Why It Matters: The Supreme Court missed an opportunity to bring some clarity to the law of regulatory takings and, instead, made the law more confusing and less protective of the rights of property owners.
Legal Background: Several decades ago, when the Supreme Court tentatively began dealing with regulatory takings after an absence of about half a century, it issued an opinion titled Penn Central Transp. Co. v. City of New York, 438 U.S. 104 (1978). As befits a Court where no member was on the bench the last time the Court considered such a case, the Penn Central opinion was indeed cautious. It declined to provide any formula for determining when a regulatory taking occurred, but provided what it called a mode of analysis, suggesting several types of factors to consider. Since then, courts at all levels have struggled to find the proper way to analyze regulatory takings cases. The central issue in Murr (as in many others) is what is generally referred to as “the denominator problem,” i.e., in deciding whether a regulation of property has taken that property, what property is the purportedly taken property compared to? The Court was presented with two stark choices here and chose to leave the analytical playing field muddy.
Facts: Many decades ago, Mr. and Mrs. Murr bought a lot on Lake St. Croix in Wisconsin. A year later, they bought the lot next door, but took title in a different name. Each lot was more than an acre in size, but because of the topography, the two lots together didn’t quite have an acre of buildable space. Years later, Mr. and Mrs. Murr decided to give the properties to their children. That is where the trouble began, as no one apparently gave thought to how the titles should be transferred. They simply transferred the titles to both lots to the children—one lot at a time—but the end result was that both lots were placed in the same names. The younger Murrs wanted to sell one of the lots and use the proceeds to improve the other one. Not so fast, said the county. There is a local ordinance that says when adjoining lots come into common ownership, the titles are merged and the lots become one. Thus no sale, because you cannot sell what is now just a piece of your merged lot. The Murrs sued, claiming that the county ordinance had taken one of their lots in violation of the Fifth Amendment. The Wisconsin courts upheld the government action.
The Decision: The government won 5-3 (pre-Justice Gorsuch). Not a shock. The Supreme Court observers among us knew we were in trouble after hearing the oral argument with the various misunderstandings presented by the justices. Both sides evidently recognized (as takings lawyers know) that getting a majority to agree on a takings theory in a case of this kind would be difficult. Thus, each side presented the Court with a bright-line rule to apply, hoping that brightness would attract five votes. The government sought a rule wedded tightly to state law. In this circumstance, the regulators focused on the provision in state law requiring the merger of adjoining lots when the titles are held in common. That, they said, was the end of the matter. The lots were merged as a matter of state law and there could be no taking. On the other side, the property owners sought a rule tied solely to lot lines. Here, because the two lots in question had been created decades ago, and their deeds described them by their lot lines, the Murrs urged the Court to apply a rule controlled by lot lines. As is apparent, each side would win if its rule were adopted.
The Court refused to adopt a bright-line rule. Instead, the Court relied on what it called a “central dynamic of the Court’s regulatory takings jurisprudence, [i.e.,] its flexibility.” But flexibility has gotten us to where we were before the Murrs came to court: a system in which there is no clear definition of what it takes for a court to find a taking. The unique thing about takings cases is that almost all the cases that have reached the Supreme Court went there on the basis of the pleadings, i.e., to decide whether the complaint adequately stated a claim for a taking. The reason for this anomaly is that vaunted “flexibility,” i.e., the absence of clearly defined rules. Thus (as in this case) almost all of the Supreme Court’s takings cases eventually devolve into an analysis that is familiar to first-year property students: Does the government action interfere with any specific sticks in the bundle that we call property rights? A little clarity would have been nice, but it did not materialize.
Worse yet, the majority went off on a tangent derived from direct condemnation valuation law, concluding that the way to determine whether a taking occurred is to determine the impact on the value of the property in question. That puts the question backward. The first order of business should be to decide whether a taking has occurred. Only then should the Court be concerned with the value of the damage inflicted. The questions are separate. The Court has gotten tangled up this way before. At the oral argument in Tahoe-Sierra Preservation Council, Inc. v. Tahoe Reg. Plan. Agency, 535 U.S. 302 (2002), Justice Stevens became fixated on whether a short temporary taking would be worth any money, rather than whether a complete taking of use (even for a short time) could be a taking, with the valuation issue left for later. In any event, the Court did no better here by confusing liability and valuation issues.
So instead of clarity, the Court gave us more vague issues that will engender years of litigation. More than that, the litigation will generally be slanted against the property owner by placing focus on the reasonableness of the governmental action rather than the impact on the owner that the Fifth Amendment was designed to protect. All in all, a disappointing result.
- Be careful how you hold or transfer a title to property.
- Keep aware of local land use regulations before acquiring land.
- Be wary of balancing tests when litigating with the government.