billy joel, the stranger (1977) office hours this week: – fri 11:45am-1:45pm – sun 1:00-5:00 pm...

Billy Joel, The Stranger (1977)

Office Hours This Week:Office Hours This Week:– FRI      11:45am-1:45pm– SUN    1:00-5:00 pm

Class TodayClass Today–  Review Problem 3B–  Penn Central Intro Continued

– Demsetz Takings Story– Arbitrariness Analysis

–  1978–  Penn Central Takings Analysis–  Course Evaluations

FINAL EXAM QUESTION 3Review Problem 3B (Oxygen)

FROM EXAM QUESTION IIIE (2000)

Should a state have to pay compensation to landowners whose property value is reduced significantly when the state bans production of a product or growing of a crop to prevent harmful or illegal uses of the product/crop where•the product/crop in question has both legal and illegal uses; and•the landowners’ methods of producing/growing of the product/crop in question cause no direct harms to the landowners’ neighbors?

DQ3.31: Penn Central & Demsetz Takings Story

• Reminder: This Analysis Provides Another Way to Think About Q of When Regulation Interferes Too Much w Property Rights

–Who Should Bear Burden for Changing Technology and/or Values?

– Though Not a Tough Question if “Change” is: “We’ve just discovered you’ve been poisoning us for years.”

Penn Central: Demsetz Takings Story

• Decision: Whether to alter historically significant building

• Old Rule: Os can do as they like.

• Externalities: Harm to nearby tourist businesses and tourism generally; harm to “history buffs” & civic pride

• Change in Circumstances: As time passes, historic buildings become more well-known/more popular/rarer

• Increased Externalities: Increase in [Perception of] Harms b/c more popularity; more reliance; loss of some historic buildings (Old Penn Station in 1963)

Jacqueline Kennedy Jacqueline Kennedy Onassis:Onassis:

"Is it not cruel to let our city die by degrees, stripped of all her proud monuments, until there will be nothing left of all her history and beauty to inspire our children? If they are not inspired by the past of our city, where will they find the strength to fight for her future? …

Jacqueline Kennedy Jacqueline Kennedy Onassis:Onassis:

"Americans care about their past, but for short term gain they ignore it and tear down everything that matters. Maybe… this is the time to take a stand, to reverse the tide, so that we won't all end up in a uniform world of steel and glass boxes."

Penn Central: Demsetz Takings Story

• Decision: Whether to alter historically significant building

• Change in Circumstances: As time passes, historic buildings become more well-known/more popular/rarer

• Increased Externalities: Increase in [Perception of] Harms b/c more popularity; more reliance; fewer historic bldgs

• Change in Rule: Passage of Historic Preservation Laws

• Response: Os of historic buildings might claim “Taking” b/c of interference w Property Rights: (Penn Central is first challenge)

Penn Central: Demsetz Takings Story

Policy Questions• For State Legislature (not you): Is Historic

Preservation a Good Way to Address Growing Externalities?

• For Federal Takings Analysis (you): Society decided relatively recently that historic preservation is important. – Fair to Os of historic bldgs to bear financial

burden? OR

– Should govt pay them to preserve landmarks?

Questions on Demsetz & Questions on Demsetz & Penn CentralPenn Central??

Penn Central: : Arbitrary? Arbitrary?DQ3.37 (Krypton)DQ3.37 (Krypton)

Penn Central claimed designation of historical

buildings arbitrarily singled out some property owners.

Why Did Majority Disagree?

Penn Central: : Arbitrary? Arbitrary?DQ3.37 (Krypton)

Majority: Not Arbitrary (pp.140-42)

• Comprehensive Plan Here –No Singling Out: Rule applies to “vast

numbers of structures” in NYC– Arbitrariness limited by judicial review

of designation or decision

Penn Central: : Arbitrary? Arbitrary?DQ3.37 (Krypton)

Majority: Not Arbitrary (pp.140-42)• Comprehensive Plan Here • Hard to say gov’t action is “arbitrary”

when PC didn’t exhaust other remedies:–Didn’t appeal designation as landmark–Didn’t appeal decision by Board to reject

plans–Only tried 2 options for additional stories

Penn Central: : Arbitrary? Arbitrary?DQ3.37 (Krypton)

Majority: Not Arbitrary (pp.140-42)

• Comprehensive Plan Here • Hard to say arbitrary gov’t action

when PC didn’t exhaust other remedies:

• NOTE: US SCt not happy to be asked to decide constitutional Q that might be unnecessary, but Majority doesn’t reject claim for this.

Penn Central: : Arbitrary? Arbitrary?DQ3.37 (Krypton)

Majority: Not Arbitrary (pp.140-42)

• Comprehensive Plan Here • PC didn’t exhaust remedies• Not “arbitrary” just b/c falls more

heavily on some landowners: regulatory burdens don’t have to be evenly distributed (citing Miller; Hadacheck; Euclid) 

Penn Central: : Arbitrary? Arbitrary?DQ3.37 (Krypton)

Majority: Not Arbitrary• Same result on this claim as

Hadacheck & Miller• Reminder: Arbitrariness won’t be an

issue for you.• Leaves us with real Takings Question• First Some Historical Context

The Blizzard of ‘78

1978: Births & Deaths

BORN:Louise Brown: 1st test tube babyClay Aiken * Kobe  BryantNelly Furtado * Josh HartnettAshton Kutcher * Dirk NowitzkiChase Utley * Reggie Wayne

DIEDHubert HumphreyMargaret MeadGolda MeirKeith MoonNorman Rockwell

1978: Entertainment (Bonus Slide)

• John Travolta– Saturday Night Fever (Grammy for album)– Grease (movie)

• Vietnam movies (5 yrs after fall of Saigon)– Deer Hunter (best picture)– Coming Home (best actor & actress)

• Premieres: Dallas; Evita; Garfield

1978: Songs (Bonus Slide)

• Just the Way You Are (Billy Joel)• Copacabana (Barry Manilow)• Three Times a Lady (Commodores)• Sailing (Christopher Cross)• Paradise by the Dashboard Light (Meat Loaf)

1978: International

• Camp David Accords: Peace treaty between Israel & Egypt

• Unrest in Iran & Nicaragua anticipates revolutions of ’79

• US agrees to formally recognize People’s Republic of China

• Panama Canal Treaties ratified by Senate; will end US control of Canal as of end of ’99

1978: California

• I arrive at Stanford mid-September• Calif. Propositions 13 & 6 (11/7)• Jonestown Mass Suicide (11/18)• Killing of Harvey Milk/George Moscone by Dan

White (11/27)

1978: Other Memorable

• 1st US casinos outside Nevada open in Atlantic City • Affirmed wins Triple Crown (not happened since)• Red Sox & Yankees: Bucky Dent• Pope Paul VI Pope John Paul I (53 Days)

Pope John Paul II

1978: U.S. Supreme Court

• Regents of the Univ. of California v. Bakke (affirmative action)

• Tennessee Valley Authority v. Hill (snail darter) • Penn Central Transportation Co. v. City of New

York (Grand Central Station)

Penn Central: Takings Analysis

Structure of Penn Central Takings Analysis

1.Overview2.Relatively Clear Instances of Takings3.Arguments from Purpose4.Arguments re Harm to Property Owner5.Means/End Testing

Penn Central: Takings Analysis

Big Qs Left Open by Big Qs Left Open by Penn Central Penn Central A.A.Noxious UseNoxious Use

B.B.Meaning of Distinct Invest-Backed Meaning of Distinct Invest-Backed Expectations (DIBE)Expectations (DIBE)

C.C.Denominator QDenominator Q

D.D.DIBE & DIBE & HadacheckHadacheck

E.E.Heightened Scrutiny for Takings?Heightened Scrutiny for Takings?

Penn Central: Takings Analysis

KEYS TO COLOR OF TEXT Greens = Arguments of Claimant PCBlues = Points Made by MajorityReds = Points Made by Dissent Purple = Points Made by Prior AuthoritiesBlack = Commentary from Me

Yellow/Gold: Open Qs After Yellow/Gold: Open Qs After Penn Penn CentralCentral

Penn Central: Takings Analysis

Structure of Penn Central Takings Analysis

1.Overview2.Relatively Clear Instances of Takings3.Arguments from Purpose4.Arguments re Harm to Property Owner5.Means/End Testing

Penn Central Takings Analysis: Overview

• Majority Makes Clear: No Easy Answers– no “set formula”– “depends on particular

circumstances”– essentially ad hoc factual inquiries– several relevant factors

Penn Central Takings Analysis: Overview

• Majority Makes Clear: No Easy Answers

• Not every case where gov’t action adversely affects property value (PV) is a Taking (p.137-38)a. Taxing Powerb. Economic harm insufficiently tied to

claimant’s reasonable expectations to be called “property” (e.g., from closing military bases)

c. Police Power cases like Miller & Hadacheck (more on later)

Penn Central: Takings Analysis

Structure of Penn Central Takings Analysis

1.Overview

2.Relatively Clear Instances of Takings 3.Arguments from Purpose4.Arguments re Harm to Property Owner5.Means/End Testing

Penn Central Takings Analysis: Relatively Clear Instances of

Takings• More likely More likely a Taking if there is a

physical invasion of property by or because of gov’t (p.137)–Note: Based on type of interference

rather than purpose or extent– Arguably Michelman reasons: Likely

high demoralization costs for physical invasions

Penn Central Takings Analysis: Relatively Clear Instances of Takings

• More likely Taking if physical invasion

• Gov’t actions that may be characterized as acquisitions of resources to permit or facilitate uniquely public functions (Sax Enterprisers) (p.138)

Penn Central Takings Analysis: Relatively Clear Instances of Takings

• More likely Taking if physical invasion• Gov’t actions that may be characterized as

acquisitions of resources to permit or facilitate uniquely public functions. (Sax Enterprisers)

• US v. Causby (DQ3.38) arguably both:– Very low airline overflights invaded

airspace –Use by military completely destroys

value of farm

Penn Central Takings Analysis: Relatively Clear Instances of Takings• US v. Causby (DQ3.38): Taking where …– Very low airline overflights invaded airspace –Use by military completely destroys value of

farm• Maj: Causby distinguishable from PC

(pp.141-42)–No physical invasion of airspace by NYC–No appropriation of property by NYC for

gov’t use or exploitation for gov’t purposes –Harm to PC not arising from gov’t

entrepreneurial operations

Penn Central Takings Analysis: Relatively Clear Instances of Takings

• DQ3.38: Majority treatment of Causby suggests endorsement of Sax with narrow view of “Enterpriser”–Majority Characterizes PC: No

appropriation of property [by NYC] for gov’t use or exploitation for gov’t purposes.

– Arguable if “Enterpriser” read broadly (see application of Sax to PC in earlier slides)

Penn Central: Takings Analysis

Structure of Penn Central Takings Analysis

1.Overview2.Relatively Clear Instances of Takings

3.Arguments from Purpose4.Arguments re Harm to Property Owner5.Means/End Testing

Penn Central Takings Analysis: Arguments from Purpose

Purpose: Where Were We Before Penn Central?

•Hadacheck & Mahon: Can regulate to stop public nuisance.•Miller: To save one type of property, can limit or destroy another type•Sax & Epstein both think purpose is important•Indirectly enters into Michelman b/c affects people’s perception of situation and thus may be relevant to both Demoralization Costs & Fairness Principle

Penn Central Takings Analysis: Arguments from Purpose

Majority’s Discussion of Zoning (p.137-38)

•US SCt had previously “upheld land-use regulations that destroyed or adversely affected recognized real property interests” where – State gov’t “reasonably concluded”

– that forbidding particular land use –would promote HSWM

•Reaffirms Hadacheck & Miller; gives many examples of permissible regulations

Penn Central Takings Analysis: Arguments from Purpose

PC Tried to Distinguish Hadacheck/Miller, etc.

•Argued laws upheld in these cases all designed to stop “noxious uses” (essentially public nuisances) (see fn 30)•This is plausible reading of earlier cases : – Stopping public nuisance/noxious use = no

Taking – Different rules for other kinds of gov’t actions.– E.g., BDS in Mahon dissent re public harm v.

public benefit

Penn Central Takings Analysis: Arguments from Purpose

Dissent Agrees with PC: Providing Benefit Different From Stopping Harm•“[T]he gov’t can prevent a property owner from using his property to injure others without having to compensate the O for the value of the forbidden use.” (p.145)•Describes Hadacheck & Miller as noxious use cases (fn8 p.145) •NOTE: Even the most Conservative Justices in 1978 don’t question results in Hadacheck & Miller

Penn Central Takings Analysis: Arguments from Purpose

Dissent Apparently Would Adopt Position Later Articulated By Epstein

(Taking unless Public Nuisance or Reciprocity)

•Dissent Sees Neither Here•DQ3.40: As I argued earlier, could see some reciprocity in tourist $$$ flowing to PC; neither opinion recognizes (although Judge in NY Ct. App. had noted)•Important: Majority Implicitly Rejects Epstein Position by Disagreeing w Dissent

Penn Central Takings Analysis: Arguments from Purpose

[DQ3.39] (n.30): Majority seems to reject distinction between preventing harm &

providing benefit. •In Hadacheck & Miller, uses lawful at time of regulation [relevance: Os not bad actors meriting punishment?]•Cases don’t turn on “noxious use” but that restrictions were “reasonably related” to implementing a policy “expected to produce a widespread public benefit”•Plus destruction of historic landmark is public harm.

Penn Central Takings Analysis: Arguments from Purpose

DQ3.39: Does Footnote 30 alter earlier cases?

•If “noxious use” category gone, would seem to mean that readings of Hadacheck & Miller that rest on public nuisance idea are incorrect.•I’m skeptical that category is completely gone. You’d think preventing greater harms ought to give state more leeway to regulate land use.

Penn Central: Takings AnalysisBig Qs Left Open by Big Qs Left Open by Penn Central Penn Central

A.A.Noxious UseNoxious UseB.B. Meaning of Distinct Invest-Backed Meaning of Distinct Invest-Backed

Expectations (DIBE)Expectations (DIBE)

C.C. DIBE & DIBE & HadacheckHadacheck

D.D. Denominator QDenominator Q

E.E. Heightened Scrutiny for Takings?Heightened Scrutiny for Takings?

Penn Central: Takings AnalysisBig Qs Left Open by Big Qs Left Open by Penn Central Penn Central

Noxious UseNoxious UseShould we read Footnote 30 literally to mean that harm/ benefit distinction is irrelevant to Takings analysis and there’s no special treatment for “noxious uses”?

—OR—Can we still argue that gov’t gets more leeway to limit property rights when stopping harm to others or when purpose is otherwise very important?

Penn Central: Takings Analysis

Structure of Penn Central Takings Analysis

1.Overview2.Relatively Clear Instances of Takings3.Arguments from Purpose

4.Arguments re Harm to Property Oa. Distinct Investment-Backed

Expectationsb. Denominator Q

5.Means/End Testing

Penn Central Takings Analysis: Arguments re Harm to Property

Owner• Majority rejected claimant’s argument

that any significant loss in value is a Taking. (Last Class)

• However, says (p.137) that a significant factor in Takings analysis is the “extent to which the regulation has interfered with distinct investment-backed expectations” (DIBE)

• Opinion is not explicit about what DIBE means or its relationship to the facts or to prior cases

Penn Central Takings Analysis: Arguments re Harm to Property

Owner[DQ3.34] Not significant interference

with DIBE in Penn Central (pp.142-43)•No interference w primary expectations re parcel. – Can still use in way intended (RR Stn)– Can still make reasonable rate of return (RRR)

on investment

•Claimant exaggerates impact on “air rights”– No indication that can't build anything above.– Can transfer air rights in any event (suggests

can consider TDRs in doing valuation)

Penn Central Takings Analysis: Arguments re Harm to Property

Owner[DQ3.34]: DIBE: My Read from

Majority•Expectations = – Refers to owner’s expectations at time of

purchase (or relevant subsequent investment)– Expectations presumably must be

plausible/lawful at time = implicit requirement of reasonableness

Penn Central Takings Analysis: Arguments re Harm to Property

Owner[DQ3.34]: DIBE: My Read from

Majority•Distinct: expectations re property right affected must be– Specific: Not vague like “someday I

might develop more” or “I want as much profit as I can get”

– Separate from Whole (where relevant): Look for evidence showing O considered right in Q separately at time purchased

Penn Central Takings Analysis: Arguments re Harm to Property

Owner[DQ3.34]: DIBE: My Read from

Majority•Investment-Backed? – Evidence that distinct property right

specifically paid for (e.g., separate price or negotiation)

–Rewards good lawyering in drafting transaction documents (e.g., separately pricing “air rights” “mineral rights” “support rights” etc.)

Penn Central Takings Analysis: Arguments re Harm to Property

Owner[DQ3.34]: My Read of DIBE

•Expectations = O’s at time of investment (reasonable)•Distinct: Specific v. Vague; Separate from Whole •Investment-Backed? Specifically paid for•Penn Central– Air Rights not focus of deal: not distinct or

investment-backed– DIBE in RR Station: No significant interference

b/c RRR

Penn Central Takings Analysis: Arguments re Harm to Property

Owner[DQ3.34]: My Read of DIBE

•Expectations = O’s at time of investment (reasonable)•Distinct: Specific v. Vague; Separate from Whole •Investment-Backed? Specifically paid for•Exam Note: – Owner generally had some DIBE at purchase

(intended uses)– Check if right affected is specific part of DIBE– Check if interference w DIBE is significant

(e.g., no RRR)