Taking Clause

In 1965 New York City enacted the Landmarks Preservation Law, which created an eleven-member Landmarks Preservation Commission and authorized it to designate buildings at least thirty years old that possess special historical or aesthetic interest. The law required owners of designated landmarks to obtain Commission approval before altering exterior architectural features and imposed an affirmative duty to keep those features in good repair. In August 1967 the Commission designated Grand Central Terminal a landmark and the city tax block it occupies a landmark site; the Board of Estimate confirmed the designation the following month. Penn Central Transportation Co. and its affiliates owned the Terminal, an eight-story Beaux-Arts structure completed in 1913 that served as the main station for the New York Central and Harlem lines. On January 22, 1968, Penn Central entered a fifty-year renewable lease with UGP Properties, Inc., under which UGP agreed to construct a multistory office building cantilevered above the Terminal and to pay Penn Central at least three million dollars annually after construction. Penn Central and UGP submitted two plans prepared by architect Marcel Breuer: Breuer I, a fifty-five-story tower resting on the Terminal roof, and Breuer II Revised, a fifty-three-story building that would have removed part of the 42d Street facade. After four days of hearings at which over 80 witnesses testified, the Commission denied this application as to both proposals. Penn Central filed suit in New York Supreme Court, Trial Term, seeking a declaratory judgment, injunctive relief, and damages for a temporary taking. The trial court granted the injunctive and declaratory relief. The Appellate Division reversed, holding that Penn Central had failed to prove deprivation of all reasonable beneficial use. The New York Court of Appeals affirmed, concluding that the Terminal could still earn a reasonable return and that transferable development rights provided significant compensation. The Supreme Court noted probable jurisdiction.

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.

In the late 1990s the city of New London, Connecticut, confronted severe economic decline after the 1996 closure of the Naval Undersea Warfare Center, which had employed more than 1,500 people. The city's unemployment rate stood nearly double the state average and its population had dropped below 24,000 residents from a 1970 high of 30,000. State and local officials therefore designated the Fort Trumbull peninsula for targeted economic revitalization. In 1998 the New London Development Corporation, a private nonprofit entity, was reactivated to prepare a redevelopment plan covering roughly 90 acres. The plan divided the area into seven parcels designated for a waterfront conference hotel and marinas, retail and entertainment space, research and office facilities, parking and park support, residential units, a Coast Guard museum, and additional office and retail uses. The city council formally approved the plan in January 2000 and authorized the NLDC to acquire needed parcels by purchase or, if necessary, by eminent domain. Petitioners Susette Kelo, Wilhelmina Dery, and seven other owners held fifteen properties within parcels 3 and 4A; ten of those parcels were occupied by the owners or their family members and none was alleged to be blighted. After negotiations with the NLDC failed, the corporation initiated condemnation proceedings against the remaining properties in November 2000. In December 2000 the petitioners filed suit in New London Superior Court asserting that the proposed takings violated the public-use limitation of the Fifth Amendment. Following a seven-day bench trial the Superior Court entered a permanent restraining order barring condemnation of the parcel 4A properties but denied relief as to the parcel 3 properties. Both sides appealed to the Connecticut Supreme Court, which upheld the validity of all challenged takings. The United States Supreme Court granted certiorari to review the federal constitutional question.

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.