Sunday, January 20, 2013

Two Florida Courts Apply Penn Central Taking Test with Reasonable Results

In Florida, as in many other places, courts have had trouble applying the Penn Central takings test. Some folks argue that this case is so muddled and unworkable that it was not only a bad takings case, but also one of the worst cases the U.S. Supreme Court ever decided. Recently, however, two courts applied the test, coming to (surpisingly) reasonable results in opinions issued on the same day. 

Galleon Bay Corp. v. Bd. of Cnty. Comm'rs of Monroe Cnty.

Galleon Bay Corp. v. Board of County Commissioners of Monroe County, - So. 3d, 2012 WL 6027768 (3d DCA Dec. 5, 2012), is one of a number of long-running takings disputes in the Florida Keys. The appellate court started by explaining the Penn Central test:
In addressing whether a "taking" has occurred, the United States Supreme "Court's decisions have identified several factors that have particular significance. The economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations are, of course, relevant considerations." Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 124 (1978) (emphasis added). The Supreme Court has also "frequently observed that whether a particular restriction will be rendered invalid by the government's failure to pay for any losses proximately caused by it depends largely `upon the particular circumstances [in that] case.'" Id. (citation omitted). Furthermore, the United States Supreme Court has also found "categorical treatment appropriate . . . where regulation denies all economically beneficial or productive use of land." Lucas v. So. Carolina Coastal Council, 505 U.S. 1003, 1015 (1992). Moreover, the Court has stated "on numerous occasions [that] the Fifth Amendment is violated when land-use regulation `does not substantially advance legitimate state interests or denies an owner economically viable use of his land.'" Id. at 1016 (citation omitted) (emphasis in original).
Robert Thomas has blogged a few thoughts about this case, pointing out that this case is a good example of how subjective these Penn Central determinations can be. Ultimately, the appellate court held that the trial court did not find a taking because it had incorrectly applied both Penn Central and Lucas. Further, it held that the landowner had "been deprived of all or substantially all of the economically viable use of its property." 

Although the appellate court held a taking had occurred and remanded the case to hold a trial on compensation, it is not yet final because the parties are awaiting a ruling on a motion for rehearing en banc.

Scott v. Galaxy Fireworks, Inc.

On the other hand, in Scott v. Galaxy Fireworks, Inc., - So. 3d -, 2012 WL 6028835 (2d DCA Dec. 5, 2012), the trial court found a taking that the appellate court reversed. In 1998, the governor of Florida entered an executive order that banned the sales, use, or discharge of fireworks for approximately two weeks. The order prohibited sales during the Fourth of July, during Florida's worst drought and fire season in recent history. The retailer showed that it realized approximately seventy percent of its profits during that time period and that it takes months of preparation to do so.

The trial court found a compensable taking, but the the appellate court reversed, holding that under Penn Central, there was no taking:
In addressing the owners' argument, the Supreme Court set forth the following three factors to be considered in determining whether there has been a compensable taking: (1) "[t]he economic impact of the regulation on the claimant," (2) "the character of the governmental action," and (3) "the extent to which the regulation has interfered with distinct investment-backed expectations." Penn Central, 438 U.S. at 124. Applying these three factors to the instant case, we conclude that the executive order here did not amount to a compensable taking.
Here, the sale of fireworks is highly regulated due to the potential danger resulting from their discharge. Appellees voluntarily invested in their inventories knowing that the regulation of the sale and use of such was subject to change from time to time and from locality to locality. The temporary limitation on the sale of the fireworks under these facts does not rise to such an interference with investment-backed expectations as to constitute a compensable taking.
Translation: stay out of highly regulated industries if you want to protect your investment! The court's language equating the government's police powers with the "character of the governmental action" concerns me some. I lived in Florida during that time, and with a family in the forestry business, I was able to see first-hand the devastation that the fires wrought in the state. There was certainly a state of emergency, which should be the important point - not necessarily that the state acted within its police powers. Later courts could easily use it out of context. But at least here, the result seems reasonable. The case is not yet final because the parties have just finished briefing Galaxy's motion for rehearing en banc.