Amicus Curiae Brief — Love Terminal Partners, L.P., et al., Petitioners v. United States

No. 18-1062

In The

Supreme Court of the United States

____________________

LOVE TERMINAL PARTNERS, L.P.,

and VIRGINIA AEROSPACE, LLC,

Petitioners,

v.

UNITED STATES OF AMERICA,

Respondent.

____________________

On Petition for Writ of Certiorari to

the United States Court of Appeals

for the Federal Circuit

____________________

BRIEF AMICUS CURIAE OF PACIFIC LEGAL

FOUNDATION IN SUPPORT OF PETITIONERS

____________________

BRIAN T. HODGES

Pacific Legal Foundation

255 S. King Street

Seattle, Washington 98134

Telephone: (916) 419-7111

Email: BTH@pacificlegal.org

Counsel for Amicus Curiae Pacific Legal Foundation

i

QUESTIONS PRESENTED

1.

In assessing whether the government has

effected a compensable taking, may courts treat real

property as worthless simply because the owner was

not generating positive cashflow from the property at

the time of the taking?

2.

In determining whether the taking of property

had any economic impact on its owner, may courts

ignore reasonable investment-backed expectations

that a regulatory environment is likely to change and,

in fact, has been changed by the very law that effects

the taking?

ii

TABLE OF CONTENTS

QUESTIONS PRESENTED ........................................ i

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

INTEREST OF AMICUS CURIAE ............................ 1

INTRODUCTION AND

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

REASONS FOR GRANTING THE WRIT ................. 5

I. THE FEDERAL CIRCUIT’S DECISION IS

CONTRARY TO PENN CENTRAL AND

PALAZZOLO AND CONFLICTS WITH

THE DECISIONS OF OTHER FEDERAL

AND STATE APPELLATE COURTS .................... 5

A. The Federal Circuit’s Formulation of

the Investment-Backed Expectations

Inquiry Conflicts with Penn Central .................. 5

B. The Decision Below Raises an Important

Question of Takings Law Left Unanswered

by Palazzolo ...................................................... 10

C. The Question Whether Any One Penn Central

Factor Can Dispose of a Takings Claim Is

Subject to a Deep Split of Authority ............... 15

II. THE FEDERAL CIRCUIT’S DECISION

IS CONTRARY TO LUCAS AND

CONFLICTS WITH THE DECISIONS

OF OTHER FEDERAL AND STATE

APPELLATE COURTS ....................................... 17

CONCLUSION.......................................................... 23

iii

TABLE OF AUTHORITIES

Page

CASES

1256 Hertel Ave. Assocs., LLC v. Calloway,

761 F.3d 252 (2d Cir. 2014)................................... 15

Adams Outdoor Advertising v. City of

East Lansing, 591 N.W.2d 404

(Mich. Ct. App. 1998) ............................................ 21

Anchorage v. Sandberg,

861 P.2d 554 (Alaska 1993) .................................. 22

Anderson v. Charter Twp.,

266 F.3d 487 (6th Cir. 2001) ................................. 21

Andrus v. Allard,

444 U.S. 51 (1979) ................................................. 12

Appolo Fuels, Inc. v. United States,

381 F.3d 1338 (Fed. Cir. 2004) ............................. 16

Arkansas Game & Fish Comm’n v. United States,

568 U.S. 23 (2012) ................................................... 1

Armstrong v. United States,

364 U.S. 40 (1960) ................................................. 23

Bormann v. Board of Supervisors,

584 N.W.2d 309 (Iowa 1998), cert. denied,

119 S. Ct. 1096 (1999) ........................................... 21

Cane Tennessee, Inc. v. United States,

62 Fed. Cl. 703 (2004) ........................................... 20

Central Colo. Water Conservancy Dist. v.

Simpson, 877 P.2d 335 (Colo. 1994) ..................... 22

Chioffi v. City of Winooski,

165 Vt. 37 (1996) .................................................. 21

iv

Page

Cienega Gardens v. United States,

331 F.3d 1319 (Fed. Cir. 2003) ............................... 8

Clay County v. Harley & Susie Bogue, Inc.,

988 S.W.2d 102 (Mo. Ct. App. 1999) ..................... 21

Columbia Venture, LLC v. Richland Cty.,

413 S.C. 423 (2015) ............................................... 15

Commonwealth Edison Co. v. United States,

271 F.3d 1327 (Fed. Cir. 2001) ....................... 10–11

Del Monte Dunes at Monterey, Ltd. v. City of

Monterey, 95 F.3d 1422 (9th Cir. 1996),

aff’d, 526 U.S. 687 (1999) ...................................... 21

Dodd v. Hood River County,

136 F.3d 1219 (9th Cir.), cert. denied,

119 S. Ct. 278 (1998) ............................................. 21

Edwards Aquifer Auth. v. Bragg,

421 S.W.3d 118 (Tex. Ct. App. 2013) .................... 16

Edwards Aquifer Auth. v. Day,

369 S.W.3d 814 (Tex. 2012) .................................. 16

Fla. Dep’t of Env. Prot. v. Burgess,

772 So. 2d 540 (Fla. 1st DCA 2000) ...................... 20

Good v. United States, 39 Fed. Cl. 81 (1997),

aff’d, 189 F.3d 1355 (Fed. Cir. 1999) ............. 13, 19

Guggenheim v. City of Goleta,

638 F.3d 1111 (9th Cir. 2010) ......................... 15–16

Guimont v. City of Seattle,

896 P.2d 70 (Wash. Ct. App. 1995) ...................... 22

Hodel v. Irving,

481 U.S. 704 (1987) ............................................... 12

v

Page

Horne v. Department of Agriculture,

135 S. Ct. 2419 (2015) ............................................. 1

In the Matter of Thaw,

769 F.3d 366 (5th Cir. 2014) ................................. 15

K & K Constr., Inc. v. Department of Natural

Resources, 456 Mich. 570, cert. denied,

119 S. Ct. 60 (1998) ............................................... 21

Kaiser Aetna v. United States,

444 U.S. 164 (1979) ................................... 3, 7–8, 12

Kavanau v. Santa Monica Rent Control Bd.,

941 P.2d 851 (Cal. 1997) ....................................... 21

Kelo v. City of New London, Conn.,

545 U.S. 469 (2005) ................................................. 1

Knick v. Township of Scott, No. 17-647 ..................... 1

Koontz v. St. Johns River Water Management

District, 570 U.S. 595 (2013) ................................... 1

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

544 U.S. 528 (2005) ................................. 2, 6, 17–18

Loretto v. Teleprompter Manhattan CATV Corp.,

458 U.S. 419 (1982) ........................................... 2, 18

Lost Tree Vill. Corp. v. United States,

115 Fed. Cl. 219 (2014), aff’d on other

grounds by 787 F.3d 1111 (Fed. Cir. 2015) ...... 8, 20

Loveladies Harbor, Inc. v. United States,

28 F.3d 1171 (Fed. Cir. 1994) ............................... 19

Lucas v. South Carolina Coastal Council,

505 U.S. 1003 (1992) ......................................passim

vi

Page

Matter of Gazza v. New York State Dep’t of

Envtl. Conservation, 89 N.Y.2d 603 (1997) .......... 16

McQueen v. S.C. Coastal Council, 329 S.C. 588

(Ct. App. 1998), rev’d, 340 S.C. 65, 530 S.E.2d

628 (2000), cert. granted, judgment vacated

sub nom. McQueen v. Dep’t of Health & Envtl.

Control, 533 U.S. 943 (2001) ................................. 20

Mehaffy v. United States,

499 F. App’x 18 (Fed. Cir. 2012) ........................... 16

Moore v. United States,

943 F. Supp. 603 (E.D. Va. 1996).......................... 20

Murr v. Wisconsin,

137 S. Ct. 1933 (2017) ............................. 4, 6, 13–14

Nollan v. California Coastal Comm’n,

483 U.S. 825 (1987) ........................................... 1, 13

Palazzolo v. Rhode Island,

533 U.S. 606 (2001) ........................................passim

Palm Beach Isles Assocs. v. United States,

231 F.3d 1354 (Fed. Cir. 2000) ............................. 20

Penn Central Transportation Co.

v. City of New York,

438 U.S. 104 (1978) ................................... 2–3, 6, 11

Preseault v. Interstate Commerce Comm’n,

494 U.S. 1 (1990) ..................................................... 5

Prosser v. Kennedy Enterprises, Inc.,

342 Mont. 209 (2008)............................................. 16

PruneYard Shopping Ctr. v. Robins,

447 U.S. 74 (1980) ................................................. 12

vii

Page

Reahard v. Lee Cty.,

968 F.2d 1131 (11th Cir. 1992) ............................ 21

Rith Energy, Inc. v. United States,

247 F.3d 1355 (Fed. Cir. 2001) ............................. 20

Ruckelshaus v. Monsanto Co.,

467 U.S. 986 (1984) ........................................... 7, 12

Suitum v. Tahoe Reg’l Planning Agency,

520 U.S. 725 (1997) ................................................. 1

Tahoe-Sierra Pres. Council, Inc. v.

Tahoe Reg’l Planning Agency,

535 U.S. 302 (2002) ................................. 3, 5, 11, 13

Webb’s Fabulous Pharmacies, Inc. v. Beckwith,

449 U.S. 155 (1980) ................................................. 7

Westside Quik Shop, Inc. v. Stewart,

341 S.C. 297, 534 S.E.2d 270 (2000) ..................... 20

Woodbury Place Partners v. City of Woodbury,

492 N.W.2d 258 (Minn. Ct. App. 1992) ................ 22

Zanghi v. Bd. of Appeals of Bedford,

61 Mass. App. Ct. 82 (2004) ............................ 20–21

Zeman v. City of Minneapolis,

552 N.W.2d 548 (Minn. 1996) ............................... 21

RULES

S. Ct. R. 37.2(a) ........................................................... 1

S. Ct. R.37.6 ................................................................ 1

viii

Page

OTHER AUTHORITIES

Berger, Michael M.,

Happy Birthday, Constitution: The Supreme

Court Establishes New Ground Rules for LandUse Planning, 20 Urb. Law. 735 (1988) ............. 7–8

Brown, Carole Necole & Merriam, Dwight M.,

On the Twenty-Fifth Anniversary of Lucas:

Making or Breaking the Takings Claim,

102 Iowa L. Rev. 1847 (2017)................................ 19

Brunner, Karen M., Note,

A Missed Opportunity: Palazzolo v. Rhode Island

Leaves Investment-Backed Expectations Unclear

As Ever, 25 Hamline L. Rev. 117 (2001)............... 15

Echeverria, John D.,

Is the Penn Central Three-Factor Test Ready

for History’s Dustbin?, 52 Land Use L.

& Zoning Dig. 3 (2000) ............................................ 6

Echeverria, John D.,

Making Sense of Penn Central,

23 UCLA J. Envtl. L. & Pol’y 171 (2005) ............. 13

Epstein, Richard A.,

Lucas v. South Carolina Coastal Council:

A Tangled Web of Expectations,

45 Stan. L. Rev. 1369 (1993) ............................. 9–10

Fenster, Mark,

The Stubborn Incoherence of Regulatory

Takings, 28 Stan. Envtl. L.J. 525 (2009).............. 11

Gordley, James R.,

Takings: What Does Matter? A Response to

Professor Peñalver, 31 Ecology L.Q. 291 (2004) ... 11

ix

Page

Kmiec, Douglas W.,

Inserting the Last Remaining Pieces

into the Takings Puzzle,

38 Wm. & Mary L. Rev. 995 (1997) ........................ 6

Lawson, Gary, et al.,

“Oh Lord, Please Don’t Let Me Be

Misunderstood!”: Rediscovering the Mathews

v. Eldridge and Penn Central Frameworks,

81 Notre Dame L. Rev. 1 (2005) ........................... 11

Meltz, Robert, et al.,

The Takings Issue: Constitutional Limits

on Land-Use Control and Environmental

Regulation 134 (1999) ............................................. 9

Michelman, Frank I.,

Property, Utility and Fairness: Comments on

the Ethical Foundations of Just Compensation

Law, 80 Harv. L. Rev. 1165 (1967) ..................... 6–7

Peterson, Andrea L.,

The Takings Clause: In Search of Underlying

Principles Part I—A Critique of Current

Takings Doctrine, 77 Cal. L. Rev. 1299 (1989) ..... 10

Radford, R.S. & Breemer, J. David,

Great Expectations: Will Palazzalo v. Rhode

Island Clarify the Murky Doctrine of

Investment-Backed Expectations in

Regulatory Takings Law?,

9 N.Y.U. Envtl. L.J. 449 (2001) ............................ 10

Siegan, Bernard H.,

Property and Freedom: The Constitution, the

Courts, and Land-Use Regulation 146 (1997) ........ 7

1

INTEREST OF AMICUS CURIAE

Pursuant to Supreme Court Rule 37.2(a), Pacific

Legal Foundation (PLF) submits this brief amicus

curiae in support of Petitioners Love Terminal

Partners, L.P., and Virginia Aerospace, LLC

(collectively, Love Terminal). 1

PLF was founded over 45 years ago and is widely

recognized as the most experienced nonprofit legal

foundation of its kind. PLF attorneys have

participated as lead counsel or amicus curiae in

several landmark United States Supreme Court cases

in defense of the right of individuals to make

reasonable use of their property, and the corollary

right to obtain just compensation when that right is

infringed. See, e.g., Knick v. Township of Scott, No. 17647; Horne v. Department of Agriculture, 135 S. Ct.

2419 (2015); Koontz v. St. Johns River Water

Management District, 570 U.S. 595 (2013); Arkansas

Game & Fish Comm’n v. United States, 568 U.S. 23

(2012); Kelo v. City of New London, Conn., 545 U.S.

469 (2005); Palazzolo v. Rhode Island, 533 U.S. 606

(2001); Suitum v. Tahoe Reg’l Planning Agency, 520

U.S. 725 (1997); Nollan v. California Coastal Comm’n,

483 U.S. 825 (1987). PLF has offices in Florida,

1 Pursuant to this Court’s Rule 37.2(a), PLF has received written

consent from all parties to the filing of this brief. Counsel of

record for all parties received notice at least 10 days prior to the

due date of the Amici Curiae’s intention to file this brief.

Pursuant to Rule 37.6

Pursuant to Rule 37.6, Amicus Curiae affirms that no

counsel for any party authored this brief in whole or in part, and

no counsel or party made a monetary contribution intended to

fund the preparation or submission of this brief. No person other

than Amicus Curiae, its members, or its counsel made a

monetary contribution to its preparation or submission.

2

California, Washington, and the District of Columbia,

and regularly litigates matters affecting property

rights in state courts across the country. PLF believes

its perspective and experience with property rights

litigation will aid this Court in the consideration of the

issues presented in this case.

INTRODUCTION AND

SUMMARY OF ARGUMENT

This case arises from the Federal Circuit’s bizarre

conclusion that Love Terminal, the owner of a

passenger terminal at an airfield near Dallas, is not

entitled to any compensation for a regulatory taking

because, according to the decision below, the property

has no value. Pet. App. 16–19. Over the years, this

Court has established three distinct tests for

determining when a regulation “goes too far” and

constitutes a compensable taking. Lingle v. Chevron

U.S.A. Inc., 544 U.S. 528, 538 (2005). Two types of

regulatory action will be deemed per se takings:

“where government requires an owner to suffer a

permanent physical invasion of her property,” id.

(citing Loretto v. Teleprompter Manhattan CATV

Corp., 458 U.S. 419 (1982)), and where a regulation

deprives an owner of “‘all economically beneficial

us[e]’ of her property.” 2 Id. (quoting Lucas v. South

Carolina Coastal Council, 505 U.S. 1003, 1019 (1992)

(emphasis in original)). Anything less than a physical

invasion or a deprivation of all beneficial use is

2 Lucas v. South Carolina Coastal Council recognized a single

exception to the total takings rule, which is not at issue here. 505

U.S. 1003, 1029 (1992) (A regulation does not effect a taking if it

merely prohibits uses of property that were already

impermissible under “background principles of the State’s law of

property and nuisance.”).

3

analyzed under Penn Central Transportation Co. v.

City of New York, which established a multifactorial

balancing test directing courts to consider a number

of case-specific factors, including the regulation’s

economic impact, the extent of the regulation’s

interference with the property owner’s “distinct

investment-backed expectations,” and the “character

of the governmental action.” 438 U.S. 104, 124 (1978).

At issue here is the Penn Central’s investmentbacked expectations inquiry. As adopted by this

Court, the expectations inquiry asks whether the

owner had invested resources in pursuit of some

distinct use of the property (Penn Central, 438 U.S. at

124), and whether that expectation is reasonable.

Kaiser Aetna v. United States, 444 U.S. 164, 175

(1979). That inquiry was intended to provide just one

part of a multifactor test, which is designed to balance

numerous competing interests to determine whether

the regulation “is so unreasonable or onerous as to

compel compensation.” Palazzolo v. Rhode Island, 533

U.S. 606, 627 (2001); see also Tahoe-Sierra Pres.

Council, Inc. v. Tahoe Reg’l Planning Agency, 535 U.S.

302, 322 (2002) (The Penn Central test “is

characterized by essentially ad hoc, factual inquiries,

designed to allow careful examination and weighing of

all the relevant circumstances.” (internal quotation

marks omitted)).

The Federal Circuit, however, drastically altered

the Penn Central test by holding that the expectations

inquiry, alone, will determine the value of the owner’s

investment in the property, and therefore is

determinative of all regulatory takings claims. Pet.

App. 22. The Federal Circuit further altered this

Court’s takings case law by holding that an owner’s

4

expectations are “limited by the regulatory regime in

place at the time [the owner] acquired the [property].”

Pet. App. 22. Thus, despite acknowledging that the

Wright Amendment Reform Act of 2006 (WARA)

barred all economically productive use of Love

Terminal’s property (Pet. App. 15), the Federal Circuit

held that Love Terminal could not, as a matter of law,

have reasonably expected to make any productive use

of the terminal (despite extensive due diligence and

pending regulatory reforms). Pet. App. 50–55, 117–18.

From that, the court leapt to the conclusion that the

terminal had no value and, therefore, WARA’s

outright ban on its use had no “adverse economic

impact” and reversed the Court of Federal Claims’

award of $133.5 million in just compensation. Pet.

App. at 19–22.

The decision below threatens to unmake this

Court’s regulatory takings jurisprudence by elevating

the investment-backed expectations factor into an

insurmountable presumption against property

owners. See Murr v. Wisconsin, 137 S. Ct. 1933, 1945

(2017) (measuring the value of the property by the

terms of the challenged regulation unfairly distorts

the takings equation in favor of the government). The

conclusion that an owner cannot advance a regulatory

takings claim if regulations in effect at the time of

purchase barred his or her anticipated use is contrary

to Penn Central and conflicts with Palazzolo, which

held that an owner’s rights and expectations in

property cannot be defined solely by reference to the

terms of the challenged regulation. 533 U.S. at 626.

The decision also conflicts with Lucas, which holds

that a property owner is categorically entitled to

compensation upon the conclusion that a “regulation

5

denies all economically beneficial or productive use of

land.” 505 U.S. at 1015.

Finally, it must be emphasized that the decision

below will apply to almost every takings claim brought

against the federal government. Preseault v. Interstate

Commerce Comm’n, 494 U.S. 1, 11–12 (1990). Thus, if

the decision stands, it will encourage the government

to enact the most intrusive regulations possible

because doing so will be deemed to destroy the

investment-backed expectations of private property

owners, and allow the government to avoid takings

liability. The Court should, therefore, grant the

Petition for Writ of Certiorari.

REASONS FOR GRANTING THE WRIT

I

THE FEDERAL CIRCUIT’S DECISION IS

CONTRARY TO PENN CENTRAL AND

PALAZZOLO AND CONFLICTS WITH

THE DECISIONS OF OTHER FEDERAL

AND STATE APPELLATE COURTS

A. The Federal Circuit’s Formulation of the

Investment-Backed Expectations Inquiry

Conflicts with Penn Central

The Federal Circuit’s conclusion that Penn

Central’s expectations inquiry is dispositive of all

regulatory takings claims raises an important

question of constitutional law upon which this Court

has issued conflicting opinions and the lower federal

and state courts are deeply divided. Although Penn

Central is considered the “polestar” of regulatory

6

takings jurisprudence, 3 this Court has largely

refrained from elaborating on its “ad hoc” factors or

explaining how the test is to be applied. See Murr, 137

S. Ct. at 1942–43; see also Palazzolo, 533 U.S. at 617

(The Court has “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.”). This reluctance, however, has

“given rise to vexing subsidiary questions” regarding

Penn Central’s application. 4 Lingle, 544 U.S. at 538–

39.

One topic on which this Court has provided only

partial

guidance

is

the

investment-backed

expectations factor. As adopted by Penn Central, the

expectations inquiry asked simply whether the owner

had invested resources in pursuit of some “distinct”

use of the property. Penn Central, 438 U.S. at 124, 128

(citing Frank I. Michelman, Property, Utility and

Fairness: Comments on the Ethical Foundations of

3 Tahoe-Sierra Pres. Council, 535 U.S. at 336; Palazzolo, 533

U.S. at 633 (O’Connor, J., concurring).

4 Scholars from both sides of the property rights debate have

criticized the Penn Central framework as being vague, impossible

to apply in a consistent manner, and an invitation to judicial

subjectivity. See, e.g., John D. Echeverria, Is the Penn Central

Three-Factor Test Ready for History’s Dustbin?, 52 Land Use L.

& Zoning Dig. 3, 11 (2000) (declaring that the Penn Central

framework “is not supported by current Supreme Court

precedent, invites unprincipled judicial decision making,

conflicts with the language and original understanding of the

takings clause, would confer unjust windfalls in many cases, and

creates seemingly insurmountable problems in terms of defining

an appropriate remedy”); Douglas W. Kmiec, Inserting the Last

Remaining Pieces into the Takings Puzzle, 38 Wm. & Mary L.

Rev. 995, 995 (1997) (describing Penn Central as an “ill fitting

piece [ ] left over from other puzzles long ago forgotten and now

deserving abandonment”).

7

Just Compensation Law, 80 Harv. L. Rev. 1165, 1233

(1967)). Professor Michelman introduced the concept

of investment-backed expectations based on the

understanding that property is comprised of

“expectations founded on existing rules.” Michelman,

80 Harv. L. Rev. at 1211–12. Under this view, security

of expectations is essential if property is to be

efficiently utilized for the betterment of society as a

whole. Id. at 1211–13. Michelman did not intend to

argue that every interference with property

expectations be compensated. Id. at 1213. Rather,

Michelman used this phrase to distinguish

speculators who are not actively putting their land to

some specific use from those owners who actually

invest in such development and deserve protection for

their investments in property. Id at 1234; Bernard H.

Siegan, Property and Freedom: The Constitution, the

Courts, and Land-Use Regulation 146 (1997)

(“[I]nvestment-expectations

law

distinguishes

between an investor and a speculator. The speculator

does not have a distinct use objective when he

purchases the property. The courts are much more

sympathetic to the distinct expectations of the

investor as contrasted with the open-ended profit

motive of the speculator.”).

This Court later refined the expectations inquiry

to require that the owner show that his or her

expectations are objectively reasonable. See, e.g.,

Kaiser Aetna, 444 U.S. at 175; see also Ruckelshaus v.

Monsanto Co., 467 U.S. 986, 1005 (1984) (An owner’s

expectation “must be more than a ‘unilateral

expectation or an abstract need.’” (quoting Webb’s

Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155,

161 (1980))). But beyond those two general criteria,

this Court has provided little guidance on what the

8

expectations inquiry requires or how it is to be

applied. See Michael M. Berger, Happy Birthday,

Constitution: The Supreme Court Establishes New

Ground Rules for Land-Use Planning, 20 Urb. Law.

735, 758 (1988) (“[I]n no case has the Court made any

effort to either define these terms or to give guidance

to lower courts in determining their meaning.”). The

lack of guidance on this critical inquiry has resulted

in remarkably inconsistent decisions among the lower

federal and state courts.

Take this case for example. It is undisputed that

Love Terminal invested significant sums in the

terminal property with the distinct expectation that

pending regulatory reforms would allow them to use

the terminal for commercial passenger services. See

Palazzolo, 533 U.S. at 634 (O’Connor, J., concurring)

(neighboring uses are relevant to the expectations

inquiry); Kaiser Aetna, 444 U.S. at 179

(Representations made by government officials can

“lead to the fruition of a number of expectancies

embodied in the concept of ‘property.’”). The outcome

of regulatory reform could have vindicated this

expectation, or (as it turned out) extinguished it. But,

according to some courts, the outcome alone cannot

determine whether an owner’s expectations were

sufficiently reasonable or distinct to warrant a full

evaluation of the Penn Central factors. See, e.g.,

Cienega Gardens v. United States, 331 F.3d 1319,

1346 (Fed. Cir. 2003) (The expectations inquiry

requires the court to determine “whether a reasonable

developer

confronted

with

the

particular

circumstances facing the Owners would have expected

the government to nullify [restrictive] regulations.”);

Lost Tree Vill. Corp. v. United States, 115 Fed. Cl. 219,

232 (2014), aff’d on other grounds by 787 F.3d 1111

9

(Fed. Cir. 2015) (owner’s expectation that the

government will permit development of a parcel

subject to regulations banning all use were not

unreasonable).

Purporting to apply the same expectations

inquiry, the Federal Circuit below held that an

owner’s expectations are “limited by the regulatory

regime in place at the time they acquired the

[property].” Pet. App. 21–22. Thus, as a matter of law,

the court refused to consider the reasonableness of

Love Terminal’s due diligence and investment plan,

which had anticipated that adoption of WARA would

lift the restrictions on its airport property. Pet. App

20–21 (“This expectations analysis is not designed to

protect private predictions of regulatory change.”).

Nor would the court consider the fact that WARA did

in fact lift the restrictions on other terminal owners at

the airfield. Pet. App. 20–22. Instead, the court simply

concluded that “[t]he failure to establish ‘reasonable,

investment-backed expectations’ . . . defeats [a

regulatory] takings claim as a matter of law.” Pet.

App. 22. Thus, the Federal Circuit concluded that

WARA did not result in a taking without considering

the remaining Penn Central factors.

The remarkable lack of consistency on this

question is unfortunately all too common due to the

lack of clear guidance from this Court on what the

expectations factor requires. See Robert Meltz, et al.,

The Takings Issue: Constitutional Limits on Land-Use

Control and Environmental Regulation 134 (1999)

(criticizing the “amorphous” standard, noting that

“[i]ts parameters remain uncertain even today”); see

also Richard A. Epstein, Lucas v. South Carolina

Coastal Council: A Tangled Web of Expectations, 45

10

Stan. L. Rev. 1369, 1370 (1993) (“[W]e should be

deeply suspicious of the phrase ‘investment-backed

expectations’ because it is not possible to identify even

the paradigmatic case of its use.”); R.S. Radford & J.

David Breemer, Great Expectations: Will Palazzalo v.

Rhode Island Clarify the Murky Doctrine of

Investment-Backed Expectations in Regulatory

Takings Law?, 9 N.Y.U. Envtl. L.J. 449, 449 (2001)

(“Although more than two decades have elapsed since

Penn Central, neither courts nor commentators have

been able to agree on the meaning or applicability of

investment-backed expectations in takings law.”);

Andrea L. Peterson, The Takings Clause: In Search of

Underlying Principles Part I—A Critique of Current

Takings Doctrine, 77 Cal. L. Rev. 1299, 1324 (1989)

(“It is not at all clear . . . what role ‘interference with

reasonable expectations’ plays in the Court’s takings

analysis.”).

Review by this Court is necessary to bring clarity

to this critical question of regulatory takings law.

B. The Decision Below Raises an Important

Question of Takings Law Left

Unanswered by Palazzolo

Review is particularly warranted in this case

because the Federal Circuit’s conclusion that an

owner’s expectations are limited by all regulations in

effect at the time of acquisition conflicts with

Palazzolo, in which this Court confirmed that a

property owner’s right to make reasonable use of his

land does not evaporate simply because a restrictive

regulation predates his ownership. 533 U.S. at 626–

28 (rejecting such a per se defense as “quixotic” and

“capricious in effect”); see also Commonwealth Edison

Co. v. United States, 271 F.3d 1327, 1350 n.22 (Fed.

11

Cir. 2001) (en banc) (“Where a regulatory taking of

real property is alleged, the state cannot defeat

liability simply by showing that the current owner

was aware of the regulatory restrictions at the time

that the property was purchased.”). And in this

regard, the decision below is also contrary to this

Court’s repeated admonition that the Penn Central

test cannot be reduced to a “set formula.” 438 U.S. at

124; see also Tahoe-Sierra, 535 U.S. at 321 (Courts

must resist “[t]he temptation to adopt what amount to

per se rules in either direction.”). On those bases

alone, this Court should grant review and reverse the

Federal Circuit decision.

However, this case also implicates the broader

question of whether a court should consider restrictive

regulations in effect at the time an owner takes title

to his or her property, and, if so, how such an inquiry

impacts the court’s evaluation of the other Penn

Central factors. Palazzolo, 533 U.S. at 629. This

unanswered question, and conflicts in this Court’s

case law, have resulted in widespread confusion

among courts, litigants, and scholars regarding what

the Penn Central factors actually require and how the

test is to be applied. 5

5 See, e.g., Mark Fenster, The Stubborn Incoherence of Regulatory

Takings, 28 Stan. Envtl. L.J. 525, 528 (2009) (noting the

“indeterminacy” of the “ad hoc, multi-factor balancing test”);

James R. Gordley, Takings: What Does Matter? A Response to

Professor Peñalver, 31 Ecology L.Q. 291, 291 (2004) (Penn

Central is an ad hoc balancing test); Gary Lawson, et al., “Oh

Lord, Please Don’t Let Me Be Misunderstood!”: Rediscovering the

Mathews v. Eldridge and Penn Central Frameworks, 81 Notre

Dame L. Rev. 1, 30 (2005) (“[T]he validity of the regulation will

depend on an examination and balancing of three elements . . . .”

12

Early decisions from this Court disagree about

whether any one Penn Central factor can be

dispositive of a regulatory takings case. In Andrus v.

Allard, for example, the Court stated that, for the

purpose of the Penn Central analysis, an owner’s

property interest is the full bundle of rights inhering

in property—an owner has no reasonable expectation

in the individual “strands” that make up the bundle.

444 U.S. 51, 65 (1979). Thus, the claimant’s failure to

allege a total deprivation was fatal to his case. Id. But

one month later, in Kaiser Aetna, the Court found that

a regulatory action interfering with a marina owner’s

right to exclude—one “strand” from that bundle—

impacted a right that is so fundamental to property

that it effected a taking. 444 U.S. at 179–80. In

PruneYard Shopping Ctr. v. Robins, however, the

Court rejected a takings claim upon finding that a

mall owner had no reasonable expectation to exclude

others. 447 U.S. 74, 84 (1980) (defining “reasonable

investment backed expectations” as a right that is

“essential to the use or economic value of the[]

property”). Then, in Ruckelshaus, the Court concluded

“that the force of [a single] factor [may be] so

overwhelming, [. . .] that it disposes of the taking

question.” 467 U.S. at 1005–06 (suggesting that the

reasonableness of investment-backed expectations

depends primarily on whether the owner knew of the

challenged restrictions); but see Hodel v. Irving, 481

U.S. 704, 715 (1987) (finding a regulatory taking even

where evidence of investment-backed expectations

was “dubious,” because the other factors weighed

heavily in favor of the owner’s claim). This line of

(quoting Appellees’ Brief, Penn Cent. Transp. Co. v. City of New

York, 438 U.S. 104 (1978))).

13

contradictory cases is particularly relevant here

because, as discussed in more detail below, the

Federal Circuit read Ruckelshaus as creating a per se

defense to a regulatory takings claim. See Pet. App.

22; see also Good v. United States, 39 Fed. Cl. 81, 95

(1997), aff’d, 189 F.3d 1355 (Fed. Cir. 1999)

(concluding that Ruckelshaus had implicitly adopted

a categorical, single-factor defense to a regulatory

takings claims).

Besides a footnote in Nollan v. California Coastal

Commission, refusing to apply Ruckelshaus in the

context of a property regulation, this Court has never

addressed the circumstances in which a single factor

can be dispositive of a regulatory takings claim. 483

U.S. 825, 833 n.2 (1987). Nor has this Court explained

how any one factor can rise to determinative weight

where “the Penn Central factors are completely

incommensurate.” John D. Echeverria, Making Sense

of Penn Central, 23 UCLA J. Envtl. L. & Pol’y 171, 208

(2005).

Instead, since Palazzolo, this Court has repeated

that courts must “examine ‘a number of factors’ rather

than a simple ‘mathematically precise’ formula” or a

per se rule when determining whether a regulation

gave rise to a taking in Tahoe-Sierra, 535 U.S. at 326.

This is because “[t]he Takings Clause requires careful

examination and weighing of all the relevant

circumstances”

and

that

“interference

with

investment-backed expectations is one of a number of

factors that a court must examine.” Id. at 326 n.23

(quoting Palazzolo, 533 U.S. at 633 (O’Connor, J.,

concurring)).

Murr confirmed that the expectations inquiry,

alone, “should not necessarily preordain the outcome

14

in every case.” 137 S. Ct. at 1944. The Court further

reiterated that an owner’s expectations cannot be

“shape[d] and define[d]” by reference to restrictive

state and local laws. 137 S. Ct. at 1944–45. Murr

explained that defining property by the terms of a

restrictive regulation would leave “landowners

without recourse against unreasonable regulations”

and “improperly would fortify the state law against a

takings claim, because the court would look to the

retained value in the property as a whole rather than

considering whether individual holdings had lost all

value.” Id.; see also Palazzolo, 533 U.S. at 635 (“If

investment-backed expectations are given exclusive

significance in the Penn Central analysis and existing

regulations dictate the reasonableness of those

expectations in every instance, then the State wields

far too much power to redefine property rights upon

passage of title.” (O’Connor, J., concurring)). With

these principles in mind, Murr explained that courts

must consider more than the regulatory environment

to “determine whether reasonable expectations about

property ownership would lead a landowner to

anticipate that [the anticipated use may be allowed].”

137 S. Ct. at 1945.

The decision below plainly conflicts with the

principles recognized by Murr, Taheo-Sierra, and

Palazzolo by giving the mere existence of a regulation

determinative force without regard to the other Penn

Central factors. Indeed, the per se nature of the

Federal Circuit’s expectations rule flouts the careful

analysis envisioned by Tahoe-Sierra and Murr by

absolving the government of its obligation to justify a

regulation that outright prohibits any use of a

passenger terminal located at an airfield otherwise

regulated for commercial air travel.

15

C. The Question Whether Any One Penn

Central Factor Can Dispose of a

Takings Claim Is Subject to a

Deep Split of Authority

The lack of guidance from this Court regarding

regulations in effect at the time an owner takes title

to his or her property, when combined with the conflict

between Ruckelshaus and this Court’s post-Palazzolo

case law, has given rise to an irreconcilable split of

authority among the lower federal courts. Karen M.

Brunner, Note, A Missed Opportunity: Palazzolo v.

Rhode Island Leaves Investment-Backed Expectations

Unclear As Ever, 25 Hamline L. Rev. 117, 146 (2001)

(noting the difficulty courts have evaluating an

owner’s investment-backed expectations against a

backdrop of regulation); see also 1256 Hertel Ave.

Assocs., LLC v. Calloway, 761 F.3d 252, 266 n.10 (2d

Cir. 2014) (This Court has not “clarified how long a

legislative enactment must remain in force before it

becomes . . . sufficiently embedded in a state’s legal

tradition that it defines property holders’ rights and

investment-backed expectations.”).

All too often, in the absence of guidance, courts

give excessive weight to a regulation in place at the

time of purchase. Columbia Venture, LLC v. Richland

Cty., 413 S.C. 423, 449 (2015), to the extent that many

jurisdictions simply readopt the notice rule

repudiated by Palazzolo. See, e.g., In the Matter of

Thaw, 769 F.3d 366, 371–72 (5th Cir. 2014) (holding

that Palazzolo is a “narrow exception” and does not

apply where a purchaser has actual knowledge of

restrictions on property); see also Guggenheim v. City

of Goleta, 638 F.3d 1111, 1121–22 (9th Cir. 2010)

(holding that a post-enactment purchaser lacked

16

standing to being a takings claim because “whatever

unfairness . . . might have been imposed by [the

regulation], it was imposed long ago, on someone

earlier in the . . . chain of title”); Prosser v. Kennedy

Enterprises, Inc., 342 Mont. 209, 214 (2008) (“[A] party

cannot complain regarding alleged diminution in

value caused by a government action when she

purchased the property after the government

action.”); Matter of Gazza v. New York State Dep’t of

Envtl. Conservation, 89 N.Y.2d 603, 615 (1997)

(holding that a plaintiff must show “an absolute right

to build on his land without a variance” to advance a

takings claim). The Texas courts, by contrast, simply

hold that “no single Penn Central factor is

determinative; all three must be evaluated together,

as well as any other relevant considerations.”

Edwards Aquifer Auth. v. Day, 369 S.W.3d 814, 840

(Tex. 2012); see also Edwards Aquifer Auth. v. Bragg,

421 S.W.3d 118, 139 (Tex. Ct. App. 2013).

The Federal Circuit, meanwhile, is all over the

map on this question. The decision below marks one

extreme, holding that an owner’s expectations are

defined by all regulations in effect at the time of

acquisition. Pet. App. 22. Other decisions hold that,

“[w]hile evaluation of the Penn Central factors ‘is

essentially an “ad hoc, factual” inquiry,’ it is possible

for a single factor to have such force that it disposes of

the whole takings claim.” Mehaffy v. United States,

499 F. App’x 18, 22 (Fed. Cir. 2012). And still other

decisions require courts to go beyond the mere

existence of a regulatory restriction and evaluate

multiple sub-factors related to the reasonableness of

an owner’s investment-backed expectations. Appolo

Fuels, Inc. v. United States, 381 F.3d 1338, 1349 (Fed.

Cir. 2004).

17

This deep and irreconcilable split of authority

cannot be resolved without this Court’s clarification.

II

THE FEDERAL CIRCUIT’S DECISION IS

CONTRARY TO LUCAS AND CONFLICTS WITH

THE DECISIONS OF OTHER FEDERAL AND

STATE APPELLATE COURTS

The Federal Circuit’s alternative conclusion that

Love Terminal was not entitled to compensation for a

total regulatory taking conflicts with this Court’s

regulatory takings case law. Lucas holds the

government categorically liable for a taking if it

imposes a regulation that deprives an owner of “‘all

economically beneficial us[e]’ of her property.” 505

U.S. at 1019. Indeed, Lucas plainly commands that

“total regulatory takings must be compensated,”

without the need to engage in the type of “case-specific

inquiry” appropriate in a Penn Central claim. Lucas,

505 U.S. at 1019 n.8, 1026; see also Lingle, 544 U.S. at

528 (Lucas established a “per se” rule).

The Federal Circuit, however, held that Love

Terminal was required to first satisfy Penn Central’s

expectations inquiry in order to advance its Lucas

claim. Pet. App. 22. Thus, despite acknowledging that

WARA barred all economically viable use of the

airport property, the Federal Circuit held that the

regulation did not result in a compensable taking

based solely on its objectionable formulation of the

expectations factor.

There is no basis in this Court’s case law for courts

to consider any of the Penn Central factors when

evaluating a categorical total taking. Indeed, Penn

Central and Lucas are premised on very different

18

considerations. The Penn Central decision responds to

the maxim that a property regulation is presumed to

“adjust[] the benefits and burdens of economic life . . .

in a manner that secures an average reciprocity of

advantage to everyone concerned.” Lucas, 505 U.S. at

1017–18 (internal quotation marks omitted).

Accordingly, Penn Central directs the courts to

balance several case-specific factors in order to

determine “the actual burden imposed on property

rights, [] how that burden is allocated, [and] when

justice might require that the burden be spread

among taxpayers through the payment of

compensation.” Lingle, 544 U.S. at 543.

Lucas, by contrast, is premised on the recognition

that a regulation can have such a severe impact on

property “that its effect is tantamount to a direct

appropriation or ouster.” 6 Lingle, 544 U.S. at 537; see

also Lucas, 505 U.S. at 1017 (A “total deprivation of

beneficial use is, from the landowner’s point of view,

the equivalent of a physical appropriation.”). The

competing interests considered by Penn Central’s

balancing test are simply not at issue “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.” Lucas,

505 U.S. at 1019. Thus, the Penn Central factors “do[]

not apply to the relatively rare situations where the

government has deprived a landowner of all

6 Lucas emphasized this point by comparing a deprivation of all

beneficial use to a regulation that compels a physical taking,

wherein the government will also be held categorically liable “no

matter how minute the intrusion, and no matter how weighty the

public purpose behind it.” 505 U.S. at 1015 (citing Loretto, 458

U.S. at 435–40).

19

economically beneficial uses.” Lucas, 505 U.S. at

1017–18. The Federal Circuit’s decision to require

that Love Terminal satisfy a single Penn Central

factor in order to advance its Lucas claim undermines

this Court’s careful and purposeful distinction

between those categories of takings claims.

Review is additionally warranted because there is

tremendous confusion among the lower federal and

state courts as to how courts should apply Lucas in

practice. See Pet. App. 22 n.6 (“We note that there

appears to be conflict between circuits as to whether

reasonable, investment-backed expectations are

relevant to the Lucas analysis.”); see also Carole

Necole Brown & Dwight M. Merriam, On the TwentyFifth Anniversary of Lucas: Making or Breaking the

Takings Claim, 102 Iowa L. Rev. 1847, 1858–59 (2017)

(discussing the confusion between Lucas and Penn

Central tests).

The Federal Circuit, itself, is deeply conflicted on

this question. The Federal Circuit first addressed this

issue in Loveladies Harbor, Inc. v. United States, 28

F.3d 1171 (Fed. Cir. 1994). There, the court opined

that Lucas intended only to eliminate the

substantially advances a legitimate government

interest inquiry from the total takings test. Id. at

1179. The Federal Circuit followed suit in Good v.

United States, opining that Lucas did not actually

intend to displace the multifactorial Penn Central test

when it created the total takings test. 189 F.3d at

1363. A year later, however, a different panel of the

court rejected both Loveladies and Good, holding

instead that, if a land use restriction amounts to a

categorical taking under Lucas, the property owner is

entitled to a recovery “without regard to the nature of

20

the owner’s initial investment-backed expectations.”

Palm Beach Isles Assocs. v. United States, 231 F.3d

1354, 1358–61, 1364 (Fed. Cir. 2000); see also Lost

Tree Vill. Corp. v. United States, 787 F.3d 1111, 1115

(Fed. Cir. 2015) (Courts must not “consider[] . . . the

landowner’s investment-backed expectations” when

adjudicating a claim of an alleged total taking.”); Rith

Energy, Inc. v. United States, 247 F.3d 1355, 1362

(Fed. Cir. 2001) (“[A] categorical taking . . . does not

require an inquiry into whether the plaintiff had

reasonable investment-backed expectations that were

defeated by the regulatory measure that gave rise to

the takings claim.”).

Loveladies and Good, however, remain on the

books and continue to be cited for the proposition that

Lucas did not create a categorical rule because a

decision of one panel “cannot be overruled by a

subsequent decision of the Federal Circuit absent en

banc consideration.” Cane Tennessee, Inc. v. United

States, 62 Fed. Cl. 703, 712 (2004); see also, e.g., Fla.

Dep’t of Env. Prot. v. Burgess, 772 So. 2d 540 (Fla. 1st

DCA 2000) (relying on Loveladies and Good); Westside

Quik Shop, Inc. v. Stewart, 341 S.C. 297, 534 S.E.2d

270 (2000) (following Good); McQueen v. S.C. Coastal

Council, 329 S.C. 588, 605 (Ct. App. 1998) (following

Loveladies), rev’d, 340 S.C. 65, 530 S.E.2d 628 (2000),

cert. granted, judgment vacated sub nom. McQueen v.

Dep’t of Health & Envtl. Control, 533 U.S. 943 (2001);

Moore v. United States, 943 F. Supp. 603, 610 (E.D.

Va. 1996) (following Loveladies).

This split of authority reaches far beyond the

Federal Circuit. Massachusetts, for example, requires

that courts consider several “pre-Lucas principles”

before applying the categorical rule. Zanghi v. Bd. of

21

Appeals of Bedford, 61 Mass. App. Ct. 82, 87 (2004)

(court must determine several pre-Lucas questions,

including “(i) the validity of the by-law as applied to

[the] property; (ii) [the owner’s] reasonable

investment-backed expectations; (iii) the economic

impact on [the] property; and (iv) the character of the

governmental action”). Minnesota, too, requires that

owners demonstrate reasonable expectations before

the courts will apply the Lucas test. Zeman v. City of

Minneapolis, 552 N.W.2d 548, 553 n.4 (Minn. 1996).

And the Eleventh Circuit holds that courts must first

determine “the extent to which the regulation has

interfered with investment-backed expectations” in

order to “resolve the question of whether the

landowner has been denied all or substantially all

economically viable use of his property.” Reahard v.

Lee Cty., 968 F.2d 1131, 1136 (11th Cir. 1992).

Other federal and state courts disagree, holding

that investment-backed expectations are not a proper

part of the total takings analysis. See, e.g., Anderson

v. Charter Twp., 266 F.3d 487, 493 (6th Cir. 2001);

Clay County v. Harley & Susie Bogue, Inc., 988 S.W.2d

102, 106–07 (Mo. Ct. App. 1999); Dodd v. Hood River

County, 136 F.3d 1219, 1228 (9th Cir.), cert. denied,

119 S. Ct. 278 (1998); Adams Outdoor Advertising v.

City of East Lansing, 591 N.W.2d 404, 411–12 (Mich.

Ct. App. 1998), K & K Constr., Inc. v. Department of

Natural Resources, 456 Mich. 570, 576, cert. denied,

119 S. Ct. 60 (1998); Bormann v. Board of Supervisors,

584 N.W.2d 309, 316 (Iowa 1998), cert. denied, 119 S.

Ct. 1096 (1999); Kavanau v. Santa Monica Rent

Control Bd., 941 P.2d 851, 860 (Cal. 1997); Del Monte

Dunes at Monterey, Ltd. v. City of Monterey, 95 F.3d

1422, 1432 (9th Cir. 1996), aff’d, 526 U.S. 687 (1999);

Chioffi v. City of Winooski, 165 Vt. 37, 42 (1996);

22

Guimont v. City of Seattle, 896 P.2d 70, 76 (Wash. Ct.

App. 1995); Central Colo. Water Conservancy Dist. v.

Simpson, 877 P.2d 335, 346–47 (Colo. 1994);

Anchorage v. Sandberg, 861 P.2d 554, 557 (Alaska

1993); Woodbury Place Partners v. City of Woodbury,

492 N.W.2d 258, 260 (Minn. Ct. App. 1992).

This split of authority is deeply entrenched and

cannot be resolved without this Court’s guidance.

23

CONCLUSION

The clear goal of this Court’s takings

jurisprudence is to prevent the government from overregulating without compensating the landowner,

because the Takings Clause “bar[s] 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 v. United States,

364 U.S. 40, 49 (1960). That principle should not be

twisted to allow the government to avoid liability by

enacting the most restrictive regulations possible. But

the Federal Circuit decision below encourages the

government to do exactly that, creating numerous

conflicts with decisions of this Court and other federal

and state courts. PLF urges this Court to grant the

Petition for Writ of Certiorari.

DATED: March, 2019.

Respectfully submitted,

BRIAN T. HODGES

Pacific Legal Foundation

255 S. King Street

Seattle, Washington 98134

Telephone: (916) 419-7111

Email: BTH@pacificlegal.org

Counsel for Amicus Curiae Pacific Legal Foundation