Property and the Regulatory State at the Supreme Court

By the time this term ends, the Supreme Court will have heard not one, not two, but three cases about the reach of the takings clause of the Fifth Amendment. These cases bring to the Court opportunities to affirm the important role that private property plays in American life.

An important constitutional protection for private property, the takings clause states, “nor shall private property be taken for public use, without just compensation.” The body of constitutional law that the Court has derived from this provision is anything but simple, and the extent of its reach remains uncertain. Takings clause cases have for some time been battlegrounds where deep, principled disagreements are joined. Though the briefs and judicial opinions employ the language of Fifth Amendment doctrine, underlying the different views of the constitutional text are radical differences about the importance of private property and the amount of respect the regulatory state owes to property’s role in society.

In early takings clause cases these differences were sometimes clearly stated, and always close to the surface. In the 1922 case, Pennsylvania Coal Company v. Mahon, the Court ruled that a state that prohibits a use of property by regulation must pay just compensation under the takings clause, just as if it had taken title to the property by exercising its power of eminent domain. Justice Holmes, writing for the majority, conceded that the values served by private property “are enjoyed under an implied limitation and must yield to the police power” of the state. But, he insisted, “usually in ordinary private affairs the public interest does not warrant” interference with property rights. And the state could not lawfully ignore the value of the estate in land that it had destroyed. When constitutional protections for property are qualified by the public interest, “the natural tendency of human nature is to extend the qualification more and more until at last private property disappears.” Constitutional protections for property must have some force, Holmes thought, lest the state crowd private property out of public life.

Justice Brandeis dissented in that case. Building on the shared premise that property rights are not absolute, Brandeis observed that some uses of property can “seriously threaten the public welfare.” He insisted, “Whenever they do, the legislature has power to prohibit such uses without paying compensation.” A regulatory “restriction imposed to protect the public health, safety or morals from dangers threatened is not a taking,” he maintained. The state must have a free hand to stand against private property owners on behalf of the public, Brandeis believed, especially where the “self-interest” of property owners was insufficient to restrain them. “If public safety is imperiled,” Brandeis argued, neither property nor contract should be allowed to “prevail against the exercise of the police power.” Brandeis thus barely concealed his view that the state is the guardian and promoter of the public good, and that private property owners engage in selfish pursuits at best and, at worst, pose serious threats to public welfare.

In 1978, those conceptions of property and the regulatory state were reversed. In Penn Central Transportation Company v. New York City, a majority of the Court adopted the Brandeis position. “Property,” the Court declaimed, consists only of those interests in which a landowner has a reasonable, investment-backed expectation. Whenever a state reasonably concludes that the destruction of “property interests” is necessary to promote the public’s health, safety, morals, or general welfare, the state must be free to destroy those interests. Because the regulation in that case—an historic landmark designation, which prevented Penn Central from building an office tower over Grand Central Terminal in New York—did not interfere with Penn Central’s “primary expectation concerning the use of the parcel” (a train station), and allowed Penn Central to retain what the Court deemed a “reasonable return” on its investment in the property, the regulation was not a taking for which the City had to pay just compensation.

Then-Justice Rehnquist, writing in dissent, articulated a much broader conception of property. Penn Central’s right to develop the space above the train station was not merely an interest but a property right. The Constitution’s property protections, Rehnquist insisted, are addressed to “every sort of interest the citizen may possess” (emphasis in original). And he criticized the majority’s implicit assumption that property rights exist at the pleasure of the state. He wrote, “A taking does not become a noncompensable exercise of police power simply because the government, in its grace, allows the owner to make some ‘reasonable’ use of his property.”

Every once in a while this foundational dispute still comes to the surface. In a case decided in 2001, a state argued that a landowner who acquires title after a regulation is enacted cannot complain of the deprivation that the regulation caused, because such a landowner takes title with notice of the regulation. The Court rejected this argument, commenting, “The State may not put so potent a Hobbesian stick into the Lockean bundle [of rights].”

But more often than not, the justices adhere to the script of constitutional doctrine, and the political philosophers remain offstage. A significant protection secured for property owners in one case is undermined by a seemingly technical adjustment to legal doctrine in the next case. Then the Court announces a new protection against regulatory excess and the pendulum swings back the other way. Thus the complexity, and even confusion, in takings clause jurisprudence can seem rather arbitrary. The result is insecurity of property rights. If a private citizen deprives another citizen of property, then he must pay compensation. But if the government deprives a citizen of his property, then it might be required to pay, or it might not, depending upon how a court weighs various factors.

One of the takings clause cases before the Court this term illustrates the problem. Arkansas Game & Fish Commission v. United States posed the question whether government actions that result in recurring, intermittent flood invasions upon an owner’s land—here, the Army Corps of Engineers’ operation of a dam, which resulted in the death of thousands of trees on the claimant’s land downstream—give rise to a just compensation claim under the takings clause.

As difficult as this question might have been if it were one of first impression, it was further vexed as a result of the Court’s own precedents. The Court had previously ruled that, if government action causes a temporary deprivation of property use, and that deprivation amounts to a taking, then the government must provide compensation, just as it would for a permanent taking. But it had also ruled that temporary flooding does not amount to a taking. On the other hand, it had also ruled that “intermittent but inevitably recurring overflows” are permanent floods, and therefore are takings. In Arkansas Game & Fish Commission, the government invited the Court to rule that an intermittent overflow that varies in its timing is “inherently temporary,” and therefore does not effect a taking. During oral argument in this case, Justice Breyer allowed that the Court’s doctrine in this area is “somewhat arbitrary.”

This arbitrariness reveals the danger of making property rights dependent upon the nature of government action. These hairs are split without reference to simple, intuitive concepts, such as “mine” and “yours.” Property rights are not certain or secure, and are therefore less effectual at promoting the common good.

Nevertheless, the complexities in this area of law also demonstrate that the regulatory state has not completely crowded property out of public life, as Holmes feared. Private property does command some respect at the Court. Oral argument in the Arkansas case went badly for the government. The government argued that it must have a free hand to choose winners and losers when it gets into the flood-control business, and that it cannot be made to pay for damage that it causes downstream. Justice Sotomayor was “totally confused” by this argument. Justice Scalia thought the government was trying to “overrule the Takings Clause.”

In a decision announced just a few weeks later, the Court ruled 8-0 (with one abstention) against the federal government. Justice Ginsburg announced the Court’s “modest decision” that “government-induced flooding temporary in duration gains no automatic exemption from Takings Clause inspection.” The Game & Fish Commission must still navigate the labyrinth of regulatory takings doctrine, but it is not categorically barred from pressing its claim. The Court did little to clarify the law, but it also avoided placing a new limitation on the takings clause.

Last term the Court handed down a decision in Sackett v. EPA, another case with significant implications for private property. The Court’s Sackett decision affirmed the statutory rights of landowners to contest burdensome assessments by the Environmental Protection Agency. It also contained a strong dictum. The right to judicial review of the EPA’s assessments constituted, as the Court put it, “a repudiation of the principle that efficiency of regulation conquers all.” Justice Alito wrote separately to stress that the government’s position, which “would have put the property rights of ordinary Americans at the mercy of [EPA] employees,” was “unthinkable” in a nation that values private property.

The question thus is squarely framed. Should we be a nation that values private property? Amid increasing skepticism of the fairness of private property, that question calls out for an answer. I will turn to that question tomorrow.