraced complexity. In a 5-3 opinion by Justice Anthony Kennedy and joined by Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan (Justice Neil Gorsuch did not participate in the decision), the court held that "the question of the proper parcel in regulatory takings cases cannot be solved by any simple test."

Under the Supreme Court's new rule for determining the relevant parcel, courts must consider at least three factors. First, they must consider the "treatment of the land" and how it is bounded or divided under state and local law. In particular, they must consider the landowner's "reasonable expectations" and the "background customs and the whole of our legal tradition." Second, they must consider the "physical characteristics" of the property. These include such factors as the physical relationship of any distinguishable tracts, the parcel's topography, and the surrounding human and ecological environment. Third, they must consider the "value of the property under the challenged regulation," including the effect of the burdened land on the value of other holdings.

The court claimed that its new multi-factor test is "objective." In reality, however, and as the qualitative nature of the open-ended factors readily reveals, the test is entirely subjective, provides clarity to no one, and greatly complicates takings law.

Perhaps more problematically, the court stated that Wisconsin's merger provision is a legitimate exercise of government power and asserted that such "reasonable" land use regulations do not constitute a taking. In so stating, the court appears to have revived the "substantially advances" due process language from its 1980 decision in Agins v. Tiburon. This runs counter to the court's unanimous Lingle v. Chevron opinion, in 2005, that rejected the "substantially advances" language as "regrettably imprecise" and held that "such a test is not a valid method of discerning whether private property has been 'taken' for purposes of the Fifth Amendment." As the court accurately observed in Lingle, the "substantially advances" test is a due process inquiry that reveals nothing about the magnitude or character of the burden a particular regulation imposes upon private property rights, and it not is tethered to the text or meaning of the takings clause.

Writing for the dissent, Chief Justice John Roberts (joined by Justices Clarence Thomas and Samuel Alito) explained that, while the court's "bottom-line conclusion does not trouble me," the majority "goes astray" with it's new "elaborate test." Roberts explained that he would stick with the court's traditional approach wherein state law defines the boundaries of distinct parcels of land and, except in rare circumstances, those boundaries determine the relevant parcel in regulatory takings cases.

Thomas wrote a separate dissent calling for the court to "take a fresh look" and determine whether its takings jurisprudence can be grounded in the original meaning of the takings clause of the Fifth Amendment or the privileges and immunities clause of the 14th Amendment.

By introducing a complicated, subjective test into the first part of a takings analysis -- defining the relevant parcel -- the Murr case is perhaps helpful to land use regulators seeking to avoid takings liability, but only for that reason. At the same time, however, the court's confusing new test appears to be a giant step back for property rights.

As Justice John Paul Stevens famously stated in his Nollan v. California Coastal Commission dissent, "[e]ven the wisest of lawyers would have to acknowledge great uncertainty about the scope of this Court's takings jurisprudence ... local governments and officials must pay the price for the necessarily vague standards in this area of the law." Consistent with much of the U.S. Supreme Court's takings jurisprudence, Murr is of little solace to land use attorneys, regulators, and courts, all of whom remain guessing about how the court will react to the next case and the one after that.