New Cert Petition: Do Pre-Purchase Regulations Negate A Property Owner's Expectations?

Here's the cert petition filed last week which asks the Supreme Court to review the Federal Circuit's unpublished opinion in Mehaffy v. United States (Dec. 10, 2012). In that case, the court affirmed the Court of Federal Claims' grant of summary judgment to the government, holding that Mehaffy failed the Penn Central test solely because he purchased the property alleged to have been taken after the governmentt adopted the Clean Water Act.

The Questions Presented give some additional background:

In 1970, the U.S. Army Corps of Engineers ("Corps") entered into an agreement that gave the Petitioner‘s predecessor in interest, Nomikano, Inc., the right to fill certain wetlands on its property. In exchange, the government obtained a flowage easement over a portion of the property. Petitioner was Secretary-Treasurer of Nomikano and involved in those negotiations. In 2000, Petitioner obtained the property. Subsequently, in 2006, he sought a permit from the Corps to fill certain wetlands in accordance with the agreement. The Corps denied his permit.

The U.S. Court of Appeals for the Federal Circuit held that Petitioner had zero reasonable investment-backed expectations simply because he purchased the property after the enactment of the Clean Water Act. 33 U.S.C. § 1521 et seq. The Federal Circuit then concluded that this, by itself, constituted a sufficient regulatory takings analysis, and affirmed the district court‘s dismissal of Petitioner‘s claims.

In Palazzolo v. Rhode Island, 533 U.S. 606 (2001), this Court uniformly rejected the categorical rule that "postenactment purchasers cannot challenge a regulation under the Takings Clause." Id. at 626.

The questions presented are:

1.  Can lower courts bypass Palazzolo and insert a new categorical rule to the Takings Clause that regulations existing prior to acquisition of land solely and entirely negate the reasonable investment-backed expectations of a landowner; and

2.  Can lower courts, in the land use regulatory takings context, ignore the holistic, multifactored balancing inquiry demanded in Penn Central Transp. Co. v. City of New York, 438 U.S. 104 (1978), and decide a case on a single factor?

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.

Other courts apply the same analysis as Mehaffy, holding that regulations predating acquistion as destroying investment-backed expectations, obviating the need to consider the economic impact of the regulation, or the character of the government action. These courts transform the investment-backed expectations factor into the dispositive consideration, despite the Supreme Court’s caution that no Penn Central factor is entitled to conclusive weight. Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 539 (2005). 

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.

We will be following Mehaffy, so stay tuned. Here's the Court's docket entry.

Petition for a Writ of Certiorari, Mehaffy v. United States, No. 12-1416 (June 3, 2013)