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Today was the day Apple's appeal of Judge Lucy Koh's refusal to issue an injunction against Samsung was scheduled at the US Court of Appeals for the Federal Circuit in Washington, DC. And Groklaw had two volunteers there. The first report is in, and we expect Webster to send in his report next. Groklaw's RFD has the framework of how it went, but he confesses he couldn't predict the outcome.
I met Webster at the hearing. The Panel consisted of Judges Prost, O'Malley, and Bryson. From the discussion, I gathered that this may be the same panel that heard the appeal concerning the preliminary injunction.
The hearing lasted well beyond the 15 minutes per side that was scheduled, driven largely by questions from the judges. Apple's opening ran 27 minutes, Samsung used 34 minutes, and Apple had 7 minutes for rebuttal. There were about 50 to 60 people in the gallery.
William Lee argued for Apple and Kathleen Sullivan for Samsung.
The question being argued was whether District Judge Koh used the correct standard in evaluating Apple's motion for a permanent injunction. Some of the argument was about what standard she actually did apply. I am sure Webster will provide a clear summary of the legal arguments. I left the courtroom without a clue how the panel will rule.
To show irreparable harm, Apple must prove causal nexus between infringement and injury, but the district court properly found that the most Apple did was to introduce evidence that some consumers value “design” and “ease of use” in general, a far cry from a showing that the limited features covered by Apple’s design and utility patents drive consumer demand for Samsung products. Apple argues that it should not have to prove causal nexus, but that argument defies this Court’s binding precedents making such a showing a well-established feature of irreparable harm analysis. Apple also argues that such a requirement applies only to preliminary and not permanent injunctions, but such a distinction is baseless.
So they both claim precedent, and that may mean it's up to how you view the patent smartphone wars. What is really going on, in my view, is that courts are noticing that the smartphone patents wars are going crazy overboard. Almost everyone sees it's harmful, everyone but the parties, or at least Apple, who just survived having an injunction against it overturned essentially as a favor, and now, within days, wants to get an injunction to block Samsung from the US market. So there is no balance in this patent warfare, and judges and regulators are trying to figure out how to keep everything from blowing up the economy or damaging customers, who want to be able to buy both types of phones.
Unfortunately, the last place to find patent balance is the Federal Circuit, and so I can only hope they hop on that train and help out, but let's wait and see.
I'll post Webster's report as soon as it arrives.
"Is that really what we're dealing with?" Bryson asked.
The current case has dragged on for two years.
Apple lawyer William Lee acknowledged that if the iPhone maker's injunction request was granted, the company would seek a so-called contempt proceeding to go after newer Samsung phones.
There's Apple. Minus a soul.
"I can't imagine that you wouldn't have some nexus requirement, regardless of how you define it, in every case of injunction," Judge Kathleen O'Malley said.
But O'Malley also questioned whether Apple even could prove that one feature of a complex product is the single driver of consumer demand, as demanded by the lower court. She said that if Apple proves one patented feature -- such as "pinch-to-zoom" -- to be the most important driver of consumer demand, it would automatically disprove the same about other patents.
Weighing all of the factors, the Court concludes that the principles of equity do not support the issuance of an injunction here. First and most importantly, Apple has not been able to link the harms it has suffered to Samsung’s infringement of any of Apple’s six utility and design patents that the jury found infringed by Samsung products in this case.
Anyway, Apple has now admitted in open court what this appeal is really all about, and the argument about causal nexus isn't really the core. This is about nuclear war against Android.
As part of its findings, the ITC overturned an administrative judge's earlier finding that Samsung infringed a potentially important Apple patent on phone design.
The ITC said Samsung can continue to import and sell its infringing devices during a two-month period in which the Obama administration can review Friday's order.
Samsung had warned the ITC that a product ban potentially could have a significant impact on the South Korean company's U.S. devices and create "an immediate and long-lasting shortfall" of smartphones in the U.S. market.
Preface: August is a nice time to be in Washington even on the morn of an Apple v Samsung Appeal. It looks like everyone has gone to the beach. The new, tree-water bags arrived yesterday, about four months late, so one felt obliged to fill them this morning lest the two young adopted saplings perish. They are already twelve feet high with lush green leaves. Nature did well enough alone so far. With a contrived hose-to-bucket-to-bottle-funnel relay system, thirty gallons were going to seep into the tree systems this day. The irrigator was relieved to see nary a copyright, trade or patent marking on the label and instructions. There was a referral to a website but what does a gardener do with IP? There was no evidence of genetic mutation.
Fearing great interest in a small courtroom, some few arrived early to the Courthouse to find what only the regulars knew was a small crowd. The judges were away too, with few of the courtrooms in operation. Indeed Apple v. Samsung was switched to the large en banc courtroom where there were ultimately few judges on the bench and few spectators in the pews. Maybe that is why the Court Police forced the closure of this chromebook.
Apple had filed this appeal because Judge Lucy Koh had refused to issue a PI (Permanent Injunction) after the jury found infringement. She denied the injunction because she said there was no “causal nexus” established between the infringements and relative sales of the parties’ respective devices.
The panel consisted of Judges Prost, O’Malley and Bryson. Judge Prost, as the senior judge, presided but she immediately yielded to Judge O’Malley who swore her recent law clerk on to the Federal Circuit bar. She listed his distinctions which included a previous science career. He was going to the patent trenches at Covington and Burling. He was young and trim and had a suspicious punk haircut. He looked to be capable of far more than rounded corners.
At the last visit to this room Judge O’Malley gushed at the wonder of flowcharts and software patents. Judge Prost had written a software patent dissent following the Supremes. Her position was supported when the Circuit took up her cause en banc. One would expect Prost and O’Malley to cancel each other out leaving this decision up to the third panelist, Judge Bryson.
By the time readers see this account, the transcript or audio will be available so it will concentrate between the words.
Mr. Lee of Apple pointed out that six patents in twenty-six products were infringed by Samsung. Apple lost sales. The trial established that there was a causal nexus between the harm and the infringement. Yet the Court denied the PI because she did not find in the evidentiary record such causal nexus between the infringement and the harm to sales. Mr. Lee discussed varying tests for such harm from “some connection” to the infringed feature being “a driver” to finally the stringent requirement being the “sole driver.” He cited the eBay case as establishing that the jury’s finding harm from infringement should be enough for a PI.
He contrasted the instant case with practicing parties to the instance with a Non-Practicing-Entity (NPE --aka Troll) where there is no irreparable harm. Since an NPE does not sell products with their patent, they only suffer “reparable harm,” that is harm reparable by monetary compensation. Since they are not selling a competing product, an injunction does not make sense.
Judge O’Malley jumped in about here. There was a summer informal feel about this whole hearing. There were few judges and people in this huge courtroom, indeed in the whole courthouse. There were no other cases on the calendar so they took up double the prescribed time for over an hour.
Judge O’Malley commented that in a tort sense there was no need for the nexus at the PI stage since the wrong was found and harm presumed. The sale of the offending product was causing irreparable harm.
The discussion necessarily mentioned that certain infringing features caused consumer appeal to a product. Apple contends that their patented features stolen by Samsung, caused Samsung’s devices to have inordinate appeal and damage Apple’s sales and market share. There was reference to rounded corners and pinch to zoom.
All conceded that Samsung claimed to stop selling 23 of the 26 products and to have designed around the remaining three. But Apple did not credit this.
Infuriatingly unmentioned in talk of offending features and their consumer charm and harm was reference to distinctive Samsung features that should have clouded any conclusion of harm. One wanted to shout, “What about the big Samsung screens?” Clearly the District Court did not find the Apple features worthy of a PI and solely responsible for Samsung fortunes.
Tactfully left voluminously unsaid by Samsung -- because the courts willfully blind themselves to the inanities on hand and it is officiously irrelevant -- was the fact that the USPTO has invalidated some of the patents.
Judge O’Malley said that her court could not order a causal nexus. Neither should Judge Koh.
It became clear in a discussion with Judge Bryson that winning a billion dollar verdict with or without a PI is only half the battle. This appeal was targeted at new products that Apple say continue the infringement. Apple accuses Samsung of selling the same products under a different name. Apparently there is a rule that if you sell the same product that is not “appreciably different” from the offending product, then a party can move to find them in contempt of the PI.
Apple argues that the trial court found lost market share, loss of downstream sales and they can not stop it with a PI. Apple has to litigate the new products and the design-arounds to enforce the old judgment. Judge Bryson made the point of products not being sold and design arounds. These are why Apple wants the PI to go after Samsung with contempt in that the new Samsung products are not colorably different from the old, offending Samsung products. [Isn’t it stunning how if you have billions of dollars and you keep litigating and appealing, you can’t lose?!] It seems like every new product will have to be subject to a contempt hearing before Judge Koh if she orders a PI. If she denies the contempt and they lose apeals, they have to file a new case from scratch!
Apple discusses the risks of letting a multi-function product get away without a PI. They argue that no case precedent mandates a causal nexus. It would seem that a flexible, multi-function product, like a computer-phone, could avoid any patent.
Judge Prost steered the discussion back to their role. She noted conflict in 9th Circuit trade dress cases. She wondered if they are reviewing the District Court by the “abuse of discretion” standard. If they find an abuse of discretion, they can either order the PI, or send it back to Judge Koh to disabuse her discretion.
Apple concluded asking the Court to tell Samsung: “Don’t do it anymore.” Samsung says it stopped. [So Samsung is not paying on the new and Apple can’t complain without a PI to enforce and find continuing infringement.] The burden is on Apple without a PI.
Samsung began by distinguishing that they were found to have *diluted* -- not infringed. They discontinued the alleged infringement. The cessation is relevant to the PI. Apple failed to show that the infringements were the drivers of consumer demand. O’Malley wondered if the District Court had to find a causal nexus on a patent-by-patent basis. Samsung's response was that Apple failed to prove that the feature was a “driver of consumer demand.” Samsung said the design claims were too broad and that “ease of use” was too broad.
Judge Bryson referred to Dr. Howser’s testimony that “customers pay for features.” There was some discussion of $10 and $300 cupholders.
Update 4: Here's the audio [mp3].
SUMMARY: Notice is hereby given that the U.S. International Trade Commission has found a violation of section 337 in this investigation and has issued a limited exclusion order prohibiting respondents Samsung Electronics Co, Ltd. of the Republic of Korea (“SEC”); Samsung Electronics America, Inc. of Ridgefield Park, New Jersey (“SEA”); and Samsung Telecommunications America, LLC of Richardson, Texas (“STA”) (collectively, “Samsung”), from importing certain electronic digital media devices that infringe one or more of claims 1, 4-6, 10, and 17-20 of U.S. Patent No. 7,479,949 (“the ’949 patent”) and claims 1-4 and 8 of U.S. Patent No. 7,912,501 (“the ’501 patent”). The Commission has also issued cease and desist orders prohibiting SEA and STA from further importing, selling, and distributing articles that infringe one or more of claims 1, 4-6, 10, and 17-20 of the ’949 patent and claims 1-4 and 8 of the ’501 patent in the United States. The Commission has found no violation based on U.S. Patent Nos. D618,678 (“the D’678 patent”); D558,757 (“the D’757 patent”); RE 41,922 (“the ’922 patent”); and 7,789,697 (“the ’697 patent”). The Commission’s determination is final, and the investigation is terminated.
If Apple were to prevail with claims based on this patent, the effects could be severe - at least, in the United States. Devices made by companies other than Apple could lose a number of important techniques which make touchscreen-based interfaces usable.
What is wrong with the USPTO that everyone has to suffer so long over this goofball, overly broad functionality patent? You can't fool me. At the USPTO, there ain't-a no Sanity Clause.
At the time of issuance and publication of this certificate, the patent remains subject to pending reexamination control number 95/000,541 filed Apr. 2, 2010. The claim content of the patent may be subsequently revised if a reexamination certificate issues from the reexamination proceeding.
It was preliminarily found invalid in December of 2012. And the ITC wants to block Samsung from the US over this patent. Do you think the President will swoop down and save Samsung from this mockery of fairness?
Along with those protections for the iPhone’s design, Apple has numerous utility patents covering various functions of the unique user experience for the iPhone and iPad. Among those patents are U.S. Patent Nos. 7,469,381 (“’381 patent”), 7,844,915 (“’915 patent”), and 7,864,163 (“’163 patent”).
The ’381 patent claims the “bounce-back” feature used by the iPhone and iPad: when a user of a touchscreen device scrolls beyond the edge of an electronic document, the device causes the electronic document to bounce back so that no space beyond the edge of the document is displayed. A36502-36505; A36519- 36520; see also A21736-21739(1736:16-1739:21).
The ’915 patent claims the multi-touch display functionality of the iPhone and iPad, which allows those products to distinguish between single-touch commands for scrolling through documents and multi-touch gestures to manipulate a document (e.g., a two-fingered “pinch-to-zoom” gesture). A36448; A36459; see also A21817-21818(1817:8-1818:22).
The ’163 patent claims the “double-tap-to-zoom” capability of the iPhone and iPad, which allows a touchscreen device to enlarge and center the text of an electronic document when a user taps twice on a portion of that document and, in response to a second user gesture on another portion of the document, recenters the screen over that portion of the document. A36564; A36568; A36570; see also A21831-21832(1831:9-1832:21).
So please don't email me with complaints that I called it a case about a rectangle with rounded corners. That's what it is about, design patents and trade dress. Out of Apple's own mouth.
And if you don't think that's ridiculous -- and overbearing to even try to patent it -- see your doctor right away.
Pursuant to FRAP 28(j), Samsung respectfully writes to respond to Apple’s August 8, 2013 letter regarding Apple Inc. v. International Trade Commission, No. 2012-1338 (Fed. Cir. Aug. 7, 2013). Contrary to Apple’s argument, that decision does not suggest that the district court abused its discretion in denying a permanent injunction.
First, that decision does not address irreparable harm, but instead concerns application of a well-established standard for proving obviousness. The “causal nexus” for proving irreparable harm in the injunction context is distinct from the “nexus” for establishing the relevancy of “copying” or “industry praise” to obviousness. In the context of an injunction, the purpose of the causal-nexus requirement is to determine whether the patentee’s “sales would be lost even if the offending feature were absent from the accused product.” Apple Inc. v. Samsung Elecs. Co., 678 F.3d 1314, 1324 (Fed. Cir. 2012). The inquiry focuses on consumer demand for the infringing feature. The inquiry in determining whether “copying” or “industry praise” shows non-obviousness focuses on the response of persons of skill in the art to the invention.
Second, in the injunction context, this Court has already determined that copying of and praise for the patentee’s product is not evidence that any particular feature drives demand for the defendant’s product. Apple Inc. v. Samsung Elecs. Co., 695 F.3d 1376-77 (Fed. Cir. 2012); Apple, 678 F.3d at 1328. Apple’s argument to the contrary in their letter simply confirms that the obviousness and irreparable harm inquiries are distinct.
Third, Apple v. ITC does not concern any of the patents or accused products that are at issue in this appeal. The patent in Apple v. ITC claimed touch screen hardware relating to a circuit with first and second layers of transparent conductive lines. Slip Op. 3-4. In contrast, the three Apple utility patents at issue in the present appeal are software patents directed to minor user interface features, not touch screen circuitry. That decision therefore did not have occasion to consider what drives demand for Samsung’s accused products, the central inquiry with respect to causal nexus in this appeal.
In both cases, Samsung has said it designed around the patents, so any loss would have minimal impact on the company’s sales.
So, several months to wait until we know how they rule.
Update 8: I've finally had a chance to listen to the entire mp3 of the hearing. Apple's Mr. Lee states that Apple can't prove that the patents at issue in this litigation were drivers of user's decision to buy Apple products. He doesn't think anyone in Apple's position could prove that kind of causal nexus in a complex product with many patents involved. He cites a case where there was a product, a snow plow, and the patent was on a latch. There was no such requirement to prove that users bought the product to get the latch. So Apple's position is that this is a change in the law, if upheld, to have to prove a causal nexus of this strictness. They've read all 44 cases this appeals court has ruled on in this context, and they didn't find any like Judge Koh's standard.
It also suggests a time period where Samsung gets a chance to alter its products and prove it no longer infringes, but after that time period an injunction should issue.
As for Samsung, Ms. Sullivan opens by saying that this court has indeed upheld the concept of the need to establish a causal nexus. The jury found only trade dress dilution, not infringement. Trade dress is about source identification, and Apple doesn't use that trade dress any longer. So what would be the point of the injunction, since the district court found there was no such trade dress dilution on the current trade dress. Cessation on both sides, then, is a factor. But one judge asks, if Coke changes its can, and someone designs a similar can, Coke has no remedy to protect its old trade dress? Samsung's cessation has been established and is a relevant factor. But the judge doesn't seem to agree that this is the right standard.
Ms. Sullivan disagrees with her friend, Mr. Lee, that there is no such causal nexus standard in a permanent injunction context. She cites cases to demonstrate that this is established law. The same judge interrupts and asks if Koh didn't introduce the concept of "aggregate". She didn't say that, Sullivan points out. Apple failed to prove that any patent or any set in the aggregate was even *a* driver. Terribly weak evidence from consumer surveys were offered by Apple. Urges the court to review them. You won't see anything about rectangular, rounded corners, flat front face etc. You won't see anything about the patentd features. Surveyed people were just asked if "design matters". That's too broad.
What about Mr. Hauser's testimony, Judge Bryce asks, that people would pay more for such features? It's not the same, she answers. All Hauser's survey asked was would you pay more for the feature? The right question is whether a consumer would buy a *Samsung* phone with that feature *instead of* an Apple phone. The fact that I would pay $10 more for a cupholder in a car I've already decided to buy, Sullivan says, that isn't the same as proving that the person bought the car because of the cup holder. The judge doesn't seem to be buying that distinction. But Sullivan says it is not impossible to design a survey that *could* establish a causal nexus. Some collection of features might result in an injunction. But Apple failed to present such evidence.
But the judges seem to think that if people will pay more for something, that proves it's a driver. Sullivan says that would be new law, should they rule that way. But Samsung's other point is that there is a full remedy here, in that money can make Apple whole, so on what basis is an injunction available? Apple has licensed these patents, all of the designs in this case. It offered to license to Samsung itself. So money should be enough. Judge O'Malley asks if the patents aren't different, but Sullivan says no, it was the design patents. But Judge Bryce then says that Mr. Teksler denied that it was the same patents, and there is no finding that these are the same patents. Sullivan says if they have any question, they can remand on that, but there is enough in the slides from the meeting, so that documentary evidence should be enough. These judges are asking her a lot more aggressive questions than they did Apple's Mr. Lee. And some of the questions indicate that they were not fully familiar with the record. That doesn't prove anything about the outcome, necessarily, but it doesn't sound good to me. At a minimum, it indicates, to me anyway, that they started the hearing with a negative view of Samsung's position. I would say the outcome depends on how they accept, or not, Ms. Sullivan's answers to their questions.
After the flurry of questions, Sullivan corrects what Lee said earlier, that Koh found that Samsung's infringement constituted irreparable harm. But that is exactly what Koh did *not* find, she points out. They are not asking to a rule against injunctions. There was no jury finding of copying. Mr. Lee was incorrect in so stating. That issue was not before the jury. It was excluded as a sanction against Apple in discovery.
Mr. Lee in rebuttal says that there is no evidence that these design patents were offered to be licensed by Apple. What it offered to Microsoft was five years earlier and not the same. Judge Bryson says that there doesn't seem to be a law that this makes a big difference. But what about Nokia and IBM etc.? Mr. Lee says it was in a cross license but it was actually about an agreement not to sue. He says they are not saying there doesn't have to be some causal nexus. This judge found that there was a loss of sales, and that should be enough. What Apple doesn't want is a categorical rule that the patented feature has to be *the* driver. Judge Bryson asked, again, if price might be enough to establish that the feature is *a* driver. Apple insists that Samsung copied. That's not looking at their motive, only what they did. The fact that it felt it needed to copy is evidence that the feature matters.
There can be no hiding my reaction: the judges were markedly more friendly to Mr. Lee than to Ms. Sullivan.


In 1986, petitioner David H. Lucas paid $975,000 for two residential lots on the Isle of Palms in Charleston County, South Carolina, on which he intended to build single-family homes. In 1988, however, the South Carolina Legislature enacted the Beachfront Management Act, which had the direct effect of barring petitioner from erecting any permanent habitable structures on his two parcels. . . . A state trial court found that this prohibition rendered Lucas’s parcels “valueless.” This case requires us to decide whether the Act’s dramatic effect on the economic value of Lucas’s lots accomplished a taking of private property under the 5th and 14th Amendments requiring the payment of “just compensation.” . . .
I-A. . . . In the late 1970’s, Lucas and others began extensive residential development of the Isle of Palms, a barrier island situated eastward of the city of Charleston. Toward the close of the development cycle for one residential subdivision known as “Beachwood East,” Lucas in 1986 purchased the two lots at issue in this litigation for his own account. No portion of the lots, which were located approximately 300 feet from the beach, qualified as a “critical area” under the 1977 Act; accordingly, at the time Lucas acquired these parcels, he was not legally obliged to obtain a permit from the Council in advance of any development activity. His intention with respect to the lots was to do what the owners of the immediately adjacent parcels had already done: erect single-family residences. He commissioned architectural drawings for this purpose.
The Beachfront Management Act brought Lucas’s plans to an abrupt end. Under that 1988 legislation, the Council was directed to establish a “baseline” connecting the landward-most “point[s] of erosion . . . during the past forty years” in the region of the Isle of Palms that includes Lucas’s lots. In action not challenged here, the Council fixed this baseline landward of Lucas’s parcels. That was significant, for under the Act construction of occupiable improvements was flatly prohibited seaward of a line drawn 20 feet landward of, and parallel to, the baseline. The Act provided no exceptions.
I-B. Lucas promptly filed suit. . . . Lucas contended that the Act’s complete extinguishment of his property’s value entitled him to compensation regardless of whether the legislature had acted in furtherance of legitimate police power objectives. Following a bench trial, the court agreed. . . .
The Supreme Court of South Carolina reversed. . . .
Nevertheless, our decision in Mahon offered little insight into when, and under what circumstances, a given regulation would be seen as going “too far” for purposes of the 5th Amendment. In 70-odd years of succeeding “regulatory takings” jurisprudence, we have generally eschewed any “‘set formula'” for determining how far is too far, preferring to “engag[e] in . . . essentially ad hoc, factual inquiries.” Penn Central Transportation Co. v. New York City (1978) (quoting Goldblatt v. Hempstead (1962)). We have, however, described at least two discrete categories of regulatory action as compensable without case-specific inquiry into the public interest advanced in support of the restraint. The first encompasses regulations that compel the property owner to suffer a physical “invasion” of his property. In general (at least with regard to permanent invasions), no matter how minute the intrusion, and no matter how weighty the public purpose behind it, we have required compensation. For example, in Loretto v. Teleprompter Manhattan CATV Corp. (1982), we determined that New York’s law requiring landlords to allow television cable companies to emplace cable facilities in their apartment buildings constituted a taking even though the facilities occupied at most only one and one half cubic feet of the landlords’ property. . . . See also United States v. Causby (1946) (physical invasions of airspace); cf. Kaiser Aetna v. United States (1979) (imposition of navigational servitude upon private marina).
The second situation in which we have found categorical treatment appropriate is where regulation denies all economically beneficial or productive use of land. . . . As we have said on numerous occasions, the 5th Amendment is violated when land-use regulation “does not substantially advance legitimate state interests or denies an owner economically viable use of his land.” Agins v. City of Tiburon (1980).
We have never set forth the justification for this rule. Perhaps it is simply, as Justice Brennan suggested, that total deprivation of beneficial use is, from the landowner’s point of view, the equivalent of a physical appropriation. See San Diego Gas & Electric Co. v. San Diego (1981) (dissenting opinion). “[F]or what is the land but the profits thereof[?]” 1 E. Coke, Institutes, ch. 1, § 1 (1st Am. ed. 1812). Surely, at least, in the extraordinary circumstance when no productive or economically beneficial use of land is permitted, it is less realistic to indulge our usual assumption that the legislature is simply “adjusting the benefits and burdens of economic life,” Penn Central Transportation Co. v. New York City, in a manner that secures an “average reciprocity of advantage” to everyone concerned, Pennsylvania Coal Co. v. Mahon. And the functional basis for permitting the government, by regulation, to affect property values without compensation — that “Government hardly could go on if to some extent values incident to property could not be diminished without paying for every such change in the general law,” — does not apply to the relatively rare situations where the government has deprived a landowner of all economically beneficial uses.
On the other side of the balance, affirmatively supporting a compensation requirement, is the fact that regulations that leave the owner of land without economically beneficial or productive options for its use — typically, as here, by requiring land to be left substantially in its natural state — carry with them a heightened risk that private property is being pressed into some form of public service under the guise of mitigating serious public harm. . . .
The many statutes on the books, both state and federal, that provide for the use of eminent domain to impose servitudes on private scenic lands preventing developmental uses, or to acquire such lands altogether, suggest the practical equivalence in this setting of negative regulation and appropriation. . . .
We think, in short, that there are good reasons for our frequently expressed belief that when the owner of real property has been called upon to sacrifice all economically beneficial uses in the name of the common good, that is, to leave his property economically idle, he has suffered a taking.
III-B. The trial court found Lucas’s two beachfront lots to have been rendered valueless by respondent’s enforcement of the coastal-zone construction ban. Under Lucas’s theory of the case, which rested upon our “no economically viable use” statements, that finding entitled him to compensation. Lucas believed it unnecessary to take issue with either the purposes behind the Beachfront Management Act, or the means chosen by the South Carolina Legislature to effectuate those purposes. The South Carolina Supreme Court, however, thought otherwise. In its view, the Beachfront Management Act was no ordinary enactment, but involved an exercise of South Carolina’s “police powers” to mitigate the harm to the public interest that petitioner’s use of his land might occasion. By neglecting to dispute the findings enumerated in the Act or otherwise to challenge the legislature’s purposes, petitioner “concede[d] that the beach/dune area of South Carolina’s shores is an extremely valuable public resource; that the erection of new construction, inter alia, contributes to the erosion and destruction of this public resource; and that discouraging new construction in close proximity to the beach/dune area is necessary to prevent a great public harm.” In the court’s view, these concessions brought petitioner’s challenge within a long line of this Court’s cases sustaining against Due Process and Takings Clause challenges the State’s use of its “police powers” to enjoin a property owner from activities akin to public nuisances. See Mugler v. Kansas (1887) (law prohibiting manufacture of alcoholic beverages); Hadacheck v. Sebastian (1915) (law barring operation of brick mill in residential area); Miller v. Schoene (1928) (order to destroy diseased cedar trees to prevent infection of nearby orchards); Goldblatt v. Hempstead (1962) (law effectively preventing continued operation of quarry in residential area).
[T]he uses in issue in Hadacheck, Miller, and Goldblatt were perfectly lawful in themselves. They involved no ‘blameworthiness, . . . moral wrongdoing or conscious act of dangerous risk-taking which induce[d society] to shift the cost to a pa[rt]icular individual.’ Sax, Takings and the Police Power, 74 Yale L.J. 36, 50 (1964). These cases are better understood as resting not on any supposed ‘noxious’ quality of the prohibited uses but rather on the ground that the restrictions were reasonably related to the implementation of a policy — not unlike historic preservation — expected to produce a widespread public benefit and applicable to all similarly situated property.
“Harmful or noxious use” analysis was, in other words, simply the progenitor of our more contemporary statements that “land-use regulation does not effect a taking if it ‘substantially advance[s] legitimate state interests.'” Nollan v. California Coastal Commission.
The transition from our early focus on control of “noxious” uses to our contemporary understanding of the broad realm within which government may regulate without compensation was an easy one, since the distinction between “harm-preventing” and “benefit-conferring” regulation is often in the eye of the beholder. It is quite possible, for example, to describe in either fashion the ecological, economic, and esthetic concerns that inspired the South Carolina Legislature in the present case. One could say that imposing a servitude on Lucas’s land is necessary in order to prevent his use of it from “harming” South Carolina’s ecological resources; or, instead, in order to achieve the “benefits” of an ecological preserve. Whether one or the other of the competing characterizations will come to one’s lips in a particular case depends primarily upon one’s evaluation of the worth of competing uses of real estate. See Restatement (Second) of Torts § 822, Comment g, p. 112 (1979) (“Practically all human activities unless carried on in a wilderness interfere to some extent with others or involve some risk of interference”). A given restraint will be seen as mitigating “harm” to the adjacent parcels or securing a “benefit” for them, depending upon the observer’s evaluation of the relative importance of the use that the restraint favors. . . . Whether Lucas’s construction of single-family residences on his parcels should be described as bringing “harm” to South Carolina’s adjacent ecological resources thus depends principally upon whether the describer believes that the State’s use interest in nurturing those resources is so important that any competing adjacent use must yield.
When it is understood that “prevention of harmful use” was merely our early formulation of the police power justification necessary to sustain (without compensation) any regulatory diminution in value; and that the distinction between regulation that “prevents harmful use” and that which “confers benefits” is difficult, if not impossible, to discern on an objective, value-free basis; it becomes self-evident that noxious-use logic cannot serve as a touchstone to distinguish regulatory “takings” — which require compensation — from regulatory deprivations that do not require compensation. A fortiori the legislature’s recitation of a noxious-use justification cannot be the basis for departing from our categorical rule that total regulatory takings must be compensated. If it were, departure would virtually always be allowed. The South Carolina Supreme Court’s approach would essentially nullify Mahon‘s affirmation of limits to the noncompensable exercise of the police power. Our cases provide no support for this: None of them that employed the logic of “harmful use” prevention to sustain a regulation involved an allegation that the regulation wholly eliminated the value of the claimant’s land.
Where the State seeks to sustain regulation that deprives land of all economically beneficial use, we think it may resist compensation only if the logically antecedent inquiry into the nature of the owner’s estate shows that the proscribed use interests were not part of his title to begin with. This accords, we think, with our “takings” jurisprudence, which has traditionally been guided by the understandings of our citizens regarding the content of, and the State’s power over, the “bundle of rights” that they acquire when they obtain title to property. It seems to us that the 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; “[a]s long recognized, some values are enjoyed under an implied limitation and must yield to the police power.” Pennsylvania Coal Co. v. Mahon. And in the case of personal property, by reason of the State’s traditionally high degree of control over commercial dealings, he ought to be aware of the possibility that new regulation might even render his property economically worthless (at least if the property’s only economically productive use is sale or manufacture for sale). See Andrus v. Allard (1979) (prohibition on sale of eagle feathers). In the case of land, however, we think the notion pressed by the Council that title is somehow held subject to the “implied limitation” that the State may subsequently eliminate all economically valuable use is inconsistent with the historical compact recorded in the Takings Clause that has become part of our constitutional culture.
Where “permanent physical occupation” of land is concerned, we have refused to allow the government to decree it anew (without compensation), no matter how weighty the asserted “public interests” involved, Loretto v. Teleprompter Manhattan CATV Corp. — though we assuredly would permit the government to assert a permanent easement that was a pre-existing limitation upon the landowner’s title. Compare Scranton v. Wheeler (1900) (interests of “riparian owner in the submerged lands . . . bordering on a public navigable water” held subject to Government’s navigational servitude), with Kaiser Aetna v. United States (1979) (imposition of navigational servitude on marina created and rendered navigable at private expense held to constitute a taking). We believe similar treatment must be accorded confiscatory regulations, i.e., regulations that prohibit all economically beneficial use of land: Any limitation so severe cannot be newly legislated or decreed (without compensation), but must inhere in the title itself, in the restrictions that background principles of the State’s law of property and nuisance already place upon land ownership. A law or decree with such an effect must, in other words, do no more than duplicate the result that could have been achieved in the courts — by adjacent landowners (or other uniquely affected persons) under the State’s law of private nuisance, or by the State under its complementary power to abate nuisances that affect the public generally, or otherwise.
On this analysis, the owner of a lakebed, for example, would not be entitled to compensation when he is denied the requisite permit to engage in a landfilling operation that would have the effect of flooding others’ land. Nor the corporate owner of a nuclear generating plant, when it is directed to remove all improvements from its land upon discovery that the plant sits astride an earthquake fault. Such regulatory action may well have the effect of eliminating the land’s only economically productive use, but it does not proscribe a productive use that was previously permissible under relevant property and nuisance principles. The use of these properties for what are now expressly prohibited purposes was always unlawful, and (subject to other constitutional limitations) it was open to the State at any point to make the implication of those background principles of nuisance and property law explicit. See Michelman, Property, Utility, and Fairness, Comments on the Ethical Foundations of “Just Compensation” Law, 80 Harv. L. Rev. 1165, 1239–41 (1967). When, however, a regulation that declares “off-limits” all economically productive or beneficial uses of land goes beyond what the relevant background principles would dictate, compensation must be paid to sustain it.
The “total taking” inquiry we require today will ordinarily entail (as the application of state nuisance law ordinarily entails) analysis of, among other things, the degree of harm to public lands and resources, or adjacent private property, posed by the claimant’s proposed activities, see, e.g., Restatement (Second) of Torts §§ 826, 827, the social value of the claimant’s activities and their suitability to the locality in question, see, e.g., id., §§ 828(a) and (b), 831, and the relative ease with which the alleged harm can be avoided through measures taken by the claimant and the government (or adjacent private landowners) alike, see, e.g., id., §§ § 827(e), 828(c), 830. The fact that a particular use has long been engaged in by similarly situated owners ordinarily imports a lack of any common-law prohibition (though changed circumstances or new knowledge may make what was previously permissible no longer so, see id., § 827, Comment g). So also does the fact that other landowners, similarly situated, are permitted to continue the use denied to the claimant.
It seems unlikely that common-law principles would have prevented the erection of any habitable or productive improvements on petitioner’s land; they rarely support prohibition of the “essential use” of land, Curtin v. Benson (1911). The question, however, is one of state law to be dealt with on remand. We emphasize that to win its case South Carolina must do more than proffer the legislature’s declaration that the uses Lucas desires are inconsistent with the public interest, or the conclusory assertion that they violate a common-law maxim such as sic utere tuo ut alienum non laedas. Instead, as it would be required to do if it sought to restrain Lucas in a common-law action for public nuisance, South Carolina must identify background principles of nuisance and property law that prohibit the uses he now intends in the circumstances in which the property is presently found. Only on this showing can the State fairly claim that, in proscribing all such beneficial uses, the Beachfront Management Act is taking nothing. . . .
Justice Kennedy, concurring in the judgment. . . .
The South Carolina Court of Common Pleas found that petitioner’s real property has been rendered valueless by the State’s regulation. The finding appears to presume that the property has no significant market value or resale potential. This is a curious finding, and I share the reservations of some of my colleagues about a finding that a beach-front lot loses all value because of a development restriction. . . . Accepting the finding as entered, it follows that petitioner is entitled to invoke the line of cases discussing regulations that deprive real property of all economic value. See Agins v. City of Tiburon (1980).
The finding of no value must be considered under the Takings Clause by reference to the owner’s reasonable, investment-backed expectations. Kaiser Aetna v. United States (1979), Penn Central (1978). The Takings Clause, while conferring substantial protection on property owners, does not eliminate the police power of the State to enact limitations on the use of their property. Mugler v. Kansas (1887). The rights conferred by the Takings Clause and the police power of the State may coexist without conflict. Property is bought and sold, investments are made, subject to the State’s power to regulate. Where a taking is alleged from regulations which deprive the property of all value, the test must be whether the deprivation is contrary to reasonable, investment-backed expectations.
There is an inherent tendency towards circularity in this synthesis, of course; for if the owner’s reasonable expectations are shaped by what courts allow as a proper exercise of governmental authority, property tends to become what courts say it is. Some circularity must be tolerated in these matters, however . . . [t]he definition . . . is not circular in its entirety. The expectations protected by the Constitution are based on objective rules and customs that can be understood as reasonable by all parties involved.
In my view, reasonable expectations must be understood in light of the whole of our legal tradition. The common law of nuisance is too narrow a confine for the exercise of regulatory power in a complex and interdependent society. Goldblatt v. Hempstead (1962). The State should not be prevented from enacting new regulatory initiatives in response to changing conditions, and courts must consider all reasonable expectations whatever their source. The Takings Clause does not require a static body of state property law; it protects private expectations to ensure private investment. I agree with the Court that nuisance prevention accords with the most common expectations of property owners who face regulation, but I do not believe this can be the sole source of state authority to impose severe restrictions. Coastal property may present such unique concerns for a fragile land system that the State can go further in regulating its development and use than the common law of nuisance might otherwise permit.
The Supreme Court of South Carolina erred, in my view, by reciting the general purposes for which the state regulations were enacted without a determination that they were in accord with the owner’s reasonable expectations and therefore sufficient to support a severe restriction on specific parcels of property. The promotion of tourism, for instance, ought not to suffice to deprive specific property of all value without a corresponding duty to compensate. Furthermore, the means, as well as the ends, of regulation must accord with the owner’s reasonable expectations. Here, the State did not act until after the property had been zoned for individual lot development and most other parcels had been improved, throwing the whole burden of the regulation on the remaining lots. This too must be measured in the balance. See Pennsylvania Coal Co. v. Mahon (1922). . . .
Justice Blackmun, dissenting. . . .
I-C. The South Carolina Supreme Court[‘s] . . . decision rested on two premises that until today were unassailable — that the State has the power to prevent any use of property it finds to be harmful to its citizens, and that a state statute is entitled to a presumption of constitutionality. . . .
If the state legislature is correct that the prohibition on building in front of the setback line prevents serious harm, then, under this Court’s prior cases, the Act is constitutional. “Long ago it was recognized that all property in this country is held under the implied obligation that the owner’s use of it shall not be injurious to the community, and the Takings Clause did not transform that principle to one that requires compensation whenever the State asserts its power to enforce it.” Keystone Bituminous Coal Assn. v. DeBenedictis (1987). The Court consistently has upheld regulations imposed to arrest a significant threat to the common welfare, whatever their economic effect on the owner. See, e.g., Goldblatt v. Hempstead (1962); Euclid v. Ambler Realty Co. (1926); Mugler v. Kansas (1887).
Petitioner never challenged the legislature’s findings that a building ban was necessary to protect property and life. . . .
Nothing in the record undermines the General Assembly’s assessment that prohibitions on building in front of the setback line are necessary to protect people and property from storms, high tides, and beach erosion. Because that legislative determination cannot be disregarded in the absence of such evidence, see, e.g., Euclid v. Ambler Realty Co. (1926); O’Gorman & Young, Inc. v. Hartford Fire Ins. Co. (1931) (Brandeis, J.), and because its determination of harm to life and property from building is sufficient to prohibit that use under this Court’s cases, the South Carolina Supreme Court correctly found no taking. . . .
III. . . . We only recently have reaffirmed that claimants have the burden of showing a state law constitutes a taking. See Keystone Bituminous Coal. See also Goldblatt (citing “the usual presumption of constitutionality” that applies to statutes attacked as takings).
Rather than invoking these traditional rules, the Court decides the State has the burden to convince the courts that its legislative judgments are correct. . . .
. . . [The Court] takes the opportunity to create a new scheme for regulations that eliminate all economic value. From now on, there is a categorical rule finding these regulations to be a taking unless the use they prohibit is a background common-law nuisance or property principle. . . .
IV-A. . . . If one fact about the Court’s takings jurisprudence can be stated without contradiction, it is that “the particular circumstances of each case” determine whether a specific restriction will be rendered invalid by the government’s failure to pay compensation. United States v. Central Eureka Mining Co. (1958). This is so because although we have articulated certain factors to be considered, including the economic impact on the property owner, the ultimate conclusion “necessarily requires a weighing of private and public interests.” Agins v. City of Tiburon (1992). When the government regulation prevents the owner from any economically valuable use of his property, the private interest is unquestionably substantial, but we have never before held that no public interest can outweigh it. Instead the Court’s prior decisions “uniformly reject the proposition that diminution in property value, standing alone, can establish a ‘taking.'” Penn Central Transp. Co. v. New York City (1978).
This Court repeatedly has recognized the ability of government, in certain circumstances, to regulate property without compensation no matter how adverse the financial effect on the owner may be. More than a century ago, the Court explicitly upheld the right of States to prohibit uses of property injurious to public health, safety, or welfare without paying compensation: “A prohibition simply upon the use of property for purposes that are declared, by valid legislation, to be injurious to the health, morals, or safety of the community, cannot, in any just sense, be deemed a taking or an appropriation of property.” Mugler v. Kansas (1887). On this basis, the Court upheld an ordinance effectively prohibiting operation of a previously lawful brewery, although the “establishments will become of no value as property.” . . .
The Court recognizes that “our prior opinions have suggested that ‘harmful or noxious uses’ of property may be proscribed by government regulation without the requirement of compensation,” but seeks to reconcile them with its categorical rule by claiming that the Court never has upheld a regulation when the owner alleged the loss of all economic value. Even if the Court’s factual premise were correct, its understanding of the Court’s cases is distorted. In none of the cases did the Court suggest that the right of a State to prohibit certain activities without paying compensation turned on the availability of some residual valuable use. Instead, the cases depended on whether the government interest was sufficient to prohibit the activity, given the significant private cost.
These cases rest on the principle that the State has full power to prohibit an owner’s use of property if it is harmful to the public. “[S]ince no individual has a right to use his property so as to create a nuisance or otherwise harm others, the State has not ‘taken’ anything when it asserts its power to enjoin the nuisance-like activity.” Keystone Bituminous Coal. It would make no sense under this theory to suggest that an owner has a constitutionally protected right to harm others, if only he makes the proper showing of economic loss.
Until today, the Court explicitly had rejected the contention that the government’s power to act without paying compensation turns on whether the prohibited activity is a common-law nuisance. . . . Instead the Court has relied in the past, as the South Carolina court has done here, on legislative judgments of what constitutes a harm. . . .
Even more perplexing, however, is the Court’s reliance on common-law principles of nuisance in its quest for a value-free takings jurisprudence. In determining what is a nuisance at common law, state courts make exactly the decision that the Court finds so troubling when made by the South Carolina General Assembly today: they determine whether the use is harmful. Common-law public and private nuisance law is simply a determination whether a particular use causes harm. . . . There is nothing magical in the reasoning of judges long dead. They determined a harm in the same way as state judges and legislatures do today. If judges in the 18th and 19th centuries can distinguish a harm from a benefit, why not judges in the 20th century, and if judges can, why not legislators? There simply is no reason to believe that new interpretations of the hoary common-law nuisance doctrine will be particularly “objective” or “value free.” Once one abandons the level of generality of sic utere tuo ut alienum non laedas one searches in vain, I think, for anything resembling a principle in the common law of nuisance.
IV-C. Finally, the Court justifies its new rule that the legislature may not deprive a property owner of the only economically valuable use of his land, even if the legislature finds it to be a harmful use, because such action is not part of the “long recognized” “understandings of our citizens.” These “understandings” permit such regulation only if the use is a nuisance under the common law. Any other course is “inconsistent with the historical compact recorded in the Takings Clause.” It is not clear from the Court’s opinion where our “historical compact” or “citizens’ understanding” comes from, but it does not appear to be history. . . .
Although, prior to the adoption of the Bill of Rights, America was replete with land-use regulations describing which activities were considered noxious and forbidden . . . the 5th Amendment’s Takings Clause originally did not extend to regulations of property, whatever the effect. . . . Most state courts agreed with this narrow interpretation of a taking. . . .
Even when courts began to consider that regulation in some situations could constitute a taking, they continued to uphold bans on particular uses without paying compensation, notwithstanding the economic impact, under the rationale that no one can obtain a vested right to injure or endanger the public. . . .
In addition, state courts historically have been less likely to find that a government action constitutes a taking when the affected land is undeveloped. . . .
With similar result, the common agrarian conception of property limited owners to “natural” uses of their land prior to and during much of the 18th century. . . .
Nor does history indicate any common-law limit on the State’s power to regulate harmful uses even to the point of destroying all economic value. Nothing in the discussions in Congress concerning the Takings Clause indicates that the Clause was limited by the common-law nuisance doctrine. . . .
In short, I find no clear and accepted “historical compact” or “understanding of our citizens” justifying the Court’s new takings doctrine. . . . If the Court decided that the law of a later period provides the background principles, then regulation might be compensable, but the Court would have to confront the fact that legislatures regularly determined which uses were prohibited, independent of the common law, and independent of whether the uses were lawful when the owner purchased. What makes the Court’s analysis unworkable is its attempt to package the law of two incompatible eras and peddle it as historical fact. . . .
Justice Stevens, dissenting. . . .
. . . In my opinion, the Court is doubly in error. The categorical rule the Court establishes is an unsound and unwise addition to the law and the Court’s formulation of the exception to that rule is too rigid and too narrow. . . .
We have frequently — and recently — held that, in some circumstances, a law that renders property valueless may nonetheless not constitute a taking. . . .
In addition to lacking support in past decisions, the Court’s new rule is wholly arbitrary. A landowner whose property is diminished in value 95% recovers nothing, while an owner whose property is diminished 100% recovers the land’s full value. . . .
Moreover, because of the elastic nature of property rights, the Court’s new rule will also prove unsound in practice. In response to the rule, courts may define “property” broadly and only rarely find regulations to effect total takings. This is the approach the Court itself adopts in its revisionist reading of venerable precedents. We are told that — notwithstanding the Court’s findings to the contrary in each case — the brewery in Mugler v. Kansas (1887), the brickyard in Hadacheck v. Sebastian (1915), and the gravel pit in Goldblatt v. Hempstead (1962) all could be put to “other uses” and that, therefore, those cases did not involve total regulatory takings.
On the other hand, developers and investors may market specialized estates to take advantage of the Court’s new rule. The smaller the estate, the more likely that a regulatory change will effect a total taking. Thus, an investor may, for example, purchase the right to build a multifamily home on a specific lot, with the result that a zoning regulation that allows only single-family homes would render the investor’s property interest “valueless.” In short, the categorical rule will likely have one of two effects: Either courts will alter the definition of the “denominator” in the takings “fraction,” rendering the Court’s categorical rule meaningless, or investors will manipulate the relevant property interests, giving the Court’s rule sweeping effect. To my mind, neither of these results is desirable or appropriate, and both are distortions of our takings jurisprudence.
Finally, the Court’s justification for its new categorical rule is remarkably thin. The Court mentions in passing three arguments in support of its rule; none is convincing. First, the Court suggests that “total deprivation of feasible use is, from the landowner’s point of view, the equivalent of a physical appropriation.” This argument proves too much. From the “landowner’s point of view,” a regulation that diminishes a lot’s value by 50% is as well “the equivalent” of the condemnation of half of the lot. Yet, it is well established that a 50% diminution in value does not by itself constitute a taking. See Euclid v. Ambler Realty Co. (1926) (75% diminution in value). Thus, the landowner’s perception of the regulation cannot justify the Court’s new rule.
Second, the Court emphasizes that because total takings are “relatively rare” its new rule will not adversely affect the government’s ability to “go on.” . . . This argument proves too little. Certainly it is true that defining a small class of regulations that are per se takings will not greatly hinder important governmental functions — but this is true of any small class of regulations. The Court’s suggestion only begs the question of why regulations of this particular class should always be found to effect takings.
Finally, the Court suggests that “regulations that leave the owner . . . without economically beneficial . . . use . . . carry with them a heightened risk that private property is being pressed into some form of public service.” . . . I agree that the risks of such singling out are of central concern in takings law. However, such risks do not justify a per se rule for total regulatory takings. There is no necessary correlation between “singling out” and total takings: A regulation may single out a property owner without depriving him of all of his property . . . and it may deprive him of all of his property without singling him out, see, e.g., Mugler v. Kansas; Hadacheck v. Sebastian. What matters in such cases is not the degree of diminution of value, but rather the specificity of the expropriating act. For this reason, the Court’s third justification for its new rule also fails.
In short, the Court’s new rule is unsupported by prior decisions, arbitrary and unsound in practice, and theoretically unjustified. In my opinion, a categorical rule as important as the one established by the Court today should be supported by more history or more reason than has yet been provided.
Like many bright-line rules, the categorical rule established in this case is only “categorical” for a page or two in the U.S. Reports. . . .
Mugler v. Kansas held that a statewide statute that prohibited the owner of a brewery from making alcoholic beverages did not effect a taking, even though the use of the property had been perfectly lawful and caused no public harm before the statute was enacted. We squarely rejected the rule the Court adopts today. . . .
Under our reasoning in Mugler, a State’s decision to prohibit or to regulate certain uses of property is not a compensable taking just because the particular uses were previously lawful. Under the Court’s opinion today, however, if a State should decide to prohibit the manufacture of asbestos, cigarettes, or concealable firearms, for example, it must be prepared to pay for the adverse economic consequences of its decision. One must wonder if government will be able to “go on” effectively if it must risk compensation “for every such change in the general law.” . . .
If accepted, that claim would represent a return to the era of Lochner v. New York (1905) when common-law rights were also found immune from revision by State or Federal Government. Such an approach would freeze the common law as it has been constructed by the courts, perhaps at its 19th-century state of development. It would allow no room for change in response to changes in circumstance. The Due Process Clause does not require such a result.
PruneYard Shopping Center v. Robins (1980) (concurring opinion).
Arresting the development of the common law is not only a departure from our prior decisions; it is also profoundly unwise. The human condition is one of constant learning and evolution — both moral and practical. Legislatures implement that new learning; in doing so they must often revise the definition of property and the rights of property owners. New appreciation of the significance of endangered species, see, e.g., Andrus v. Allard (1979); the importance of wetlands . . . and the vulnerability of coastal lands . . . shapes our evolving understandings of property rights.
Of course, some legislative redefinitions of property will effect a taking and must be compensated — but it certainly cannot be the case that every movement away from common law does so. . . . The rule that should govern a decision in a case of this kind should focus on the future, not the past.
The Court’s categorical approach rule will, I fear, greatly hamper the efforts of local officials and planners who must deal with increasingly complex problems in land-use and environmental regulation. . . .
Viewed more broadly, the Court’s new rule and exception conflict with the very character of our takings jurisprudence. We have frequently and consistently recognized that the definition of a taking cannot be reduced to a “set formula” and that determining whether a regulation is a taking is “essentially [an] ad hoc, factual inquir[y].” Penn Central Transportation Co. v. New York City (1978). This is unavoidable, for the determination whether a law effects a taking is ultimately a matter of “fairness and justice,” Armstrong v. United States (1960), and “necessarily requires a weighing of private and public interests,” Agins v. City of Tiburon (1992). The rigid rules fixed by the Court today clash with this enterprise: “fairness and justice” are often disserved by categorical rules.
III. It is well established that a takings case “entails inquiry into [several factors:] the character of the governmental action, its economic impact, and its interference with reasonable investment-backed expectations.” PruneYard. The Court’s analysis today focuses on the last two of these three factors: The categorical rule addresses a regulation’s “economic impact,” while the nuisance exception recognizes that ownership brings with it only certain “expectations.” Neglected by the Court today is the first and, in some ways, the most important factor in takings analysis: the character of the regulatory action.
The Just Compensation Clause “was designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.” . . . We have, therefore, in our takings law frequently looked to the generality of a regulation of property.
For example, in the case of so-called “developmental exactions,” we have paid special attention to the risk that particular landowners might “b[e] singled out to bear the burden” of a broader problem not of his own making. Nollan[v. California Coastal Comm’n (1987)]; see also Pennell v. San Jose (1988). Similarly, in distinguishing between the Kohler Act (at issue in Mahon) and the Subsidence Act (at issue in Keystone), we found significant that the regulatory function of the latter was substantially broader. . . . Perhaps the most familiar application of this principle of generality arises in zoning cases. A diminution in value caused by a zoning regulation is far less likely to constitute a taking if it is part of a general and comprehensive land-use plan, see Euclid v. Ambler Realty Co.; conversely, “spot zoning” is far more likely to constitute a taking, see Penn Central.
The presumption that a permanent physical occupation, no matter how slight, effects a taking is wholly consistent with this principle. A physical taking entails a certain amount of “singling out.” . . . In analyzing takings claims, courts have long recognized the difference between a regulation that targets one or two parcels of land and a regulation that enforces a statewide policy. . . .
In considering Lucas’ claim, the generality of the Beachfront Management Act is significant. The Act does not target particular landowners, but rather regulates the use of the coastline of the entire State. . . . Moreover, the Act did not single out owners of undeveloped land. The Act also prohibited owners of developed land from rebuilding if their structures were destroyed. . . . In short, the South Carolina Act imposed substantial burdens on owners of developed and undeveloped land alike. This generality indicates that the Act is not an effort to expropriate owners of undeveloped land. . . .
The impact of the ban on developmental uses must also be viewed in light of the purposes of the Act. . . .
In view of all of these factors, even assuming that petitioner’s property was rendered valueless, the risk inherent in investments of the sort made by petitioner, the generality of the Act, and the compelling purpose motivating the South Carolina Legislature persuade me that the Act did not effect a taking of petitioner’s property.
Justice Stevens’ critique in Lucas of the expansive use of categorical analysis in takings cases seems to have gained the support of the majority of the Court. In Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency (2002), the Supreme Court rejected a takings claim arising from a series of “temporary” moratoria on development. The plaintiffs alleged that the moratoria deprived their property of all economic use during the pendency of the moratoria and that, consistent with Lucas, this loss should constitute a taking per se. Justice Stevens delivered the opinion of the Court and was joined by Justices O’Connor, Kennedy, Souter, Ginsburg, and Breyer. Chief Justice Rehnquist dissented, joined by Justices Scalia and Thomas. Justice Thomas also dissented, joined by Justice Scalia. The dissenters argued for application of categorical analysis.
[W]e still resist the temptation to adopt per se rules in our cases involving partial regulatory takings, preferring to examine “a number of factors” rather than a simple “mathematically precise” formula.
Thomas E. Roberts, An Analysis of Tahoe-Sierra and Its Help and Hindrance in Understanding the Concept of a Temporary Regulatory Taking, 25 U. Haw. L. Rev. 417, 425 (2003). Following the Lucas litigation, a neighboring landowner offered the state $350,000 to buy one of the lots as a buffer, promising not to build on it. Professor Roberts concludes that if the Lucas case were retried today, it would therefore be subjected to Penn Central balancing.
Decades of economic decline led a state agency to designate New London, Connecticut a “distressed municipality” in 1990. Subsequently, state and local officials targeted New London, and in particular the Fort Trumbull neighborhood, for economic revitalization. The New London Development Corporation (NLDC), a private nonprofit entity, was created to oversee the project. The State authorized a $5.35 million bond issue to support the NLDC’s planning activities and a $10 million bond issue toward the creation of a Fort Trumbull State Park. The NDLC eventually developed an integrated development plan focused on 90 acres in the Fort Trumbull area. The centerpiece of the plan was to be a $300 million research facility that Pfizer Inc. committed to build. The development plan included such things as a waterfront conference hotel, marinas, a riverwalk, residences, a U.S. Coast Guard Museum, and research and development office space. The plan’s purposes were to create jobs, generate tax revenue, and make the City more attractive to developers.
After the plan was approved, the City Council authorized the NDLC to purchase the property or to acquire property by exercising eminent domain in the City’s name. Much of the land was purchased, except for the land of the Plaintiffs. None of the Plaintiffs’ properties were blighted or otherwise in poor condition. The NDLC condemned the Plaintiffs’ land when they refused to sell. The Plaintiffs then filed suit in state court, claiming that the taking of their property violated the public use restriction of the 5th Amendment (as incorporated by the 14th).
On the other hand, this is not a case in which the City is planning to open the condemned land — at least not in its entirety — to use by the general public. Nor will the private lessees of the land in any sense be required to operate like common carriers, making their services available to all comers. But although such a projected use would be sufficient to satisfy the public use requirement, this “Court long ago rejected any literal requirement that condemned property be put into use for the general public.” Id. . . .
The disposition of this case therefore turns on the question whether the City’s development plan serves a “public purpose.” Without exception, our cases have defined that concept broadly, reflecting our longstanding policy of deference to legislative judgments in this field. . . .
Given the comprehensive character of the plan, the thorough deliberation that preceded its adoption, and the limited scope of our review, it is appropriate for us, as it was in Berman, to resolve the challenges of the individual owners, not on a piecemeal basis, but rather in light of the entire plan. Because that plan unquestionably serves a public purpose, the takings challenged here satisfy the public use requirement of the 5th Amendment.
To avoid this result, petitioners urge us to adopt a new bright-line rule that economic development does not qualify as a public use. . . . Clearly, there is no basis for exempting economic development from our traditionally broad understanding of public purpose.
Alternatively, petitioners maintain that for takings of this kind we should require a “reasonable certainty” that the expected public benefits will actually accrue. Such a rule, however, would represent an even greater departure from our precedent. “When the legislature’s purpose is legitimate and its means are not irrational, our cases make clear that empirical debates over the wisdom of takings — no less than debates over the wisdom of other kinds of socioeconomic legislation — are not to be carried out in the federal courts.” Midkiff.
In affirming the City’s authority to take petitioners’ properties, we do not minimize the hardship that condemnations may entail, notwithstanding the payment of just compensation. We emphasize that nothing in our opinion precludes any State from placing further restrictions on its exercise of the takings power. Indeed, many States already impose “public use” requirements that are stricter than the federal baseline. Some of these requirements have been established as a matter of state constitutional law, while others are expressed in state eminent domain statutes that carefully limit the grounds upon which takings may be exercised.
Under the banner of economic development, all private property is now vulnerable to being taken and transferred to another private owner, so long as it might be upgraded — i.e., given to an owner who will use it in a way that the legislature deems more beneficial to the public — in the process. To reason, as the Court does, that the incidental public benefits resulting from the subsequent ordinary use of private property render economic development takings “for public use” is to wash out any distinction between private and public use of property — and thereby effectively to delete the words “for public use” from the Takings Clause of the 5th Amendment.
The 5–4 division in this case is likely to encourage further litigation challenging local government’s use of the taking power.
As we have seen, Dred Scott (1857) held that a statute outlawing slavery in the Missouri Territory deprived territorial slave owners of their property without due process of law. Dred Scott did not invoke the Takings Clause, probably because the clause was understood to be limited to appropriations or physical invasions — not regulations. In this sense, Dred Scott was a substantive due process case akin to Lochner. How would you compare Dred Scott and Lucas?
As of 1998, takings cases had involved either a physical invasion of property or virtually complete elimination of the owner’s right to use his property. In Eastern Enterprises v. Apfel (1998), four members of the Court held that the Takings Clause prohibited retroactive regulatory legislation that imposed what the Justices thought was a “severe, disproportionate, and extremely retroactive burden.” See generally William Church, The Eastern Enterprises Case: A New Vigor for Judicial Review, 2000 Wis. L. Rev. 547.
Eastern Enterprises was an energy company that beginning in 1929 had been extensively involved in coal mining. In 1965, it transferred its coal business to a wholly owned subsidiary, and continued to earn profits from that company until it was sold in 1987.
Coal miners had long suffered from occupational diseases and injuries and inadequate medical care. Beginning in the 1950s, the United Mine Workers negotiated labor contracts that provided health care for miners, and later for their families, through health care funds administered by trustees. The funds were originally funded out of a royalty on coal sold from mines with union contracts. Until 1978, these health care plans provided for medical coverage only to the extent of the funds available from the royalties. In 1978, a new agreement obligated signatories to make sufficient contributions to maintain benefits as long as they were in the coal business. As medical costs escalated, companies began to withdraw from the coal business, leaving a smaller group of remaining signatories to absorb the increasing costs. Retired miners were faced with loss of health benefits.
Congress intervened and enacted a tax on coal to be used to pay for miners’ health benefits. This plan was vetoed by President George H. W. Bush, as violating his “no new taxes” pledge. Congress then passed the Coal Act of 1992. The Act required those companies that had, at one time, employed miners who were now retired, to contribute to the ongoing health costs of those retirees. Eastern, now out of the coal business, objected and filed suit to avoid liability.
Eastern had signed union agreements providing for miners’ health costs between 1947 and 1964, but none of these agreements had fixed benefits; rather, the benefits were derived from contributions from royalties on coal sold. In spite of some statements by coal company and government officials that retired miners would always be protected, nothing had contractually obligated companies to provide lifetime care for miners or their families. However, the congressional act applied to Eastern as a former participant and it sued seeking to avoid the large expenses involved. Eastern argued that it had never contractually promised to pay lifetime health care benefits for the retired miners and therefore, the Coal Act, as applied to Eastern, constituted both a taking and a violation of substantive due process. Four Justices (O’Connor, Rehnquist, Scalia, and Thomas) held the Act was a taking. They concluded that the Act imposed a severe retroactive liability on a limited class of parties that could not have anticipated the liability and that the extent of the liability was substantially disproportionate to Eastern’s involvement in the coal industry.
Our cases do not support the plurality’s conclusion that the Coal Act takes property. The Coal Act imposes a staggering financial burden on the petitioner, Eastern Enterprises, but it regulates the former mine owner without regard to property. It does not operate upon or alter an identified property interest, and it is not applicable to or measured by a property interest. The Coal Act does not appropriate, transfer, or encumber an estate in land (e.g., a lien on a particular piece of property), a valuable interest in an intangible (e.g., intellectual property), or even a bank account or accrued interest. The law simply imposes an obligation to perform an act, the payment of benefits. The statute is indifferent as to how the regulated entity elects to comply or the property it uses to do so. To the extent it affects property interests, it does so in a manner similar to many laws; but until today, none were thought to constitute takings. To call this sort of governmental action a taking as a matter of constitutional interpretation is both imprecise and, with all due respect, unwise.
As the role of Government expanded, our experience taught that a strict line between a taking and a regulation is difficult to discern or to maintain. This led the Court in Pennsylvania Coal Co. v. Mahon (1922), to try to span the two concepts when specific property was subjected to what the owner alleged to be excessive regulation. “The general rule at least is, that while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.” The quoted sentence is, of course, the genesis of the so-called regulatory takings doctrine. See Lucas v. South Carolina Coastal Council (1992) (“Prior to Justice Holmes’s exposition in Pennsylvania Coal Co. v. Mahon, it was generally thought that the Takings Clause reached only a ‘direct appropriation’ of property or the functional equivalent of a ‘practical ouster of [the owner’s] possession'”. Without denigrating the importance the regulatory takings concept has assumed in our law, it is fair to say it has proved difficult to explain in theory and to implement in practice. Cases attempting to decide when a regulation becomes a taking are among the most litigated and perplexing in current law. See Penn Central Transp. Co. v. New York City (1978) (“The question of what constitutes a ‘taking’ for purposes of the 5th Amendment has proved to be a problem of considerable difficulty”); Kaiser Aetna v. United States (1979) (the regulatory taking question requires an “essentially ad hoc, factual inquir[y]”).
Until today, however, one constant limitation has been that in all of the cases where the regulatory taking analysis has been employed, a specific property right or interest has been at stake. After the decision in Pennsylvania Coal Co. v. Mahon, we confronted cases where specific and identified properties or property rights were alleged to come within the regulatory takings prohibition: air rights for high-rise buildings, Penn Central; zoning on parcels of real property, e.g., MacDonald, Sommer & Frates v. Yolo County (1986); trade secrets, Ruckelshaus v. Monsanto Co. (1984); right of access to property, e.g., PruneYard Shopping Center v. Robins (1980); right to affix on structures, Loretto v. Teleprompter Manhattan CATV Corp. (1982); right to transfer property by devise or intestacy, e.g., Hodel v. Irving (1987); creation of an easement, Dolan v. City of Tigard (1994); right to build or improve, Lucas; liens on real property, Armstrong v. United States (1960); right to mine coal, Keystone Bituminous Coal Assn. v. DeBenedictis (1987); right to sell personal property, Andrus v. Allard (1979); and the right to extract mineral deposits, Goldblatt v. Hempstead (1962). The regulations in the cited cases were challenged as being so excessive as to destroy, or take, a specific property interest. The plurality’s opinion disregards this requirement and, by removing this constant characteristic from takings analysis, would expand an already difficult and uncertain rule to a vast category of cases not deemed, in our law, to implicate the Takings Clause.
Several academic commentators have been less gentle than Justice Kennedy in their descriptions of the Court’s takings jurisprudence, describing it as a mess. E.g., Daniel A. Farber, Public Choice and Just Compensation, 9 Const. Comm. 279 (1992); cf, William Michael Treanor, The Original Understanding of the Takings Clause and the Political Process, 95 Col. L. Rev. 782 (1995).
Four other Justices in the Eastern Enterprises case held there was not a taking. In a dissenting opinion written by Justice Breyer, they agreed with Justice Kennedy that the claim should be evaluated under economic substantive due process to determine if the arrangement was “fundamentally unfair.” They found it was not, and therefore found no due process violation. These Justices said the claim of arbitrary retroactive means to accomplish the congressional goal implicated the “fair application of law, which . . . hearkens back to the Magna Carta.” They insisted they were not “resurrect[ing] the long-discredited substantive notions of ‘freedom of contract.'” Still, the test of “fundamental fairness” (perhaps limited to retroactive legislation) seems more similar to heightened rational basis scrutiny (rational basis with bite) than the low level rational basis which was announced by the Court in the years of and following the New Deal Court.
These dissenters found the statute fair because it applied only to miners Eastern had employed whose labor had benefitted Eastern when they were younger and healthier; because Eastern created the working conditions that often caused the health problems; because Eastern had contributed to a promise of health care which, while not contractually binding, led the miners to have a reasonable expectation of protection; and because even after it sold its mines to a wholly owned subsidiary, Eastern continued until the late 1980s to reap profits from the mines.
The conflict between an expansive reading of the Takings Clause and a possible resurrection of economic substantive due process arose again in Stop the Beach Renourishment v. Florida Department of Environmental Protection (2010). The constitutional issue in Stop the Beach Renourishment involves whether or not judicial decisions which unexpectedly change the law and thereby adversely affect private property values are subject to a takings challenge in the same way that legislative or executive conduct is. The facts of the case involved a decision by the Florida Supreme Court determining ownership boundaries to beachfront property that had increased in size as the result of a beach renourishment project. Common law property doctrine distinguishes between sand which is incrementally added to a beach by natural forces such as storms, ocean currents, etc., and sand which is suddenly added by man. The case has significant federalism implications, because recognizing that judicial behavior is subject to the Takings Clause could create an avalanche of litigation as courts routinely develop common law property rules that can adversely affect ownership rights.
All members of the Court agreed that the decision below was consistent with prior Florida law and that the property owners should lose. However, Chief Justice Roberts and Justices Scalia, Thomas, and Alito went on to say that they would extend the Takings Clause to judicial decisions. Justice Kennedy, as he had done in Eastern Enterprises, again said that an arbitrary change in reasonable expectations regarding property rights would be subject to a due process challenge. Justice Sotomayor joined this opinion. Justices Breyer and Ginsburg said that since all members of the Court had agreed that the Florida Supreme Court’s opinion was consistent with prior case law that the Court should not even address the takings issue.
One thing is especially worthy of note as we conclude this chapter on due process analysis. The Lochner Court, the Lochner dissenters, the New Deal Court, and the Justices of the current Court often refer to “rational basis” as the test when evaluating economic legislation. But of course, the words “rational basis,” as used by Justice Peckham in Lochner (1905) and Justice Douglas in Williamson v. Lee Optical (1955), have very different meanings. This fact shows why understanding constitutional law requires the understanding of constitutional history and the eras in which the Court functions.
As you consider the ebb and flow of judicial activism in the area of substantive due process, recall the excerpt from Chapter 8 of Mark Twain’s Life on the Mississippi set out in Chapter 2 of this casebook.
. Regrettably, the rhetorical force of our “deprivation of all economically feasible use” rule is greater than its precision, since the rule does not make clear the “property interest” against which the loss of value is to be measured. When, for example, a regulation requires a developer to leave 90% of a rural tract in its natural state, it is unclear whether we would analyze the situation as one in which the owner has been deprived of all economically beneficial use of the burdened portion of the tract, or as one in which the owner has suffered a mere diminution in value of the tract as a whole. (For an extreme — and, we think, unsupportable — view of the relevant calculus, see Penn Central Transportation Co. v. New York City, where the state court examined the diminution in a particular parcel’s value produced by a municipal ordinance in light of total value of the takings claimant’s other holdings in the vicinity.) Unsurprisingly, this uncertainty regarding the composition of the denominator in our “deprivation” fraction has produced inconsistent pronouncements by the Court. Compare Pennsylvania Coal Co. v. Mahon (law restricting subsurface extraction of coal held to effect a taking), with Keystone Bituminous Coal Assn. v. DeBenedictis (1987) (nearly identical law held not to effect a taking). . . . The answer to this difficult question may lie in how the owner’s reasonable expectations have been shaped by the State’s law of property — i.e., whether and to what degree the State’s law has accorded legal recognition and protection to the particular interest in land with respect to which the takings claimant alleges a diminution in (or elimination of) value. In any event, we avoid this difficulty in the present case, since the “interest in land” that Lucas has pleaded (a fee simple interest) is an estate with a rich tradition of protection at common law, and since the South Carolina Court of Common Pleas found that the Beachfront Management Act left each of Lucas’s beachfront lots without economic value.
. Justice Stevens criticizes the “deprivation of all economically beneficial use” rule as “wholly arbitrary,” in that “[the] landowner whose property is diminished in value 95% recovers nothing,” while the landowner who suffers a complete elimination of value “recovers the land’s full value.” Post. This analysis errs in its assumption that the landowner whose deprivation is one step short of complete is not entitled to compensation. Such an owner might not be able to claim the benefit of our categorical formulation, but, as we have acknowledged time and again, “[t]he economic impact of the regulation on the claimant and . . . the extent to which the regulation has interfered with distinct investment-backed expectations” are keenly relevant to takings analysis generally. Penn Central Transportation Co. v. New York City. . . . It is true that in at least some cases the landowner with 95% loss will get nothing, while the landowner with total loss will recover in full. But that occasional result is no more strange than the gross disparity between the landowner whose premises are taken for a highway (who recovers in full) and the landowner whose property is reduced to 5% of its former value by the highway (who recovers nothing). Takings law is full of these “all-or-nothing” situations. Justice Stevens similarly misinterprets our focus on “developmental” uses of property (the uses proscribed by the Beachfront Management Act) as betraying an “assumption that the only uses of property cognizable under the Constitution are developmental uses.” We make no such assumption. Though our prior takings cases evince an abiding concern for the productive use of, and economic investment in, land, there are plainly a number of noneconomic interests in land whose impairment will invite exceedingly close scrutiny under the Takings Clause. See, e.g., Loretto v. Teleprompter Manhattan CATV Corp. (interest in excluding strangers from one’s land).
. In Justice Blackmun’s view, even with respect to regulations that deprive an owner of all developmental or economically beneficial land uses, the test for required compensation is whether the legislature has recited a harm-preventing justification for its action. . . . Since such a justification can be formulated in practically every case, this amounts to a test of whether the legislature has a stupid staff. We think the Takings Clause requires courts to do more than insist upon artful harm-preventing characterizations.
. [J]ustice Blackmun . . . argu[es] that our description of the “understanding” of land ownership that informs the Takings Clause is not supported by early American experience. That is largely true, but entirely irrelevant. The practices of the States prior to incorporation of the Takings and Just Compensation Clauses . . . were out of accord with any plausible interpretation of those provisions. Justice Blackmun is correct that early constitutional theorists did not believe the Takings Clause embraced regulations of property at all . . . but even he does not suggest (explicitly, at least) that we renounce the Court’s contrary conclusion in Mahon. Since the text of the Clause can be read to encompass regulatory as well as physical deprivations . . . we decline to do so as well.
. Justice Blackmun decries our reliance on background nuisance principles at least in part because he believes those principles to be as manipulable as we find the “harm prevention”/”benefit conferral” dichotomy. There is no doubt some leeway in a court’s interpretation of what existing state law permits — but not remotely as much, we think, as in a legislative crafting of the reasons for its confiscatory regulation. We stress that an affirmative decree eliminating all economically beneficial uses may be defended only if an objectively reasonable application of relevant precedents would exclude those beneficial uses in the circumstances in which the land is presently found.
. James Madison, author of the Takings Clause, apparently intended it to apply only to direct, physical takings of property by the Federal Government. . . .
. Of course, the same could easily be said in this case: Lucas may put his land to “other uses” — fishing or camping, for example — or may sell his land to his neighbors as a buffer. In either event, his land is far from “valueless.” This highlights a fundamental weakness in the Court’s analysis: its failure to explain why only the impairment of “economically beneficial or productive use” . . . , of property is relevant in takings analysis. I should think that a regulation arbitrarily prohibiting an owner from continuing to use her property for bird watching or sunbathing might constitute a taking under some circumstances; and, conversely, that such uses are of value to the owner. Yet the Court offers no basis for its assumption that the only uses of property cognizable under the Constitution are developmental uses.