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In an opinion
written by Justice Kennedy (joined by Chief Justice Rehnquist and Justices
O'Connor, Scalia, and Thomas), the Court ruled in favor of Palazzolo on
two issues, concluding that the case is ripe and that the Rhode Island
Supreme Court erred in rejecting Palazzolo's takings claim simply because
he acquired title to the property after the challenged wetland regulations
were enacted. The Court ruled
in favor of the State on the third issue, concluding that there was no Lucas
taking because the property retains $200,000 in value.
The Court remanded the case for further consideration of
Palazzolo's Penn Central claim.
Justice O'Connor
wrote a concurrence, arguing that the timing of Palazzolo's acquisition is
relevant to the Penn Central analysis,
but Justice Scalia also wrote a concurrence disputing this view.
Justice Stevens penned a dissent arguing that the case is ripe but
that the state court properly rejected the claims on the merits due to the
timing of Palazzolo's acquisition. Justice
Ginsburg authored a dissent (joined by Justices Souter and Breyer) arguing
that the case is unripe. Justice Breyer also wrote a brief dissent.
Ripeness: The
Court ruled that the case is ripe, but in so ruling the Court reaffirmed
its holdings in Williamson County and
McDonald that a regulatory
takings case is not ripe until "a court knows 'the extent of
permitted development' on the land in question."
Slip op. at 8. The
Court ruled that Palazzolo is
ripe because it found no ambiguity in the record regarding the extent of
permitted development: one single family home and nothing more.
It rejected the State's contention that Palazzolo might be able to
build more than one house in large measure because the State failed to
make this point clearly in its opposition to certiorari.
Id. at 14.
The State also argued that the case was unripe due to
Palazzolo's failure to apply for the 74-unit subdivision that formed the
heart of its takings claim at trial.
But the Court rejected this argument, stating that this failure
goes only to damages, not ripeness. Id. at 15-16.
On balance, the ripeness ruling seems largely limited
to the facts of this case, particularly what the Court viewed as
unequivocal evidence that the State would not permit filling of any of
Palazzolo's wetlands. In good
news for state and local governments, the Court reaffirmed "that a
landowner may not establish a taking before a land-use authority has the
opportunity, using its own reasonable procedures, to decide and explain
the reach of a challenged regulation."
Id. at 11. Before
bringing a takings claim, a landowner must follow the "reasonable and
necessary steps to allow regulatory agencies to exercise their full
discretion in considering development plans for the property, including
the opportunity to grant any variances or waivers allowed by law." Id.
The Court also reaffirmed that state law ripeness or
exhaustion principles may impose requirements beyond those imposed by
federal ripeness rules under Williamson
County.
The Timing of
Palazzolo's Acquisition: The Court rejected the "sweeping
rule" that a claimant's acquisition of title after enactment of the
challenged regulation automatically bars a takings claim, stating that
"[t]he State may not put so potent a Hobbesian stick into the Lockean
bundle" of property rights. Id. at 17. The
Court concluded that a blanket rule precluding all post-enactment
purchasers from prevailing on a takings claim would improperly "put
an expiration date on the Takings Clause."
Id. at 17-18. "Future generations, too, have a right to challenge
unreasonable limitations on the use and value of land," the Court
wrote. Id. at 18. The Court
expressed concern that the process of ripening a claim might prevent the
owner at the time of enactment from bringing a claim. Moreover, a blanket rule against recovery would create unfair
results for older property owners and those who need to sell, as opposed
to those with the resources to hold title.
The Court treated footnote 2 of Nollan as controlling precedent on the issue, and it declined to
view the discussion of background principles in Lucas as limiting Nollan.
Not every pre-existing regulation is a background principle
that precludes takings liability, the Court ruled.
The Court did make clear, however, that background principles under
Lucas are not limited to common
law (as some have argued) and that it was possible that even the Rhode
Island statute might be a background principle.
Id. at 20 ("We have
no occasion to consider the precise circumstances when a legislative
enactment can be deemed a background principle of state law or whether
those circumstances are presented here."); see also id.
(recognizing that "an existing, general law" may be a background
principle). It described background principles "in terms of those common,
shared understandings of permissible limitations derived from a State's
legal tradition." Id.
This standard tracks the analysis set forth in our amicus brief,
which argued that the Rhode Island wetland laws are background principles
because they are derived from the state's nuisance law.
Justice O'Connor wrote separately to emphasize that
the timing of a takings claimant's acquisition is relevant to the Penn
Central analysis. Significantly, all four dissenters expressly agreed
with Justice O'Connor on this issue.
The Lucas
Per Se Rule: The Court affirmed the state court's ruling that
Palazzolo was "not deprived of all economic use of his property
because the value of [the] uplands portions is substantial."
Id. at 6-7. Although
the State may not avoid a Lucas taking
by leaving the landowner with "a token interest," the $200,000
value of Palazzolo's parcel defeated his Lucas
claim. His ability to build a
home on the upland showed that his land was not left "economically
idle" under Lucas.
Other
Observations: In disposing of the Lucas
claim, the Court expressly declined to address Palazzolo's argument that
the wetland portion of its property should be considered separately from
the upland portion because Palazzolo failed to make this argument in the
state courts. In leaving the
issue open, the Court stated that some its prior rulings
"indicate" that takings analysis requires consideration of the
parcel as a whole, and it noted that it has "expressed discomfort
with the logic of this rule." Id.
at 22 (citing Lucas, note 7).
The Court also cited two articles that advocate use of an
"affected portion" standard.
The Court failed to note (but Justice Ginsburg did note in dissent,
n.2) that after Lucas the Court unanimously reaffirmed the parcel-as-a-whole rule in
Concrete Pipe. Lower courts
almost universally have applied the parcel-as-a-whole rule, but the Palazzolo
discussion might create confusion on this point. The relevant-parcel
issue is pending before the Supreme Courts of Pennsylvania and Ohio in
takings challenges to mining bans that restrict portions of the claimants'
property.
It is somewhat surprising that none of the six
opinions discuss the value of wetlands or the extensive record evidence of
the damage that would be caused by Palazzolo's proposed filling. Although this harm was not directly relevant to the legal
issues before the Court, one might hope for some recognition of the stakes
involved in the case from the community's perspective.
Instead, the Court includes an interesting but irrelevant
description of the development of Westerly, Rhode Island as a resort town.
Bottom Line: Planners
and government officials won a clear victory on the Lucas per se rule with a holding that significantly cabins the scope
of liability under that rule. On
ripeness, the Court ruled for Palazzolo on the facts but reaffirmed its
basic ripeness doctrine and the right of state and local officials to
fashion their land-use procedures as they see fit.
On post-enactment acquisition, the Court rejected a blanket rule of
per se non-liability, but it recognized that regulations may serve as
background principles where they are "derived from" a State's
legal tradition. Five Justices re-affirmed Penn
Central's ruling that pre-existing regulations are relevant to the
issue of whether a Penn Central taking
has occurred. Finally, the
Court served up an unhelpful discussion of the relevant parcel issue.
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