At its heart, this is a simple case. The Takings Clause of the Fifth Amendment requires payment of “just compensation” whenever the government takes “private property” for “public use.” In this case, a county took the property of the Pung estate and paid far less than just compensation for it, because of a poorly run auction that took in far less than the property was worth. Nonetheless, the Sixth Circuit held that the county had not violated the Fifth Amendment. Now the Supreme Court has taken up the case, and Cato has filed an amicus brief along with Professors Ilya Somin, Jessica Asbridge, James Ely, and Julia Mahoney urging the Court to reverse the Sixth Circuit.

In our brief, we explain that if the Court does not reverse the badly flawed decision of the Sixth Circuit, state and local governments could systematically undercompensate vulnerable property owners who lose their land to tax foreclosure. Such an outcome would gravely undermine the rule set out in the Court’s unanimous decision in Tyler v. Hennepin County (2023), which held that “home equity theft” violates the Takings Clause and vindicated “[t]he principle that a government may not take more from a taxpayer than she owes.” The compensation paid to the Pung estate fell far short of the “fair market value” standard required by this Court’s precedents, as indicated by the County’s own valuation of the property at $194,400 – more than twice the amount it paid to the estate.

Part I of our brief explains why reversal of the Sixth Circuit decision is required by basic Takings Clause principles, including those enunciated in Tyler. There is no other way to forestall home equity theft and ensure that property owners facing loss of property through tax foreclosure are fully compensated.

Part II outlines historical evidence showing the importance of the requirement of just compensation, and the need to fully compensate property owners for property taken by the government. Mere partial compensation is not enough.

Finally, Part III explains why a ruling upholding the lower court is likely to result in severe abuses of property rights, because local governments often have incentives to undercompensate property owners whose land is subject to tax foreclosure. Elderly, minority, and less affluent property owners are likely to be particularly vulnerable.

The Supreme Court should reverse the Sixth Circuit and hold that the county violated the Fifth Amendment.