[*PG65]ON HISTORY, TAKINGS JURISPRUDENCE, AND PALAZZOLO: A REPLY TO JAMES BURLING

Timothy J. Dowling*

Abstract:  The so-called property rights movement has hailed Palazzolo v. Rhode Island as a landmark win for landowners, a blockbuster breakthrough that will end “smart growth,” curtail other land use controls, and lead to manifold victories for claimants under the Takings Clause of the Fifth Amendment. James Burling’s piece on Palazzolo is more of the same, proclaiming the ruling to be a decisive win in an age-old, ideological battle. This Article shows that Burling’s take on the ruling is wishful thinking. He errs in his description of history, takings jurisprudence, and Palazzolo. Palazzolo is but a small, incremental development in the case law from which both takings claimants and defendants may draw support. The Court’s most recent takings ruling, Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, reaffirms that the vast bulk of land use controls and other community protections do not implicate the Takings Clause.

Those who want skill to use those evidences they have of probabilities; who cannot carry a train of consequences in their heads; nor weigh exactly the preponderancy of contrary proofs and testimonies, making every circumstance its due allowance; may be easily misled to assent to positions that are not probable.1

Introduction

In Private Property Rights and the Environment After Palazzolo,2 James Burling commits three fundamental errors. He misreads history, misinterprets takings jurisprudence, and misapprehends the [*PG66]meaning of Palazzolo v. Rhode Island.3 In this reply, I describe his three errors in turn.

Regarding Palazzolo in particular, Burling calls the ruling perhaps “the most significant skirmish” in an overarching ideological war.4 He concludes that Palazzolo has removed “some of the more pernicious governmental defenses to regulatory takings claims” and “injected new life in the doctrine of regulatory takings.”5 These dramatic characterizations are of a piece with similar assertions by Burling and his colleagues at Pacific Legal Foundation (PLF) at the time of the ruling, which proclaimed Palazzolo a “landmark victory” for landowners,6 predicted that smart growth is now “doomed,”7 and pontificated that “[t]he notice rule is dead, except in what remains of [Justice] Stevens’ mind.”8

The reaction to Palazzolo by Burling and his colleagues is plainly hyperbolic. As shown below, Palazzolo is not a major jurisprudential breakthrough in favor of takings claimants, but instead yet another modest, incremental development in takings case law. Indeed, there is much good news for government officials in Palazzolo. For instance, the ruling emphatically reaffirms the Court’s ripeness precedent, which largely pays appropriate deference to the role of local officials in land-use planning. To be sure, the Palazzolo majority bends over backwards to resuscitate a claim that has no business being in court, falling victim to a bait-and-switch perpetrated by PLF.9 But it does not, as Burling argues, impose new requirements on government officials in the land-use negotiation process.10

Nor is the so-called notice rule dead. Palazzolo’s ruling on the timing of a claimant’s acquisition of property is quite narrow, rejecting only the absolute rule that acquisition prior to enactment of the [*PG67]challenged regulation always defeats takings liability.11 At least five Justices agree that the timing of a claimant’s acquisition of property is relevant to the analysis in most takings cases.12 Moreover, Palazzolo clarifies that background principles of law that defeat takings claims include not just common law nuisance principles, but also positive laws, such as statutes and regulations, in appropriate circumstances.13

Palazzolo also unambiguously rejects the argument that per se liability attaches where regulation denies a landowner a reasonable return on investment.14 In fairness to Burling, it must be acknowledged that Palazzolo contains a brief and thoroughly confused discussion of the Court’s parcel-as-a-whole rule, but because the Court just recently reaffirmed the rule,15 Palazzolo’s vague dicta is not nearly as significant as Burling suggests.16

I.  “The Traditional American View” of the Takings Clause

Burling begins his article by attempting to cast Palazzolo as part of a vast philosophical battle between competing visions of property rights. One side of the debate is what Burling calls “the traditional American view,” a view in which property rights and other individual rights are “sacrosanct over the needs of the group.”17 The other side, Burling tells us, consists of those who suggest that this purported traditional view “is an anachronism in this Age of the Environment.”18 This side of the debate, we are told, consists of new-fangled theorists (Professor Joseph Sax receives special mention) who use a riparian model to argue for “the adoption of a legal philosophy that would make the use and ownership of property subject to common consent.”19 John Locke plays a central role in Burling’s version of history, [*PG68]for it was Locke who first described property as predating sovereign power.20 Because, in Burling’s view, the Framers of the Constitution were “firmly predisposed” to Locke’s philosophy,21 he suggests that “a vibrant Lockean tradition” compels an aggressive application of the Takings Clause to the regulation of private property in the public interest.22

This description of the takings debate is a fairy-tale, for it has the relevant history exactly backwards. The “traditional” view of the Takings Clause—the view shared by the founding generation and the view that predominated for the first 130 years of our nation’s history—was that the Clause does not extend to government regulation at all. The founding generation and several succeeding generations understood the Takings Clause as applying only to the appropriation or physical invasion of property. Justice Antonin Scalia, one of the Court’s staunchest advocates of property rights, has noted that “early constitutional theorists did not believe that the Takings Clause embraced regulations of property at all.”23 In the words of Justice Scalia, “[p]rior to Justice Holmes’s exposition in Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922), it was generally thought that the Takings Clause reached only a ‘direct appropriation’ of property . . . or the functional equivalent of a ‘practical ouster of [the owner’s] possession.’”24

Historical research overwhelmingly supports Justice Scalia’s assertions in this regard.25 So do the Court’s rulings prior to Mahon. In [*PG69]the Legal Tender Cases, for instance, the Court explained that “[the Takings Clause] has always been understood as referring only to a direct appropriation, and not to consequential injuries resulting from the exercise of lawful power. It has never been supposed to have any bearing upon, or to inhibit laws that indirectly work harm and loss to individuals.”26 Nor is it correct to suggest that the Framers were uniformly, or even predominantly, predisposed to Locke’s views on property. In fact, the Framers’ views on property were very much a mixed bag. Benjamin Franklin, one of the few Framers who signed both the Declaration of Independence and the Constitution, asserted in unequivocal terms that property is created by the State and thus subject to extensive state control:

Private Property therefore is a Creature of Society, and is subject to the Calls of that Society, whenever its Necessities shall require it, even to its last Farthing; its Contributions therefore to the public Exigencies are not to be considered as conferring a Benefit on the Publick, entitling the Contributors to the Distinctions of Honour and Power, but as the Return of an Obligation previously received, or the Payment of a just Debt.27

Franklin’s views on property evidence the emerging consensus among historians that both republican and liberal ideas, i.e., Lockean as well as Hobbesian philosophy and other competing worldviews, had a profound influence on the Framers. After a survey of the relevant authorities, one scholar recently concluded that “[w]hile historians are sharply divided on a host of interpretive matters concerning republicanism and liberalism in the revolutionary era and the first years of the early republic, there is now a near consensus that both republican and liberal ideas powerfully influenced American politics during the 1780s and 1790s.”28

[*PG70] Moreover, Locke himself believed that private property rights could be exercised only “where there is enough and as good left in common for others.”29 In other words, Locke’s theory of property recognized the right of each person to an equal share of property and precluded private acquisitions of property that deprived others of this right.30 This severe limitation on the acquisition of property stemmed from Locke’s view that God originally gave all property to humankind to be held in common.31 Although Professor Richard Epstein relies on Locke to bolster his call for a breathtakingly expansive application of the Takings Clause,32 even Epstein recognizes that this key aspect of Locke’s philosophy is in severe tension with an aggressive theory of regulatory takings.33 Epstein addresses this tension by “correct[ing]” Locke and discarding the notion of original ownership in common,34 a correction that prompted one critic to write that “Locke himself . . . was insufficiently Lockean” for Epstein.35 Burling, too, would have difficulty reconciling Locke’s views on property acquisition with a broad vision of the Takings Clause, but, unlike Epstein, Burling fails to acknowledge the issue.

Nor is it accurate to suggest that property rights were sacrosanct over the needs of the community in colonial America and the early years of our Republic. Both eras saw extensive land-use controls, none of which were considered to implicate the compensation requirement of the Takings Clause.36 For instance, the Massachusetts Bay Colony prohibited dwellings from being located more than one-half mile [*PG71]from town meeting houses without judicial approval.37 Connecticut land-use controls limited not only the amount but also the sequence of new development, much as modern smart-growth initiatives seek to avoid “leapfrog development.”38 These land-use restrictions during the colonial era were “so numerous and varied, so widely distributed, that they cannot be viewed as anomalous.”39 Likewise, during the early years of our Republic, American legislatures extensively regulated land use.40 Yet those who push for an expansive application of the Takings Clause have unearthed no evidence in the ratification debates or other founding documents to suggest that anyone in the founding generation contemplated application of the Takings Clause to these land-use controls.

Thus, the traditional view of the Takings Clause supports those who call for a restrained application of regulatory takings doctrine. The new-fangled theorists in the debate are those who push for a far more aggressive application of the Clause to land-use restrictions and other community protections.

II.  The Scope and Content of Modern Regulatory
Takings Jurisprudence

Burling’s broad outline of regulatory takings jurisprudence contains both general and specific errors. As a general matter, he asserts that “private property owners have been winning the debate before the United States Supreme Court”41 and suggests that lower courts are beginning to fall into line.42 It is not entirely clear what he means by the phrase “winning the debate,” but if he intends to suggest that takings jurisprudence is moving toward his vision of individual property rights as preeminent over the public interest, he is thoroughly mistaken.

Just as Burling fails to acknowledge that the narrow original meaning of the Takings Clause precluded application of the Clause to land-use controls, he does not appreciate how that narrow meaning [*PG72]continues to act as a severe restraint on modern regulatory takings jurisprudence, limiting application of the Clause to those rare situations in which regulation constitutes the functional equivalent of an appropriation of property. In the landmark Mahon decision, the Court found a taking only because the challenged restraint had “very nearly the same effect for constitutional purposes as appropriating or destroying” private property.43 More recently, the Court has stated unequivocally that in regulatory takings cases, its task is “to distinguish the point at which regulation becomes so onerous that it has the same effect as an appropriation of the property through eminent domain or physical possession.”44 Not surprisingly, land-use regulation rarely rises to this level.45 In establishing its two per se rules of takings liability, the Court used functional equivalency to appropriation as a benchmark.46 It described those rules as “very narrow”47 and as applying in only “extraordinary” circumstances.48

The recent ruling in Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency49 confirms these basic precepts and shows that property owners are hardly winning any argument to the contrary. In Tahoe-Sierra, the Court emphasized the analytical divide between physical and regulatory takings,50 observing that the distinction [*PG73]flows directly from the text of the Takings Clause.51 It described regulatory takings as occurring where restrictions are “so severe that they are tantamount to a condemnation or appropriation.”52 And it rejected a takings challenge to a thirty-two-month moratorium, stressing the importance of careful land-use planning in protecting our communities from “inefficient and ill-conceived growth.”53 Tahoe-Sierra stands as an emphatic reaffirmation that the vast bulk of land-use controls do not trigger the compensation requirement set forth in the Takings Clause.

As for the lower courts, Burling cites six cases to support his suggestion that landowners now are winning the takings debate in the courts and reaping substantial judgments in their favor. But all six cases involve rulings against the federal government by the U.S. Court of Appeals for the Federal Circuit, the U.S. Court of Federal Claims, or its predecessor, the U.S. Claims Court.54 This exceedingly narrow focus is odd and distortive for three reasons. First, those on both sides of the takings debate view these courts as among the most politicized tribunals in the country on takings issues.55 Second, these courts have no jurisdiction over state and local agencies,56 the institutions that impose virtually all of our nation’s land-use controls. A review of state court rulings in takings cases in recent years shows that state and local officials continue to win the vast majority of regulatory takings cases, including many cases in which the challenged restriction was substantial.57 Third, even if one focuses exclusively on takings claims against [*PG74]the federal government, from 1991 to 1997 courts found a taking in only thirty-one of 230 cases that resulted in a ruling on the merits (excluding cases dismissed on standing, ripeness, jurisdictional, or other procedural grounds)—hardly cause for celebration among the claimants’ bar.58 In fact, the so-called property rights movement elsewhere has argued that we need federal takings legislation precisely because landowners are losing the overwhelming majority of takings [*PG75]cases on procedural grounds.59 Any suggestion that landowners are winning the takings debate in the courts is a victory of PLF’s hope over reality.

When Burling turns to the specifics of regulatory takings jurisprudence, his analysis fares no better. His errors and oversimplifications are too numerous to explicate comprehensively, and so this reply focuses on two representative examples.

First, Burling tells us that a compensable taking occurs where land-use regulation fails to substantially advance a legitimate public interest, citing Agins v. City of Tiburon.60 This substantially-advance standard is sometimes referred to as a means-end test because it requires a court to determine whether the legislatively chosen means adequately advance a legitimate end. In discussing this standard, Burling fails altogether to note that in recent years, five U.S. Supreme Court Justices expressly disavowed the Agins means-end test as an appropriate standard of takings liability,61 and every other member of the Court has written or joined opinions at least questioning its continued role in takings jurisprudence.62

Second, Burling tells us that under Lucas v. South Carolina Coastal Council,63 a taking occurs where regulation denies all economically [*PG76]viable use of land unless it “merely codifies the existing ‘common law nuisance’ limitations on property.”64 Here, Burling is referring to what the Lucas Court called the background-principles inquiry. The Lucas majority explained that no taking occurs where background principles of law “show[] that the proscribed use interests were not part of [the claimant’s] title to begin with.”65 In other words, the claimant does not possess the property interest alleged to have been taken because the constraint “inhere[s] in the title itself, in the restrictions that background principles of the State’s law of property and nuisance already place upon land ownership.”66 Ever since Lucas, PLF and others who represent takings claimants have striven mightily to confine the background-principles inquiry to common law nuisance.67 On this view, neither positive laws such as statutes and regulations nor non-nuisance common law doctrines, such as the public trust doctrine,68 may constitute background principles that defeat takings liability.

This crabbed view of the background-principles defense is plainly contradicted by Lucas and other authorities.69 Lucas describes background principles no less than four times as embracing not only nuisance law, but the full range of state property law.70 Most of Lucas’s references to state property law are unqualified, i.e., without regard to whether that law is embodied in common law or statute.71 And Lucas specifically discusses a non-nuisance doctrine, the navigational servitude, as an example of a background principle that defeats takings [*PG77]liability.72 Moreover, in noting that property interests generally are defined by state law, Lucas relies on Board of Regents of State Colleges v. Roth,73 which recognized that state statutes, rules, and other sources of state law define property interests.74 Thus, Lucas provides strong support for the argument that the background-principles defense extends beyond common law nuisance, and lower courts have been quite expansive in their application of the defense to statutes, regulations, and non-nuisance common-law doctrines.75 As discussed below, Palazzolo resolves any ambiguity by confirming that background principles may include statutes, regulations, and the full range of common law doctrines in appropriate circumstances.76

III.  Palazzolo: Good News and Bad News for State
and Local Officials

A.  The Facts and Equities

Although my principal quarrels with Burling’s account of Palazzolo concern the legal effect of the ruling, before turning to those disagreements it is important to clarify three factual nuances that color the equities of the case. First, Burling tells us that the property near Palazzolo’s site has been developed with homes.77 The discussion appears designed to suggest that the State unfairly singled out Palazzolo for development restrictions while allowing others to build.78 Although there are houses in the general vicinity, no one on Winnapaug Pond has been permitted to destroy wetlands on the scale desired by Palazzolo. The key question is not whether others have built houses in the area, but whether they have done so on similar terrain on the scale proposed by Palazzolo. Palazzolo proposed to fill all eighteen [*PG78]acres of intertidal wetlands on his property to build a seventy-four house subdivision.79 As shown in the photo below,80 the south (ocean-side) shore of Winnapaug Pond remains largely undeveloped, and the existing houses are concentrated on the ridge of uplands along the road between the beach and the marsh.81

The salt marshes along the pond are largely unbuildable because the soil is unsuitable for sanitary facilities, the compressible nature of the mucky peat is ill-suited for permanent structures, and the development costs would be extraordinary.82 In this regard, Palazzolo stands in stark contrast to the landowner in Lucas, who proposed to do to his property precisely what his immediately adjacent neighbors had done to their property.83

[*PG79] Second, Burling asserts that Palazzolo intended to fill 11.4 acres of wetlands to build a “family beach recreational area” on the site.84 Although Palazzolo’s 1985 application to fill the land set forth this proposal, Palazzolo’s takings claim as litigated had nothing to do with the proposed beach club.85 At the heart of the case as tried in state court was Palazzolo’s desire to destroy all eighteen acres of wetlands on the site to build a seventy-four-home subdivision.86 In his opening statement to the trial court, Palazzolo’s attorney referred to the proposed development as “need[ing] fill to be able to construct homes.”87 Palazzolo’s valuation evidence was based exclusively on the subdivision plan,88 and the record is silent as to the economic viability of the beach club. Following Palazzolo’s lead, the state trial court and state supreme court naturally found that his takings claim was rooted in his proposal to destroy all eighteen acres of wetlands to build a subdivision, and they resolved the case on this basis.89 In seeking review by the U.S. Supreme Court, Palazzolo cited these very rulings to emphasize that his claim is based on the State’s denial of permission to destroy all eighteen acres of wetlands.90

One might legitimately question whether Palazzolo ever intended to build a beach club on the property. As noted by Justice Kennedy, writing for the Court, “[t]he details [of the proposed beach club] do not tend to inspire the reader with an idyllic coastal image.”91 Justice Ginsburg was less forgiving, calling the proposal “most disagreeable” and noting that “to get to the club’s water, i.e., Winnapaug Pond rather than the nearby Atlantic Ocean, ‘you’d have to . . . work your [*PG80]way through approximately 70, 75 feet of marshland or conservation grasses.’”92

After having litigated his claim based on the subdivision proposal, Palazzolo switched gears in the U.S. Supreme Court and argued instead that the takings claim is rooted in the beach club proposal. Evidently, Palazzolo was concerned that his failure to apply for permission to build a subdivision might sink his claim as unripe, as it had in the state supreme court.93 The State understandably argued that courts should prohibit such “sandbagging” by landowners who submit one land-use proposal and then use the denial as the basis for a takings claim based on a much more extravagant proposal.94 As discussed below, the U.S. Supreme Court ruled that while federal ripeness law did not prevent him from doing so, States may design their land-use processes to preclude this kind of chicanery.95

Third, Burling fails to mention that the trial court found that Palazzolo’s proposed destruction of eighteen acres of wetlands, which constitute twelve percent of the existing salt marsh around Winnapaug Pond, would constitute a public nuisance.96 The proposed wetland destruction would reduce the ability of the salt marsh to filter out harmful pollutants, resulting in higher levels of nitrates in the groundwater, which is the sole source of drinking water for the surrounding community.97 Moreover, the proposed fill would significantly reduce commercial and recreational shellfish and finfish populations.98 Based on these facts, the trial court found that the proposed fill would be a public nuisance because it would “not be suitable for the locality of the subject property.”99 The state supreme court did not rely on the nuisance finding to support its rejection of Palazzolo’s takings claim,100 and thus the U.S. Supreme Court had no occasion to refer to it. Nevertheless, the finding might well prove to [*PG81]be dispositive in the remand proceedings, and it certainly colors the equities of the case.101

B.  The Palazzolo Ruling on Ripeness

The state supreme court ruled that Palazzolo’s takings claim is unripe for two reasons. First, the court concluded that the record failed to show the extent to which the State would permit development on the property because Palazzolo failed to apply for permission to use the land in ways that would involve filling substantially less wetlands or building only on the upland portion.102 Second, the court relied on Palazzolo’s failure to submit even one application for the seventy-four-home subdivision proposal that formed the heart of his claim as litigated in state court.103

The broader implications of the ripeness issue in Palazzolo may be best understood by examining existing ripeness precedent as well as the debate that took place during the consideration of federal ripeness legislation in the 105th Congress.

Under Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City,104 a takings challenge to a land-use regulation is not ripe until the government has reached a final decision regarding the application of the regulation to the claimant’s property.105 Obtaining a final decision might require the landowner to seek a variance or waiver from an initial determination.106 In McDonald, Sommer & Frates v. County of Yolo,107 the Court made clear that it also might well require the landowner to submit multiple applications because the rejection of one development plan does not necessarily mean that the govern[*PG82]ment will not permit less intensive development of the property.108 In other words, a takings claim is unripe where there remains “the potential for . . . administrative solutions” to the dispute.109 A takings claim ripens only when the record from the land-use negotiations reveals “the nature and extent of permitted development.”110

This ripeness requirement flows from the very nature of the takings inquiry. Under Mahon, a regulation becomes a taking where it “goes too far,”111 but a court cannot determine whether regulation goes too far until it knows how far the regulation goes.112 Ripeness rules also stem from the flexibility and discretion of local agencies in addressing land-use issues,113 and the reluctance of courts to second-guess local land-use agencies.114 A landowner need not continue to pursue relief from the local land-use agency, however, where the record makes clear that doing so would be futile.115

The national developers’ lobby, the National Association of Home Builders (NAHB), does not like existing ripeness doctrine, and in the 105th Congress, NAHB drafted and lobbied for a bill that would have changed ripeness rules dramatically.116 The Private Property Rights Implementation Act of 1997 was designed to authorize developers and other landowners to file takings claims in federal court [*PG83]without pursuing available opportunities to resolve land-use conflicts at the local level.117 Deemed a “hammer to the head” of state and local officials by NAHB’s chief lobbyist,118 the bill would have radically shifted the balance of power in land-use negotiations to developers by allowing them to threaten a federal court lawsuit far earlier in the land-use planning process.119

Among other things, the bill would have required local officials to specify the permitted intensity of development after the denial of a single application.120 Failure to do so would have allowed the landowner to proceed immediately to federal court without continuing to pursue available local processes.121 In other words, a landowner could file a single, extravagant land-use proposal, and upon denial the burden would shift to local officials to determine precisely how the property would be used. Local officials objected to this provision because it would have imposed costly and unwarranted new burdens.122

Virtually every national organization that represents state and local officials opposed the bill.123 So too did federal cabinet-level officials, federal judges, state judges, planners, religious groups, labor groups, environmental groups, and various other groups, largely due to concerns that developers already dominate the land-use planning process in many communities, and that a further across-the-board shift of power to them would come at the expense of neighboring property owners and the public interest.124 Due to the tremendous [*PG84]opposition to the bill, it never went to the Senate floor for a vote.125 Undeterred, NAHB filed an amicus brief in Palazzolo asking the Court to abandon its existing ripeness doctrine and adopt rules that were in great part similar to its failed legislative agenda.126

The Palazzolo Court rejected this request. The Court reversed the state supreme court and ruled that Palazzolo’s case was ripe, but in so ruling it emphatically reaffirmed its existing ripeness doctrine as set forth in Williamson County, MacDonald, and other leading ripeness precedents.127 In particular, the Court stressed that a takings claim is not ripe “until a court knows ‘the extent of permitted development’ on the land in question”128 at least to a “reasonable degree of certainty.”129 The Court continued to recognize the critical role of local land-use officials in the planning process by confirming “the important principle that a landowner may not establish a taking before a land-use authority has the opportunity, using its own reasonable procedures, to decide and explain the reach of a challenged regulation.”130 The Court emphasized the need to allow local officials “to exercise their full discretion,” including procedures that allow for variances and waivers.131

The specific ripeness ruling is tied to the facts of the case and is thus unlikely to have much precedential effect adverse to government officials. The Court held that the case is ripe because the record shows the extent of permitted development on the property: one single-family home.132 In this regard, the Court emphasized that the applicable regulation unequivocally banned Palazzolo from filling the wetlands on the property.133 Although the State contended that Palaz[*PG85]zolo might be able to build more than one house on the upland portion of the site, the Court held that the State waived this argument by failing to contest Palazzolo’s assertion to the contrary in its opposition to Palazzolo’s petition for certiorari.134 By limiting its ripeness ruling to “this circumstance,”135 the Court provided an easy basis for government officials to distinguish Palazzolo in future cases.

The Palazzolo Court went on to indicate that in its view there was no genuine ambiguity in the record regarding the extent of permitted development on the uplands,136 but in a dissent joined by Justices Souter and Breyer, Justice Ginsburg took issue with this conclusion.137 Noting that Palazzolo pursued only a Lucas per se claim in state court, she observed that the State had no incentive to flesh out the full extent of permitted development.138 In her view, the State’s submissions establish only a floor, not a ceiling, on permissible development.139

In a highly unusual condemnation of Supreme Court counsel, Justice Ginsburg showed that PLF changed the nature of Palazzolo’s claim from a per se claim under Lucas to a non-per se claim, thereby elevating the significance of whether he could build more than one house, and then misrepresented the record regarding the extent of permissible development.140 Responding to the majority’s conclusion that it was now too late for the State to suggest that additional development might be allowed because it failed to raise this possibility in its opposition to certiorari, Justice Ginsburg observed that the Court’s ruling “amounts to an unsavory invitation to unscrupulous litigants: Change your theory and misrepresent the record in your petition for certiorari; if the respondent fails to note your machinations, you have created a different record on which this Court will review the case.”141 Justice Ginsburg concluded that the record was ambiguous on this issue because Palazzolo never submitted a survey of his land, and she argued against “step[ping] into the role of supreme topographical fact finder to resolve ambiguities in Palazzolo’s favor.”142

[*PG86] With respect to the state supreme court’s second ripeness ground—Palazzolo’s failure to submit an application for the seventy-four-home subdivision proposal—the Court ruled that his failure went only to damages, not to ripeness under the federal Constitution.143 Because the extent of permitted development was (in the Court’s view) manifest, further applications would not provide additional clarification that would assist the ripeness inquiry.144 In good news for state and local government officials, however, the Court recognized the State’s “valid concern” that a landowner might attempt to use a hide-the-ball strategy by applying for a modest proposal and then using a denial as the basis for a takings claim for an exorbitant sum based on a much more extensive proposal.145 Although federal ripeness rules do not preclude this abuse, the Court made clear that state ripeness rules may do so, stating that it did “not intend to cast doubt” on local planning procedures and state ripeness rules designed to prevent takings claims based on hypothetical uses that would not pass muster under local law.146

Notwithstanding the Court’s clear reaffirmation of its existing ripeness precedent, Burling tells us that perhaps the most significant aspect of Palazzolo’s ruling on ripeness is that once the government denies a single permit application, the denial shifts the burden to the government to indicate what other uses are available to the landowner.147 This, of course, is exactly what the developers’ lobby wanted to accomplish through its now-moribund federal ripeness legislation.148 Palazzolo does nothing of the sort.

As support, Burling first quotes the Court as saying that before a claim is ripe, a local land-use agency must have “the opportunity, using its own reasonable procedures, to decide and explain the reach of a challenged regulation.”149 The quoted language says exactly the opposite of what Burling would like it to say, making clear that local officials may use the full range of local procedures to flesh out the extent of permitted development. The very next sentence notes the importance of allowing local officials to exercise “their full discretion” [*PG87]and permitting local procedures for variances, waiver, and the like to play out before landowners may proceed to court.150 Burling also cites to the Court’s assertion that there was no indication that the State would have approved a development application to fill less than 11.4 acres,151 and the observation that “there is no indication that any use involving any substantial structures or improvements would have been allowed.”152 The Court’s point here, however, is not that government officials have the burden to specify permitted development upon the denial of a single application, but rather that the unambiguous nature of the wetland regulations plainly ruled out any such approval.153 If the wetland rules had not been unequivocal, there is little doubt from the ruling that the Court would have found the case to be unripe until the extent of permitted fill could be determined.154 It is wishful thinking by Burling to infer the establishment of a significant new burden on local governments in the planning process from a ruling that so plainly reaffirms the core of the Court’s existing ripeness precedent.155

C.  The Palazzolo Ruling on Expectations and Background Principles

In the wake of Palazzolo, PLF declared “dead” what Burling calls the notice rule.156 With apologies to Mark Twain, rumors of the notice [*PG88]rule’s death have been greatly exaggerated.157 The Court’s ruling regarding the relevance of the timing of a claimant’s acquisition vis--vis the enactment of the challenged regulation is very narrow.

The Palazzolo Court viewed the state supreme court’s ruling as having established a “sweeping” and “blanket rule” that acquisition of title after enactment of the challenged regulation automatically bars a takings claim in every case.158 The Court rejected this rule of per se non-liability as “too blunt an instrument,”159 stating that “[t]he State may not put so potent a Hobbesian stick into the Lockean bundle” of property rights.160 The Court concluded that precluding all post-enactment purchasers from prevailing on a takings claim would improperly “put an expiration date on the Takings Clause.”161 “Future generations, too, have a right to challenge unreasonable limitations on the use and value of land,” the Court wrote.162 The Court expressed concern that the process of ripening a claim might prevent the owner at the time of enactment from bringing a claim.163 Moreover, a blanket rule against recovery would create unfair results for older property owners and those who need to sell, as opposed to those with the resources to hold title.164

In so ruling, the Court noted that Palazzolo acquired the land personally by operation of state law upon dissolution of his corporation.165 It is not an ideal posture for a government defendant to argue that the pre-transfer existence of the challenged law precludes liability. Justice Kennedy, writing for the Court, Justice O’Connor in concurrence, and Justice Breyer in dissent all mention inheritance as another kind of transfer that should not always preclude challenge to a pre-existing law.166 In these circumstances, it might be difficult to ar[*PG89]gue that the transfer greatly changes anyone’s expectations about the property. On the other hand, acquisition of title by purchase often affects reasonable expectations associated with property, particularly where the purchase price is discounted due to laws in effect at the time of the transfer.167

In fact, five Justices made clear that post-enactment purchase remains relevant to non-per se claims brought under the multi-factor test of liability set forth in Penn Central Transportation Co. v. City of New York,168 the test that governs the vast bulk of regulatory takings claims.169 Justice O’Connor wrote a separate concurrence specifically to emphasize that the timing of a takings claimant’s acquisition is relevant to the Penn Central analysis, stating: “[I]t would be just as much error to expunge this consideration from the takings inquiry as it would be to accord it exclusive significance.”170 The regulatory regime in place at the time of acquisition “helps to shape the reasonableness of [the claimant’s] expectations” under Penn Central.171 She expressed concern that “if existing regulations do nothing to inform the analysis, then some property owners may reap windfalls and an important indicium of fairness is lost.”172 In other words, where a buyer purchases land at a discount due to restrictions in place at the time of purchase, courts should consider those reduced expectations (as reflected in the reduced purchase price) in evaluating a takings challenge to those restrictions. Significantly, all four dissenters ex[*PG90]pressly agreed with Justice O’Connor regarding the relevance of the timing of acquisition to the Penn Central analysis.173 At least one commentator argues that expectations are relevant even to a per se claim under Lucas.174

In a typically biting separate opinion, Justice Scalia took issue with Justice O’Connor’s approach and argued that the timing of acquisition is never relevant to takings analysis unless the pre-existing regulation constitutes part of the background principles of law that preclude a taking.175 But because no other member of the Court joined Justice Scalia’s opinion, it is clear that Justice O’Connor has a controlling majority that will treat the timing of the claimant’s acquisition as relevant to most takings claims.176

The Palazzolo Court cites Nollan v. California Coastal Commission177 as “controlling precedent” for its ruling.178 In Nollan, the Court found a taking where the State conditioned a development permit on a compelled dedication of lateral beach access, even though the claimants acquired the land after the State had announced its policy to require such dedications.179 Although Nollan served as a counterexample to the sweeping, blanket rule of non-liability rejected by the Court, it provides little guidance for future cases since it addressed acquisition after the adoption of a policy, not a regulation or statute. As noted above, a majority of the Justices joined Justice O’Connor in declining to view Nollan as precluding consideration of the timing of a claimant’s acquisition in most takings cases.

In a portion of Palazzolo largely ignored by Burling, the Court clarified that background principles of law under Lucas are not lim[*PG91]ited to common law.180 Although not every pre-existing law is “transformed into a background principle of the State’s law by mere virtue of the passage of title,”181 the Court went so far as to suggest that the very Rhode Island statute before it might be a background principle, stating: “We have no occasion to consider the precise circumstances when a legislative enactment can be deemed a background principle of state law or whether those circumstances are presented here.”182 The Court described background principles “in terms of those common, shared understandings of permissible limitations derived from a State’s legal tradition.”183 This “derived from” language—perhaps the two most important words in the opinion—strongly suggests that background principles include not only pre-existing statutes and regulations that codify common law doctrines of nuisance and property law, but also those that represent a reasonable extension of those doctrines.184 Lower courts undoubtedly will be called upon to apply this “derived from” standard in future cases where government officials argue that a pre-existing statute or regulation constitutes a background principle of law.185

Finally, Burling suggests that no background principle of law prohibits the proposed destruction of the intertidal salt marsh, citing “centuries of tradition wherein landowners freely reclaimed tidelands.”186 In fact, Rhode Island’s public trust doctrine appears to prevent precisely that.187 Although early public policy sometimes encouraged wharfing, long-standing precedents in Rhode Island hold that coastal filling must be done with the State’s permission or acquies[*PG92]cence.188 The State’s brief on remand sets forth a compelling argument that the public trust doctrine in Rhode Island precludes Palazzolo from ever having owned a property interest in destroying the coastal wetlands that he alleges has been taken.189

D.  The Palazzolo Ruling on the Lucas Per Se Rule

The clearest victory for government officials in Palazzolo comes in the Court’s rejection of Palazzolo’s per se claim under Lucas. Lucas holds that a per se taking may occur where regulation denies a landowner all economically viable use of the land.190 Although Palazzolo’s land was worth at least $200,000191 (more than thirteen times his original purchase price of $13,000),192 he argued that the challenged wetland regulations denied him all economically viable use of the property. Alleging that the land would be worth $3,150,000 if he were allowed to develop,193 Palazzolo argued that the remaining value, roughly six percent of the alleged unregulated value, should not be enough to defeat a per se claim under Lucas.194 He also argued that in determining whether a regulation denies all economically viable use, [*PG93]the Court should consider whether the regulation allows the owner to realize a reasonable return on investment.195

The Palazzolo Court rejected this argument, stating that “[a] regulation permitting a landowner to build a substantial residence on an 18-acre parcel does not leave the property ‘economically idle’” under Lucas.196 Although the State may not avoid a per se claim under Lucas by leaving the landowner with “a token interest,” the $200,000 value of Palazzolo’s parcel defeated his Lucas claim.197

Palazzolo also speaks to another important aspect of the Lucas per se rule. Plaintiff’s counsel argued that for the government to avoid application of the Lucas per se rule, a landowner must be able to derive value from the land by developing it.198 On this view, the Lucas per se rule applies even where the land retains significant “speculative” value (the value speculators might pay in the hope that the restrictions will be lifted), or where a neighboring property owner offers to purchase the land to acquire a permanent view shed or a buffer zone for adjacent property, or where recreation or other non-development uses exist and lend value to the land.

This argument is unpersuasive. The Lucas Court made clear that its per se rule turns on remaining value, regardless of its source.199 Lucas states unequivocally that if land retains as little as five percent of its unregulated value, the per se rule does not apply.200 This ruling came in response to a hypothetical posed by Justice Stevens in his dissent regarding a landowner whose property is diminished in value ninety-five percent.201 In language that could not be clearer, the Lucas majority held that “in at least some cases the landowner with 95% loss [in value] will get nothing” under the Takings Clause because such an owner would “not be able to claim the benefit of [the Lucas] categorical formulation.”202 Both the Lucas majority and Justice Stevens in dissent agreed that only “the landowner who suffers a complete elimination of value” recovers under the per se rule.203 This exchange shows that the per se rule is inapplicable where land may be sold for five [*PG94]percent of its original value, even where the land is unbuildable.204 In fact, the Lucas Court expressly reaffirmed the common sense notion that the sale of property for value is an economically beneficial use of that property.205 Because Lucas’s per se rule applies only where regulation denies all beneficial use, it is inapplicable where the owner is able to sell the land for value. The inquiry that drives the per se rule is value, not the ability to build.206

Palazzolo confirms that the Lucas per se rule is inapplicable where land retains more than nominal value, rejecting Palazzolo’s per se claim because he “failed to establish a deprivation of all economic value . . . .”207 Indeed, Palazzolo serves as a real-world illustration of the exchange between the Lucas majority and dissent regarding the inapplicability of the per se rule to a ninety-five percent value loss. In one of the first interpretations of Palazzolo, the U.S. Court of Appeals for the Federal Circuit ruled that Palazzolo reaffirms that no per se taking occurs unless regulation leaves land valueless or with only nominal value: “The [Palazzolo] Court held that because Mr. Palazzolo retained some economic value in the regulated property, the denial of a building permit in Mr. Palazzolo’s case did not constitute a categorical tak[*PG95]ing.”208 Tahoe-Sierra, too, confirms that “[a]nything less than a ‘complete elimination of value,’ or a ‘total loss,’ . . . would require the kind of analysis applied in Penn Central.209

Palazzolo does not explain precisely what the Court means by “token” value, which would be insufficient to defeat a Lucas per se claim. But because both Palazzolo and Lucas reject the suggestion that a ninety-five percent value loss may support a per se claim, Palazzolo’s assertion regarding token value must refer to truly de minimis value, something significantly less than five percent.210

E.  The Palazzolo Dicta on the Parcel-as-a-Whole Rule

In disposing of the Lucas claim, the Court expressly declined to address Palazzolo’s argument that the wetland portion of his property should be considered separately from the upland portion because Palazzolo failed to make this argument in the state courts.211 In other words, the Court refused Palazzolo’s invitation to revisit its prior rulings that a regulation’s economic impact should be evaluated by considering its effect on the claimant’s entire parcel.212

Burling argues that the Court’s treatment of this parcel-as-a-whole rule “has been mixed, hopelessly contradictory, and defiant of synthesis,”213 but he greatly overstates the alleged confusion in the law [*PG96]on this score. In fact, the parcel-as-a-whole rule is one of the few firmly entrenched, bright lines in takings jurisprudence. The Court articulated this parcel-as-a-whole rule more than twenty years ago in Penn Central. There, the City of New York applied historic preservation laws to deny the owners of Grand Central Terminal permission to build an office building atop the terminal.214 The Court rejected the owners’ argument that takings analysis should focus solely on the air rights above the terminal, stating:

“Taking” jurisprudence does not divide a single parcel into discrete segments and attempt to determine whether rights in a particular segment have been entirely abrogated. In deciding whether a particular governmental action has effected a taking, this Court focuses rather . . . on the nature and extent of the interference with rights in the parcel as a whole—here, the city tax block designated as the “landmark site.”215

Because the owners could still operate the Terminal and the surrounding contiguous properties that they owned, the challenged regulation did not deny them all economically viable use of their entire parcel, and the Court rejected the takings claim.216

The Court has reaffirmed the parcel-as-whole rule time and again.217 The overwhelming majority of lower courts that have addressed the issue have followed Penn Central and other binding precedent to hold that the relevant parcel for takings analysis consists of at [*PG97]least all of the claimant’s contiguous property, not just the affected portion.218

In view of this long-standing precedent it is puzzling that Justice Kennedy, writing for the Palazzolo Court, would refer to the matter as a “difficult, persisting question.”219 Although Justice Kennedy cited cases applying the rule, he did not describe these cases as holding that courts should look to the parcel as a whole, but instead used more tepid language, stating that “[s]ome of our cases indicate that the extent of deprivation effected by a regulatory action is measured against the value of the parcel as a whole.”220 Justice Kennedy also cited to footnote seven of Lucas for the proposition that the Court “at times expressed discomfort with the logic of this rule.”221 He further observed that certain commentators have also criticized the parcel-as-a-whole rule.222 As Burling’s article portends, the plaintiff’s bar probably will use this discussion in an attempt to persuade lower courts to abandon the parcel-as-a-whole rule.

Several responses present themselves. First, the parcel-as-a-whole rule is based not on mere “indicat[ions]” as suggested by Justice Kennedy, but instead on long-standing, binding rulings promulgated by the Supreme Court, including Concrete Pipe & Products of California, Inc. v. Construction Laborers Pension Trust, a unanimous post-Lucas rul[*PG98]ing.223 In her dissent, Justice Ginsburg points out the majority’s failure to acknowledge Concrete Pipe.224 Burling tries to downplay the significance of Concrete Pipe by noting that it did not involve real property,225 but Concrete Pipe cites and relies on both Penn Central and Keystone, both real property cases, in its reaffirmation of the parcel-as-a-whole rule.226

Second, Justice Kennedy’s description of Lucas’s footnote seven is inaccurate, for footnote seven does not “express discomfort with the logic” of the parcel-as-a-whole rule. Indeed, it does not discuss the “logic” of the rule at all. Instead, footnote seven observes that the deprivation-of-all-economically-feasible-use rule does not, by itself, offer guidance on how to define the relevant parcel,227 and it then notes that the relevant parcel might be defined by considering either the affected portion or the parcel as a whole. Footnote seven then expresses disagreement with the particular relevant-parcel definition used by the New York Court of Appeals in Penn Central.228 It is noteworthy that the Lucas Court did not question its own use of the parcel-as-a-whole rule in its Penn Central ruling. Footnote seven then notes that uncertainty regarding the denominator has led to disparate results on occasion, and it suggests that state law might be relevant to the proper definition of the relevant parcel.229 However, footnote seven nowhere analyzes, much less criticizes, the “logic” of the parcel-as-a-whole rule.

Third, the discussion of the relevant-parcel issue by the Palazzolo majority is gratuitous dicta because the Palazzolo Court expressly declined to address the issue. So too is footnote seven of Lucas because, as indicated in that footnote, Lucas alleged a taking of his entire parcel.230

[*PG99] Finally, and most importantly, the Tahoe-Sierra Court resoundingly reaffirmed the parcel-as-a-whole rule, setting forth a comprehensive discussion of the decades of precedent that support the rule 231 and stating that the Court has “consistently rejected” any other approach.232 The Court rejected both geographic and conceptual severance, insisting that “[a]n interest in real property is defined by the metes and bounds that describe its geographic dimensions and the term of years that describes the temporal aspect of the owner’s interest.”233 Even the dissent acknowledges that the majority concludes that the parcel-as-a-whole rule is settled law,234 and thus there can be no question that Tahoe-Sierra puts to rest any confusion created by Palazzolo regarding the rule.

Conclusion

State and local officials won a clear victory with a holding that significantly cabins the scope of liability under the Lucas per se rule. On ripeness, the Court ruled for Palazzolo on the facts but reaffirmed its basic ripeness doctrine and the right of state and local officials to fashion their land-use procedures as they see fit. On post-enactment acquisition, the Court rejected a blanket rule of per se non-liability, but it recognized that regulations may serve as background principles where they are “derived from” a state’s legal tradition. Five Justices re-affirmed that pre-existing regulations are relevant to the issue of whether a non-per se Penn Central taking has occurred.

The State of Rhode Island is likely to prevail on remand, particularly given the trial court’s findings that the proposed fill would constitute a nuisance, the State’s compelling argument that the public-trust doctrine precludes liability, the absence of evidence as to the viability of Palazzolo’s beach club proposal, and the speculative nature of Palazzolo’s subdivision proposal. Regardless of the outcome on remand, however, Palazzolo stands not as a landmark victory for property owners, but instead as yet another modest, incremental development in takings jurisprudence, one from which both sides may draw support.

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