Judicial Takings and Givings

Saturday, May 28, 2005

THE SUPREME COURT'S decision this week in the case of Lingle v. Chevron didn't make big news. No surprise: The unanimous decision dealt with a technical-sounding question of property rights. But Lingle is important, because in it the court unambiguously repudiated a dangerous doctrine it had articulated in 1980, a doctrine with horrid implications for environmental and other regulatory enforcement.

The Takings Clause of the Fifth Amendment bans governmental seizure of private property without just compensation. Traditionally, this stricture was understood to ban only the physical expropriation of land or other things of value. But starting in the 1920s, the court expanded the concept to include certain regulatory actions that so devalue a person's property as to render it worthless. The idea of a "regulatory takings" makes sense at the extremes, but limiting it has proven tricky. Government actions often diminish property values, after all, so a broad regulatory takings principle could have the effect of forcing governments to pay people to get them to comply with the law. Precisely for this reason, the doctrine has become a favorite of libertarian legal theorists interested in using the courts to restrain the regulatory state.

In 1980, the court, in a throwaway sentence whose importance the justices clearly did not appreciate, added a mischievous piece to this puzzle. The court suggested that a regulatory taking happens if a regulation "does not substantially advance legitimate state interests." This test seemed to suggest that courts should review not merely how much a regulation burdens property rights but whether that regulation is reasonable in the first place. Normally, such challenges take place under due- process principles. But unlike a traditional due-process challenge, where a court will defer to a regulation that has a rational basis, the new takings approach suggested a kind of heightened judicial scrutiny. In the years since, lower courts have applied this doctrine in rent control, land use and zoning cases. The test, had it found lasting legs, would have given judges the power to interfere with a whole swath of government actions.

Fortunately, on Monday, in a case dealing with rent caps on gas stations in Hawaii, the court shifted gears. What's more, it did so with admirable candor. The 1980 test, wrote Justice Sandra Day O'Connor, "was regrettably imprecise" and "reveals nothing about the magnitude or character of the burden a particular regulation imposes upon private property rights" -- which is what the Takings Clause is supposed to be about. "Today we correct course," holding that the matter of a regulation's effectiveness "has no proper place in our takings jurisprudence." The court made clear that regulatory takings can be found only in those situations that are so dire as to be "functionally equivalent to the classic [physical] taking." This opinion dramatically and rightly limits the potential use of the Takings Clause and returns the court to a path of restraint in the creation of economic rights.

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