Property Rights Foundation of America®

Speech from the Ninth Annual National Conference
on Private Property Rights
(2005)

Forward for Private Property Rights

James Burling, Senior Counsel, Pacific Legal Foundation

Thank you for that kind introduction. It is always good to be back in New York State, and I mean that quite sincerely. I went to a little school called Hamilton College not far from here near Utica and then I saw the light and went out west for more sunshine and good weather. Then I got involved in property rights.

We have heard a lot of really excellent talks about property rights, and I don't have to talk too much about some of the things that have already been said. I'll mention that, when I was here speaking at the conference seven or eight or nine years ago, I told you that one of the problems that we have in trying to convince legislators, courts, and even the general populace of what the problem is in defending property rights is that if you want to see sometime what the real enemy looks like, go in the morning and look in the mirror and we see ourselves. We are the ones that want to do what we can to stop our neighbors from painting the house an ugly color, from blocking our view with their two-story house where a one-story house used to be, and it is difficult. We may believe in property rights down to our toes, for everything we have, but it is difficult to talk to your neighbors about that when your neighbors are the ones that really don't want to have development, that don't want to have the congestion in their neighborhood. They don't want to have their views affected, and so how do you talk to your neighbors about that? It is very, very difficult.

The same sort of problem comes along when you are talking to legislators, because they want to see the birds and the bunnies protected. They want to have an easing of traffic congestion without building highways, of course, because highways are bad. And they want to have all these quality of life issues without realizing what that means. So you can have maybe three approaches.

You can talk about economic arguments. You can talk about the fact that, if you have excessive zoning, the cost of housing inevitably is going to go up and that is going to make it very, very difficult to have affordable homes for our children and new people that are coming into the housing market. But sometimes that argument falls on deaf ears as well, because I have a home and, you know, my kids, I've only got two of them, they'll figure out a way. I was able to figure out a way. They'll figure out a way, and why do we want to have cheap housing for all those other people because I don't get my way. You can talk about the impact of excessive regulation on having jobs and the economy and that has a huge impact on people who at the moment don't happen to have a job. They are very concerned about it, but you have a good job and you are not very concerned about the impact of excessive land use regulation. So these arguments are difficult.

Or you can talk about the need to have a reasonable regulatory environment so you can have economic growth, but people start talking about growth and they realize, well, what does growth mean? Growth means that a new subdivision is going to eventually go down here to support the new workers. That means there is going to be more congestion, the traffic, the schools are going to be overcome with more children, and, well, we don't want growth in our community. Let's have it somewhere else. And so things become very parochial and very difficult to make the sort of logically reasoned economical argument of why we need to have some sort of reasonable land use regulations.

Therefore a lot of us turn to the philosophical arguments, and you heard a really good explication of some of the philosophical arguments this morning—the idea that our home is our castle. That was Lord Cook that said that back in the seventeenth century the first time, and it has been repeated over and over again. William Blackstone, a great legal jurist who was highly influential with the founding fathers, talked about the home being the castle, quoting Lord Cook before him. And our Supreme Court talks about that, that our property is where we have autonomy, where we can shut the door and not even the king can enter the door without the appropriate legal requirements to do that.

But these arguments, too, I would suggest are lost on a lot of people. People don't get very philosophical. You ask the typical man on the street who John Locke was, and they'll look at you kind of quizzically and say, are these the guys that you call if you are locked out of your car? It doesn't mean a whole lot to them. You can talk about Thomas Hobbes. And they say, oh, I remember that cartoon, that was pretty funny. If you talk about the philosophical basis for property ownership—and I have given a lecture sometimes and I go through the whole history of property rights from the law code of Hammurabi up to modern times, highly fascinating to lawyers and to people that have a perverse interest in that sort of thing, maybe some of the people in this room, but, to the ordinary man on the street, you know, they are more interested in getting to work on time, getting back to work on time, making sure that they have food on their table and that their television shows are not blacked out when they want to watch the local sports team.

So it is hard to take this philosophical viewpoint, and one of the issues that the founding fathers wrestled with, when you talk about property rights, is the tyranny of the majority problem. Property owners, we may be in the majority, but, if you are talking about owners of land with development potential on it, now we are starting to talk about some real minorities. If you are talking about people who have land with development potential and the wherewithal to develop it and the desire to develop it within a short period of time, the next five or ten years, you are talking about a real tiny minority. You are generally not even talking about us. You are talking about the evil developers, the guys that smoke cigars and walk around in these suits and look and shake their hands and say, look what we could do to this community. We could really ruin it by building more homes for their children. So we talk about the tyranny of the majority. That kind of argument is lost, too, because we are the majority, right? We are the people who have homes. We already live in our homes, so do we really want to start dealing with these philosophical arguments.

So the third strategy, and the one that we have adopted, we being attorneys, at PLF and some of these other legal organizations around the country, like Institute for Justice that handled the Kelo case, is looking at what happens to real life people when these regulations that are designed for the good of us all, when they actually run into an individual, and what happens to that individual, "the widows and orphans are us" sort of way of arguing for property rights. And I am not going to spend time talking about the Kelo case, because you will hear enough about that in the afternoon, but that is a classic horror story of what happens when people who have lived in their home since, say, 1917 or 1918 or whenever that happened, when they are kicked out of their home. We have had a series of cases over the years, and I am going to use these cases to try to set an example of what we are going to look at in the future and how we can possibly get some of the courts and some of the legislators to turn things around a little bit. I am only going to talk about a few of the many cases we have been involved in and only briefly on those cases.

One case that I just want to mention is the Suitum case, where we represented a widow at Lake Tahoe. She had a residential lot that was between a couple of other fully developed lots in a subdivision that had completely built out except for her lot, which she was not able to build because her husband was quite ill for a number of years. When he passed on, she decided to build a home so she could have a nice place to retire. Mrs. Suitum was told by the Tahoe Regional Planning Agency that she couldn't build her home, but maybe, if she entered into a lottery, she would get some transferable development rights, which she could go out and sell. She lost her case at the trial court. She lost her case at the Ninth Circuit, at which point we took over. Representing the agency were a number of attorneys, but, in particular, was a gentleman named Richard Lazarus.

I am mentioning his name because when we talked before about what I just mentioned about property being this area of autonomy that we care deeply about, that it is where we can hold out the government and that it is so important, Richard Lazarus has written Law Review articles—he is a law professor now at Georgetown—saying that property isn't that important anymore to people because people live in urban areas, they live in fully built out subdivisions, or they live in apartments, and they don't have the sense of autonomy of property as something that really separates them from the rest of the world where they can have a sense of identity. He just rejects that idea. So Richard Lazarus represented the agency in the Suitum case, and Mrs. Suitum was there in the courthouse, in the U.S. Supreme Court, where one of our attorneys, R. S. Radford, was arguing. At one point Justice O'Connor leaned forward and said, "My goodness, why don't you just give this poor elderly woman her day in court?" At that point we knew we had won the case, because she is one of the swing votes on this issue. Indeed, that is what the court said, that she had a right to go into court and argue that her property had been taken because this idea that she could perhaps get transfer of development rights really did not bar her from going to court. She eventually settled with the agency and got a few hundred thousand dollars for her property. Unfortunately, she was too old to enjoy the money at that time. She was bedridden and did not live too much longer after that, but she did achieve a victory in the court.

The point is that when you can take a real life hardship example, you can move mountains. It is very easy to talk in the abstract about the economy, it is easy to talk in the abstract about John Locke or Thomas Hobbes, but it is lost on people. But when you can talk about this widow not being able to build on her property and not getting a dime in compensation for it, that makes a difference to some people.

Let's move on to Anthony Palazzolo, who at the time that I represented him in the Supreme Court was about 81 or 82 years old. He had property that he had acquired in 1959 and 1960. He had been trying to develop it for years and years afterwards, could not do it, could get nowhere with the agency.

For you to understand this case, I should give you a brief thumbnail. He had bought it in 1959 and '60 as part of a corporation of which he is the sole shareholder. At the time he acquired it there were no wetland regulations. He tried to develop it, and gave up. After a while, he actually got permission to develop the property, and he was about ready to move in the bulldozers when the state department of environmental protection had a new boss, and they said, no, we are pulling the permits that you have. You can't develop your property. So the heck with it, he concluded, I have many things to do. I am a hard working entrepreneur. I own a tow truck and a wrecking yard and this is my business. I don't have time to develop this property. He did that.

Wetland regulations are passed. He decided to give up the corporation because it was costing him a hundred bucks a year, so he stopped paying the corporation fees, at which point, after the wetland regulations were in place, he owned the property in his personal capacity. He then tried to develop the property again in the eighties and was told no. He tried again and was told, no, you can't do it. You can't do anything with your wetlands. So he sued.

One of the primary reasons that he lost in the Rhode Island courts was that he acquired the property when the corporation lapsed in 1970s after the wetland regulations were put in place. That is, he acquired the property from himself after the regulations were in place so he was on notice of the regulations because he had acquired the property when the regulations were there. Since he was on notice of the regulations, he had no right to complain about them because he knew what he was getting into when he acquired the property from himself after the regulations were put in place. Am I making the scenario clear enough? I hope so.

We took that case to the U.S. Supreme Court, where the Supreme Court looked at the situation and again O'Connor leaned forward and said, "What about the poor widow woman who has property she can't do anything with it and she has to sell it. Does this mean she doesn't get anything for it?" And we knew at that point again that we had probably won that case and indeed we did win that case.

The point is that we have these regulations and these cases we talk about, 800,000 acres here, 30 million acres here, you know, big deal, 800,000 acres or 30 million acres. After a while, I suppose it begins to be significant, but it is a lot more significant if we are talking about a quarter acre lot that a widow can't build on than if we are talking about 800,000 or 20 million acres in the abstract. This is why we find some of these horror stories and exploit them in the courts and in the press because it does seem to have an impact.

The last case that I want to talk about of the older cases—and I am going to briefly talk about some cases that were cited this last year by the Supreme Court—is the Nollan case. The Nollan case, once again, is a case that people, even some judges, can identify with. The Nollans had a one-story house. Some of you have heard me tell this story before, so I will keep it very short. They wanted to tear it down and build a two-story house, but the problem was that the Coastal Commission came in and said, if you do that, you are going to create a psychological barrier to realizing the existence of the ocean. That is, people driving down Highway 1—you have to understand this is California where psychological problems are very, very serious, and many people in California sometimes forget to take their Valium. All right? It is a serious problem. So you are going down Highway 1 and all of a sudden you look over and you see the two-story house where a one-story house used to be, and you have a psychological barrier attack realizing the existence of the ocean. It is serious stuff. So the Nollans are told that they could build their house but they had to make up for the impact that it was going to cause in the public and to make up for that impact they had to give away one third of their property between their house and the beach, along the beach there. That made perfectly good sense to most people in California because, look, if you have enough Valium, everything makes sense. I could do my George Carlin routine but I'd better not. So, you know, it's cool. But Judge Scalia apparently is not on Valium, and so we took that case to the Supreme Court. He said, now, wait a minute, wait a minute. He realized that people driving down the coast would not be helped because, even if they were suffering a psychological barrier attack, they would realize that the property that the Nollans had to give away couldn't be seen from the highway where people were going to be experiencing this psychological barrier problem. He said, maybe they could be required to build a little viewing tower, so that people could climb up and look over their house and see something there, but we are not going to require them to give up a condition. This has had a tremendous impact on the ability of government agencies to exact conditions. It used to be that if you want to get a permit, you have to give up something. Now agencies are required at least to show some relationship between the permit that they are asking for and a harm caused by the development and the thing they are asked to give up.

In Bill Moshofsky's case that he mentioned earlier at lunch, they were required to give up, among other things, a bicycle path to make up for traffic impacts caused by building a plumbing store. At the Supreme Court argument, one of the great comments was, well, I don't see too many people with plumbing supplies on bicycles going in most neighborhoods, and indeed he was right and that was thrown out as well.

But we have this idea that property is important, and one of the best ways of demonstrating that is to show these absurd stories that I can tell you about that we go to court and you win on them. You know, we can have a lot of fun talking about them now, but they are not really necessarily fun to the people that are involved in the cases at the moment. Also, things are very difficult for landowners to bring, and so let me give you a sad story out of the Lake Tahoe area.

The Tahoe Sierra Preservation Council was a group of about 450 landowners that found that when Nevada and California got together to have a compact agency to regulate property in the Lake Tahoe basin, they found they were suffering under a series of moratoriums. First a three-year moratorium preventing any use of the property until the agency could figure out what regulations to put in place, then another moratorium of nearly three years because the agency couldn't get its act together in the first three years. It takes a long time to write a regulation. I mean, for heaven's sake, you've got paper and pencil and typewriter, and you get all those things in the room at the same time and it can take six years, okay? So they took six years and then they came out with regulations that essentially prohibited the ability of these landowners to use their property.

And they had suits that they had brought, arguing that these were regulatory takings. They had a series of episodes and they went into the trial court, up into the federal district court, to the Ninth Circuit Court of Appeals, back down to the trial court. They are bouncing around like a yo-yo for ten or fifteen years, losing a little bit here, losing a little bit there.

They finally got into the U.S. Supreme Court, and the issue was, when a regulation for a period of time destroys all use and value of the property, is there a regulatory taking? This is a case that did not turn out so well. Richard Lazarus originally was apparently going to be arguing the case, and he claimed to be too busy, and he had one of his friends argue the case for him. Richard Lazarus is the professor that says property is not important. He turned to one of his old roommates from the time that they were both early young lawyers and just starting out. His roommate happened to be John Roberts, and John Roberts argued the case very effectively for the Tahoe Regional Planning Agency. John Roberts argued that, really, this all should be looked at in terms of balancing. And balancing tests are what happens when landowners go to court to lose. They are takings cases. Because you have to balance the economic impact of the regulation, investment expectations, the character of the regulation, and it is very, very difficult for a landowner to win these balancing cases. Bill Moshofsky mentioned that only one party has actually won one of these cases hands down. That was the quarry down in Florida. It's very difficult. But that is what Roberts argued. Now, some people would say John Roberts is only arguing for his client. He was the mouthpiece. But he happened to have written very similar things in a 1978 Law Review article, which gives me some concern of where the court may be going in the future, because I'm sure you realize that I'm talking about the same John Roberts who is now Chief Justice.

We have had some very significant developments in the last year in property rights, also, from the courts, none of them particularly good. Which is why we need to find more good horror stories. There is the Lingle case, Chevron vs. Lingle. Let's face it. Chevron. Who is going to get very sympathetic about the property rights of an oil company? Certainly not the Supreme Court. Hawaii passed a rent control regulation regulating the leases that gas station lessees would pay to the major oil companies The rationale behind the statute was to keep gas prices lower. Chevron came in with economists that proved hands down that that was economic lunacy, that the State of Hawaii didn't know what it was talking about, and the regulation failed to substantially advance a legitimate governmental interest, one of the tests for a taking is a test that has been around since the 1970s. It was quite clear, we thought, that that was a taking, if you could prove that it doesn't advance a legitimate governmental interest.

But the court said, no, we are not going to have the courts start looking at economists and weighing the wisdom of a regulatory or a legislative action regulating the economy. That's just not the business of the Takings Clause. It is a due process test where you give substantial deference to the courts. We are not going to have the courts simply, on their own, weighing whether or not this sort of regulation substantially advances a legitimate governmental interest, and the property rights argument in the Lingle case was also lost. It was an unfortunate decision, not a terrible surprise, because, look, the minute you start talking to many judges and justices about economics and bring in economists, the eyes glaze over and get me out of there. Get the stuff away. Or, we don't want to be talking about numbers because, heck, I went into law school because I couldn't do numbers and calculus is one of the worst things I ever did. Right? We have an aversion in the courts to listen to some of these hard economic arguments.

The next case that the court decided last spring was the San Remo case. San Remo was an instance in California where the City of San Francisco decided there is a housing affordability problem, and one way of fixing that problem was to make sure that people who own flop houses and long-term residential hotels only rent those hotels to people on a long-term basis. So you have the long-term renters, but not the tourists. Well, the owners of the San Remo Hotel wanted to rent their property out to tourists. In fact, they had been doing it for years when they found themselves in a zoning classification saying that they could only rent their property out for long-term residential uses, which means generally low income people. They thought, well, it is our property; we should be able to rent it out to who we want to. And the City said, absolutely, you can do that. Oh, by the way, you have to pay us a half million bucks because that is the partial cost of creating new low income housing in the city of San Francisco. Besides, the agency in charge has big budgets to pay. We have lots of employees.

They said, no, this is a taking. It is a regulatory taking, and they filed in federal court. The federal court said, no, you can't go into federal court. You have to go into state court first. So they went to state court and promptly lost in the trial court. They went to the Court of Appeals and promptly lost, went to the California Supreme Court where they lost again. A wonderful dissent by Justice Janice Rogers Brown. She was one of the controversial appointments to the D.C. Circuit in the last year, and she wrote in her dissent that in California property rights are an endangered species but in San Francisco they are extinct, one of the passages that got her into a lot of trouble. So San Remo went back into federal court saying, federal court, you told us that we couldn't be in here in federal court until we went to the state court and lost. Well, we've done exactly what you said, we've gone to state court, we've lost, and now we are bringing our claim in federal court. The federal court said, no, not so fast, because you already litigated a state taking issue in state court which is essentially very similar to a federal taking claim, and therefore you have already litigated this issue and you are out of federal court.

In other words, if you have a taking claim, you can no longer bring it in federal court right now. We have a case out of Puerto Rico where we are trying to get that overturned by getting the U.S. Supreme Court to take a look at it because there were four justices in the San Remo case that said, now, wait a minute. This underlying rule that you can't get into federal court in the first place seems to be a bit screwy. We don't like that at all.

The last case is Kelo, which I said I won't talk about, and I won't, but again it points out that the problem in Kelo is a train wreck that was 50 years in the making. In 1954 the Supreme Court in a case called Berman vs. Parker said it was okay in a redevelopment process to take property from one private owner and have it redeveloped by another private developer. In that case, property was being taken by a business, and it really didn't involve widows or children and nobody really thought much of it. In 1984 the Supreme Court said it was okay to take property from a land trust and to give that to individual home lessees and that was okay, too. Nobody thought much about it, because we weren't dealing with people being thrown out of their home. Because of that Hawaiian case, after 1984 the Supreme Court really opened up the floodgates to redevelopment agencies around the country taking private property with very little judicial check. The Kelo case came along and it just fulfilled the promise that had been started 50 years ago in the Berman case, but it was the first time that old people and ordinary home owners just like you and me were being kicked out of their homes. That is why that case has generated so much excitement and we will hear much more about that today.

Where are we going in the future in the court? We have two things that I want to talk about. One is the Repanos case, the one that the U.S. Supreme Court just granted cert on last week. That is a case dealing with wetland regulation. Those of you who are familiar with wetland regulation know that up until a few years ago the federal government said that it could regulate any wetland it wanted to in the United States because it had power to regulate under the Commerce Clause. As you know, the federal government can only regulate where it has the actual power to do so under the Commerce Clause, and the Commerce Clause was interpreted by the Corps of Engineers to give the federal government regulation over all wetlands. The Corps of Engineers said that we have regulatory jurisdiction over every isolated wetlands in the U.S. whether or not it is close to a navigable waterway, because ducks may fly over and, if ducks might use that wetland at some point in time, then that is an interstate commerce. The Supreme Court threw that out a few years ago and said no.

So what the Corps says now is that if you have a molecule of water in a wetland that may eventually go to a navigable waterway, they say that is enough for us to have jurisdiction because it affects a navigable waterway. In the Repanos case a molecule of water would go through a drainage ditch to a tributary and into a navigable waterway twenty miles away. The Repanos case is combined with another case where that molecule of water is never going to get to a water body in the United States. We don't know what the court is going to do. John Roberts has been an enigma on that issue. Looking at an Endangered Species Act where he is talking about the Commerce Clause, he has indicated on the one hand he didn't like one reason for giving the federal government power over some endangered species but he would like perhaps some other reasons.

The Endangered Species Act has been a very pernicious statute. You have heard a lot about the Preble's Jumping Mouse and all sorts of other things. I will tell you that Congress does have before it The Endangered Species Act Reform Act. This is one statute that may very well help landowners. It has two especially important provisions. The first provision is to provide finality to a landowner who wants to use his or her property. We represented a landowner who had six trees on his property that he wanted to cut. It was the only economic value of this property. It was a small parcel up in the woods in northern California. Six big valuable trees that provided shade for riparian habitat for endangered species. Fish and Wildlife Service said, if you cut those trees, you may be violating the Endangered Species Act, and if you violate the Endangered Species Act, you may go to jail. He said, tell me for sure. Am I going to violate it or not? Can I cut the trees or not? They only would tell him, you may violate the Endangered Species Act. Come on, tell me. Will I go to jail if I cut the trees or not? You may violate the Endangered Species Act. He sued. He said that's good enough for me. He went into claims court, eventually the federal circuit, saying, my property has been taken, and the courts and the agency and the court agreed and said, no. There is no final determination of what he can and cannot do with his property. He should apply for a permit. What kind of permit? A habitat conservation plan. What does that cost? $20,000. What do the trees cost? $10,000. Figure it out. But he has had no final determination. So the first part of The Endangered Species Act Reform Act provides a mechanism where the Secretary of Interior must grant a yes or a no to a landowner if they wish to use their property and it might violate the Endangered Species Act.

The second part of The Endangered Species Act Reform Act that is so important is that it has a compensation mechanism that, if you get a "no" determination when you go to the Secretary asking to use your property, then the Secretary is required to compensate you, if you ask, to give you what is the fair market value of the use to which you cannot put the property. Large landowners who want to build large subdivisions or shopping malls are not going to use that provision. This is meant for the little guy, the small landowner, the farmer, the rancher, or whoever, and it really will make a huge and tremendous difference if this gets passed. For those of you in New York, you know who your senators are. Hillary hasn't said no yet. Bother her. No, I can't lobby, of course. We are not a lobbying organization, but I do suggest that you look at The Endangered Species Act Reform Act and realize that it does provide substantial mechanisms for protecting the interests of property rights.

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