Amicus Curiae Brief — Palazzolo v. Rhode Island

Supreme Court, U.S.

FILED

vol 24 2 7 Ov 24 2900

No. 99-2047

K

In the Supreme Court of the Gni tates

ANTHONY PALAZZOLO, Petitioner,

Vv.

RHODE ISLAND ex rel. PAUL K. TAVARES, AND

COASTAL RESOURCES MANAGEMENT COUNCIL,

Respondents.

On Writ Of Certiorari To The

Supreme Court of Rhode Island

BRIEF AMICUS CURIAE OF THE AMERICAN

FARM BUREAU FEDERATION AND RHODE

ISLAND FARM BUREAU IN SUPPORT OF

PETITIONER

JOHN J. RADEMACHER TIMOTHY S. BISHOP

General Counsel Counsel of Record

American Farm Bureau JEFFREY W. SARLES

Federation STEFFEN N. JOHNSON

225 Touhy Avenue Mayer, Brown & Platt

Park Ridge, Illinois 60068 190 South LaSalle Street

(847) 685-8600 Chicago, Illinois 60603

(312) 782-0600

JOHN J. KUPA

The Meadows Professional

Office Building

1130 Ten Rod Road

North Kingstown, Rhode Island 02852

(401) 294-5566

Counsel for the Amici Curiae

QUESTIONS PRESENTED

1. Whether a regulatory taking is categorically barred

whenever the enactment of the regulation predates the

claimant’s acquisition of the property.

2. Where a land-use agency has authoritatively denied a

particular use of property and the owner alleges that such denial

per se constitutes a regulatory taking, whether the owner must

file additional applications seeking permission for “less

ambitious uses” in order to ripen the takings claim.

3. Whether the remaining permissible uses of regulated

property are economically viable merely because the property

retains a value greater than zero.

TABLE OF CONTENTS

Page

SEED DUOEEEED cc cccccccscscccccccscces i

INTEREST OF THE AMICICURIAE ................ l

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

EE ee 3

I A FORMAL TRANSFER OF PROPERTY

BY OPERATION OF LAW DOES NOT

TRIGGER INQUIRY INTO THE

REASONABLE EXPECTATIONS OF THE

TRANSFEREE IN LIGHT OF THE

REGULATORY REGIME AT THE TIME

EE 6 oie cec ened cgecesenedes 4

Il. PETITIONER’S TAKINGS CLAIMIS RIPE ..... 6

Il. RHODE ISLAND TOOK PETITIONER’S

PROPERTY BY ERASING SUB-

STANTIALLY ALL OF ITS VALUE .......... 7

A. Erasing Substantially All Of A

Property's Value Through Regulation

May Be A Categorical Taking ............ 9

B. As In Physical Takings Cases, A Partial

Regulatory Taking Should Result In At

Least Partial Compensation ............. 13

C. The Consequences Of The Decision

Below Are Absurd And Carry Heavy

acess sekeehheeeheeneeens 15

TABLE OF CONTENTS—Continued

Page

D. Even If The State’s Taking Was Not

Categorical, The Severe Economic

Impact On Mr. Palazzolo Entitles Him

To Just Compensation ..........----+++: 18

20

CONCLUSION ........ cece eee cece eee ween eeeee

iV

TABLE OF AUTHORITIES

Cases: Page:

Andrus v. Allard, 444 U.S. 51 (1979) .............. 4,18

Armstrong v. United States, 364 U.S. 40 (1960) ........ 18

Babbitt v. Sweet Home Chapter of Communities

for a Great Oregon, 515 U.S. 687 (1995) ........... |

Bauman v. Ross, 167 U.S. 548, 573 (1897) .... 2.00.0... 14

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

Pa PI bn ececeehecexesKkécesue passim

Concrete Pipe & Prods., Inc. v. Construction Laborers

Pension Trust, 508 U.S. 602 (1993) .............. 10

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

PP es <cevacaveubhewabeees kceabes 8

Dolan v. City of Tigard, 512 U.S. 374 (1994) ...... passim

Eastern Enters. v. Apfel, 524 U.S. 498 (1998) ......... 19

First English Evangelical Lutheran Church v.

County of Los Angeles, 482 U.S. 304 (1987) ........ 1]

Florida Rock Indus., Inc. v. United States, 18 F.3d

et 11, 12,19

Franklin v. United States, 2000 WL 1665135,

. 8. fe A rr er ae 5, 13

Hodel v. Irving, 481 U.S. 704 (1987) ............. 10, 19

Vv

TABLE OF AUTHORITIES—Continued

Page

Kaiser Aetna v. United States, 444 U.S. 164 (1979) .... 10, 18

Keystone Bituminous Coal Ass'n v. DeBenedictis,

4B0 U.S. STOCIGST) .. ww ccc ccccccccccccceccces 10

Kirby Forest Indus., Inc. v. United States,

of, BY. rere rrr rrr ree 13

Loretto v. Teleprompter Manhattan CATV Corp.,

458 US. GID (IDEA) . ow cc ccc cccccccccecvscess 15

Loveladies Harbor, Inc. v. United States,

28 F.3d 1171 (Fed. Cir. 1994) ............----55- 12

Lucas v. South Carolina Coastal Council,

$05 U.S. 1003 (1992) ... 2... cece eee eeeeenee passim

Nollan v. California Coastal Comm'n,

483 U.S. B25 (ISDST) . nw cece ccc c cc cceneess passim

Palm Beach Isles Assocs. v. United States, 208 F.3d 1374

(Fed. Cir. 2000), modified on panel rhg., sub nom.

Franklin v. United States, 2000 WL 1665135 (Fed. Cir.

ae > eee rr ee 5

Penn Central Transp. Corp. v. New York City,

43B US. 106 CIDE) . 0. occ cc ccccccccsccecsces 4,17

Pennell v. City of San Jose, 485 U.S. 1 (1988) .......-. 10

Pennsylvania Coal Co. v. Mahon,

DEDUD. THB CITED 2c cccccccsccvcccsccccess 11,19

vi

TABLE OF AUTHORITIES—Continued

Page

Pumpelly v. Green Bay & Miss. Canal Co., 80 US.

Pa SIN 64 bduteuGeneunnceuecdueee 13

San Diego Gas & Elec. Co. v. City of San Diego,

Po ckdbuvisesdicabesdonceans 14

Solid Waste Agency of Northern Cook County v.

United States Army Corps of Engineers, No. 99-1178 ... 1

Suitum v. Tahoe Regional Planning Agency,

PEE ecu Ne del ershccdunes ots 1, 7, 10

United States v. Causby, 328 U.S. 256 (1946) ......... 15

United States v. General Motors Corp., 323 U.S. 373

EOE: Ree PC Alain Mere rete srt ROM Gn Pe cele 12

United States v. Pewee Coal Co., 341 U.S. 114(1951) .... 13

United States v. Security Indus. Bank, 459 U.S. 70

SRC 635 bes ok cyUheie db uee cians ienecneawce 17

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

er ae CD oo ad's a eid on 0 Ch ikes ec euducee 18

Williamson County Reg 'l Planning Comm'n vy.

Hamilton Bank, 473 U.S. 172 (1985) .............. 10

Yancey v. United States, 915 F.2d 1534 (Fed. Cir. 1990) ... 19

Vil

TABLE OF AUTHORITIES—Continued

Page

Miscellaneous:

FEDERALIST No. 10 (C. Rossiter ed. 1961) ...........-. 8

FEDERALIST No. 54 (C. Rossiter ed. 1961) ............. 9

J. Lewts, A TREATISE ON THE LAW OF EMINENT

DOMAIN § 55 (1888) .....-- 6. ce eee eee eee eee 12

McConnell, Contract Rights and Property Rights,

TE Cas. ©. BEV. FOF CUSSED oc ccc cctcccccccvcsecces 8

J. NEDELSKY, PRIVATE PROPERTY AND THE

LIMITS OF AMERICAN CONSTITUTIONALISM (1990) ..... 8

Rose, Mahon Reconstructed: Why the Takings Issue

is Still a Muddle, 57 S. CAL. L. REV. 561 (1984) ...... 17

ae eee ee ee

ee ee eee

INTEREST OF THE AMICI CURIAE'

The American Farm Bureau Federation (“AFBF’”) was

established in 1920 to protect, promote, and represent the

business, economic, social, and educational interests of American

farmers and ranchers. AFBF has member organizations in all 50

states and Puerto Rico, representing more than 4.9 million member

families. AFBF’s farmer and rancher members own or lease

significant amounts of land, on which they depend for their

livelihoods and on which all Americans depend for high quality,

affordable food and other basic necessities. Because that land is

subject to increasingly onerous regulation from all levels of

government—-such as the state wetlands regulation at issue in this

case—AFBF and its members are vitally interested in the legal

rules establishing the availability of compensation under the

Takings Clause when regulation goes too far. Accordingly, AFBF

has participated as an amicus in this Court in support of

landowners in takings cases such as Lucas v. South Carolina

Coastal Council, 505 U.S. 1003 (1992), Dolan v. City of Tigard,

512 U.S. 374 (1994), Suitum v. Tahoe Regional Planning Agency,

520 U.S. 725 (1997), and City of Monterey v. Del Monte Dunes,

Ltd., 526 U.S. 687 (1999), as well as in cases concerning the

permissible scope of federal land use regulation such as Babbitt v.

Sweet Home Chapter of Communities for a Great Oregon, 515

U.S. 687 (1995), and Solid Waste Agency of Northern Cook

County v. United States Army Corps of Engineers, No. 99-1178.

The Rhode Island Farm Bureau (“RIFB”) is a voluntary, non-

profit organization with 2800 members which advocates for those

involved in Rhode Island agriculture and rural living. It is the

policy of RIFB, adopted by vote of its members, “to protect the

right of private owners in questions concerning the use of private

' This brief was not written in whole or in part by any party and no

one other than the amici made a monetary contribution to its

preparation. The written consents of the parties to the filing of this

brief have been filed with the clerk.

>

property for the public good. That mght shall be a just

compensation for use taken.”

Because the land of many of Rhode Island’s commercial

farmers abuts Narragansett Bay, Rhode Island Sound, or the tidal

Sakonnet River, farmers generally must obtain a permit from

respondent Coastal Resource Management Council (“CRMC”)

before they can make full use of their land. RIFB has been active

in attempting to constrain CRMC’s powers through legislation and

in seeking to protect Rhode Island's farm community by

advocating state takings legislation-—ultimately without success.

As the opportunity to make a moderate living trom agriculture 1s

diminishing, farmers need the protection of the Fifth Amendment

and the federal courts if they are to find economically feasible

ways to use their land and remain in the agnicultural business.

SUMMARY OF ARGUMENT

This case presents three issues of great Importance to AFBF,

RIFB. and their members. First, farmers and ranchers are

threatened by formalistic rules that measure “investment backed

expectations” as at the time of a transfer of property that occurs by

operation of law—here, the 1978 transter from petitioner Anthony

Palazzolo’s single-shareholder corporation to Palazzolo in his

personal capacity when Rhode Island revoked his corporation's

charter—or that otherwise do not occur as the result of an arms-

length sale. Farm and ranch properties often are owned and

worked by the same family for generations facilitated by

transfers among individuals, family corporations, and family

partnerships. Those sorts of bequests and formal transfers—stll

less involuntary transfers by operation of law like that involved

here —should have no substantive effect at all on determining a

landowner’s reasonable investment backed expectations.

Second, ripeness rules that require landowners to retum

repeatedly to regulating agencies with more and more limited and

3

less and less economically viable plans encourage gamesmanship

on the part of regulators aware that they can delay or avoid a

takings claim by dragging out the administrative process in this

way. See City of Monterey, 526 U.S. 687. Such rules especially

threaten the nghts of farmers and ranchers, who generally lack the

hnancial resources to engage in extended administrative

proceedings.

| In this brief, however, AFBF and RIFB focus pnmanily on a

third issue of tremendous importance to America’s farmers and

ranchers—whether the mere fact that land retains some relatively

small value and use after regulation is imposed prevents the

occurrence of a compensable taking as a matter of law. If the Just

C ompensation Clause is not to be gutted of virtually all practical

meaning—and if government regulators are to be restrained at all

by that Clause—the answer to that question must be “no.” On any

plausible theory of takings, the destruction of almost all the value

and use of land is compensable even though some minimal value

and use remains. Otherwise regulators will be free to take property

from individuals to benefit the public at large, free of any

obligation to compensate, by the simple expedient of leaving de

minimis value and use for the land or even—as in this case—for

just a small and distinct segment of the land. If petitioner’s land

has not been taken, merely because a small part of it supposedly

retains some economic use, no farmer or rancher is safe from

huge, uncompensated regulatory burdens in the name of the public

good. That is not what the Framers of the Bill of Rights

contemplated.

ARGUMENT

Betore focusing on the third question presented bv the

eee a taking may occur where regulation leaves

some relatively small value and use in the property—amici ve

. . ry

briefly address why this Court should reach that issue. Neither of

the Rhode Island Supreme Court’s other grounds for rejecting

4

petitioner's takings claim—grounds that are the subject of the first

two questions presented—withstands scrutiny.

} MAL TRANSFER OF PROPERTY BY OPER-

: pron OF LAW DOES NOT TRIGGER INQUIRY

INTO THE REASONABLE EXPECTATIONS OF THE

TRANSFEREE IN LIGHT OF THE REGULATORY

REGIME AT THE TIME OF THE TRANSFER.

The Rhode Island Supreme Court erred in attnbuting constitu-

tional importance to the timing of a formalistic, involuntary 1978

transfer of the property in question from petitioner's single-

shareholder corporation to petitioner in his individual capacity.

Petitioner had owned the property in some capacity ever since

1959 and 1960, acquiring another small part of it in 1969. All that

happened in 1978 was that the State revoked the charter of

petitioner’s single-shareholder corporation, which had previously

held title. As the State admits, this revocation had the effect of

“devolf[ ving] title by operation-of-law to Mr. Palazzolo individu-

ally. Br. in Opp. 3. Treating the date of such a formalistic,

involuntary transfer as the appropriate time to determine what

limitations “inhere in the title” to land as a result of “background

principles of the State’s law of property and nuisance under

Lucas, 505 U.S. at 1029, or to determine a landowner’s reasonable

investment-backed expectations under Penn Central Transp. Ci orp.

vy. New York City, 438 U.S. 104, 124 (1978), is inconsistent with

the fairness considerations that inform the Takings C lause. See

Andrus v. Allard, 444 U.S. 51, 65-66 (1979) (the Takings C lause

subjects governmental regulation “to the dictates of ‘justice and

fairmess’”’).

5

Even assuming that the existence of a mere regulatory scheme

is relevant to determining whether a taking has occurred’—and

amici agree with the Federal Circuit that “[t]he existence of a

regulatory regime does not per se preclude all investment-backed

expectations for development” (Franklin v. United States, 2000

WL 1665135, at *11 (Fed. Cir. Nov. 3, 2000) (emphasis

added))}—the compensatory purpose of the Takings Clause may

not be evaded by treating formal, insubstantial transfers as

triggering an inquiry into the regulatory scheme in place at the

time of the transfer.

To the contrary, the economic rationale behind looking at the

regulatory scheme in place at the time an owner acquires land in

order to determine the owner’s reasonable investment-backed

expectations is the assumption that the owner discounted the price

he or she paid for the property to take account of regulatory

restrictions on use.’ When the transfer has occurred not as the

,

A regulatory permitting scheme that envisages agency

decisionmaking particular to a parcel of land—such as Clean Water

Act Section 404 permitting or Endangered Species Act “incidental

take” permitting related to proposed habitat modification—is

different in kind from a legal limitation on title that runs with the

property, such as a negative easement or navigational servitude (see

Palm Beach Isles Assocs. v. United States, 208 F.3d 1374, 1385 (Fed.

Cir. 2000)), and from limitations on use that flow from state nuisance

law. This court has never held that a mere permitting scheme—a

scheme that assumes a permit may be granted—operates as a

restriction on title or is analogous to a nuisance prohibition.

> It follows that when a rational purchaser would not discount the

price paid, or would discount only minimally, because a regulatory

scheme usually does not interfere with productive use of the

land—for example, the U.S. Army Corps of Engineers claims that it

permits landowners to fill wetlands on their property in more than

85% of all cases governed by Section 404—that regulatory scheme

6

result of an arms-length sale but as the result of an involuntary

transfer by operation of law—or as the result of a bequest to heirs

or an inter-vivos intra-family transfer dnven by estate tax or

operational considerations—it 1s especially clear that the pnor

owners must be understood to have transferred their full property

rights in conveying the” property. Nollan v. California Coastal

Comm'n, 483 U.S. 825, 834 n.2 (1987). Because petitioner s

single-shareholder corporation acquired the property in issue 40

years avo. before his wetlands were regulated either by Rhode

Island or by the federal government, wetlands regulatory schemes

are simply irrelevant to determining the scope of petitioner's

property interest or investment-backed expectations.

Il. PETITIONER’S TAKINGS CLAIM IS RIPE.

Petitioner applied to the state no fewer than tou: times to fill the

wetlands on his property over the course of two decades. CRMC

and its predecessors denied each permit taking five years te do

so in one instance. Pet. App. A-4. In those circumstances, W here

filling the wetlands 1s the necessary precondition for any aconeume

use of petitioner’s property and w hen permission to fill them _

repeatedly been denied in a series of “final decisions,” petitioner

need do no more to nipen his federal takings claim. See City of

Monterey, 526 U.S. at 698 (no question takings claim was npe

where municipality put a developer through “five years, Sve

formal [plan rejections], and 19 different site plans ), ¢ ooley v.

United States, 46 Fed. Cl. 538, 540 (2000) (takings claim npe

where U.S. Army Corps had once denied landowner a Section 404

fill permit, and was not “unnpened” by € orps demands wee

plaintiff submit a renewed application seeking less fill). omen

agree with the Court of Federal Claims that “[f]rom eee

(a] denial [is] signed, the nght to compensation vest[s]."” Cooley,

should have no relevance at all to determining the purchaser's

reasonable investment-backed expectations.

5

46 Fed. Cl. at 548-549. But even if reapplication is required,

petitioner more than satisfied that requirement here.

Any doubt about the ripeness of petitioner’s takings claim is in

any event conclusively resolved by his unrebutted testimony, as

found by the trial court, that “CRMC informed him that any

proposal involving the filling of wetlands would be denied.” Pet.

App. B-5. See Suitum, 520 U.S. at 739 (claim is ripe where “there

[is] no question * * * about how the regulations at issue apply to

the particular land in question’).

III. RHODE ISLAND TOOK PETITIONER’S PROP-

ERTY BY ERASING SUBSTANTIALLY ALL OF

ITS VALUE.

The Rhode Island Supreme Court’s ruling that Mr. Palazzolo

retains “beneficial use” of his property is refuted by its own

opinion. His property consists of 18 acres of wetlands and “no

more than a few additional upland acres.” Pet. App. A-3 n.1. The

CRMC precluded him from filling the 18 acres of wetlands.

effectively conscnipting the bulk of his property to serve as “‘a

refuge and feeding ground for fish, shellfish, and birds” and as a

“buffer for flooding.” Pet. App. A-3. As a result, petitioner must

leave most of his land in an undeveloped state and forgo the

opportunity to build the 74 single-family homes for which the land

is subdivided—or, indeed, to make any other productive use of his

wetland acres. Nevertheless, based on estimates that the uplands

piece would be worth $200,000 ifdeveloped and that Mr. Palazzo-

lo can obtain another $157,500 by donating the wetlands “as an

open space gift,” the court below held that his land retains enough

value to prevent the CRMC’s action from being a categonical

taking.

As an initial matter, the record is less than clear as to how much

value, if any, remains in Mr. Palazzolo’s land. The purported

$200,000 figure represents the value of one single-family house

8

that the CRMC concluded could be built on the upland asian

Mr. Palazzolo’s land. Pet. 14; Br. in Opp. 19. That figure me wea

appear to account for any of the costs that petitioner ore di

to incur to develop the upland segment, and the commen oe

does not explain how building and marketing a single- = wd

house surrounded by 18 acres of marshes and swamps —_ ="

economically feasible. Moreover, the nominal amount that ~~ .

available for donated land bears no relation to the land's aa -

cial value. See Del Monte Dunes, Ltd. v. City of Monterey, on

1422, 1432 (9th Cir. 1996) (Gury could properly conclude 7

City’s permit denial left property owner without an econom a" rw

viable use” despite sale of property to the State of C aliformia

$800,000), aff'd, 526 U.S. 687 (1999).

In any event, even the figures used by the court iow one

that Rhode Island has taken “substantially all of the value o — ;

Palazzolo’s land. If his land retains $357,000 in total rye ‘

suffered an 89 percent diminution in value from the $3.1 5 a : :

that he would have reaped from the planned development . “ee

property. The Takings Clause was intended to protect wen : =

owners of private property from bearing such a heavy _— oe

vovernment actions directed to the general public good. a

why it does not say: “Nor shall private property be taken for - nn

use, without just compensation, unless the property Penge oo

value.” And the italicized phrase cannot reasonably be read 1

the Clause consistent with the Framers’ intentions.

“{Pjrotection of private property was a , an ogee

intention among the founding generation. Leos —_ > oa ~ ;

Rights and Property Rights, 76 CAL. L.REY. aer.¢ . ~— tree

Framers viewed the protection of property nm ghts, an son ‘ “4

rights in land, as “the first object of government. FUnenALs -

10, at 78 (Madison) (C. Rossiter ed. 1961 ). That conv a

on the Framers’ understanding that private pupany canes —

“the clear, compelling, even defining, instance of gto

private nghts place on legitimate government.” J. NEDELSKY,

te

9

PRIVATE PROPERTY AND THE LIMITS OF AMERICAN

CONSTITUTIONALISM 9 (1990). Indeed. they understood govem-

ment to be “instituted no less for protection of the property than of

the persons of individuals.” FEDERALIST No. 54, supra, at 339

(Madison). Hence, the Takings Clause, a bulwark against arbitrary

rule that fosters respect for individuals and their nght to use and

reap the benefits of their property, is fundamental to our constitu-

tional order. As this Court has emphasized, there is “no reason

why the Takings Clause of the Fifth Amendment. as much a part

of the Bill of Rights as the First Amendment or Fourth Amend-

ment, should be relegated to the status of a poor relation.” Dolan

Vv. City of Tigard, 512 U.S. 374, 392 (1994).

The decision below takes the heart out of the Takings Clause.

It allows the government to transform pnvate land into a wildlife

refuge by decree, and, even worse, to avoid compensating the

landowner simply by leaving him a smidgeon of property to

develop. That distortion of the Takings Clause, and of this Court's

takings cases, is an invitation to gamesmanship on the part of

regulators and completely at odds with the constitutiona| guaran-

tees of liberty and faimess on which our polity rests.

A. Erasing Substantially All Of A Property's Value

Through Regulation May Be A Categorical Taking.

The standard applied by the Rhode Island Supreme Court,

requinng that a challenged regulation leave the subject property

with no value whatsoever to be a candidate for a categorical

taking, represents an extremist and unjustifiable reading of this

Court's precedents. In particular, the court below misread Lucas

Vv. South Carolina Coastal Council, 505 U.S. 1003 (1992). In

Lucas, this Court recognized that a regulation that deprives land of

“all economically beneficial or productive use” may effect a

categorical taking. The court below focused solely on the words

all and use, ignoring this Court’s clear command that compensa-

tion be paid unless the regulated property retains economically

10

heneficial or productive use. This Court has never required

deprivation of “all use” or “all value” for a categoncal takings

claim, instead using such formulations as “economically viable

use. “economically feasible use,”* and “economically beneficial

use.”* By failing to give effect or meaning to the modifiers this

Court has attached to “use,” the decision below deviated from this

Court’s categorical taking standard and from the mandate of the

Takings Clause.

Those modifiers counsel a practical approach to measuring the

deprivation of a property's economic value. The holding

below—that a categorical taking is always precluded unless all

value is removed from every square inch of land—cannot be

reconciled with this Court’s insistence that the categorical takings

test comport with economic reality. Such a practical approach is

reflected in Lucas, where this Court recognized that “requiring

land to be left substantially in its natural state” may deprive the

land of “all economically beneficial or productive use” and thus be

a categorical taking. 505 U.S. at 1015 (emphasis added). See also

Kaiser Aetna v. United States, 444 U.S. 164, 180(1979)(compen-

sation is appropriate where the impact of regulation is more than

“an insubstantial devaluation of petitioners’ private property’).

This emphasis on substantiality reflects this Court’s practical

perspective and refusal to elevate form over substance when

* Eg. Del Monte Dunes, 526 U.S. at 720, Suitum, 520 U.S. at 736

n.10: Dolan, 512 US. at 385; Pennell v. City of San Jose, 485 US.

1. 18 (1988); Nollan, 483 U.S. at 834; Keystone Bituminous Coal

Ass'n v. DeBenedictis, 480 U.S. 470, 495 (1987).

> Eg, Lucas, 505 US. at 1016 n.7; Williamson County Reg 'l

Planning Comm'n Vv. Hamilton Bank, 473 U.S. 172, 191 (1985).

° Eg, Dolan, 512 U.S. at 385 n.6; Concrete Pipe & Prods., Ime. v.

Construction Laborers Pension Trust, 508 U.S. 602, 643 (1993);

Lucas. 505 U.S. at 1016; Hodel v. Indiana, 452 US. 314, 335 (1981).

— ——_— »

— the economic impact of governmental regulations. See

, * ag a a Evangelical Lutheran Church v. County of Los

Angeles, 482 U.S. 304, 318 (1987) (denying that ter

takings are “different in kind” from sonal —

ake Justice Holmes noted in Pennsylvania Coal Co. v. Mahon

260 U.S. 393, 414 (1922), when a regulation has so diminished 2

aoe . ght as to render its exercise “commercially impractica-

won imitation “has very nearly the same effect for constitu-

al Purposes as appropriating or destroying it.” Accordingly, an

~ ry into whether purported uses are commercially practicable

re purported value realistically attainable is antecedent to an

ctermination that regulated land retains value. If the 4

—— attainable, a categorical bar to a uaeied the

[ - is unwarranted. See Florida Rock Indus.. Inc. v. United

ates, 18 F.3d 1560, 1571 (Fed. Cir. 1994) (“alternative itted

activities” must be “economically realistic” and “realistical

pee ). This approach, amici believe, also would address the

on ae concem expressed by Justice Stevens in Lucas

. nsk of arbitrariness where “{a] landowner who

property is diminished in value 95% recovers nothing, while a

owner whose property is diminished 100%

alue.” /o recovers the land’s fu

value. 505 U.S. at 1064 (Stevens, J., dissenting). as

. ae by the court below is hard-wired to

atically reject any claim that a property regulation is

categoncal taking. A court can always find some conceivabl :

of property. In Lucas, Justice Blackmun in dissent iene a

—_—~ s conclusion that Lucas’ property had lost all sniatie

= _ Paces certainly erroneous” because Lucas could still

: — y z en of ownership, such as the nght to exclude

chr aes the land, and he could continue to “picnic,

= ‘ ron : a tent, or live on the property in a moveable

liane sets oe 044. “7 the Court did not adopt Justice

eatin diy entail

are sufficient to defeat a categorical iaeedan He cae

12 =

Mr. Palazzolo can build and sell a house or erect an observation

booth that attracts nature lovers, these are not reasonable economic

uses of the 20 acre-plus parcel. At best, they create de minimis

requirements for a categorical regulatory taking by, at a minimum

making clear that courts must engage in a realistic analysis of

whether the government has effectively deprived an owner of

value that bears no comparison to the real commercial value of the

land. See Loveladies Harbor, Inc. v. United States, 28 F.3d 1171,

1181-1182 (Fed. Cir. 1994) (where permit denial left relevant

parcel with only “de minimis” value, there was “a total taking”).

The court below failed to recognize that leaving Mr. Palazzolo

with “ownership” of land with little or no nght to use it destroys

his property interest. Ownership of property is a “bundle of nghts”

(Dolan, 512 U.S. at 393) that includes “the right to possess, use

and dispose of it.” United States v. General Motors Corp., 323

US. 373, 377-378 (1945); see also J. Lewis, A TREATISE ON THE

LAW OF EMINENT DOMAIN § 55, at 43 (1888) (“The dullest

individual among the people knows and understands that his

property in anything is a bundle of nghts,” including “the nght to

use a thing in this way or that”). The Rhode Island Supreme

Courts’ decision treats the abrogation of one stick in that bun-

dle—petitioner’s choice as to how to use his land— as

noncompensable. But the night to make “productive improve-

ments” is an “essential use” of land. Lucas, 505 U.S. at 1031; see

also Nollan, 483 U.S. at 833 n.2 (recognizing that “the nght to

build on one’s own property” is part of the property night). And

abrogation of the use stick destroys, in economic terms, the entire

bundle. By rendering Mr. Palazzolo’s property economically

useless, the CRMC has destroyed the essence of his property

rights.

Based on the above principles, the CRMC has categorically

taken Mr. Palazzolo’s land by preventing him from using all but

a small and distinct piece of it and from using any of it in a viable

economic sense. This case is the one forecast in Lucas: Rhode

Island’s regulation of Mr. Palazzolo’s land unquestionably

requires it “to be left substantially in its natural state.” 505 U.S. at

1015. This Court should extinguish any lingering doubts about the

economically beneficial and productive use of his property.

B. As In Physical Takings Cases, A Partial Regulatory

Taking Should Result In At Least Partial Compensa-

tion.

Based on the impact to the property owner, condemnation is

condemnation whether it is traditional or inverse. If the CRMC

had physically invaded Mr. Palazzolo’s land, the taking would be

clear and categorical. See, e.g., United States v. Pewee Coal Co

341 U.S. 114 (1951). The result should be no different where the

invasion is regulatory rather than physical. As this Court has

‘frequently recognized,” a “radical curtailment of a landowner’s

freedom to make use of or ability to derive income from his land

may give rise to a taking within the meaning of the Fifth Amend-

ment, even if the Government has not physically intruded upon the

premises or acquired a legal interest in the property.” Kirby Forest

Indus., Inc. v. United States, 467 U.S. 1, 14 (1984).

Ever since Pumpelly v. Green Bay & Miss. Canal Co., 80 US

(13 Wall.) 166, 177-178 (1872), this Court has instructed that the

government need not physically appropriate property to effect a

taking so long as the practical effect is to deny the owner use of

the property. Thus, regulatory impositions, if sufficiently severe

are the “equivalent of a physical appropriation” and may categori-

cally warrant just compensation. Lucas, 505 U.S. at 1017: see also

Franklin v. United States, 2000 WL 1665135, at *9 (Fed. Cir

Nov. 3, 2000) (regulations may have “the same effect as a physical

seizure and occupation of public purposes—leaving the owner

with essentially no viable economic uses whatever and no nights

except bare legal title’). As Justice Brennan explained, it makes

little difference to the property owner “whether his land is

condemned or flooded, or whether it is restricted by regulation to

14

use in its natural state, if the effect in both cases is to depnve him

of all beneficial use of it.” San Diego Gas & Elec. Co. v. City of

San Diego, 450 U.S. 621, 652 (1981) (Brennan, J., dissenting).

Thus, even though the CRMC would have been obliged to

compensate Mr. Palazzolo if it had formally condemned his

property, and even though to all intents and purposes it Aas

condemned 18 acres of Mr. Palazzolo’s land for use as a wildlife

refuge, the Rhode Island Supreme Court says he gets no compen-

sation. Yet his land is little or no more valuable to him now than

if it had been condemned outnght. Rhode Island should not be

able to circumvent its obligation to pay just compensation by

relying on wetlands instead of condemnation statutes.

The fact that the agency left Mr. Palazzolo with a dry spot on

which to build a solitary house should not alter the legal analysis.

In a formal condemnation, the government could not avoid paying

compensation by seizing all of a house except the bathroom. The

law should be no different when the government seizes most of an

owner’s land by regulation. The lack of any requirement in the

Fifth Amendment that the government eradicate the owner's entire

property interest before paying compensation was not an over-

sight. Everyone at the time, including the Framers, knew that if the

government were to take a portion of Mt. Vernon to build a

military barracks, George Washington would be entitled to

compensation for the value of the portion taken. See Bawman vy.

Ross, 167 US. 548, 573, 575-582 (1897) (discussing states’

historical practice of providing compensation “for taking part of

a parcel of land” by eminent domain). The result should not differ

simply because the governmental purpose is protecting wildlife

and the government wields its regulatory rather than formal

condemnation power.

Traditional property concepts illuminate the substance of the

governmental encroachment here. By refusing to permit Mr.

Palazzolo to make any reasonable economic use of his property,

15

the CRMC has effectively imposed a negative easement on it. See

Dolan, 512 U.S. at 394 (requirement to dedicate public greenway

space amounted to “‘a permanent recreational easement’’); Lucas,

505 U.S. at 1019 (recognizing “the practical equivalence [of]

negative regulation and appropnation”); Nollan, 483 U.S. at 831

(if government “wants an easement across the Nollans’ property,

it must pay for it”). The Takings Clause compels Rhode Island to

fully compensate Mr. Palazzolo for that negative easement. If a

one-half-inch cable across a property owner's roof is a compensa-

ble taking (Loretto v. Teleprompter Manhattan CATV Corp., 458

U.S. 419, 438 (1982)), and the same is true of a narrow public

casement across beachfront property (Nollan, 483 U.S. at 841) and

of government flights over chicken farms (United States v.

Caushy, 328 U.S. 256, 261-262 (1946)), denying compensation

where regulation has rendered land almost completely useless for

all practical purposes defies both common sense and basic justice.

C. The Consequences Of The Decision Below Are Ab-

surd And Carry Heavy Social Costs.

The absolutist position of the Rhode Island Supreme Court

would lead to absurd results. Lucas provides a ready illustration.

This Court held that South Carolina’s refusal to allow Mr. Lucas

to build single-family homes deprived his beachfront property of

all economic value and categoncally effected a taking. But what

if the government had left him free to place a souvenir stand on a

tiny comer of his land? Based on the Rhode Island Supreme

Court’s decision in this case, Mr. Lucas’ property would have

retained some economic value and he would not have suffered a

categorical taking. That cannot be night. If the Lucas decision

hinged on whether he could set up a souvenir stand, government

agencies could too easily circumvent the compensation require-

ment by leaving a small spot on a targeted property free from

otherwise confiscatory regulation.

16

Or suppose that Smith owns 10 acres of land adjacent to Jones’

11 acres, and that a state agency requires 20 acres of wetlands (10

each from Smith and Jones) to remain undeveloped because it

provides habitat for wildlife and includes wetlands. Smith and

Jones each have had 10 acres of land rendered worthless. But if the

Rhode Island Supreme Court is right, the agency categorically

took Smith’s 10 acres but not Jones’ 10 acres. That cannot be the

law if compensation is to be “just,” as the Constitution requires.

The unfairness of the decision below is compounded by the

strategic gamesmanship that it is certain to engender, which would

harm not only individual landowners like Mr. Palazzolo but the

public as a whole. This Court in Lucas recognized that permit

denials of the type at issue are often based on hidden agendas and

not the public good, noting that regulations “requiring land to be

left substantially in its natural state [suggest] that pnvate property

is being pressed into some form of public service under the guise

of mitigating serious public harm.” 505 U.S. at 1018. A rule that

allows government to regulate almost all the value out of an

owner's land without paying compensation 1s bound to encourage

strategic behavior and regulatory overreaching. A city could obtain

parks for free under that approach simply by leaving burdened

owners with tiny remnants of their land. Or an agency seeking to

transform private residentially zoned land into a wildlife refuge,

but unable to obtain voter approval for the large expenditure

required to purchase or formally condemn the land, could accom-

plish its purpose by regulatory fiat, avoiding compensation by

leaving the owner with control over a fragment. If an agency were

free to ride roughshod over the will of the voting public in such

fashion, the Takings Clause would be rendered toothless and

democracy meaningless.

Such a regime also would enable government bureaucrats to

curry favor among property owners by disproportionately directing

the impact of regulations to less favored sectors of the citizenry

without incurring the costs mandated by the Constitution. Govern-

17

ments could reward favored voters by providing amenities without

raising taxes, simply by targeting land use regulations to portions

of the properties of less favored landowners. “{A]djusting the

benefits and burdens of economic life” is one thing (Penn Central

Transp. Co. v. New York City, 438 U.S. 104, 124 (1978)), but

seizing from one and bestowing on another is something else

again. See United States v. Security Indus. Bank, 459 U.S. 70, 78

(1982) (Takings Clause protects against “a general economic

regulation which in effect transfers the property interest from a

private [party] to a private [party]"). In this case, the decision of

the Rhode Island courts that Mr. Palazzolo’s right to compensation

is defeated by the presence of a supposedly developable dry spot

on his land exemplifies the risk of reckless regulation inherent in

its approach.

The holding below, that only 100 percent devaluations can be

categorical takings, also would encourage property owners to

engage in costly and unproductive transactional ploys. For

example, if Mr. Palazzolo had sold off the uplands on his property

to a confederate—or had bought the upland and wetland parcels

separately, with ownership held in separate corporate vehicles—he

would presumably have been eligible, if the Rhode Island

Supreme Court is right, to prosecute a categorical taking claim.

Such transactional maneuvering would be socially costly as well

as individually unjust. See Rose, Mahon Reconstructed: Why the

Takings Issue is Still a Muddle, 57 S. CAL. L. REV. 561, 568

(1984) (warning that misapplication of the Takings Clause “may

cause owners to make elaborate and socially useless splits of their

property nghts”). The Framers did not intend, when they gave

constitutional protection to the ownership of property, to encour-

age games subject to manipulation by the government or property

owners.

To the contrary, the Takings Clause was intended both to guard

against unfair and discriminatory conduct and to discourage

governments from treating private property as a free good and

18

thereby wasting resources. If Rhode Island knows it must pay for

the land it covets for wildlife and flood control, it will have to fully

account for its own resources and those of ali its citizens and

property owners. Such accountable decisionmaking, in addition to

its more general benefits, would comport with the Constitution.

The Takings Clause, after all, subjects governmental regulation

“to the dictates of ‘justice and fairness.” Andrus v. Allard, 444

U.S. 51, 65-66 (1979). However much the government may desire

to leave Mr. Palazzolo’s land wet and undeveloped, there are

“outer limits” to how “laudable” goals may be achieved. Dolan,

512 U.S. at 396. Even “a strong public desire to improve the

public condition is not enough to warrant achieving the desire by

a shorter cut than the constitutional way of paying for the change.”

Pennsylvania Coal, 260 U.S. at 415-416; see also Kaiser Aetna,

444 U.S. at 180 (govemment’s plan to make private pond into

“public aquatic park” required just compensation to pond owner).

In this case, forcing Mr. Palazzolo to forfeit all or almost all the

value of his property to benefit the environment would unconstitu-

tionally force him “alone to bear public burdens which, in all

faimess and justice, should be bore by the public as a whole.”

Armstrong v. United States, 364 U.S. 40, 49 (1960). Reversing the

decision below will permit the Takings Clause to continue to

“stand as a shield against the arbitrary use of governmental

power.” Webb's Fabulous Pharmacies, Inc. v. Bechwith, 449 US.

155, 164 (1980).

D. Even If The State’s Taking Was Not Categorical, The

Severe Economic Impact On Mr. Palazzolo Entitles

Him To Just Compensation.

Based on its faulty “reasonable expectations” ruling (see supra

Part I), the Rhode Island Supreme Court never analyzed the

economic impact on Mr. Palazzolo of the CRMC’s permit denial.

But even if the record were sufficient to establish that Mr.

Palazzolo’s land retains enough value to preclude a categorical

19

taking, the government’s action sufficiently diminished its value

to constitute a taking under this court’s ad hoc approach to takings

analysis, in which economic impact is a critical factor. See, e.g.,

Eastern Enters. v. Apfel, 524 U.S. 498, 523 (1998).

The economic impact on Mr. Palazzolo from being forced to

leave almost all of his land undeveloped is, by any token, signifi-

cant. Before the permit denial, he expected to earn $3,150,000 in

profits from developing his long-subdivided land. A fter the denial,

he can obtain (at most, based on the speculative opinion below)

$357,000. That loss of at least $2.79 million—some 89% of his

projected return—represents an economic impact more than

sufficient to trigger the just compensation requirement. See Dolan,

512 US. at 380 (city’s forced dedication of 10 per cent of peti-

tioner’s land for public recreational use was a taking); Hodel v.

Irving, 481 U.S. 704, 714 (1987) (taking of property interests

worth less than $2000 may have “substantial” economic impact

because “{t]hese are not trivial sums”); Florida Rock, 18 F.3d at

1567-1569 (60% reduction in value of land was enough for a

taking); Yancey v. United States, 915 F.2d 1534, 1543 (Fed. Cir.

1990) (77% diminution in value).

And even if the proper measure of economic impact would

compare any residual value of his land to its fair market value if

filled and awaiting development, the economic impact still would

plainly be very substantial, although determining the precise

amount would require further proceedings below.

Mr. Palazzolo has been trying to develop his property for over

40 years, and he filed this case well over 12 years ago. The slow

pace of takings cases, generally to the advantage of (if not caused

by) the government defendants, unduly obstructs the prosecution

of many valid claims. The authors of the Takings Clause certainly

did not intend the denial of justice by delay, and amici submit that

this case presents an appropnate opportunity for this Court to draw

attention to this widespread problem. Mr. Palazzolo, unlike Mr.

20

Carstone in the Jarndyce case, should obtain any just compensa-

tion to which he is entitled in this lifetime, not “through disposi-

tion by the Lord.” Scales v. United States, 360 U.S. 924, 926

(1959) (Jackson, J.).

CONCLUSION

For the foregoing reasons, the judgment of the Rhode Island

Supreme Court should be reversed.

Respectfully submitted.

JOHN J. RADEMACHER TIMOTHY S. BISHOP

General Counsel Counsel of Record

American Farm Bureau JEFFREY W. SARLES

Federation STEFFEN N. JOHNSON

225 Touhy Avenue Mayer, Brown & Platt

Park Ridge, Illinois 60068 190 South LaSalle Street

(847) 685-8600 Chicago, Illinois 60603

(312) 782-0600

JOHN J. KUPA

The Meadows Professional

Office Building

1130 Ten Rod Road

North Kingstown,

Rhode Island 02852

(401) 294-5566

Counsel for the Amici Curiae

NOVEMBER 2000