Amicus Curiae Brief — RCK Properties, Inc. v. United States, 120 S. Ct. 373 (1999) (No. 99-286)

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No. 99 - 286

In the ——

Supreme Court of the United States

FOREST PROPERTIES, INC.

(now known as RCK Properties, Inc.),

Petitioner,

UNITED STATES,

Respondent.

On Petition for Writ of Certiorari to the United

States Court of Appeals for the Federal Circuit

BRIEF OF AMICI CURLZ ATLANTIC LEGAL

FOUNDATION AND NEW ENGLAND LEGAL

FOUNDATION IN SUPPORT OF PETITIONER

Counsel for Amici Curia MICHAEL E. MALAMUT,

Counsel of Record

New England Legal Foundation

150 Lincoln Street

Boston, MA 02111

Telephone: (617) 695-3660

Facsimile: (617) 695-3656

MARTIN S. KAUFMAN

Atlantic Legal Foundation

205 East 42nd Street, Ninth Floor

New York, NY 10017

Telephone: (212) 573-1960

Facsimile: (212) 573-1959

QUESTIONS PRESENTED

May government deny a Clean Water Act § 404 permit

thereby taking a parcel of real property and avoiding the

payment of just compensation by claiming that the

parcel is not the relevant parcel but rather part of a

larger parcel when in fact it was a separate parcel

acquired at a different time and by a different method,

is under different ownership, is located in a different

political jurisdiction and is subject to an entirely

different permit process?

May a property purchaser be denied just compensation

because of notice of a preexisting governmental permit

scheme, especially one that does not indicate the

property owner has any reason to believe its permit

application would not be granted or that, if not, just

compensation would not be paid?

TABLE OF CONTENTS

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DUMIMART GP ARCHUIEEIT occ c cs civveneinedilass 4

| TTT PE ore te aa pes 4

I. THIS CASE INVOLVES AN IMPORTANT QUESTION

OF UNSETTLED FEDERAL CONSTITUTIONAL

LAW THAT SHOULD BE RESOLVED BY THIS

COUT oo cs vic vine 0500 eee 4

Il. By TREATING FOREST PROPERTIES MORE

HARSHLY THAN ITS RELATED PREDECESSOR IN

TITLE IN REGARD TO ITS’ PROPERTY

DEVELOPMENT RIGHTS, THE COURT OF

APPEALS FAILED TO TAKE INTO ACCOUNT

ADVERSE PUBLIC POLICY IMPLICATIONS ......... 13

CZ © ek v. vv i adekeses eee ee 19

TABLE OF AUTHORITIES

CASES

Andrus v. Allard, 444 U.S. 51 (1979) 2.0.0... 0000. 11

Bowen v. Campbell, 344 Mass. 24, 181 N.E.2d 342 (1962) 18

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

EE 14

Deltona Corp. v. United States, 657 F.2d 1184

CE fossa te CGiv eet ecyediwedicuce 10

First English Evangelical Lutheran Church y.

County of Los Angeles, 482 U.S. 304 (1987)... .. 10, 11

Florida Rock Indus., Inc. v. United States,

18 F.3d 1560 (Fed. Cir. 1994), cert. denied,

EN a ra ee eee 8, 10

Forest Properties, Inc. v. United States, 177 F.3d 1360 (Fed.

Cir. 1999), petition for cert. filed, 68 U.S.L.W. 3137

(U.S. Aug. 17, 1999) (No. 99-286) ............ 14, 16

Iglehart v. Iglehart, 204 U.S. 478 (1907) ............. 18

Keystone Bituminous Coal Assn. v. DeBenedictis,

ek Cs ons 5c oo SSA MME. ba-0% ae

Lopes v. City of Peabody, 507 U.S. 981 (1993) ......... 14

Lopes v. City of Peabody, No. SJC-08030 (Mass.),

28 MASS. LAW. WKLY. 2959 (1999) .............. 15

Lopes v. City of Peabody, 417 Mass. 299,

i PPPOE. pc cbccccceuvececeeees 14, 15

Loretto v. Teleprompter Manhattan CATV Corp.,

EE Ee eee ee 5, 6

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

ado os kas 6 deb oes 7, 10, 11, 12, 13

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

RU Sito ri ses desneeeeies eee 5, 6, 7, 8, 9, 14, 19

Nollan v. California Coastal Comm'n, 483 U.S. 825

SPT cdo cheé den Nah ue Eeaeee aes enee 5, 10, 14

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

gk | err Pe reer ey reer ee eee 10

Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922)5, 8, 9

Steinbergh v. City of Cambridge, 413 Mass. 736, 604

N.E.2d 1269 (1992), cert. denied, 508 U.S. 909 (1993) 15

United States v. General Motors, 323 U.S. 373 (1945) ... 11

Williamson County Regional Planning Comm'n v. Hamilton

Bank of Johnson City, 473 U.S. 172 (1985) ........ 17

CONSTITUTION

Ce. CS. GI Ws oo ve isc se ehesece vis 5, 14, 19

UE, CRIES. MIE. FEET a0 oc cc cc cessse cas tecoxesaes 5

RULES

Ce 6 tne on én chs b4een can esae cede 14

OTHER AUTHORITIES

John E. Fee, Comment, Unearthing the Denominator in

Regulatory Takings, 61 U. CHI. L. REV. 1535 (1994) . 10

Robert S. Freilich and Elizabeth A. Gavrin, Takings After

Lucas, in David L. Callies, ed. AFTER LUCAS: LAND USE

REGULATION AND THE TAKING OP PROPERTY WITHOUT

COMPENSATION (American Bar Ass’n Section of Urban,

State and Local Government Law 1993) ........... 11

Gregg Easterbrook, Suburban Myth, NEW REPUBLIC,

Died, ES eee Gr os oe es ed ob eteakevevisbe ceed 18

JOHN LOCKE, OF Civ GOVERNMENT (1690) ........... 12

JENNIFER N EDELSKY, PRIVATE PROPERTY AND THE LIMITS OF

AMERICAN CONSTITUTIONA LISM: THE MADISONIAN

FRAMEWORK AND ITS LEGACY AEE Cees 5

Margaret Jane Radin, The Liberal Conception of Property:

Cross Currents in the Jurisprudence of Takings,

88 COLUM. L. REV. 1667 (1988) ................. 1]

Rose, Mahon Reconstructed: Why the Takings Issue is

Still a Muddle, 57 §. CAL. L. REV. 56] See 9

Max Weber, Politics as a Vocation, in H. H. Gerth and C.

Wright Mills, eds., FRom MAx WEBER, ESSAYS IN

SOCIOLOGY 78 (Galaxy ed. SWUM vabeuecescs cane. 12

No. 99 - 286

In the

Supreme Court of the United States

FOREST PROPERTIES, INC.

(now known as RCK Properties, Inc.),

Petitioner,

UNITED STATES,

Respondent.

On Petition for Writ of Certiorari to the United

States Court of Appeals for the Federal Circuit

BRIEF OF AMICI CURIA. ATLANTIC LEGAL

FOUNDATION AND NEW ENGLAND LEGAL

FOUNDATION IN SUPPORT OF PETITIONER

INTEREST OF AMICI CURL&

Atlantic Legal Foundation (“ALF”) is a not-for-profit public

interest legal foundation whose mandate includes the advocacy

in the courts of principles of private enterprise and the

mechanism of the market economy, protection of private

property rights against unnecessary governmental intrusion,

limited and responsible government, opposition to unnecessary

interference by government with individual rights, and

vindication of constitutional rights and protections. ALF

receives financial support from individuals, business ;

enterprises, and philanthropic foundations. ALF’s board of

directors and legal advisory committee consist of legal scholars,

corporate legal officers, business executives, retired public

officials and judges, and prominent scientists.

In pursuit of its mandate, ALF has frequently appeared

before this Court and inferior federal courts, as well as state

courts in many jurisdictions, both as counsel for a party in

interest, as counsel for amici curia, and itself as amicus curiae

in cases involving First, Fifth, and Fourteenth Amendment

rights; arbitrary and capricious exercise of power by local, state

and federal officials; violations of the principle of separation of

powers between the legislative and executive branches of State

and federal government; and appropriate standards for

admissibility of expert evidence. Of particular relevance to this

case, ALF (then named “Mid-Atlantic Legal Foundation”)

submitted an amicus curia brief in Keystone Bituminous Coal

Association v. DeBenedictis, 480 U.S. 470 (1987), in support of

the petitioner in that case.

The New England Legal Foundation (“NELF’), a non-

profit, public interest law firm, was incorporated in 1977. Its

membership consists of individuals, businesses, and others who

believe in promoting balanced economic growth for New

England, protecting the free enterprise system, and defending

economic rights. NELF’s more than 130 members and

supporters include a cross-section of large and small businesses

from all parts of New England and the United States. NELF has

regularly appeared in state and federal court, as party or counsel,

in Cases raising issues of general economic Significance to the

business community. See, e.g., UNUM Life Ins. Co. v. Ward,

119 S. Ct. 1380 (1999): Lockheed Corp. v. Spink, 517 U.S. 882

(1996); BMW v. Gore, 517 U.S. 559 (1996); Reich v. Southern

New England Telecommunications Corp., 121 F.3d 58 (2d Cir.

1997); Cigna Health Plan of Louisiana v. Louisiana, 82 F.3d

642 (Sth Cir. 1996); Georgine v. Amchem Products, Inc., 83

F.3d 610 (3d Cir. 1996); Conservation Law Foundation v.

Department of the Air Force, 79 F.3d 1250 (Ist Cir. 1996):

Preseault v. United States, 66 F.3d 1167 (Fed. Cir. 1995);

Eastern Mountain Platform Tennis, Inc. v. Sherwin-Williams

Co., 40 F.3d 492 (1st Cir. 1994); B.F. Goodrich Co. v. Murtha,

958 F.2d 1192 (2d Cir. 1992); International Paper Co. v. Town

of Jay, 665 A.2d 998 (Me. 1995); O’Brien v. New England

Telephone & Telegraph Co., 422 Mass. 686, 664 N.E.2d 743

(1996).

Amici seek to bring to the Court’s attention their views, and

those of their supporters, concerning the scope of the takings

clause under the Fifth Amendment to the United States

Constitution. If the decision below is not reversed, government

agencies will be able to take private property with absolutely no

compensation in money or development rights, simply because

it is adjacent to other property under similar ownership.

Moreover, under the “coming to the regulation” theory

espoused by the Court of Appeals for the Federal Circuit below,

property owners unable to develop their own property when a

confiscatory regulation is passed will be forced to bring

litigation before the area is ready for development or to sell at

a steep discount. These issues are of significance to Amici as

well as to property owners generally. Amnici believe that this

brief may provide an additional perspective which may aid the

Court in determining whether to grant the petition for a writ of

certiorari.'

Pursuant to Supreme Court Rule 37.2, counsel for Amici

have secured written consent for the filing of this brief from

counsel for Petitioner and Respondent.

1 Pursuant to Supreme Court Rule 37.6, counsel for amici state that

counsel for neither Petitioner nor Respondent authored this brief in

whole or in part and no person or entity other than amici made a

monetary contribution to the preparation or submission of the brief.

STATEMENT OF THE CASE

Amici adopt the Statement of the Case contained in the Brief

of the Petitioner, Forest Properties, Inc., now known as RCK

Properties, Inc.

SUMMARY OF ARGUMENT

Amici argue that the issue of partial regulatory takings

needs to be addressed by this Court because of the lack of

consistency among the various state and federal courts that have

addressed this issue and the need to recognize partial regulatory

takings as significant infringements on property rights (pp.

4-13). Amici further contend that a purchaser of property

should not be penalized by prohibiting him or her from

challenging a regulation that pre-dated the purchase, because

such a theory distorts the incentives for the property’s

development (pp. 13-19).

ARGUMENT

I. THIS CASE INVOLVES AN IMPORTANT QUESTION OF

UNSETTLED FEDERAL CONSTITUTIONAL LAW THAT

SHOULD BE RESOLVED BY THIS COURT.

This Court should grant the petition for certiorari to clarify,

and if need be rectify, an issue that has bedeviled the courts as

a result of the takings jurisprudence of this Court in the last two

decades. That issue arises from the disparate treatment

accorded by this Court to partial physical takings and to partial

regulatory takings in the context of a regulation that effectively

prohibits all economically viable use of a distinct part of

petitioner’s property holdings.

It is clear from the Constitution itself that any interference

with property rights which constitutes a taking must, under the

Fifth and/or Fourteenth Amendments, be compensated.” Prior

to Justice Holmes’ opinion in Pennsylvania Coal Co. v. Mahon,

260 U.S. 393 (1922), however, this Court had applied the

Takings Clause only to “physical invasion” of property.’ In

Mahon, this Court held, for the first time, that excessive

regulation could constitute a “taking” requiring compensation.

However, this Court has held that losses resulting from “mere”

regulation are not compensable unless the regulations deprive

the property owner of “all economically beneficial or productive

use of land,” see Lucas v. South Carolina Coastal Council, 505

U.S. 1003, 1015 (1992); see also Nollan v. California Coastal

Comm'n, 483 U.S. 825, 834 (1987); Keystone Bituminous Coal

Assn. v. DeBenedictis, 480 U.S. 470, 495 (1987), presumably

because government regulation is considered part of the cost of

social order which all citizens must bear.* The way this Court’s

takings jurisprudence has developed creates anomalous results

that are not, we submit, supported by reason or Constitutional

principle.

Consider the following examples: There are two contiguous

2. The Fifth Amendment states: “nor shall private property be taken for

public use without just compensation.” U.S. Const. amend. V.

3. A “physical invasion” need not be a transfer of ownership, or even an

intrusion by the government itself. See Loretto v. Teleprompter

Manhattan CATV Corp., 458 U.S. 419 (1982) (holding that a regulation

that directly, and unconditionally imposes a permanent physical

occupation on an unwilling owner is a taking per se).

4. See JENNIFER NEDELSKY, PRIVATE PROPERTY AND THE LIMITS OF

AMERICAN CONSTITUTIONALISM: THE MADISONIAN FRAMEWORK AND ITS

LEGACY 233 (1990). We submit that this formulation begs the question:

Why should the landowner bear the cost of government regulation that,

presumably, benefits all, or at least a broad class of persons?

ne ae

properties, Whiteacre, which consists of five acres, and

Blackacre, which comprises 50 acres. The two parcels are

owned by different persons, who are not related to one another

in any way. In the first hypothetical, the state floods all of

Whiteacre and 10 of the 50 acres of Blackacre by building a

dam and reservoir; there is little doubt that under takings law,

the state would have to pay the owners of Whiteacre and

Blackacre for five acres and 10 acres, respectively, and,

assuming each acre is of equal value, the owner of Blackacre

would receive twice as much compensation as the owner of

i Whiteacre. In the second case, the state requires the owners of

Blackacre and Whiteacre to permit a utility company to lay fibre

optic cable across their land, preventing them from digging

foundations for buildings on all five acres of Whiteacre and ten

of Blackacre’s 50 acres. The owners of both properties would

probably be entitled to compensation. As the Court reiterated

in Lucas, regulations that result in permanent physical invasions

require compensation, “no matter how minute the intrusion, and

no matter how weighty the public purpose behind it.” Lucas,

supra, 505 U.S. at 1015; see also Loretto v. Teleprompter

Manhattan CATV Corp., 458 U.S. 419 (1982). A permanent

physical invasion is called a “categorical” taking.

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In a third example, the state enacts the Greenacres

Protection Law, which denies the landowner of all economically

beneficial use of land which is deemed “protected” under this

law. One of the areas “protected” encompasses all of Whiteacre

and 10 of Blackacre’s 50 acres. Under current takings

jurisprudence of this Court, the Greenacres statute

unquestionably has effected a compensable taking of Whiteacre,

because the law has deprived Whiteacre’s owner of “all

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economically beneficial or productive use of [its] land’”* and

therefore the state’s action is “compensable without case-

specific inquiry into the public interest advanced in support of

the restraint.” Lucas supra, 505 U.S. at 1015. Under this

Court’s jurisprudence, and that of the Federal Circuit, it is not

at all clear whether the owner of Blackacre is entitled to

compensation; under the Federal Circuit’s ruling in this case it

would not be, whereas under the Federal Circuit’s decision in

Loveladies Harbor, Inc. v. United States, 28 F.3d 1171 (Fed.

Cir. 1994), the owner of Blackacre would be entitled to

compensation for the 10 acres on which it could not build.

If Blackacre is considered as a single unit, and if we assume

that each of the 50 acres.is of equal value, the loss of one-fifth

of the value of the property would not be considered a taking by

most jurisdictions, even though it is undeniable that Blackacre’s

owner has fewer rights and a thing of less value after the

enactment of the Greenacres law than before. If one considers

only the acreage affected by the Greenacres law, distinct from

the unaffected acres, takings law would compel the payment of

just compensation for the five acres, since 100 percent of the

five acres has been rendered economically useless.

Under current decisional law, the key issue in making the

determination whether there has been a compensable taking is

defining the appropriate unit of property against which to

conduct the takings inquiry. In determining whether a

regulation “denies all economically beneficial or productive use

of land,” one must make a comparison, in the form of a fraction,

by dividing the value of the property after the regulatory

5. We assume that the land has no substantial residual value for other,

albeit less profitable, purposes, such as use as farmland or a nature

reserve.

imposition (the numerator) by the value of the property before

the regulatory imposition (the denominator). While this

fractional analysis is easy to visualize, it provides little or no

guidance in making the often crucial determination of what unit

of property will furnish the denominator value in the

deprivation fraction.° In the third hypothetical, if the Blackacre

denominator is the value of the entire 50 acre parcel, there is no

taking, yet if it is the value of the ten affected acres, there is a

taking.’

This Court has recognized the existence and importance of

6. Justice Brandeis, in his dissent in Mahon, pointed out this

“denominator” problem with the diminution in value test. Mahon,

supra, 260 U.S. at 419 (Brandeis, J., dissenting, argued that the

denominator in that case should be “the value not of the coal alone, but

. .. the value of the whole property,” both above and below ground).

7. This is the result under the Federal Circuit’s current jurisprudence. To

date, the “total denial of economically beneficial use” test articulated

in Lucas is the only partial takings test adopted by this Court. Lucas,

supra, 505 U.S. at 1015-17. It is important to note, however, that

analytically there are at least two approaches to a partial takings

analysis. The first, and the one that this Court has thus far recognized,

requires that all economically beneficial use of the land be denied to the

Owner; in other words, the property must be rendered valueless by the

regulation. Lucas, supra, 505 U.S. at 1015. The second approach

permits compensation when less than one hundred percent of the value

of the land is destroyed. The Federal Circuit Court of Appeals found

that a taking had occurred when the value of land was reduced by

approximately sixty percent. Florida Rock Indus., Inc. v. United States,

18 F.3d 1560 (Fed. Cir. 1994), cert. denied, 513 U.S. 1109 (1995).

Under the Florida Rock partial takings analysis, the appropriate parcel

(the denominator) for the diminution in value fraction often will be

unimportant, because a partial taking will often be found even using the

whole extent of the owner’s contiguous holdings as the denominator.

Florida Rock, supra, 18 F.3d at 1572-1573.

the “denominator” issue, but has yet to provide any real

guidance in this area. See Lucas, supra, 505 U.S. at 1016 n.7.*

While the lower courts have been faced with several

8. In note 7, Justice Scalia acutely observed that:

Regrettably, the rhetorical force of our “deprivation of all

economically feasible use” rule is greater than its precision,

since the rule does not make clear the “property interest”

against which the loss of value is to be measured. When,

for example, a regulation requires a developer to leave 90%

of a rurai tract in its natural state, it is unclear whether we

would analyze the situation as one in which the owner has

been deprived of all economically beneficial use of the

burdened portion of the tract, or as one in which the owner

has suffered a mere diminution in value of the tract as a

whole. . . . Unsurprisingly, this uncertainty regarding the

composition of the denominator in our “deprivation”

fraction has produced inconsistent pronouncements by the

Court. Compare Pennsylvania Coal Co. v. Mahon, 260

U.S. 393, 414, 43 S. Ct. 158, 160, 67 L. Ed. 322 (1922)

(law restricting subsurface extraction of coal held to effect

a taking), with Keystone Bituminous Coal Assn. v.

DeBenedictis, 480 U.S. 470, 497-502, 107 S. Ct. 1232,

1248-1251, 94 L. Ed. 2d 472 (1987) (nearly identical law

held not to effect a taking); see also id., at 515-520, 107 S.

Ct., at 1257-1260 (Rehnquist, C.J., dissenting); Rose,

Mahon Reconstructec': Why the Takings Issue is Still a

Muddle, 57 S. CAL. L. REV. 561, 566-569 (1984).

Lucas, supra,505 U.S. at 1016 n.7.

We submit that the “deprivation of all economically feasible use” rule

should be abandoned as a separate category of regulatory takings, and

that all takings, whether “physical invasions” or regulatory impositions,

be compensated so that society will understand that there are costs to it

if it expects to enjoy the benefits of superimposing the collective will

on that of the property owner. Common good should be paid for out of

the common purse, not out of the purses of individual property owners.

“denominator problem cases,” they have been inconsistent in

their ad hoc determinations not only on the facts, but in

fundamental approach. Even within the Court of Appeals for

the Federal Circuit, there is inconsistency. Compare Loveladies

Harbor, Inc. v. United States, 28 F.3d 1171 (Fed. Cir. 1994)

(stating that compensation was required where the denial of the

fill permit destroyed all the value of one discrete portion of a

large parcel—an 11.5-acre wetland that was part of a 250-acre

building development) and Florida Rock Indus., Inc. v. United

States, 18 F.3d 1560 (Fed. Cir. 1994), cert. denied, 513 U.S.

1109 (1995) (finding that a compensable taking had occurred

where the denial of a fill permit effectively prohibited limestone

mining on the land, thereby reducing the value of the land by

approximately sixty percent), with Deltona Corp. v. United

States, 657 F.2d 1184 (Ct. Cl. 1981), cert. denied, 455 U.S.

1017 (1982) (where the court refused to engage in horizontal

severance’ and thus found no taking in the denial of two of three

9. “Horizontal severance” refers to division of land into separate parcels

or areas; it is also referred to as horizontal segmentation. The term

“horizontal” is used in contrast to “vertical,” “temporal,” and

“functional” divisions of the various interests in land. See, e.g., John

E. Fee, Comment, Unearthing the Denominator in Regulatory Takings,

61 U. Cui. L. REv. 1535 (1994). Dividing a parcel into air rights,

surface rights, and subsurface rights is an example of a vertical

division. See, e.g., Penn Central Transp. Co. v. New York City, 438

U.S. 104, 124 (1978) (refusing to permit vertical severance of

property). Dividing property interests into life estates and future estates

is an example of a temporal division, and dividing a property so as to

include easements, rights of way, and servitudes is an example of a

functional division. Fee, supra, at 1537 and n.10. This Court has

recognized both the functional severance of property rights, see Nollan,

supra, 483 U.S. 825 (1987) (holding that granting a building permit to

landowners on the condition that they in return give a public access

easement across their property constitutes a taking); and temporal

severance of property rights, see First English Evangelical Lutheran

fill permit requests because other “wetland necks” were

considered part of the denominator). One of the principal flaws

with the “denominator” analysis is that the denominator can be

manipulated by the government agency or the court to achieve

a particular fraction and thus reach a “no takings” conclusion,

even if the result is inconsistent with prior decisions or

decisions of other tribunals, or economically unrealistic. See,

e.g., Andrus v. Allard, 444 U.S. 51 (1979), in which the Court’s

assignment oj “value” to the few remaining sticks in the

owner’s bundle of rights left the owner with purely illusory

power to possess, use, or dispose of the property.'° For a

description of the subtlety of land use planners in devising

methods to prevent development without incurring the

obligation to pay compensation, see Robert S. Freilich and

Elizabeth A. Gavrin, Takings After Lucas, in David L. Callies,

ed., AFTER LUCAS: LAND USE REGULATION AND THE TAKING OP

PROPERTY WITHOUT COMPENSATION (American Bar Ass’n

Section of Urban, State and Local Government Law 1993).

We believe that the Federal Circuit used the correct

approach in Loveladies, and that this Court should formally

adopt that analytical model. The Federal Circuit noted that it

was not deciding “whether the Government can lawfully

prevent a property owner from filling or otherwise injuring or

Church v. County of Los Angeles, 482 U.S. 304 (1987) (requiring that

compensation be paid for the “temporary” taking of property that

occurs between the time the regulation goes in effect and the time it is

struck down by a court). The broader term “conceptual severance” has

been applied to all of the different types of severance collectively. See

Margaret Jane Radin, The Liberal Conception of Property: Cross

Currents in the Jurisprudence of Takings, 88 COLUM. L. REV. 1667,

1676 (1988).

10. See United States v. General Motors, 323 U.S. 373, 377-378 (1945).

destroying vital wetlands,” for the existence of substantial

governmental interests in environmental conservation and

preservation are undeniable, but, rather, it was deciding

whether, “when the Government fulfills its obligation to

preserve and protect the public interest, may the cost of

obtaining that benefit fall solely upon the affected property

owner, or is it to be shared by the community at large.” In

resolving this question of “fundamental public policy,” the court

noted that it had to “balance the legitimate claims of the society

to constrain individual actions that threaten the larger

community with . . . the rights of the individual and our

commitment to private property as a bulwark for the protection

of those rights.” Loveladies, 28 F.3d at 1174-75. The

Loveladies court’s emphasis was on the fundamental

importance to liberty and democracy of the balance between

individual rights, including property rights, and collective

interest of society."

The Federal Circuit noted that the three criteria used in

making the regulatory takings determination were whether: (1)

there was a denial of economically viable use of the property as

a result of the regulatory imposition; (2) the property owner had

distinct investment-backed expectations; and (3) in the balance

11. Even this formulation is imperfect, because it assumes that a

bureaucratic agency truly represents the interests of the community, a

fact not lightly to be assumed given the complex, subtle and sometimes

opaque interactions of the legislative branch, elected members of the

executive branch, and the “permanent government.”

For the central importance of private property to the creation and

preservation of democracy in the inevitable tension between the

individual and government, see JOHN LOCKE, OF CIVIL GOVERNMENT Ff

135, 138 (1690); Max Weber, Politics as a Vocation, in H. H. Gerth

and C. Wright Mills, eds., FROM MAX WEBER, ESSAYS IN SOCIOLOGY 78

(Galaxy ed. 1958).

between the property owner’s right to own and use the property

without unwarranted governmental interference on the one

hand, and on the other, the public interest asserted by the

Government in support of the regulatory imposition, the liberty

interest of the property owner should prevail. Loveladies, 28

F.3d. at 1177-78.

Historically the Takings Clause was designed to protect

private citizens from governmental interference with property

rights. That original purpose of the clause has, we submit, been

lost or seriously diminished in the interests of expanding the

regulatory state.

We urge that this Court redress the balance, and at least

permit the property owner initially to shape the denominator

inquiry, within the bounds of realism.

This Court should grant certiorari in this case and explicitly

recognize the appropriateness of horizontal severance in certain

cases, including this one. If, for example, the property in issue

is divided under state or local law into separate lots for tax,

zoning, or other purposes, it is reasonable for the court to permit

the owner to treat each lot separately in the calculation of

economic impact of the regulation or law that has limited the

owner’s rights in the property.

Il. By TREATING FOREST PROPERTIES MORE HARSHLY

THAN ITS RELATED PREDECESSOR IN TITLE IN REGARD

TO ITS PROPERTY DEVELOPMENT RIGHTS, THE COURT

OF APPEALS FAILED TO TAKE INTO ACCOUNT ADVERSE

PUBLIC POLICY IMPLICATIONS.

The Court of Appeals found that Forest Properties’

investment-backed expectations were not reasonable because

the Army Corps’ Clean Water Act regulations were in effect

when Forest Properties purchased the option to acquire the lake-

bottom property. Forest Properties, Inc. v. United States, 177

F.3d 1360, 1366-67 (Fed. Cir. 1999), petition for cert. filed, 68

U.S.L.W. 3137 (U.S. Aug. 17, 1999) (No. 99-286).

This “coming to the regulation” theory—that a purchaser on

notice of a regulation cannot contest the validity of the

regulation—has been disparaged by this Court in Nollan, supra,

483 U.S. at 833 n.2, which indicated that property owners’

rights should not be altered “because they acquired the land

well after the [regulatory] commission had begun to implement

its policy.” Jd. In City of Monterey v. Del Monte Dunes, Ltd.,

119 S. Ct. 1624 (1999), this Court recently upheld a verdict in

a regulatory takings case in favor of a developer who purchased

the property in question towards the end of the regulatory

application process without comment on the issue of “coming

to the regulation.”

Certainly, it is circular to insist that a purchaser loses all

right to challenge a regulation simply because he or she is aware

at the time of purchase that the regulation may be found valid.

Nevertheless, as this Court has not issued a direct condemnation

of the theory, several courts, as cited by Forest Properties in its

Brief, Petititoner’s Brief at 23, have adopted the “coming to the

regulation” theory, contrary to the clear implications of this

Court’s holdings in Nollan, supra, and Lucas, supra.

The Massachusetts Supreme Judicial Court, on the other

hand, rejected the “coming to the regulation” theory for zoning

challenges in Lopes v. City of Peabody, 417 Mass. 299, 629

N.E.2d 1312 (1994), thus creating a conflict on an important

Fifth Amendment Takings issue between the Court of Appeals

for the Federal Circuit and at least one state court of last resort.

See Sup. CT. R. 10 (a). Lopes was decided in light of Lucas,

supra, on remand from this Court. Lopes v. City of Peabody,

507 U.S. 981 (1993); Lopes, supra, 417 Mass. at 300 n.2. The

Massachusetts court held:

[T]he validity of the ordinance is before us, and [the

property owner], a purchaser of land subject to the

restriction at the time of his purchase, has every right

to challenge the continued application of the

restriction. We see no reason to permit challenges to

the validity of a zoning enactment only by those

landowners who owned land when the zoning

provision first affected it. A rule that a purchaser of

real estate takes subject to all existing zoning

provisions without any right to challenge any of them

would threaten the free transferability of real estate,

ignore the possible effect of changed circumstances,

and tend to press owners to bring actions challenging

any zoning provision of doubtful validity before

selling their property. Moreover, such a rule of law

would in time lead to a crazy-quilt pattern of the

enforceability of a zoning law intended to have

uniform applicability.

Lopes, supra, 417 Mass. at 302-03 (citations omitted).'”

The absurdity of denying relief to a purchaser that “comes

to the regulation” is demonstrated in this case, where Forest

12. The confusion and consequent need for clarification in this area is clear

in light of the Massachusetts Supreme Judicial Court’s reservation of

the applicability of the “coming to the regulation” theory to takings

claims. See Lopes, supra, 417 Mass. at 302-03 n.7; Steinbergh v. City

of Cambridge, 413 Mass. 736, 742-43, 604 N.E.2d 1269 (1992), cert.

denied, 508 U.S. 909 (1993). Oral argument on the temporary takings

issue in the Lopes case is scheduled for September 13, 1999. Lopes v.

City of Peabody, No. SJC-08030 (Mass.), 28 MASS. LAW. WKLY. 2959

(1999).

Properties purchased the option to develop the lake-bottom

property from a related company, Big Bear Properties, Inc.

Forest Properties, supra, 177 F.3d at 1362. If “coming to the

regulation” were a reason to deny Forest Properties the ri ght to

develop the lake-bottom property, then the common owners of

both companies could have structured the deal in such a way

that Big Bear Properties retained ownership of the option

through the development stage. The transfer from Big Bear

Properties to Forest Properties was a convenience for the

ultimate investors who preferred shifting ownership of the

option and the adjacent upland from their real estate holding

company to their real estate development company because they

were ready to develop the land. See id.

A developer with a skillful attorney could eviscerate the

effect of the “coming to the regulation” theory for land in

corporate ownership through legal fictions including mergers,

consolidations, stock transfers, formation of subsidiaries, and

corporate divisions. All that would have been required in this

case would have been for Big Bear Properties to have formed

a new real estate holding company and transferred all its assets

aside from the subdivision in question to the new company.

Instead of using Forest Properties as their real estate

development company, the investors would use Big Bear

Properties as their development company for this one

subdivision and the new company as their future holding

company. The investors in a real estate company that only

owned one proposed subdivision could similarly evade the

“coming to the regulation” theory by transferring their stock to

a new purchaser, rather than transferring the real estate. The

“coming to the regulation” theory would thus invite litigation

over the form of the transaction, the nature of the transfers, and

the effect of partial transfers (for instance a new investor buying

out the partner of a continuing investor). The theory would also

disadvantage individual property owners and developers, who

would not be able to take advantage of such sophisticated

transactions to protect their development rights in their

property.

In addition to its potential for spawning legal fictions and

litigation, the “coming to the regulation” theory loses its

superficial substantive appeal when its underlying premises are

examined in light of economic principles. The theory is

contrary to sound public policy because it would produce

unwarranted distortions in property ownership and development

patterns.

For example, a property owner’s claim that a regulation

constitutes a taking is not ripe until the property owner is denied

the right to develop. Williamson County Regional Planning

Comm'n v. Hamilton Bank of Johnson City, 473 U.S. 172, 186,

195 (1985). Thus, the owners of undeveloped property under

a “coming to the regulation” regime are in a Catch-22 when a

regulation restricting development is passed. The property

owners cannot challenge the regulation until they are ready to

develop the property and are denied a development permit, even

if the regulation would clearly constitute a taking. An owner

without adequate capital to develop immediately after the

regulation is adopted is in a difficult position. The owner may

not want or be able to face the time, expense, uncertainty, and

exasperation of challenging the regulation. In such case, the

value of the property to the owner is effectively reduced to zero.

Nevertheless, he cannot sell at a modest discount to someone

else willing to take on the challenge, because the purchaser

would not retain the same right to challenge the regulation.

Instead, the owner must sell to someone else at a steep discount

to cover the purchaser’s loss of rights under the “coming to the

regulation” theory or retain the property until such time as he or

she is finally able to raise the capital to develop the property

alone. This disincentive to sell at a fair price under the “coming

to the regulation” theory is thus in the nature of a long-

disfavored restraint on alienation of property. See Bowen vy.

Campbell, 344 Mass. 24, 26, 181 N.E.2d 342 (1962). See also

Iglehart v. Iglehart, 204 U.S. 478, 484 (1907).

On the other hand, an owner with adequate capital at the

time the regulation is passed may have an incentive to seek to

develop the property immediately, so as to receive the benefits

of the regulatory challenge (the recognition of his or her

development rights) when he or she is capable of exercising

those rights and before future uncertainties take their toll on the

owner’s ability to develop the property. An owner mi ght prefer

to hold property thinking that in the long run the surrounding

area will grow and development of the property will be

warranted. At that time, assuming the area has grown,

ordinarily the owner could then develop the property or sell the

property to a developer who would retain whatever

development rights the original owner had. If the “coming to

the regulation” theory were applied, however, the property

might well be developed prematurely because it is the only way

for the owner to realize the benefits of a developed property

(i.e., higher value per square foot), as a subsequent purchaser

(without the right to challenge the regulation) would not have

the same development rights as the original owner. Since the

surrounding area will not by then have grown out to the

development, the price for the developed property will be lower

than it would be in the future and may thus not be the best

investment for the owner, nor the best use of the property at the

time. This incentive for premature development would thus

unnecessarily contribute to the suburban “sprawl” of

leapfrogged development that has been decried recently. See,

e.g., Gregg Easterbrook, Suburban Myth, NEW REPUBLIC, Mar.

15, 1999, at 18.

Under this Court’s decision in Lucas, supra, a complete

regulatory denial of any economically beneficial or productive

use of property, such as the loss of the use of the lake-bottom

land at issue here, should constitute a categorical taking

regardless of whether the property remains in the hands of the

same owner who held the property when the regulation was

passed. The “coming to the regulation” theory would promote

legal fictions, encourage litigation, constitute a restraint on

alienation, and stimulate premature development leading to

unnecessary “sprawl.” The policies behind the Fifth

Amendment’s protection of property ownership would be

vitiated if original owners are prohibited from challenging

regulations until they are ready to develop while subsequent

owners are prevented from challenging the regulation when the

property is ready to be developed. The issue presented

addresses an important aspect of property rights which this

Court should resolve to bring fairness to property development

decisions nationwide.

enc

Saabiers

CONCLUSION

For the reasons stated above, the petition for a writ of

certiorari should be granted.

Respectfully submitted,

ATLANTIC LEGAL FOUNDATION

and

NEW ENGLAND LEGAL

FOUNDATION,

By their attorneys,

Counsel for Amici Curie Michael E. Malafnut