The essence of the infamous three-factor Penn Central test for whether a restriction on the use of private property under the police power “goes too far” and is treated as a de facto exercise of eminent domain is the Court’s admonition that the takings question is resolved by “essentially ad hoc, factual inquiries,” and not, generally speaking, by the application of categorical rules.
To quote the unanimous Court in a more recent takings case (an opinion authored by Justice Ginsburg), there is no “magic formula” to determine “in every case, whether a given government interference with property is a taking,” because “of the nearly infinite variety of ways in which government actions or regulations can affect property interests.” Thus, there are “few invariable rules in this area.”
An “ad hoc” test surely suggests that the balancing and weighing to be done is for the trier of fact and presumptively resolved by a trial (or maybe if the evidence is all on one side or on irrelevant points by summary judgment). A corollary of that is that “ad hoc” factor-weighing is not for judges, and not at the stage where the plaintiff is merely giving notice of his or her claim (the pleadings).
Add to this the fact that the Supreme Court has never adopted a categorical “no taking” test that cuts off property owners asserting a de facto taking at the knees. Indeed, the only bright lines in takings law runs in the opposite direction: if a regulation authorizes a physical invasion or occupation, or wipes out all economically beneficial uses, it is a taking — game, set, match. Anything could be a taking, and a few things are always takings.
But in 1210 Cacique Street, LLC v. City of Santa Barbara, No. 24-7728 (July 21, 2026), a divided 2-1 panel of the U.S. Court of Appeals for the Ninth Circuit apparently found a way to reinforce the existing de facto categorical “no taking” rule that has been bouncing around in the lower courts for a long time: most Penn Central claims will not survive the 12(b)(6) pleadings gateway.
[Disclosure: this is one from our shop.]
The lower courts have been doing this by establishing categorical bars for each Penn Central factor. Diminution in use or value: some courts say that unless you come very, very near to a Lucas wipeout, property owner, you lose. So even dramatic percentage losses are not sufficient, and even massive reductions in use or value must be tolerated as a matter of law, even though the lower courts have not established where the cut off line is. Character of the government action: many courts have created a bright line here, also: if the government action is valid under the police power (and what isn’t, we ask?), then this factor kills the Penn Central claim. And finally, distinct investment-backed expectations: you operate in a highly regulated environment (and who doesn’t, we ask?), you have no expectation not to be regulated into oblivion.
These categorical rules, which seem to run afoul of Penn Central‘s core message that courts just can’t tell by applying one-size-fits-all rules whether a restriction is a de facto taking, are on full display in Cacique.
This is a case in which the city imposed a new vacancy control restriction that capped the rent increase upon a change in mobilehome ownership at 10%. A mobilehome park owner challenged the regulation, asserting a Penn Central claim. The district court dismissed the complaint for failure to state a claim, and the Ninth Circuit panel affirmed.
Rather than review the complaint to determine whether it provided adequate notice to the city of the nature of the claim (remember, this is the pleadings stage), the panel “assessed” each of the three Penn Central factors, and decided that on the whole, the complaint didn’t pass muster:
Loss of use or value: This one sorta went in favor of the owner, because the complaint alleged a 92.5% loss of the property’s value because of the regulation. “We assume without deciding that the complaint has plausible pleaded a 92.5% diminution in the value of the property … [and] [w]e also assume that a 92.5% diminution, if proven, could support a takings claim and that the first prong of the Penn Central test is satisfied here.” Slip op. at 3.
Distinct investment-backed expectations: the city has long regulated rent for mobilehomes, and even though Cacique purchased the property before the challenged regulations were adopted, it bought the land when it was already subject to some form of rent control, so hey, what’s the difference, you had to know that more was coming, property owner. Slip op. at 4 (“one could not reasonably be surprised that the City would buttress the rent control ordinance by later amendment”).
Character of the government action: this is one of those “adjustments” to economic life that government can play around with and you just have to accept it. Slip op. at 7 (“We have consistently characterized mobile home rent control ordinances as adjustments of the benefits and burdens of economic life to promote the common good rather than as akin to physical invasions of property.”).
Done with all the weighing, the court affirmed, imposing what is in effect a categorical rule: unless you convince us that on balance, this looks like a taking, you lose.
As we’ve asked before, what is a court doing weighing anything merely alleged in a complaint? Moreover, what is a court doing imposing categorical rules like the owner cannot possible have distinct investment backed expectations because of the regulated environment, and that rent control is generally immune from Penn Central challenges? That’s not an ad hoc inquiry into the facts by a trier of fact, but rather the court creating legal hurdles that virtually no claimant may successfully navigated. Courts have no business gatekeeping at the pleadings stage.
Judge Miller saw it differently and dissented. He viewed this through the lens of pleading, and focused on the allegations in the complaint, concluded that, if weighed and balanced in light of all the circumstances, the city’s regulations could “go too far.” Dissent at 2-3 (“In concluding otherwise, the district court effectively required Cacique to prove an element of its case in the complaint.”).
Same with the expectations factor: “we have never adopted a per se rule that whenever a regulatory change was foreseeable, a takings claim will automatically fail the second prong of Penn Central.“).
Here’s the takeaway quote from Judge Miller:
In any event, even assuming that Cacique has not adequately pleaded the second or third prong of the Penn Central test, its allegations on the first prong should still allow it to survive a motion to dismiss. In holding otherwise, the court converts what is supposed to be a “situation-specific factual inquir[y],” Arkansas Game & Fish Comm’n, 568 U.S. at 31–32, into a mechanical exercise in box-checking. That approach finds no support in our precedent: Although some of our decisions have rejected regulatory-takings claims after full factual development when the plaintiff demonstrated substantial economic impact but failed to satisfy the remaining Penn Central factors, those cases do not establish a categorical rule at the pleading stage. Instead, our case law suggests that dismissal is appropriate only when none of the Penn Central factors are plausibly alleged.
Dissent at 6-7 (citations omitted).
Stay tuned, more to come.
1210 Cacique Street, LLC v. City of Santa Barbara, No. 24-7728 (9th Cir. July 21, 2026) (unpub.)