Here are my remarks from last week's Brigham-Kanner Property Rights Conference at the William & Mary Law School in Williamsburg, Virginia. Our panel spoke on "Property Rights in Times of Economic Crisis," and included lawprofs James W. Ely (Vanderbilt), William Fischel, (Dartmouth), and Eric Kades (William & Mary). See the complete faculty list and agenda here.
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Aloha, I bring you greetings from the land of Midkiff, the land of Lingle.
I practice in the jurisdiction that believed it would cure our economic ills to use eminent domain to bust up the legacy land trusts, and make sure that everyone who owns a home could also own the fee simple interest.
Which they may now do, provided they can afford our median price for a single-family residence, $637,000.
I practice in the jurisdiction that believed that it would be a good idea to try and bring down the price of gasoline to consumers -- and who can doubt that this is a desired public good? -- by regulating the rent that company-owned gas stations could charge service station operators.
Which only resulted in the price of gas going up.
So it is appropriate, given my origins, that I've been asked to speak on the topic of "Property Rights in Times of Economic Crises." The Fifth Amendment, after all, is the only provision in the Bill of Rights (joined perhaps by the Excessive Fines Clause) expressly phrased in terms of economic rights: public use of property, and of course, the just compensation requirement, which requires that justice be measured by the amount of money or other compensation an owner is entitled to when her property is taken.
Of course, my glib side wants to say that if we respected property rights more, we'd have economic crises less, and that if you want to understand how to avoid economic hard times, you simply need to read the scholarship of today's panelists and exclaim, to paraphrase General George Patton -- or, more accurately, actor George C. Scott:
"Professor Ely, you magnificent bastard, I read your book!"
But that would be too easy, and I'd be left yielding 12 minutes of my time to my fellow panelists, and perhaps releasing you early for our lunch break. So to fill that time, I'd like to discuss three illustrations of the importance of property rights when times are tight.
First, property rights, almost by definition, protect those who own property, and property rights are viewed as the province of the wealthy and the powerful, who, current theory goes, deserve lesser judicial protection because their wealth and power give them a means to participate in the political process on a "more equal" basis that their less fortunate fellow citizens.
But a recent decision from the Ninth Circuit repudiates that view.
In Lavan v. City of Los Angeles, No.11-56253 (Sep. 5, 2012), a 2-1 decision from a Ninth Circuit panel, two judges viewed as "liberal," including Judge Stephen Reinhardt, the judge who gave us the bizarre economic theory that eventually bore fruit in the Tahoe-Sierra majority (it's OK to wipe out all value temporarily, because the property will "eventually recover its value"), held that the City of Los Angeles could not presume that property owned by homeless people in the Skid Row area was abandoned, and prohibited the City from seizing and destroying it when the owner was "momentarily away" from it.
This being the Ninth Circuit, the majority judges were more comfortable basing the ruling on the Fourth Amendment and not the Fifth. But get a load of this quote:
As we have repeatedly made clear, "[t]he government may not take property like a thief in the night; rather, it must announce its intentions and give the property owner a chance to argue against the taking." Clement v. City of Glendale, 518 F.3d 1090, 1093 (9th Cir. 2008). This simple rule holds regardless of whether the property in question is an Escalade or an EDAR [a small, portable shelter provided to homeless people], a Cadillac or a cart. The City demonstrates that it completely misunderstands the role of due process by its contrary suggestion that homeless persons instantly and permanently lose any protected property interest in their possessions by leaving them momentarily unattended in violation of a municipal ordinance. As the district court recognized, the logic of the City’s suggestion would also allow it to seize and destroy cars parked in no-parking zones left momentarily unattended.
Slip op. at 10591.
From this case, I glean the constitutional rule that "one man's junk is another's gold," a rule that undoubtedly has allowed the creators of e-Bay to earn billions, and the producers of reality TV shows to schedule seemingly infinite programming. But all kidding aside, this is a great point by the Ninth Circuit (something I am not able to say with much frequency): if property rights are frequently asserted by those who own lots of property, they surely protect those who have little. Because there, but for the grace of God, go I.
But what about the so-called "one-percent?" Aren't they the ones who assert property rights most frequently? I turn now to the recent proposal that seems to be gaining the most traction in California, for municipal governments to use eminent domain to seize "underwater" but performing mortgages.
Proponents of the scheme argue it will fix the burst bubble and right the housing market, all at little to no cost to the public. Call me a skeptic, but this plan sounds like those from my home jurisdiction that went all farpotshket, a term that our esteemed colleague for whom the Brigham-Kanner prize is named surely recognizes.
But I'm not here today to offer my thoughts on the wisdom of the plan; let's just say I was officially agnostic until I heard the CEO of Mortgage Resolution Partners remark at a recent conference on the topic that eminent domain will have no cost, and as a consequence I am now against it, or at least highly skeptical. A "doubting Thomas" if you will. Eminent domain will have "no cost?" For a scheme that, I think, has not fully thought out whether it will pass muster under even the low Kelo bar or the particulars of California's law of necessity. And the proponents' belief that they have correctly calculated just compensation for the underwater-but-performing mortgages appears overly simplistic and too optimistic to me. If that situation ever develops into litigation, it will be the "one-percenters," not our homeless friends on Skid Row, who will be asserting and defending property rights.
How much sympathy should we have for those lenders and bankers who are supposedly keeping homeowners in economic bondage? Not much, I guess, but my point is that in the context of defending property rights, who cares who is doing the defending, since we all benefit from the result when the courts rule correctly. We speak quite often -- last night's Vice Presidential Debate being the most recent example -- of our overarching desire to protect the "middle class." But because most of the members of this group cannot afford to litigate to defend their property rights, it is left up to either outfits like Pacific Legal Foundation or the Institute for Justice who can litigate a select few cases pro bono, or the property owners who have the staying power to pay their lawyers to defend their rights, to take up the fight.
If they don't do it, property rights lose. To paraphrase Martin Niemöller, if I don't speak up when they come for the lenders and bankers, when they come for me there will be no left to speak up.
Lastly, a quick word about the case the Supreme Court agreed last week to review, Koontz v. St. Johns River Water Management Dist., No. 11-1447 (cert. granted Oct. 5, 2012). The Court has taken up the question of whether the Nollan/Dolan nexus-proportionality tests apply to government demands for cash, as well as land exactions. This case may also settle other issues such as whether compensation is the sole remedy for a regulatory taking, whether substantive due process or takings the vehicle by which to evaluate exactions, and whether money is "property."
And here I offer a prediction. Not what the Court will do (I will let you guess what position the amicus brief we're going to file will be arguing), but rather than because of the economy in which we find ourselves, and the Questions Presented are expressly about money, that the Court will deal with the contrasts I have highlighted today.
Finally, please allow me to wrap up by offering my thanks to the organizers of this program. To a property owners' lawyer, and an admitted property law nerd, to participate in this conference is like a baseball fan being offered the chance for an at-bat at Yankee Stadium in October. In other words, the pinnacle; a chance to rub shoulders, and perhaps share the limelight for a moment, with the Ruths and the Gehrigs in our field of law. Thank you.