Arguing that, in a Regulatory Taking case, Penn Central Does Not Establish a Rule that Two Legally and Economically Distinct Parcels Must be Combined as the “Parcel as a Whole” in the Takings Analysis Simply Because They are Contiguous and Commonly Owned.
This case had presented the Supreme Court with an opportunity to take a first step toward defining, or at least setting some limits to, the “parcel as a whole,” which has been a key concept in regulatory takings law since the phrase first appeared in the Court’s 1978 decision Penn Central Transportation Co. v. City of New York, 438 U.S. 104. It is against the value of the parcel as a whole that the extent of any alleged regulatory taking is measured.
The Murrs had attempted sell one of two contiguous lakeside lots they own. The lot, left (unlike the neighboring lot) undeveloped, was bought and retained specifically for the purpose of appreciation and sale. They found, however, that the sale was blocked by environmental regulations that rendered the lot individually unsaleable and largely worthless. After the Wisconsin courts had found that there had been no regulatory taking of the lot because the regulations had legally merged it with the developed lot, the Murrs petitioned the U.S. Supreme Court.
NELF filed a brief in support of the Murrs, urging the court to clarify the concept of the parcel as a whole and arguing that the court should reject the rigid rule used by the Wisconsin courts whereby contiguity of lots plus common ownership equals the parcel as a whole.
NELF first argued on equitable principles that the Court should strike a fair and just balance when identifying the “parcel as a whole.” Invoking the principles of fairness and justice on which the Court has avowedly founded its takings jurisprudence, NELF expressed its concern, echoed by distinguished legal commentators, that the tendency of courts to expand the “parcel as a whole” concept has created a serious risk of under-compensation of property owners.
NELF then went on to illustrate analytically the insufficiency of the rigid two factor rule (based on adjacency and common ownership) that had been applied by the Wisconsin court. NELF argued that these two factors alone are too tenuous to justify evaluating separate parcels as one, and it urged the Court to require at least integrated “unity of economic use” as a third factor (the Murrs’ two parcels, of course, always had different economic uses, one being a developed residential parcel and the other being an investment asset). NELF developed its argument by drawing a close analogy to well-established principles of eminent domain law. As NELF pointed out, both eminent domain law and takings law sometimes must answer a common question: what parcel (if any), other than the one directly affected by government action, must be considered along with the affected parcel in order to evaluate the claim for compensation in a fair and just way in relation to the whole of the relevant property? In eminent domain law this question arises when there has been a taking of one parcel, and additional damages are sought for the economic effects of that taking on a second parcel. The key factor, widely recognized by the states, is that there must be an integrated unity of economic use of the two parcels; mere contiguity and common ownership are insufficient. NELF urged the Supreme Court to reject the two-factor test of the Wisconsin court and to adopt “unity of economic use” as the crucial factor.
When the case was argued before the Supreme Court on March 20, 2017, NELF was encouraged to see that its analogy played a role in the oral argument.
However, on June 23, 2017, the Supreme Court, in a five-justice majority opinion written by Justice Kennedy, rejected NELF’s arguments and affirmed the judgment below. The majority rejected the “formalistic” appeals to state rules made by both sides for determining the parcel as a whole. The state parties had relied on the merger regulation to supply the defining principle, while the Murrs had argued that state laws that establish the identity of legally separate lots should be taken to identify the presumptive parcel as a whole (a position NELF endorsed). Instead, the Court used a multifactor test that first gives substantial weight to state laws regarding how land is bounded and divided, then looks at the physical characteristics of the land in question, especially its topography and environmental features, and then assesses the value of the land under the regulation, with special attention to the value of the burdened land to other holdings. By this test the Court found that the parcel as a whole comprised both Murr lots, and it then concluded that there had been no regulatory taking because the lots, taken together, retained sufficient value.
In a “dissent” which read more like a concurrence in the judgment, Chief Justice Roberts, joined by Justices Alito and Thomas, wrote that while the outcome “does not trouble me,” the majority’s methodology does. He said that the majority double-counted the factors of the takings analysis proper by incorporating them into the threshold analysis of what constitutes the parcel as a whole. The result of this error, he said, is to “tip the scales in favor of the government.” He favored the methodology of the Murrs for identifying the presumptive the parcel as a whole, but apparently believed that the facts of the case overcame the presumption. (Justice Gorsuch did not take part in the decision.)
This case had presented the Supreme Court with an opportunity to take a first step toward defining, or at least setting some limits to, the “parcel as a whole,” which has been a key concept in regulatory takings law since the phrase first appeared in the Court’s 1978 decision Penn Central Transportation Co. v. City of New York, 438 U.S. 104. It is against the value of the parcel as a whole that the extent of any alleged regulatory taking is measured.
The Murrs had attempted sell one of two contiguous lakeside lots they own. The lot, left (unlike the neighboring lot) undeveloped, was bought and retained specifically for the purpose of appreciation and sale. They found, however, that the sale was blocked by environmental regulations that rendered the lot individually unsaleable and largely worthless. After the Wisconsin courts had found that there had been no regulatory taking of the lot because the regulations had legally merged it with the developed lot, the Murrs petitioned the U.S. Supreme Court.
NELF filed a brief in support of the Murrs, urging the court to clarify the concept of the parcel as a whole and arguing that the court should reject the rigid rule used by the Wisconsin courts whereby contiguity of lots plus common ownership equals the parcel as a whole.
NELF first argued on equitable principles that the Court should strike a fair and just balance when identifying the “parcel as a whole.” Invoking the principles of fairness and justice on which the Court has avowedly founded its takings jurisprudence, NELF expressed its concern, echoed by distinguished legal commentators, that the tendency of courts to expand the “parcel as a whole” concept has created a serious risk of under-compensation of property owners.
NELF then went on to illustrate analytically the insufficiency of the rigid two factor rule (based on adjacency and common ownership) that had been applied by the Wisconsin court. NELF argued that these two factors alone are too tenuous to justify evaluating separate parcels as one, and it urged the Court to require at least integrated “unity of economic use” as a third factor (the Murrs’ two parcels, of course, always had different economic uses, one being a developed residential parcel and the other being an investment asset). NELF developed its argument by drawing a close analogy to well-established principles of eminent domain law. As NELF pointed out, both eminent domain law and takings law sometimes must answer a common question: what parcel (if any), other than the one directly affected by government action, must be considered along with the affected parcel in order to evaluate the claim for compensation in a fair and just way in relation to the whole of the relevant property? In eminent domain law this question arises when there has been a taking of one parcel, and additional damages are sought for the economic effects of that taking on a second parcel. The key factor, widely recognized by the states, is that there must be an integrated unity of economic use of the two parcels; mere contiguity and common ownership are insufficient. NELF urged the Supreme Court to reject the two-factor test of the Wisconsin court and to adopt “unity of economic use” as the crucial factor.
When the case was argued before the Supreme Court on March 20, 2017, NELF was encouraged to see that its analogy played a role in the oral argument.
However, on June 23, 2017, the Supreme Court, in a five-justice majority opinion written by Justice Kennedy, rejected NELF’s arguments and affirmed the judgment below. The majority rejected the “formalistic” appeals to state rules made by both sides for determining the parcel as a whole. The state parties had relied on the merger regulation to supply the defining principle, while the Murrs had argued that state laws that establish the identity of legally separate lots should be taken to identify the presumptive parcel as a whole (a position NELF endorsed). Instead, the Court used a multifactor test that first gives substantial weight to state laws regarding how land is bounded and divided, then looks at the physical characteristics of the land in question, especially its topography and environmental features, and then assesses the value of the land under the regulation, with special attention to the value of the burdened land to other holdings. By this test the Court found that the parcel as a whole comprised both Murr lots, and it then concluded that there had been no regulatory taking because the lots, taken together, retained sufficient value.
In a “dissent” which read more like a concurrence in the judgment, Chief Justice Roberts, joined by Justices Alito and Thomas, wrote that while the outcome “does not trouble me,” the majority’s methodology does. He said that the majority double-counted the factors of the takings analysis proper by incorporating them into the threshold analysis of what constitutes the parcel as a whole. The result of this error, he said, is to “tip the scales in favor of the government.” He favored the methodology of the Murrs for identifying the presumptive the parcel as a whole, but apparently believed that the facts of the case overcame the presumption. (Justice Gorsuch did not take part in the decision.)
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