Property Rights Foundation of America®

Closing address from the Eighth Annual New York Conference
on Private Property Rights
(2004)

INVERSE CONDEMNATION

The Rationale for Compensation for Regulatory Takings

By Henry St. John FitzGerald

Thank you! And I certainly enjoy coming up here to talk to a group of people who are interested in protecting and fighting for rights, in your case property rights. Fighting for rights in general has been something to which I have devoted my entire professional career. In the interest of full disclosure, I think I must say that I am not a land lawyer. I don't do land law as such. I don't do titles or anything like that. I am a court room gunslinger. I go to court and try the cases when somebody's rights have been trampled on and we try to get them rectified in court. I put the witnesses on, argue to the judge, argue to the jury to try to get some justice done. That includes all rights, property rights as well as any other kind of rights that need to be protected in a court. But just because you travel across the landscape in fighting all kinds of disputes, when you have been at it as long as I have, it doesn't mean that your experience is limited. I have had to deal with all manner of land rights disputes and condemnation and inverse condemnations and so forth over the years, and those are important cases, important rights to the people who are involved.

I am asked nowadays to help people work on issues that reach higher courts, which is why I have opened this Legal Advocacy Institute to try to devote some of our time to the people who don't have large amounts of money, but do have important problems and have important rights that need justification and just can't pay the fees of top law firms., I have been giving my time pro bono to people who need assistance or would appreciate some assistance in courtroom activity, oral argument.

I was asked to and spent a lot of time as the oral argument coach for a guy named Gilbert Davis, who argued the Paula Jones case in the Supreme Court of the United States for Paula Jones. We won in a 9 and 0 decision where the Supreme said 9 to 0 the President of the United States cannot stop a lawsuit against him that occurred before he became President just because he holds the office of President. The person can be sued. A very important decision.

Earlier this year the public defender in Eastern Virginia got me to help him on his oral argument for a man named Yasir Esam Hamdi, who was being held in Norfolk, not allowed access to anyone, family, lawyers, and we won a decision there in which the Supreme Court rejected the Administration's position that they could hold him indefinitely and said, no, you have to have a habeas corpus hearing and bring him before a judge or release him. That is an enforcement of important rights, not property rights, but they are all the same when you get down to it.

The biggest source of the law and the biggest bulwark to protect our rights, including property rights, is our Constitution. The Constitution and the Bill of Rights are an invaluable bulwark against government intrusion on private rights. One thing that we are suffering from, as I see it, and I see it behind what this immediate speaker just referred to, I see it behind what Mike said in his talk, I see a pattern going on which I participated in, or at least was a witness to, when I was an assistant United States attorney. The government officials—federal, state, county, municipal, whatever—they all have agendas. They've got programs. A mayor gets elected on a platform he is going to do this and somebody else gets elected governor and they have programs. They are there all the time. They are paid by us. They get paid no matter what they do, so they can think up things. Well, what shall we do? Well, I think it would be good to go out and expand this and expand that—expand their own power, expand their own divisions, expand their own department, get their budget up. So in order to do that, to a very large extent, a lot of this is coming from that bureaucracy which sits there year in and year out getting paid. Year in and year out, they justify what they are doing by embarking on programs that can trample on other people's rights. They are not familiar enough, the people who do these things, these bureaucrats, they haven't owned any property, they haven't been out there to experience what it is like, they don't have the feel for it. They are not evil people. I don't think that at all. They are just inexperienced. They don't know. I have a recommendation for you at the close of my remarks concerning that. But I think that is where a lot of it is coming from. How can I please the governor? Well, let's go take a bunch of land or let's put it in a bunch of restrictive regulations, let's do something, and then we can run for office and we will get some more votes on this.

George Bernard Shaw said many years ago that a government that robs Peter to pay Paul can always count on the support of Paul. We, those of us who are not Paul, or if you are interested in justice, you want to keep an eye on what they are doing and if they are robbing from Peter, go after them. Point the finger, do what each of the speakers before us have said to do. Focus attention on it, get out there before it becomes law, before it gets to my hands where I have to go to court and say to some judge that this is illegal. If you can stop it, prevent, blunt it, dampen it, reduce it, do it! When you get to court, when I get to court, the odds very generally are stacked against the landowner in favor of the government. There is a huge presumption that government is doing what it is supposed to, that its decisions are fair and just, that they are only doing what is good for all of us, some people's rights have to be sacrificed for the good of all. All of that is true but in every given case there can be exceptions and distinctions and they can go too far.

The lead case in setting up this analysis of where the government goes too far is the Pennsylvania Coal Company case. It is cited in my outline, (See attached appendix.) In 1922 the opinion in that case by Justice Holmes early in the opinion refers to this issue, which is constantly present and will be present in every one of your cases if you get in them. He said, "Government hardly could go on if to some extent values incident to property could not be diminished without paying for every such change in the general law." That's true. The government has to be able to restrict people's rights and cut down on people's freedom for the good of all. They can impose height limitations, set backs, they can restrict, make you have roads that are sixty feet wide or fifty feet wide. They do have a lot of power and that is for the good of all of us, but as Justice Holmes continues on in his opinion, he said, "The general rule is that, while property may be regulated to a certain extent, if regulation goes too far, it will be recognized as a taking." That one sentence set up the whole business of regulatory and inverse takings. "If regulation goes too far, it will be recognized as a taking."

How far is too far? That's the issue. In a given case you have to decide, and go into each and every case and decide, whether the regulation goes too far. He goes on to say, "It may be doubted how far exceptional cases like the blowing up of a house to stop a confrontation go, and if they go beyond the general rule, whether they do not stand as much upon tradition as upon principle. In general it is not plain that a man's misfortunes or necessities will justify his shifting the damages to his neighbor's shoulders." Then he gives a most prophetic and very loaded statement. "We are in danger of forgetting that a strong public desire to improve the public condition is not enough to warrant achieving the desire by a shorter cut than the Constitutional way of paying for the change." Very, very foresighted and very, very accurate. There is a limit to how far government can go in the cause of the general good imposing restrictions on rights of individuals and small groups of people, and, when they want to go that far, they have to take the land and pay for it.

Inverse condemnation is the situation where the landowner says that my rights have been so taken away, so restricted, so harmed, that this is a "taking". Although no papers have been filed taking anything, nothing of the ordinary eminent domain proceedings have occurred, which is usually started by a document called a "taking," nothing like that has happened, the landowner says this amounts to a taking. This is constructive taking. I am so harmed that it is the same thing as a taking. That is what Justice Holmes is saying can occur. And in that case and from that statement, the doctrine of inverse condemnation has grown and blossomed all over, so that if you are the victim of such a regulatory action, where so much of your property has been taken away or the value has been so harmed that you are really left with very little, you can file a suit and require the government to pay you damages, in essence, the value of the land. They have taken your land for the public good and the public should pay for it. That is the essence of an inverse condemnation. You can do that under the Constitutional due process and the Fifth Amendment—no property shall be taken without due process—and require that you be compensated for that as a Constitutional right.

Justice Holmes' opinion from which I quoted in the Pennsylvania Coal case and other cases have not actually been takings cases. That was not a takings case. And it is interesting to remember that. I understand that there is a minority of lawyers here. The majority here are not lawyers, so I am not talking too much technicality to lawyers. But in the Coal case, which started this and gave us Justice Holmes' opinion ,the Pennsylvania Coal Company was sued by the State of Pennsylvania under what was called the Kohler Act, which said they couldn't remove coal under certain circumstances, and the coal company kept on removing the coal. The State sued. The Pennsylvania Coal Company objected to the suit, saying that the statute was unconstitutional on the ground that it took their property without just compensation, which violates the Fifth Amendment, and the statute itself is unconstitutional. The Supreme Court of the United States agreed. The statute was declared unconstitutional. I point that out to show the difference between a case where the Pennsylvania Coal Company would go running into a court and say, oh, they are taking my land. Please convene a court and give me compensation. That is a different matter. That is inverse condemnation. Attacking the statute is a good tactic. If it doesn't provide just compensation, then it may be void and that's the end of that. In many states, including California, is procedure to provide for inverse condemnation, so that if you perceive that you have had your land taken in a way which would require just compensation under the Fifth Amendment, you can file under that statute and require that they convene a court and you have a complaint and an answer and a trial and appraisers and ultimately you get some result under that procedure.

In one of the Supreme Court cases I am going to mention, the Monterey vs. Del Monte Dunes case in California, the state had no such statute. After the Monterey case, the legislature adopted one. So if you say that you are harmed by state action taking your land and you have a state procedure that you could go to get compensation under the federal law, you've got to go there. You must pursue that remedy. You can't turn your back away to get compensated and ask the federal court to come in. You will not have exhausted your remedies, or your case is not ripe for decision by the Supreme Court. So if you claim inverse condemnation with your own suit or you proceed with a statutory action, you can get compensation for the taking of property without just compensation under the Fifth Amendment.

Nollan vs. California Coastal Commission is a similar case. The California Coastal Commission passed a regulation governing all ocean front land. If you owned ocean front land, you would not be allowed to obtain a construction permit for any building unless you dedicated an easement on the side of your land to allow the public to reach the ocean on your property. You must dedicate an easement along the side of your property as a condition of getting a building permit. The Supreme Court struck that down and said that is an unconstitutional enactment. It requires people to give away property. It is a taking of property without just compensation.

Penn Central Railroad in the fifties owned Grand Central Station in New York City, of course, had owned it for decades. The city came along and passed a resolution designating, of over a million buildings in the city of New York, they designated 400 as historic landmarks. Grand Central Station was one of them. The owners couldn't do anything to disturb Grand Central Station or any of these historic landmarks. Penn Central Railroad, which had owned it, had a contract, they had a contract with someone to build a big high-rise, big skyscraper in the air rights above Grand Central Station, and they were turned down by the city and they sued. They went to the Supreme Court and they lost. The Supreme Court said no, historic landmarks and the good of the whole city, it is a valid government purpose. They are not taking away the station. You can do anything you want to with the station. You can continue to use it, make money out of it. They haven't bothered the station. They just say that you can't tamper with it, and that restriction is within the police power of the city because historic landmarks are a big deal to the city, and the individual good or interest of the people who own these historic landmarks must give way to the greater good of the whole city. But in that case, while they turned down the case and Penn Central lost, they included some language that said that if a taking is such that it bothers the use of the property that you have, you have to examine the nature of the taking—exactly what the restriction is, what the property is used for—a list of criteria which in lawyers' terms is called dicta. It is not a part of the ruling but it is sort of a, hey, look here, there are some other things that you might think about which gave rise to the phrase "Penn Central Taking." There is such a thing in the law as Penn Central taking that, if the restriction does impair the economic utility and value of a piece of property, then a whole list of criteria will be looked at and maybe that will be considered a taking which requires just compensation under the Fifth Amendment.

One of the best ones is the City of Monterey vs. Del Monte Dunes. One of the most interesting parts of that case to me is the fact that it was not an inverse taking case at all. It was brought as a Civil Rights Act case. For over five years, the Del Monte Dunes had tried to develop a substantial tract near Monterey, California, with dunes and waterfront and some grass, and somebody said there was a habitat of some obscure butterfly that lived over in one corner of it. Everybody in California was up in arms. They were all excited about this Del Monte Dunes property, but the lawyers in that case did a very good job. They filed an application, they tailored them, they did their best to comply with the law and give the city what was reasonably due in the way of public interest, but, really, the city would just turn them down. They were not going to grant anything and they did and the city would turn down an application and say this is no good but if you did a, b, and c, we would approve it. So they would go out and they would do a, b, and c and come back and the City would say, oops, no, we changed our mind. You did a, b, and c but now you ought to do e, f, and g. And they would go back and come back and oops, we changed our mind again. They just kept whipsawing them.

So they went to the United States District Court, and sued under the Civil Rights Act, Section 1983 of Title 42, which says anyone who is deprived by state action of any rights guaranteed under the Constitution may file a suit in the federal court and obtain regress. They did that and they asked for a jury trial. They got a jury trial and they got a verdict of a million and a half. They took it to the Supreme Court. The Supreme Court went over the whole case very carefully and affirmed. They affirmed that case.

Monterey is a very interesting case. The landowner, developer, won by doing his homework, doing a very good job of touching all the legal bases. I'll just read you a quote out of that. The Supreme Court of the United States opinion in the Monterey case, written by Judge Kennedy—Kennedy of course is a California justice—stated that, "To the extent the city contends the judgement sustained by the Court of Appeals was based upon a jury determination of the reasonableness of its general zoning laws or land use policies, its argument can be squared with neither the instructions given to the jury nor the theory on which the case was tried." Let me stop there and say the lawyers did not attack the general ordinances of these things, which would be a mistake. They attacked the specific application to their land of those ordinances. The instructions did not ask the jury whether the city zoning ordinance or policies were unreasonable but only whether "the city's decision to reject the plaintiff's 190 unit development proposal did not substantially advance a legitimate public purpose, that is, whether there was no reasonable relationship between the city's denial of the proposal and the legitimate public purpose." This is a very important point in Constitutional analysis. The government has to have a legitimate public purpose as the underpinnings for its actions. If it doesn't have that, it has no power to act at all. So if you can attack that, that is useful. They didn't attack the overall enactment, but whether this decision to deny the 190 units advanced a public purpose.

Furthermore, Del Monte Dunes' lawyers were explicit in conceding, and here they are quoting, "This case is not about the right of a city, in this case the City of Monterey, to regulate land." Proposals were made keeping in mind various regulations and requirements, heights, setbacks, intensities, and all that. That is not what this case is about. They have their right to set height limits. They have their right to talk about where they want to access. That is not what this case is all about. We all accept that, in today's society, cities and counties can tell a landowner what to do to some reasonable extent with their property, so this is constantly a balance, sometimes very technical, very detailed. You need competent attorneys to assist you in this battle. I am telling you that you will not be able to do it yourself. You need assistance. I have a proposal on that before I conclude.

In Agins vs. the City of Tiburon, another California case, they attacked the statute,. The city had passed a statute, a zoning ordinance, which seemed very, very burdensome. They went to court to have the ordinance stricken. The district court threw it out, they appealed to the Supreme Court, and the Supreme Court said, you can't. Reading the ordinance doesn't tell us that anybody's rights have been taken away. You have to try to get something under that ordinance and have it denied and then show that that denial is denying you some valuable right.

The Palazzolo versus Rhode Island case, a very recent case, in 2001 out of Rhode Island, is very interesting. He had applied for filling some wetlands, two times been denied over a long period of time, and finally asked for a development to be approved. They turned it down and he appealed, went to court in Rhode Island, went to the Supreme Court of Rhode Island, lost, and went to the Supreme Court of the United States, which reversed. They ruled with Palazzolo. This is a very interesting case. They said to Palazzolo that his case was ripe. They were saying he had not done all the steps. He hadn't exhausted this and that. He hadn't tried for all the things he should have tried for, and the Supreme Court very carefully went through the record and said, yes, he did. He did everything he could. He asked for the right to fill so he could have a beach club, and they said, and under that particular statute you could get a waiver for compelling public purpose. His purpose was a beach club. The state turned him down on the grounds that the beach club was not a valid compelling public purpose as a basis for a waiver. So the state then contended that under some other decisions of the Supreme Court you might have to apply for a smaller development. Just because, as they call it, a grandiose development is turned down, it is not necessarily the end of the matter and go and get a federal court ruling. You might have gotten some lesser development that would have been constitutional and you should have tried it. Rhode Island tried to throw Palazzolo out on that, and the Supreme Court said, no, he tried that and he tried for, I think, eleven acres of fill and for a beach club, and they made a ruling that a beach club is not an overwhelming or good public purpose. So cutting down the number of acres also for a beach club isn't going to do him any good. It is going to be turned down for that, so his case was ripe.

He had bought out some of his partners in the land years ago, but after this zoning enactment. The zoning enactment went on when he and some other people owned the land. He bought them out. They put the zoning on and then he bought them out and later dissolved the corporation and so he was the sole owner. The state argued that he acquired the land with the zoning regulations on it and so he doesn't have the right to complain. The Supreme Court said, nope, that's not right. He certainly has a right to complain. The state cannot put a time limit on constitutional rights. If what they did was unconstitutional when he applied for it and they denied him unconstitutionally, the fact that he acquired the property after those zoning enactments does not disqualify him. So Palazzolo won two of the points.

They said he had a taking, a so-called Lucas taking, in the Lucas case where he was deprived of all economic benefit. This is one of the bad parts of inverse condemnation. On the doctrine, you have to have lost all, virtually all economic utility. They said that of his seventeen acres there were a couple of acres called upland. He had seventeen acres, fifteen of them wetlands, two acres of so-called upland. He could build a house on the two acres. So the fact that he couldn't do one single thing with the other fifteen acres under the zoning did not necessarily mean he was unconstitutionally taken. You have to take all the economic utility to have a Lucas type taking. They hadn't taken it all. They left him one house site, which might be worth $200,000. Instead of $3 million, it was worth $200,000. But that's enough that they did not take all of your economic utility. Then the U.S. Supreme Court reversed and sent it back to the Supreme Court of Rhode Island to determine the Penn Central criteria, the ones I referred to earlier. Take each individual case and determine all the specifics, the kind of a taking, what happens, how it affects, what is the public use, how does it affect this particular owner, and maybe there is a Penn Central taking which the Rhode Island court did not examine. So they remanded it to Rhode Island to consider the Penn Central criteria to see whether there might be a taking. So he won two and tied one out of three and the case is still going on.

In closing, I'd like to point out the tactics that you should use. I heartily agree with the speakers on this panel before me to go out and work in your community to try to stop these things, frame the issues, press early, organize the vote, watch the programs coming. Watch what is coming, because they are planning. They are organized. They have got lawyers. They could say, well, now if we do this, are we going to violate the Constitution? Well, maybe so. Well, maybe we better do it this way. None of us are out here paying attention to what they are doing. They are going to try to jolly it around to make it as close to legal as possible and you have to be on top of that.

I had a case where a substantial restaurant down our way, a place called the Orleans House, was bought, a big restaurant down there. There was a street beside it and the state was going to widen a state road beside it and take four feet off the building. Just take four feet off the building, and the owner went in to get some construction permit to rehab and put a lot of money into the place. The state said, oh, my gosh, if that happens we are going to have to pay through the nose for that place. Stop. They went to the county and said, don't grant the permit. Don't let them improve this property because we are coming with a condemnation. Of course, the condemnation wasn't there. It depends on the legislature. They've got to appropriate the money. You know how that is. A road is coming. Well, who knows. But the County of Arlington, and this is the bureaucracy I am talking about. They are all friends. The state highway department and the county manager all working together, and the county manager denied the construction permit, so that it would be unimproved when the state came along to condemn it. This is not a taking. This is, well, you could call it a taking. There are a lot of ways you can argue these things. We went in and filed a mandamus and got the court to order the county manager to issue the construction permit. He had no grounds to deny one. He is saying, well, I know they are coming with a condemnation. The judge said, how do you know? Well, he said he had no proof, no money. It hadn't been taken. If it has been taken, don't give them the permit. If it is his, give him the permit. And that was the end of that, so this isn't an inverse taking, but there is a lot of twists and turns in this business and you have to be paying attention to protect your issues.

It is a pleasure to talk to people who are interested in that. I enjoy it. I have done a lot of it, and it is to me forever new, fighting for people's rights. I say that I have a little bit of gray hair and I have been at it a long time, but it is forever new to do this.

I will close with a quotation from a dissenting Justice of the Supreme Court who said very prophetically that "America will never lose its freedom to a man on a horse. Where it will lose its freedom it will be to smiling young men in suits with briefcases." Don't let them do it. Be there to oppose it.

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