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Regulation as a Taking
The government does not have unlimited authority to regulate activities on private property. This limit has been addressed in numerous court cases and the issue centers on whether the government activitiy was an "appropriate exercise of police power," or whether the government activity amounted to a "taking" of private property rights. This web page provides an overview of the question and excerpts from several decisions wherein courts have attempted to provide an answer.
Overview of question --
The following excerpts are from court cases that distinguish between 1) a regulation that is an exercise of police power and 2) a regulation that amounts to a "taking."
A regulatory takings claim "'arises from some public program adjusting the benefits and burdens of economic life to promote the common good,'" as opposed to a government appropriation of private property for its own use ... When a takings claim arises from [a regulation], it is necessary to determine whether "'justice and fairness' require that economic injuries caused by public action be compensated by the government, rather than remain disproportionately concentrated on a few persons." ... No per se rules or "set formula[s]" govern such determinations; instead, courts "engag[e] in . . . essentially ad hoc, factual inquiries." The Supreme Court has, however, identified several factors having particular significance, namely, the "economic impact of the regulation on the claimant," "the extent to which the regulation has interfered with distinct investment-backed expectations," and "the character of the governmental action." Application of these Penn Central criteria is required where, as here, "less than a 'complete elimination of value'" resulted from the regulation at issue.
[Inserted from another section of the opinion] The Lucas per se rule only applies in the 'extraordinary case' where three prerequisites are met: the regulation must (1) permanently deprive, (2) the whole property, (3) of all its value" (emphasis in original).
A. Economic Impact
Simply put, it is not possible to determine the economic impact of a regulatory scheme applied to a private [person] without casting the appropriate absolute measures of the effect of the regulation against the backdrop of relevant indicators of the economic vitality of the [persons] ... Yet, an assessment of the severity of the economic impact of the regulations … must take [those relevant indicators] into account.
In regulatory takings cases concerning diminished real estate values, this concept is known as the "parcel as a whole."
The Court recently elaborated on this concept, stating:
We recognized in Yancey that comparable or even larger diminutions in value had been held insufficient for takings purposes in particular cases (holding that a 75% value diminution caused by a zoning law did not constitute a taking), and (holding that no taking resulted from an 87% diminution in value). We rejected the notion that such cases set a minimum value diminution that had to be demonstrated for liability to lie. In so doing, we recognized that "the modern Penn Central approach" requires a balancing of "all the relevant considerations."
All of which is to note that there are a number of different ways to measure the severity of the impact of the restrictions...
B. Reasonable Investment-Backed Expectations
The trial court noted that, although the industry in general is highly regulated, government experts previously believed [the problem arose in only one way]. Accordingly, prior to 1990, [the government pursued one type of regulatory action. The recent change in government regulatory action, based on new scientific understanding of the problem, was not contemplated by private persons who made investments in the industry prior to this new understanding. Accordingly, the investors would argue that the new regulatory scheme interferes with reasonable investment-backed expectations.]
The government [in its counter-argument] seeks to define the field of relevant regulation more broadly, citing to long-standing regulations aimed at preventing the [problem]. It argues that a new regulation aimed at a specific, recently-recognized disease threat was not unforeseeable in such an environment.
But the [new] regulations were more than an extension of comparable regulations to a new disease. They were grounded in new scientific understanding... Accordingly, even accounting for the history of regulation in the industry, we cannot agree that [this regulation did not extend to a new issue].
C. Character of the Government's Action
"[a] 'taking' may more readily be found when the interference with property can be characterized as a physical invasion by government, ... than when interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good." The court cited with approval a decision holding that no compensation under the Fifth Amendment was due orchard owners ordered to cut down their ornamental cedar trees infected with cedar rust to protect neighboring apple orchards. This decision so held based solely on the power of the state to prevent impending harm to a valuable public resource -- the apple industry. ...[W]here the public interest is involved preferment of that interest over the property interest of the individual, to the extent even of its destruction, is one of the distinguishing characteristics of every exercise of the police power which affects property." "Although a comparison of values before and after" a regulatory imposition "is relevant, ... it is by no means conclusive..."
As noted above, Keystone Bituminous also sprang from a police power regulation -- action on the part of the Commonwealth of Pennsylvania "to protect the public interest in health, the environment, and the fiscal integrity of the area." The Court there noted that "the nature of the State's interest in the regulation is a critical factor in determining whether a taking has occurred." It reaffirmed the principle that "no individual has a right to use his property so as to create a nuisance or otherwise harm others," and noted that "the Takings Clause did not transform that principle to one that requires compensation whenever the State asserts its power to enforce it."
"A regulation that burdens private property may 'constitute a "taking" if [the burden is] not reasonably necessary to the effectuation of a substantial public purpose.'" (quoting Penn Central).
But the issue is not whether a less restrictive alternative to the government action existed or was "possible." It is whether there is a nexus between the regulation and its underlying public purpose (if the regulation "utterly fails to further the end advanced as the justification," the "purpose then becomes the obtaining of an easement to serve some valid governmental purpose, but without payment of compensation").
The trial court's finding that [private person] "shared a disproportionate amount of the burden of the ... regulations," even if correct, is not relevant.
Nowhere does [person] argue that the regulatory means were inconsistent with knowledge the government possessed at the time [the initial regulations] were adopted or applied. Nor does [the person] contend that there was no nexus between those means and the substantial public purpose underlying the regulations -- protecting the public against exposure to a potentially serious, even fatal, food-borne illness.
D. Balancing of the Penn Central Factors
The Penn Central test was "designed to allow "careful examination and weighing oJuly 25, 2006ions at issue in this case went "too far" and, therefore, constituted a taking is thus determined by balancing their interference with [the person's] right to use its property in accordance with its reasonable economic expectations against the substantiality of the government's purpose and the nexus between that purpose and the means undertaken to achieve it.
Only when all of the relevant criteria and circumstances are considered, and considered together, can a conclusion be reached as to whether compensation is required in this case. The court must evaluate the severity of the economic impact and weigh that against the other Penn Central factors.
Here then, the same analysis must be employed to determine whether [the person] is entitled to compensation under the Fifth Amendment. The trial court must evaluate the severity of the economic impact of the regulation ... Further inquiry into whether the regulations [a.] interfered with [the person's] reasonable investment-backed expectations and [b.] furthered a substantial public interest need not be undertaken... However, the court must ultimately weigh all the Penn Central factors to determine whether the Fifth Amendment requires compensation.
Last updated July 25, 2006
This material is intended for educational purposes
only. It is not a substitute for competent legal counsel. Seek appropriate
professional advice for answers to your specific questions.
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