The past ten years have witnessed an explosive increase in the intensity of public debate on how to best use our nation's natural resources.(1) On one side of the debate are the well-established national environmental groups that have supported increased regulation and engaged in litigation for the enforcement of existing regulations.(2) In these efforts, environmental groups have sought to secure the public interest through the conservation and preservation of natural resources.(3) Newer to the scene is the Wise Use Movement that seeks to represent the views of private landowners and businesspeople in the debate over natural resource policy.(4) In particular, the Wise Use Movement advocates decreased regulation and the protection of private landowners' rights. Like environmental groups, the Wise Use Movement focuses much of its energy on the legislative process in order to obtain policies, laws, and regulations consistent with its positions.(5)
The environmental groups draw inspiration for their ongoing efforts from the large number of environmental statutes enacted in the 1970s, including the Coastal Zone Management Act,(6) the Endangered Species Act,(7) and the Clean Water Act.(8) These same statutes, however, have also functioned as a catalyst for the Wise Use Movement, as each additional grant of governmental regulatory authority increases the possibility of undue regulatory activity.(9)
As the level of regulation aimed at protecting natural resources and the
environment has increased, so has the number of private and public entities affected.(10) A recurring issue in this debate is the appropriate level of government regulation of natural resources.(11) Environmental groups, for example, have typically proposed maintaining or increasing current levels of regulation, while the Wise Use Movement favors decreasing current levels or eliminating regulation.(12) A variety of intermediate positions are espoused by others involved in the debate, including industry; regulatory agencies; federal, state, and local governments; and interested citizens who rely upon natural resources for income or recreational opportunities. The debate is intensified by the assertion that in many instances the level of regulation to which a landowner is subject is so high that an unconstitutional taking has occurred.(13)
The debate over the appropriate level of regulation raises additional issues with long-term implications of its own. If the level of regulation is such that landowners often claim an unconstitutional taking, costly and time-consuming litigation will likely follow.(14) Similar litigation will ensue to the extent that landowners that disfavor environmental regulations contest the enforcement of such regulations.(15) To the extent that courts decide in favor of landowners challenging regulations, the effectiveness of regulation for management of natural resources is decreased. Conversely, to the extent that landowner claims are found invalid, it is the landowners' efforts and resources that will have been wasted.
An examination of regulatory takings case law is needed to improve the discourse about the appropriate level of regulation and the parameters of unconstitutional regulatory takings. Recent court decisions on this issue further accentuate the need for a fresh look at regulatory takings case law. This Article examines such case law to promote informed dialogue among resource managers, policy makers, private landowners, activists, and interested citizens. Part II introduces the concept of a taking and its constitutional underpinnings. Part III summarizes and analyzes the earliest takings case law and emphasizes the concept of police powers and the establishment of the regulatory takings concept. Part IV details takings cases from 1962 to 1999, highlights guidelines utilized in takings cases, and examines trends in this area of the law. Part V offers hypothetical takings claims to elucidate the guidelines established by the case law. Part VI summarizes the guidelines and trends to be drawn from takings case law.
II. OVERVIEW OF THE TAKINGS CLAUSE OF THE FIFTH AMENDMENT
A. What is a Taking?
The Fifth Amendment to the United States Constitution provides, in part, "nor shall private property be taken for public use, without just compensation."(16) Each of the terms contained in the provision (property, taken, public use, and just compensation) is subject to interpretation and has been analyzed in court decisions.(17) Most takings cases focus on the question of whether a taking of property has actually occurred.(18) For purposes of the Fifth Amendment, property generally may be taken in the following two ways: 1) the government may intrude directly on private property and take possession of it,(19) or 2) the government may regulate the use of the property to the extent that the government has constructively possessed the property.(20) Takings accomplished by the second method are described as regulatory takings.(21)
Not all takings are unconstitutional; it is the absence of just compensation that makes a taking unconstitutional.(22) Landowners can obtain compensation for a taking in one of two ways. First, if the property is taken by direct intrusion, the government should initiate a condemnation proceeding.(23) In the course of this proceeding, the court will determine the appropriate level of compensation and order the government to pay the landowner.(24) Second, if the government does not initiate a condemnation proceeding, or if the landowner believes that a taking has occurred because of unjust regulation, the landowner may initiate an inverse condemnation proceeding.(25) As in the condemnation proceeding, the court will assess the appropriate level of compensation in an inverse condemnation proceeding and order the government to pay the landowner.(26)
B. Purpose and Effect of the Takings Clause
In 1791 Congress proposed and the states ratified the addition of the Fifth Amendment to the Constitution, as well as nine other amendments.(27) These amendments, also known as the Bill of Rights, were adopted as limitations on the powers of the federal government? Having recently engaged in a revolution to overthrow British control of the colonies, Americans were wary of granting excessive power to the new federal government.(28) Through the Takings Clause, they rendered it impermissible for the federal government to take property without paying just compensation to the landowner. While the Takings Clause was initially adopted as a limitation on the powers of the federal government, the United States Supreme Court has since declared that the clause also applies to state governments through the Fourteenth Amendment.(30)
C. Effect of the Due Process Clause
In addition to containing the Takings Clause, the Fifth Amendment includes the Due Process Clause, which provides that "[n]o person shall ... be deprived of life, liberty, or property, without due process of law."(31) The Fourteenth Amendment, which applies to the states directly, contains an almost identical Due Process Clause.(32) In its early cases, the Supreme Court generally determined the constitutionality of regulations by applying the requirements of one of these Due Process Clauses.(33) It was not until the twentieth century that the Court increasingly assessed regulations with regard to the requirements of the Takings Clause.(34) Under Takings Clause analysis, if a regulation is unconstitutional, the government must pay compensation for takings resulting from the regulation.(35) By contrast, under due process analysis, if a regulation is unconstitutional, it is invalidated.(36) Despite this distinction, the Court has often recognized the precedential value of due process analysis in takings cases, blurring the line between the two types of analyses.(37) In addition, the earlier due process cases not only demonstrate the Court's initial attempts to deal with regulation, but also elucidate the Court's later regulatory takings decisions.(38) Accordingly, due process concerns, as they relate to regulatory takings, will be considered in this Article.(39)
III. EARLY CASES
A. Regulations Upheld as an Exercise of Police Powers
Challenges to government regulation were present even in the nineteenth century. In the most often cited cases from this period, however, the Supreme Court upheld regulations as valid exercises of police powers by state governments.(40) The source of state police powers comes in part from the desire of the nation's citizens for the government to secure the common good. The Tenth Amendment establishes the constitutional source of these powers, declaring that "[t]he powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."(41)
1. Munn v. Illinois
As early as 1876, we have an example of a private business owner bringing a claim of unconstitutional regulation to court and a discussion by the United States Supreme Court of the police powers and their source. In Munn v. Illinois, the state court had found that Munn had operated a public warehouse without a license in violation of an Illinois statute.(42) Following the state court's judgment, Munn claimed that the statute, which required licenses as part of a regulatory scheme to fix maximum prices for the storage of grain in warehouses, was unconstitutional.(43) The ensuing court case was ultimately
appealed to the United States Supreme Court.
Munn asserted that, among other provisions, the Illinois statute violated the Fourteenth Amendment's Due Process Clause.(44) The Court found that the General Assembly of Illinois had committed no violation of the U.S. Constitution by its enactment of the regulatory statute. The Court gave the following two bases for its decision: 1) the police powers, and 2) the public nature of Munn's business.(45)
As to the police powers, the Court reflected upon the formation of the United States, noting that the people granted to the government the power to act "as they deemed necessary for the common good and the security of life and property."(46) As a result, "[w]hen one becomes a member of society, he necessarily parts with some rights or privileges which, as an individual not affected by his relations to others, he might retain."(47) Citing the maxim sic utere tuo ut alienum non laedus (use your own so as not to harm others), the Court addressed the issue of regulatory statutes, stating that the social compact "authorize[s] the establishment of laws requiring each citizen to so conduct himself, and so use his own property, as not unnecessarily to injure another."(48) The Court concluded that this social compact provided the source and basis for the police powers.(49) Pursuant to these police powers the government may regulate how individuals act toward one another and how they use their property.(50) The Court further noted the existence of many regulatory statutes, none of which had been adjudged in violation of "constitutional prohibitions against interference with private property."(51)
In finding the Illinois statute constitutional, the Court also considered the nature of Munn's business. Because Munn charged fees to the public for storing grain in his Chicago warehouses (where the grain of different owners was mixed together), Munn's business was one in which the public had an interest, and accordingly the private property used by him was "'affected with a public interest."(52) As such, Munn's business was similar to that of innkeepers, bakers, ferrymen, and other common carriers who "exercise a sort of public office, and have duties to perform in which the public is interested."(53) Furthermore, the Court stated that "when private property is devoted to a public use, it is subject to public regulation."(54) With this, the Court contrasted a hypothetical, dissimilar situation where the government unconstitutionally compelled individuals to put their private property to uses in which the public had an interest.(55)
In short, the Court upheld the Illinois statute because it was a valid exercise of the state police powers and because Munn's business was affected with a public interest, rendering it subject to regulation.
2. Mugler v. Kansas
Mugler v. Kansas(56) is another nineteenth century example of the Supreme Court's reliance upon state police powers to uphold a regulatory statute. The facts of Mugler parallel those of the Munn case. The decision in Mugler, however, differs notably in that Mugler's property was declared a nuisance by the legislature and the use to which it was put was declared noxious. After Mugler had constructed a brewery and operated it for a number of years, the Kansas legislature enacted a statute that 1) prohibited the sale of intoxicating liquors and 2) declaring them nuisances, closed all places that manufactured intoxicating liquors. Mugler was found guilty of violating this statute, but claimed that the Kansas statute violated the Fourteenth Amendment, including its Due Process Clause.(57)
In considering Mugler's claim, the United States Supreme Court upheld the Kansas statute on the basis of state police powers.(58) As described by the Court, the states are empowered to regulate all internal matters relating to moral and political welfare.(59) This broad power provides states with the authority to destroy property. Citing earlier cases as support for its conclusion, the Court explained that the states may "protect the health, morals, and safety of their people by regulations that do not interfere with the execution of the powers of the general government, or violate rights secured by the constitution of the United States."(60) The Court also noted that its reasoning in the Munn case supported its decision in this case. "As was said in Munn v. Illinois, ... while power does not exist with the whole people to control rights that are purely and exclusively private, government may require `each citizen to so conduct himself, and so use his own property, as not unnecessarily to injure another."(61)
Although the Court discussed the breadth of the police powers, it also delineated constitutional limits that the legislatures could not exceed.(62) Acknowledging that the role of devising measures necessary for the protection of the public welfare belongs to the legislature, the Court emphasized that "[i]t does not at all follow that every statute enacted ostensibly for the promotion of these ends is to be accepted as a legitimate exertion of the police powers of the state."(63) The Court indicated that, in order for regulatory measures to fall within permissible limits, a legislative measure and its provisions must bear a "substantial relation"(64) to the public good sought. Nonetheless, acknowledging once again the breadth of the police powers, the Court stated that "every possible presumption is to be indulged in favor of the validity of a statute."(65) Applying the substantial relation standard, the Court upheld the Kansas regulatory statute, concluding that it was "fairly adapted" to the goal of protecting Kansas communities from the ill effects of excessive alcohol consumption."(66) In doing so, the Court conceded that it would defer to the Kansas legislature's determination of the need for such regulation.(67)
In analyzing Mugler's claim, the Court decided that Mugler's claim included an allegation that application of the Kansas statute to his business, and the resulting decrease in value of the business, constituted a taking of property for public use without compensation or due process (in violation of the Fifth and Fourteenth Amendments).(68) The Court found that no such violation occurred. The Court reiterated that all property is used subject to the limitation that its use not injure others: "A prohibition simply upon the use of property for purposes that are declared, by valid legislation, to be injurious to the health, morals, or safety of the community, cannot, in any just sense, be deemed a taking or an appropriation of property for the public benefit."(69) Although Mugler's property decreased in value, the Court emphasized that the statute did not interfere with Mugler's control or use of his property for lawful purposes; the restriction on the use of his property applied only to a forbidden use.(70)
In upholding the Kansas statute and rejecting Mugler's constitutional claims, the Court stated that "[t]he exercise of the police power by the destruction of property which is itself a public nuisance, or the prohibition of its use in a particular way, whereby its value becomes depreciated, is very different from taking property for public use, or from depriving a person of his property without due process of law."(71) Accordingly, the state's proper exercise of its police power served as the Court's basis for upholding the Kansas statute. These same powers also justified the limitations placed on Mugler's use of his property, particularly since the legislature had determined that use to be noxious.(72)
3. Hadacheck v. Sebastian
In the early twentieth century, the Court provided additional insights into legal principles relating to regulation in Hadacheck v. Sebastian.(73) As with Munn and Mugler, the Court upheld a regulatory statute as a valid exercise of the police powers. Hadacheck was convicted for violating a Los Angeles ordinance that prohibited operating brickyards within the city limits. Before the United States Supreme Court, Hadacheck contested the judgment against him and claimed that the ordinance violated the Fourteenth Amendment and that his property had been taken without just compensation.(74)
Hadacheck based his takings claims upon his purchase of the property for his brickyard prior to the city's annexation of that area and his expectation that the city limits would not later encompass his property.(75) He alleged that his property was worth eight hundred thousand dollars if used as a brickyard, but only sixty thousand dollars if used for residential purposes. Hadacheck further complained that he had purchased the property because it contained a bed of clay suitable for brickmaking, which must take place at the site of a clay bed, and that the property was no longer suitable for residential purposes due to excavations. He added that he had invested in expensive machinery to operate the brickyard and that the operation of his brickyard was not a nuisance under state law. In response, the city government claimed that fumes, dust, and other byproducts of brick manufacturing had made some residents in the area ill. In addition, the government alleged that the ordinance did not "entirely deprive [Hadacheck] of his property and the use thereof."(76)
The Hadacheck Court took an expansive view of the scope of the police powers, describing them as "one of the most essential powers of government--one that is the least limitable."(77) The Court acknowledged that in some instances the exercise of these powers may seem harsh in its effect on individuals, "but the imperative necessity for [their] existence precludes any limitation upon [them] when not exerted arbitrarily."(78) As to the harshness claimed by Hadacheck, the Court reasoned that he had no vested interest in the nonannexed condition of the area in which he had earlier purchased property; the allowance of such interests would obstruct changes necessary for societal progress.(79)
In finding that application of the Los Angeles ordinance to Hadacheck's property did not effect an unconstitutional taking, the Court discussed its earlier decision in Reinman v. Little Rock.(80) At issue in Reinman was a prohibition on livery stables. As with Hadacheck, Reinman had invested in property based upon conditions existing at the time of purchase, and the value of the property decreased as a result of a subsequent ordinance. Reinman argued that the city had unconstitutionally declared an otherwise lawful business a nuisance. While conceding that Reinman's business was not inherently a nuisance, the Court concluded that the legislature could determine that such a business under certain circumstances is a nuisance and declare it such by law.(81) The police powers enabled the legislature to do so. However, the Court noted in Reinman, as it did in Mugler, that these powers are not without limits; they "could not be exerted arbitrarily or with unjust discrimination."(82) Finding no arbitrariness or discrimination, the Reinman Court held that the city had not acted unconstitutionally.(83)
The Hadacheck Court described the Reinman decision as illustrative of the breadth of the police powers.(84) In determining whether the government had exceeded these powers in Hadacheck, the Court stated, "We must accord good faith to the city in the absence of a clear showing to the contrary...."(85) Deciding that the city had exercised its police powers without exceeding their limits, the Court upheld the ordinance as constitutional.
4. Perley v. North Carolina
Four years after deciding Hadacheck, the Court found itself again presented with a case in which an individual claimed that a regulatory statute was constitutionally infirm and continued its approval of restrictive regulations. In Perley v. North Carolina.(86) Perley had previously been indicted for violating a North Carolina watershed protection statute. Specifically, the statute provided that timber harvesting operations must include the removal of all commercially undesirable tree parts (e.g., treetops, boughs) if such operations occurred within four hundred feet of a municipal watershed. The trial court determined that the City of Asheville, North Carolina held land as a watershed and that Perley owned standing and fallen timber within four hundred feet of that watershed. Accordingly, the court found Perley guilty of violating the North Carolina statute and fined him three hundred dollars. The state supreme court affirmed the decision.(87)
In the ensuing appeal to the United States Supreme Court, Perley claimed that the North Carolina statute was unconstitutional. He asserted that the statute violated the Fifth and Fourteenth Amendments by abridging his privileges and immunities as a U.S. citizen, depriving him of his property without due process and denying him equal protection of the laws.(88) The Court considered Perley's claims and found them to be without merit. The Court reasoned that property and property rights "necessarily are subject to some exertions of government."(89) In addition, the Court focused upon the purpose of the North Carolina statute (to reduce the risk of fire and the related damage to watersheds) and emphasized the protection of the public welfare toward which the statute was aimed. "`Treetops, boughs, and laps' left upon the ground may not of themselves be a nuisance; but they may become dry, and the more quickly and certainly so from the denudation of the land of its trees, and therefore become a source of fires and the perils and damages of fires."(90) Having considered the risks expressed in the statute, the Court rejected Perley's claims "that the statute is not proportionate in its regulation ... [and] that its application to defendant['s] property is arbitrary and unconstitutional."(91)
Thus, the Court's earlier opinions of constitutional challenges to regulations in Munn, Mugler, Hadacheck, and Perley exhibited deference to the states and their legislatures. This deference was based upon the police powers accorded the states, and the Court appeared willing to champion these powers.
B. The Genesis of Regulatory Takings: Pennsylvania Coal Co. v. Mahon
Just three years after it upheld government regulation against constitutional challenge in Perley, the Supreme Court issued Pennsylvania Coal Co. v. Mahon, a landmark decision finding a regulatory taking for the first time.(92) This decision greatly strengthened the legal position of parties alleging that a government regulation had effected an unconstitutional taking.
In Pennsylvania Coal, Mahon sued to prevent the Pennsylvania Coal Company from mining coal underneath his property. He had earlier acquired the deed for the surface rights to his property from the Pennsylvania Coal Company. The 1878 deed, issued by the Company, reserved the right to remove all coal underneath the surface of the property. In 1921, however, the Pennsylvania legislature enacted a statute that prohibited any mining of coal that would cause residential structures on the surface to subside. Mahon relied upon this statute to prevent the Company from mining underneath his property.
Acknowledging the state's police powers, but emphasizing its limits, the Supreme Court found the application of the statute to the Company to be unconstitutional. The Court reasoned that without such limits, the police powers would render the Contract and Due Process Clauses of the U.S. Constitution meaningless.(93) While the Court accorded great weight to the judgment of the legislature, it also noted that legislative actions are always open to challenge to determine whether the legislature had exceeded its powers.(94) The facts of each individual case, including whether a diminution in value had occurred, must be considered.(95) When the diminution in value "reaches a certain magnitude, in most if not in all cases there must be an exercise of eminent domain …