February 23, 2011

Does the Takings Clause have an expiration date?

By Does the Takings Clause have an expiration date?

Author: Luke A. Wake

One of Pacific Legal Foundation's litigation objectives is to ensure that individuals acquiring property have the same rights to make economically beneficial use of their property as preceding owners–including the right to defend the property in court against an uncompensated regulatory taking. We took a step toward achieving that goal in our landmark 2001 victory in Palazzolo v. Rhode Island, when the Supreme Court roundly rejected the so called "notice rule." In that opinion, the Court made clear that government may not put an expiration date on the Takings Clause by barring takings claims predicated upon regulatory restrictions in place at the time a litigant acquires his or her property.

Under the so called "notice rule," courts throughout the country were holding that property owners were barred from advancing takings claims on the ground that they had 'notice' of the challenged regulatory restrictions at the time they acquired their property. As the Court explained, "The theory underlying the argument that post-enactment purchasers cannot challenge a regulation under the Takings Clause seems to run on these lines: Property rights are created by the State… [so] by proscriptive legislation the State can shape and define property rights and reasonable investment backed expectations, and subsequent owners cannot claim any injury from the loss." But, the Court rejected this rationale in stark terms stating that, "The State may not put so potent a Hobbsian stick into the Lockean bundle."

Unfortunately the notice rule continues to rear its ugly head in courts across the country. We may thank Justice O'Connor in part, because her concurrence in Palazzolo left the door open for Courts to consider preexisting regulations in assessing the "reasonableness" of a property owner's investment backed expectations under the Penn Central test. But even more troubling is the fact that courts are still applying blanket rules barring takings claims for post-enactment purchasers.

Recently the Federal Circuit handed down a disturbing opinion in the case of CRV Enterprises v. United States. The Court held that landowners lack standing to advance takings claims accruing with enactment of a regulatory restriction prior to their acquisition of a property. Under this precedent, to use the language of the Palazzolo Court, government can absolve itself of the "obligation to defend its [actions] restricting land use, no matter how extreme or unreasonable." This would, "in effect… put an expiration date on the Takings Clause," but the Supreme Court rejected such a bar because, "Future generations, too, have a right to challenge unreasonable limitations on the use and value of land."

Indeed, if post-enactment purchasers lack standing to challenge a taking accruing before their acquisition, property rights could effectively be extinguished within a generation or so, with the passing of title from one generation to the next, or as property otherwise changes hands. Then landowners would have only "privileges," as opposed to actual rights to use their land. Absent the right to protect a property in court from a taking, there would be no meaningful property rights, because there would be no recourse when individuals suffer divestment.

Given the importance of this issue for property owners throughout the country, Pacific Legal Foundation will soon be filing a petition for certiorari in the United States Supreme Court on behalf of CRV Enterprises so that CRV can have its day in court to litigate its regulatory takings claim on the merits. Please contact me if you would like more information about the case, or if you would like to file an amicus brief in support of CRV's petition. 

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