Tag: Fifth Amendment

The Constitution Protects Even Old-Timey Property Rights

By
Ilya Shapiro and Trevor Burrus

In the 19th Century, when railroads were being built across the West, the federal government granted significant land and benefits to the railroad companies. The Great Railroad Right-of-Way Act of 1875 allowed the government to give railroad companies easements to build tracks — that is, a right to use sections of another’s property without legally owning it. The Brandt family eventually acquired land in Wyoming that came with pre-existing railroad easements.

In 2001, the owner of the easement formally abandoned all claims to it, presumably returning the property to the Brandts. But the government wanted that land. In 2006, it sued for title to the former easement land on the theory that the government retained a residual claim to it after the railroad abandoned it. The Brandts argue that the government has no such right and that taking their land requires just compensation under the Fifth Amendment’s Takings Clause.

Although this may seem like a small, unique problem, the scope of the Old West’s railway system was huge and those old easements criss-cross the land of thousands of property owners. In 1983, Congress amended the National Trails System Act to allow the government to take abandoned railroad easements and turn them into land for public recreation and “railroad banking.” Landowners have been fighting the taking of their property under the Trails Act ever since, claiming, as here, that the government’s original grant to the railroads contained no residual right of possession for the government.

Indeed, two federal courts of appeals, the Seventh and Federal Circuits, have held that the government didn’t retain any residuary rights. In the Brandts’ case, however, the Tenth Circuit held otherwise. This circuit split is untenable. Over 5,000 miles of abandoned track has been taken by the government since the Trails Act, and about 10,000 property owners are currently fighting in federal courts to hold onto their property.

Of course, given the possible benefits of not having to pay compensation to landowners, the government has responded to these claims by being aggressively litigious, reaching into its endless war-chest of taxpayer-provided resources to challenge the landowners on every tiny point. As the Federal Circuit said, the government’s behavior is “puzzling” in that it is “foregoing the opportunity to minimize the waste both of its own and plaintiffs’ litigation resources, not to mention that of scarce judicial resources,” but also by advancing arguments “so thin as to border on the frivolous.”

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Topics: 
Law and Civil Liberties, Regulatory Studies

U.S. Can’t Use Supreme Court’s Property Rights Ruling to Rewrite Takings Law

By
Ilya Shapiro

The Supreme Court ruled in December that a taking occurs when a government action gives rise to “a direct and immediate interference with the enjoyment and use of land,” thus allowing the Arkansas Game & Fish Commission to proceed with claims relating to the damage caused by government-induced flooding of a state wildlife management area. (The lower court had bizarrely held that while temporary physical invasions and permanent floods were subject to takings analysis, temporary flooding, even if repeated, was not.  For more background and links to Cato’s amicus briefs before the Supreme Court, see Roger Pilon’s commentary.)

On remand to the U.S. Court of Appeals for the Federal Circuit, however, the United States, relying on a single passage from the opinion, contends that the Supreme Court created a new multi-factor test applicable to all regulatory and temporary physical takings claims. Cato has now joined the Pacific Legal Foundation, National Federation of Independent Business, and National Association of Home Builders on a brief supporting the Commission and arguing that the passage upon which the government relies is both non-binding (“dicta” in legal terms) and in any event cannot be read to upset the distinction between regulatory and physical takings that the Court has consistently asserted.

It is well established in the Supreme Court’s takings jurisprudence that government intrusions on private property that permanently deprive the owner of a valuable property interest are to be subjected to the same test, regardless of whether the invasions are permanent or temporary. Under that test, courts are to consider the duration of the government intrusion, along with other information, to determine (1) whether the invasion is the direct cause of injury to the property and (2) whether the injury is substantial enough to subtract from the owner’s full enjoyment of the property and limit his exploitation thereof. If the injury to the property is substantial, it doesn’t matter whether the it was caused by an invasion of limited duration; once it is shown that the government invasion directly and substantially interfered with an owner’s property right, the government has a categorical duty to pay compensation.

In this case, the government’s intrusion permanently damaged significant property — valuable timber, from the destruction of trees — and is thus a compensable taking. The Supreme Court’s decision in Arkansas Game & Fish Commission didn’t modify or overturn the well-settled test for adjudicating physical takings claims, which remains distinct from the test that controls regulatory takings claims.

The Federal Circuit will hear argument in the case later this spring.

Topics: 
Law and Civil Liberties, Regulatory Studies

A Good Day for Property Rights

By
Roger Pilon

Property owners enjoyed a qualified win in the Supreme Court this morning when a unanimous Court (Justice Kagan recused) decided that “government-induced flooding temporary in duration gains no automatic exemption from Takings Clause inspection.” The case, Arkansas Game & Fish Commission v. United States, was brought by AGFC, which owns and operates 23,000 acres of land as a wildlife refuge and recreational preserve. Clearwater Dam, a federal flood control project, lies 115 miles upstream. Water is released from the dam in quantities governed by a pre-approved “management plan” that considers agricultural, recreational, and other effects downstream.

Between 1993 and 2000, the federal government released more water than authorized under the plan. AGFC repeatedly objected that these excess releases flooded the preserve during its growing season, which significantly damaged and eventually decimated tree populations. In 2001, the government acknowledged the havoc its flooding had wreaked on AGFC’s land and ceased plan deviations. By then, however, the preserve and its trees were severely damaged, requiring costly reclamation measures, so AGFC sued the government, claiming damages under the Fifth Amendment’s Takings Clause. Today, the Supreme Court agreed, reversing the U.S. Court of Appeals for the Federal Circuit.

Earlier, Cato had joined the Pacific Legal Foundation on an amicus brief urging the Supreme Court to take the case, which it did. We then joined the Pacific Legal Foundation and the Atlantic Legal Foundation with a second amicus brief urging the Court to uphold the Fifth Amendment rights of property owners whose land is destroyed by the federal government.

As is so often the case with the Court’s property rights jurisprudence, however, today’s decision was not an unqualified win for property owners. Because there is “no magic formula” for determining whether a particular government action constitutes a taking of property, Justice Ruth Bader Ginsburg wrote for the Court, “the Court has recognized few invariable rules in this area.” It has drawn some bright lines: regulations that constitute a permanent physical occupation of property or that require an owner to sacrifice all economically beneficial uses of his property will be ruled a taking. But in other cases, the Court will weigh several “factors.” Here, for example, in deciding whether the temporary flooding was a taking and hence compensable under the Takings Clause, the Court weighed the duration of the flooding, the degree to which the flooding was an intended or foreseeable result of the government’s action, the character of the land at issue, the severity of the interference, and—drawing from its infamously opaque Penn Central opinion—the owner’s “reasonable investment-backed expectations.”

Thus, the case is not over yet. Because the government had challenged several of the trial court’s fact-findings, including those relating to causation, forseeability, substantiality, and the amount of damages, the Court remanded the case for further proceedings. Still, the basic principle was settled: temporary government-induced flooding enjoys no automatic exemption from Takings Clause inspection. And that’s a win.

Topics: 
General, Law and Civil Liberties

I Heard It Through the Grapevine That the Government Was Violating Property Rights

By
Ilya Shapiro

This blogpost was co-authored by Cato legal associate Kathleen Hunker.

Property owners shouldn’t be made to suffer a needless, Rube Goldberg-style litigation process to vindicate their constitutional rights. Yet that is exactly what the U.S. Department of Agriculture seeks to impose on independent raisin farmers Marvin and Laura Horne when they protested the enforcement of a USDA “marketing order” that demanded that the Hornes turn over 47 percent of their crop without compensation.

The marketing order—a much-criticized New Deal relic—forces raisin “handlers” to reserve a certain percentage of their crop “for the account” of the government-backed Raisin Administrative Committee, enabling the government to control the supply and price of raisins on the market. The RAC then either sells the raisins or simply gives them away to noncompetitive markets—such as federal agencies, charities, and foreign governments—with the proceeds going toward the RAC’s administration costs.

Believing that they, as raisin “producers,” were exempt, the Hornes failed to set aside the requisite tribute during the 2002-2003 and 2003-2004 growing seasons. The USDA disagreed with the Hornes’ interpretation of the Agricultural Marketing Agreement Act of 1937 and brought an enforcement action, seeking $438,843.53 (the approximate market value of the raisins that the Hornes allegedly owe), $202,600 in civil penalties, and $8,783.39 in unpaid assessments.

After losing in that administrative review, the Hornes brought their case to federal court, arguing that the marketing order and associated fines violated the Fifth Amendment’s Takings Clause. Having litigated the matter in both district and appellate court, the government—for the first time—alleged that the Hornes’ takings claim would not be ripe for judicial review until after the Hornes terminated the present dispute, paid the money owed, and then filed a separate suit in the Court of Federal Claims.

The San Francisco-based U.S. Court of Appeals for the Ninth Circuit proved receptive to the government’s about-face. Relying on Williamson County v. Hamilton Bank (1985)—the Supreme Court case that first imposed ripeness conditions on takings claims—the court ruled in a revised opinion that the Tucker Act (which relates to federal waivers of sovereign immunity) divested federal courts of jurisdiction over all takings claims until the property owner unsuccessfully sought compensation in the Court of Federal Claims. In conflict with five other circuit courts and a Supreme Court plurality, the Ninth Circuit also concluded that the Tucker Act offered no exception for those claims challenging a taking of money, nor for those claims raised as a defense to a government-initiated action.

The ruling defies both law and common sense. It stretches the Supreme Court’s ripeness rule beyond its moorings and forces property owners to engage in utterly pointless, inefficient, and burdensome activities just to recover what should never have been taken in the first place.

Cato has thus filed an amicus brief, joined by the National Federation of Independent Business, Center for Constitutional Jurisprudence, and Reason Foundation, supporting the Hornes’ request that the Supreme Court take the case and correct the Ninth Circuit’s overbroad reading of Williamson County. We argue that an unjustified monetary order is inherently a taking without just compensation and that a ruling to the contrary imposes a pointless burden on property owners, particularly when the government initiated the original proceeding.

We also encourage the Court to reconsider Williamson County, noting that the text and history of the Takings Clause don’t permit the government to defer compensation—that indeed the most natural reading of the Takings Clause demands that compensation be offered as a prerequisite to government action. Just as the Court wouldn’t permit the government to seize property without some prior “due process of law,” it shouldn’t permit the government to seize property without prior “just compensation.”

The Court has no reason to treat takings claims with less deference than rights anchored in other constitutional provisions. It will decide this fall whether to address that issue in the case of Horne v. U.S. Dept. of Agriculture.

Topics: 
Government and Politics, Law and Civil Liberties, Regulatory Studies

Net Neutrality Violates the First and Fifth Amendments

By
Ilya Shapiro

This blogpost was co-authored by legal associate Matt Gilliam.

In December 2010, the FCC adopted Preserving the Open Internet, a “network neutrality” order regulating broadband internet access service. Issued under authority (ostensibly) derived from 24 disparate provisions of federal communications law, Preserving the Open Internet is predicated on three basic rules: transparency, no blocking, and no discrimination.

Broadly speaking, “transparency” requires broadband providers to “disclose network management practices, performance characteristics, and terms and conditions of services.” The “no blocking” rule forbids fixed broadband providers from “blocking lawful content, applications, services, and non-harmful devices.” Meanwhile, mobile broadband providers are restricted from blocking “lawful websites” and certain applications. The “No Discrimination” rule prohibits broadband providers from unreasonable discrimination in transmitting lawful network traffic.

The promulgation of the FCC’s network neutrality order will have serious consequences for the constitutional rights of broadband providers. One such provider, Verizon, now seeks to challenge the FCC order in the U.S. Court of Appeals for the D.C. Circuit. This week, Cato joined TechFreedom, the Competitive Enterprise Institute, and the Free State Foundation, on a brief urging the court to uphold Verizon’s First and Fifth Amendment rights.

We first argue that the FCC order violates broadband providers’ First Amendment rights by compelling speech, forcing them to transmit messages from content providers that they might not wish to convey, preventing them from transmitting messages they want to convey, prohibiting them from exercising editorial discretion, and generally restricting the mode and content of their communications. Because the order singles out certain speakers, it demands “strict scrutiny,” which it cannot survive because it neither serves a compelling governmental interest nor is narrowly tailored. We next argue that the FCC order violates broadband providers’ Fifth Amendment rights by subjecting them to physical and regulatory takings. The FCC order enacts a physical taking by granting the content providers an unrestricted right to occupy property while slicing through the bundle of property rights broadband providers enjoy as network owners. The order essentially gives the content providers unlimited use of the network owners’ physical property without any compensation, forbidding the rightful owners from exercising their right to control the use of their property and exclude others.

Furthermore, in forcing network owners to give network space to content providers, the regulation shifts costs to consumers, discouraging them from using broadband service and thus diminishing the network’s economic value. The FCC order also constitutes a regulatory taking because it prevents broadband providers from attaining their networks’ full economic value and subverts network owners’ reasonable investment-backed expectations. Finally, we argue that the FCC’s assertion of authority to regulate the Internet is a dangerous aggrandizement of agency power. In sum, while seeking to benefit content providers, the FCC has promulgated a regulation that violates the First and Fifth Amendment rights of broadband providers.

The case of Verizon v. FCC will be argued at the D.C. Circuit later this summer.

Topics: 
Law and Civil Liberties, Telecom, Internet & Information Policy

‘Temporary’ Takings That Cause Permanent Damage Still Require Just Compensation

By
Ilya Shapiro

This blogpost was co-authored by Trevor Burrus.

The Arkansas Game and Fish Commission owns and operates 23,000 acres of land as a wildlife refuge and recreational preserve; the preserve’s trees are essential to its use for these purposes. Clearwater Dam, a federal flood control project, lies 115 miles upstream. Water is released from the dam in quantities governed by a pre-approved “management plan” that considers agricultural, recreational, and other effects downstream.

Between 1993 and 2000, the federal government released more water than authorized under the plan. AGFC repeatedly objected that these excess releases flooded the preserve during its growing season, which significantly damaged and eventually decimated tree populations. In 2001, the government acknowledged the havoc its flooding had wreaked on AGFC’s land and ceased plan deviations. By then, however, the preserve and its trees were severely damaged, so AGFC sued the government, claiming damages under the Fifth Amendment’s Takings Clause.

The district court awarded $5.8 million in lost timber and reforestation costs based on the substantiality of the government’s flooding and the foreseeability of the damage it caused. The U.S. Court of Appeals for the Federal Circuit reversed that decision, holding that flooding can never be a taking unless that flooding is permanent. It further held that, in determining whether the government’s flooding was permanent or temporary, courts must focus on the character of the policy behind the intrusion rather the effects of the intrusion itself. A taking cannot have occurred here because each deviation from the plan constituted a “temporary” policy, the court concluded, so AGFC had no constitutional remedy.

In December, Cato joined the Pacific Legal Foundation on an amicus brief urging the Supreme Court to take the case, which it did. Now Cato again joins the Pacific Legal Foundation, as well as the Atlantic Legal Foundation, on a new brief urging the Court to uphold the Fifth Amendment rights of property owners whose land is destroyed by the federal government.

We argue that the length of time of the government’s physical invasion of property should not be used to determine whether a taking occurred, but rather only for calculating how much damage the taking caused. We further argue that the Federal Circuit’s focus on the “intent” of the government action—whether the flooding resulted from a “permanent or temporary policy”—is likewise irrelevant to whether a taking occurred. Instead, the inquiry should be whether the government caused permanent damage and, if so, how much. The lower court erroneously created a rule—that so long as it might be “temporary,” no government flooding can be remedied under the Fifth Amendment—that runs afoul of a constitutional provision meant to compensate property owners for government intrusions on their land.

The Supreme Court will hear the case of Arkansas Game & Fish Commission v. United States in October or November.

Topics: 
Law and Civil Liberties

Can the Government Destroy Propety Values ‘Temporarily’ Without Compensation?

By
Ilya Shapiro and Trevor Burrus

This blogpost was co-authored by Trevor Burrus.

A seemingly complicated legal case that has caught Cato’s attention, CCA Associates v. United States, boils down to a simple constitutional question: If the government reneges on a contract and forces a property owner to rent apartments at below-market rates for longer than originally agreed, does it constitute a taking under the Fifth Amendment (which would require the government to pay just compensation)?

In 1961, Congress amended the National Housing Act to create incentives for private builders to supply housing to low- and moderate-income families. Builders were given below-market mortgages backed by the federal government and, in return, the owners agreed to certain restrictions from the Department of Housing and Urban Development, the most relevant being limitations on raising rent. Owners were also given the right to pre-pay the 40-year mortgage after 20 years, however, freeing them at that time from their rent-control obligations.

In 1990, as one 20-year period came to a close, Congress took away the owners’ right to pre-pay their mortgages. In 1996, however, Congress returned the property owners’ right to pre-pay. Therefore, between 1991 (when the original 20-year period would have lapsed) and 1996, the property owners were forced to rent at below-market rates.

CCA Associates is one of many similarly situated property owners who are suing the federal government for its clear act of duplicity. CCA Associates’ case, among many others, has been bouncing back and forth between the Court of Federal Claims and the Federal Circuit for many years.

One of the key questions is how to determine the degree to which the government’s actions economically affected CCA Associates’ property. One view is that there was substantial economic impact during the five-year period between when Congress eliminated and then restored the pre-pay right – CCA Associates lost approximately 81% of the property’s possible value during those five years. Another view looks at the impact during the five-year period as fraction of the entire life of the property, not just the diminished value during the five-year period. Under this calculation, CCA Associates only lost 18% of the total value of the property.

The Federal Circuit adopted the latter formula and held that 18% is not a substantial enough economic impact to constitute a Fifth Amendment taking. Cato has joined the National Federation of Independent Business, the Center for Constitutional Jurisprudence, and Professor Steven Eagle of George Mason University Law School on an amicus brief urging the Supreme Court to take CCA Associates’ case.

We argue that adopting the Federal Circuit’s answer to the so-called “denominator question” – that is, whether the denominator in the “economic impact” fraction should be the entire life of the property or the shorter (here five-year) period during which the government temporarily took the owners’ right to rent at the market price – could preclude all possible claims that the government committed a “temporary taking.” By choosing a big-enough denominator, courts can always characterize an economic impact as being below the constitutional threshold.

We also argue that, in applying the Supreme Court’s factors in the famous 1978 Penn Central case (which set up the analytical framework for regulatory takings), the Federal Circuit incorrectly treated the factors as a magic formula and ignored other relevant factors. Finally, we point out how courts are obviously confused about the proper standards to apply in these cases, thus creating a perfect time for the Supreme Court’s guidance.

The Court will decide this fall whether to hear CCA Associates v. United States.

Topics: 
Government and Politics, Law and Civil Liberties, Regulatory Studies

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