Amdt5.5.1.2.4.2 Regulatory Takings: Exceptions to the General Doctrine

Fifth Amendment:

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

Penn Central is not the only guide to when an inverse condemnation has occurred; other criteria have emerged from other cases before and after Penn Central. The Court has long recognized a per se takings rule for certain physical invasions: when government permanently¹ occupies property (or authorizes someone else to do so), the action constitutes a taking regardless of the public interests served or the extent of damage to the parcel as a whole.² The modern case dealt with a law that required landlords to permit a cable television company to install its cable facilities upon their buildings; although the equipment occupied only about 1½ cubic feet of space on the exterior of each building and had only a de minimis economic impact, a divided Court held that the regulation authorized a permanent physical occupation of the property and thus constituted a taking.³ Recently, the Court sharpened further the distinction between regulatory takings and permanent physical occupations by declaring it inappropriate to use case law from either realm as controlling precedent in the other.⁴ Physical invasions falling short of permanent physical occupations remain subject to Penn Central.

A second per se taking rule is of more recent vintage. Land use controls constitute takings, the Court stated in Agins v. City of Tiburon, if they do not substantially advance legitimate governmental interests, or if they deny a property owner economically viable use of his land.⁵ This second Agins criterion creates a categorical rule: when, with respect to the parcel as a whole, the landowner has been called upon to sacrifice all economically beneficial uses in the name of the common good, that is, to leave his property economically idle, he has suffered a taking.⁶ The only exceptions, the Court explained in Lucas, are for those restrictions that come with the property as title encumbrances or other legally enforceable limitations. Regulations so severe as to prohibit all economically beneficial use of land cannot be newly legislated or decreed (without compensation), but must inhere in the title itself, in the restrictions that background principles of the State’s law of property and nuisance already place upon land ownership. A law or decree with such an effect must, in other words, do no more than duplicate the result that could have been achieved in the courts – by adjacent land owners (or other uniquely affected persons) under the State’s law of private nuisance, or by the State under its complementary power to abate [public] nuisances . . . , or otherwise.⁷ Thus, while there is no broad noxious use exception separating police power regulations from takings, there is a narrower background principles exception based on the law of nuisance and unspecified property law principles.

Together with the investment-backed expectations factor of Penn Central, background principles were viewed by many lower courts as supporting a notice rule under which a taking claim was absolutely barred if based on a restriction imposed under a regulatory regime predating plaintiff’s acquisition of the property. In Palazzolo v. Rhode Island,⁸ the Court forcefully rejected the absolute version of the notice rule, regardless of rationale. Under such a rule, it said, [a] State would be allowed, in effect, to put an expiration date on the Takings Clause.⁹ Whether any role is left for preacquisition regulation in the takings analysis, however, the Court’s majority opinion did not say, leaving the issue to dueling concurrences from Justice O’Connor (prior regulation remains a factor) and Justice Scalia (prior regulation is irrelevant). Less than a year later, Justice O’Connor’s concurrence carried the day in extended dicta in Tahoe-Sierra,¹⁰ though the decision failed to elucidate the factors affecting the weighting to be accorded the pre-existing regime.

The or otherwise reference, the Court explained in Lucas,¹¹ was principally directed to cases holding that in times of great public peril, such as war, spreading municipal fires, and the like, property may be taken and destroyed without necessitating compensation. Thus, in United States v. Caltex, Inc.,¹² the owners of property destroyed by retreating United States armies in Manila during World War II were held not entitled to compensation, and in United States v. Central Eureka Mining Co.,¹³ the Court held that a federal order suspending the operations of a nonessential gold mine for the duration of the war in order to redistribute the miners, unaccompanied by governmental possession and use or a forced sale of the facility, was not a taking entitling the owner to compensation for loss of profits. Finally, the Court held that when federal troops occupied several buildings during a riot in order to dislodge rioters and looters who had already invaded the buildings, the action was taken as much for the owners’ benefit as for the general public benefit and the owners must bear the costs of the damage inflicted on the buildings subsequent to the occupation.¹⁴

The first prong of the Agins test,¹⁵ asking whether land use controls substantially advance legitimate governmental interests, has now been erased from takings jurisprudence, after a quarter-century run. The proper concern of regulatory takings law, said Lingle v. Chevron U.S.A. Inc.,¹⁶ is the magnitude, character, and distribution of the burdens that a regulation imposes on property rights. In stark contrast, the substantially advances test addresses the means-end efficacy of a regulation, more in the nature of a due process inquiry.¹⁷ As such, it is not a valid takings test.

A third type of inverse condemnation, in addition to regulatory and physical takings, is the exaction taking. A two-part test has emerged. The first part debuted in Nollan v. California Coastal Commission,¹⁸ and holds that in order not to be a taking, an exaction condition on a development permit approval (requiring, for example, that a portion of a tract to be subdivided be dedicated for public roads)¹⁹ must substantially advance a purpose related to the underlying permit. There must, in short, be an essential nexus between the two; otherwise the condition is an out-and-out plan of extortion.²⁰ The second part of the exaction-takings test, announced in Dolan v. City of Tigard²¹ specifies that the condition, to not be a taking, must be related to the proposed development not only in nature, per Nollan, but also in degree. Government must establish a rough proportionality between the burden imposed by such conditions on the property owner, and the impact of the property owner’s proposed development on the community – at least in the context of adjudicated (rather than legislated) conditions.

Nollan and Dolan occasioned considerable debate over the breadth of what became known as the heightened scrutiny test. The stakes were plainly high in that the test, where it applies, lessens the traditional judicial deference to local police power and places the burden of proof as to rough proportionality on the government. In City of Monterey v. Del Monte Dunes at Monterey, Ltd.,²² the Court unanimously confined the Dolan rough proportionality test, and, by implication, the Nollan nexus test, to the exaction context that gave rise to those cases. Still unclear, however, is whether the Court meant to place outside Dolan exactions of a purely monetary nature, in contrast with the physically invasive dedication conditions involved in Nollan and Dolan.²³ The Court clarified this uncertainty in Koontz v. St. Johns River Water Management District by holding that monetary exactions imposed under land use permitting were subject to essential nexus/rough proportionality analysis.²⁴

The announcement following Penn Central of the above per se rules in Loretto (physical occupations), Agins and Lucas (total elimination of economic use), and Nollan/Dolan (exaction conditions) prompted speculation that the Court was replacing its ad hoc Penn Central approach with a more categorical takings jurisprudence. Such speculation was put to rest, however, by three decisions from 2001 to 2005 expressing distaste for categorical regulatory takings analysis. These decisions endorse Penn Central as the dominant mode of analysis for inverse condemnation claims, confining the Court's per se rules to the relatively narrow physical occupation and total wipeout circumstances, and the special context of exactions.²⁵