Amicus Curiae Brief — Pacetta, LLC, et al., Petitioners v. Town of Ponce Inlet, Florida

No. 17-1698

In the Supreme Court of the United States

PACETTA, LLC, ET AL.,

Petitioners,

v.

TOWN OF PONCE INLET,

Respondent.

On Petition for a Writ of Certiorari to the

Florida Fifth District Court of Appeal

MOTION FOR LEAVE TO FILE BRIEF AND BRIEF

OF THE CATO INSTITUTE AND

NFIB SMALL BUSINESS LEGAL CENTER

AS AMICI CURIAE IN SUPPORT OF PETITIONERS

_____________________

KAREN R. HARNED

LUKE A. WAKE

NFIB Small Business

Legal Center

1201 F St., N.W.

Washington, D.C. 20004

(202) 314-2048

karen.harned@nfib.org

July 25, 2018

ILYA SHAPIRO

Counsel of Record

TREVOR BURRUS

MEGGAN DEWITT

Cato Institute

1000 Mass. Ave. N.W.

Washington, D.C. 20001

(202) 842-0200

ishapiro@cato.org

1

MOTION FOR LEAVE TO FILE BRIEF AS

AMICI CURIAE SUPPORTING PETITIONERS

The Cato Institute (“Cato”) and the National Federation of Independent Business (“NFIB”) Small Business Legal Center hereby move, pursuant to Supreme

Court Rule 37.2, for leave to file a brief amici curiae in

support of the petition for a writ of certiorari to the

Florida Fifth District Court of Appeal. All parties were

provided with timely notice of intent to file this brief.

The Petitioners consented. The Respondent declined to

consent. A copy of the proposed brief is attached.

Cato is a nonprofit, nonpartisan public policy research foundation that was established in 1977 to advance the principles of individual liberty, free markets,

and limited government. Cato’s Robert A. Levy Center

for Constitutional Studies promotes the principles of

limited constitutional government that are the foundation of liberty. Towards those ends, Cato conducts

conferences; publishes books, studies, and the annual

Cato Supreme Court Review; and files amicus briefs on

a host of legal issues, including property rights.

The NFIB Legal Center is a nonprofit, public interest law firm established to provide legal resources and

be the voice for small businesses in the nation’s courts

through representation on issues of public interest affecting small businesses. Founded in 1943 as a nonprofit, nonpartisan organization, NFIB’s mission is to

promote and protect the right of its members to own,

operate and grow their businesses. To fulfill its role as

the voice for small business, the NFIB Legal Center

frequently files amicus briefs in cases that will impact

small businesses.

As further explained in the proposed brief’s “Interest of Amici Curiae” section, amici are organizations

2

that frequently participate in cases raising significant

constitutional issues, including cases involving property rights. Amici have a vital interest in this case because it affords the Court an opportunity to clarify the

regulatory-takings muddle by providing guiding principles for how to weigh the Penn Central factors.

Amici have no direct interest, financial or otherwise, in the outcome of this case. Their sole interest in

filing this brief is to ensure the availability of a remedy

for Fifth Amendment takings. Accordingly, the Cato

Institute and NFIB Legal Center respectfully request

that they be allowed to participate in this case by filing

the attached brief.

Respectfully submitted,

Karen R. Harned

Luke A. Wake

NFIB Small Business

Legal Center

1201 F. Street, N.W.

Washington, D.C. 20004

(202) 314-2048

July 25, 2018

Ilya Shapiro

Counsel of Record

Trevor Burrus

Meggan DeWitt

Cato Institute

1000 Mass. Ave. N.W.

Washington, D.C. 20001

(202) 842-0200

ishapiro@cato.org

i

QUESTION PRESENTED

Does government effect a taking when it endeavors to

devalue private property and force the owners into financial distress so that it may acquire the property at

a steep discount?

ii

TABLE OF CONTENTS

Page

MOTION FOR LEAVE TO FILE BRIEF AS AMICI

CURIAE SUPPORTING PETITIONERS ............. 1

QUESTION PRESENTED ........................................... i

TABLE OF AUTHORITIES ....................................... iii

INTEREST OF AMICI CURIAE ................................. 1

SUMMARY OF ARGUMENT ..................................... 2

ARGUMENT ................................................................ 6

I. THE PENN CENTRAL FACTORS ARE A

MUDDLED MESS THAT OPERATE TO BAR

PROPERTY OWNERS FROM RECOVERING

FOR REGULATORY TAKINGS ............................ 6

A. Contextualizing Loretto’s Categorical Rule

Within the Penn Central Factors Would

Provide Necessary Clarity .............................. 10

B. Contextualizing Lucas’s Categorical Rule

Within the Penn Central Factors Would

Provide Needed Clarity ................................... 14

II. THE COURT SHOULD TAKE THIS CASE TO

SHOW WHAT A PENN CENTRAL WIN

LOOKS LIKE AND BRING CLARITY TO

REGULATORY-TAKINGS LAW ......................... 18

CONCLUSION .......................................................... 21

iii

TABLE OF AUTHORITIES

Page(s)

Cases

Armstrong v. United States, 364 U.S. 40 (1960) ..... 4, 9

Bernardsville Quarry, Inc. v. Borough of

Bernardsville, 608 A.2d 1377 (N.J. 1992) ............... 9

Ganson v. City of Marathon, 222 So.3d 17

(Fla. Dist. Ct. App. 2016) ....................................... 17

Kirby v. N.C. Dep’t of Transp.,

786 S.E.2d 919 (N.C. 2016) .................................... 14

Lingle v. Chevron U.S.A., Inc.,

544 U.S. 528 (2005) .......................................... 3, 6, 8

Loretto v. Teleprompter Manhattan CATV Corp.

458 U.S. 419 (1982) .................................... 10, 12, 13

Loretto v. Teleprompter Manhattan CATV Corp., 415

N.Y.D.2d 180 (1979) ............................................... 11

Loretto v. Teleprompter Manhattan CATV Corp.,

422 N.Y.S.2d 550 (1979) ........................................ 11

Loretto v. Teleprompter Manhattan CATV Corp.,

423 N.E.2d 320 (N.Y. 1981) ................................... 11

Lucas v. S.C. Coastal Council,

404 S.E.2d 895 (S.C. 1991) .................................... 16

Lucas v. S.C. Coastal Council,

505 U.S. 1003 (1992) ............................ 14, 15, 16, 17

Nasser v. City of Homewood, 671 F.2d 432

(11th Cir. 1982) ........................................................ 9

Pace Res., Inc. v. Shrewsbury Twp.,

808 F.2d 1023 (3d Cir. 1987) ................................... 9

Palazzolo v. Rhode Island, 511 U.S. 606 (2001) ......... 6

iv

Penn Cent. Transp. Co. v. New York City,

438 U.S. 104 (1978) ............................................ 3, 14

Pennsylvania Coal Co. v. Mahon,

260 U.S. 393 (1922) .............................................. 2, 6

Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg’l

Planning Agency, 535 U.S. 302 (2002) ............ 5, 6, 8

Walcek v. United States, 303 F.3d 1349

(Fed. Cir. 2002)......................................................... 9

Williamson County Reg’l Planning Comm’n v.

Hamilton Bank, 473 U.S. 172 (1985) .................... 19

Other Authorities

Eric R. Claeys, Takings, Regulations, and Natural

Property Rights, 88 Cornell L. Rev. 1549

(2003) .................................................................. 7, 10

F. Patrick Hubbard et al., Do Owners Have a Fair

Chance of Prevailing Under the Ad Hoc Regulatory

Takings Test of Penn Central Transportation

Company?, 14 Duke Envtl. L. & Pol’y F. 121

(2003) .................................................................... 4, 9

Holly Doremus, Takings and Transitions, 19 J. Land

Use & Envtl. L. 1 (2003) .......................................... 7

Lise Johnson, After Tahoe-Sierra, One Thing Is

Clearer: There Is Still a Fundamental Lack of

Clarity, 46 Ariz. L. Rev. 353 (2004) ......................... 7

Luke A. Wake, The Enduring (Muted) Legacy of

Lucas v. South Carolina Coastal Council: A Quarter

Century Retrospective, 28 Geo. Mason U. Civ. Rts.

L.J. 1 (2017) .................................................. 3, 17, 20

Mark W. Cordes, The Fairness Dimension in Takings

Jurisprudence, 20 Kan. J.L. & Pub. Pol’y 1 ............ 8

v

R.S. Radford, Luke A. Wake, Deciphering and

Extrapolating: Searching for Sense in Penn

Central, 38 Ecology L.Q. 731 (2011) .................. 3, 12

1

INTEREST OF AMICI CURIAE1

The Cato Institute (“Cato”) is a nonprofit, nonpartisan public policy research foundation that was established in 1977 to advance the principles of individual

liberty, free markets, and limited government. Cato’s

Robert A. Levy Center for Constitutional Studies promotes the principles of limited constitutional government that are the foundation of liberty. Towards those

ends, Cato conducts conferences; publishes books,

studies, and the annual Cato Supreme Court Review;

and files amicus briefs on a host of legal issues.

The National Federation of Independent Business

Small Business Legal Center (NFIB Legal Center) is a

nonprofit, public interest law firm established to provide legal resources and be the voice for small businesses in the nation’s courts through representation

on issues of public interest affecting small businesses.

The NFIB represents small businesses nationwide,

and its membership spans the spectrum of business

operations, ranging from sole proprietor enterprises to

firms with hundreds of employees. To fulfill its role as

the voice for small business, the NFIB Legal Center

frequently files amicus briefs.

Amici are interested in this case because it provides the Court with an opportunity to clarify the Penn

Central test. If the decision below stands, land owners

like the Petitioners will continue to suffer uncompensated takings of their property. The law surrounding

regulatory takings is an infamous muddle, and amici

1 Rule 37 statement: All parties were timely notified of amici’s

intent to file this brief. Petitioners consented. Respondents withheld consent, so a motion for leave to file precedes this brief. No

part of this brief was authored by any party’s counsel; no person

or entity other than amici funded its preparation or submission.

2

are particularly concerned with the inability of the

Court’s Penn Central factors—as lower courts currently apply them—to constrain abusive government

behavior. Only this Court can provide the clarity that

property owners, practitioners, and lower courts have

been clamoring for. The petition presents an opportunity to affirm that the “polestar” of regulatory takings law provides some protection for property owners.

SUMMARY OF ARGUMENT

At the center of this case are parcels of property

owned by Simone and Lyder Johnson in the town of

Ponce Inlet, Florida, through their company Pacetta.

The town persuaded the Johnsons to invest in the area

and planned a development in concert with them. It

then set out to devalue and cheaply acquire the same

property through eminent domain. See Pet. App. B.

The town’s actions were so egregious that the trial

judge remarked that “[a]t first blush . . . it’s hard to

believe that a government would act in such a way.”

See Pet. at B-60. But the state intermediate appellate

court reversed the trial court’s finding that a taking

had occurred, despite the likelihood “that the elimination of all virtual uses on the Pacetta Group property

was long planned and has been effectively executed by

the Town expecting the practical immunity that would

come from a financially troubled developer who could

not respond.” Id. The Johnsons’ plight is all too familiar to property owners across the country.

More than half a century after the proclamation

that “while property may be regulated to a certain extent, if regulation goes too far it will be recognized as

a taking,” Pa. Coal Co. v. Mahon, 260 U.S. 393, 415

(1922), this Court outlined the test for regulatory takings in Penn Cent. Transp. Co. v. New York City, 438

3

U.S. 104 (1978). Although often used, the Penn Central

factors are notoriously confusing. Those factors—(1)

the “character of the government action,” (2) the regulation’s economic impact, and (3) the regulation’s interference with “reasonable investment-backed expectations”—are vague and difficult to apply to concrete

property interests. See, R.S. Radford, Luke A. Wake,

Deciphering and Extrapolating: Searching for Sense in

Penn Central, 38 Ecology L.Q. 731 (2011). As a result,

courts have considered the individual inquiries very

differently depending on the case.

Problems with Penn Central persist despite decades

of scholarship and cert. petitions pleading for clarity.

Not only is the “polestar” decision lacking in true guiding principles, but the Court has yet to articulate how

a property owner might go about winning under its

test. See, e.g., Luke A. Wake, The Enduring (Muted)

Legacy of Lucas v. South Carolina Coastal Council: A

Quarter Century Retrospective, 28 Geo. Mason U. Civ.

Rts. L.J. 1, 6 (2017) (“[W]hile styled as a test sounding

in equity under which a landowner might conceivably

win, the reality is that government defendants almost

invariably prevail under Penn Central.”).

The Court has made several attempts at clarifying

Penn Central. See, e.g., Lingle v. Chevron U.S.A., Inc.,

544 U.S. 528 (2005). Those efforts have fallen short of

clarifying the meaning of each factor or explaining how

each should be weighed. The petition here presents an

opportunity to begin clearing up this confusion by confirming that when one of the Penn Central inquiries

tips strongly in favor of the property owner—whether

because the government action is egregious in nature

or causes extreme results—a taking has occurred and

the owner is due just compensation.

4

Where the character of the government action is nefarious, as here where Petitioners were targeted and

forced “alone to bear public burdens which, in all fairness and justice, should be borne by the public as a

whole,” Armstrong v. United States, 364 U.S. 40, 49

(1960), Penn Central’s government-action prong

should count heavily in favor of the property owners as

to outweigh any other considerations.

The Court’s takings decisions formulating categorical rules after Penn Central illustrate the same thing:

when any one factor weighs heavily in favor of the

property owners, they can and should win under the

factual, ad hoc balancing test. The bright-line rules

fashioned in Loretto v. Teleprompter Manhattan CATV

Corp., 458 U.S. 419 (1982), and Lucas v. S.C. Coastal

Council, 505 U.S. 1003 (1992), illustrate the extremes

of this framework. Yet, as the Petitioners’ story

demonstrates, lower courts frequently fail to approach

the Penn Central factors as if they provide any real

protection. Simone and Lyder Johnson invested millions of dollars and years of their lives planning and

beginning a development that they had devised together with Ponce Inlet. Years into the project, the

town changed its mind, decided that it should own the

land, and set out to devalue the Petitioner’s property

and acquire it cheaply through eminent domain. See

Pet. App. B. Yet the intermediate appellate court could

not say that a taking had occurred.

This is all too common. Landowners rarely prevail

in these cases; one empirical study found that landowners lose 90 percent of regulatory takings claims.

See F. Patrick Hubbard, et al., Do Owners Have a Fair

Chance of Prevailing Under the Ad Hoc Regulatory

Takings Test of Penn Central Transportation Company?, 14 Duke Envtl. L. & Pol’y F. 121, 141 (2003).

5

The impact of such losses can be staggering, with landowners losing almost all the value in their properties.

But lower courts frequently find that no taking occurred in circumstances that render the protections of

Penn Central meaningless and seem to fly in the face

of even the categorical rules created in Loretto and Lucas while leaving regulators free to eliminate reasonable uses of property. Contextualizing the categorical

rules within the Penn Central factors would do much

to clarify how those factors should be applied.

Since the Court has been unwilling to repudiate

Penn Central as unworkable, it must give life to the

idea that it represents the “polestar” of regulatory takings. Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg’l

Planning Agency, 535 U.S. 302, 336 (2002) (O’Connor,

J., concurring) (“Our polestar instead remains the

principles set forth in Penn Central itself and our other

cases that govern partial regulatory takings.”). Guiding principles are needed by the lower courts who are

responsible for administering the “essentially factual,

ad hoc inquiries.” This case presents the perfect opportunity to clarify regulatory takings by evaluating the

Johnsons’ claim under Penn Central and finding that

a taking occurred. Doing so would confirm Penn Central’s position as the North Star of regulatory-takings

law and give property owners confidence in the protection of their fundamental rights.

The difficulties with this Court’s regulatory-takings

jurisprudence are well known, and Petitioners have

thoroughly explained the many ways this case is an

excellent vehicle for clarifying the surrounding law.

Amici thus write to address but one aspect of the question presented and to suggest a way this Court might

address Penn Central’s role within the broader regulatory-takings framework.

6

ARGUMENT

I.

THE PENN CENTRAL FACTORS ARE A

MUDDLED MESS THAT OPERATE TO BAR

PROPERTY OWNERS FROM RECOVERING

FOR REGULATORY TAKINGS

Penn Central was this Court’s first foray into regulatory takings after Justice Holmes’s pronouncement

more than fifty years earlier that, “while property may

be regulated to a certain extent, if regulation goes too

far it will be recognized as a taking,” Mahon, 260 U.S.

at 415. Forty years later, regulatory-takings cases are

typically governed by the test set out in Penn Central.

See, e.g., Lingle, 544 U.S. at 539. That test eschews a

“set formula” and instead relies on “several factors

that have particular significance.” Id. (quoting Penn

Central, 544 U.S. at 124). “Primary among those factors are ‘[t]he economic impact of the regulation on the

claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed

expectations.’” Id. (quotations omitted). Another inquiry is into the “‘character of the governmental action’—for instance whether it amounts to a physical

invasion or instead merely affects property interests

through ‘some public program adjusting the benefits

and burdens of economic life to promote the common

good.’” Id. (quoting Penn Central, 544 U.S. at 124).

The Court has recognized the difficulty in assessing

whether the government has effected a regulatory taking. See Palazzolo v. Rhode Island, 511 U.S. 606, 617

(2001) (“[W]e have given some, but not too specific,

guidance to courts confronted with deciding whether a

particular government action goes too far and effects a

regulatory taking.”); Lingle, 544 U.S. at 529 (noting

the Penn Central factors have “given rise to vexing

subsidiary questions.”); Tahoe-Sierra, 535 U.S. at 322

7

(explaining the Penn Central analysis “is characterized by ‘essentially ad hoc, factual inquiries.’”) (citation

omitted). See also Holly Doremus, Takings and Transitions, 19 J. Land Use & Envtl. L. 1, 7–8 (2003)

(“Faced with the Court’s obscure pronouncements on

regulatory takings, lower courts could surely be forgiven for throwing up their hands in despair [and] [l]itigants would be hard-pressed to distill from the cases

any principles that explain the distinctions.”).

Scholars have also lamented the ambiguities and

vagaries of the Penn Central analysis, and the Court’s

failure to fix it. See, e.g., Eric R. Claeys, Takings, Regulations, and Natural Property Rights, 88 Cornell L.

Rev. 1549, 1555 (2003) (“[M]odern regulatory takings

law is widely recognized to be a ‘muddle.’ This muddle

has become especially severe in recent years. Cases

like Lucas, Tahoe-Sierra, and Palazzolo v. Rhode Island have exposed serious conceptual tensions in contemporary regulatory takings doctrine.”); Lise Johnson, After Tahoe-Sierra, One Thing Is Clearer: There Is

Still a Fundamental Lack of Clarity, 46 Ariz. L. Rev.

353, 378 (2004) (“The Court has let the regulatory taking genie out of the bottle, and it cannot now refuse to

discipline it.”) (citation and quotation marks omitted).

Missteps administering Penn Central have been attributed to everything from the ambiguities of the factors themselves to the lack of precise direction from

this Court on how the test is to be applied. Is one factor

dispositive? Are courts to weigh each equally when determining if a regulatory taking has occurred? See

Doremus, supra, at 7 (“The Court has many times repeated the list of Penn Central factors, but has never

refined the meaning of those factors, or explained how

they should be weighted.”). “The persistence of incoherence, instability and incomplete explanations in

8

this area of the law suggests that the Court itself is

dissatisfied with the tests it has developed.” Id. at 2.

Over a decade ago, this Court inched towards clarity by unwinding substantive-due-process inquiries

from takings analyses. Lingle, 544 U.S. at 540–543. It

acknowledged that asking if a regulation is effective

does nothing to help determine the magnitude of the

burden it creates or how that burden is “distributed

among property owners.” Id. at 540–42. This is a welcome affirmation that property rights are not based on

the outcome of a means-end test applied to the burdensome government action. But the Court’s concurrent

instruction that takings claims are to be considered in

light of the “fairness and justice” underlying the purpose of the Takings Clause does little to clarify how the

Penn Central factors should be applied in cases that

fall short of categorical rules. See id. at 537, 543.

Fairness and justice sound great, but the words

alone provide no additional guidance for parties seeking direction on how to apply a nebulous test. See Mark

W. Cordes, The Fairness Dimension in Takings Jurisprudence, 20 Kan. J.L. & Pub. Pol’y 1, 4–5 (“[B]oth the

Penn Central test itself, as well as notions of ‘fairness

and justice,’ are hardly meaningful guideposts to assess whether a restriction constitutes a regulatory taking. . . . When is it fair to require individual landowners to shoulder costs, and when do costs become disproportionate enough to shift the regulatory burden to

the government?”) (citation omitted). The Court had

already admitted as much when it said, three years before Lingle, that the concepts of fairness and justice

were themselves indeterminate and instructed reliance on Penn Central and its application to the factual

circumstances of each case. See Tahoe-Sierra, 535 U.S.

302, 321–23.

9

Moreover, empirical studies have shown that landowners lose over 90 percent of their takings claims under the Penn Central analysis, see Hubbard, supra, at

141, making the test a poor protector of landowner

rights. Examination of a random sampling of 133 of

the 1329 cases citing Penn Central shows that owners

prevailed in a mere 9.8 percent of all cases, and in 13.4

percent of cases in which courts reached the merits.

Id.2 Many lower court decisions since Penn Central

have not found a taking even when the property suffered an extreme diminution in value. See, e.g., Walcek

v. United States, 303 F.3d 1349, 1357 (Fed. Cir. 2002)

(a 59.7 percent diminution in value is not a taking);

Pace Res., Inc. v. Shrewsbury Twp., 808 F.2d 1023,

1031 (3d Cir. 1987) (a 89.5 percent diminution in value

is not a taking); Nasser v. City of Homewood, 671 F.2d

432, 435, 438 (11th Cir. 1982) (a 52.6 percent diminution in value is not a taking); Bernardsville Quarry,

Inc. v. Borough of Bernardsville, 608 A.2d 1377, 1386,

1388–90 (N.J. 1992) (a 92 percent diminution in value

is not a taking). Landowners are increasingly being

conscripted into bearing a significant amount of our

regulatory costs, despite the fact that “[t]he Fifth

Amendment’s guarantee that private property shall

not be taken for a public use without just compensation was designed to bar Government from forcing

some people alone to bear public burdens which, in all

fairness and justice, should be borne by the public as a

whole.” Armstrong, 364 U.S. at 49.

While the Penn Central test is muddled, “the muddle never quite seems to stop the government from

2 On August 23, 2002, the study’s author used Westlaw’s Keycite

feature to generate a list of all cases citing Penn Central; from

this list of 1329 cases, one-tenth were randomly selected for

review. Hubbard, supra, at 141.

10

winning.” Claeys, supra, at 1644. The inherent ambiguity involved in attempting to apply Penn Central

and the Court’s subsequent decisions contribute to the

dramatically different rates of success between property owners and government. This case provides an opportunity to emphasize that, consistent with the

Court’s precedents, one of Penn Central’s prongs may

weigh so heavily in favor of the property owner that

other considerations implicated by the traditional ad

hoc inquiries are of little or no importance. Explaining

how the categorical rules created by Loretto and Lucas

interact with the Penn Central factors, while simultaneously placing those rules within the larger regulatory-takings framework, would be a helpful first step.

A. Contextualizing Loretto’s Categorical Rule

Within the Penn Central Factors Would

Provide Necessary Clarity

Decided only four years after the Court provided

the Penn Central factors to evaluate regulatory takings, Loretto v. Teleprompter Manhattan CATV Corp.

involved the installation of cable wires and boxes to

provide cable tv access to renters. 458 U.S. 419, 421–

25 (1982). A New York statute required landlords to

permit community access television (CATV) facilities

on their properties and prevented them from extracting any payment beyond a one-time $1 fee because

that is what the state commission determined was reasonable. On behalf of a class of similarly situated New

York City landlords, Jean Loretto sued for damages

and injunctive relief arguing that the statute requiring

landlords to provide access for CATV installations and

equipment effected an uncompensated taking.

11

The government argued that the statute requiring

landlords to permit a physical occupation of their property was a “justifiable exercise of the police power of

the State,” Loretto v. Teleprompter Manhattan CATV

Corp., 415 N.Y.D.2d 180, 181–82 (1979). There was no

question “that the obvious public advantage sought to

be served by the legislation under attack greatly outweighs the insignificant nature of the physical use of

private property permitted by the statute.” Id. at 182.

Moreover, “it is not contended that such use has an adverse economic impact on the income-producing potential of rental premises.” Id. Those arguments were

adopted by the trial court in an extremely short opinion granting summary judgment to New York City and

Teleprompter, which was then affirmed by the appellate division without opinion. Loretto v. Teleprompter

Manhattan CATV Corp., 422 N.Y.S.2d 550 (1979).

Without explicitly citing this Court’s decision in

Penn Central, the New York courts still addressed

Loretto’s takings claim through that lens. The trial

court determined that the character of the government

action was acceptable—cable access served an important public interest and the physical intrusion on

private property was minor. Loretto, 415 N.Y.D.2d at

181–82. Likewise, the intrusion did not significantly

impact the value of the property or interfere with any

investment backed expectations. Id. at 182 (“[I]t is not

contended that such use has an adverse economic impact on the income-producing potential of rental premises”). The New York Court of Appeals also affirmed,

holding that the statute was within the state’s police

power because it served an important purpose. Loretto

v. Teleprompter Manhattan CATV Corp., 423 N.E.2d

320, 327–29 (N.Y. 1981).

12

On appeal, this Court came to the contrary and correct conclusion: “a permanent physical occupation authorized by government is a taking without regard to

the public interests that it may serve.” Loretto, 458

U.S. at 426. Nevertheless, the decision failed to crystalize the new rule’s place in the Court’s developing

regulatory takings jurisprudence. It’s still unclear

whether and how Loretto fits with Penn Central, further contributing to the Penn Central “muddle.” See,

e.g., Radford & Wake, supra, at 736–37 (“It must

therefore be the case that either the character prong

[of Penn Central] was intended to incorporate a

broader array of considerations, or it was rendered superfluous by Loretto.”).

Justice Marshall’s majority opinion in Loretto cites

Penn Central approvingly and alludes to the fit between its multi-prong framework and the reasons for

the Court’s announcement of the categorical rule for

physical takings. 458 U.S. at 426–35. As he wrote,

In Penn Central Transportation Co. v. New

York City, the Court surveyed some of the

general principles governing the Takings

Clause. The Court noted that no ‘set formula’ existed to determine, in all cases,

whether compensation is constitutionally

due for a government restriction of property.

Ordinarily, the Court must engage in ‘essential ad hoc, factual inquires.’ But the inquiry

is not standardless. The economic impact of

the regulation, especially the degree of interference with investment-backed expectations, is of particular significance. ‘So, too, is

the character of the governmental action. A

“taking” may more readily be found when

the interference with the property can be

13

characterized as a physical invasion by government, than when interference arises

from some public program adjusting the

benefits and burdens of economic life to promote the common good.’

Id. at 426 (citations omitted).

Justice Marshall gives different weight to part of

the Penn Central test. Sometimes, the “character of

the governmental action” can be so extreme that the it

amounts to a taking apart from any public interests it

may serve and despite its minimal economic impact on

the property owner. Id. at 426, 434–35. The remaining

Penn Central factors are of no consequence to determining whether a taking occurred when the character

prong tips so heavily in favor of the property owner.

In summarizing the Court’s precedents on the matter of physical invasions of property, Justice Marshall

again cites Penn Central and places the Loretto per se

rule in the context of its inquiries. Loretto, 458 U.S. at

434–35 (“In short, when the character of the governmental action is a permanent physical occupation of

property, our cases uniformly have found a taking to

the extent of the occupation, without regard to

whether the action achieves an important public benefit or has only minimal economic impact on the

owner.”) (citations omitted). This assessment led the

Court to fashion its first categorical rule in regulatory

takings: “[A] permanent physical occupation authorized by government is a taking without regard to the

public interests that it may serve.” Id. at 426.

Loretto illustrates that it is possible for the nature

of the government-action prong to weigh so heavily in

favor of the property owner as to marginalize the relative importance of the other considerations in Penn

14

Central’s “essentially ad hoc, factual inquiries.” 438

U.S. at 124. What the Court fundamentally acknowledged in Loretto is also what Petitioners request here:

affirmation that one of the “inquiries” in Penn Central’s ad hoc analysis can tip so heavily in favor of the

property owner as to render the other inquiries moot.

This Court would aid litigants and lower courts if it

were to clarify this premise and acknowledge that

here, where Respondents set out to deliberately devalue and later acquire Petitioners’ property, a taking

occurred based on the “character of the governmental

action” alone. It would be particularly helpful if the

Court did so while placing Loretto’s per se rule within

the larger Penn Central framework. See, e.g., Kirby v.

N.C. Dep’t of Transp., 786 S.E.2d 919 (N.C. 2016)

(holding that a transportation plan that restricted the

landowners’ rights to improve, develop, and subdivide

their property for an indefinite period of time was outside the scope of the police power).

B. Contextualizing Lucas’s Categorical Rule

Within the Penn Central Factors Would

Provide Needed Clarity

A decade after it created a per se rule for physical

occupations of property, this Court decided another

important takings case and created another categorical rule. Lucas v. S.C. Coastal Council, 505 U.S. 1003

(1992). Like the per se physical takings rule in Loretto,

Lucas announced that “when the owner of real property has been called upon to sacrifice all economically

beneficial uses in the name of the common good, that

is, to leave his property economically idle, he has suffered a taking.” Id. at 1019. And, like Loretto, this per

se rule was borne of the Penn Central framework but

has never been properly placed within the Court’s regulatory takings jurisprudence.

15

Lucas involved a claim brought by the owner of

beachfront property in South Carolina when he discovered a newly passed “Beach Management Act” prohibited any development or economically beneficial use of

property previously zoned as suitable for building. Lucas, Id. at 1007–10. Justice Scalia’s majority opinion

announcing the “total taking” standard made it clear

that, when government action destroys all beneficial

use of property, there is no need for balancing the

other prongs of Penn Central’s ad hoc inquiries to know

a taking has occurred. Id. at 1015. With Loretto and

Lucas, there were “at least two discrete categories of

regulatory action as compensable without case-specific

inquiry into the public interest advanced in support of

the restraint . . . regulations that compel the property

owner to suffer a physical ‘invasion’ of his property …

[and] where regulation denies all economically beneficial or productive use of land.” Id.

Lucas illustrates again how one of the Penn Central

factors may sometimes weigh so heavily in favor of

property owners that a taking has occurred. The complete destruction of all economically beneficial use of

the property was sufficient to set aside the character

of the government action responsible for that destruction. Indeed, Mr. Lucas conceded that the Beach Management Act was likely a valid exercise of police power

because preventing erosion and preserving beachfront

were legitimate state goals. Id. at 1009–10. Nevertheless, because Lucas had purchased the property before

it was within a “critical area” coastal zone and had invested over $1.2 million planning to build a home on

each lot—a purpose permitted by the applicable zoning

laws at the time of purchase—the laudable goals of the

Beachfront Management Act didn’t prevent its operation from effecting a taking. Id. at 1007–08, 1018–21.

16

A total deprivation of economically beneficial use can

allow a property owner to win due to interference with

investment-backed expectations. As Justice Scalia explained, “there are good reasons for our frequently expressed belief that when the owner of real property has

been called upon to sacrifice all economically beneficial

uses in the name of the common good, that is, to leave

his property economically idle, he has suffered a taking.” Id. at 1019 (emphasis in original).

Prior arguments and decisions in the South Carolina state courts in Lucas also showcase the influence

of Penn Central. The South Carolina Court of Common

Pleas, where Lucas filed suit when all plans for use of

his property were brought to a halt, found that the

Beachfront Management Act’s prohibition on construction was a taking because it “‘deprived Lucas of any

reasonable economic use of the lots . . . eliminated the

unrestricted right of use, and rendered them valueless’” Id. at 1010 (citing Pet. at A-37). The trial court

therefore held that the economic consequences for the

property owner were so severe as to mitigate any consideration of the nature of government action.

Reversing that holding, the Supreme Court of South

Carolina hung its hat on a different consideration

within Penn Central’s “essentially ad hoc, factual inquiries.” See, Lucas v. S.C. Coastal Council, 404 S.E.2d

895, 896–99 (S.C. 1991). Rather than place primary

importance on the Act’s interference with Lucas’s investment-backed expectations, or the regulation’s economic impact, the South Carolina Supreme Court focused on the nature of the government action, finding

that the prohibition on development was “to prevent

serious public harm” and required no compensation regardless of impact on a property’s value. Id. at 898–99.

17

On review, this Court established the “total takings” rule, 505 U.S. at 1030–31, and it was hailed as a

win by property rights advocates. But lack of grounding relative to Penn Central has rendered its perceived

protections hollow. Lucas introduced new ambiguities

about residual versus economically beneficial value

that encouraged the Penn Central test to operate to the

detriment of property owners. After Lucas, “some

courts have held that a finding of any residual value

cuts against the landowner under the Penn Central

balancing test.” Wake, supra, at 23

Failure to treat situations in which an owner is deprived of all economically beneficial use of land as a

total taking has encouraged government defendants to

find any number of creative ways to escape takings liability. For example, many jurisdictions have opted for

the use of “transferable development rights” (TDRs)

which are awarded to owners who are left unable to

develop or make any use of their land due to ever-tightening restrictions on use. Courts are then free to find

that the potential value of the TDRs, in a market that

may or may not exist, leaves some residual value remaining in the property. On that basis, no taking occurs. This is the case even when the government action

prevents the real property from being put to any beneficial use. See, e.g., Ganson v. City of Marathon, 222

So.3d 17 (Fla. Dist. Ct. App. 2016) (finding no taking

where owners were prohibited from using their land

for anything that altered the natural state of the property in any way because they had been awarded Rate

of Growth Ordinance points that could theoretically be

sold to a different party who planned to collect enough

points to develop in a different, allowable location).

18

Only this Court can bring clarity to the mire that is

regulatory takings. Emphasizing that one Penn Central factor may be dispositive and placing its earlier

categorical rules within a broader regulatory takings

framework would be an excellent way to exit the bog.

II.

THE COURT SHOULD TAKE THIS CASE TO

SHOW WHAT A PENN CENTRAL WIN LOOKS

LIKE AND BRING CLARITY TO REGULATORY-TAKINGS LAW

Loretto demonstrates that when the nature of the

government action—in that case, a permanent physical invasion—is extreme, a taking occurs. Lucas provides another extreme example of one of Penn Central’s ad hoc inquiries—the total deprivation of all economically beneficial use of land is a taking. The Court

should accept this case and find that the predatory behavior exhibited by Ponce Inlet tips the “character of

the government action” factor so heavily in favor of Petitioners that a taking has occurred and just compensation is due.

Recall the detailed steps that led to the taking here.

After devising “a delightful mixed-use planned waterfront development . . . that had been developed in conjunction with and at the insistence of the Town,” Pet.

at B-4, Petitioners Lyder and Simone Johnson invested millions of dollars and years of their lives in the

project, only to have the town do an about-face and put

a halt to the plans after a lengthy “harmonious convivial relationship that might even be described as pacesetting.” Id. at B-19. The trial court determined that

Ponce Inlet had planned to devalue Petitioners’ property, drive them into financial ruin, and immunize the

town from potential consequences. Id. at B-60. Ulti-

19

mately finding that “[w]hen state and city officials employ every means available to restrict the private development of a capital center in order to keep its acquisition prices low for eminent domain, there is a taking.” Id. at B-60. The trial judge determined that the

petitioners were due compensation. Pet. at D-1–D-3.

On review, Florida’s intermediate appellate court

acknowledged that Petitioners had worked with Ponce

Inlet while planning the development, describing them

as “amenable” to requirements the town had for the

project. Ponce Inlet, 226 So. 3d at 307. The court noted

that the Johnsons had purchased the parcels over several years and at great expense in tandem with their

work with the town. Id. But, despite the town’s eventual egregious behavior, the fact that the town council

passed legislation prohibiting any further development, and the detailed factual findings of the trial

court that the town had intentionally set out to drastically devalue and acquire the property, the court remanded the case with instructions to reconsider

whether the claim was ripe and to reevaluate the economic impact of the town’s actions on the parcel as a

whole. Id. at 313–15.

A takings claim should be ripe for review under Williamson County’s finality requirement when, as here,

a city council sets out to intentionally devalue the

property, retracts approval for development plans, and

goes so far as to codify a prohibition on any development on the land. See, generally, Pet. App. B.; Williamson County Reg’l Planning Comm’n v. Hamilton Bank,

473 U.S. 172, 186 (1985) (“[A] claim that the application of government regulations effects a taking of a

property interest is not ripe until the government entity charged with implementing the regulations has

reached a final decision regarding the application of

20

the regulations to the property at issue.”). Petitioners

certainly made a “meaningful attempt” to put their

property to beneficial use, but the Town refused to permit any such use. Pet. at B-72 (The “decisions were final as to the Pacetta property and entitled the plaintiffs to proceed . . . There is no doubt that by 2010, the

government had made it clear by legislation, acts and

conduct . . . that by a reasonable degree of certainty,

the property could not be used as vested and the matter was legally ripe for a challenge.”). Any suggestion

that Petitioners should make additional futile and

costly attempts before vindicating their constitutional

rights is offensive to the Fifth Amendment.

As the Petitioners note, even if there was some

question as to the proper “parcel as a whole,” the appellate court should have reviewed the trial court’s factual findings and applied a Penn Central inquiry to

find that a taking had occurred based on the character

of the government action alone. Pet. at 27. The Fifth

Amendment’s promise that “private property shall not

be taken for public use, without just compensation”

prevents Ponce Inlet, or any other government entity,

from intentionally setting out to devalue and acquire

private property without paying for the privilege.

Unfortunately, “we are not likely to see teeth—

much less principled decision-making—in our regulatory takings jurisprudence unless and until the Supreme Court should endeavor to provide more concrete

guidance as to how the Penn Central test should be assessed in the context of a successful partial takings

claim.” Wake, supra, at 33. This case provides an opportunity to clarify Penn Central by showing what a

win for the property owner looks like under the ad hoc

inquiries, and to do so in a way that further clarifies

this Court’s broader regulatory-takings jurisprudence.

21

CONCLUSION

For the foregoing reasons, the Court should grant

the petition for a writ of certiorari.

Respectfully submitted,

Karen R. Harned

Luke A. Wake

NFIB Small Business

Legal Center

1201 F. Street N.W.,

Suite 200

Washington, D.C. 20004

(202) 314-2048

karen.harned@nfib.org

July 25, 2018

Ilya Shapiro

Counsel of Record

Trevor Burrus

Meggan DeWitt

Cato Institute

1000 Mass. Ave. N.W.

Washington, D.C. 20001

(202) 842-0200

ishapiro@cato.org