The Parcel as a Whole: Defining the Relevant Parcel in Temporary Regulatory Takings Cases

• Publication year: 2021

THE PARCEL AS A WHOLE: DEFINING THE RELEVANT PARCEL IN TEMPORARY REGULATORY TAKINGS CASES

Laura J. Powell

Abstract: In regulatory takings cases, courts must look at the "parcel as a whole" rather than individual property interests to determine whether a taking has occurred. The Supreme Court, however, has not clarified how exactly the relevant parcel should be defined. The Federal Circuit's recent decision in CCA Associates v. United States highlights the confusion surrounding the parcel as a whole. It also highlights the continuing need to clarify how the relevant parcel should be defined in temporary regulatory takings cases. This Comment analyzes the parcel as a whole in temporary regulatory takings cases, specifically those involving lost income. It argues that the relevant parcel should not be measured by the property's entire lifetime value, as the Federal Circuit decided in Cienega Gardens v. United States (Cienega X) and ultimately reaffirmed in CCA Associates. Neither Supreme Court jurisprudence nor standard economics supports this interpretation of the parcel as a whole. Instead, this Comment argues that the relevant parcel should be determined by the owner's investment in the property in consideration with principles of fairness and justice. This approach harmonizes Supreme Court jurisprudence and standard economics. It also achieves uniformity and equitability in temporary regulatory takings cases involving lost income.

INTRODUCTION

The world of the relevant parcel is indeed a wonderland, where size seems to change in confusing ways.(fn1)

Thirty-six years ago, the United States Supreme Court decided that courts must look at the "parcel as a whole" rather than individual property interests(fn2) when deciding whether a regulatory taking(fn3) has occurred. The Court, however, did not clarify how exactly the parcel as a whole should be defined.(fn4) Consequently, courts have struggled to define the relevant parcel in regulatory takings cases.(fn5) As one court explained, "[r]epeated admonitions to use the 'parcel as whole,' . . . do little to define the contours of that whole parcel in any particular case."(fn6)

A recent case from the Federal Circuit(fn7) highlights the confusion surrounding the parcel as a whole. In CCA Associates v. United States,(fn8) apartment building owners sued the federal government under the Takings Clause of the United States Constitution.(fn9) The owners argued that a temporary regulatory taking(fn10) occurred when two federal housing acts deprived them of their contractual right to prepay their mortgage and exit a low-income housing program.(fn11)

Initially, the Court of Federal Claims determined that the relevant parcel was the owners' investment in the property.(fn12) In doing so, the trial court relied on the Federal Circuit's parcel as a whole approach in Cienega Gardens v. United States (Cienega VIII),(fn13) a temporary regulatory takings case involving the same federal housing acts.(fn14) Using Cienega VIII's approach, the trial court held that a temporary regulatory taking had occurred.(fn15)

While CCA Associates was pending appeal, the Federal Circuit changed its parcel as a whole approach in Cienega Gardens v. United States (Cienega X).(fn16) In Cienega X, the Federal Circuit determined that the relevant parcel was actually the property's entire lifetime value.(fn17)

The Federal Circuit's change in methodology created a considerably different result in CCA Associates.(fn18) Using Cienega X's lifetime value approach, the Federal Circuit held that no temporary regulatory taking had occurred in CCA Associates.(fn19) Although the facts remained the same, the court changed the relevant parcel-thereby also changing the case's outcome.(fn20)

As CCA Associates demonstrates, the parcel as a whole impacts whether a regulatory taking has occurred.(fn21) If the parcel is defined too broadly, a taking can be disguised.(fn22) Conversely, if the parcel is defined too narrowly, a taking can appear to emerge.(fn23) As a result, the parcel as a whole plays an important role in regulatory takings cases,(fn24) particularly those involving temporary regulations, as in CCA Associates. But despite the relevant parcel's importance, significant confusion remains as to how the parcel should be defined.

This Comment analyzes the parcel as a whole in temporary regulatory takings cases, specifically those involving lost income. Part I traces the Supreme Court's regulatory takings jurisprudence. Part II examines the development of the parcel as a whole in the Court's regulatory takings jurisprudence. Part III discusses current confusion in the Federal Circuit regarding how the relevant parcel should be defined in temporary regulatory takings cases. Finally, Part IV argues that the relevant parcel in temporary regulatory takings involving lost income should not be determined by the property's entire lifetime value. Neither Supreme Court jurisprudence nor standard economics supports this interpretation of the parcel as a whole. Instead, this Comment argues that the relevant parcel should be determined by the owner's investment in the property in consideration with principles of fairness and justice.

I. THE SUPREME COURT AND REGULATORY TAKINGS: GUIDING PRINCIPLES, BALANCING TESTS, AND TEMPORARY TAKINGS

The Supreme Court generally avoids drawing bright-line rules in regulatory takings cases.(fn25) Instead, the Court prefers to examine "a number of factors" rather than use a "mathematically precise" formula.(fn26) Unfortunately, these fact-specific inquiries have created confusion and inconsistent results in regulatory takings jurisprudence,(fn27) particularly in regards to the parcel as a whole.(fn28) Commentators have repeatedly criticized the Court's regulatory takings jurisprudence for being "famously incoherent"(fn29) and "incomprehensible."(fn30) Even Supreme Court Justices have recognized this confusion-Justice Stevens once explained that "[e]ven the wisest lawyers would have to acknowledge great uncertainty about . . . this Court's takings jurisprudence."(fn31)

This Part analyzes the Supreme Court's "famously incoherent" regulatory takings jurisprudence. Subpart A summarizes guiding principles in regulatory takings cases. Subpart B explains the Court's three-part regulatory takings test. Finally, Subpart C discusses temporary regulatory takings.

A. The Supreme Court Is Guided by Principles of Fairness and Justice in Regulatory Takings Cases

Generally, property ownership includes broad rights to "possess, use and dispose of it."(fn32) The government, however, may impose regulations that infringe upon private ownership rights.(fn33) While almost any government regulation can impact private property rights, not all government regulations constitute a taking.(fn34) Most regulatory burdens must be borne by private property owners "as concomitants of the advantage of living and doing business in a civilized community."(fn35) Moreover, the "[g]overnment hardly could go on" if it was required to compensate property owners for every regulation that affected private property.(fn36) Yet some regulations can be so substantial and unforeseeable that they constitute a regulatory taking.(fn37)

In order to balance the government's interests with private property interests in regulatory takings cases, the Supreme Court relies on principles of fairness and justice,(fn38) such as the property owner's reasonable expectations.(fn39) "While scholars have offered various justifications for [the Takings Clause]," the Court has emphasized its role in "bar[ring] Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole."(fn40)

Some commentators have criticized the Court's emphasis on fairness and justice in regulatory takings cases. These commentators argue that basing judicial outcomes on notions of fairness and justice is an undesirable approach,(fn41) because "[f]airness, like beauty, is often in the eye of the beholder."(fn42) Despite these critiques, "the Court has long affirmed that 'fairness and justice' is at the heart of the takings inquiry."(fn43) Indeed, recent Supreme Court cases suggest that fairness and justice is one of the principal considerations in regulatory takings cases.(fn44)

B. The Supreme Court Uses a Three-Part Balancing Test in Regulatory Takings Cases

Until the early twentieth century, only physical takings were recognized under the Takings Clause.(fn45) The Supreme Court first recognized regulatory takings in 1922 in Pennsylvania Coal Co. v. Mahon.(fn46) In Mahon, a coal company sold its surface rights to a parcel of property, but expressly reserved the right to mine coal beneath the surface.(fn47) After the sale, the Pennsylvania state legislature enacted a statute that prohibited any coal mining that would cause homes and surfaces near residential property to sink.(fn48) This regulation made it commercially impracticable for the company to mine coal beneath the property it had sold.(fn49) Thus, the regulation had almost the same effect as if the government had appropriated or destroyed the property.(fn50)

In light of these facts, the Court determined that the regulation constituted a taking.(fn51) Writing for the Court, Justice Holmes announced: "[W]hile property may be regulated to a certain extent, if regulation goes too far it will be recognized as a...