Regulatory Takings

AuthorStephen M. Johnson
Chapter 11
Regulatory Takings
I. Background
From the early days of the Clean Water Act Section 404 program through today, private
property rights advocates have criticized government regulation of wetlands. Although the
Corps denies very few Section 404 permit applications, over the years, several landowners
have challenged wetland permit denials as “takings” of their property. In light of the fact that
almost 75% of the remaining wetlands in the lower 48 states are privately owned, the
takings issue is likely to remain an important consideration in the design and
implementation of wetlands protection programs.
To the extent that “takings” claims arise regarding federal or state wetlands regulation, the
claims usually arise when the government
denies a permit to a landowner that would
authorize development in wetlands, although
some landowners have raised takings claims
as soon as the government has asserted
jurisdiction over wetlands on their property.
Landowners have also raised takings
challenges when the government issues a
permit, but includes conditions or limits in the
permit that the landowners oppose.
Takings claims are based on the Fifth
Amendment of the United States Constitution,
which provides that private property shall not
be “taken for public use, without just
compensation.” See U.S. Const., Amend. 5.
While the Fifth Amendment provides the basis
for takings claims against the Corps of
Engineers and other federal agencies, the
takings prohibition is also made applicable to states and state agencies through the Due
Process Clause of the Fourteenth Amendment of the Constitution. See Chicago, B. & Q. R.
Co. v. Chicago, 166 U.S. 226 (1897).
Photo 35 By Ian Paterson
Although early court decisions focused on physical invasion or appropriation of property by
government as takings, the Supreme Court has held, since 1922, that government
regulation of property that restricts the use of the property can constitute a taking if the
regulation “goes too far.” See Pennsylvania Coal v. Mahon, 260 U.S. 393 (1922). At the
same time, though, Justice Holmes, writing for the Court, stressed that “[g]overnment
hardly could go on if to some extent values incident to property could not be diminished
without paying for every such change in the general law.” Id. at 413.
Fifty years later, the Court provided some guidance to help determine when government
regulation “goes too far,” so that is a taking. In Penn Central Transportation Company v.
New York City, 438 U.S. 104, 124 (1978), the Court eschewed adopting any bright line
rules, but held that several factors are significant in evaluating whether government
regulation constitutes a taking, including (1) the economic impact of the regulation on the
claimant; (2) the extent to which the regulation has interfered with investment-backed
expectations of the claimant; and (3) the character of the government action. Regarding
the character of the government action, the Court suggested that it was less likely that
government regulation would be a taking when the interference with private property rights
“arises from some public program adjusting the benefits and burdens of economic life to
promote the common good.” Id. According to the Court, the three factor Penn Central test
requires an ad hoc, factual analysis in each case. Id. The Penn Central Court again
stressed that the government is not required to pay for every reduction in property value
caused by regulation, but is only required to pay when the regulation “goes too far.” Id. In
Hadacheck v. Sebastian, 239 U.S. 394 (1915), a case cited by the Penn Central Court, the
Supreme Court upheld a law prohibiting the operation of a brickyard in a residential
neighborhood against a taking challenge even though the regulation reduced the
landowner’s property value by more than 90%.
II. Jurisdiction and Timing of Takings Claims
According to the Tucker Act, takings claims against the United States must be brought in
the United States Court of Federal Claims if the plaintiff is seeking more than $10,000. See
28 U.S.C. § 1491. Takings claims for less than $10,000 can be brought in the federal
district courts. See 28 U.S.C. § 1346. The Court of Federal Claims does not have
jurisdiction to adjudicate the validity of the Corps’ denial or issuance of a Section 404
permit, an EPA veto of a permit, or a jurisdictional determination by EPA or the Corps, so a
landowner who is seeking more than $10,000 in compensation for a taking based on those
actions must bring two separate actions if they want to challenge the validity of the
underlying agency determination that is allegedly a taking. Decisions of the U.S. Court of
Federal Claims can be appealed to the United States Court of Appeals for the Federal
Circuit. Consequently, most of the takings jurisprudence developed outside of the Supreme
Court is developed in the Court of Federal Claims and the Federal Circuit.
Since a court determining whether a government regulation constitutes a taking must
conduct an ad hoc factual analysis of the impact of the government regulation on the
property, the Supreme Court has stressed that a takings claim “is not ripe until the
government entity charged with implementing the regulations has reached a final decision
regarding the application of the regulations to the property at issue.” See Williamson
County Regional Planning v. Hamilton Bank, 473 U.S. 172 (1985). In that case, the Court
held that a developer could not challenge, as a taking, a county planning commission’s
decision to deny approval for a development proposal because the developer had not yet
sought a variance that might have allowed the development to proceed. In the following
year, in McDonald et al v. County of Yolo, 477 U.S. 340, 351 (1986), the Court again
stressed that a landowner cannot pursue a takings challenge based on the application of a
government regulatory program to its land until the landowner receives the government’s
final, definitive position regarding how it will apply the regulations at issue to the particular
land in question.” In McDonald, the Court determined that, even though the government
had denied the landowner’s subdivision proposal, it was possible that the government
would approve a more limited subdivision proposal if the landowner sought approval, so the
Court could not determine the extent of the government interference with the landowner’s
property rights until the government identified a final, definitive position on the limits on the
development of the property. Id.
There are, however, limits to this line of authority. In Palazzolo v. Rhode Island, 533 U.S.
606, 620 (2001), the Supreme Court held that “once it becomes clear that the agency lacks
the discretion to permit any development, or the permissible uses of the property are known
to a reasonable degree of certainty, a takings claim is likely to have ripened.” In that case,
the government argued that the plaintiff’s takings challenge to regulation limiting the
development of wetlands was unripe because the plaintiff had not submitted additional
development proposals after three development proposals were rejected, but the Court
concluded that the plaintiff could pursue a takings claim because it was clear that the
government would not allow any development of the wetlands even if the plaintiff submitted
another development proposal. Id. Thus, if the limits that the government will ultimately
place on a landowner’s property can be determined to a reasonable degree of certainty, the
landowner’s taking claim will be ripe and they do not have to pursue variance procedures or
advance other development proposals that would be futile.
In light of ripeness concerns like those in the Williamson County and McDonald cases,
landowners are generally unable to bring takings challenges based on a preliminary or
approved jurisdictional determination by the Corps or EPA. See United States v. Riverside
Bayview Homes, 474 U.S. 121 (1985). Since a landowner might still be able to obtain a
Section 404 permit to develop their property after the government has determined that the
property contains jurisdictional waters, it is not clear, at the time of the jurisdictional
determination, what restrictions, if any, will be placed on the landowner’s use of their
property. Similarly, a landowner will generally not be able to challenge a cease and desist
order or administrative compliance order as a taking, since the landowner may ultimately be
able to engage in the prohibited development of their property if they seek and obtain a

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