On the Twenty-Fifth Anniversary of Lucas: Making or Breaking the Takings Claim

On the Twenty-Fifth Anniversary of Lucas : Making or Breaking the Takings Claim Carol Necole Brown * & Dwight H. Merriam ** ABSTRACT: In Lucas v. South Carolina Coastal Council , the United States Supreme Court established the premier categorical regulatory takings standard with certain limited exceptions. The Lucas rule establishes that private property owners are entitled to compensation for a taking under the Fifth Amendment Takings Clause when a government regulation “denies all economically beneficial or productive use of land.” Today, Lucas remains the controlling law on categorical regulatory takings. But in application, how much does Lucas still matter? In reviewing more than 1,700 cases in state and federal courts, we identified that Lucas claims were successful in just 1.6% of the cases. This does not mean Lucas is unimportant, however. The small Lucas claim success rate suggests the importance of being strategic in pleading takings claims. The problem of defining the denominator in the regulatory takings equation is essential to understand for litigants pursuing the Lucas categorical regulatory takings analysis. Based upon our research, we argue that Lucas’s holding incentivizes the private contractual agreements entered into by property owners to shrink the takings denominator and tilt the scales slightly in favor of the plaintiff. The ability of a property owner to reduce the denominator remains the loadstar for a Lucas case-winning strategy. This is important for not only theorists but also for practitioners to know as they litigate and conduct transactions in Lucas’s shadow. * Professor of Law, University of Richmond School of Law. Special thanks to Suzanne B. Corriell, Associate Director for Reference, Research and Instructional Services at the University of Richmond School of Law and to my research assistants, Jessica Barile and William Stroud. Thanks to Professor Vada Lindsey and the entire Marquette University Law School faculty for allowing me to workshop this paper and for their invaluable assistance. Thank you also to Professors Daniel R. Mandelker, Corinna Barrett Lain, and David L. Callies, and to the University of Richmond School of Law and Dean Wendy Perdue for her support of this project. Thank you to my parents, the late Allen S. Brown, Jr., and the late Valerie J. Brown, as well as to my husband, Paul Clinton Harris, Sr., and my daughters, Reagan Mackenzie Harris and Hannah Madison Harris. ** Robinson & Cole LLP, Hartford, Connecticut. Mr. Merriam is past president and a fellow of the American Institute of Certified Planners and is also a member of the American College of Real Estate Lawyers as well as a counselor of real estate. He is a co-author of The Takings Issue and co-editor of Rathkopf’s The Law of Zoning and Planning , 4th edition. 1848 IOWA LAW REVIEW [Vol. 102:1847 I. INTRODUCTION ........................................................................... 1848 II. TAKINGS CLAIMS À LA L UCAS ....................................................... 1850 A. LUCAS AND I TS H OLDING ...................................................... 1850 B . T HE C ATEGORICAL R EGULATORY T AKINGS R ULE ................... 1851 1. The Nuisance and Background Principles Defenses ....................................................................... 1852 2. The Denominator Question ....................................... 1853 C. C OMPLICATING THE P ICTURE : T HE D ISSENTING AND S EPARATE O PINIONS .............................................................. 1853 D. A MBIGUITIES A BOUND ........................................................... 1855 1. The Categorical Regulatory Takings Rule ................. 1856 2. The Nuisance Defense ................................................ 1858 3. The Denominator Question and the Parcel as a Whole ........................................................................... 1859 III. SUCCESSFUL L UCAS TAKINGS CASES: EMPIRICAL DATA ............... 1862 A. T HE N UISANCE A BATEMENT C ASES (T HE LUCAS E XCEPTION ) .......................................................................... 1863 B. P RIVATE A GREEMENTS AND THE D ENOMINATOR ..................... 1866 C. P YRAMIDAL S EGMENTATION AND P UBLIC L AW I MPACT ........... 1875 D. D ELAY T HEORY ..................................................................... 1884 IV. IMPLICATIONS ............................................................................. 1887 A. J URISPRUDENTIAL I MPLICATIONS ............................................ 1887 B. P RACTICAL I MPLICATIONS ..................................................... 1890 V. CONCLUSION .............................................................................. 1892 I. INTRODUCTION In Lucas v. South Carolina Coastal Council , the Supreme Court established the premier categorical regulatory takings standard with certain limited exceptions. 1 The Lucas rule establishes that private property owners are entitled to compensation for a taking under the Fifth Amendment Takings Clause when a government “regulation denies all economically beneficial or productive use of land.” 2 The Fifth Amendment Takings Clause states that “private property [shall not] be taken for public use, without just compensation.” 3 In determining whether the regulation at issue meets this 1 . See generally Lucas v. S.C. Coastal Council, 505 U.S. 1003 (1992). 2 . Id. at 1015. 3. U.S. CONST. amend. V. 2017] MAKING OR BREAKING THE TAKINGS CLAIM 1849 standard, courts have traditionally used an “economic value fraction.” 4 The numerator is the diminution in value of the private property attributable to the impact of the government regulation. 5 The denominator is the entirety of the owner’s rights in the “parcel as a whole.” 6 For a Lucas categorical taking, the denominator must be at least virtually equal to the numerator such that there is a deprivation of “all economically beneficial or productive use of land.” 7 As a result, property owners seek to characterize their property rights narrowly for as small a denominator as possible. 8 The smaller the denominator, the more likely it is to be equal to the numerator. On the other hand, government regulators seek to characterize the property owner’s property rights broadly for as large a denominator as possible. 9 This creates a denominator that is much larger than the numerator signaling that the land still has economic benefit to the property owner. Today, Lucas remains the controlling law on categorical regulatory takings. 10 But in application, how much does Lucas matter? Our review of more than 1,700 cases in state and federal courts reveals only 27 cases in 25 years in which courts found a categorical taking under Lucas. 11 By percentage, 4. Walcek v. United States, 49 Fed. Cl. 248, 261–62 (2001), aff’d , 303 F.3d 1349 (Fed. Cir. 2002). 5. Lost Tree Vill. Corp. v. United States ( Lost Tree CFC II ), 115 Fed. Cl. 219, 258, 262 (2014), aff’d , 787 F.3d 1111 (Fed. Cir. 2015); see also Lucas , 505 U.S. at 1016 n.7 (“ Regrettably, the rhetorical force of our ‘deprivation of all economically feasible use’ rule is greater than its precision, since the rule does not make clear the ‘property interest’ against which the loss of value is to be measured.”). 6. Penn Cent. Transp. Co. v. New York City, 438 U.S. 104, 130–31 (1978); see also Lucas , 505 U.S. at 1016 n.7 (describing “the ‘property interest’ against which the loss of value is to be measured”). For a discussion on the Penn Central test, see infra Part IV. 7. Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1015 (1992); see also Palazzolo v. Rhode Island, 533 U.S. 606, 631 (2001) (stating in the context of the Lucas total - takings analysis that “[a]ssuming a taking is otherwise established, a State may not evade the duty to compensate on the premise that the landowner is left with a token interest”); Lost Tree Vill. Corp. , 787 F.3d at 1113 (finding that a taking resulted from 99.4% diminishment in value in claimant’s land and “affirm[ing] that a Lucas taking occurred because the government’s permit denial eliminated all value stemming from Plat 57’s possible economic uses”). 8. DOUGLAS T. KENDALL ET AL., TAKINGS LITIGATION HANDBOOK: DEFENDING TAKINGS CHALLENGES TO LAND USE REGULATIONS 170 (2000). 9 . See Danaya C. Wright, A New Time for Denominators: Toward a Dynamic Theory of Property in the Regulatory Takings Relevant Parcel Analysis , 34 ENVTL. L. 175, 188 (2004) (“[W]hen the numerator is a small toothpick and the denominator is the entire bundle, the likelihood of the Court requiring compensation is small. Where the numerator is a large portion of the bundle, or cuts across every stick in the bundle, the likelihood of compensation increases until it becomes mandatory if certain core sticks or the entire bundle is taken.”). 10. Wendie L. Kellington, New Takes on Old Takes: A Takings Law Update , LAND USE L., http://landuselaw.wustl.edu/takings_update.htm (last visited Apr. 29, 2017). 11. These 1,700 cases represent all cases available in the two major online databases (Lexis Advance and WestlawNext) that cited Lucas v. South Carolina Coastal Council , 505 U.S. 1003 (1992), through March 23, 2017. A total of 1,808 cases were drawn from a Lexis Shepard’s report and 1,713 cases were drawn from a Westlaw Keycite report. Compare Citing References for Lucas v. 1850 IOWA LAW REVIEW [Vol. 102:1847 that works out to a Lucas -claim success rate of just 1.6%. This does not mean Lucas is unimportant, however. Rather, the paucity of successful Lucas claims itself tells a significant story about the importance of pleading takings claims. We contend that Lucas’ s most enduring value is not its contribution to the positive law but rather its effect on how litigants shape their cases. A crucial aspect of the Lucas categorical regulatory takings analysis has been, and will continue to be, the problem of defining the denominator in the regulatory takings equation. Our research...