Land Use Update: The Takings Clause and the Graham Rule

Land Use Update Editor: Daniel R. Mandelker, Stamper Professor of Law Emeritus, Washington University School of Law, St. Louis, Missouri.

A landowner can argue that a land use regulation is unconstitutional because it is a taking of property under the takings clause of the federal constitution: “[N]or shall private property be taken for public use, without just compensation.” Since Justice Holmes’s opinion in Pennsylvania Coal Company v. Mahon, 260 U.S. 393 (1922), more than 100 years ago, the US Supreme Court has applied the takings clause to laws regulating property.

Assume that a zoning ordinance prohibits multifamily dwellings in singlefamily residential districts. This restriction can be a taking if it is excessively restrictive. Justice Holmes’s famous dictum in Pennsylvania Coal explained when a taking will occur. He said that “while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.” Courts frequently cite this dictum, but it is unclear when a regulation goes “too far” because Justice Holmes did not explain what “too far” means.

Two US Supreme Court takings decisions dominate takings law and give meaning to Justice Holmes’s dictum. They attracted extensive scholarship, but recent studies found that takings claims based on these decisions seldom succeed.

Takings: The Penn Central Factors

Penn Central Transportation Company v. City of New York, 438 U.S. 104 (1978), which the US Supreme Court calls its “default” takings rule, is the first case. Justice Brennan held that the city’s historic landmark law and its decision to landmark the historic Grand Central Terminal were not a taking.

He explained that the Court had been unable to develop any “set formula” for deciding when “justice and fairness” require that economic injuries caused by public action are a taking. The takings decision, he held, depends on the circumstances of each case. Justice Brennan listed several factors that should have particular significance for what he called this essentially ad hoc, factual inquiry. They are the “economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations,” and “the character of the governmental action.”

These factors are irrelevant and ambiguous. The “economic impact” factor is questionable because the Court later held that a per se taking occurs when land is deprived of all of its beneficial economic use. It is unclear whether this rule affects the first “economic impact” factor, but it could mean that a taking requires a total economic impact. The investment-backed expectations factor has had little effect. One of my students found that courts held this factor relevant in only three out of a large group of cases he reviewed, and the Court has never explained what it means.

In Penn Central, Justice Brennan did explain that the “character” factor may be more readily found “when the interference with property can be characterized as a physical invasion by government, than when interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good,” a category that includes land use regulation. This factor is no longer relevant because the Court later held that a physical invasion of property is a per se taking. Neither has the Court clarified what weight to give to each takings factor or whether all the factors must be considered in a takings analysis. Ramsey Thrasher, Daunting Odds: Regulatory Takings Claims in the United States Circuit Courts of Appeals (2023), https://tinyurl.com/circ820, reviewed 366 takings cases decided in the Circuit Courts of Appeals from the mid1970s to 2023 and found that a taking occurred in only 24 cases. The courts dismissed many of these cases for lack of ripeness, but success under the Penn Central takings factors was rare. See my Land Use Update on ripeness, Takings Litigation and Zoning Reform, 36 Prob. & Prop. 62 (Jul/Aug 2022).

Takings: The Lucas Bright Line Rule

In the second significant takings case, Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992), Justice Scalia ignored the Penn Central takings factors and adopted a categorical bright-line rule. Why he adopted this rule is not clear. Perhaps he thought it would protect landowners better.

Lucas arose in an unusual takings situation. A real-estate developer bought two oceanfront lots on a coastal barrier island and planned to build two single-family homes on the lots. Homes lined the oceanfront on each side of the lots. South Carolina enacted a Beachfront Management Act a couple of years later to prevent beach erosion. The Act directs the Coastal Council to establish a “baseline” on each barrier island that connects the landward-most “point[s] of erosion ... during the past forty years.” It allows development only landward of a baseline. Lucas could not develop his lots because they were not landward of the baseline on his barrier island.

Justice Scalia’s opinion paid no attention to the US Supreme Court’s admission that it had not found a “set formula” for takings cases, the case-specific inquiry rule, and the takings factors. He identified “two discrete categories of regulatory action” that the Court holds compensable “without case-specific inquiry into the public interest advanced in support of the restraint.” A taking occurs in the discrete category that applies to this case when a “regulation denies all economically beneficial or productive use of land.”

On remand, the South Carolina Supreme Court remanded to the circuit court to determine the actual damages Lucas sustained from being temporarily deprived of the use of his property.

The Lucas decision was a dramatic change in precedent. Its categorical takings rule does not require a case-specific inquiry, depends only on the severity of the economic deprivation, and eliminates public purpose as a factor in takings analysis. Lucas was a warning for environmental regulation, which can deny all economically beneficial or productive use of the land to protect an environmental resource, such as a wetland.

Justice Scalia predicted, however, that the Lucas categorical takings rule would apply only in an “extraordinary circumstance.” His prediction was accurate, as Lucas categorical takings cases rarely succeed. Carol Necole Brown & Dwight H. Merriam, On the Twenty-Fifth Anniversary of Lucas: Making or Breaking the Takings Claim, 102 Iowa L. Rev. 1847 (2017), https://tinyurl.com/merrcar, examined more than 1,600 Lucas cases across the United States and found that only 27 were successful.

The authors grouped successful Lucas cases into these categories: (1) nuisance abatement cases; (2) cases considering private agreements and the denominator problem, which is how to define the parcel of land that is the basis for a takings claim; (3) cases where there was a segmentation of uses under the zoning land use pyramid; and (4) cases where there were taking delays. These are not typical land use cases.

The US Supreme Court narrowed the Lucas categorical takings rule in Palazzolo v. Rhode Island, 533 U.S. 606 (2001). The Court held that a taking did not occur when a Coastal Resources Management Council denied an application to fill 18 acres of coastal wetlands and construct a beach club. The landowner was not deprived of all economic use of his property because the remaining value of his upland portions was substantial. To prove a taking, a plaintiff must show that a regulation leaves a property “economically idle” and that a landowner retains no more than “a token interest.”

Environmental laws similar to the law in Lucas have escaped the categorical takings rule. In Gove v. Zoning Board of Appeals, 831 N.E.2d 865 (Mass. 2005), a zoning board of appeals denied a building permit for a single-family home on a 1.8-acre lot subject to flooding that was located in a coastal conservancy district that prohibited residential development. The landowner’s expert testified that the property was worth $23,000, which suggested more than a “token interest” in the property. Neither did this value consider nonresidential uses the conservancy district allowed by right or special permit, such as marine-related uses, which the plaintiff admitted could make the property “an income-producing proposition.”

The Takings Gloss

Michael Allan Wolf, Superfluous Judicial Activism: The Takings Gloss, 91 Geo. Wash. L. Rev. 287 (2023), https://tinyurl.com/wolftak, argues that three recent US Supreme Court cases put a gloss on takings law by ignoring precedent and not focusing primarily on the words of the takings clause. The cases applied an extratextual judicial gloss on words established in takings opinions over the last 100 years.

One of these cases, Cedar Point Nursery v. Hassid, 594 U.S. 139 (2021), held that a California regulation that gave labor organizers access rights to an agricultural employer’s property for up to three hours daily for 120 days each year was a per se taking. Chief Justice Roberts’s opinion makes little sense as a coherent analysis. He increased the takings risk for land use regulation by holding that “whether the government action at issue comes garbed as a regulation” is not the “essential question.” He added, “Government action that physically appropriates property is no less a physical taking because it arises from a regulation.”

The Graham Rule

A landowner doubting success under the takings clause can bring an alternative constitutional claim. She can argue that a land use regulation that does not serve a substantial governmental interest or that an arbitrary land use decision violates substantive due process. She can claim, for example, that the abusive rejection of a residential architectural design by an architectural design commission is a substantive due process violation.

The problem is that substantive due process is a generic constitutional limitation. Unlike specific constitutional limitations, it does not identify a particular action, such as an unreasonable search and seizure, that can violate the Constitution. This difference could block a substantive due process claim in court. Graham v. Connor, 490 U.S. 386 (1989), held that a substantive due process claim is preempted if it could have been brought under a more specific constitutional clause. In this case, the Court held that the Fourth Amendment Search and Seizure clause preempted a substantive due process claim that law enforcement officers used excessive force during an arrest. The substantive due process claim could not be brought.

Graham preemption is a judicial anomaly. It conflicts with well-established US Supreme Court precedent that allows a plaintiff to sue on multiple constitutional theories. Still, it survives, and the Court has extended it to other Fourth Amendment cases and constitutional provisions.

Courts are split on whether the takings clause preempts a substantive due process claim under the Graham rule. The Ninth Circuit believes that it does not preempt a substantive due process claim because no takings rule duplicates substantive due process. Crown Point Development, Inc. v. City of Sun Valley, 506 F.3d 851 (9th Cir. 2007). Graham preemption through the takings clause could be a dead end because a takings case is so difficult to win.

See my article, Litigating Land Use Cases in Federal Court: A Substantive Due Process Primer, 55 Real Prop. Tr. & Est. L.J. 69, 93-101 (2020), https://tinyurl.com/litigsub, discussing the Graham rule.