Defense Digest

Land Use Earthquake: Supreme Court Modifies "Takings" Jurisprudence

In the last few weeks of its 2004-05 term, the United States Supreme Court issued three significant opinions construing the takings clause (also called the just compensation clause) of the Fifth Amendment to the United States Constitution. These decisions significantly modify the substantive and procedural rules applicable to takings litigation involving municipalities and other political subdivisions.

The Fifth Amendment takings clause provides, "Nor shall private property be taken for public use, without just compensation." The Supreme Court has long held that this provision applies to political subdivisions of state governments by virtue of the Fourteenth Amendment due process clause.

Abolition of "Substantially Advances" Test

The last 25 years of federal takings jurisprudence have been informed by the classic test for a regulatory taking formulated by Justice Powell for a unanimous Court in Agins v. City of Tiburon, 447 U.S. 255, 260 (1980): "The application of a general zoning law to particular property effects a taking if the ordinance does not substantially advance legitimate state interests, or denies an owner economically viable use of his land." Justice Powell's use of the disjunctive "or" plainly meant that zoning legislation could be attacked by a theory that it did not substantially advance legitimate governmental interests and/or by an argument that it denied the property owner all viable use of the subject land. Although takings cases since Agins have often focused on the deprivation of all economically viable use prong of the Agins analysis, land developers and other property owners have also frequently invoked an Agins "substantially advances" claim in land use litigation against local governments.

Notwithstanding the apparent invincibility of the "substantially advances" prong of the Agins rule, the Supreme Court abruptly discarded that ground of takings clause liability in its May 23, 2005, decision in Lingle v. Chevron U.S.A. Inc., 2005 U.S. LEXIS 4342. Writing for a unanimous Court, Justice O'Connor introduced her opinion with the startling observation that "[o]n occasion, a would-be doctrinal rule or test finds its way into our case law through simple repetition of a phrase-however fortuitously coined." She concluded that "this ['substantially advances'] formula prescribes an inquiry in the nature of a due process, not a takings, test, and that it has no proper place in our takings jurisprudence."

In addition to abolishing the "substantially advances" prong of takings analysis, Lingle attempts to summarize, reorganize, and, in effect, codify the Court's surviving regulatory takings jurisprudence. The Court continues to recognize two types of per se regulatory takings: (1) permanent physical invasions of property, however minor; and (2) regulations that deprive owners of all economically viable use of their property. Outside of what Lingle characterizes as "these two relatively narrow categories" (and apart from the special context of land-use exactions), regulatory takings challenges are governed by the amorphous criteria set forth in Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978). The Penn Central factors include the economic impact of the regulation on the claimant (and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations) and the character of the governmental action (for example, whether it amounts to a physical invasion or, instead, merely affects property interests through a public program adjusting the benefits and burdens of economic life to promote the common good).

The Lingle Court's renewed emphasis on what Penn Central itself called its fact-specific and formula-less approach to takings analysis may produce another new wave of takings litigation. Thus, what the Court took away from property owners with the abolition of "substantially advances" analysis may be given back, with interest, by the fact-driven, subjective approach of the Penn Central "factors." Perhaps it will all come down to a judge or justice knowing a taking when he/she sees one.

Ripeness Procedures Not an Exception to Full Faith and Credit Statute

"The Fifth Amendment does not proscribe the taking of property; it proscribes taking without just compensation." Williamson County Reg'l Planning Comm'n v. Hamilton Bank, 473 U.S. 172, 194 (1985). Accordingly, "if a State provides an adequate procedure for seeking just compensation, the property owner cannot claim a violation of the Just Compensation Clause until it has used the procedure and been denied just compensation." Id. at 195.

Twenty years after Williamson County, the Supreme Court has now considered the interrelationship of the foregoing ripeness rule to the claim and issue prelusion concepts of the full faith and credit statute, 28 U.S.C. § 1738 (providing that "judicial proceedings . . . shall have the same full faith and credit in every court within the United States and its Territories and Possessions as they have by law or usage in the courts of such State"). In San Remo Hotel, L.P. v. City and County of San Francisco, 2005 U.S. LEXIS 4848, the Court held, on June 20, 2005, that the full faith and credit statute must be applied in the takings context, even when the effect is to deprive the litigant of a federal trial court forum for the adjudication of a Fifth and Fourteenth Amendment takings claim.

Economic Development Is a "Public Use"

The language of the takings clause ("nor shall private property be taken for public use, without just compensation") raises the question of what is a "public use" for which property can be taken by a local government through its powers of eminent domain.

On June 23, 2005, in a 5-4 decision, the Court held in Kelo v. City of New London, 2005 U.S. LEXIS 5011, that a municipal development plan designed to revitalize the City's economy constituted a "public use" within the meaning of the takings clause. Justice Stevens' Opinion of the Court (joined by Justices Kennedy, Souter, Ginsburg, and Breyer) argued that such redevelopment plans served a legitimate governmental function and cited many of the Court's previous cases as analogous authority. In a bitter dissent, Justice O'Connor (joined by Chief Justice Rehnquist and Justices Scalia and Thomas) argued that "[u]nder 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… ." Kelo definitively resolved a long-standing question in takings clause jurisprudence. Although this decision benefits local governments, it should be observed that Kelo does not affect current or forthcoming constitutional or statutory measures on the state government level to limit such takings. The interest groups that supported the property owners in Kelo are now refocusing their efforts on state constitutions, legislation, initiatives, and judicial proceedings. The closeness of the Kelo decision and the obvious liberal-conservative divide of its majority and dissenting opinions may also raise the question of whether that decision will someday be overruled by a Supreme Court with a more conservative majority.

*Alan is an associate in our Pittsburgh, PA office. He can be reached at (412) 803-1196 or ajohnson@mdwcg.com.