Eminent Domain in United States Constitutional Law

1
Eminent Domain in United States Constitutional Law
Investment Treaty Forum Conference British
Institute of International and Comparative Law 5
May 2006
Gary B. Born Wilmer Cutler Pickering Hale and
Dorr LLP
2
Fifth Amendment Takings Clause

• Takings Clause . . . nor shall private property
  be taken for public use, without just
  compensation.

• Due Process Clause Fifth Amendment No person
  shall . . . be deprived of life, liberty, or
  property, without due process of law. . .
• Due Process and Equal Protection Clauses
  Fourteenth Amendment
• . . . nor shall any State deny to any person
  within its jurisdiction the equal protection of
  the laws.

3
Historical Origins of Takings Clause

• Fifth Amendment . . . is designed to bar
  Government from forcing some people alone to bear
  public burdens which, in all fairness and
  justice, should be borne by the public . . .
  Penn Central Transp. Co. v. City of New York, 438
  U.S. 104, 123 (1978) (quoting Armstrong v. United
  States, 364 U.S. 40, 49 (1960)).
• Relatively limited use of Takings Clause for more
  than 100 years after adoption

4
Origin of Regulatory Takings Doctrine

• Takings historically limited to direct
  expropriation / eminent domain
• Pennsylvania Coal Co. v. Mahon Takings Clause
  requires just compensation for so-called
  regulatory takings

5
Origin of Regulatory Takings Doctrine

• Justice Brandeis dissent
• Restriction imposed to protect the public
  health, safety or morals from dangers threatened
  is not a taking. The restriction here in
  question is merely the prohibition of a noxious
  use. The property so restricted remains in the
  possession of its owner. . . . Where the
  police power is exercised, not to confer
  benefits upon property owners but to protect the
  public from detriment and danger, there is in my
  opinion, no room for considering reciprocity of
  advantage. Mahon, 260 U.S. at 422.

6
Origin of Regulatory Takings Doctrine

• Justice Holmes majority

• As applied in this case, the statute is admitted
  to destroy preexisting rights of property and
  contract. The question is whether the police
  power can be stretched so far. Government hardly
  could go on if to some extent values incident to
  property could not be diminished without paying
  for every such change in the general law. . . .
  The general rule at least is that while property
  may be regulated to a certain extent, if
  regulation goes too far it will be recognised as
  a taking. 260 U.S. at 413.

• Court holds that statutes essentially complete
  destruction of the mineral rights reserved by the
  coal company constituted a taking

7
Overview of Contemporary Takings Law

• Lack of clear rules under Takings Clause,
  particularly in regulatory takings analysis
• U.S. Supreme Court has repeatedly said that there
  is no set formula, Goldblatt v. Town of
  Hempstead, 369 U.S. 590, 594 (1962)
• Takings analysis depends largely on essentially
  ad hoc, factual inquiries. Penn Central, 438
  U.S. at 124.

8
Overview of Contemporary Takings Law

• Doremus, Takings and Transitions, 19 J. Land Use
  Envtl. L. 1, 1-2 (2003) (regulatory takings law
  famously incoherent)
• Bell Parchomovsky, Takings Reassessed, 87 Va.
  L. Rev. 277, 278 (2001) (Takings jurisprudence
  is replete with inconsistent distinctions that
  provide scant guidance for courts and
  policymakers.)
• Schroeder, Never Jam To-day On the Impossibility
  of Takings Jurisprudence, 84 Geo. L.J. 1531, 1531
  (1996) (Takings jurisprudence is a top contender
  for the dubious title of most incoherent area of
  American law.)
• Farber, Public Choice and Just Compensation, 9
  Const. Comment. 279, 279 (1992) (Takings
  doctrine is a mess.)

9
Overview of Contemporary Takings Law

• Peterson, The Takings Clause In Search of
  Underlying Principles, 77 Cal. L. Rev. 1301, 1304
  (1989) (It is difficult to imagine a body of
  case law in greater doctrinal and conceptual
  disarray.)
• Rose, Mahon Reconstructed Why the Takings Issue
  is Still a Muddle, 57 S. Cal. L. Rev. 561, 561-62
  (1984) (Takings jurisprudence is by far the
  most intractable constitutional property issue.)
• Epstein, The Seven Deadly Sins of Takings Law, 26
  Loy. L.A. L. Rev. 955, 956 (1993) (Making
  sense of the Takings Clause . . . is complicated
  enough when the constitutional text stands alone,
  but it has been made more formidable still by the
  grotesque judicial gloss on the clause that now
  passes for constitutional interpretation.)

10
Overview of Contemporary Takings Law

• Despite a general absence of clear rules, it is
  possible to derive a few principles, even in the
  field of regulatory takings
• Eminent Domain - acquisition of title or formal
  expropriation virtually always requires just
  compensation United States v. Gen. Motors Corp.
  (1945)
• Permanent physical occupation of property
  virtually always requires just compensation -
  Loretto v. Teleprompter Manhattan CATV Corp.
  (1982)
• Total (100) destruction of property value
  generally requires just compensation, subject to
  general nuisance doctrine - Lucas v. South
  Carolina Coastal Council (1992)
• Ordinary Regulatory Takings Claims Generally
  Subject to Multi-Factor Analysis - Penn Central
  Transp. Co. v. City of New York (1978)
  Tahoe-Sierra Preservation Council, Inc. v. Tahoe
  Regional Planning Agency (2002).

11
Permanent Physical Occupation Loretto

• New York statute requiring land owner to permit
  installation of cable television cable and
  directional taps on private rental property
• U.S. Supreme Court held that statute effected a
  regulatory taking
• A permanent physical occupation authorized by
  government is a taking without regard to the
  public interests it may serve a physical
  intrusion is a property restriction of an
  unusually serious character for purposes of the
  Takings Clause when the physical intrusion
  reaches the extreme form of a permanent physical
  occupation, a taking has occurred. Loretto, 458
  U.S. at 426.

12
Total Destruction of Economic Value Lucas

• South Carolina Beachfront Management Act - no
  construction within specified distance from
  beachfront
• We have found categorical treatment
  appropriate . . . where regulation denies all
  economically beneficial or productive use of
  land. Lucas v. South Carolina Coastal Council,
  505 U.S. 1003, 1015 (1992).
• 100 loss of value required for categorical
  treatment NOT 90

13
Lucas Exception Nuisance Law

• Lucas exception Background principles of
  nuisance law
• where the State seeks to sustain regulation
  that deprives land of all economically beneficial
  use, we think it may resist compensation only if
  the logically antecedent inquiry into the nature
  of the owner's estate shows that the prescribed
  use interests were not part of his title to begin
  with must inhere in the title itself, in the
  restrictions that background principles of the
  State's law of property and nuisance already
  place upon land ownership Lucas, 505 U.S. at
  1027.

14
Lucas Exception Nuisance Law

• Examples
• zoning restrictions - Village of Euclid v. Ambler
  Realty (1926)
• industrial uses prohibited - Hadacheck v.
  Sebastian (1915) (brickyard plant operations in
  urban areas) United States v. Central Eureka
  Mining Co. (1958) (non-essential gold mine)
  Mugler v. Kansas (1887) (brewery)
• height restrictions - Welch v. Swasey (1909)
• health/crop restrictions - Miller v. Schoene
  (1928) (destruction of ornamental cedars)

15
Ordinary Regulatory Takings Claims Penn
Central Factors

• In contrast to the categorical per se rules under
  Loretto and Lucas, most regulatory takings claims
  are subject to ad hoc, case-by-case analysis.
• Penn Central Transp. Co. v. City of New York, 438
  U.S. 104 (1978) NY Court of Appeals held that
  there could be no taking since the Landmarks
  Preservation Law had not transferred control of
  the property to the city, but only restricted
  appellants exploitation of it.
• US Supreme Court held that, for alleged
  regulatory taking, the Fifth Amendment required
  essentially ad hoc, factual inquiries, with
  several factors that have particular
  significance.

16
Ordinary Regulatory Takings Claims Penn
Central Factors

• Three Penn Central factors
• economic impact of the regulation on the
  claimant
• the extent to which the regulation has
  interfered with distinct investment-backed
  expectations
• the character of the governmental action A
  taking may more readily be found when the
  interference can be characterised as a physical
  invasion by government, than when interference
  arises from some public program adjusting the
  benefits and burdens of economic life to promote
  the common good

17
Ordinary Regulatory Takings Claims Penn
Central Factors

• Penn Central held that permit denial was NOT a
  taking
• other uses of property, including profitable use,
  are permitted by statute
• no interference with present uses of property by
  statute, including historic use as a terminal
  (not office building)
• development rights available for claimants with
  regard to their other properties
• possibility for application for different office
  tower, which might be approved
• comprehensive, city-wide scheme, which did not
  single out claimants or Grand Central Terminal
• positive impact of legislation on property values

18
Ordinary Regulatory Takings Claims After Penn
Central

• Supreme Court has not clarified the Takings
  Clause materially since Penn Central
• Numerous, sharply-divided opinions ideological
  divide
• A few generalizations may be made
• Magnitude of Economic Harm (Lucas)
• Interference with "Distinct Investment Backed
  Expectations" Correlates with Greater Likelihood
  of Taking (Lingle v. Chevron, U.S.A., Inc.)
• Departure from Settled Custom (Eastern
  Enterprises v. Apfel)

19
Ordinary Regulatory Takings Claims After Penn
Central

• Magnitude of Interference with Private
  Rights/Control (Eureka and Pewee)
• Magnitude of Temporal and Spatial Intrusion
  (Tahoe)
• Magnitude of Physical Invasion (United States v.
  Causby)
• Singling Out, Particularly of Disfavoured
  Parties (Lucas)

20
Ordinary Regulatory Takings Claims After Penn
Central

• Violation of Government Assurances / Promises
  (United States v. Winstar Corp.)
• Government Actions Must Be Logically Related and
  Proportional to the Stated Government Objectives
  (Nollan v. Calif. Coastal Comm'n Dolan v. City
  of Tigard)
• No Reciprocity of Advantages (Village of Euclid)

21
Conclusion

• CAFTA Chapter 10 (Investments) Annex 10-C, para.
  4
• 4. The second situation addressed by Article
  10.7.1 is indirect expropriation, where an
  action or series of actions by a Party has an
  effect equivalent to direct expropriation
  without formal transfer of title or outright
  seizure.
• (a) The determination of whether an action or
  series of actions by a Party, in a specific
  fact situation, constitutes an indirect
  expropriation, requires a case-by-case,
  fact-based inquiry that considers, among other
  factors
• (i) the economic impact of the
  government action, although the fact that an
  action or series of actions by a Party has an
  adverse effect on the economic value of an
  investment, standing alone, does not establish
  that an indirect expropriation has occurred
• (ii) the extent to which the
  government action interferes with distinct,
  reasonable investment backed expectations and
• (iii) the character of the government
  action.
• (b) Except in rare circumstances,
  nondiscriminatory regulatory actions by a
  Party that are designed and applied to protect
  legitimate public welfare objectives, such as
  public health, safety, and the environment,
  do not constitute indirect expropriations.