Also known as: economic impacts
Written by attorneys — see sources below.
A factor in regulatory takings analysis consisting of the degree to which a government regulation diminishes the value or utility of the claimant's property. Courts weigh this factor along with interference with investment-backed expectations and the character of the government action to decide whether compensation is required.
Everest Holdings owned Grand Central Terminal and sought to build a large office tower above it. The city enacted a landmarks law that barred the tower and left the terminal in its historic form. Everest Holdings claimed the restriction destroyed the most profitable use of its air rights and substantially reduced the property's overall market value.
Eastern Enterprises had exited the coal business decades earlier. A federal statute then assigned it responsibility for lifetime health benefits of retirees it had never employed after 1965. The company faced hundreds of millions of dollars in new premiums that had no connection to its post-1965 operations.
Eastern Enterprises was organized as a Massachusetts business trust in 1929 under the name Eastern Gas and Fuel Associates. Until 1965, Eastern conducted extensive coal mining operations centered in West Virginia and Pennsylvania. As a signatory to each National Bituminous Coal Wage Agreement executed between 1947 and 1964, Eastern made contributions of over $60 million to the 1947 and 1950 Welfare and Retirement Funds. In 1963, Eastern decided to transfer its coal-related operations to a subsidiary, Eastern Associated Coal Corp. The transfer was completed by the end of 1965. It was described in Eastern's federal income tax return as an agreement by EACC to assume all of Eastern's liabilities arising out of coal mining and marketing operations in exchange for Eastern's receipt of EACC's stock. Eastern retained its stock interest in EACC through a subsidiary corporation, Coal Properties Corp., until 1987. It received dividends of more than $100 million from EACC during that period. In 1987, Eastern sold its interest in Coal Properties Corp. to Peabody Holding Company, Inc. Following enactment of the Coal Industry Retiree Health Benefit Act of 1992, the Commissioner of Social Security assigned to Eastern the obligation for Combined Fund premiums respecting over 1,000 retired miners who had worked for the company before 1966. The assignment rested on Eastern's status as the pre-1978 signatory operator for whom the miners had worked for the longest period of time. Eastern's premium for a 12-month period exceeded $5 million. Eastern responded by suing the Commissioner, as well as the Combined Fund and its trustees, in the United States District Court for the District of Massachusetts. Eastern asserted that the Coal Act, either on its face or as applied, violates substantive due process and constitutes a taking of its property in violation of the Fifth Amendment. The District Court granted summary judgment for respondents on all claims. The Court of Appeals for the First Circuit affirmed. The Supreme Court granted certiorari.
View caseLucas purchased two beachfront lots intending to build single-family homes. A new state coastal council regulation prohibited all construction on the lots. The ban left the parcels with no economically beneficial use whatsoever.
In 1986, petitioner David H. Lucas purchased two residential lots on the Isle of Palms in Charleston County, South Carolina, for $975,000. He intended to construct single-family homes on the parcels, which at the time were zoned for such use and required no building permit for development. No portion of the lots qualified as a critical area under then-existing coastal zone legislation. Subsequently, in 1988, the South Carolina Legislature enacted the Beachfront Management Act. The legislation established a baseline and prohibited construction of occupable improvements seaward of a line drawn 20 feet landward of that baseline, directly affecting Lucas's parcels by barring any permanent habitable structures. Lucas filed an action in the Court of Common Pleas alleging that the Act's restrictions effected a taking of his property without just compensation. Following a bench trial, the court determined that the prohibition rendered the lots valueless and ordered the state to pay just compensation in the amount of $1,232,387.50. The Supreme Court of South Carolina reversed the trial court's judgment. It accepted the legislature's findings that new construction threatened public resources and concluded that a regulation designed to prevent serious public harm could not constitute a taking. The United States Supreme Court granted certiorari to review the South Carolina Supreme Court's decision.
View caseNollan owned a beachfront lot and applied for a permit to replace a small bungalow with a larger house. The coastal commission granted the permit only on the condition that Nollan dedicate a public access easement across the dry sand portion of the lot.
The Nollans own a beachfront lot in Ventura County, California. A concrete seawall approximately eight feet high separates the beach portion of their property from the rest of the lot. The historic mean high tide line determines the lot's oceanside boundary. The Nollans originally leased their property with an option to buy, and the building on the lot was a small bungalow totaling 504 square feet. The Nollans' option to purchase was conditioned on their promise to demolish the bungalow and replace it. On February 25, 1982, they submitted a permit application to the California Coastal Commission proposing to demolish the existing structure and replace it with a three-bedroom house. The Commission informed them that the permit would be granted subject to the condition that they allow the public an easement to pass across a portion of their property bounded by the mean high tide line and their seawall. On June 3, 1982, the Nollans filed a petition for writ of administrative mandamus in the Ventura County Superior Court to invalidate the access condition. The court remanded the case to the Commission for a full evidentiary hearing. After the hearing, the Commission reaffirmed the condition. The Superior Court ruled in favor of the Nollans on statutory grounds and directed that the permit condition be struck. While the Commission's appeal to the California Court of Appeal was pending, the Nollans tore down the bungalow, built the new house, and bought the property. The Court of Appeal reversed the Superior Court. The Nollans appealed to this Court, raising only the constitutional question.
View caseChevron operated service stations in Hawaii. A state rent-control statute capped the rent Chevron could charge independent dealers. Chevron argued the cap substantially reduced its net returns on the leased properties without advancing any legitimate state interest.
In 1997, the State of Hawaii had a highly concentrated wholesale oil market due to its small size and isolation over 1,600 miles from the mainland, with only two refineries and six gasoline wholesalers operating in the state. Chevron U.S.A. Inc. was the largest refiner and marketer, controlling 60 percent of the in-state gasoline market and 30 percent of the wholesale market on Oahu. Gasoline was sold at retail through approximately 300 service stations, about half leased by oil companies to independent lessee-dealers. Chevron operated 64 such lessee-dealer stations under arrangements where it leased land, constructed stations, and leased them to dealers while setting wholesale prices and requiring supply contracts. In June 1997, the Hawaii Legislature enacted Act 257, which capped the rent oil companies could charge lessee-dealers at 15 percent of gross profits from gasoline sales plus 15 percent of other product sales, and imposed other restrictions on station ownership. Thirty days after enactment, Chevron filed suit in the United States District Court for the District of Hawaii against the Governor and Attorney General, challenging the rent cap. The parties stipulated that the cap would reduce aggregate rent on 11 of Chevron's stations by about $207,000 per year but allow increases on the remaining 53, potentially raising overall rental income by nearly $1.1 million annually, and that Chevron had not recovered station maintenance costs through rent alone over the past 20 years. The District Court granted summary judgment to Chevron. On appeal, the Ninth Circuit vacated the judgment and remanded the case. After a one-day bench trial featuring competing expert economists, the District Court entered judgment for Chevron. The Ninth Circuit affirmed, and the Supreme Court granted certiorari in 2004.
View caseThe City of Detroit condemned an entire residential neighborhood to assemble land for a General Motors assembly plant. Poletown residents and businesses lost their properties even though the city planned to transfer the assembled parcels to a private corporation.
This case arises out of a plan by the Detroit Economic Development Corporation to acquire, by condemnation if necessary, a large tract of land to be conveyed to General Motors Corporation as a site for construction of an assembly plant. The plaintiffs, a neighborhood association and several individual residents of the affected area, brought suit in Wayne Circuit Court to challenge the project on several grounds. In the spring of 1980, General Motors informed the City of Detroit that it would close its Cadillac and Fisher Body plants located within the city in 1983. General Motors offered to build an assembly complex in the city if a suitable site could be found meeting four criteria: an area of between 450 and 500 acres, a rectangular shape, access to a long-haul railroad line, and access to the freeway system. The city evaluated nine potential sites and selected a parcel of approximately 465 acres straddling the Detroit-Hamtramck border known as Central Industrial Park. In July 1980 the Detroit Common Council approved the boundaries of the project. On September 30, 1980, the completed project plan was approved by the Detroit Economic Development Corporation. On October 31, 1980, the Common Council passed a resolution approving the project plan with minor modifications and declaring that the project constituted a public purpose. General Motors required that title to the entire site and the rail marshalling yard must be vested in the City of Detroit by May 1, 1981. The projected public cost of preparing a site agreeable to the board of directors of General Motors is over $200 million. The site was to be sold to General Motors for little more than $8 million. The trial court conducted a ten-day trial on defendants’ motion to dismiss from November 17 to December 2, 1980, limited to the question whether the city abused its discretion in determining that condemnation of plaintiffs’ property was necessary under 1980 PA 87. On December 9, 1980, the court entered judgment for defendants and dismissed the complaint. Plaintiffs filed a claim of appeal with the Court of Appeals on December 12, 1980, and an application for bypass with the Michigan Supreme Court on December 15, 1980, which the Court granted along with a motion for immediate consideration.
View caseCourts compare the value of the property before and after the regulation and assess whether the owner retains any economically viable use. A mere reduction in value or loss of the most profitable use is usually insufficient to establish a taking.
Supporting sources
No. Even when the economic impact is substantial, courts still balance it against the extent of interference with investment-backed expectations and the character of the government action.
Supporting sources
…they effect a taking. In deciding this question, we have identified several factors that are particularly significant. The economic impact of the regulation on the claimant, the extent to which the regulation has interfered with distinct investment-backed expectations, and the character of the governmental action are all…