Amicus Curiae Brief — Lingle v. Chevron USA Inc.

No. 04-163

In the

Supreme Court of the United States

—>

LINDA LINGLE, Governor of the

State of Hawaii, and MARK J. BENNETT,

Attorney General of the State of Hawaii,

Petitioners,

Vv.

CHEVRON USA, INC..,

Respondent.

+

On Writ of Certiorari to the United States

Court of Appeals for the Ninth Circuit

+

BRIEF AMICUS CURIAE OF PACIFIC

LEGAL FOUNDATION; GENE CASHMAN;

ATHENA SUTSOS; WESTERN MANUFACTURED

HOUSING COMMUNITIES ASSOCIATION; and

DEFENDERS OF PROPERTY RIGHTS IN

SUPPORT OF RESPONDENT CHEVRON USA, INC.

+

NANCIE G. MARZULLA R.S. RADFORD

Of Counsel Counsel of Record

Defenders of Property Rights Pacific Legal Foundation

1350 Connecticut Avenue, N.W. 3900 Lennane Drive, Suite 200

Suite 410 Sacramento, California 95834

Washington, DC 20035 Telephone: (916) 419-7111

Telephone: (202) 822-6760 Facsimile: (916) 419-7747

Facsimile: (202) 822-6774

Counsel for Amici Curiae

i

QUESTIONS PRESENTED

1. Should this Court reverse 24 years of precedent and

abandon what it has called its “general test” of liability for a

regulatory taking: whether a land-use regulation substantially

advances legitimate state interests?

2. Should this Court continue to afford meaningful

protection to individual rights guaranteed under the Takings

Clause of the Fifth Amendment, by applying mid-level scrutiny

to land-use regulations challenged under the “substantial

advancement” test, as mandated by Nollan v. California

Coastal Commission and its progeny?

TABLE OF CONTENTS

Page

QUESTIONS PRESENEGD «co ccscvecsestiésuneen 1

TABLE OF AUTIOORIUEBS «occcctesessteenseeee IV

IDENTITY AND INTEREST OF AMICI CURIAE ...... l

INTRODUCTION AND STATEMENT

OF Tite CARE... cccccccesseeeus ene 3

ARGUDMIENT ...+.0000000850560606 05 5 une 5

I. WHETHER A LAND-USE REGULATION

SUBSTANTIALLY ADVANCES A

LEGITIMATE STATE INTEREST HAS

LONG BEEN—AND SHOULD

REMAIN—THIS COURT'S “GENERAL

TEST” FOR A REGULATORY TAKING ........ 5

A. The Substantial Advancement Test

Is a Settled, Long-Established, and

Coherent Regulatory Takings Standard ....... 5

B. The Pedigree of the Substantial

Advancement Test Stretches Back

Through Penn Central to Pennsylvania Coal ... 8

C. No Phantom “Majority” of the

Eastern Enterprises (Or Any Other)

Court Has Repudiated the Substantial

Advancement Standard ................08. 11

Il. REGULATORY TAKINGS CLAIMS

BROUGHT UNDER THE SUBSTANTIAL

ADVANCEMENT STANDARD MUST

RECEIVE A HIGHER LEVEL OF JUDICIAL

REVIEW THAN SUBSTANTIVE DUE

PROCESS CLABGS 2.0 0000006005000 00e eee 15

TABLE OF CONTENTS—Continued

Page

Ill. THIS COURT’S SUBSTANTIAL

ADVANCEMENT TAKINGS ANALYSIS

IS ESSENTIAL TO EXPOSE AND REMEDY

NAKED MAJORITARIAN RENT SEEKING,

SUCH AS IS EVIDENCED IN MOBILE HOME

PARK RENT CONTROL ......... 660000 e ees 20

IV. THE CORRECT APPLICATION OF THE

SUBSTANTIAL ADVANCEMENT

STANDARD IS A STRAIGHTFORWARD

EXERCISE OF THE LEGITIMATE

FUNCTION OF JUDICIAL REVIEW ..........- 26

IMS occ ccc cece cccccccccscccccccccees 30

iv

TABLE OF AUTHORITIES

Page

Cases

Agins v. City of Tiburon,

ey a i Ceeee recat eee 3-6, 10

Armstrong v. United States,

PP ED ‘eedbdicdhidcnacdbuscescencek 29

Bennett v. Spear, 520 U.S. 154 (1997) ................ 3

Cashman vy. City of Cotati,

374 F.3d 887 (9th Cir. 2004)................ 2, 25-26

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

224 F.3d 1030 (9th Cir. 2000) ..................-. “4

Chicago, B. & Q. R. Co. v. Chicago,

Se EE cndevasdesacdandsweshaudens 7

City of Monterey v. Del Monte Dunes at

Monterey, Lid., 526 U.S. 687 (1999) ..... 3-4, 13-14, 29

Dews v. Town of Sunnyvale,

109 F. Supp. 2d 526 (N.D. Tex. 2000) .......... 19-20

Dolan v. City of Tigard,

Pee NE i. d'b-65000004806t0eueeedicns 3-4

Eastern Enterprises v. Apfel,

Pe GEE a0 nscccccoccccad¥ecteece 11-13

Euclid v. Ambler Realty Co.,

PEED Sundbcedsdvedcesceeesuances 10

Hage v. United States,

PPPOE énecdcecadeéceueccecunoees 29

Hall v. City of Santa Barbara,

833 F.2d 1270 (1986) ...... ee. -eeeeee ee. 17, 22-23

Vv

TABLE OF AUTHORITIES—Continued

Page

Keene Corp. v. United States,

SEBS, FID CIGSD cccceccscccccccencessecsoss 3

Keystone Bituminous Coal Ass'n v.

DeBenedictis, 480 U.S. 470 (1987) ..........+55. 4,11

Loretto v. Teleprompter Manhattan

CATV Corp., 458 U.S. 419 (1982) ..... 2... eee eee 22

Lucas v. South Carolina Coastal

Council, 505 U.S. 1003 (1992) ..........66. 3-4,10, 17

Marbury v. Madison,

§ U.S. (1 Cranch) 137 (1803) ..........2e eee eeeee 28

Mayhew v. Town of Sunnyvale,

964 S.W. 2d 922 (Tex. 1998) ......... 2c eee ee eeee 19

Moore v. City of East Cleveland,

GO UD, GOO CISOD cc cccccccccesccccccsesscnces 7

Nectow v. City of Cambridge,

BITTE, GE GHND ccc cccdcccdcccccscceccsece 6-8

Nollan v. California Coastal Commission,

GER UG. GRP CSSD cccccccccccccess 1, 4, 6-7, 10, 16

Palazzolo v. Rhode Island,

TIDE. GROG cc cccccccceseccccccesccese 1,3

Penn Central Transportation Co. v.

City of New York, 438 U.S. 104 (1978) .........- 8, 10

Pennell v. City of San Jose,

GER US. CORTE cccccccccecccccccceseceses 18, 19

Pennsylvania Coal Co. v. Mahon,

y LIE | . SPPrerriririrr eee —

vi

TABLE OF AUTHORITIES—Continued

Page

Phillips v. Washington Legal Foundation,

ny es ae clea eau ncents 3

Richardson v. City and County of Honolulu,

roe fi lk ee 24

San Diego Gas & Electric Co. v. City of

San Diego, 450 U.S. 621 (1981) ............... 27-28

Solid Waste Agency of Northern Cook County vy.

U.S. Army Corps of Engineers,

Be ee EY GCovdnateneebadsnddddduvnces 3

Suitum v. Tahoe Regional Planning Agency,

SP SEE. Ndnecenedldeeuscesdkséecnis 1,3

Tahoe-Sierra Preservation Council v. Tahoe Regional

Planning Agency, 535 U.S. 302 (2002) ........ 4, 14-17

United States v. Riverside Bayview

Homes, Inc., 474 U.S. 121 (1985) .. 2.0... 2 eee ee 4

Yee v. City of Escondido

PPC, cscecddecsudsedesadces 4, 23-24

Statutes

Haw. Rev. Stat. § 486H-10.4 ............... 0... cee eee 4

Miscellaneous

Bickel, Alexander M., The Least Dangerous

SPE, SOS GIS GE, FEED cc cc sccccesesesecscess 28

Cordes, Mark W., Legal Limits on Development

Exactions: Responding to Nollan and Dolan,

BP Oe Ge Oh Ee BE DED OUNOED cocccccccecccccese 16

Vii

TABLE OF AUTHORITIES—Continued

Page

Dale-Johnson, David, Deng, Yongheng,

Gordon, Peter & Zheng, Diehang,

An Examination of the Impact of Rent

Control on Mobile Home Prices in California,

Working Paper No. 2004-1010, Lusk

Center for Real Estate, University-of

Southern California (Nov. 1, 2004).............55. 22

Dringman, Page Carroccia, Comment, Regulatory

Takings: The Search for a Definitive Standard,

55 Mont. L. Rev. 245 (1994) .......... cece cece eens 16

Echeverria, John D., Does a Regulation That

Fails to Advance a Legitimate Governmental

Interest Result in a Regulatory Taking?,

2D Baw, L. GSB CIGGOD oc ccccccccccccscseses 8-9, 11

Epstein, Richard A., Yee v. City of Escondido:

The Supreme Court Strikes Out Again,

26 Loy. L.A. L. Rev. 3 (1992) .......ceceeccccees 21

Hirsch, Werner Z., An Inquiry into Effects

of Mobile Home Park Rent Control,

36 5. Ui. Bowe. BEB CIGEED 2 cc cccccccccccccscces 21,22

Hirsch, Wemer Z., & Hirsch, Joel C., Legal-Economic

Analysis of Rent Controls in a Mobile Home Context:

Placement Values and Vacancy Decontrol,

35 UCLA L. Rev. 399 (1988) .... 2... eee eee ee eee 21

Hirsch, Werner Z., & Rufolo, Anthony M., The

Regulation of Immobile Housing Assets Under Divided

Ownership, 19 Int'l Rev. L. & Econ. 383 (1999) ..... 22

Vill

TABLE OF AUTHORITIES—Continued

Kahn, Jordan C., Lake Tahoe Clarity and

Takings Jurisprudence: The Supreme Court

Advances Land Use Planning in Tahoe-Sierra,

26-Fall Environs 33 (2002) ........cccceccccececs

Lazarus, Richard J., Restoring What's Environmental

About Environmental Law in the Supreme Court,

47 UCLA L, Rev. 703 (2000) ... nc ccccccvvceess

Mandelker, Daniel R., & Payne, John M., Planning

and Control of Land Development: Cases and

MMateriaks 119 (SG OB. BIBT) . ww cccccccccccccces

McUsic, Molly S., Looking Inside Out: Institutional

Analysis and the Problem of Takings,

Fe Pew. U. £. Rav. SOG CIGGED cc ccccccccccsccce

Quigley, John M., Economic Analysis of

Mobile Home Rent Control: The Example of

San Rafael, California (Sept. 12, 2002) ..........

Radford, R.S., Why Rent Control Is a Regulatory

Taking, 6 Fordham Envtl. L.J. 755 (1995) ........

Salzberg, Kenneth, Rights with Responsibilities

Land Use Law Symposium: “Takings” as Due

Process, or Due Process as “Takings”’?,

36 Val. U. L. Rev. 413 (2002)..........0..0000.

Skouras, George, Takings Law and the

Supreme Court: Judicial Oversight of the

Regulatory State's Acquisition, Use and

Control of Private Property 117 (1998) .........

Sutton, Victoria, Constitutional Taking Doctrine—

Did Lucas Really Make a Difference?,

18 Pace Envtl. L. Rev. 505 (2001) .............

Page

ix

TABLE OF AUTHORITIES—Continued

Page

Williams, Norman, et al., The White River Junction

Manifesto, 9 Vt. L. Rev. 193 (1984) «0.6.55 e eee eens 28

l

IDENTITY AND INTEREST

OF AMICI CURIAE'

Pacific Legal Foundation (PLF) is the largest and most

experienced public interest legal foundation of its kind in the

United States. Founded over 30 years ago, PLF is a nonprofit,

tax-exempt corporation organized under the laws of California

for the purpose of litigating matters affecting the public interest

at all levels of state and federal courts. Representing the views

of tens of thousands of members and supporters nationwide,

PLF is an advocate of individual rights, including the

fundamental right to own and make productive use of private

property. PLF has appeared before this Court in many high-

orofile cases arising under the Takings Clause of the Fifth

Amendment to the United States Constitution. PLF attorneys

were counsel of record in Palazzolo v. Rhode Island, 533 U.S.

606 (2001); Suitum v. Tahoe Regional Planning Agency, 520

U.S. 725 (1997); and Nollan v. California Coastal Commission,

483 U.S. 825 (1987). PLF has also participated as amicus

curiae in nearly every major real property takings case heard by

this Court in the last two decades.

Gene Cashman and Athena Sutsos are owners of small

mobile home parks in Cotati, California, which are subject to

that city’s mobile home rent control scheme. Regulations of

this type enable park tenants (who dominate the political

process in small towns like Cotati) to capture cash windfalls

representing part of the value of the mobile home parks in

which they reside. By enacting rent control and promptly

selling their mobile homes in rent controlled parks, these

' All parties have consented to the filing of this brief under the terms

of general consent letters, which have been filed by the parties with

the Clerk of the Court. No counsel for any party authored this brief

in whole or in part, and no person or entity made a monetary

contribution specifically for the preparation or submission of this

brief.

2

tenants acquire part of the value of the park owners’ property,

with no benefit accruing to the community as a whole.

Cashman and Sutsos successfully challenged this scheme as a

regulatory taking in Cashman v. City of Cotati, 374 F.3d 887

(9th Cir. 2004), a decision that relies on a straightforward

application of the substantial advancement takings test from

Agins v. City of Tiburon. Cotati’s petition for rehearing or

rehearing en banc is currently pending before the Ninth Circuit,

where it awaits this Court's disposition of the present case.

Western Manufactured Housing Communities

Association represents 1,700 mobile home park operators. It

is the largest such organization in the United States. The

Association has a vital interest in the issues raised by this case

because its members face those same_ issues

continuously—particularly in California, where mobile home

rent control ordinances are ubiquitous and the state courts are

inhospitable to the claims of park owners to a fair return on

their investments. In most cases, these owners’ only

meaningful avenue of relief from confiscatory rent regulations

is to pursue regulatory takings claims in federal court, relying

on the “substantial advancement” prong of Agins v. City of

Tiburon. If this Court rejects or significantly restricts the

applicability of the substantial advancement standard, the

Association's members will have no effective judicial remedy

for the systematic confiscation of the value of their property via

mobile home park rent control.

Defenders of Property Rights (Defenders) is the only

national legal defense foundation dedicated exclusively to

protecting private property rights. Based in Washington, D.C.,

Defenders was founded as a nonprofit, public interest legal

foundation in 1991. Its mission is to protect vigorously those

rights considered essential by the framers of the Constitution,

and to promote a better understanding of the relationship

between private property rights and individual liberty.

Defenders engages in litigation across the country on behalf of

3

its thousands of members and the public interest to prevent

government incursion into protections guaranteed by the Bill of

Rights. Since its inception, Defenders has participated in every

major property rights case before this Court, including

Palazzolo v. Rhode Island, 533 U.S. 606; Solid Waste Agency

of Northern Cook County v. U.S. Army Corps of Engineers, 531

U.S. 159 (2001); City of Monterey v. Del Monte Dunes at

Monterey, Ltd., 526 U.S. 687 (1999); Phillips v. Washington

Legal Foundation, 524 U.S. 156 (1998); Suitum v. Tahoe

Regional Planning Agency, 520 U.S. 725; Bennett v. Spear, 520

U.S. 154 (1997); Dolan v. City of Tigard, 512 U.S. 374 (1994);

Keene Corp. v. United States, 508 U.S. 200 (1993); and Lucas

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

Counsel for amici are familiar with the issues in this case

and have reviewed the Brief for Petitioners (Pet. Brf.) and the

amicus brief filed in this matter by the Solicitor General. Amici

believe these briefs incorporate fundamental doctrinal errors

based upon misinterpretations of this Court’s regulatory takings

jurisprudence. Amici further believe that their experience with

regulatory regimes such as the rent control statute at issue in

this case, together with their litigation experience in the issues

involved, their special expertise in regulatory takings law, and

their public interest perspective will assist this Court in

resolving the important issues presented by this case.

INTRODUCTION AND

STATEMENT OF THE CASE

Twenty-four years ago, in Agins v. City of Tiburon, 447

U.S. 255 (1980), a case involving a facial challenge to a

residential zoning ordinance, this Court explained the criteria

for finding such measures unconstitutional under the Takings

Clause of the Fifth Amendment:

The application of a general zoning law to particular

property effects a taking if the ordinance does not

4

substantially advance legitimate state interests . . . or

denies an owner economically viable use of his land.

Id. at 260. Since 1980, this Court has frequently reiterated and

applied the “substantial advancement” prong of Agins as a test

for regulatory takings in cases involving a wide variety of both

facial and as-applied challenges to legislative enactments and

regulatory actions. See Tahoe-Sierra Preservation Council vy.

Tahoe Regional Planning Agency, 535 U.S. 302, 334 (2002);

City of Monterey v. Del Monte Dunes at Monterey, Ltd.,526

U.S. 687 at 704, Dolan v. City of Tigard, 512 U.S. 374 at 385;

Lucas v. South Carolina Coastal Council, 505 U.S. 1003 at

1016; Yee v. City of Escondido, 503 U.S. 519, 534 (1992);

Keystone Bituminous Coal Ass'n. v. DeBenedictis, 480 U.S.

470,485 (1987); Nollan v. California Coastal Commission, 483

U.S. 825 at 834; United States v. Riverside Bayview Homes,

Inc., 474 U.S. 121, 126 (1985). This standard is so thoroughly

ingrained in this Court's protection of individual rights

guaranteed under the Fifth Amendment it has been described as

the Court’s “general test” for a regulatory taking. City of

Monterey, 526 U.S. at 704.

The present case involves the application of the substantial

advancement test by the Ninth Circuit Court of Appeals to

strike down a state law that controls the rent oil companies may

charge to the lessees of their service stations. The ostensible

purpose of the statute, Haw. Rev. Stat. § 486H-10.4, is to hold

down the price of gasoline to consumers. Plaintiff-Appellee

Chevron U.S.A., Inc. (Chevron), sued to have the law declared

unconstitutional as an uncompensated taking of its property in

violation of the Fifth and Fourteenth Amendments to the United

States Constitution.

Chevron initially prevailed on a motion for summary

judgment, the trial court finding that the rent control scheme

failed to substantially advance legitimate state interests as a

matter of law, and therefore violated the Takings Clause. On

5

remand by the Ninth Circuit, a trial was held which again

resulted in a judgment that the rent control law effected a

regulatory taking under the substantial advancement standard.

The trial court found, inter alia, that controlling Chevron’s

station rents will not, as a factual matter, advance the law’s

objective of reducing gasoline prices. Instead, the operative

effect of the law is merely to create a premium in the value of

rent-controlled service stations, that Chevron’s lessees can

capture by selling their leases.

On certiorari to this Court, the State and its amici argue

that the trial court’s inquiry into whether Haw. Rev. Stat. §

486H-10.4 substantially advances legitimate state interests—

which has long been recognized as the appropriate standard for

regulatory takings claims of this sort—should in fact be

regarded as a substantive due process inquiry. Similarly,

rejecting 17 years of Supreme Court precedent, the State and its

amici urge this Court to return to the deferential review of

constitutionally suspect regulations that prevailed prior to

Nollan.

ARGUMENT

I

WHETHER A LAND-USE REGULATION

SUBSTANTIALLY ADVANCES A

LEGITIMATE STATE INTEREST HAS

LONG BEEN—AND SHOULD REMAIN—

THIS COURT’S “GENERAL TEST”

FOR A REGULATORY TAKING

A. The Substantial Advancement Test

Is a Settled, Long-Established, and

Coherent Regulatory Takings Standard

The State of Hawaii and its amicus, the Solicitor General,

have assumed the burden of persuading this Court to jettison 24

years of precedent and repudiate the first prong of Agins v. City

—-

6

of Tiburon, which holds that “[t]he application of a general

zoning law to particular property effects a taking if the

ordinance does not substantially advance legitimate state

interests.” 447 U.S. at 260. Such a sharp break with this

Court's historical jurisprudence would deal a crushing blow to

constitutional protections of the rights of property owners.

Moreover, the arguments that are advanced in support of this

radical revisionism are not supported by careful analysis.

The core insight advanced by the State and the Solicitor

General amounts to nothing more than the self-evident

proposition that, in setting forth the first prong of its takings

test, the Agins Court cited to Nectow v. City of Cambridge, 277

U.S. 183 (1928), a challenge to a zoning ordinance brought

under the Fourteenth Amendment’s Due Process Clause. The

State's implicit reasoning is that, because the language of

“substantial advancement” was previously used in a due process

case, when that terminology is subsequently cited in a

regulatory takings decision, the cited language must remain a

due process standard.

The difficulties with this position are manifold. Perhaps

most crucially, it assumes a doctrinal fastidiousness that never

exists in the real world of constitutional adjudication.

Standards and criteria developed in cases brought under one

Constitutional provision are commonly brought to bear on

issues implicating completely different clauses or even

Amendments, without prompting analysts to protest that these

tests must remain permanently and solely wed to the

applications in which the Court first found them useful. The

use of evaluative standards that seem similar or even identical

does not imply that the Court has confused the Free Exercise

Clause with the Equal Protection Clause, or that it has chosen

to use the same test for both clauses by mistake. See, e.g.,

Nollan, 483 U.S. at 834 n.3:

7

There is no reason to believe (and the language

of our cases gives some reason to disbelieve) that so

long as the regulation of property is at issue, the

standards for takings challenges, due process

challenges, and equal protection challenges are

identical, any more than there is any reason to believe

that so long as the regulation of speech is at issue, the

standards for due process challenges, equal protection

challenges, and First Amendment challenges are

identical.

The migration of standards between the Takings and Due

Process Clauses is especially unremarkable, given the close

historical relationship between the two provisions. On its own

terms, the Takings Clause—like the rest of the Bill of Rights—

applies only against the federal government. It was not until the

Fifth Amendment was deemed incorporated into the Fourteenth

Amendment’s Due Process Clause in 1897 that it became

possible to plead a cause of action against a state or local

governmental entity under the Takings Clause. See Chicago, B.

& O. R. Co. v. Chicago, 166 U.S. 226, 239 (1897).

In the first decades following this development, the fact

that nearly every takings claim also entailed a due process

violation led to a substantial conflation of terminology. As

Justice Stevens has explained, the Court in the early years of the

20th century had “fused the two express constitutional

restrictions on any state interference with private property that

property shall not be taken without due process nor for a public

purpose without just compensation, into a single standard,

Moore v. City of East Cleveland, 431 U.S. 494, 514 (1997)

(Stevens, J., concurring), and “this principle was applied in

Nectow.” Id.

Thus, far from being surprised that Nectow was cited in

Agins, we should be surprised if it were not cited in other

regulatory takings cases—and, in fact, it has been. Even the

8

recently proclaimed “polestar” of the Court’s regulatory takings

jurisprudence, Penn Central, cites Nectow as authority. See

Penn Central Transportation Co. v. City of New York, 438 U.S.

104, 127 (1978) (citing Nectow, 227 U.S. at 188). Of course,

the same objections can be (and have been) raised to Nectow’s

appearance in Penn Central as to its citation in Agins, but the

argument becomes more strained as the underlying enterprise

takes on more clarity. See John D. Echeverria, Does a

Regulation That Fails to Advance a Legitimate Governmental

Interest Result in a Regulatory Taking?, 29 Envtl. L. 853, 857-

58 (1999):

In Penn Central, the Court relied upon due

process, not takings, precedents .... Nectow patently

was not a takings case, but instead involved a due

process claim that the ordinance ‘deprived [the owner]

of his property without due process of law in

contravention of the Fourteenth Amendment.”

It is one thing to cling to a formalistic insistence that each

constitutional provision should have its own neatly

compartmentalized set of doctrines, but it is something else

again to insist that violating these largely imaginary doctrinal

boundaries is grounds for jettisoning this Court’s entire corpus

of regulatory takings law—which is, in fact, precisely the

enterprise the State and the Solicitor General have undertaken.

B. The Pedigree of the Substantial

Advancement Test Stretches Back

Through Penn Central to Pennsylvania Coal

In any event, it isn’t necessary to go back to Nectow to

trace the lineage of Agins’ two-pronged takings test, since its

immediate progenitor is much closer at hand. It has long been

recognized that the takings standards set out in Agins differ only

in terminology from Penn Central's focus on “the character of

the governmental action” and “(t]he economic impact of the

regulation on the claimant.” 438 U.S. at 124. Conceptually, the

9

Agins and Penn Central standards are equivalent. See John D.

Echeverria, Does a Regulation That Fails to Advance a

Legitimate Governmental Interest Result in a Regulatory

Taking?, 29 Envtl. L. at 855:

More than twenty years ago, in Penn Central

Transportation Co. v. New York City (Penn Central),

the Court stated that “a use restriction may constitute

a ‘taking’ if [it is] not reasonably necessary to the

effectuation of a substantial government purpose.”

Two years later, in Agins v. City of Tiburon, the Court

said essentially the same thing: a government action

“effects a taking” if it “does not substantially advance

legitimate state interests.”

See also Jordan C. Kahn, Lake Tahoe Clarity and Takings

Jurisprudence: The Supreme Court Advances Land Use

Planning in Tahoe-Sierra, 26-Fall Environs 33,57 n.160 (2002)

(“the ‘character of government action’ factor in the Penn

Central analysis . . . includes a consideration of whether the

regulation at issue does or ‘does not substantially advance

legitimate state interests’ ”); Victoria Sutton, Constitutional

Taking Doctrine—Did Lucas Really Make a Difference?, 18

Pace Envtl. L. Rev. 505, 509 (2001) (characterizing Penn

Central's “character of the government action” test as “the

progenitor of the ‘substantially advances legitimate state

interests’ test articulated two years later in Agins”); R. S.

Radford, Why Rent Control Is a Regulatory Taking, 6 Fordham

Envtl. L.J. 755, 757 (1995) (“In Agins, the two-part Penn

Central inquiry was recast in terms of whether the challenged

measure: (1) substantially advances legitimate state interests;

or (2) denies the owner economically viable use of the land.”).

Justice Brennan advanced the clearest statement of the

equivalence (indeed, the virtual identity) of the standards set out

by the two cases in his Nollan dissent:

10

Our phraseology may differ slightly from case to

case—c.g., regulation must “substantially advance,” Agins

v. Tiburon, 447 U.S. 255, 260 (1980), or be“reasonably

necessary to,” Penn Central Transportation Co. v. New

York City, 438 U.S. 104, 127, (1978), the government's

end. These minor differences cannot, however, obscure

the fact that the inquiry in each case is the same.

Nollan, 483 U.S. at 845 (Brennan, J. dissenting) (emphasis

added). More recently, Justice Scalia’s majority opinion in

Lucas provided a further refutation of the view that Agins’ first

prong marked a departure from the Court's established takings

jurisprudence:

“Harmful or noxious use” analysis was, in other

words, simply the progenitor of our more

contemporary statements that “land-use regulation

does not effect a taking if it ‘substantially advance[s]

legitimate state interests’ ”. . . . . Nollan, supra, 483

U.S. at 834 (quoting Agins v. Tiburon, 447 U.S. at

260); see also Penn Central Transportation Co.,

supra, 438 U.S. at 127; Euclid v. Ambler Realty Co.,

272 U.S. 365, 387-388, (1926).

Lucas, 505 U.S. at 1023-24.

In fact, as this Court has noted, Agins’ two-pronged

takings inquiry can be traced back not just to Penn Certral, but

to the very font of its modern takings jurisprudence,

Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922):

Justice Holmes rested on two propositions, both

critical to the Court’s decision. First, because it

served only private interests, not health or safety, the

Kohler Act could not be “sustained as an exercise of

the police power.” Second, the statute made it

“commercially impracticable” to mine “certain coal”

in the areas affected by the Kohler Act.

11

Keystone, 480 U.S. at 484. See also George Skouras, Takings

Law and the Supreme Court: Judicial Oversight of the

Regulatory State's Acquisition, Use and Control of Private

Property 117 (1998) (“Justice Holmes, working through

balancing tests, established a set of criteria that continue

unabated until this day.... The criteria in Pennsylvania Coal

were refined in Penn Central.”).

The doctrinal equivalence of Penn Central and Agins is

acknowledged by the more perceptive critics of the substantial

advancement standard, but this only serves to shift their

objections back a step—to Penn Central itself, or in extreme

cases, all the way back to Pennsylvania Coal. See, e.g., John D.

Echeverria, Does a Regulation That Fails to Advance a

Legitimate Governmental Interest Result in a Regulatory

Taking?, at 857-58. With this shift, however, the very

consistency of their argument undermines its credibility. If

Agins’ first prong were, as is sometimes claimed, an isolated

anomaly, it is arguably not too far-fetched to suppose that the

substantial advancement standard might be dismissed as some

sort of doctrinal slip of the pen. But when we realize we are

dealing with a standard that has been deeply ingrained into the

entire corpus of regulatory takings law from the beginning,

nothing less than the modern Court’s protection of the

constitutionally-guaranteed rights of property owners hangs in

the balance.

C. No Phantom “Majority” of the Eastern

Enterprises (Or Any Other) Court

Has Repudiated the Substantial

Advancement Standard

In the face of this Court’s long-established use of the

substantial advancement test to resolve regulatory takings

claims, the State invokes a phantom “majority” that supposedly

backed away from this standard in Eastern Enterprises v-Apfel,

524 U.S. 498 (1998). See Pet. Brf. at 30-32. This remarkable

12

claim, which is recycled from the State's unsuccessful brief to

the Ninth Circuit, is simply ungrounded in reality.

In Eastern, Justice O’Connor’s plurality opinion found a

statute’s creation of retroactive financial liability to be

unconstitutional under the Takings Clause. The plurality did

not cite to Agins, nor did it decide the case under the substantial

advancement standard. Instead, Justice O’Connor applied a

straightforward Penn Central analysis, finding that the character

of the regulation was such that it “singles out certain

employers” based on long-past activities, thereby “implicat[ing]

fundamental principles of fairness underlying the Takings

Clause.” Jd at 537.

Concurring in the result, Justice Kennedy agreed that the

statute was unconstitutional as applied to Eastern, but he would

strike it down “as contrary to essential due process principles,

without regard to the Takings Clause of the Fifth Amendment.”

Id. at 539 (Kennedy, J., concurring in the judgment and

dissenting in part). The crux of Justice Kennedy's concérn was

that the Act did not directly impinge upon any identifiable

property interest. Without a direct link between the impact of

the law and “a specific property right or interest” protected by

the Fifth Amendment, id. at 541, Justice Kennedy felt the

Takings Clause was not implicated. In this context, he worried

that

[t]he imprecision of our regulatory takings doctrine

does open the door to normative considerations about

the wisdom of government decisions. See, e.g., Agins

v. City of Tiburon, 447 U.S. at 260 (zoning constitutes

a taking if it does not “substantially advance

legitimate state interests”).

Id. at 545. But of course, Agins did involve governmental

interference with a traditional, constitutionally cognizable

property interest, and therefore presumably escaped Justice

13

Kennedy's concern about the applicability of the Takings

Clause.

Writing for a four-Justice dissent, Justice Breyer agreed

that “[t]he Constitution’s Takings Clause does not apply.” /d.

at 554 (Breyer, J., dissenting). Like Justice Kennedy, the

dissent was troubled by the plurality’s application of the

Takings Clause to a case that

involves not an interest in physical or intellectual

property, but an ordinary liability to pay money, and

not to the Government, but to third parties.

Id. Like the plurality, however, the dissent did not address the

substantial advancement standard.

In view of these facts, the State’s present effort to concoct

a five-Justice “majority” out of a concurrence and a dissent—

including four Justices who did not so much as mention the

substantial advancement issue—seems puckish at best. That

Justice Kennedy's concurrence in Eastern Enterprises cannot

be construed as a general rejection of the substantial

advancement takings standard is evident from the opinion of the

Court he drafted just eleven months later in City of Monterey v.

Del Monte Dunes at Monterey, 526 U.S. 687. In City of

Monterey, a property owner brought a regulatory takings suit

based on a city’s repeated, unreasonable denials of development

permits. See id. at 695-98. The case went to a jury on a strange

amalgam of Agins and Lucas: the trial court instructed the

panel that takings liability should be found either if the permit

denials deprived the owner of all economically viable use of the

property, or if the city’s actions did not “substantially advance

a legitimate public purpose.” See id. at 700. As a practical

matter, only the latter criterion provided a realistic basis for

takings liability, since the plaintiffs had sold the regulated

property for $4.5 million. The jury returned a general verdict

of liability, see id. at 701, in effect finding a compensable

taking because the City’s successive denials of the plaintiff's

14

permit applications failed to substantially advance legitimate

governmental interests. See, e.g., Daniel R. Mandelker & John

M. Payne, Planning and Control of Land Development: Cases

and Materials 119 (5th ed. 2001) (the City of Monterey trial

court “essentially put the case to the jury on the first prong of

Agins, and because it was a general verdict, it had to be

presumed that the jury had decided on this theory”).

In affirming the finding of a taking, Justice Kennedy's

opinion for the Court repeatedly expressed its satisfaction with

the jury instructions, and with the substantial advancement

inquiry serving as the basis for takings liability. See City of

Monterey, 526 U.S. at 702-07. The Supreme Court's answer to

the City of Monterey’s question was clear: “the trial court's

instructions are consistent with our previous general discussions

of regulatory takings liability.” 526 U.S. at 704. In other

words, Eastern Enterprises notwithstanding, Justice Kennedy's

opinion in City of Monterey expressly reiterated this Court's

traditional understanding that takings liability may properly be

grounded on the failure of land-use regulations to substantially

advance legitimate state interests, going sc far as to characterize

this as “the general test for regulatory takings liability.” Id.

(emphasis added).

With the exception of the State’s counsel, virtually all

commentators have acknowledged that City of Monterey

reaffirms the substantial advancement test as a central element

of the Supreme Court's regulatory takings jurisprudence. See,

e.g., Richard J. Lazarus, Restoring What's Environmental

About Environmental Law in the Supreme Court, 47 UCLA L.

Rev. 703, 720 n.89 (2000) (“[t]he ruling in favor of the property

owner in City of Monterey is especially significant because it

represents the first occasion that the Court has ever upheld a

regulatory takings claiia based just on the so-called first prong

of the regulatory takings test announced in Agins v. City of

Tiburon). This understanding was underscored in the Court’s

most recent regulatory takings decision, Tahoe-Sierra

15

Preservation Council v. Tahoe Regional Planning Agency, 535

U.S. 302, in which the Court enumerated seven alternative

theories under which a development moratorium could give rise

to a regulatory taking, including:

Sixth, apart from the District Court’s finding that

TRPA’s actions represented a proportional response

to a serious risk of harm to the !ake, petitioners might

have argued that the moratoria did not substantially

advance a legitimate state interest, see Agins and

Monterey.

Id. at 334 (emphasis added).

In short, in the half-decade since the Court’s fragmented

decision in Eastern Enterprises, every Justice has written or

joined opinions applying, upholding, or expressly reaffirming

the general applicability of the substantial advancement test to

regulatory takings. Thus, as of its last major land-use takings

decision, the Court is unanimous in its understanding that a

land-use regulation that fails to substantially advance legitimate

state interests does result in a regulatory taking.

REGULATORY TAKINGS CLAIMS BROUGHT

UNDER THE SUBSTANTIAL ADVANCEMENT

STANDARD MUST RECEIVE A HIGHER —

LEVEL OF JUDICIAL REVIEW THAN

SUBSTANTIVE DUE PROCESS CLAIMS

As a corollary to their efforts to relegate the substantial

advancement takings test to a toothless variety of due process

review, the State and its amici also seek to undermine the level

of scrutiny required by this Court in regulatory takings cases.

See Pet. Brf. at 37-50. At issue is No/lan’s footnote 3, which

has been under continuous attack by virtually every level of the

16

regulatory bureaucracy since the day it was enunciated, over 17

years ago:

—

[O]ur opinions do not establish that [takings] stan-

dards are the same as those applied to due process or

equal protection claims. To the contrary, .. . [w]e

have required that the regulation “substantially

advance” the “legitimate state interest” sought to be

achieved, not that “the State ‘could rationally have

decided’ that the measure adopted might achieve the

State’s objective.”

Nollan, 483 U.S. at 834 n.3 (citations omitted).

Obviously, substantial advancement takings claims cannot

both be subjected to deferential review and be expressly

distinguished from the level of scrutiny applied in due process

or equal protection claims. The theoretical significance of this

Court's requirement of heightened scrutiny has been clear to

commentators from the outset. See, e.g., Mark W. Cordes,

Legal Limits on Development Exactions: Responding to Nollan

and Dolan, 15 N. Ill. U. L. Rev. 513, 534 (1995) (noting that

the Dolan “Court's analysis demonstrated a seriousness of

review to protect [against] unjustified intrusions on property

interests”); Page Carroccia Dringman, Comment, Regulatory

Takings: The Search for a Definitive Standard, 55 Mont. L.

Rev. 245, 253 (1994) (“Nollan v. California Coastal

Commission signaled the United States Supreme Court's

movement away from a ‘rubber stamp’ or superficial

application of the rational basis test to a more rigorous standard

ol review”).

This Court's application of heightened scrutiny under

Agins’ first prong is not an aberration, nor is it an arbitrary or

mistaken appendage to takings law. Rather, the requirement of

an elevated standard of review is implied by the very existence

of a cause of action for regulatory takings. As the Tahoe-Sierra

Court noted, regulatory takings differ in nature from physical

17

occupations or invasions, either directly by the government or

by third parties acting under governmental authority. See 535

U.S. at 322-23. It is this very difference that gives rise to the

need for heightened scrutiny of regulatory takings claims.

Physical invasions or occupations of private property by the

state are normally obvious to a fact finder employing even a

minimal standard of review. The only question in such cases is

whether just compensation has been paid—again, an inquiry

that can be conducted on the level of an evidentiary hearing,

without need for probing review on the part of the court. The

situation is completely different when the government,

inadvertently or by design, accomplishes the same effect as if

it had taken title to private property, but without acknowiedging

either the usurpation or the requirement to compensate. As the

Ninth Circuit Court of Appeals has observed:

It makes considerable sense to give greater deference

to the legislature where it deliberately resorts to its

eminent domain power than where it may have

stumbled into exercising it through actions that

incidentally result in a taking.

Hall v. City of Santa Barbara, 833 F.2d 1270, 1280 n.25

(1986). In the successive two-part inquiries set out in

Pennsylvania Coal, Penn Central, and Agins, this Court has

recognized the necessity of examining the nature and impact of

challenged regulations to determine whether they are the

functional equivalent of seizures, pressing private property

“into some form of public service under the guise of mitigating

serious public harm,” but without payment of compensation.

Lucas, 505 U.S. at 1018. Such an inquiry, by definition,

requires going behind the surface of the regulatory rationale—

i.€., it requires an elevated level of scrutiny.

But the heightened scrutiny requirement implicit in Agins’

first prong does not flow automatically from the mere

invocation of the standard; applying meaningful review of state

18

action requires an act of judicial will. This responsibility can

easily be evaded. The most common way to convert the

substantial advancement standard into deferential review 1s to

characterize it as merely requiring a rational relationship

between regulatory ends and means—since requiring means-

ends consistency is just another way of describing rational basis

review.

In Nollan, this Court did inquire into the relations.ip

between regulatory ends and means. Far more important,

however, was No//an’s emphasis on the need for a close causal

nexus between the burdens imposed by the regulations, and the

social costs that would otherwise be imposed by the property's

unregulated use. As Professor McUsic points out,

[The Nollan] Court described the “substantially

advance” test as one that examines the proportionate

relationship between the amount of public harm

caused by the owner and the regulatory burden

imposed: a cause-effect test. ...

The second meaning of the substantially

advance requirement—the cause-effect test—focuses

on whether the burden of a regulation is properly

placed on a particular owner.

Molly S. McUsic, Looking Inside Out: Institutional Analysis

and the Problem of Takings, 92 Nw. U—L-Rev. 591, 602

(1998). It is the requirement of a cause-effect nexus, not just an

ends-means fit, that offers real protection against the imposition

of unjustified or disproportionate burdens on individual

property owners. This fact was emphasized by Justice Scalia in

his separate opinion in Pennell v. City of San Jose, 485 U.S. 1

(1988), in which he explained:

Traditional land-use regulation (short of that which

totally destroys the economic value of property) does

not violate this [substantial advancement] principle

ee —- -- —

- eS ~_—

19

because there is a cause-and-effect relationship

between the property use restricted by the regulation

and the social evil that the regulation seeks to remedy.

Id. at 20 (Scalia, J., concurring in part and dissenting in part).

The crucial importance of applying heightened scrutiny in

conjuiiction with the substantial advancement test has never

been more dramatically illustrated than by a pair of cases

springing from a common factual setting: Mayhew v. Town of

Sunnyvale, 964 S.W. 2d 922 (Tex. 1998), and Dews v. Town of

Sunnyvale, 109 F. Supp. 2d 526 (N.D. Tex. 2000). In Mayhew,

a proposed residential development was prohibited after years

of negotiations on the grounds that it would be inconsistent

with the town’s minimum lot size requirements. The property

owners sued, alleging that the town’s actions failed to

substantially advance legitimate state interests. A trial court

agreed, finding that the town’s denial of the Mayhews’ project

-

_“does not bear any factual relationship to valid planning

principles or objectives.” 964 S.W.2d at 927. The state

supreme court reversed, applying a deferential level of scrutiny

to conclude that the permit denial advanced Sunnyvale’s

legitimate interest in maintaining “the overall character of the

community and the unique character and lifestyle of the Town.”

Id. at 935.

Following a second permit denial, the Mayhews’

successors in interest sued in federal district court on equal

protection grounds. In contrast to the Texas Supreme Court, the

federal judge applied a heightened standard of review and found

the town’s building restrictions were racially motivated—

designed primarily to prevent minorities from moving into the

community. Dews, 109 F. Supp. 2d at 568-71. In other words,

by probing beneath the town’s superficial rationale, the federal

court was able to determine that what local officials meant by

preserving the “unique character and lifestyle” of the town, was

keeping it White. The official rationalizations, unquestioningly

20

accepted under the state court's deferential review, were found

to have comprised merely “a facade in an unsuccessful attempt

to shield [the Town] from liability for excluding both African-

Americans and affordable housing from Sunnyvale.” /d. at 572.

This sobering example should not be taken to mean that

governmental bad faith is the sole rationale for a meaningful

standard of review in takings cases. The nature and effect of

restrictive land-use regulations must be subjected to more than

bare rationality review if courts are to determine whether any

such measure effectively takes private property for public use,

no matter how well-intentioned it may be. Nevertheless, as was

clear to the Founders and has been demonstrated repeatedly

throughout our Nation's history, good faith on the part of the

regulatory bureaucracy can never be presumed. Abandoning

heightened scrutiny for the deferential review urged on this

Court by the State and the Solicitor General would be

tantamount to shifting every property owner in the United

States from the position of the plaintiffs in Dews, to those in

Mayhew.

——

THIS COURT’S SUBSTANTIAL

ADVANCEMENT TAKINGS ANALYSIS

IS ESSENTIAL TO EXPOSE AND REMEDY

NAKED MAJORITARIAN RENT SEEKING,

SUCH AS IS EVIDENCED IN MOBILE

HOME PARK RENT CONTROL

Mobile home park rent control offers a paradigm example

of the capture of local legislative processes by rent-seeking

majorities, whose eagerness to transfer the assets of property-

owning minorities to themselves cannot be checked except by

vigorous judicial review. This type of regulation embodies an

especially malevolent breakdown in the political process,

because once tenant-lobbyist-legislators succeed in imposing

controls, they can immediately “cash out,” capturing the full

21

present value of below-market rents by selling their mobile

home coaches in place in rent-controlled parks. See, e.g.,

Richard A. Epstein, Yee v. City of Escondido: The Supreme

Court Strikes Out Again, 26 Loy. L.A. L. Rev. 3, 10 (1992)

(Mobile home park rent control “increases the returns to local

renters from the passage of the rent control statute by allowing

them to capture the full stream of future periodic expropriations

from the landlord.”’).

The mechanism that facilitates this is both obvious and

simple enough to have been employed by hundreds of tenant-

dominated localities in California. Mobile home park tenants

normally own their own coaches, which sit on “pads” owned by

the mobile home park. Their housing costs are therefore the

sum of mortgage payments on the coach, plus rent payments on

the underlying land. Rent control obviously reduces the second

component, but in addition, the assurance of below-market rents

in the future is capitalized into the resale value of the coach.

This “premium,” or incremental resale value attributable to rent

control, represents the present value of the future stream of

financial benefits tenants will receive from the regulations,

discounted at an appropriate rate. It is an amount equal to the

decrease in value of the underlying land because of rent control,

and therefore is the equivalent of a direct cash transfer from

park owner to tenant, effected via the legisiative process. See,

e.g., Werner Z. Hirsch & Joel C. Hirsch, Legal-Economic

Analysis of Rent Controls in a Mobile Home Context:

Placement Values and Vacancy Decontrol, 35 UCLA L. Rev.

399, 423-24 (1988).

The capitalization into coach prices of the monetary value

of mobile home park rent control has been well documented

empirically. As long ago as 1988, research by the

internationally reputed economist, Dr. Werner Hirsch, showed

that California mobile home park tenants used rent control to

transfer to themselves a part of the value of mobile home parks

equal to 32% of the resale value of their coaches. See Werner

22

Z. Hirsch, An Inquiry into Effects of Mobile Home Park Rent

Control, 24 J. Urb. Econ. 212, 223-24 (1988). A second study

published more than a decade later confirmed that these

regulations were still being successfully used by tenant

majorities to transfer to themselves the cash value of mobile

home park assets. See Werner Z. Hirsch & Anthony M. Rufolo,

The Regulation of Immobile Housing Assets Under Divided

Ownership, 19 Intl Rev. L. & Econ. 383, 396 (1999). Again in

2002, an empirical study by a University of California

economist showed that in one upscale California community,

tenant-legislators were able to pocket almost $61,000 per coach

in confiscated asset value as a direct result of enacting mobile

home park rent control. See John M. Quigley, Economic

Analysis of Mobile Home Rent Control: The Example of San

Rafael, California (Sept. 12, 2002). The most recent scholarly

research on this topic was conducted by economists at the

prestigious Lusk Center for Real Estate at the University of

Southern California. Like Hirsch, Hirsch & Rufolo, and

Quigley, these researchers confirmed that mobile home park

rent control is a powerful and effective mechanism for

confiscating the value of park land and transferring it to tenants

who then convert it to cash. See David Dale-Johnson,

Yongheng Deng, Peter Gordon & Diehang Zheng, An

Examination of the Impact of Rent Control on Mobile Home

Prices in California, Working Paper No. 2004-1010, Lus!

Center for Real Estate, University of Southern California (Nov.

1, 2004).

This confiscation by tenants of the value of park owners’

land was initially challenged as a taking under the “permanent

physical occupation” theory of Loretto v. Teleprompter

Manhattan CATV Corp., 458 U.S. 419 (1982). The Ninth

Circuit agreed with this analysis, striking down a mobile home

rent control scheme in Hall v. City of Santa Barbara, 833 F.2d

1270. Significantly, the court of appeals went beyond the

physical taking issue presented by the plaintiffs, to consider

23

whether Santa Barbara’s ordinance could be said to

substantially advance legitimate state interests—and found that

it could not. See id. at 1280. Because new tenants would

receive no financial benefit from rent control, having paid its

full cash value to the previous coach owners, the Hall court

found that the law “may well hinder” its objective of alleviating

a “critical shortage of low and moderate income housing.” /d.

at 1280-81.

The successful Hail litigation triggered a number of

lawsuits challenging the constitutionality of mobile home rent

~ control in California. In 1992, one such action, Yee v. City of

Escondido, 503 U.S. 519, was accepted for review by this

Court. Justice O’Connor’s majority opinion focused on the

legal-theoretical shortcomings of applying the Loretto physical

takings model to rent control. The Court recognized and

addressed the effect of Escondido’s ordinance in enabling

tenant-legislators to capture the monetary value of the

regulations in the resale price of their coaches. See id. at 530.

Yet, while acknowledging that such an explicit majoritarian

wealth transfer might fall “within the scope of our regulatory

taking cases,” id. at 527, the Court rejected the park owners’

argument that the tenants’ capture of the value of occupying the

plaintiffs’ property effected a physical taking. Perhaps most

significantly, Justice O’Connor went on to add:

This effect might have some bearing on whether the

ordinance causes a regulatory taking, as it may shed

some light on whether there is a sufficient nexus

between the effect of the ordinance and the objectives

it is supposed to advance.

Id. at 530 (citing Nollan, 483 U.S. at 834-35). This is, of

course, a reference to the substantial advancement takings

standard, already cited by the Ninth Circuit as an alternative

basis for takings liability in Hall. Yet despite the urging of

Judge Bork’s brief for the petitioners and an amicus brief filed

24

in their support by Pacific Legal Foundation, the Court declined

to consider the merits of a regulatory takings claim in Yee, on

the technical grounds that this question had not been presented

in the Yees’ petition for certiorari. See id. at 533.

The first response to Yee’s seeming invitation came in

Richardson v. City and County of Honolulu, 124 F.3d 1150 (9th

Cir. 1997). Typically, there is divided ownership of

condominiums on Oahu and the underlying land. The

ordinance at issue in Richardson limited land-rent increases and

specifically provided that the below-market rents were

transferable, thereby facilitating capture and capitalization of

the financial benefits of rent control by condominium residents.

As in the analogous case of mobile home parks, the Ninth

Circuit recognized that “[i]ncumbent owner occupants who sell

to those who intend to occupy the apartment will charge a

premium for the benefit of living in a rent controlled

condominium.” /d. at 1166. Drawing on Yee, the court of

appeals went on to note that this feature of the ordinance

prevented it from substantially advancing legitimate

governmental interests:

The conveyance provision, as explained above

{facilitating the capitalization and capture of the

monetary benefits of rent control], vitiates the cause-

and-effect relationship between the preperty use

restricted (rent rates) and the social evil the Ordinance

seeks to remedy (lack of affordable housing).

Id. at 1165.

f

A similar analysis was subsequently applied in Chevron

U.S.A. Inc. v. Cayetano, 224 F.3d 1030 (9th Cir. 2000), the

immediate forerunner of the present case before the Court.

However, the Ninth Circuit found that summary judgment had

been improperly granted because of the existence of conflicting

expert testimony on whether the premium created by the

regulations could be capitalized and captured by the dealers, or

/

25

whether Chevron could offset this effect by adjusting the

wholesale price of its gasoline. At this point the factual dispute

in Chevron diverges from the mobile home park paradigm,

since in the latter case there is no possibility of a secondary,

offsetting revenue flow between owners and tenants.

Meanwhile, independently of the Chevron litigation, a

Richardson-based regulatory takings challenge to a mobile

home park rent control scheme came before the Ninth Circuit.

In 1998, the voters of the City of Cotati terminated years of

litigation by repealing that city’s general rent control ordinance.

But no sooner had the electorate voted to remove rent control

from the books, than the city council adopted a new measure

that applied rent control exclusively to mobile home parks. The

city’s three park owners, including the present amici Gene

Cashman and Athena Sutsos, filed suit under a Richardson-

style substantial advancement takings theory. This case,

Cashman vy. City of Cotati, 374 F.3d 887, reached the Ninth

Circuit in 2004.

In a decision that closely tracks the legal analysis of

Richardson, the Cashman panel reversed a trial court’s ruling

that Cotati’s new rent ordinance passed constitutional muster,

and held that an earlier order granting summary judgment to the

park owners should be reinstated. The panel noted the case’s

factual similarity to Richardson, which was also decided on

summary judgment:

Like in Richardson, there is no dispute that Ordinance

No. 680 does not on its face prevent mobilehome

tenants from capturing a premium. There is separate

ownership of the mobilehome coaches and the

underlying land, controlled rent, and the ability of

incumbent tenants to sell their mobilehomes subject

to this controlled rent. This creates the possibility of

26

a premium, which undermines the City’s interest in

creating or maintaining affordable housing.

Cashman vy. City of Cotati, 374 F.3d 887, 899 (2004).

Moreover, the Cashman court pointed to the absence of

extraneous variables such as were present in Chevron, that

could potentially prevent Cotati’s tenants from capitalizing and

capturing the rent control premium.

On August 3, 2004, the City of Cotati filed a petition with

the Ninth Circuit seeking rehearing or rehearing en banc, once

again urging rejection of the substantial advancement standard

and heightened scrutiny of regulatory takings claims. This

petition remains pending, presumably awaiting this Court's

determination of the present case.

It is essential that this Court maintain the vitality of the

substantial advancement test if there is to be any justice for

victims of majoritarian rent-seeking such as Gene Cashman and

Athena Sutsos. Under a deferential due process standard, the

constitutional rights of Cashman, Sutsos, and hundreds of other

mobile home park owners in California will be worth no more

than those of the plaintiffs in Mayhew.

IV

THE CORRECT APPLICATION OF

THE SUBSTANTIAL ADVANCEMENT

STANDARD IS A STRAIGHTFORWARD

EXERCISE OF THE LEGITIMATE

FUNCTION OF JUDICIAL REVIEW

The radical position advanced by the State and the Solicitor

General in this case comprises a protest against this Court's

fundamental approach to regulatory takings analysis—and

indeed, against the very concept of regulatory takings. The

argument to relegate Agins’ first prong to a due process inquiry

may seem more plausible, because it appears to be more

27

limited, than calls for overruling Penn Central and

Pennsylvania Coal, or for the outright elimination of regulatory

takings as a viable constitutional claim. Nevertheless, since the

substantial advancement test or its conceptual equivalent has

been an essential element of this Court’s takings jurisprudence

since its inception, appeals to eliminate this standard fit easily

within the broader assault on regulatory takings per se. The

underlying theme is that courts should not apply the Takings

Clause in any situation »t involving outright physical

appropriations:

What is wrong with a simple reading of the Takings

Clause that would apply it to occasions when the

government actually physically takes and uses the

land in question? What limitations could there then

be on the government’s overreaching by regulation?

What should a court do when the government goes too

far? If “goes too far” means the same thing as

interfering with due process rights in property, then

the more consistent, predictable, and traditional result

would be to strike down the regulation as an

unconstitutional denial of due process.

Kenn¢th Salzberg, Rights with Responsibilities Land Use Law

Symposium: “Takings” as Due Process, or Due Process as

“Takings "’?, 36 Val. U. L. Rev. 413, 418 (2002).

Of course, what's “wrong” with eliminating the doctrine of

regulatory takings was spelled out by Justice Brennan in his

dissent in San Diego Gas & Electric Co. v. City of San Diego,

450 U.S. 621 (1981), the first opinion to employ the term,

“regulatory taking.” In that case, the California Supreme Court

adopted the rule proposed by the passage above: a land-use

regulation can never violate the Takings Clause, but at worst

may be invalidated as a violation of due process. See id. at 621.

As Justice Brennan pointed out, invalidation is hardly an

adequate remedy for a plaintiff who (in that case) was deprived

28

of the use of its property for seven years. At least equally

important, the unavailability of a regulatory taking claim

encourages government agencies to promptly adopt new

regulations whenever one is struck down on due process

grounds, to maintain oppressive and unconstitutional

restrictions indefinitely. Justice Brennan brought this point

home by quoting extensively, in his San Diego Gas dissent,

from a tract circulated by a California city attorney, light-

heartedly urging his colleagues to do just that. See id. at 655-

57.

A few of the staunchest regulatory partisans have directly

repudiated Justice Brennan's reasoning, insisting that

compensation under the Takings Clause should never be

required for land-use regulations, no matier how draconian or

basely motivated. See, e.g., Norman Williams, et al., The White

River Junction Manifesto, 9 Vt. L. Rev. 193, 193-97 (1984).

More commonly, however, as in the case at bar, the imposition

of regulatory takings liability is rejected on more abstract

grounds: close judicial review of legislative or administrative

actions is said to undermine the separation of powers, threaten

the principle of democratic self-government, be contrary to the

plain language of the Drafters, or signal a return to

“Lochnerism.” See, e.g., Pet. Brf. at 39; Brf. for United States

at 12-13. At this level of generality, however, these arguments

run aground on the commonplace observation that the

Constitution was intended to check majoritarian excesses, and

interpreting the document's proper application to the other two

branches of government has been an essential attribute of the

judiciary since Marbury v. Madison, 5 U.S. (1 Cranch) 137

(1803). See also Alexander M. Bickel, The Least Dangerous

Branch, 1-14 (2d ed. 1986) (critiquing the argument for judicial

review flowing from Marbury). As for the bogey of Lochner,

no supra-textual normative charter is required for courts to

administer the straightforward protections of property owners

that animate the Fifth and Fourteenth Amendments. The proper

29

role of a court applying the substantial advancement test to

takings claims has seldom been expressed more clearly than by

Chief Judge Loren Smith of the Court of Federal Claims:

In takings claims the judge does not sit as super

legislator or executive, intent on preventing regulation

that “goes too far,” as a facile reading of Justice

Holmes might imply. The job of the court is to deal

with a concrete claim, by an aggrieved person or

persons, that their Constitutional rights under the Fifth

Amendment have been violated by some

governmental action. The court must proceed to

analyze this claim, as any other legal claim, regardless

of the consequences to government policy.

Hage v. United States, 35 Fed. Cl. 147, 150-51 (1996).

In the final analysis, courts engaged in the proper

application of the substantial advancement test are doing no

more than performing their responsibility under our

constitutional system of checks and balances. As the majority

of this Court’s Justices noted in Eastern Enterprise, the first

requisite for the application of this standard is the existence of

a discrete, constitutionally protected property interest. Once

that threshold is met, the test resolves to a two-part inquiry: (1)

Is the regulation designed to mitigate some public harm that

would otherwise be caused by the unregulated use of the

property in question? (2) Does the regulatory scheme single out

some small group of property owners to bear a burden that

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

whole? See Armstrong v. United States, 346 U.S. 40, 49

(1960). If the answer to the first inquiry is negative, or if the

answer to the second inquiry is affirmative, the regulatory

scheme in question fails to substantially advance legitimate

state interests “within the meaning of our regulatory takings

doctrine,” City of Monterey, 526 U.S. at 721 (emphasis added),

and thereby violates the Takings Clause.

30

CONCLUSION

For all the reasons set forth above, the opinion of the court

below should be AFFIRMED.

DATED: December, 2004.

Respectfully submitted,

NANCIE G. MARZULLA R.S. RADFORD

Of Counsel Counsel of Record

Defenders of Property Rights Pacific Legal Foundation

1350 Connecticut Avenue 3900 Lennane Drive, Suite 200

Suite 410 Sacramento, California 95834

Washington. DC 20036 Telephone: (916) 419-7111

Telephone: (202) 822-6760 Facsimile: (916) 419-7747

Facsimile: (202) 822-6774

Counsel for Amici Curiae