Penn Central Lives On

During oral argument in the Koontz case Chief Justice John Roberts asked rhetorically of counsel for the government:  “Do you know of any case where the government has lost a Penn Central case?”   In response, counsel cited several Supreme Court cases in which Penn Central claims prevailed.   He also might have cited an assortment of successful Penn Central claims in the lower courts.   It is certainly true that most Penn Central claims fail, which is only natural given, for example, the bedrock understanding that the Takings Clause is reserved for “extreme circumstances” (Riverside Bayview Homes v. United States) and Justice Antonin Scalia’s affirmation that a “property owner necessarily expects the uses of his property to be restricted, from time to time, by various measures newly enacted by the State in legitimate exercise of its police powers.” (Lucas v. South Carolina Coastal Council).  But a claim under Penn Central certainly can be successful.

A sort of oddball case on point is the recent decision of the New York Appellate Division in In the Matter of New Creek Bluebelt, Phase 4.  The case was actually a straight condemnation case involving a half-acre parcel on Staten Island.  Normally the compensation award in a condemnation case takes into account the regulatory restrictions in place that limit the market value of the property.   But the claimants contended that wetlands regulations limiting the development of their property were so onerous that they constituted a taking, and that the condemnation award therefore should be increased to reflect the probability that the regulations were a taking.

The Appellate Division agreed with this approach and upheld the lower court’s determination that there was a reasonable probability that the regulations constituted a taking under Penn Central (though the Court seemed to apply a strange version of the 3-part Penn Central test).   First, the Court upheld the trial court finding that wetlands regulations reduced the value of the property by 82%, observing that that figure, “standing alone,” is generally “insufficient to constitute a regulatory taking.”  Second, the Court observed that the plaintiffs failed to present any evidence with respect to the reasonableness of their expectations, but said this omission was “not fatal” in this case upon consideration of the third factor, the “character” of the regulation, in particular the fact that the regulation “effectively prevented any economically beneficial use of the property.”

Considering the 82% reduction in value, “together with the effective prohibition of any development of any portion of the property,” the Court agreed with the trial court that there was a reasonable probability that the wetland regulations constituted a taking, and accordingly made an upward adjustment in the compensation award as demanded by the claimants.

One could certainly quibble with aspects of this analysis, and this precedent only supports an award of compensation for a regulatory taking in extreme cases (but still falling short of a Lucas total wipe out), but at least the decision further confirms that the Penn Central analysis lives.