Property Rights Are Not Second-Class Rights
When state and local governments violate federal constitutional rights (e.g., First Amendment free speech), they can be sued in federal court — except when that government action violates the Fifth Amendment’s protections for property rights. Under the Supreme Court’s decision in Williamson County v. Hamilton Bank, individuals and businesses alleging unconstitutional takings by state or local governments are required to exhaust state review procedures — seeking redress from the very officials who harmed them — before turning to federal courts.
This constitutional anomaly is evident in Colony Cove v. City of Carson, where the operators of a rental property in California alleged an unconstitutional taking when the local rent control board refused to approve an increase in rent to allow their business to operate profitably. California law forecloses judicial review of the findings of rent control boards, so municipal governments have an unchecked license to determine whether such businesses may operate: A property owner’s sole recourse is to appeal to the very rent control board who forbade her from charging a profitable rent in the first place.
These “review” procedures, like some others across the nation, are wildly insufficient. Even more significantly, once a takings claim has been fully heard in state proceedings per Williamson County‘s command, it is usually barred from federal review based on various prudential doctrines. The result is the indiscriminate exclusion of takings claims from federal courts, a situation that invites opportunist states to usurp private property rights.
Seeking to afford citizens across the nation the opportunity to assert Takings Clause claims in parity with other constitutional rights, Cato joined the New England Legal Foundation, National Federation of Independent Business, Institute for Justice, Goldwater Institute, and Professors James Ely and Richard Epstein in filing an amicus brief supporting the California property owners’ petition for Supreme Court review of the Ninth Circuit’s ruling against them.
We argue that Williamson County should be overruled because it relegates takings claims to second-class status despite the constitutional first principle that uniform protection of individual rights is vital to our system of government. At the very least, the Court should require federal reprieve when state procedures for rectifying a taking are futile — as they were here. Finally, we argue that the Court should correct lower courts’ misinterpretation of Williamson County, which puts property rights jurisprudence at odds with Section 1983 of the Civil Rights Act of 1871 (a statute that gives people access to federal courts when a state denies them their constitutional rights).
The Court will decide whether to review Colony Cove v. City of Carson later this year. Thanks to legal associate Anna Mackin for her help with the brief, whose counsel of record is Cato adjunct scholar Ilya Somin.
The Takings Clause Has No Expiration Date II
As I wrote last week, a decade ago in Palazzolo v. Rhode Island, the Supreme Court rejected the idea that those who buy property subject to burdensome regulations lose the right the seller otherwise has to challenge those regulations. The Court ruled that the Takings Clause does not have an “expiration date.” Sadly, not all government authorities or courts took Palazzolo to heart, and now we have a second such case meriting Cato’s involvement in the span of a week.
In 2000, after the EPA issued a Record of Decision concerning limiting access to a “slough” (a narrow strip of navigable water) on its Superfund National Priorities List, CRV Enterprises began negotiations to buy a parcel of land next to the slough across from a site once occupied by a wood-preserving plant. CRV hoped to develop that parcel and others it already controlled into a mixed-use development, including a marina, boat slips, restaurants, lodging, storage, sales, and service facilities. The company eventually bought the land with notice of the EPA’s ROD but the EPA later installed a “sand cap” and “log boom” that obstructed CRV’s access to the slough.
CRV sued the United States in the Court of Federal Claims, which dismissed the case for lack of standing. The Federal Circuit affirmed, finding that CRV’s claim “is barred because [the company] did not own a valid property interest at the time of the alleged regulatory taking.” The Federal Circuit thus turned two Supreme Court precedents on their head and put that “expiration date” on the Takings Clause. It did so despite the fact that multiple federal courts have upheld Palazzolo‘s rule and that longstanding California common law recognizes that a littoral (next to water) owner’s access to the shore adjacent to his property is a property right.
Cato, joined by Reason Foundation, the Center for Constitutional Jurisprudence, and the National Federation of Independent Business, filed an amicus brief supporting CRV’s request that the Supreme Court review the Federal Circuit’s decision and reaffirm Palazzolo. We argue the following: (1) when post-enactment purchasers are per se denied standing to challenge regulation, government power expands at the expense of private property rights; (2) a rule under which pre-enactment owners have superior rights to subsequent title-holders threatens to disrupt real estate markets; (3) the Federal Circuit abrogated the rule of Palazzolo; and (4) this case — viewed in the context of other courts’ rulings — indicates the need for the Supreme Court to settle the spreading confusion about Palazzolo. Otherwise, the existence of a “post-enactment” rule will create a “massive uncompensated taking” from small developers and investors that would preserve and enhance the rights of large corporations.
Palazzolo put to rest “once and for all the notion that title to property is altered when it changes hands.” The ability of property owners to challenge government interference with their property is essential to a proper understanding of the Fifth Amendment; the Court must reestablish the principle that transfer of title does not diminish property rights. Significantly, the Federal Circuit isn’t alone in its misapplication of Palazzolo; the Ninth Circuit in Guggenheim v. City of Goleta (in which Cato also filed a brief) recently issued an opinion severely narrowing Palazzolo‘s scope and deepening a circuit split.
Thanks to legal associate Nick Mosvick and former legal associate Brandon Simmons (acting as our outside counsel in this case) for their work on this case, CRV Enterprises v. United States.
The Takings Clause Has No Expiration Date
Just a decade ago in Palazzolo v. Rhode Island, the Supreme Court rejected the idea that those who buy property subject to burdensome regulations lose the right the seller otherwise has to challenge those regulations. The Court ruled that the Takings Clause does not have an “expiration date.”
Sadly, not all government authorities or courts took Palazzolo to heart. In 1997, Daniel and Susan Guggenheim bought a mobile home park that, at the time of purchase, was in “unincorporated territory” of Santa Barbara County, California. The Guggenheims did not challenge the county’s 1979 rent control ordinance but instead challenged the 2002 adoption of that ordinance by the City of Goleta when the city incorporated the Guggenheims’ land.
The Ninth Circuit essentially limited Palazzolo to its particular facts and circumstances, deciding to convert the established three-factor test for regulatory takings (Penn Central) into a one-factor test focused solely on “investment-backed expectations.” The court did this largely on the premise that the Guggenheims did not present an “as-applied” challenge — as Palazzolo did — to the ordinance’s application to their mobile home park, but instead filed a facial challenge to the constitutionality of the ordinance itself. As a result, the Ninth Circuit turned two Supreme Court precedents on their head and put that “expiration date” on the Takings Clause in this case.
Significantly, the Ninth Circuit isn’t alone in its misapplication of Palazzolo; the Federal Circuit in CRV Enterprises v. United States (in which Cato will also be filing a brief) also recently issued an opinion severely narrowing Palazzolo‘s scope and deepening a circuit split.
Cato filed an amicus brief supporting the Guggenheims’ request that the Supreme Court review the Ninth Circuit decision and reaffirm its decision in Palazzolo. The brief argues the Supreme Court should review the case because: (1) a rule that allows the transfer of title to immunize government regulation from constitutional or other legal challenge expands government power and diminishes property rights; (2) the Ninth Circuit “flouts” the rule of Palazzolo; and (3) this case — as well as CRV Enterprises — indicates the need for the Supreme Court to settle the spreading confusion about Palazzolo.
Otherwise, the existence of a “post-enactment” rule will create a “massive uncompensated taking” from small developers and investors that would preserve and enhance the rights of large corporations. The ability of property owners to challenge government interference with their property is essential to a proper understanding of the Fifth Amendment; the Court must reestablish the principle that transfer of title does not diminish property rights.
Thanks to legal associate Nick Mosvick and former legal associate Brandon Simmons (acting as our outside counsel in this case) for their work on this case, Guggenheim v. City of Goleta.
Eminent Domain Shenanigans
Five years ago, in the landmark property rights case of Kelo v. New London, the Supreme Court upheld the forced transfer of land from various homeowners by finding that “economic development” qualifies as a public purpose for purposes of satisfying the Fifth Amendment’s Takings Clause. In doing so, however, the Court reaffirmed that the government may not “take property under the mere pretext of a public purpose, when its actual purpose was to bestow a private benefit.”
State and federal courts have since applied that pretext standard in widely differing ways while identifying four factors as indicators of pretext: evidence of pretextual intent, benefits that flow predominantly to a private party, haphazard planning, and a readily identifiable beneficiary. Moreover, since Kelo, 43 states have passed eminent domain reform laws that constrain or forbid “economic development” condemnations.
While many of these laws are strong enough to curtail abuse, in at least 19 states the restrictions are undercut by nearly unlimited definitions of “blight.” The state of New York has seen perhaps the most egregious examples of eminent-domain abuse in the post-Kelo era, and now provides the example of Columbia University’s collusion with several government agencies to have large swaths of Manhattan declared blighted and literally pave the way for the university’s expansion project. In this brazen example of eminent-domain abuse, the New York Court of Appeals (the highest state court) reversed a decision of the New York Appellate Division that relied extensively on Kelo’s pretext analysis and thus favored the small business owners challenging the Columbia-driven condemnations. The Court of Appeals failed even to cite Kelo and ignored all four pretext considerations, instead defining pretext so narrowly that even the most abusive forms of favoritism will escape judicial scrutiny.
Cato joined the Institute for Justice and the Becket Fund for Religious Liberty in a brief supporting the condemnees’ request that the Supreme Court review the case and address the widespread confusion about Kelo’s meaning in the context of pretextual takings. Our brief highlights the need for the Court to establish and enforce safeguards to protect citizens from takings effected for private purposes. We argue that this case is an excellent vehicle for the Court to define what qualifies a taking as “pretextual” and consider the weight to be accorded to each of the four criteria developed by the lower and state courts.
The Supreme Court will decide whether to hear the case later this fall. The name of the case is Tuck-It-Away, Inc. v. New York State Urban Development Corp and you can read the full brief here (pdf). You can read more from Cato on property rights here.
Frivolous Lawsuit Aimed at Silencing Critics of Eminent Domain Abuse
In Kelo v. City of New London, the Supreme Court ruled that a locality could use its eminent domain authority to seize private property to sell to private developers. Cato’s amicus brief opposing this abuse of the Takings Clause is available here, and an article on Kelo and other property law rulings of the 2004-2005 term by law professor James W. Ely, Jr. is available here.
One positive outcome of Kelo was the legislative restriction of eminent domain usage in state houses across the country. On the other hand, developers and localities have attempted to muzzle their critics with frivolous lawsuits. The Institute for Justice is currently litigating one of these actions in Texas:
Investigative journalist Carla Main wrote a book about eminent domain abuse in Freeport, Texas. The city is attempting to force out a generations-old family shrimp and marine supply business to make way for a luxury marina development that was to be owned and operated by Royall’s private company. When the victims of this eminent domain abuse complained, Royall sued them for defamation. Main’s book, Bulldozed: “Kelo,” Eminent Domain, and the American Lust for Land, tells the story of the Gore family’s generations-old shrimp business and how Royall and the city tried to take their land. Prominent law professor Richard Epstein (University of Chicago and New York University) contributed a blurb to the back cover of Bulldozed.
Royall sued Main, Epstein and Encounter Books (the publisher) for defamation over the contents of Bulldozed. He also sued two newspapers and a journalist who published reviews of Bulldozed. Royall is attempting to use the power of the courts to silence his critics.
A Dallas trial court ruled last year that the lawsuit was not barred by the First Amendment, even though Royall could not point to any statement in Main’s book that came close to the legal standard for defamation. The Institute for Justice is appealing the trial court’s decision. As Bill McGurn writes in today’s Wall Street Journal, this suit is one of the “high costs of Mr. Kennedy’s concurrence” in Kelo. Here’s hoping that rights protected by both the First and Fifth Amendments can prevail.
Susette Kelo, the owner of the Little Pink House at the center of the Kelo case, spoke at the Cato Institute about her ordeal, and her story is the subject of this Cato Institute video.
Is the Supreme Court Conservative?
In my last two posts I described how the New York Times misunderstands the Constitution and highlighted Reason’s great new article comparing conservative and libertarian theories of constitutional interpretation. Well, now I have a chance to put those topics together, in response to yesterday’s big front-pager entitled “Court Under Roberts Is Most Conservative in Decades.”
Times Supreme Court reporter Adam Liptak — generally a sharp and honest broker — surveys some new political science literature and concludes, among other things, that since John Roberts became Chief Justice five years ago, the Court has been moving (modestly) to the right and is now “the most conservative one in living memory.” Ed Whelan debunks both of these empirical claims at NRO’s Bench Memos blog — I disagree with Ed on some legal issues, not least unenumerated rights, but his fisking is worth a read – and I want to add two broad points.
First, the claim that “all” (or even most) judicial decisions can be assigned an ideological value is simply laughable. Are all decisions favoring criminal defendants, unions, and people claiming discrimination or civil rights violations ”liberal” while those favoring prosecutors, employers, and the government “conservative” (as the scholars who maintain the database maintain)? What about union members suing unions or large corporations suing each other? What if the criminal defendant is a Fortune 500 CEO (like Conrad Black and Jeffrey Skilling in this past term’s ”honest services fraud” cases)? What about “reverse” racial discrimination claims like those at issue in Ricci v. DeStefano (the New Haven firefighters case)? What about an oil company suing the EPA? A financial services company suing the SEC (or vice-versa)?
And what about civil rights claims involving the Second Amendment, or the Fifth Amendment’s Takings Clause, or the right to earn an honest living? Are those not ”real” civil rights claims? What if it’s poor people losing their houses to a big developer who promises a town it will create jobs and increase tax revenues? What if it’s black hair braiders who can’t set up their shops without passing haridressing license exams requiring expertise only with white hair styles? What if it’s women who want to buy and carry handguns to defend themselves on their walks home in a dangerous neighborhood? Attempts to code such cases — like attempts to decide them based on “empathy” or support for the “little guy” – are bound to fail.
Second – and this ties together all the criticisms – the labeling of decisions (and courts!) as “conservative” and “liberal” ultimately boils down to results-based analysis that equates law with politics. The liberal political position is to favor abortion rights, separation of church and state, gun control, wealth redistribution, economic regulation, and racial preferences, and to disfavor the death penalty. It is then obvious that court rulings against those positions must be “conservative.” Add in the fact that the researchers performing all these analyses –and reporters writing about them — are themselves quite “liberal” and it becomes all the more alarming when the Supreme Court moves in a “conservative” (= wrong) direction.
Likely Supreme Court Tie Would Be a Loss to Property Owners
Today, the Supreme Court heard argument in Stop the Beach Renourishment v. Florida Department of Environmental Protection, which is a Fifth Amendment Takings Clause challenge involving beachfront property (that I previously discussed here).
Essentially, Florida’s ”beach renourishment” program created more beach but deprived property owners of the rights they previously had — exclusive access to the water, unobstructed view, full ownership of land up to the “mean high water mark,” etc. That is, the court turned beachfront property into “beachview” property. After the property owners successfully challenged this action, the Florida Supreme Court – “SCOFLA” for those who remember the Bush v. Gore imbroglio – reversed the lower court (and overturned 100 years of common property law), ruling that the state did not owe any compensation, or even a proper eminent domain hearing.
As Cato adjunct scholar and Pacific Legal Foundation senior staff attorney Timothy Sandefur noted in his excellent op-ed on the case in the National Law Journal, “[T]he U.S. Constitution also guarantees every American’s right to due process of law and to protection of private property. If state judges can arbitrarily rewrite a state’s property laws, those guarantees would be meaningless.”
I sat in on the arguments today and predict that the property owners will suffer a narrow 4-4 defeat. That is, Justice Stevens recused himself — he owns beachfront property in a different part of Florida that is subject to the same renourishment program — and the other eight justices are likely to split evenly. And a tie is a defeat in this case because it means the Court will summarily affirm the decision below without issuing an opinion or setting any precedent.
By my reckoning, Justice Scalia’s questioning lent support to the property owners’ position, as did Chief Justice Roberts’ (though he could rule in favor of the “judicial takings” doctrine in principle but perhaps rule for the government on a procedural technicality here). Justice Alito was fairly quiet but is probably in the same category as the Chief Justice. Justice Thomas was typically silent but can be counted on to support property rights. With Justices Ginsburg, Breyer, and Sotomayor expressing pro-government positions, that leaves Justice Kennedy, unsurprisingly, as the swing vote. Kennedy referred to the case as turning on a close question of state property law, which indicates his likely deference to SCOFLA.
For more analysis of the argument, see SCOTUSblog. Cato filed an amicus brief supporting the land owners here, and earlier this week I recorded a Cato Podcast to that effect. Cato also recently filed a brief urging the Court to hear another case of eminent domain abuse in Florida, 480.00 Acres of Land v. United States.
The Nets Finally Win!
Unfortunately, that win comes as another blow to property rights:
The last major obstacle to a groundbreaking for the $4.9 billion Atlantic Yards development in Brooklyn fell Tuesday when New York’s highest court, the Court of Appeals, dismissed a challenge to the state’s use of eminent domain on behalf of the developer, Bruce C. Ratner.
Mr. Ratner, whose 22-acre development has been delayed for three years by a flurry of lawsuits, the collapse of the credit and real estate markets and a glut of luxury housing, plans to begin selling tax-free bonds next month to finance the development’s cornerstone project: an 18,000-seat basketball arena for the New Jersey Nets at the intersection of Flatbush and Atlantic Avenues near downtown.
Given the high-profile nature of the would-be new tenants of the land, this is the most famous property rights case currently being litigated, but it’s the same ol’ story: rich company wants land on the cheap, company gets the government to seize the land, property owners lose their land for the benefit of another private party for a decidedly not public use.
And, as I allude to in this post’s title, this loss comes to the 0-13 New Jersey Nets. (Even the Redskins can win a game without getting the government to bail them out!)
And while the story goes on to promise all this new office space and buildings to go on the newly acquired land, we know from recent experience that a successful deal doesn’t automatically trigger the jobs and benefit promised. To give you an idea what the rest of Brooklyn is looking like:
If construction begins in the coming weeks as expected, Atlantic Yards will stand out in a city where 530 different construction projects are stalled, sitting lifeless and without adequate financing in virtually every neighborhood.
One would think that if there was such a guarantee of money to be made, investors would be funding one of those 530 other projects in the city.
And if you think a brand spanking new stadium is more likely to bring in business to the immediate area, just ask the shop owners around the new Yankee Stadium how business was this year — when that team put up the best record in baseball and won the World Series. (NB: Go Red Sox!)
In any event, Cato continues the fight for the Fifth Amendment’s Takings Clause. We filed a brief in a case coming before the Court next week, Stop the Beach Renourishment, Inc. v. Florida Department of Environmental Protection, which can be found here; and just yesterday filed a brief urging the Court to consider 480.00 Acres v. United States, which you can read here.
HT: Jonathan Blanks
Richard Epstein on Sotomayor
Cato adjunct scholar Richard Epstein of the University of Chicago and New York University, finds much to worry about in Judge Sonia Sotomayor’s nomination to the Supreme Court:
The treatment of the compensation packages of key AIG executives (which eventually led to the indecorous resignation of Edward Liddy), and the massive insinuation of the executive branch into the (current) Chrysler and (looming) General Motors bankruptcies are sure to generate many a spirited struggle over two issues that are likely to define our future Supreme Court’s jurisprudence. The level of property rights protection against government intervention on the one hand, and the permissible scope of unilateral action by the president in a system that is (or at least should be) characterized by a system of separation of powers and checks and balances on the other.
Here is one straw in the wind that does not bode well for a Sotomayor appointment. Justice Stevens of the current court came in for a fair share of criticism (all justified in my view) for his expansive reading in Kelo v. City of New London (2005) of the “public use language.” Of course, the takings clause of the Fifth Amendment is as complex as it is short: “Nor shall private property be taken for public use, without just compensation.” But he was surely done one better in the Summary Order in Didden v. Village of Port Chester issued by the Second Circuit in 2006. Judge Sotomayor was on the panel that issued the unsigned opinion–one that makes Justice Stevens look like a paradigmatic defender of strong property rights.
I have written about Didden in Forbes. The case involved about as naked an abuse of government power as could be imagined. Bart Didden came up with an idea to build a pharmacy on land he owned in a redevelopment district in Port Chester over which the town of Port Chester had given Greg Wasser control. Wasser told Didden that he would approve the project only if Didden paid him $800,000 or gave him a partnership interest. The “or else” was that the land would be promptly condemned by the village, and Wasser would put up a pharmacy himself. Just that came to pass. But the Second Circuit panel on which Sotomayor sat did not raise an eyebrow. Its entire analysis reads as follows: “We agree with the district court that [Wasser's] voluntary attempt to resolve appellants’ demands was neither an unconstitutional exaction in the form of extortion nor an equal protection violation.”
Maybe I am missing something, but American business should shudder in its boots if Judge Sotomayor takes this attitude to the Supreme Court.
When the Government Takes Your Money, It Takes Your Property
When Daniel and Andrea McClung applied for a permit to build a small business on their property in Sumner, Washington, the city charged them nearly $50,000 to pay for improvements to the city’s entire storm drainage system.
The McClungs sued the city under the Fifth Amendment to the Constitution, whose Takings Clause prohibits the government from “taking” private property for public use without just compensation. They argue that the city cannot force them to pay fees for off-site pipes absent proof that their development would have a specific detrimental effect on the existing drainage system–and without any evidence that the impact was worth $50,000.
The Ninth Circuit ruled in favor of the city, reasoning that money is not property (so there could be no unconstitutional taking) and that because the fees were imposed by ordinance (so the city’s determination that the pipes needed upgrading was justification enough for the fees). The McClungs have now asked the Supreme Court to review their case.
Cato, joined by the Pacific Legal Foundation and the Building Industry Association of Washington, argues that this case is a perfect vehicle for the Court to revisit the scope of Fifth Amendment protections.
Our brief highlights the deep divisions among state and federal courts over several important issues, such as whether the Takings Clause applies to legislative (as opposed to bureaucratic) exactions and whether it applies to monetary exactions (not just burdens on land use). The Court should take this case to ensure that the standard for reviewing development conditions is uniform across the country and make clear that property right protections do not depend on ill-defined distinctions such as the form of property demanded by the government or the manner in which a condition is imposed.
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