Thursday, July 26, 2012

A Primer in Eminent Domain and Takings Law under the U.S. Constitution

The American Bar Association's Young Lawyer's Division has published my article with Joseph Whealdon on eminent domain and takings as a part of its "201 Practice Series." The series is aimed at providing young lawyers with a quick and dirty introduction to specific areas of the law. The article is available here and is reposted below. The publication of this article is especially timely, since I've joined the Tampa law firm Bricklemyer Smolker & Bolves, where I'll add practice in eminent domain to my current environmental, land use, and property rights practice.

A Primer in Eminent Domain and Takings Law under the U.S. Constitution

It is not uncommon for decisions of the Supreme Court of the United States to result in surprising changes. However, the changes wrought by Kelo v. New London, 545 U.S. 469 (2005), were unique: in less than a decade a well-maintained middle class neighborhood in Connecticut was, quite literally, transformed into a dump.[1] The Kelo decision reminded Americans that the Founders wanted to limit the government’s power of eminent domain, which is the power of a sovereign to appropriate private property. Eminent domain is “an essential attribute of sovereignty, inherent in every independent government, and to be exercised in the discretion of the sovereign power, to promote the general welfare of the people.”[2]

The Fifth Amendment to the United States Constitution limits the right of the sovereign. It guarantees that in no case will “private property be taken for public use, without just compensation.” This “Takings Clause” provides that if the government seizes private property, that property's owner must receive fair compensation. Although protection under the Takings Clause originally applied only to takings of property by the federal government, the Fourteenth Amendment later extended this protection to takings by the states and their political subdivisions.[3]
I. Types of Condemnation (“Takings”)
There are two types of governmental appropriations of property—commonly called “takings.” The first type involves the exercise of eminent domain powers and is known as direct condemnation. The government admits that it wishes to take or has taken private property from an individual. It then brings the individual into court to obtain the property in exchange for just compensation. A civil jury determines the value of just compensation.[4] The second type of taking, known as inverse condemnation, occurs where the government takes property from an individual but denies that it is using its power of eminent domain. In this situation, an individual who wants to receive compensation must bring a claim against the government. The individual only receives compensation if it succeeds in court.

Finally, it is possible that a taking may occur by an act of the judiciary, though this type of taking has not been affirmatively recognized yet.

II. Direct Condemnation
For many years, direct condemnation was a relatively innocuous subject. With the recent Kelodecision, however, it became a hot topic in property law. In order for the government to exercise its eminent domain powers, a direct act of condemnation must be rationally related to a conceivable public purpose.[5] The U.S. Supreme Court construes public purposes broadly, andKelo has been widely criticized as expanding the concept. In Kelo, a company attempted to purchase tracts of land in New London to construct a large development catering to workers at a proposed Pfizer facility.[6] When several homeowners refused to sell their property to the developer, the City of New London took the property.[7] One resident, Susette Kelo, challenged the condemnation action.[8] Kelo argued that the taking of her property violated the Fifth Amendment because the property would be used for private property development, rather than a public use.[9]

The Supreme Court disagreed.[10] First, the Court explained that the government could not merely transfer property from one private party to another, even if just compensation is paid.[11] Instead, the Court explained that government could transfer property from one private party to another only if the purpose of the transfer was to provide the public with a future use of the property and just compensation was paid.[12] However, the Court said that neither of these factors was present.[13] Instead, the Supreme Court held that economic development was a public use, even where it was not reasonably certain that a benefit to the public would occur.[14] The Court deferred to New London’s judgment about which strategies would spur economic development.[15] Thus, New London’s condemnation action succeeded, and Kelo was forced to take compensation from the city.[16] The Kelo decision was instantly criticized. After Kelo, most states enacted laws banning or restricting the ability of municipalities to condemn land for the purpose of economic development.[17] The effects of the taking have now placed eminent domain under further scrutiny. The Pfizer Corporation never built a facility in New London, and the land stood vacant for several years. The Kelo property is now used by the city as a dump for plants and trees uprooted during the hurricanes of early 2011.[18]

III. Inverse Condemnation
As the regulatory state grew in the twentieth century, the U.S. Supreme Court struggled to define inverse condemnation. The Court has struggled with when a property was so burdened by regulation that the government should be forced to condemn the property by taking title to it and providing just compensation. It has held there are three types of taking by inverse condemnation:

A. physical,

B. regulatory (categorical and non-categorical), and

C. land-use exactions. [19]

Each is described briefly below.

A. Physical
A physical taking occurs when the government undertakes a permanent physical occupation of real property.[20] It does not matter how minor the occupation is. Id. This is true even when a third party, rather than the government, is given the right to occupy the landowner’s property.[21]

B. Regulatory: Categorical and Non-Categorical
A regulatory taking occurs when the value or usefulness of private property is eliminated or greatly lowered by a regulatory action without physical occupation.[22] Regulatory takings can be separated into two classes: categorical and non-categorical regulatory takings. A categorical regulatory taking occurs when a regulatory action causes a property to lose all economic value.[23] The complex test for determining whether a non-categorical regulatory taking has occurred involves weighing a number of factors:

1. The economic impact of the regulation on the landowner. The court will consider two aspects. The first involves balancing the liberty interest of the landowner against the government’s need to use the regulation to protect the public interest.[24] The second involves considering the change in fair market value, if any.[25] This has been boiled down to whether not a landowner has been denied “economically viable use of [their] land.”[26]

2. The character or nature of the governmental action. The court will consider whether there has been a physical invasion or simple interference from a public program.

3. The degree that the regulation interferes with distinct investor-backed expectations. The court will consider whether the landowner’s use of the property has become commercially impracticable. It will also consider whether a property owner purchased the property relying on a state of affairs that did not include the challenged regulatory regime. This reliance is not blindly contained to the time of purchase.[27]

4. Whether the ordinance prevented a reasonable use of the property. This factor is not dispositive, and attacks to an ordinance based solely on this often fail.[28]

5. Whether the owner of the property received a benefit that matched the burden of the ordinance. This applies to each property owner individually.

6. Whether there is an average reciprocity of advantage. This occurs if all of the property owners in an area receive the same restrictions, benefitting both each other and the municipality.[29]

If a regulatory taking occurs, making changes in the regulation afterwards does not relieve the government of its duty to compensate the landowner for the taking.[30]

C. Land-Use Exactions
A land-use exaction is compensation that a development is required to cede to the government before constructing a new structure or putting land to a new use. This compensation can come in several different forms, including a payment to the government or the allowance of an easement on the property to be developed. To be valid, an exaction must satisfy two conditions:

1. There must be an essential nexus between the exaction itself and the state interest that the exaction is advancing.[31]

2. There must be a “rough proportionality”- the exaction must be related in both nature and extent to the impact of the proposed development.[32]

III. Judicial Takings
Finally, there may be a type of taking initiated by the judiciary. In a recent U.S. Supreme Court case, a plurality of justices recognized that, theoretically, a taking could occur by an act of the judiciary.[33] Although the Court unanimously agreed that type of taking was not present in the instant case, Justice Scalia wrote that a judicial taking occurred where a state court “declares that what was once an established right of private property no longer exists.”[34] Whether the Court will establish more firmly that judicial takings may occur in the future remains to be seen.

IV. Conclusion
The growing amount of interaction between the government and the private sector will lead to a continued increase in the regulation of private property. As the regulatory scheme becomes more complex and the government makes additional requests of landowners, it is important for counsel to be aware of conditions that may constitute a taking. Recognition of a taking offers a young lawyer a chance to demonstrate value to a client. Earning a reputation for acknowledging and acting on legitimate takings claims presents a timely and cost-effective way for a young lawyer to grow their book of business.
[1] Washington Times Water Cooler Blog, “PICKET: '05 Kelo decision a failure; CT site remains a dump,” (Sept. 3, 2011).
[2] Penn. Mut. Life Ins. Co. v Heiss, 141 Ill. 35, 31, N.E. 138 (1892); see also Kansas City v. Marsh oil Co., 140 Mo. 458, 41 S.W. 943 (1897) (“The right of eminent domain is inherent in every government.  In this state it is not conferred, but is limited by the constitution.”).
[3] See Chicago, Burlington & Quincy RR. Co. v. Chicago, 166 U.S. 226 (1897).
[4] See, e.g., Kennelly v. U.S. Army Corps of Eng’rs, 2002 U.S. Dist. LEXIS 26502, at *45 (S.D. Fla. 2002) (relating the award of property to the South Florida Water Management District following a jury verdict fixing compensation for the property’s owner).
[5] Kelo, 545 U.S. at 490.
[6] Id. at 472-3.
[7] Id. at 475.
[8] Id.
[9] Id.
[10] Id. at 477.
[11] Id.
[12] Id.
[13] Id.
[14] Id. at 488.
[15] Id. at 488-9.
[16] See id.
[17] See Carol L. Zeiner, Eminent Domain Wolves in Sheep’s Clothing: Private Benefit Masquerading as Classic Public Use, 28 VA. ENVTL. L.J. 1,2 (2010) (stating that over forty states enacted legislature to curb the effects of Kelo by the end of 2008).
[18] See Washington Times Water Cooler Blog.
[19] Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 548 (2005).
[20] Loretto v. Teleprompter Manhattan CATV Corp,, 458 U.S. 419, 427 (1982).
[21] Preseault v. United States, 100 F.3d 1525, 1534-5 (Fed. Cir. 1996).
[22] Hotel and Motel Ass’n of Oakland v. City of Oakland, 344 F.3d 959, 965 (9th Cir. 2003).
[23] Palm Beach Isles Assocs. v. United States, 231 F.3d 1354, 1357 (Fed. Cir. 2000).
[24] Loveladies Harbor v. United States, 28 F.3d 1171, 1176 (Fed. Cir. 1994).
[25] Forest Props., Inc. v. United States, 177 F.3d 1360, 1367 (Fed. Cir. 1990).
[26] Agins v. Tiburon, 447 U.S. 255, 260 (1980). 
[27] See Cinega Gardens v. United States, 331 F.3d 1319, 1346 (Fed. Cir. 2003).
[28] See Miller v. Schoene, 276 U.S. 272 (1928).
[29] Penn Cent. Transp. Co. v. New York City, 438 U.S. 104 (1978).
[30] First English Evangelical Luther Church v. County of Los Angeles, 482 U.S. 304, 321 (1987).
[31] Nollan v. Cal. Coastal Com., 483 U.S. 825, 837 (1987).
[32] Dolan v. City of Tigard, 512 U.S. 374, 391 (2005).
[33] Stop the Beach Renourishment, Inc. v. Fla. Dep’t of Envtl. Prot., 130 S. Ct. 2592 (2010).
[34] Id. at 2602 (Scalia, J., plurality opinion, joined by Roberts, C.J., Thomas, J., and Alito, J.).

Jacob T. Cremer is an attorney at Bricklemyer Smolker & Bolves, P.A. in Tampa, Florida. His practice focuses on environmental and land use law, including property rights litigation and growth management issues. He received his bachelor’s degree in economics and business administration from Rhodes College, and he received his law degree and masters of science in urban and regional planning from Florida State University. He assisted counsel of record for the petitioners in the Stop the Beach Renourishment case, supra.

Joseph Y. Whealdon is an attorney at Sniffen & Spellman, P.A., in Tallahassee, Florida. His practice areas include labor and employment law, school law, and civil rights litigation. He received his bachelor’s degree in history and American studies from Florida State University, his law degree from the University of Pennsylvania, and has a certificate in business and public policy from the Wharton School. He is currently pursuing a legal master’s degree in environmental law and policy from Florida State University.