The Clause requires the government to pay “just compensation” any time it “takes” private property. In its 1978 decision in the Penn Central case, the Supreme Court ruled that whether regulatory restrictions on property rights amount to a taking depends on their impact on the “parcel as a whole.” If the regulation affects only a small part of the parcel or has little impact on its overall value and use, it probably will not be ruled a taking, and no compensation is required. The bigger the unit that counts as the relevant “parcel as a whole,” the less likely it is that the courts will rule that a particular restriction on the use of any part of it is a taking requiring compensation. For this reason, regulators who want to avoid paying compensation have an obvious interest in counting contiguous parcels as well as the one actually being restricted.
Remarkably, none of the three governments opposing the property owners in Murr endorsed the lower court ruling that contiguous lots under common ownership automatically qualify as a single unit for takings purposes. The state of Wisconsin essentially argues that the rule should track whatever is required by state law. Though Wisconsin Solicitor General Misha Tseytlin indicated he might make an exception for situations where the two lots were “involuntarily merged by state action,” what counts as a “voluntary” merger itself on his theory seems to depend on state law (as was pointed out by Justice Kennedy). The County of St. Croix and the federal government (which is not directly involved in the case, but filed a brief opposing the property owners) argue for the use of vague multifactor balancing tests. The feds propose a test that “focuses on all of the relevant facts and circumstances,” which includes “spatial,” “functional,” and “temporal” considerations. The County of St. Croix advocates a different complex balancing test.
In the oral argument, the majority of the justices seemed unwilling to accept either the Murrs’ view that there should be a strong presumption against aggregating contiguous parcels or Wisconsin’s position that states should have largely untrammeled discretion to aggregate whenever state law permits. Justice Anthony Kennedy, a key swing voter, derided both positions as “wooden.” The four liberal justices, and perhaps also Kennedy, seem more sympathetic to the multifactor balancing approaches promoted by the County and the federal government. However, unlike these two parties, the justices seem unwilling to say that preexisting plot lines delineating parcels are essentially irrelevant. Even Justice Sotomayor, the current justice most hostile to property rights claims in previous cases, emphasized that she believes plot lines should carry at least some weight.
So we might well end up with a decision that gives us a multifactor test where preexisting parcel lines are given some significance, but so too are a lot of other factors. The result is likely to be a conceptual muddle that makes it hard to predict whether contiguous parcels will be treated as a unit in any given case. That, in turn, will incentivize strategic manipulation by both property owners and state and local governments to try to game the factors in their favor. The uncertainty will also incentivize property owners to avoid acquiring contiguous properties, where possible, and otherwise deter valuable development in ways summarized in my amicus brief.
It would be far better to simply analyze each lot separately for takings purposes. That would forestall the creation of arbitrary situations where a restriction on land use that would otherwise be a taking stops being one merely because its owner also happens to own the parcel next door.
The ultimate root of the problem is the “parcel as a whole” rule itself. As scholars on both right and left have pointed out, this is a rule that has little if any basis in the text or original meaning of the Constitution, and was essentially invented by the Supreme Court. Even when it comes to a single parcel, there is no good reason for concluding that a regulation that qualifies as a taking for a one acre parcel might cease to be one if the parcel were two acres instead. The question to ask in a takings case is what the government has taken away from the owner, not how much property is left to him. The text of the Fifth Amendment requires compensation whenever private property is “taken,” not just when it is taken and the owner doesn’t have enough other property left in the area.
It is highly unlikely that the Supreme Court will overturn the parcel as a whole rule in the near future. But they should at least not make that rule worse by allowing the government to include adjacent lots as part of the denominator. Unfortunately, Murr might well result in a ruling allowing it to do just that, at least in some situations. If the court adopts a complex balancing test, it will often be very hard to tell whether aggregation apples in any given case or not. Such an outcome may be good news for takings lawyers, and scholars who specialize in the subject (myself included). There will be plenty of job opportunities for us. For most other people likely to be affected by it, it won’t be nearly as much fun.
The above analysis assumes that the Court will decide the case with only the eight justices who participated in the oral argument. But if they split 4-4, that might lead to a reargument of the case after Neil Gorsuch gets confirmed (assuming that he indeed does). It is hard to predict what will happen in that scenario, as Gorsuch has very little prior record in takings cases.
NOTE: I coauthored an amicus brief supporting the property owners, on behalf of nine state governments led by the state of Nevada. As with other posts about Murr, what I write here represents solely my own views, not those of the nine state governments I helped write the amicus brief for. The brief is a pro bono project, and I have no financial interest in the case.