Here’s the government’s Brief in Opposition in Mehaffy v. United States, No. 12-1416 (cert. petition filed June 3, 2013.
In that case, the Federal Circuit, in an unpublished opinion, held that Mehaffy failed the Penn Central ad hoc takings test solely because he purchased the property alleged to have been taken after the governmentt adopted the Clean Water Act. As a matter of law, he could not have any “reasonable investment-backed expectations” because his land was subject to regulations that, as applied to his land, are alleged to take property.
That reasoning seems somewhat circular, and would seem to run smack-dab into the Supreme Court’s determination in Palazzolo v. Rhode Island, 533 U.S. 606, 626 (2001), rejecting a per se rule that “postenactment purchasers cannot challenge a regulation under the Takings Clause.”
But for some reason, the lower courts have applied (or, in some cases, have not applied) Palazzolo in a decidedly uneven manner. Some take the Supreme Court at its word, and conclude that pre-existing regulations do not cut off a takings claim. Others view pre-acquisition regulations as part of the “background principles” which inhere in titile under Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992). Under this theory, a post-regulation purchaser does not possess Constitutionally-recognized “property,” and thus could not assert a takings claim. See, e.g., CRV Enters. v. United States, 86 Fed. Cl. 758 (2009) (plaintiff did not own the property at the time of the taking and thus did not have a “valid property interest” entitling it to compensation), aff’d, 626 F.3d 1241 (Fed. Cir. 2010); Huntleigh USA Corp. v. United States, 525 F.3d 1270, 1377 (Fed. Cir. 2008); Bair v. United States, 515 F.3d 1323, 1327 (Fed. Cir. 2008); Cienega Gardens v. United States, 331 F.3d 1219, 1328 (Fed. Cir. 2003). Even the Federal Circuit does not apply this rule uniformly, however. See, for example, Schooner Harbor Ventures, Inc. v. United States, 569 F.3d 1359 (Fed. Cir. 2009), in which the court applied the Palazzolo rule more faithfully, concluding that a preexisting regulation was not a categorical bar to a takings claim, but “is a factor that may be considered, depending on the circumstances,” and that the Supreme Court “reject[ed] the argument that one who acquires title after the relevant regulation was enacted could never bring a takings claim.” Id. at 1366.
For more cases illustrating the lower court split, see this brief which we filed in another case (cert denied) that challenged the Ninth Circuit’s failure to apply to Palazzolo rule.
Initially, the government declined to respond to Mehaffy’s cert petition, but the Court asked for one. The BIO asserts that the Federal Circuit:
did not announce such a [categorical] rule. Instead, in a brief but fact-intensive opinion, the court held that a reservation in an easement did not give petitioner a reasonable, investment-backed expectation of filling wetlands on his property…. Accordingly, there is no merit to petitioner’s suggestion that the decision below effectively revives the categorical notice rule that this Court rejected in Palazzolo.
BIO at 7-8.
Really, that’s what the Federal Circuit did? Let’s take a look at the short passage in the opinion the BIO is referencing:
In legal terms, the property owner who buys land with knowledge of a regulatory restraint “could be said to have no reliance interest, or to have assumed the risk of any economic loss.” Loveladies Harbor, Inc. v. United States, 28 F.3d 1171, 1179 (Fed. Cir. 1994). Here, section 404 permitting requirements were in place and well known at the time Mr. Mehaffy purchased the land. Mr. Mehaffy admits that due to his work in the construction field, he was aware of the need to obtain a section 404 permit when filling wetlands. App. 103. Additionally, Mr. Mehaffy knew as early as 1980 the Corps intended to apply this requirement to the property. Before he purchased the property, Mr. Mehaffy had both constructive and actual knowledge that federal regulations could ultimately prevent him from exercising the right reserved in the easement to fill certain land. Therefore, he did not have a reasonable, investment-backed expectation that he could develop the property without being subject to the permitting requirements of the CWA.
The language of the easement does not change this analysis. When the easement was granted in 1970, it did not give Nomikano any new property rights. Rather, the easement reserved a right which Nomikano shared with all other similarly situated land owners—the ability to fill one’s land without asking the government’s permission. The CWA altered the expectation of this right for all landowners. When Mr. Mehaffy purchased the land 30 years later, the easement could not give him a new expectation of rights. Mr. Mehaffy is in the same position as other property owners and has no expectation to fill his wetlands without first obtaining a permit under the CWA.
In other words, Mehaffy knew, “therefore he did not have a reasonable, investment-backed expectation.” And once the court determined the language of the easement did not change that conclusion, it went no further:
Because this court finds the reasonable expectations factor dispositive, it affirms the trial court’s grant of summary judgment and will not further discuss the character of the government action or the economic impact of the regulation.
We’re not sure how much more “categorical” you can get than considering one factor of three “dispositive,” especially since this is an as-applied challenge and not a facial takings claim.
The cert petition is posted here. Here’s the amicus brief of Pacific Legal Foundation.
We’ll post the petitioner’s reply when filed. In the meantime, follow along on the Court’s electronic docket here.
Brief for the United States in Opposition, Mehaffy v. United States, No. 12-1416 (Nov. 25, 2013)