January 20, 2010

Can states redefine property rights?

By Can states redefine property rights?

Author:  Luke A. Wake

In December, the U.S. Supreme Court heard oral arguments in Stop The Beach Renourishment, Inc., v. Florida Department of Environmental Protection, a case which may have a profound impact on the law of property in the United States. Legal commentators have speculated that the Court may endorse a previously unrecognized takings theory.

To date, the Court has endorsed only four takings theories. A taking occurs when: (1) the government physically encroaches upon private property; (2) regulations deny a property owner all economic benefit of a property; (3) regulations deny a property owner reasonable investment backed expectations; or (4) the government attempts to exact property from a landowner in exchange for a land use permit without meeting the nexus and rough proportionality standards set forth in Nollan and Dolan. Still, many property rights advocates believe that a property owner may pursue a takings theory where a judicial decision operates to take away previously recognized property rights; this so called "judicial takings theory" could be affirmed in Stop The Beach Renourishment.

Like other takings theories, the judicial takings theory is premised upon the Fifth Amendment, which provides that the states cannot take away property without just compensation. While this point has been clearly accepted with regard to regulatory takings perpetrated by other branches of state government, it is not entirely clear whether state courts are exempt from the rule.

The problem is that, the Fifth Amendment only guarantees that property shall not be taken without just compensation, but it does not establish what property is. In fact, the Supreme Court has made clear that the background principles of property are defined by state law. Therefore, the state courts have the ultimate say in defining property rights within their sovereign dominion. Or do they?

Although the Supreme Court has left it to the states to define property, it seems to violate the dictates of justice and fair-play to allow the state (by virtue of its courts) to flippantly redefine its background principles of property law in such a way as to upset the settled expectations of property owners. On this ground, we filed a brief in Stop The Beach Renourishment, arguing that states cannot negate existing background principles, because this would effectively take away previously recognized rights. Thus, although state courts may define the background principles of state property law, they cannot simply judicially decree the suspension of private property rights, nor the expansion of a public trust.

To put it simply, the Fifth Amendment requires compensation for the taking of any previously recognized property right, regardless of which branch of government is acting to facilitate the taking.

What to read next