Politics & Policy

Property Rights & Wrongs

Supreme Court handed property advocates three deserved losses.

Property-rights advocates did not fare too well at the Supreme Court this term. In three cases the Court turned away property-based challenges to state or local government actions, upholding an ill-advised Hawaii rent-control statute, rejecting a challenge to San Francisco’s housing law, and validating New London, Connecticut’s egregious use of eminent domain for economic redevelopment. In each case, the landowners lost on the legal merits. If property rights are to receive greater constitutional protection–as they should–advocates will have to pursue different lines of attack.

In Lingle v. Chevron U.S.A., the Court unanimously upheld a Hawaii law that limited the rent oil companies could charge on leased service stations. While the economic case for the law is exceedingly weak, that did not make it an unconstitutional “taking” of private property. The Fifth Amendment of the Constitution provides that private property “shall not be taken for public use, without just compensation.” As the Supreme Court has reiterated time and again, the purpose of this law is to prevent the government from imposing burdens on a minority of property owners that should rightfully be borne by the public at large. If the government wishes to build a courthouse, school, or public park, it may do so. But it cannot simply require a landowner to give up title or use of his land without paying for what was taken.

In Lingle, the landowner’s property was not “taken” in any meaningful sense of the word. Rather, the petitioners alleged that the law violated the constitution because it failed to “advance legitimate state interests.” Perhaps so, but that should not make the law a Fifth Amendment “taking.” How “effective” or sensible the government action has nothing to do whether a taking occurred. As Justice O’Connor explained for a unanimous court,

A test that tells us nothing about the actual burden imposed on property rights, or how that burden is allocated cannot tell us when justice might require that the burden be spread among taxpayers through the payment of compensation. The owner of a property subject to a regulation that effectively serves a legitimate state interest may be just as singled out and just as burdened as the owner of a property subject to an ineffective regulation.

The bottom-line is that however idiotic a state’s rent or price control statutes may be, they are not Fifth Amendment takings that require compensation. If, as Chevron claimed, the regulation failed to advance a legitimate government interest it could well be unconstitutional, perhaps as a due process violation, but not under the “takings” clause.

In San Remo Hotel v. San Francisco, a hotel owner sought to challenge San Francisco’s housing law in federal court, even though state courts had already rejected the claim. A unanimous court turned away the suit on technical grounds because the federal full faith and credit statute clearly bars such suit. To challenge state court constitutional judgments, parties have to appeal from the state’s high court straight to the Supremes. The problem for landowners is that Supreme Court precedent bars takings claims against state governments in federal court until a state court denies the compensation claim. As a practical matter, this creates a Catch-22 for landowners, because a state court takings claim will often resolve the federal claims too. Nonetheless, San Remo Hotel’s claim was clearly precluded under federal law.

If there was a silver-lining in San Remo Hotel, it was Chief Justice Rehnquist’s opinion concurring in the judgment. Joined by Justices Thomas, Kennedy, and O’Connor, Rehnquist questioned whether the prudential requirement that landowners to sue in state court first should remain good law. If other constitutional claims against states can be filed when the violation occurs, Rehnquist reasoned, there’s no reason to treat takings claims any differently. Federal law may have precluded relitigation of San Remo Hotel’s specific claim, but future claimants could perhaps bring federal takings claims straight to federal court.

Kelo v. New London was a closer case than either Lingle or San Remo Hotel, but the constitutional claim was still weaker than many property advocates like to admit. In Kelo, several homeowners sought to challenge New London, Connecticut’s plan to take their homes, via eminent domain, to pave the way for economic development. Although the landowners would receive Fifth Amendment-mandated compensation, they claimed New London’s plan was unconstitutional because economic development could not be considered “public use.”

A 5-4 court upheld the constitutionality of New London’s plans, holding that eminent domain may be used for nearly any “public purpose,” including economic redevelopment, under the federal constitution. Property rights advocates find such projects offensive, and with good reason, but that does not make them unconstitutional. The originalist case for a robust, judicially enforceable “public use” limitation is fairly weak. Justice Clarence Thomas marshaled what evidence he could in a forceful dissent, but it still failed to make the case. While the Fifth Amendment clearly requires compensation for takings of any sort, there is little evidence the Founders sought to limit the purposes for which eminent domain could be used. Beyond naked property transfers from A to B, it may well be that and legislatively determined public purpose is allowed under the Fifth Amendment.

Even accepting that the phrase “public use” places some limitation on the use of eminent domain, it is not clear what that limit is. “Public use,” by its terms, does not bar using eminent domain for economic development, for it is certainly allowed for highways and other public infrastructure–projects that are often driven by economic concerns. Perhaps “public use” means that the land must be “used” by the “public,” but this is still imprecise. It cannot mean that the public at large has access, for that would preclude its use for military bases, prisons, and other restricted-access facilities. It is also hard to square with the historic use of eminent domain for private roads and grist mills. Should “public use” mean that the land must be owned and maintained by the “public”? For how long? It would be ironic, to say the least, if a constitutional provision protecting private property limited the transfer of government property to private hands. This would turn the takings clause into a ratchet, encouraging an ever-greater expansion of the government estate.

This is not a defense of eminent domain. State and local governments routinely abuse this power to advance pecuniary interests. Such actions offend private property rights and contravene constitutional values. But it is not clear that the constitution’s text bars such actions across-the-board. The burden is on those who would call for federal courts to invalidate state and local government decisions, and the case has yet to be made. Fortunately for landowners, the most egregious uses of eminent domain may still be challenged under state constitutions in many state courts, and there is hope that political opposition to eminent domain abuse is on the rise. Last year voters in Lakewood, Ohio ousted their mayor for supporting a Kelo-like eminent domain plan.

While state and local governments had the better of the argument in Lingle, San Remo Hotel, and Kelo, this does not mean all is right with takings law. Far from it. Current doctrine often allows government regulators to strip property owners of their land in all but title, without paying a cent. While the Court was right to reject the claim that any ineffective or irrational law constitutes a taking, it should more aggressively consider when government regulations are tantamount to taking private land. There is no constitutional warrant for allowing government to take land through land-use regulations so as to avoid paying compensation. By the same token, while it may be hard to exclude the New London development from a permissible “public use,” courts should scrutinize such cases for procedural irregularities and ensure that adequate compensation is paid.

Property advocates are understandably disappointed with this Supreme Court term, but none of these cases was a surprise. Few thought any of them would be close (in this regard, Kelo was a surprise). The specific legal claims in these cases were not particularly strong ground upon which to make a constitutional stand. It is not enough that property owners win in court. For the rule of law, they should win the right way, as not every unjust or irrational policy is unconstitutional.

NRO Contributing Editor Jonathan H. Adler is associate professor and associate director of the Center for Business Law and Regulation at the Case Western Reserve University School of Law.

Jonathan H. Adler — Mr. Adler is an NRO contributing editor and the inaugural Johan Verheij Memorial Professor of Law at Case Western Reserve University School of Law. His latest book is Marijuana Federalism: Uncle Sam and Mary Jane.

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