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Takings and judicial deference: takings law after the 2004-05 Supreme Court Term.

The 2004-05 United States Supreme Court term was one of the most significant in recent years for property rights decisions. Since the "bundle of rights" of property owners is at the heart of what appraisers value, three recent Supreme Court decisions are of more than a passing interest to appraisers. They also offer valuable insights into continuing and troubling intellectual schisms at the Court and markedly different judicial philosophies on such subjects as the role of precedent and when it should be overturned as well as the role of the Court versus Congress in deciding when a compensated taking is permissible.

Reading and analyzing the recent takings cases reveals an interesting patchwork of issues and philosophies at the Court, almost certain to change now with two vacancies:

* The Court, through a series of decisions including one this term, has effectively changed the language of the Fifth Amendment, which prohibits governmental takings except for public use and only if the property owner is justly compensated. "Public use" has now been abandoned by the Court in favor of the much broader concept of "public purpose."

* All three of this term's cases presented opportunities for the Court to reconsider precedent. The justices did so in only one case, but the philosophy for doing so in one case and not the others cannot be harmonized. The best that can be said is that "unwise" precedent that has not subsequently spawned wrong decisions might be reconsidered.

* The Court continues to retreat and defer to the legislative branch of government, including deferring to legislative determinations of what constitutes a "public purpose" under the Takings Clause of the Fifth Amendment. Juxtapose this with the right to privacy, which relies upon an interpretation of the Constitution's penumbra.

* Compared to many other rights in our constitutional structure, property rights clearly receive fewer judicial protections. Part of this is because they can be compensated. A large part of this, however, is due to the shift in judicial philosophy that other rights, such as the right against racial discrimination, are more deserving of a more searching judicial scrutiny.

* An assortment of factors govern takings. The paradigmatic taking is a direct government appropriation or physical invasion of private property. Then, there are regulatory takings. If a regulation goes "too far," it will be a taking. A regulation requiring a permanent physical invasion goes too far. A regulation that deprives the owner of all economically beneficial uses of the property goes too far. Other than this, regulatory takings analysis is governed by an amorphous set of factors, including the extent the regulation interferes with "investment-backed expectations." Although the Court had an opportunity to provide further guidance on how far is too far, it again avoided the issue.

* The Court has left intact a minefield that effectively prevents access to federal courts for Fifth Amendment takings claims where there are similar claims under state law that must be decided first. Litigants who have state law claims that could moot the federal controversy must first pursue those state claims without, at the same time, relying upon any takings law or precedent which, if adjudicated in the state court, could unknowingly, but conclusively, resolve the federal takings claim without ever getting into federal court.

Kelo v. City of New London

One of the most important and controversial decisions of the U.S. Supreme Court's 2004-05 term, and certainly the most important regarding property rights, was Kelo v. City of New London. (1) Unlike the other two closely-watched property rights cases of the term, Kelo did not disappoint in terms of an intellectual exchange of fire and display of ideology. It also revealed an interesting role reversal, with the most conservative justices arguing for an activist approach to overrule precedent. More fundamentally, however, the Kelo decision certainly reflects a high (or a low, depending upon your viewpoint) watermark with respect to the role of property rights in our constitutional structure, especially when viewed in an appropriate historical context in which property rights were, at one time, entirely determinative of the vesting and exercise of many other rights. Kelo makes clear that property rights are now a second, lower class of rights than other civil rights and liberties, particularly the right against racial discrimination, the guarantee of equal protection, and the right to vote. Property and property rights now can be taken, as they could before, with "just compensation," but what has been clearly delineated now is the almost negligible and deferential role federal courts will play under the Constitution when a legislative body, be it Congress or some local taxing authority, decides to take private property and give it to another private party so long as there is an incidental public benefit, such as hoped-for tax revenues. And, because legislative takings frequently focus on areas of towns or cities that are economically disadvantaged for a variety of reasons, Kelo also introduces another philosophical surprise, with so-called conservative justices expressing concern for the decision's impact on the economically deprived and politically underrepresented of the country.

From the standpoint of an appraiser, Kelo suggests a potential impact in the application of the highest and best use principle in condemnation and eminent domain cases involving distressed neighborhoods. What might be considered "reasonably possible" and "legally permissible" today is potentially more expansive than it was yesterday, thereby potentially helping the economically distressed, not hurting them.

Kelo Background

The detailed background and arguments of the case were laid out in the previous "Law and the Appraiser" (2) and will only be summarized here. In 2000, the City of New London, Connecticut, approved a development plan that was projected to produce 1,000 new jobs, increase tax and other revenues, and revitalize what everyone agreed was an economically distressed city. Pfizer had previously announced that it was building a huge pharmaceutical research facility right next to the development site. The development plan envisioned that private developers would finance and construct a hotel, a marina and support area, a boardwalk, and other amenities. The plan was approved by the city council and a development agency was created and given the power of eminent domain and condemnation. Nine homeowners owning 15 properties refused to sell, and the development agency instituted condemnation proceedings.

The New London Superior Court ruled that the taking of these homeowners' properties violated the "public use" restriction in the Fifth Amendment as it related to planned park areas and "marina support," but not as it related to properties located in a parcel that was to contain office space. On appeal, the Connecticut Supreme Court reversed the finding regarding the park and marina support areas, finding that these constituted a public use even though a private developer would own and develop them. Three dissenters on the court argued that the takings were for a public use, but they would have applied a heightened standard of review and required the city to adduce "clear and convincing evidence" that the economic benefits of the plan would in fact come to pass. The U.S. Supreme Court granted certiorari to determine whether a city's decision to take property for the purpose of economic development satisfies the "public use" requirement of the Fifth Amendment, which provides that "private property [shall not] be taken for public use, without just compensation."

Taking Property and Giving It to Another Private Party for Economic Development Is a "Public Use"

Relying upon a series of cases stretching back to the late 1800s when the Due Process Clause of the Fourteenth Amendment first made the Fifth Amendment applicable to state actions, the majority in Kelo abandoned the term "public use" in favor of the term "public purpose" The majority found that "use" by the public was a "difficult test to administer," inviting such questions as what proportion of the public need have access to the property and at what price (3) Instead, Justice Stevens, writing for the majority (with Justices Kennedy, Souter, Ginsburg, and Breyer joining), stated that the test had expanded over time. It was given a broad meaning to approve takings where manufacturers needed dams powered by water and flooded upstream areas, or where a mining company's aerial bucket line traversed land that it did not own, or where an owner of arid land was authorized to widen a ditch on a neighbor's property to permit a nearby stream to irrigate the owner's land. Under these and other precedents, Justice Stevens admitted that there is "no principled way of distinguishing economic development from the other public purposes that we have recognized." (4) "Quite simply, the government's pursuit of a public purpose will often benefit individual private parties," he further admitted, and it is not for the Court to say "that public ownership is the sole method of promoting the public purposes of community redevelopment projects." (5) He pointed out that the transferees in one prior case were other residents of Hawaii, and the transferee in another prior case was likely another department store owner. In the end, Justice Stevens simply felt bound by precedent. (6)

Such a broad interpretation was consistent with the proper judicial deference to legislative determinations of needs and policies, Justice Stevens concluded. "For more than a century, our public use jurisprudence has wisely eschewed rigid formulas and intrusive scrutiny in favor of affording legislatures broad latitude in determining what public needs justify the use of the takings power." (7) This was done in Berman v. Parker, (8) Justice Stevens wrote, in upholding a determination by Congress that all properties within a bounded area of Washington, DC, were "blighted" even though the particular department store that sued to block the taking was not. There, Justice Douglas wrote that "the Congress and its authorized agencies have made determinations that take into account a wide variety of values" and "lilt is not for us to reappraise them." (9) Similarly, in Hawaii Housing Authority v. Midkiff, (10) the Court approved the Hawaii legislature's action in breaking up a feudal, oligarchic land-ownership structure on the islands and redistributing those lands, for just compensation, to many private owners who occupied them as tenants. The social benefit of breaking up a land oligarchy satisfied the constitutional public use/public purpose requirement.

Accordingly, Justice Stevens wrote that the City of New London's determination that the area was "sufficiently distressed" to justify the redevelopment program, along with its "belief [that it] will provide appreciable benefits to the community, including--but by no means limited to-new jobs and increased tax revenue," was entitled to deference. (11) This was underscored by the "comprehensive character of the plan" and "the thorough deliberation that preceded its adoption." (12) Applying some form of heightened judicial review of the taking would "unquestionably" impose "significant impediment[s]" to the successful consummation of many urban renewal plans. (13) So would requiring a showing of a "reasonable certainty" that the expected public benefits will actually accrue. "When the legislature's purpose is legitimate and its means are not irrational, our cases make clear that empirical debates over the wisdom of taking-no less than debates over the wisdom of other kinds of socioeconomic legislation--are not to be carried out in the federal courts." (14) Accordingly, Justice Stevens concluded that "the plan unquestionably serves a public purpose" (15)

The Dissenters' Arguments. The dissenting opinions exposed once again some deep philosophic divisions within the Court. Justice O'Connor wrote a dissent in which Justices Rehnquist, Scalia, and Thomas joined. Justice Thomas also wrote a solo dissent. They both attacked the majority's broad reading of' "public use" to mean "public purpose," and the notion that deference to legislative determinations is due merely because "the needs of society have varied between different parts of the nation, just as they have evolved over lime in response to changed circumstances" Both dissents attacked the majority's public purpose test on four grounds. (16)

1. Lack of a Meaningful Limitation The dissenters argued that the term "public purpose" is so broad as to lack a meaningful limitation. Justice O'Connor wrote that taking ordinary private property from an ordinary private person who was using it in an ordinary way and giving it over to another private person who plans to use it in a different, but still ordinary, way should not be permitted merely because that new use is "predicted to generate some secondary benefit for the public--such as increased tax revenue, more jobs, maybe even aesthetic pleasing." With this as a test, she wrote, "nearly any lawful use of real private property can be said to generate some incidental benefit to the public." "Thus, if predicted (or even guaranteed) positive side-effects are enough to render the transfer from one private party to another constitutional, then the words 'for public use' do not realistically exclude any takings, and thus do not exert any constraint on the eminent domain power." "The trouble with economic development takings," she wrote, "is that private benefit and incidental public benefit are, by definition, merged and mutually reinforcing. In this case, for example, any boon for Pfizer or the plan's developer is difficult to disaggregate from the promised public gains in taxes and jobs." (17)

Justice Thomas attacked the majority's reluctance to "second-guess the policy wisdom of public works projects." Because the Court must make a threshold determination that the taking is not a purely private one, i.e., that it "rationally advance[s] the public interest," he wrote that the majority's test invited second-guessing. By contrast, "It is far easier to analyze whether the government owns or the public has a legal right to use the taken property than to ask whether the taking has a 'purely private purpose'-unless the Court means to eliminate public use scrutiny of takings entirely. Obliterating a provision of the Constitution, of course, guarantees that it will not be misapplied." (18)

Justice Thomas concluded that the Court has replaced the Public Use Clause with a "Public Purpose or perhaps a Diverse and Always Evolving Needs of Society Clause" that is satisfied so long as the purpose is legitimate and the means not irrational. This does not make common sense, he concluded, "and the Court has erased the Public Use Clause from our Constitution." (19)

Surprisingly, the majority virtually admitted the point because, in the words of Justice Stevens, there is "no principled way of distinguishing economic development from the other public purposes that we have recognized," (20) thus leaving readers to conclude that the lack of such a distinction clearly also means a lack of a meaningful limitation on its application.

2. Precedent Was Misapplied or Wrong

The two dissenting opinions disagreed about the proper role of precedent. Justice O'Connor argued that the decisions in Berman and Midkiff were still valid decisions; they were just being misused. Both involved pre-existing "affirmative harm" to the public that was eradicated by a transfer to a subsequent private owner. In Berman, it was the urban blight inside Washington, DC, and in Midkiff, it was the economic chokehold of an oligarchic land-ownership structure. "Because each taking directly achieved a public benefit, it did not matter that the property was turned over to private use. Here, in contrast, New London does not claim that Susette Kelo's and Withelmina Dery's well-maintained homes are the source of any social harm." (21) As a result, "if predicted (or even guaranteed) positive side-effects are enough to render transfer from one private party to another constitutional, then the words 'for public use' do not realistically exclude any takings, and thus do not exert any constraint on the eminent domain power." (22)

One would think that adherence to precedent would be something all justices, especially conservative ones, would get behind. Not so for Justice Thomas, however, perhaps the most conservative judge on the Court with the retirement of Justice O'Connor and the death of Chief Justice Rehnquist. He wrote: "When faced with a clash of constitutional principle and a line of unreasoned cases wholly divorced from the text, history, and structure of our founding document, we should not hesitate to resolve the tension in favor of the Constitution's original meaning," (23) thereby advocating the overthrow of Berman and Midkiff and likely other cases as well. Although he "share[s] the Court's skepticism about a public use standard that requires courts to second-guess the policy wisdom of public works projects," Justice Thomas argued that "[i]t is difficult to imagine how a court could find that a taking was purely private except by determining that the taking did not, in fact, rationally advance the public interest." (24)

3. Deference Not Due the Legislature

The dissenters forcibly argued that the majority's approach of deferring to the legislature essentially leaves the courts with no meaningful role to play in determining the propriety of any taking. They argued that it is improper to simply defer to the legislative judgment in a takings case by relying upon the principle of deference, which courts have employed in reviewing economic regulation since the New Deal. "We give considerable deference to legislature's determinations about what governmental activities will advantage the public. But were the political branches the sole arbiters of the public-private distinction, the Public Use Clause would amount to little more than hortatory fluff. An external, judicial check on how the public use requirement is interpreted, however limited, is necessary if this constraint on government power is to retain any meaning." (25)

Justice Thomas was more pointed and more direct, saying there was "no justification" for affording "almost insurmountable deference to legislative conclusions that a use serves a 'public use." (26) "We would not defer to a legislature's determination of the various circumstances that establish, for example, when a search of a home would be reasonable, or when a convicted double-murderer may be shackled during a sentencing proceeding without on-the-record findings, or when state law creates a property interest protected by the Due Process Clause." (27) "Something has gone seriously awry with this Court's interpretation of the Constitution. Though citizens are safe from the government in their homes, the homes themselves are not." (28)

In Justice Thomas's mind, it is simply wrong to equate the takings power as coterminous with the police power because a taking requires compensation, whereas no compensation is required for traditional uses of the regulatory, police power. "The question whether the State can take property using the power of eminent domain is therefore distinct from the question whether it can regulate property pursuant to the police power." (29)

4. Disproportionate Impact on the Poor

The dissenters argued that the result of this decision by a "liberal" block of justices will be to disadvantage the economically deprived and politically disadvantaged. Justice O'Connor wrote:
 Any property may now be taken for the benefit of
 another private party, but the fallout from this decision
 will not be random. The beneficiaries are
 likely to be those citizens with disproportionate influence
 and power in the political process, including
 large corporations and development firms. As
 for the victims, the government now has license to
 transfer property from those with fewer resources
 to those with more. (30)


Justice Thomas agreed, noting that poor communities "are not only systematically less likely to put their lands to the highest and best social use, but are also the least politically powerful. If ever there were justification for intrusive judicial review of constitutional provisions that protect 'discrete and insular minorities,' surely that principle would apply with great force to the powerless groups and individuals the Public Use Clause protects. The deferential standard this Court has adopted for the Public Use Clause is therefore deeply perverse." (31)

Some Explicit and Some Suggested Limitations on Kelo

What constitutional limitations are left in the area of takings that might produce indirect economic benefits for the general public? Not many. The only clear one on which all justices agreed was that "the sovereign may not take the property of A for the sole purpose of transferring it to another private party B, even though A is paid just compensation." (32) Thus, "the City would no doubt be forbidden from taking petitioners' land for the purpose of conferring a private benefit on a particular private party." (33) It is very hard to see how this will actually work in the future, however, since most large urban projects get to the point of condemning land only after it is clear there is private development support and, in many cases, a commitment to develop. About the only clear instance of an A to B transfer that would clearly violate Kelo would be where B asks a city to condemn A's property for a private use that creates no additional jobs and no additional tax revenue. Short of that, it is unclear where the line is to be drawn. Perhaps the test of forbidden transfers will be like the test for obscenity: I know it when I see it.

Justice Kennedy spent much of his concurrence trying to make up for what he perceived to be the obvious failure of the majority to lay out a rational test for when a transferee is really a "private party:' Beyond B simply being "Mr. Smith" or "Mrs. Jones," Justice Kennedy suggested that "[t]here may be private transfers in which the risk of undetected impermissible favoritism of private parties is so acute that a presumption (rebuttable or otherwise) of invalidity is warranted under the Public Use Clause" Thus, he suggested that "there may be categories of cases in which the transfers are so suspicious, or the procedures employed so prone to abuse, or the purported benefits are so trivial or implausible, that courts should presume an impermissible private purpose." "A court confronted with a plausible accusation of impermissible favoritism to private parties should treat the objection as a serious one and review the record to see if it has merit, though with the presumption that the government's actions were reasonable and intended to serve a public purpose." (34)

Justice O'Connor was not impressed with this as a limiting test because it does not specify "what courts should look for in a case with different facts, how they will know if they have found it, and what to do if they do not. Whatever the details of Justice Kennedy's as-yet-undisclosed test, it is difficult to envision anyone but the 'stupid staff[er]' failing it." (35)

Observations about Kelo

Kelo and Highest and Best Use. Kelo might have future impact on an appraiser's highest and best use analysis. That cornerstone analysis determines "[t]he reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, and financially feasible and that results in the highest value." (36) Kelo clearly opens a wider path to what is a "legal" use for purposes of the Fifth Amendment. For similar reasons, it also impacts what might be "reasonably probable" The result, from an appraisal standpoint, could be to add value to otherwise challenged properties--exactly the opposite of the concern expressed by the Kelo dissenters, who worried about exploitation of the poor.

Kelo: Right or Wrong? Kelo was one of those cases that arrived and left the scene with a high degree of polarity. It was a Category Four intellectual hurricane. In the political spectrum, property rights are and always have been sacrosanct to the average American, who assumes (wrongly) that property cannot be taken, period. Kelo touched people on an emotional level as few modern property rights cases have been able to do. Many state legislators were immediately spurred into action, introducing bills to curb the power of eminent domain and condemnation in light of the decision. (37) How one felt about the underlying issues before the Supreme Court decision likely did not change as a result of the decision itself.

The debate regarding the underlying issues in Kelo are not going to go away soon. Dana Berliner of the Castle Coalition estimates that, from 1998 through 2002, there were more than 10,000 instances of filed or threatened condemnations for private parties. (38) Some of the current controversies described by the Castle Coalition indicate controversies that have continued for many years, some of which have elements of precisely the type of underprivileged class disenfranchisement decried by the Kelo dissenters:
 Alhambra, California--The city has declared at least
 60 businesses "blighted," including the Museum of Contemporary
 Arab Art, in order to pave the way for upscale
 condominiums and shops.

 Daytona Beach, Florida--The city is condemning
 three more boardwalk businesses to clear the way for
 oceanfront condominiums, retail, and restaurants that
 will profit off the same location. Officials are basing
 the condemnations on a blight study from more than
 20 years ago.

 Hollywood, Florida--On June 21, 2005, the city voted
 to condemn David Mach's one-story Art Deco style
 building that houses three small businesses for a private
 developer's condominium project on Young Circle.
 The building was the first property Mach's father, an
 immigrant from Budapest who recently passed away,
 ever purchased. David has said of his father, "He always
 wanted to buy because be figured in America, they
 couldn't take it" The city is also condemning a Bank of
 America parking lot for a condominium project.

 Baltimore, Maryland-The city is in the midst of condemning
 a neighborhood of hundreds of homes near
 the Johns Hopkins medical campus in East Baltimore
 into a biotech park along with new homes, retail, and
 office space.

 Boston, Massachusetts--Council members are calling
 for the condemnation of the Pritzker family's South
 Boston waterfront property, Fan Pier. The city preemptively
 lined up a developer for the site, with plans to
 build a harborfront neighborhood.

 Brooklyn Center, Minnesota--The 8.5-acre Hmong
 American Shopping Center, built in the late 1950s and
 significantly revitalized by Cha Fong Lee, was condemned
 in March for unknown future private development.
 Lee provided the city with three of his own redevelopment
 plans for the property, but to no avail. He is
 now fighting the condemnation in court.

 New York, New York--Developer Forest City Ratner
 wants the city to help him acquire 21 acres of homes
 and businesses in a historic Brooklyn neighborhood for
 a new Nets basketball stadium and surrounding residential,
 retail, and office development. 11 properties
 have been seized so far, and many others sold under
 the threat of eminent domain.

 Freeport, Texas--Hours after the Kelo decision, officials
 in Freeport began legal filings to seize the waterfront
 property of two seafood companies to make way for an
 $8 million private boat marina. The Texas legislature is
 working on bills to reform eminent domain, but it is
 not clear that these will pass before the legislature goes
 out of session or that they will do anything to prevent
 these condemnations. (39)


To be sure, many state courts have rejected the principles underlying Kelo. One of the most interesting was Southwestern Illinois Development Authority v. National City Environmental, L.L.C., (40) in which the Illinois Supreme Court struck down an attempt to condemn an auto scrap yard and landfill in favor of a neighboring racetrack that wanted to build a parking lot. The Illinois Supreme Court had upheld the taking in 2001 but, after a new court was elected, reversed itself, holding that "revenue expansion alone does not justify an improper and unacceptable expansion of the eminent domain power of the government." (41)

Nevertheless, the selections from the Castle Coalition's list of pending controversies also underscore an unmentioned but somewhat obvious fact. Few local development authorities have the economic ability, let alone the political will, to exercise their taxing authority to undertake modern and costly urban renewal and rejuvenation projects using only the public dollar. The means of accomplishing the large-scale urban renewal or development project now rests almost exclusively within the hands of classic private capitalists working with local authorities. It is frequently said that the Supreme Court justices are very aware of political opinions as well as economic realities. Had the dissenters in Kelo prevailed, there might have been some serious questions about the means and availability of capital to finance large-scale urban projects. From that perspective, Kelo should not have been much of a surprise.

Property Rights, Like Economic Rights, Now Occupy a Back Seat to Other Rights Despite Historically Being Accorded the Highest Respect and Value in Our System of Government. Kelo will be discussed from a historical perspective for many years because of its significance in reducing property rights to a "second class" of rights behind political rights and rights against racial discrimination.

Our national attention deficit disorder combined with our lack of appreciation for our own history deprives Kelo of its proper context. Take, for example, the role of property and property rights in our nation's history. The United States Constitution was ratified in 1787. At that time, individual states each set the criteria for who could vote. At the time of ratification, white, protestant males who were property owners could vote. (42) It was not until 1792 that New Hampshire eliminated property ownership requirements, expanding the number of white, protestant males who could vote. It was not until 1856 that property ownership was totally eliminated by the states as a voting prerequisite. (43) Thus, roughly a quarter of this country's history contained a requirement that only property owners could vote. Such was the importance of property and property rights, the theory being that property owners would be more interested in how government was run and in it being fiscally responsible. The theory also was that potential voters would have an incentive to acquire property in order to participate in the franchise.

As Justice Thomas observed in his Kelo dissent, eminent legal scholar William Blackstone wrote that the English common law had such a high regard for private property "that it will not authorize the least violation of it; no, not even for the general good of the whole community." (44) And Justice O'Connor quoted Alexander Hamilton to the effect that one of the great objects of government is the security of property. (45) The taking allowed in Kelo could not have been envisioned by either Blackstone or Hamilton.

Just 90 years ago, a controversial theory was advanced that the framers of the Constitution actually wrote the document primarily to protect and enshrine their property rights. In 1915, Beard published a theory that the founders drafted the Constitution not to promote democracy but, instead, to frustrate the populace and the popular will by protecting property rights and those that owned them. (46) It was not until 1954 that Beard's "evidence" of property rights elitism in the Constitution was almost conclusively refuted when Berman approved the taking of a perfectly fine department store in Washington, DC, as part of an urban renewal project, and two years later when Brown published a critical analysis of Beard's theory. (47)

Kelo demonstrates how property rights, once deeply intertwined with political and essential electoral rights, have been all but divorced from those concepts. Along with the voting rights, civil rights, and equal rights reforms of the 1960s and 1970s came a series of Supreme Court decisions that set in place certain standards of judicial review of legislative and administrative actions. For instance, in Loving v. Virginia, (48) the Supreme Court struck down a statutory scheme by Virginia to prevent interracial marriages. The Court ruled that such racial classifications would be subjected to the "most rigid scrutiny" and must be shown necessary to accomplish a permissible state objective.

The property rights in Kelo join a variety of other economic rights in terms of judicial protection or the lack thereof. Thus, in Dandridge v. Williams, (49) the Court refused to apply strict scrutiny to a law that imposed a maximum grant of $250 per month per family for welfare benefits regardless of family size. Instead, the Court employed a test that such legislation was permissible if it had a reasonable basis, holding that stricter scrutiny would simply result in the Court substituting its opinion for that of the legislature as to what constitutes wise economic or social policy. Similarly, the Court rejected a "fundamental interest" in "decent shelter" and "possession of one's home" in Lindsey v. Normet. (50) That decision sustained a statute prescribing judicial procedures for eviction of tenants for nonpayment of rent.

Thus, once a prerequisite for participating in our democracy, property is no longer a voting prerequisite and, indeed, it can be taken (with payment of just compensation) and simply given to another private party so long as there is some rational basis for the underlying legislative determination that it might result in a public benefit. The Kelo majority opinion, however, does not provide a definition of "rational basis" That is likely why the majority refused to answer what is perhaps the most damning criticism leveled against it by the dissenters. As Justice O'Connor opined, "Under the banner of economic development, all private property is now vulnerable to being taken and transferred to another private owner, so long as it might be upgraded--i.e., given to an owner who will use it in a way that the legislature deems more beneficial to the public--in the process." (51) "The specter of condemnation hangs over all property. Nothing is to prevent the State from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory." (52)

The Sum of All Deference. In addition to the direct taking involved in Kelo, a regulation can result in a taking in two ways. The first is a per se taking where a government restriction totally eliminates the use or value of the property. (53) A more common second category of regulatory takings involves a regulation that interferes with an investment but does not totally destroy it. Here, courts employ the test of Penn Central Transportation Co. v. New York City, (54) which balances the degree of interference with investment-backed expectations and its "character." It is hard to see how Kelo's deference, combined with the deference courts give to the legislature in exercising its regulatory power, will impact future decisions on when a regulation has gone "too far" and has effectuated a taking. If courts under Kelo are now to defer the constitutional question of "public use" to the legislature, the trend may expand, so that the courts defer to the legislature's determination that a regulation does not effect a taking. This would be consistent with the voluntarily diminished role that courts have accepted in the takings controversy. (55)

Not Quite Kelo: The Court's Other Takings Cases

While a divided court was a key feature of the Kelo decision, the two other takings cases from the most recent term have yielded unanimous decisions and little public outcry, despite the fact that all three decisions create obstacles for litigants challenging takings in federal court. In both Lingle v. Chevron USA, Inc. (56) and San Remo Hotel, L.P. v. City and County of San Francisco, (57) a unanimous Court rejected takings challenges, restricting the circumstances in which an owner of property will be able to obtain relief in federal court.

Lingle v. Chevron USA, Inc.

Lingle arose out of the Court's regulatory takings jurisprudence. Since Justice Holmes first recognized the possibility of a regulatory taking in Pennsylvania Coal Co. v. Mahon, (58) the doctrine has perplexed courts and commentators as they have tried to decipher what separates permissible regulations from those that go too far. (59) Put another way, when is the burden of regulation placed on one person's property so great and pervasive that it should be borne by all as a taking? Given that regulatory takings challenges constitute the bulk of modern takings cases, regulated entities must have been hoping that the Court would use Kelo to signal greater judicial review in the property rights area in general and Lingle as a means of reining in regulatory takings in particular. They were sure to be disappointed, as the Court did neither.

The Lingle case involved Chevron's challenge to a Hawaii statute limiting the amount of rent the oil company could charge a lessee-dealer gas station. (60) Hawaii's Act 257 prohibited oil companies from charging lessee-dealers more than 15% of the dealer's gross profits from gasoline sales plus 15% of gross sales of other products. (61) The parties stipulated that the Act reduced by about $207,000 per year the aggregate rent that Chevron could otherwise charge 11 of its 64 lessee-dealer stations. On the other hand, under the statute Chevron could collect more rent than it would otherwise charge at its remaining 55 lessee-dealer stations. Chevron claimed that the statute's rent cap provision effected a taking of its property in violation of the Fifth and Fourteenth Amendments. Chevron characterized the statute's effect as an unconstitutional taking because it failed to substantially advance a legitimate state interest. Hawaii's purported state interest was to prevent concentration of the retail gasoline market and resultant high prices for consumers. (62) Hawaii maintained that the legitimacy of a regulation is not part of classic takings analysis. (63)

Certiorari was granted by the Court on the question of whether a regulation must "substantially advance" state interests or else result in a compensable taking. This gave the Court the opportunity to address whether a rent cap that causes measurable loss to a regulated party is a taking or what level of scrutiny is appropriate in examining the purpose behind a taking. A unanimous Court ducked the issue, however, and backtracked 25 years to extricate takings analysis from a due process test that had wormed its way into the doctrine. In doing so, Justice O'Connor, writing for the Court, purported to clarify the function of the Takings Clause. The clause, she said, "does not prohibit the taking of private property, but instead places a condition on the exercise of that power." (64) It is not designed "to limit the governmental interference with property rights per se, but rather to secure compensation in the event of otherwise proper interference amounting to a taking." (65)

The Court then moved on to discuss the "substantially advances" language that had been read for over two decades to announce a wholly independent regulatory takings test. (66) This language found its roots in Agins v. City of Tiburon, a case that was decided 25 years earlier. (67) In that case, the Court declared that applying "a general zoning law to particular property effects a taking if the ordinance does not substantially advance legitimate state interests." (68) Although this language had been construed for many years as part of a regulatory takings analysis, the Lingle court concluded that it "prescribes an inquiry in the nature of a due process, not a takings, test," and that it had "no proper place in our takings jurisprudence." (69) The Court further stated that "[t]he 'substantially advances' inquiry reveals nothing about the magnitude or character of the burden a particular regulation imposes upon private property rights." (70) Because the "substantially advances" test reveals nothing about the actual burden imposed on property rights or how that burden is allocated, it cannot tell courts when justice might require the burden to be spread among taxpayers. (71) The Court hastened to add that its rejection of the "substantially advances" formula did not require it to disturb any other prior holdings, given that it had generally assumed the validity of takings under the formula and upheld them. (72)

In considering the propriety of substantive review of regulations in the takings context, the Court declined to impose heightened scrutiny, essentially deferring to the judgment of the regulators. (73) Inquiring into a regulation's underlying validity, the Court said, is logically prior to and distinct from the question of whether a regulation effects a taking. (74) However, Justice Kennedy's concurrence demonstrates that some degree of review remains available under the due process clause. (75) Unfortunately for regulated entities, though, courts need only ask whether the regulation is so arbitrary or irrational as to violate due process, (76) a standard that does very little to rein in the discretion of the governing bodies empowered to pass such regulations. On the other hand, if a regulation is arbitrary and capricious, it is invalid and, therefore, cannot constitute a valid taking.

Interestingly, the deference given to regulators in Lingle did not appear to trouble the Court's more conservative bloc as it did in Kelo, where they objected to deferring to the legislature's determination about what constituted a "public use." (77) They likely remain unconcerned about eschewing substantive review of regulations under the Takings Clause for a couple of reasons. One is that for 70 years the Court has deferred to the legislature about the wisdom of a regulation but only recently to the legislature's interpretation of a clause in the Constitution. Consistent with this, the Takings Clause did not originally protect against regulatory takings; instead, it focused exclusively on tangible property, like realty and personalty. (78) Moreover, deference is consistent with federalism principles because it leaves states free to regulate without the threat of federal interference.

Proceedings in the lower court demonstrated how difficult applying the "substantially advances" test can be. At the district level, both Chevron and Hawaii called expert witnesses to testify regarding the effect that the rent control provision would have on gas prices. (79) The district court found Chevron's witness to be more persuasive in predicting that oil companies would raise wholesale gasoline prices to offset any rent reductions, and thus held that the regulation would not substantially advance any state interest. (80) Requiring federal courts to choose between competing experts and speculate about the future success of a regulation is viewed as unduly meddlesome in state affairs. Thus, the conservative justices could easily get behind the Court's rejection of the "substantially advances" test.

Although the Court answered the question of whether a potential regulatory taking needs to advance a substantial government interest, the question it chose to avoid is one of the case's distinguishing features. In the end, the Court remanded the more difficult regulatory takings inquiry--whether or not the regulation in question is, in fact, a taking-back to the lower court for further proceedings consistent with its opinion. (81) Before doing so, the Court observed that "the rub" of the regulatory takings doctrine is "how to discern how far is 'too far,'" and added that "government regulation-by definition-involves the adjustment of rights for the public good." (82) Proving that the regulation in question goes too far will be a difficult task for Chevron given that federal courts recognize only two categories of per se regulatory takings (83) and otherwise resort to a balancing test (84) that is usually fatal to plaintiffs.

It will be interesting to see how the lower court reaches a conclusion on this issue. Even though the Lingle decision has not caused an uproar like Kelo, the end result is the same: plaintiffs challenging takings now have a tougher burden to bear. It is far easier for the government to defend the rationality of a regulation than it is for the government to prove that it "substantially advances" a state interest.

San Remo Hotel, L.P. v. City and County of San Francisco

The San Remo decision, handed down just three days before Kelo, disposed of a plaintiff's challenge under the Takings Clause of the Constitution on narrow procedural grounds. A case with a long procedural history stretching over 12 years, San Remo involved the intersection of numerous doctrines including exhaustion, ripeness, and abstention, as well as the federal "full faith and credit" statute. The Court's holding that claims under the Takings Clause did not warrant an exception to the full faith and credit statute will likely prevent a class of litigants from having their day in federal court. Chief Justice Rehnquist's concurrence suggested that he would reconsider that whole line of cases, but his death now casts doubt that such a review and reversal will happen in the near future.

The San Remo Hotel owners challenged a $567,000 "in lieu" fee assessed against them under a city ordinance prohibiting the conversion of residential hotel rooms into tourist rooms in order to provide housing for elderly, disabled, and low-income persons. (85) Hotel owners could convert residential units into tourist units only if they had obtained a conversion permit. Such permits were available to owners constructing new residential units, rehabilitating old ones, or paying an "in lieu" fee into the city's Residential Hotel Preservation Fund Account. (86)

The San Remo Hotel owners first filed suit in federal court in 1993, asserting both facial (i.e., the ordinance on its face is invalid) and as-applied (i.e., as applied to me under these circumstances, the ordinance is invalid) challenges to the ordinance. (87) The district court rejected the facial challenge and found the as-applied challenge unripe under Williamson County, a previous case holding that takings claims are not ripe until a state fails to provide adequate compensation for the taking. (88) Under Williamson County, then, a claimant must seek and be denied compensation by the state in order to pursue a federal claim. (89) On appeal, the Ninth Circuit abstained from deciding the facial challenge while affirming the district court's holding that the as-applied challenge was unripe. (90) The Ninth Circuit added that San Remo Hotel owners could reserve the federal takings issue in state court and refile it in federal court when it became ripe. (91)

Upon bringing their claims back to state court, the San Remo Hotel owners did not fare well. The state court upheld the city ordinance on its face and as-applied. (92) While in state court, San Remo Hotel owners attempted to litigate the state takings claim while reserving the federal takings claim. When the case reached the California Supreme Court, it initially noted that the hotel owners had reserved their federal causes of action, but observed that the Takings Clause of the California Constitution had been construed congruently with the federal clause. (93) Accordingly, the California Supreme Court analyzed San Remo's takings claim under the decisions of the United States Supreme Court as well as its own relevant decisions, finding there was no taking. (94)

After losing their facial and as-applied challenges in California's courts, San Remo Hotel owners returned to federal court only to find themselves the victim of a procedural catch-22--the district court held that the hotel owners' attack on the ordinance was precluded because it had already been litigated in state court. (95) A federal full faith and credit statute implemented the general rule "that parties should not be permitted to relitigate issues that have been resolved by courts of competent jurisdiction." (96) Since California takings law proved to be coextensive with federal law, the statute required preclusion, so the Court had only one narrow question to decide: "whether [to] create an exception to the full faith and credit statute ... in order to provide a federal forum for litigants who seek to advance federal takings claims that are not ripe until the entry of final state judgment denying compensation." (97)

To support their position that an exception was warranted, the San Remo Hotel owners relied on two cases: England v. Louisiana State Board of Medical Examiners (98) and a Second Circuit case, Santini v. Connecticut Hazardous Waste Management Service. (99) In England, the Supreme Court held "that when a federal court abstains from deciding a federal constitutional issue to enable the state courts to address an antecedent state-law issue, the plaintiff may reserve his right to return to federal court for the disposition of his federal claims." (100) However, the San Remo Court clarified that the England holding does not apply to cases in which the federal issue is "functionally identical" to an issue already decided in state court. (101)

As for Santini, the Court discredited the Second Circuit's holding that "parties 'who litigate state-law takings claims in state court involuntarily' pursuant to Williamson County cannot be precluded from having those very claims resolved 'by a federal court,'" as being based on faulty assumptions. (102) First, the Second Circuit assumed that plaintiffs have a right to vindicate their federal claims in a federal forum, an argument that has been repeatedly rejected by the Supreme Court. (103) The Santini case also relied on an assumption that courts can freely create exceptions to the full faith and credit statute, but the Supreme Court maintained that such exceptions are only justified where consistent with the clearly manifested intent of Congress. (104) Because Congress had expressed no intention to exempt takings cases from full faith and credit requirements, plaintiffs could not bring a federal challenge that had already been decided by state courts "fully competent to adjudicate constitutional challenges to local land-use decisions." (105)

Although this holding could potentially block large numbers of litigants' access to federal courts, the effects of the decision may not be so drastic. First, given the facts of this case, the hotel owners could have accessed a federal court had they not pursued the state takings claim. That is, had the hotel owners limited their state court proceedings to the antecedent writ of mandate issue, they could have insulated their federal challenge from preclusion. (106) As the Court observed, by pursuing the state takings claim "petitioners effectively asked the state to resolve the same federal issues they asked it to reserve." (107) In other words, the Court did not hold that the plaintiff had no right to reserve the issue in the first place--it simply held that the hotel had failed to reserve it.

A second feature of the San Remo case that may narrow its effect is Chief Justice Rehnquist's concurrence, in which he expressed willingness to reconsider the Williamson County case. The chief justice conveyed uncertainty about the correctness of Williamson County's requirement that claimants must seek and be denied compensation in state court before bringing a federal takings claim. (108) Although he had signed on to the Court's opinion, he could not explain why federal courts "should hand authority over federal takings claims to state courts, based simply on their relative familiarity with local land-use decisions and proceedings, while allowing plaintiffs to proceed directly to federal court in cases involving, for example, challenge to municipal land-use regulations based on the First Amendment." (109) In short, he wrote, "the affirmative case for the state-litigation requirement has yet to be made." (110) Chief Justice Rehnquist observed that since Williamson County was decided, it had created "some real anomalies," justifying reconsideration of the case. Among these anomalies is the fact that the case "all but guarantees that claimants will be unable to utilize the federal court to enforce the Fifth Amendment's just compensation guarantee." (111) Because the justifications for the state-litigation requirement are suspect, while the requirement's impact on plaintiffs is dramatic, Chief Justice Rehnquist encouraged the Court to reconsider the issue in an appropriate case. (112) His death leaves great uncertainty that anyone will pick up this intellectual mantle.

While the San Remo case could be characterized as a dramatic denial of federal access for some takings claimants, in reality, the most that can be said about the case is that its effect remains uncertain. Because the holding applied narrowly to a distinctive case with a complicated procedural history and relied heavily on a precedent whose future validity is in question, it is a far more benign case than the Kelo bombshell or the Lingle decision, which outright rejected analysis that had persisted for a quarter of a century.

(1.) U.S. Supreme Court Case No. 04-108, 125 S. Ct. 2655 (2005), 2005 WL 1469529 (Stevens, J.) (hereafter, "Kelo, 125 S. Ct. at--.").

(2.) Hugh J. Totten, "U.S. Supreme Court Tackles Three Takings Cases That Could Chart New Directions for Eminent Domain," The Appraisal Journal (Spring 2005): 136-145.

(3.) Kelo, 125 S. Ct. at 2662.

(4.) Kelo, 125 S. Ct. at 2665.

(5.) Kelo, 125 S. Ct. at 2666.

(6.) "Because over a century of our case law interpreting [the Fifth Amendment] dictates an affirmative answer [to whether the proposed condemnations constitute a public use], we may not grant petitioners the relief that they seek." Kelo, 125 S. Ct. at 2668.

(7.) Kelo, 125 S. Ct. at 2664.

(8.) 348 U.S. 26 (1954).

(9.) Id. at 33.

(10.) 467 U.S. 229 (1984).

(11.) Kelo, 125 S. Ct. at 2665.

(12.) Id.

(13.) Kelo, 125 S. Ct. at 2668. In his concurrence, Justice Kennedy explained that "deference" means that a taking will be upheld as consistent with the Public Use Clause as long as it is "rationally related to a conceivable public purpose," something that "echoes the rational-basis test used to review economic regulation under the Due Process and Equal Protection Clauses." Kelo, Slip Op., 2005 WL 1469529 at *10 (Kennedy, J., concurring).

(14.) Kelo, 125 S. Ct. at 2667, quoting Midkiff, 467 U.S. at 242.

(15.) Kelo, 125 S. Ct. at 2665.

(16.) Justices O'Connor and Thomas both advanced a fifth ground that is of less significance to appraisers--a literal interpretation of the words of the Constitution: "When interpreting the Constitution, we begin with the unremarkable presumption that every word in the document has independent meaning, 'that no word was unnecessarily used, or needlessly added.'" Kelo, 125 S. Ct. at 2672 (O'Connor, J., dissenting). Justice Thomas expounded on this "use" argument by relying on dictionaries from the time of the founding that defined "use" with the "act of employing," which, in this case, was being done not by the public but by a private party. He also noted that the Framers specifically wrote "for public use" in the Fifth Amendment and "for the public welfare" elsewhere in the Constitution, leading Justice Thomas to conclude that the two phrases have much different meanings and implications. "The Constitution's text, in short, suggests that the Takings Clause authorizes the taking of property only if the public has a right to employ it, not if the public realizes any conceivable benefit from the taking." Kelo, 125 S. Ct. at 2680 (Thomas, J., dissenting).

(17.) Kelo, 125 S. Ct. at 2675 (O'Connor, J., dissenting).

(18.) Kelo, 125 S. Ct. at 2686 (Thomas, J., dissenting).

(19.) Kelo, 125 S. Ct. at 2677-78 (Thomas, J., dissenting).

(20.) Kelo, 125 S. Ct. at 2665.

(21.) Kelo, 125 S. Ct. at 2676 (O'Connor, J., dissenting) (emphasis original).

(22.) Id.

(23.) Kelo, 125 S. Ct. at 2687 (Thomas, J., dissenting).

(24.) Id.

(25.) Kelo, 125 S. Ct. at 2673 (O'Connor, J., dissenting).

(26.) Kelo, 125 S. Ct. at 2684 (Thomas, J., dissenting).

(27.) Id.

(28.) Kelo, 125 S. Ct. at 2685 (Thomas, J., dissenting).

(29.) Id.

(30.) Kelo, 125 S. Ct. at 2677 (O'Connor, J., dissenting).

(31.) Kelo, 125 S. Ct. at 2687 (Thomas, J., dissenting).

(32.) Kelo, 125 S. Ct. at 2661. Justice Kennedy concurred: "The determination that a rational-basis standard of review is appropriate does not, however, alter the fact that transfers intended to confer benefits on particular, favored private entities, and with only incidental or pretextual public benefits, are forbidden by the Public Use Clause." Kelo, 125 S. Ct. at 2669 (Kennedy, J., concurring).

(33.) Id.

(34.) Kelo, 125 S. Ct. at 2670 (Kennedy, J., concurring).

(35.) Kelo, 125 S. Ct. at 2675 (O'Connor, J., dissenting), citing Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1025-26 n.12 (1992). Nevertheless, Justice Kennedy did recount the things that he found persuasive about the process that was employed by New London and the private development agency:
 "The trial court considered testimony from government officials and
 corporate officers; documentary evidence of communications between
 these parties; respondents awareness of New London's depressed
 economic condition and evidence corroborating the validity of this
 concern; the substantial commitment of public funds by the State
 to the development project before most of the private beneficiaries
 were known; evidence that respondents reviewed a variety of
 developments plans and chose a private developer from a group of
 applicants rather than picking out a particular transferee
 beforehand; and the fact that the other private beneficiaries of
 the project are still unknown because the office space proposed
 to be built has not yet been rented." Kelo, 125 S. Ct. at 2669
 (Kennedy, J., concurring).


This still did not impress Justice O'Connor as a meaningful test:
 "If legislative prognostications about the secondary public
 benefits of a new use can legitimate a taking, there is
 nothing in the Court's rule or in Justice Kennedy's gloss on
 that rule to prohibit property transfers generated with less
 care, that are less comprehensive, that happen to result from
 less elaborate process, whose only projected advantage is the
 incidence of higher taxes or that hope to transform an already
 prosperous city into an even more prosperous one." Kelo, 125
 S. Ct. at 2676 (O'Connor, J., dissenting).


(36.) Appraisal Institute, The Appraisal of Real Estate, 12th ed. (Chicago: Appraisal Institute, 2001), 305.

(37.) See Emily Bazar, "States Move to Protect Property," USA Today, August 2, 2005, http://www.usatoday.com/news/nation/2005-08-02-eminent-domain_x.htm (recounting changes in the laws of Alabama and Delaware since Kelo and proposed changes in at least eight other states); Tresa Baldas, "States Ride Post-'Kelo' Wave of Legislation," The National Law Journal (August 2, 2005), http://www.law.com (recounting that more than 70 bills were introduced in 28 states to change the law post-Kelo).

(38.) Dana Berliner, Public Power, Private Gain: A Five-Year, State-By-State Report Examining the Abuse of Eminent Domain (Washington, DC: Castle Coalition, 2003), available at http://www.castlecoalition.org/report/.

(39.) http://www.castlecoalition.org/current_controversies/index.asp. These examples were selected and, in some cases, edited from among the many that are published on the Castle Coalition Web site.

(40.) 199 Ill.2d 225, 768 N.E.2d 1 (Ill. 2002).

(41.) 199 Ill.2d at 241, 768 N.E.2d at 10-11 (2002). See also Aaron v. Target Corp., 269 F. Supp.2d 1162 (E.D. Mo. 2003) (enjoining a tenant's efforts to condemn a landlord's property when that tenant could not expand its store on the terms it desired); 99 Cents Only Stores v. Lancaster Redevelopment Agency, 237 F. Supp.2d 1123 (C.D. Cal. 2001); and Cottonwood Christian Center v. Cypress Redevelopment Agency, 218 F. Supp.2d 1203 (C.D. Cal. 2002).

(42.) ACLU, "Voting Rights Act Timeline," American Civil Liberties Union, March 4, 2005, http://www.aclu.org/VotingRights/VotingRights.cfm?lD=17621&c=32&.

(43.) Id.

(44.) Kelo, 125 S. Ct. at 2680 (Thomas, J., dissenting), quoting 1 Blackstone 135.

(45.) Kelo, 125 S. Ct. at 2672 (O'Connor, J., dissenting).

(46.) Charles A. Beard, An Economic Interpretation of the Constitution of the United States (New York: Macmillan, 1913, 1935).

(47.) Robert E. Brown, Charles Beard and the Constitution: A Critical Analysis of "An Economic Interpretation of the Constitution" (Princeton: Princeton University Press, 1956). A series of essays published in 2001 probably brought the end to Beardian concepts. See Shlomo Slonim, Framers' Construction/Beardian Deconstruction: Essays on the Constitutional Design of 1787 (New York: Peter Lang Publishing, 2001).

(48.) 388 U.S. 1 (1967).

(49.) 397 U.S. 471 (1970).

(50.) 405 U.S. 56 (1972).

(51.) Kelo, 125 S. Ct. at 2671 (O'Connor, J., concurring).

(52.) Kelo, 125 S. Ct. at 2676 (O'Connor, J., dissenting).

(53.) Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992). Here, the property owner sued because of regulations imposed after the purchase of property. The state of South Carolina passed a Beachfront Management Act to control sand erosion, effectively prohibiting the landowner from rebuilding his home, which was destroyed by Hurricane Hugo. The Supreme Court decision, written by Justice Antonin Scalia, concluded that the state could not impose new restrictions on a property without just compensation unless the proposed construction was found to be a public nuisance. He further wrote that compensation is due only when a regulation deprived a landowner of all property value. This case left unanswered the question, when is a regulation so extreme that it constitutes a taking of property?

(54.) 438 U.S. 104, 124 (1978).

(55.) This may explain the government's near-perfect litigation track record involving the federal Endangered Species Act. So far, only one of the twelve reported decisions involving the Act has found a taking. Robert Meltz, The Endangered Species Act and Claims of Property Rights "Takings," Congressional Research Service Report RL31796 (updated March 9, 2005), The Library of Congress.

(56.) 125 S. Ct. 2074 (2005).

(57.) 125 S. Ct. 2491 (2005).

(58.) 260 U.S. 393, 415 (1922).

(59.) See for example Matthew P. Harrington, Regulatory Takings and the Original Understanding of the Takings Clause, 45 Win. & Mary L. Rev. 2053, 2054 (2004) (discussing the confusion generated by Holmes's Mahon opinion).

(60.) Id. at 2078.

(61.) Id.

(62.) Id. at 2079.

(63.) Lingle, Pet. 6r. at *11.

(64.) Id. at 2080 (quoting First English Evangelical Lutheran Church of Glendale v. County of Los Angeles, 482 U.S. 304, 314 (1987)).

(65.) Id. (emphasis in original). This is an interesting description of the Takings Clause by Justice O'Connor, particularly since she so forcefully argues for using the Takings Clause to limit at least some types of governmental interference in Kelo.

(66.) Id. at 2082.

(67.) 447 U.S. 255 (1980).

(68.) Id. at 260.

(69.) 125 S. Ct. 2083.

(70.) Id. at 2084 (emphasis in original).

(71.) Id.

(72.) Id. at 2085-86.

(73.) Outside of regulatory takings context, substantive review is limited to the public use inquiry that was at issue in Kelo. Given the Court's decision in that case, one could argue that the definition of public use/public purpose has expanded so far as to preclude any meaningfull substantive review of the takings themselves, even when they involve real property.

(74.) 125 S. Ct. at 2084.

(75.) Chevron had previously dismissed its due process claim without prejudice, so the oil company could still pursue a challenge in that area. See Id. at 2087.

(76.) Id.

(77.) Justice O'Connor's spirited dissent maintains that the public use requirement imposes a basic limitation on takings and circumscribes the scope of the eminent domain power. Kelo, 125 S. Ct. at 2672. She further insists that an external, judicial check "is necessary if this constraint on government power is to retain any meaning." Id.

(78.) See Harrington, supra note 59. The Court recognized that pre-Mahon, the general consensus was that the Takings Clause applied only to direct appropriations of property, or the functional equivalent of a practical ouster of the owner's possession. 125 S. Ct. at 2081.

(79.) Id. at 2080.

(80.) Id.

(81.) Id. at 2087.

(82.) Id. at 2081.

(83.) First, if the government "requires an owner to suffer a permanent physical invasion of her property--however minor--it must provide compensation." Id. An example of such a taking would be a law requiring landlords to permit the installation of cable facilities in apartment buildings. Id. A second category of per se takings occurs when a regulation completely deprives "an owner of all economically beneficial use of her property." Id. (emphasis in original).

(84.) Courts have recognized several factors that have particular significance in this inquiry: the regulation's economic impact on the claimant; the extent to which the regulation has interfered with distinction investment-backed expectations; and the character of the governmental action. Id. at 2081-82.

(85.) San Remo, 125 S. Ct. at 2495.

(86.) Id.

(87.) Id. at 2497.

(88.) Id.

(89.) Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City, 473 U.S. 172 (1985).

(90.)125 S. Ct. at 2497.

(91.) Id.

(92.) Id. at 2499.

(93.) Id. at 2498.

(94.) Id.

(95.) Id. at 2499-2500.

(96.) Id. at 2501.

(97.) Id.

(98.) 375 U.S. 411 (1964).

(99.) 342 F.3d 118 (2d Cir. 2003).

(100.) 375 U.S. at 419.

(101.) 125 S. Ct. at 2502.

(102.) Id. at 2504.

(103.) Id.

(104.) Id. at 2505.

(105.) Id. at 2507. In fact, given the extent to which challenges under the Takings Clause depend on underlying state law, state courts may even be better equipped to decide such issues. See Stewart E. Sterk, "The Federalist Dimension of Regulatory Takings Jurisprudence," Yale Law Journal 114 (2004): 203.

(106.) Id. at 2503.

(107.) Id.

(108.) Id. at 2508.

(109.) Id. at 2509.

(110.) Id.

(111.) Id.

(112.) Id. at 2510

Hugh J. Totten, JD, is a partner in the Chicago, Illinois office of Perkins Cole LLP, an international law firm with fourteen offices in the United States and China. He specializes in complex commercial litigation and valuation disputes. Contact: Perkins Cole LLP, 131 South Dearborn Street, Suite 1700, Chicago, IL 60603; T 312-324-8693; F 312-324-9400; E-mail: HTotten@perkinscoie.com

Jade R. Lambert is a 2006 Juris Doctorate candidate at Northwestern University School of Law in Chicago, Illinois.
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Date:Sep 22, 2005
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