Regulatory takings and the original understanding of the takings clause.

• Author: Harrington, Matthew P.

It is black letter law that government must provide compensation to an owner whose property is taken for public use. This rule is most prominently found in the Compensation Clause of the Fifth Amendment to the U.S. Constitution, which provides that "private property [shall not] be taken for public use, without just compensation." (1) As with all such rules, however, the basic premise is often easier stated than applied. Determining precisely when property has been "taken" by the government has often proven to be something of a challenge.

Courts and commentators have generally agreed that compensation is due when the government physically takes property from a private landowner, as for example, when land is taken for the building of a school or post office. A far more vigorous debate arises, however, when the government regulates private property in such a way as to restrict or eliminate the owner's right to use property in a particular manner. The circumstances under which compensation ought to be payable in these so-called "regulatory takings" cases have been the subject of a great deal of scholarly comment.

The origin of this debate can be traced to the Supreme Court's decision in Pennsylvania Coal Co. v. Mahon, (2) which Chief Justice William Rehnquist once called "the foundation of our 'regulatory takings' jurisprudence." (3) In Mahon, the Supreme Court was confronted with the question of whether a Pennsylvania statute limiting a coal company's right to conduct certain mining operations resulted in a regulatory taking. (4) Writing for the majority, Justice Oliver Wendell Holmes recognized that a state must have some power to regulate property in ways that would not implicate the Compensation Clause. (5) The difficulty, he noted, was in determining the proper boundary between lawful regulations under the state's police power and regulations that amount to a taking under the Compensation Clause. (6) "The general rule," Holmes concluded, "is, that while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking." (7) Holmes himself recognized that this particular formulation did not offer much guidance beyond the statement of a general principle. Instead, he asserted that precise determinations had to be made on the facts of each case. (8) In Holmes' view, the question of whether a regulatory taking "goes too far" is really one "of degree--and therefore cannot be disposed of by general propositions." (9) Justice Holmes' opinion in Mahon has generated an enormous amount of scholarly comment. Although much of this comment has been devoted to attempts to place the opinion in Mahon within the context of Holmes' jurisprudence on the proper deference to be accorded to legislative decision making, the real significance of Mahon is that "it has become a virtual surrogate for the original understanding of the Takings Clause." (10)

As this Article will show, the original understanding of the clause was that compensation for property affected by government action was due only when the government physically took the property in question. Compensation was not required where the value of property had been diminished by government regulation. Mahon altered this understanding, however. In advancing what was essentially a diminution in value test, Justice Holmes provided the basis for an entirely new understanding of the Fifth Amendment's compensation requirement. As a result, it is Holmes' opinion in Mahon, rather than the founding generation's original understanding, that has become the primary point of reference for those seeking to understand the nature and scope of the Compensation Clause. Mahon has become, in other words, a "touchstone from the past that can be used to resolve current controversies." (11) Relying on Mahon, the Supreme Court has embarked upon an entirely new form of jurisprudence in which it attempts to test the validity of state and federal legislation from the vantage point of whether government regulations go "too far." (12)

Recently, however, a number of scholars have sought to demonstrate that Holmes' opinion in Mahon was not as dramatic a departure as is often claimed. They argue instead that the regulatory takings doctrine emerged well before the Supreme Court's opinion in Mahon. Some attempt to show that both state and federal courts had already recognized a right to compensation for regulatory takings long before Justice Holmes wrote his now famous opinion. (13) Other scholars have raised doubts about the traditional view that the Compensation Clause was designed to require compensation only in cases of physical takings. (14) They seek to show that the original understanding of the Compensation Clause was broad enough to encompass precisely the sort of regulatory taking that was at issue in Mahon. In the view of these commentators, Justice Holmes' opinion was not groundbreaking insofar as it altered the traditional understanding of the clause. (15) Rather, they argue that in Mahon, Holmes merely gave credence to a view of the Compensation Clause that was well within the contemplation of the founding generation at the time the clause was drafted.

This line of inquiry has produced its own scholarly backlash as other commentators have attempted to refute what they perceive to be the creation of a "revisionist" history of the Compensation Clause. Relying on eighteenth century dictionaries and other sources, these scholars make a semantic argument, attempting to show that the words chosen by the drafters of the Fifth Amendment evidence an intent to limit the requirement of compensation only to cases of physical expropriation of property. (16) Consequently, they argue that in drafting the Compensation Clause, the first Congress intended merely to require compensation for physical expropriations of property. (17)

This Article will attempt to resolve the debate surrounding the original meaning of the Compensation Clause. It will show that the Compensation Clause was designed to perform the limited function of addressing Anti-Federalist fears that a distant and insular government would expropriate the property of the citizenry without reasonable compensation. Although it might seem strange to us today, the fear that a distant national government would confiscate the property of the people was not an idle one in the early republic. After all, at this point in their short history, the only experience Americans had with a central government was that which was created under the Articles of Confederation. Although this government has often been characterized as weak and impotent, (18) it did not hesitate to engage in widespread confiscations to support the Continental Army during the Revolutionary War. (19) The extent of these confiscations angered many, to the point that even the most ardent patriots worried about the detrimental effect such takings had on public confidence. (20)

The ratification debate of 1787 to 1788 rekindled these fears as Anti-Federalists repeatedly warned Americans about the dangers posed by the extensive powers granted to the national government in the new Constitution. (21) As a result, the Compensation Clause became the means by which supporters of the new government attempted to neutralize the fears of those who worried that a powerful central government would engage in widespread expropriations of private property. (22)

This Article will begin by briefly outlining the concerns for the protection of property rights that formed the basis of efforts to strengthen the American union during the "critical period" of American history between 1781 and 1787. (23) Part II will examine the concerns about the extensive powers of the national government during the course of the ratification debate, and will demonstrate that the drafting of the Compensation Clause, like that of the rest of the Bill of Rights, was designed to address Anti-Federalist fears about the power of a distant and overreaching national government. This Article will conclude in Part III by showing that the original understanding of the Compensation Clause did not encompass a right to compensation for so-called "regulatory takings."

1. PROTECTING PROPERTY RIGHTS

   The decade following the outbreak of war between England and her American colonies was marked by severe economic turmoil. Traditional trading patterns and relationships were severed or disrupted; prices of staples and other commodities fluctuated wildly; and the specie necessary for the payment of debts nearly evaporated. (24) Faced with the potential collapse of the economic system, state legislatures passed a wide range of laws designed to prop up their economies. These included laws emitting large amounts of paper currency, tender laws, and debtor protection statutes. However, as the decade progressed, commercial interests began to complain about the way in which state legislatures arbitrarily altered existing legal and economic relationships. In time, these complaints grew so loud that political elites expressed concern about the security of property rights. According to James Madison, attacks on property rights by state legislatures had become "so frequent and so flagrant as to alarm the most steadfast friends of republicanism." (25)

   By the latter part of the 1780s, therefore, it seemed clear to many that some means of limiting the power of state government must be devised if the nation's economic situation were to be improved. As a result, in setting about the task of framing a new government, the Constitutional Convention which met at Philadelphia in the summer of 1787 was motivated, in part, by a desire to provide adequate protection for property rights. (26) During the course of the convention, the delegates expended a great deal of energy on devising the means by which property rights might be protected. In particular, they sought to prevent state legislatures from passing laws impairing...