Opinion analysis: In regulatory takings case, court announces a new test – SCOTUSblog (blog)

 In U.S.
Posted Fri, June 23rd, 2017 9:31 pm by Miriam Seifter

Under the doctrine of regulatory takings, government regulation that goes “too far” in burdening property rights counts as a taking under the Fifth Amendment, entitling the owner to “just compensation.” In deciding such claims, courts often must deal with a tricky preliminary question: How should they define the bounds of the property that the government has allegedly taken? That question, often dubbed “the denominator problem,” could be outcome-determinative. For example, a regulatory burden on a small pond may seem minor if the property interest is defined as the developer’s much larger contiguous holdings, but severe if the property is defined as the pond itself. The court has long maintained that the denominator analysis must focus on the “parcel as a whole,” but that cryptic instruction has left litigants and lower courts at sea.

The parties in Murr v. Wisconsin offered the court three very different approaches to the denominator analysis. The case is interesting, and challenging, because each test would vindicate a slightly different view of the takings clause. As described in my earlier post, the Murrs argued that  a “merger” provision in state and local law — which barred them from selling separately their two undersized, riverfront lots — was a taking of the one lot they wished to sell. The Murrs urged a bright-line denominator test, hinging on the lot lines of the parcel alleged to be taken. This test would typically make it easier for landowners to assert takings. The state, arguing against a taking, offered a different bright-line test based on state law taken as a whole; here, the state’s merger provision would set the denominator as both lots together. The state’s test would offer the greatest deference to state prerogatives in defining property. Finally, the county (and in a similar vein, the United States as amicus) offered a multi-factor approach that would provide the least predictability, but the most flexibility to determine the interests of justice in any given case.

In today’s 5-3 decision, the court ruled against the Murrs, adopting aspects of the tests pressed by the county and the United States. Writing for the majority, Justice Anthony Kennedy stated that the denominator question, like the overall takings inquiry, turns on a multi-part analysis. “Like the ultimate question whether a regulation has gone too far,” he wrote, “the question of the proper parcel in regulatory takings cases cannot be solved by any simple test.” The court rejected the “formalistic” rules proposed by both the Murrs and Wisconsin. The Murrs’ proposed test, the court explained, would unjustifiably elevate lot lines over other aspects of state law. And although state law is relevant to the inquiry, the majority could not accept Wisconsin’s proposal to define the denominator based on state law as a whole: Courts must also “weigh[] whether the state enactments at issue accord with other indicia of reasonable expectations about property.”

The court emphasized that any denominator test must ascertain, through an “objective” analysis, “whether reasonable expectations about property ownership would lead a landowner to anticipate that his holdings would be treated as one parcel, or, instead, as separate tracts.” The court’s prescribed test includes three factors: “[1] the treatment of the land under state and local law; [2] the physical characteristics of the land; and [3] the prospective value of the regulated land.” With regard to the third factor, the analysis should give “special attention to the effect of burdened land on the value of other holdings.”

 The court then applied these guidelines and concluded that the Murrs’ two lots should be treated as one for takings analysis. First, Wisconsin property law — specifically, the merger provision — treats the two parcels as one. Second, the lots are contiguous, and their “rough terrain,” “narrow shape,” and riverfront location all make land-use regulations predictable. Third, the lots are more valuable when combined. Going one step further (and arguably a bit beyond the question presented), the court then held that, on the facts of this case, no taking had occurred.

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