US Supremes Clarify Takings Rules by Limiting Agins' "Substantial Relationship" Test
In doing so, Justice O'Connor, writing for a unanimous court, seems to have taken a stab at clarifying and categorizing takings law going forward. In this case, the "substantially advances" test had been used to strike down a Hawaiian statute that imposed rent controls on oil-company owned gas stations, because Chevron demonstrated to the satisfaction of the trial judge that the provision did not advance the state's interest in controlling consumer oil prices, and therefore was a taking. The court pretty much rejected the proposition out of hand (calling it "not only doctrinally untenable as a takings test [but also that] its application as such would also present serious practical difficulties."), but only after taking some time to clarify why the analysis here was a substantive due process analysis misplaced into takings claims.
This ruling was somewhat expected, but I think the big news is Justice O'Connor's related analyses. Unsurprisingly, there are three kinds of regulatory takings, and a special case. The first, and most general, is the Penn Central balancing test. The second is the Loretto style invasion, which is a categorical taking. And the third, of course, is the categorical Lucas taking when a regulation takes all economically beneficial use of the property. These three inquiries (as Justice O'Connor called them) "share a common touchstone. Each aims to identify regulatory actions that are functionally equivalent to the classic taking in which government directly expropriates private property or ousts the owner from his domain. Accordingly, each of these tests focuses on the severity of the burden that government imposes upon private property rights."
Three kinds? What about Nollan and Dolan?
In Part III of the opinion, Justice O'Connor takes some pain to clarify Nolan and Dolan, but in doing so raises many questions. These cases, she reasons, "involved Fifth Amendment takings challenges to adjudicative land-use exactions - specifically, government demands that a landowner dedicate an easement allowing public access to her property as a condition of obtaining a building permit." She notes that in both cases, the expropriation of the easement would have been a taking, but goes on to not that Dolan held that "an adjudicative exaction requiring dedication of private property must also be 'roughly proportional' . . . both in nature and extent to the impact of the proposed development." [sorry about the depth-of-quote there - everyone should read this on their own anyway.] She then ties them both back to the unconstitutional conditions theory, characterizing the "problem" as the government's demand that they give up their right to be compensated for the taking of the property in exchange for a "discretionary benefit." [I somehow doubt that her choice to modify the term "exaction" twice with the term "adjudicative" was accidental.]
This leaves us in a pickle as to whether Nollan and Dolan apply a) to ordinances or statutes that set forth exaction requirements and levels (i.e., what makes an exaction adjudicative and when would legislative exactions be covered) or b) when money rather than easements, dedications or other transfers of real property interests are involved. It could be argued that by focusing on the unconstitutional condition aspect, she actually has opened the door wider to argue this in other contexts, but it also could be argued that impact fees have been pulled out of the protection of the takings clause.
What we have here is (perhaps finally) a takings case that will help law professors and land use lawyers alike categorize the substantive takings approaches and when they should be used. By purging the tempting but problematic "substantially advances" test and putting Dolan and Nollan off into the "unconstitutional conditions" corner (rather than being another form of takings analyis), Justice O'Connor has provided some clarity to a longstanding analytical quagmire.
Let's see if the court provides similar procedural simplification when it tackles the San Remo Hotel case.