The Supreme Court on January 15 granted cert. in Murr v. Wisconsin, 359 Wisc. 2d 675 (Wis. App. 2014), rev. denied, 862 N.W.2d 899 (Wis. 2015), a regulatory takings case involving the “relevant parcel” or “parcel-as-a-whole” issue, one of the most important takings issues that the Supreme Court has never addressed.
The relevant parcel issue, which can be determinative in many regulatory takings cases, concerns the extent of property that should be considered in assessing whether a regulatory imposition constitutes a taking. Generally speaking, the larger the scope of property to be considered, the less severe the regulatory impact on the entire parcel-as-a-whole; conversely, if only a small parcel is relevant to the takings inquiry, the regulatory impact will be more concentrated on that small parcel and likely more adverse. Because the economic impact of a regulation is the usually most important factor in determining whether a taking has occurred – and, indeed, under the Supreme Court’s Lucas decision a regulation that entirely eliminates the value of the relevant parcel is a per setaking – property owners will benefit from a ruling in Murr that leads courts to define the relevant parcel narrowly, and thus to make regulatory impacts more concentrated and more severe.
The regulatory imposition in Murr is an ordinance that precludes development of one of two contiguous lots (“lot E”) that are both owned by the Murrs. The Wisconsin court applied a per serule, under which contiguous parcels of land must always be considered together in assessing takings claims. The court therefore rejected the Murrs’ takings claim because they retained significant value in the relevant property, which was deemed to be the two contiguous parcels together. Notably, the ordinance in Murr only precludes development of contiguous lots under common ownership. If lot E were owned by anyone other than the Murrs (who also own the adjacent lot), the development prohibition would not apply, and lot E could be developed. Even as owned by the Murrs, if lot E could be considered alone for takings purposes, the ordinance likely would be held to work a taking, because the development prohibition it imposes eliminates the value of lot E. So the question before the Supreme Court is whether or not lot E should be considered alone in assessing the Murrs’ takings claim.
Lower courts have articulated various tests for determining what property is relevant in assessing a regulatory takings claim. In contrast the per se rule applied by the lower court in Murr — that contiguous parcels must always be considered together — other courts have applied a presumption that separate parcels should be considered separately, even if contiguous. In a case involving the relevant parcel issue in which Greenberg Traurig represents the landowner, the Federal Circuit held that whether multiple parcels should be considered together for takings purposes depends on the economic plans and expectations of the owner. Thus, “even when contiguous land is purchased in a single transaction, the relevant parcel may be a subset of the original purchase where the owner develops distinct parcels at different times and treats the parcels as distinct economic units.” See Lost Tree Village Corp. v. United States, 707 F.3d 1286, 1293 (Fed. Cir. 2013).
The Supreme Court has frequently counseled (and held) against the application of per se rules in takings cases, so there is reason to believe it may also reject the per se rule the lower court applied in Murr. Whether the Court will go further and articulate its own test for determining whether or not multiple parcels should be considered together remains to be seen. What is clear is that the Court’s ruling in Murr on the relevant parcel issue will have important implications for many regulatory takings cases.