You know where this is.
Here's the cert petition filed recently in a case we've been tracking. (See also this guest post by economist Bill Wade about that case.)
As the above photo tells you, this one is going into what may the last truly unexplored frontier of regulatory takings law, the details of the ad hoc Penn Central test, the "default" test in most situations where the regulation does not wipe out all economically beneficial use (Lucas), doesn't physically invade the property (Loretto, Kaiser Aetna), or doesn't render useless a fundamental attribute of property (Webb's Fabulous Pharmacies).
In all but those situations, the Court has told us to apply the multifactor three-part (or as Professor Steve Eagle argues, the four-part) test from Penn Central. But only in a few cases have property owners successfully navigated that minefield to prove a taking (and defend it on appeal). This petition asks the Court directly to revisit that decision and provide a test that is more understandable, and more workable.
In this case, the plaintiff owned a vacant lot in a residential subdivision, and from 1975 to 2005, she and her predecessor owners (she inherited it from her parents) did not take steps to develop it. But then she did, undertaking several of the things you usually do in order to get a property ready to develop: she hired land planning consultants, architects, and planners to craft plans and applications. She also informed the town conservation commission that she intended to build a home on the property, because "[a]s submitted, the plaintiff's plans required several variances from the wetlands protection bylaw, as they did not comply with its requirements covering coastal banks, salt marshes, or land subject to coastal storm flowage." Slip op. at 4.
When the commission denied the variance, she sued in a Massachusetts court for a regulatory taking, seeking compensation. She asked that a jury determine both liability and damages. The jury concluded that the application of the wetlands law was a taking, and awarded her $640,000. But the court of appeals reversed the judgment and ordered the commission be declared the winner.
The court not only held that there's no right to a jury for an inverse condemnation claim (a ruling on which the owner has not sought U.S. Supreme Court review), but that the Penn Central test mandates that the property owner lose.
1. Economic impact. There was not a significant-enough diminution of value ($700k to $60k) because the purchase price was lower ($49k). [Barista's note: huh?]. Plus, even with the restrictive regulations applied, the owner could still make use of the property as a park or playground, or it could be sold to neighbors "for privacy or for expansion of their respective properties." [Barista's note: again, the "investment use."]. And sorry, this is economic illiteracy.
2. Investment-backed expectations. The owner inherited the property. That alone "does not by itself defeat a claim," slip op. at 15, but here, the owner didn't invest much in the property except pay property taxes, and spend a few hundred on some soil testing. Any compensation "would constitute a windfall." Palazzolo, anyone?
3. Character of the government action. No physical invasion. Generally-applicable environmental regulations that are sourced in harm mitigation. And you know what that means: property owner loses.
Here are the Questions Presented by the petition:
In Penn Central Transp. Co. v. N. Y., 438 U.S. 104 (1978), this Court held that Fifth Amendment “regulatory takings” claims are governed by three factors: the “economic impact” of the challenged regulatory action, the extent of interference with a property owner’s “distinct investment-backed expectations” and the “character of the governmental action.” Id.Follow the case on the Court's e-docket here.The Massachusetts Appeals Court applied the Penn Central factors to hold that Respondent Town of Falmouth (Town) did not unconstitutionally take Petitioner Janice Smyth’s (Mrs. Smyth) property by denying a permit to build a home. Mrs. Smyth’s parents purchased the lot in 1975 for $49,000 ($216,000 in today’s dollars), but did not develop it. In the meantime, the entire subdivision was developed. When Mrs. Smyth inherited the lot and sought to build, the Town refused to grant a permit based on regulation post-dating her interest. The denial left Mrs. Smyth’s lot without any possible use except as a “playground” or “park,” and stripped it of 91.5% of its value. Yet, the court below held that none of the Penn Central factors weighed in favor of a taking under these circumstances.
The questions presented are:
- Whether the loss of all developmental use of property and a 91.5% decline in its value is a sufficient “economic impact” to support a regulatory takings claim under Penn Central.
- Whether a person who acquires land in a developed area, prior to regulation, has a legitimate “expectation” of building and, if so, whether that interest can be defeated by a lack of investment in construction?
- Whether the Court should excise the “character” factor from Penn Central regulatory taking analysis.
