The Supreme Court
Anthony Palazzolo owned waterfront property on the Rhode Island coast. Most of that property was salt marsh, which was subject to tidal flooding. The land was purchased by a corporation in which Palazzolo was a sole owner in 1959. When the corporation failed to pay income taxes, the property passed to Palazzolo. The change of title occurred after the Rhode Island Resources Management Council was created and regulations were adopted to protect and greatly limit development of Rhode Island's coastal wetlands.
Palazzolo filed suit in state court claiming that the state's wetlands regulations had “taken” his property without compensation in violation of the Fifth and Fourteen Amendments because he was denied “all economically beneficial use” of his property. The state courts denied his claim for three reasons:
The Supreme Court disagreed with the state court's ruling and decided (on a split 5 to 4 vote) in favor of Palazzolo. The majority opinion was written by Justice Kennedy, but there were two concurring opinions, two dissenting opinions, and one opinion concurring on some issues and dissenting on others. Joining Kennedy were Rehnquist, O'Connor, Scalia, and Thomas. Justices O'Connor and Scalia wrote concurring opinions. Justice Ginsburg wrote a dissenting opinion that was joined by Souter and Breyer. Breyer also wrote an additional dissenting opinion. Justice Stevens wrote an opinion that partially concurred and partially dissented. Kennedy wrote for the majority:
Palazzolo established the precedent that a “takings” claim can be made on property that came into your possession after a regulation that limits development of that property—thereby protecting heirs to your property. Also a property owner does not need to go through countless rounds of repetitive land use review processes before filing suit.
The case was remanded back to Rhode Island's state courts to decide whether or not the land was 100 percent “taken.” The Rhode Island Superior Court ruled in 2005 that it was not a 100 percent take because the property was still available for single family development.
One key precedent set in this case was that an owner who gained title to property after a development regulation became law still had the right to claim a taking without compensation. The state tried to argue Palazzolo had no claim because ownership was transferred to him after the new regulations were in place. This is particularly important to heirs, who now clearly have the right to challenge laws that limit the fair use and value of land they have inherited. The second key precedent is that the Court ruled a landowner “need not go through countless rounds of repetitive land use review processes with other agencies just to prove that the claim was 'ripe.'”
Justice Ginsburg in her dissent did not believe this case was ripe for decision because a final development decision had not yet been made by the state agency. She wrote:
Moratoria that temporarily take away “all economically beneficial uses” of a property do not enjoy the same protections against “taking” as permanent regulations. This issue was clarified in the next case we'll review, Tahoe-Sierra Preservation Council, Inc. et al v. Tahoe Regional Planning.
Stalling Lake Development
California and Nevada sought to preserve the beauty of Lake Tahoe, which they believed was threatened by development. To preserve the lake they formed the Tahoe Regional Planning Compact and created the Tahoe Regional Planning Agency (TRPA) in 1972. When the TRPA failed to limit new residential development, the two states formed a new compact in 1980 that required the agency to develop standards for water quality, air quality, and vegetation conservation. Once developed, the TRPA was required to adopt a regional plan to achieve those standards. The states also directed the TRPA to place a moratorium (freeze) on development until implementing the plan.
A per se rule is a rule set by judges after long experience with certain practices that are common in a given market condition. Once set, the per se rule helps to avoid expensive litigation in areas that a clear rule of law has been set. Before this per se rule is set, cases are determined on a rule of reason that looks at the specific issues of the case before the judge.
Two moratoria ended up stopping all development over a 32-month period while the TRPA put together its comprehensive land-use plans. The property owners filed a series of suits in federal district court claiming that these moratoria were a taking of their property without compensation. The district court sided with the owners that the moratoria did constitute a taking based on the rules set forth in Lucas v. South Carolina Coastal Council.
TRPA appealed the district court decision to the 9th Circuit Court, which sided with the TRPA, saying the moratoria only had a temporary impact on the landowners, so it was not a taking. The 9th Circuit Court went on to say that Lucas was not an appropriate precedent because, in the current case, there was not a permanent denial of all productive use of the land.
The U.S. Supreme Court sided with the TRPA in a 6 to 3 decision on April 23, 2002. Justice Stevens wrote the majority opinion and was joined by Justices O'Connor, Kennedy, Souter, Ginsburg, and Breyer. Chief Justice Rehnquist wrote the dissent and was joined by Justices Scalia and Thomas. Justice Thomas also wrote a separate dissent that was joined by Justice Scalia.
In the majority opinion, Stevens wrote:
Chief Justice Rehnquist in his dissent questioned the length of time for these particular moratoria. He believed the decision-making process took too long in this case. Rehnquist wrote:
At least for now, temporary moratoria are not considered takings, but it is likely that more cases will make it to the court until a per se rule is established for moratoria.