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THE CONSTITUTIONAL LAW OF PROPERTY I.
PROPERTY & ECONOMIC REGULATION A
1. Background principles. The constitutional law of property is divided into two camps, illustrated by the opinions of Justices Chase and Iredell in Calder v. Bull. i. Chase. Property is a pre-political right that is protected by not only the Constitution, but reason itself. a. Legislatures bound by first principles. "An act of the legislature (for I cannot call it a law), contrary to the great first principles of the social compact, cannot be considered a rightful exercise of legislative authority." b. Constitution not only set of requirements. "It is against all reason and justice for a people to intrust a legislature with
[a power that "takes property from A, and gives it to B"]. . . . The legislature . . . cannot punish innocence as a crime; or violate the right of an antecedent lawful private contract; or the right of private property. To maintain that our federal or state legislature possesses such powers, if they had not been expressly restrained, would, in my opinion, be a political heresy altogether inadmissible in our free republican governments . . . ." c. Positive law governs management of property. Nevertheless, "the right, as well as the mode, or manner, of acquiring property and of alienating or transferring, inheriting, or transmitting it, is conferred by society . . . and is always subject to the rules prescribed by positive law . . . ." ii. Iredell. Regardless of whether property is a natural right, a court is limited to evaluating whether a law is constitutional. a. Court has no power to overrule legislature re: natural justice. "It is true . . . that a legislative act against natural justice must, in itself, be void; but I cannot think that, under such a government any court of justice would possess a power to declare it so." b. Constitutions are only restraints. "In order, therefore, to guard against so great an evil," Americans have adopted constitutions "to define with precision the objects of legislative power, and to restrain its exercise within marked and settled boundaries." c. No standard for natural justice. If a legislature passes a law "within the general scope of their constitutional power, the court cannot pronounce it to be void, merely because it is, in their judgment, contrary to the principles of natural justice. The ideas of natural justice are regulated by no fixed standard; . . . [only constitutional] fundamental law . . . must be our guide, whenever we are called . . . to determine [its]
The Ex Post Facto Clause (ART. I, SS 9). This prohibits only retroactive criminal laws, not civil regulations or benefits, such as pardons. Calder. But see Eastern Enterprises. The Due Process Clause (AMEND. XIV). i. Lochner Era. The Fourteenth Amendment prohibits states from depriving an individual of life, liberty, or property---including the liberty to purchase or sell one's labor. States' inherent "police powers," however, authorize them to protect their citizens' safety, welfare, and morals. So long as an economic regulation has a "direct relation" to a "legitimate" end, it is okay. Lochner. But economic laws that require someone to accept personal services of another on terms to which he did not assent violate the 14th Amendment. Coppage. a. Holmes' dissents. Only when "fundamental principles" are at stake should a Court overrule a legislature; the Constitution tolerates many different theories of "natural rights"; "The 14th Amendment does not enact Mr. Herbert Spencer's Social Statics." Lochner. Instead, it authorizes legislatures to establish an equality of position between reasonable bargainers. Coppage. ii. New Deal Era. 14th Amend. "demands only that the law not be unreasonable, arbitrary, or capricious. Nebbia. "[R]egulation which is reasonable in relation to its subject and is adopted in the interests of the community is due process." W. Coast Hotel. iii. Eastern Enterprises. Justice Kennedy in his concurrence, infra, wrote that a severe retroactive liability violates the Due Process Clause because of the minor fit between justification and means. Justice Thomas wrote that such a liability might violate the Ex Post Facto Clause. E. Enters. Due Process Clause. Lochner Era. The Lochner Court observed that "it must, of course, be conceded that there is a limit to the valid exercise of the [police power]. Otherwise states would have "unbounded power." If one accepts that "freedom of contract" is a "fundamental" liberty, then a state should not be able to violate it by just calling any act a "police power." This should satisfy both Chase and Iredell. Lochner. a. Holmes's dissent. Holmes took an Iredellian position that Court may only overrule actions explicitly prohibited by the Constitution. ii. New Deal Era. "[N]either property rights nor contract rights are absolute; for government cannot exist if the citizen may at will use his property to the detriment of his fellows . . . . Equally fundamental with the private right is that of the public to regulate it in the common interest." Nebbia. "[T]here is no closed class or category of business affected with a public interest." Nebbia; cf. Error: Reference source not found. a. Institutional justification. "We refuse to sit as a 'superlegislature to weigh the wisdom of legislation." Ferguson. i.
Calder v. Bull (U.S. 1798) (SUPP. V, 1) (Chase, J.) Conn. ct. declared will void. Legislature told court to set judgment aside. According to natural justice, this is okay retrospective law.
6. (Iredell, J., concurring) No constitutional prohibition against what Conn. did. Lochner v. New York (U.S. 1905) (SUPP. V, 5) i. (Peckham, J.) N.Y. passed law imposing 10 hr/day maximum and provided for inspections of facilities. Since law is "a labor law, pure and simple," the link to police powers is too "shadowy" to be Constitutionally authorized. ii. (Harlan, J., dissenting) Court should vest discretion in the legislature; the burden is on D to prove there is no real connection to health/safety/welfare. Plus, baking is dangerous, so law does promote health. iii. (Holmes, J., dissenting) Court should not interpret "liberty" in 14th Amendment as an economic theory that contradicts the will of a majority. Coppage v. Kansas (U.S. 1915) (SUPP. V, 11) i. (Pitney, J.) Kan. prohibited employers from requiring employees to sign non-union agreements. D fired employee who would not sign. This violates freedom of contract. Nebbia v. New York (U.S. 1934) (SUPP. V, 25) i. (Roberts, J.) N.Y. set prices of milk. Since regulation is not arbitrary or capricious, and industry is "affected with a public interest," okay. W. Coast Hotel v. Parrish (U.S. 1937) (SUPP. V, 29) i. (Hughes, J.) Wash. min wage law for women/minors in public interest. ii. (Sutherland, J., dissenting) This changes the meaning of the Constitution. Ferguson v. Skrupa (U.S. 1963) (Supp. V, 33) i. (Black, J.) Kan. law forbidding non-lawyers from consolidating debt okay. ii. (Harlan, J.) "[R]ational relationship to a constitutionally permissible objective."
Eminent Domain A
Eminent domain (AMEND. V). The Fifth Amendment reads, "nor shall private property be taken for public use, without just compensation." This is a "tacit recognition of a pre-existing power" of government to transfer property from owners to itself. United States v. Carmack (U.S. 1946). Still, "the sovereign may not take the property of A for the sole purpose of transferring it to another private party B." Kelo. i. Just compensation. Government typically negotiates to purchase or makes deposit based on fair market value (not, e.g., sentimental value). ii. Public use in the Supreme Court. The main issue in ED cases is whether the law was for public use. "For the power of eminent domain is merely the means to the end." Berman. The Court defines "use" broadly as "purpose," having "long ago rejected any literal requirement that the condemned property be put into use for the general public." Kelo. a. Police power. "The 'public use' requirement is . . . coterminous with the scope of a sovereign's police powers." Hawaii Hous. b. Private developer. "We cannot say that public ownership is the sole method of promoting the public purposes." Berman. However, "A purely private taking could not withstand the scrutiny of the public use requirement." Kelo. c. Unsuccessful plan. "[W]hether in fact the provision will accomplish its objectives is not the question: the
[requirement] is satisfied if . . . the . . . state Legislature rationally could have believed that the [Act] would promote its objective." Hawaii Hous. d. Plan as "whole." The Constitution does not force the government to purchase on a "structure-by-structure basis." "Once the question of the public purpose has been decided, the amount and character of the land to be taken for the project . . . rests in the discretion of the legislative branch. Berman. iii. Public use in state courts. State courts, however, have been more restrictive; many include a "heightened scrutiny" when private developers are involved. Poletown. a. Mich. "means/ends" test. Three types of public use for private developers: (1) "public necessity of the extreme sort otherwise impracticable" (e.g. highways, railroads, etc.) (means/ends); (2) "when the private entity remains accountable to the public in the use of that property" (ends); (3) "on the basis of 'facts independent of public significance,'" (e.g. slum clearance) (ends). Cnty. of Wayne.
1. Eminent domain. Three historical justifications: (1) sovereign states have original and absolute ownership over all land (see, supra, at Error: Reference source not found); (2) ED is a remnant of feudalism; (3) ED is an inherent attribute of sovereignty. Two modern defenses: (1) ends (e.g. slum clearance) and (2) means (e.g. necessary to correct for "market failure," Hawaii Hous.). I. RICHARD POSNER, ECONOMIC ANALYSIS OF LAW (2007) (1063).
2. Eminent domain as "antimonopoly device." Holdouts in way of, e.g., railroad are like monopolists, causing high transaction costs, higher prices, and smaller output. "As a result of all this, land that would have been more valuable to a right-of-way company than to its present owners will remain in its existing, less valuable uses, and this is inefficient." b. Only use when TCs are high. When low transaction costs, "the law should require the parties to transact in the market, which it can do by making the present owner's property right absolute" to promote negotiation. But when high transaction costs, "people must be allowed to use the courts to shift resources to a more valuable use; the market is by definition unable to perform this function in those settings." ii. Thomas Merrill, The Economics of Public Use (1986). a. More difficult for government to develop than private market. Assembly through voluntary actions is unattractive for government (1) because it often seeks larger more sitedependent parcels than private developers and (2) it would have greater difficulty balancing secrecy against opportunities for corruption. iii. William Fischel & Perry Shapiro, Takings, Insurance, and Michelman (1988) (1064). a. Compensation requirement. A compensation requirement "serves the dual purpose of offering a substantial measure of protection to private entitlements, while disciplining the power of the state, which would otherwise overexpand unless made to pay for the resources that it consumes." iv. Frank Michelman, Property, Utility, and Fairness (1967) (1064) a. "[I]s it fair to effectuate this social measure without granting this claim to compensation for private loss thereby inflicted?" Public use in the Supreme Court. "The concept of the public welfare is broad and inclusive. The values it represents are spiritual as well as physical, aesthetic as well as monetary." Berman. i. Private developer. "The public end may be as well or better served through an agency of private enterprise than through a department of government." Berman. However, "The government now has license to transfer property from those with fewer resources to those with more." Kelo (O'Connor, J., dissenting). Indeed, when states recruit developers, they offer tremendously expensive financial incentives, e.g. $400 million to recruit a Nissan factory. Black Families Resist Miss. Land Push, N.Y. TIMES (2001). ii. The police power. This definition is similar to Iredell, except "public interest" is fundamental as "natural justice"; reduces judicial scrutiny. "Subject to specific constitutional limitations, when the legislature has spoken, the public interest has been declared in terms well-nigh conclusive. In such cases the legislature, not the judiciary, is the main guardian of the public needs to be served by social legislation." Berman. iii. Plan as "whole." "If owner after owner were permitted to resist these redevelopments on the ground that his particular property was not being used against the public interest, integrated plans for redevelopment would suffer greatly." Berman.
Public use in state courts. The Supreme Court emphasizes that "nothing in our opinion[s] precludes any State from placing further restrictions on its exercise of the takings power." Kelo. Similar to idea that legislatures better "guardians" than courts. i. Richard Posner, A Political Court (2005) a. "When the Court declines to invalidate an unpopular government power, it tosses the issue back into the democratic arena."
1. Berman v. Parker (U.S. 1954) (SUPP. V, 35) (Douglas, J.) Congress passed law giving private enterprise in D.C. power of eminent domain to clear slums. P claimed it was not slum but was taken anyway. As law satisfies "public purpose," not for Court to second-guess. Hawaii Hous. Auth. v. Midkiff (U.S. 1984) (SUPP. V, 35) i. (O'Connor, J.) Hawaii attempted to eliminate feudal land system where 72 families owned 47% of Hawaii's land. Since this is "public purpose" and addresses a market failure, does not violate Fifth Amendment. Poletown Neighborhood Council v. Detroit (Mich. 1981) (SUPP. V, 49) i. (Per curium) Detroit condemned land to build GM plant and get jobs. Examining with heightened scrutiny, public interest (jobs) is predominant, so this is okay. ii. (Ryan, J., dissenting) "With this case the Court has subordinated a constitutional right to private corporate interests." Wayne Cnty. v. Hathcock (Mich. 2004) (SUPP. V, 55) i. (Young, J.) County wanted to use ED to build a new tech park. Overturning Poletown, court requires ED to private developer to meet one of three permissible types. Building a tech park does not accomplish this. Kelo v. New London (U.S. 2005) (1065) i. (Stevens, J.) Conn. authorized nonprofit developer to plan area around $300 million Pfizer facility using ED. As public "purpose" is broad, this is permissible. However, states can impose higher standards. ii. (Kennedy, J.) "Purpose" should not benefit particular private party. Heightened scrutiny may be more appropriate where evidence of favoritism. iii. (O'Connor, J.) ED should only be used to cure public harms; this will harm poor people. i.
REGULATORY TAKINGS A
Background: police power v. eminent domain. When states regulate, the Fifth Amendment requires them to compensate the latter but not the former. "The Fifth Amendment bars the 'Government from forcing some people to alone to bear the public burdens which, in all fairness and justice, should be borne by the public as a whole.'" Penn Cent. Three tests follow: (1) the "bad" v. "good" test, (2) the "reciprocity of advantage" test, and (3) the "diminution in value" test. i. Ripeness. "[T]he constitutionality of statutes ought not be decided except in an actual factual setting that makes such a decision necessary." Pennell. This means that successive owners should be allowed to sue regarding a previous regulation, or ripeness would be impossible. Palazzolo. "Bad" v. "good" test. States regulate under the police power to maintain health, safety, and welfare and curb a public "bad." States take under eminent domain to expropriate a public "good." i. Rent control. Although a regulation like rent control may seem "permanent," there is no physical occupation that would warrant compensation if owner did other line of work. Yae v. Escondido (U.S. 1992). See also Pennell (considering rent control under Due Process Clause). Reciprocity of advantage. Where there is "an average reciprocity of advantage" between owner and government, there is implicit compensation so act more likely valid. Pa. Coal Co. i. Penn Central. Penn Central approves of N.Y.C.'s transferable development-rights program as form of implicit compensation. Diminution in value test. "[O]bviously the [police power] must have its limits, or the contract and due process clauses are gone. . . . When [a diminution] reaches a certain magnitude, in most if not all cases there must be an exercise of eminent domain. . . . The general rule at least is, that while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking." Pa. Coal Co. i. Conceptual severance. The diminution-in-value test runs into the problem of diminution relative to what. Brandeis in Pa. Coal Co. argued that "The sum of the rights in the parts can not be greater than the rights in the whole," so the entire property regulated must be considered. This has become the majority view, in time, TahoeSierra and in space, Keystone Bituminous. There are exceptions for when a "stick" in the bundle of rights is abolished, Hodel, and compensating "temporary" takings, First English. a. Time. "[O]rdinances which would constitute takings if allowed to remain in effect permanently, [do not] necessarily also constitute takings if they are in effect for only a limited period." First English (Stevens, J., dissenting). First English about compensation; determining whether regulation has effected a temporary taking "requires careful examination and weighing of all the relevant circumstances." TahoeSierra. b. Space. "Because petitioners retain the right to mine virtually all of the coal in their mineral estates, the burden" of the regulation is not a taking. Keystone Bituminous.
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