U.S. Supreme Court Takings Cases Raise Research Issues

By John R. Nolon and Jessica A. Bacher

John R. Nolon is a professor at Pace University School of Law, counsel to its Land Use Law Center, and visiting professor at Yale’s School of Forestry and Environmental Studies.

Jessica A. Bacher is an adjunct professor at Pace University School of Law and a staff attorney for the Land Use Law Center.

“[N]o person . . . shall be deprived of . . . property without due process of law . . . ; nor shall private property be taken for public use, without just compensation.”1

A t the end of its recent term, the U.S. Supreme Court decided two cases that both clarify and confuse Fifth Amendment jurisprudence: Lingle v. Chevron 2 and Kelo v. New London. 3 In Lingle, the Court unanimously reversed a troublesome twenty-five-year-old precedent that clouded regulatory takings law; the case was one of broad application, yet it received almost no media coverage, few protests from the losing interests, and, so far, little commentary in legal journals. In Kelo, a five-Justice majority affirmed a solid fifty-year-old precedent regarding the scope of governmental power to take title to land for a public use, over a passionate dissent, which had the effect of confounding relatively clear constitutional doctrine; the debate within the Court caused a media frenzy, stirred by great agitation from the interest groups affected, and has led to countless legislative proposals for corrective legislation.

The majority decisions in both cases square well. They are based on the understanding that the power of government to regulate private property in the public interest and the power to condemn private property for a public use are coterminous. They are both limited and justified by the power of the sovereign to act to protect the public health, safety, and welfare. The exercise of both powers is subject to the same standard of review by the courts: one of deference to the judgments of the legislative branch, which will not be set aside unless found to be unreasonable. When a property owner alleges that a condemnation of property is invalid because it is not calculated to achieve a public use under the Takings Clause, courts apply the same standards that they do to determine whether a regulation violates the Due Process Clause. Justice O’Connor’s strong dissent in Kelo, which was joined by the Chief Justice and Justices Scalia and Thomas, disagreed with these basic constitutional notions. After a brief recitation of the facts and holdings of the two cases, this article discusses several of the major issues raised by the dissent in Kelo and the firestorm of criticism that followed.

Lingle v. Chevron

In Lingle, 4 Chevron challenged a Hawaii statute that placed a cap on the amount of rent an oil company may charge a lessee-dealer. Hawaii adopted Act 257 in June 1997 to prevent gasoline price inflation due to the effects of market concentration. Chevron filed suit in the U.S. District Court for the District of Hawaii claiming that the Act affected a taking of its property and sought a declaratory judgment and an injunction against the application of the rent cap to its stations. The Supreme Court “correct[ed] course” by overruling its decision in Agins v. Tiburon, 5 which held that a land use regulation can be a regulatory taking if it does not “substantially advance” a legitimate public purpose. The Lingle court determined that the Agins “substantially advances” formula is not an appropriate test for determining whether a regulation constitutes a taking under the Fifth Amendment. The “formula prescribes an inquiry in the nature of a due process, not a takings, test, and . . . it has no proper place in . . . takings jurisprudence.” 6 The effect of the Court’s holding and its explanatory dicta is to clarify greatly the field of regulatory takings law as applied to land use regulations and agency determinations.

The Court in Lingle identifies four categories of regulatory takings cases. The first two categories are per se takings: void on their face without regard to the extent of their impact on aggrieved property owners. “First, where government requires an owner to suffer a permanent physical invasion of her property—however minor—it must provide just compensation.” 7 “A second categorical rule applies to regulations that completely deprive an owner of ‘all economically beneficial use’ of her property.” 8 The third category, land use exactions, involves the imposition, by a land use approval board, of a condition requiring a landowner to dedicate an easement allowing public access to her property—the effect of which is to oust the landowner from a portion of her domain. 9 All other regulatory takings challenges are governed by the standards set forth in Penn Central Transportation Co. v. New York City. 10 The Penn Central “principal guidelines” are: the economic impact of the regulation on the claimant, particularly the extent to which the regulation has interfered with distinct investment-backed expectations, and the character of the governmental regulation.

Kelo v. City of New London

In Kelo, 11 the Court affirmed the long-standing principle that governments can condemn private land in order to carry out area-wide redevelopment projects. The question was whether the taking, by condemnation, of title to unblighted single-family homes and transferring ownership of them to a private developer to accomplish a large-scale waterfront redevelopment project constituted a “public use” under the Fifth Amendment. At issue is the critical matter of whether distressed cities, like New London, when specifically authorized by state legislation, can carry out programs to increase jobs, strengthen their tax bases, revitalize neighborhoods, and stabilize property values by condemning the land of private property owners who are not willing to sell to the government at a negotiated price.

The majority in the Kelo case, in a 5–4 decision written by Justice Stevens, held that the purpose for the taking was a legitimate public use, clearing the way for the New London Development Corporation to condemn title from nine individual owners who held onto fifteen parcels of the 115 private lots in the redevelopment area. Justice Stevens noted: “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.” 12 The dissenting opinion, drafted by Justice O’Connor, agreed with the petitioners who argued that the Court should establish a new “heightened scrutiny” test for condemnations carried out to accomplish economic development purposes.

The cases relied upon by the majority in Kelo involved the validation of takings of private property in order to advance economic development, such as accomplishing the revival of a blighted urban neighborhood in Berman v. Parker, 13 and eliminating the social and economic evils of a land oligopoly by requiring land transfers from lessors to lessees in Midkiff v. Hawaii Housing Authority. 14 In these cases, compensation was paid and the Court deferred to the government’s public use determination. The minority, apparently content with deference in these prior economic development cases, distinguished them from Kelo by pointing out that the condemned property in Berman and Midkiff “inflicted affirmative harm on society” and the taking, therefore, was necessary to “eliminat[e] existing property use . . . to remedy the harm.” 15

Questions Raised by Kelo and Lingle

Because of the strength of the dissent and the contagious furor caused by the decision in Kelo, scholars and practitioners should read the decision carefully, consider it in the context of the unanimous Lingle decision, and answer a number of questions the cases pose. Our top ten issues for further study are as follows:

1. The Court in Berman and Midkiff states that the police power of the sovereign justifies both the regulation of property and its taking. The scope of power of the sovereign to act—its police power—is the proper reference for determining whether property owners have been denied due process and whether property has been taken for a public use. What basis is there for Justice O’Connor’s statement that this is “errant language,” and that the Court is free to define “public use” in condemnation cases like Kelo more narrowly than the “public purpose” to be achieved by land use regulations adopted under the police power? Is there any case law or constitutional scholarship that supports Justice O’Connor’s view? What do we make of the strong statement in Lingle that the Takings Clause is not meant to limit governmental interference with private property, only to secure compensation where property has been taken? How do we square this doctrine, affirmed by a unanimous decision written by Justice O’Connor, with the dissent Justice O’Connor authored in Kelo, which says that the Takings Clause “public use” provision must be read to prevent condemnations whose purpose is “economic development?” As a per se matter, Justice O’Connor “would hold that [economic development condemnations] are unconstitutional.” 16 The Court’s understanding of the Takings Clause in Lingle follows what it held in First English v. Los Angeles County that the basic “understanding of the Amendment makes clear that it is designed not to limit the governmental interference with property rights per se, but rather to secure compensation in the event of otherwise proper interference[.]” 17 Later in First English, the Court noted, citing Midkiff and Berman, that “[n]othing we say today is intended to abrogate the principle that the decision to exercise the power of eminent domain is a legislative function ‘for Congress and Congress alone to determine.’” 18

2. What is there about the Kelo context of cases that justifies the dissent’s desire to use a harm/benefit distinction when the Court rejected the harm/benefit distinction in the context of regulatory takings challenges? In Kelo, Justice O’Connor, joined by Justices Scalia, Thomas, and the Chief Justice, states that Berman and Midkiff involved condemnations of property uses that “inflicted affirmative harm on society.” In Lucas v. South Carolina Coastal Council, 19 written by Justice Scalia who was joined by the Chief Justice, and Justices White, O’Connor, and Thomas, the Court summarily rejected the harm/benefit distinction: “When it is understood that ‘prevention of harmful use’ was merely our early formulation of the police power justification necessary to sustain (without compensation) any regulatory diminution in value; and that the distinction between regulation that ‘prevents harmful use’ and that which ‘confers benefits’ is difficult, if not impossible, to discern on an objective, value-free basis; it becomes self-evident that noxious-use logic cannot serve as a touchstone to distinguish regulatory takings—which require compensation—from regulatory deprivations that do not require compensation.” 20

3. The majority in Kelo makes it clear that it was deciding a very narrow question and that “a one-to-one transfer of property [from one private property owner to another], executed outsidethe confines of an integrated development plan, is not presented in this case.” 21 However, Justice O’Connor addresses what she calls purely private takings, which “could not withstand the scrutiny of the public use requirement.” 22 She seems either to be deciding a different case than the one addressed by the majority or to be arguing that area-wide redevelopment projects in nonblighted areas simply cannot be classified as a public use. The only clear factual difference between Kelo and Berman is the absence of a blight finding in Kelo. Both redevelopment projects otherwise achieve precisely the same public benefits: employment, tax base increase, and property value enhancement in a financially strapped, distressed city. Does the dissent really mean that the absence of physical blight in an area-wide redevelopment project converts it from a program that achieves public benefits to one that is “purely private?” Or did the dissent mean to say that economic development projects that only incidentally achieve pubic benefits are purely private and, therefore, void? Would it hold that restoring economic vitality to a state-designated distressed city is an “incidental” public benefit?

4. If the dissent’s concern is with one-to-one property transfers from property owner X to property owner Y, why isn’t the Due Process Clause an adequate remedy for those situations? How do such transfers benefit the public? They add a few jobs, perhaps, or increase the tax base marginally. Isn’t the absence of substantial public benefits, such as those sought by area-wide projects like those involved in Kelo and Berman, sufficient to invalidate one-to-one transfers under due process principles? What have the state and federal courts done here? How many such challenges have been brought and how have they been decided? Justice Kennedy, in his concurrence, is confident that due process criteria are sufficient to invalidate “purely private” takings.

5. Do due process findings in regulatory cases, such as those reviewed in Lingle, support Justice Kennedy’s assertion by providing further guidance regarding when governmental actions will be invalidated by the judiciary? If a land use regulation’s primary goal were to benefit the competitive interests of a private person, wouldn’t that be found invalid under due process in most state and federal courts, despite proof of incidental public benefits? If there are a number of due process cases that invalidate regulations that primarily further competitive interests of private parties, while incidentally benefiting the public, wouldn’t this indicate that the courts are competent to protect innocent property owners in condemnation cases?

6. What do state statutes provide regarding the power to condemn for area-wide redevelopment projects? When state statutes, such as the one relied on by New London in Connecticut, authorize condemnations for area-wide redevelopment projects, what safeguards do they contain? Do they require that the public benefits of the projects be stated? Is the public informed and involved in the decision-making process? Do such statutes require blight findings or findings that an area is substantially underdeveloped? Do they require negotiations with private parties before condemnation proceedings are initiated? Are there any other protections for private property owners whose land may be condemned? Depending on the outcome of this research, is there truly a need for corrective legislation to ensure that private owners are protected while allowing redevelopment projects to use the power of condemnation? What cases are there that sustain the use of eminent domain in area-wide redevelopment?

7. What is the basis in each state for condemnations outside the context of area-wide redevelopment projects? Are they permitted other than for public works or utility projects? To what extent? What do the constitutions of the fifty states say regarding state and local power to condemn? What discrete power do state constitutions and statutes give state and local agencies to condemn? What limitations are there on that power? What do state constitutions and statutes say about the role of the courts versus the role of the legislature in determining what public uses are sufficient to justify condemnations? Is there any evidence that corrective legislation is needed to reign in these “lesser” takings? Do they threaten mom and pop businesses and average citizens’ homes everywhere? Does this vary from state to state?

8. Are there any post-taking empirical studies of how much hardship is actually caused to those whose homes and properties are condemned? What corrective measures are needed to prevent documented hardships? Do proposals for reform deal with imagined or real hardships?

9. Are there any empirical studies of whether redevelopment projects would be feasible without the availability of condemnation? How many property owners would fail to negotiate for a fair settlement with redevelopment agencies if they didn’t realize that the agency could take their property if negotiations fail? If the absence of the power of condemnation would mean that most redevelopment projects would not be feasible, what are the costs to the public of that result? Have redevelopment projects helped distressed cities to the benefit of the public? Is urban revitalization happening? To what extent is this due to area-wide redevelopment projects?

10. What is the larger context within which urban redevelopment projects should be evaluated? What role do urban areas play in modern society? If they don’t thrive, will affluent populations continue to take their wealth and spread out in the exurban countryside? What’s the societal harm in that? New London is 5.5 square miles in size. It was carved out of the affluent town of Waterford, Connecticut, and used to locate public transit facilities, the hospital, colleges, low- and moderate-income housing, and a host of other unwanted land uses. Waterford’s affluent population pays a tax rate 40 percent lower than New London’s. State aid for education, infrastructure, libraries, social services, and other public programs needed to serve New London’s lower income populations is very limited. If corrective legislation is needed, should it be focused instead on property tax reform, governmental consolidation, and regional land use decision-making regarding the location of affordable housing and other land uses typically zoned-out of affluent suburban communities?

Please feel free to contact us at jbacher@law.pace.edu with responses to the questions we raise. We are particularly interested in learning if any of the empirical studies we recommend have been done.

Endnotes

1. U.S. Const. amend. V.

2. Lingle v. Chevron U.S.A., Inc., 125 S. Ct. 2074 (2005).

3. Kelo v. City of New London, 125 S. Ct. 2655 (2005).

4. Lingle, 125 S. Ct. at 2074.

5. Agins v. Tiburon, 447 U.S. 255 (1980).

6. Lingle, 125 S. Ct. at 2083.

7. Id. at 2081 (citing Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982)).

8. Id. (quoting Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1019 (1992)).

9. Id. at 2086 (citing Nollan v. Cal. Coastal Comm’n, 483 U.S. 825 (1987); Dolan v. City of Tigard, 512 U.S. 374 (1994)).

10. Id. at 2081 (citing Penn Central Transp. Co. v. New York City, 438 U.S. 104 (1978)).

11. Kelo, 125 S. Ct. at 2655.

12. Id. at 2664.

13. 348 U.S. 26 (1954).

14. Haw. Hous. Auth. v. Midkiff, 467 U.S. 229 (1984).

15. Kelo, 125 S. Ct. at 2674 (O’Connor, J., dissenting).

16. Id. at 2677 (O’Connor, J., dissenting).

17. First English Evangelical Lutheran Church v. County of Los Angeles, 482 U.S. 304, 315 (1987).

18. Id. at 321 (citing Midkiff, 467 U.S. at 240 (quoting Berman v. Parker, 348 U.S. 26, 33 (1954))).

19. Lucas v. S.C. Coastal Council, 505 U.S. 1003 (1992).

20. Id. at 1026.

21. Kelo, 125 S. Ct. at 2667.

22. Id. at 2674 (O’Connor, J., dissenting) (quoting Midkiff, 467 U.S. at 245).