For the second time in a year, the U.S. Supreme Court rejected an attempt by landowners to extend the reach of the "categorical" or per se regulatory taking rule adopted a decade ago in Lucas v. South Carolina Coastal Council. [1]  Last June, in Palazzolo v. Rhode Island, [2] the Court determined that the state's denial of a permit to fill and develop an area of tidal marsh wetlands did not constitute a categorical regulatory taking, because the landowner could still construct at least one substantial residence on the upland portion of his 20-acre parcel, and thus had not been denied all economically viable use of the entire property as required to recover for a total regulatory taking under Lucas. Now, in Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, [3] the Court has held by a 6-3 vote that the per se rule for total regulatory takings established in Lucas does not apply to a temporary moratorium on development that was imposed for the purpose of affording government authorities time to adopt a comprehensive land use plan.

     Palazzolo confirmed that to recover for a categorical regulatory taking of property, the landowner must show that the deprivation of all economically viable use is "total" in the physical sense-i.e., that the prohibition of use encompasses the entire area of the parcel. Tahoe-Sierra establishes that a regulatory taking will qualify as categorical only if it is also "total" in the temporal sense-i.e., that the prohibition of use is permanent. The Court in Tahoe-Sierra recognized, as it did in Palazzolo, that the landowner might still demonstrate entitlement to compensation for a regulatory taking based on an application of the ad hoc, factual analysis formulated in Penn Central Transportation Co. v. New York City. [4]

The Factual and Procedural Background

     The Tahoe Regional Planning Agency ("TRPA") was created in 1968 by a Compact between the states of California [5] and Nevada [6] and the federal government [7] to protect the water quality of Lake Tahoe, a "uniquely beautiful...national treasure" [8] that was being threatened with degradation due to runoff from the increasing area of impervious surfaces associated with development of the surrounding lands. [9]  When the original land use ordinance enacted in 1972 by TRPA proved unsatisfactory to regulate development around the Lake, the Compact was amended in 1980 to require that TRPA promulgate certain environmental standards within 18 months, which would then be embodied in a comprehensive regional land use plan to be adopted by TRPA within a year thereafter. [10]

     When TRPA determined it could not meet the Compact's 18-month deadline for the promulgation of environmental standards, it imposed a moratorium in August 1981 prohibiting virtually all development on sensitive lands. [11]  That moratorium did not provide for any termination date, but was to remain effective indefinitely pending the adoption of a plan. After completing the formulation of environmental standards in August 1982, TRPA realized that it would be unable to comply with the one-year deadline for adoption of a regional plan. Thus, a second moratorium was imposed, also without specific duration, which remained in force until the regional plan was adopted in April 1984. [12]  In effect, the two moratoria together prohibited all construction on sensitive lands around Lake Tahoe for 32 months. [13]

     Shortly after the regional plan was adopted in 1984, parallel federal court suits were filed against TRPA in California and Nevada on behalf of some 400 landowners who had purchased their property prior to the 1980 Compact amendment with the understanding that they would be authorized to construct single-family homes on their parcels at a future time of their choosing if they "complied with reasonable requirements for building." [14]  The landowners, as a class, asserted a facial challenge claiming that imposition of the two temporary development moratoria by TRPA constituted a regulatory taking of their property for which they were entitled to compensation. [15]

     The District Court of Nevada, in which the suits were consolidated for trial, first determined that the landowners could not establish a taking under the ad hoc factual analysis of Penn Central, because they had not established that they had reasonable investment-backed expectations that they would be able to build homes on their land within the period while the development prohibition was in effect. [16]  The District Court concluded, however, that under the principles enunciated in Lucas and in First English Evangelical Lutheran Church of Glendale v. County of Los Angeles, [17] the temporary deprivation of all economically viable use through a moratorium on development that contained no express termination date constituted a categorical taking that automatically entitled the landowners to compensation. [18]

     TRPA appealed the District Court's judgment awarding compensation for a categorical taking to the Ninth Circuit. [19] Significantly, however, the landowners did not cross-appeal the District Court's ruling that they had failed to prove a regulatory taking under the Penn Central test. [20]  Thus, the only issue before the Ninth Circuit was whether the categorical taking rule of Lucas applies to a temporary development moratorium that denied the landowners any economically beneficial use of their property for period of 32 months. [21]  On that point, the Ninth Circuit reversed the District Court. Focusing on the concept that property interests have three dimensions-physical, functional, and temporal-the Ninth Circuit reasoned that because a regulation that restricts the use of only a limited portion of the "parcel as a whole" does not amount to a "total" taking in the physical sense, and because a regulation that prohibits only certain limited uses of the property does not amount to a "total" taking in the functional sense, a regulation that denies all economically beneficial use of the entire parcel for only a limited "slice" of time cannot be deemed a "total" taking in the temporal sense. [22]  Thus, the Ninth Circuit concluded, and reaffirmed over the dissenting votes of five judges on rehearing en banc, that a temporary moratorium on development would not be subject to a categorical taking claim under Lucas, but could only give rise to a regulatory taking claim based on the Penn Central framework of analysis. [23]

The Supreme Court's Decision

     The U.S. Supreme Court granted certiorari and affirmed the Ninth Circuit's decision. [24]  Writing for the majority, Justice Stevens framed the issue before the Court as "whether a moratorium on development imposed during the process of devising a comprehensive land-use plan constitutes a per se taking of property requiring compensation...." [25]  At the outset, Justice Stevens explained that the government actions at issue were TRPA's adoption of Ordinance 81-4 and Resolution 83-21, not the TRPA's adoption of its 1984 or 1987 plans. [26]  Thus, the relevant time period for purposes of the Court's analysis was the 32-month period covered by TRPA's ordinance and resolution. [27]

     Setting the tone for its decision, the Court noted that because the landowners were facially attacking the validity of the moratoria, they faced "an uphill battle" [28] made "especially steep" by their quest for a categorical rule that would require compensation whenever a government entity imposes any temporary moratorium on development that denies a property owner all viable use of his property during the time the moratorium is in effect -- regardless of the reasons for the moratorium, its actual impact on landowners, the public interest served by the moratorium, or the landowners' investment-backed expectations. [29] The Court drew a distinction between physical takings and condemnations on one hand, and regulatory takings on the other.

     Physical takings and condemnations through which the government acquires private property for a public purpose historically have been treated for jurisprudential purposes as per se takings, [30] while regulatory taking cases have involved "essentially ad hoc, factual inquiries" [31] designed to allow "careful examination and weighing of all the relevant circumstances." [32]  Due to the historic distinction between the two lines of taking cases, decisions from one line typically are not treated as precedent for the other. [33]  Starting with Pennsylvania Coal Co. v. Mahon, [34] the relevant inquiry, according to the Court, has always been whether a regulation "goes too far" so as to constitute a taking. [35]

     As the body of regulatory taking case law evolved, the Court has "generally eschewed" establishing a set formula for determining how far is too far, electing instead to engage in ad hoc, factual inquiries to determine whether a regulation effects a taking. [36]  The Court stated that even in partial taking cases, it has declined to adopt categorical rules, but instead considers numerous factors in determining whether a partial regulatory taking has occurred. [37] Importantly, the relevant scale of analysis in all regulatory taking cases for purposes of determining whether rights have been destroyed is the entire parcel, [38] not discrete segments, so that "where an owner possesses a full 'bundle' of property rights, the destruction of one 'strand' of the bundle is not a considered a taking." [39]

    According to the majority, First English Evangelical Lutheran Church of Glendale v. County of Los Angeles [40] decided only that if a regulation effects a taking, no subsequent governmental action can relieve the government of the duty to provide compensation for the period during which the taking was effective; it did not address the question of whether a taking occurs when all valuable use of property is denied on a temporary basis. [41] Thus, the landowners' argument that First English dictated they be compensated for a temporary deprivation of use of their land was misplaced. [42]

     Having set the stage, the Court then addressed the landowners' reliance on Lucas v. South Carolina Coastal Commission, a case in which the Court had applied a categorical rule to determine that compensation was due for the permanent deprivation of all use of an owner's land as the result of a state law prohibiting construction of habitable improvements seaward of a coastal construction line established under the law. [43]  Lucas, according to the majority, established a narrow categorical exception to the Penn Central analysis that generally governs regulatory taking cases. The Lucas exception applies only when a regulation effects a taking of all economically productive or beneficial use of the land. [44]

     Since TRPA's regulations prohibiting any economic use of the land in the Lake Tahoe Basin for a 32-month period did not deprive the owners of all economically productive or beneficial use of their land, according to the Court, Lucas did not dictate the application of the categorical rule to this case. [45]  To hold otherwise, the Court explained, would require the severance of the 32-month temporal segment from the rest of the property -- an exercise contrary to Penn Central's direction that the parcel must be viewed as a whole, not in segments, in determining whether a taking has occurred. [46]  A permanent deprivation of the owner's use of his land, as in Lucas, is a taking of the parcel as a whole; however, a temporary deprivation of all economic use cannot constitute a taking of a fee simple estate because the property, treated as a whole, will recover value upon lifting of the prohibition. [47]

     Finally, the Court addressed whether the interests of "fairness and justice" underlying taking jurisprudence dictated that the 32-month moratoria prohibiting all economic use of the land in the Lake Tahoe Basin constituted a burden that should be "borne by the public as a whole." Expressing concern that such a categorical rule would cause "normal delays" attendant to obtaining zoning changes, building permits, and other routine development approvals to be compensable takings, essentially eviscerating government police power regulation of property, [48] the Court concluded that fairness and justice would be better served by application of Penn Central's ad hoc, factual analysis than by a categorical rule that any deprivation, no matter how brief, constitutes a compensable taking. [49]  The Court observed that "[a] rule requiring compensation for every delay in the use of property would render routine government processes prohibitively expensive or encourage hasty decisionmaking." [50]

     The Court was persuaded that "the better approach" to claims that a regulation has effected a temporary taking requires "careful examination and weighing of all relevant circumstances," consistent with Penn Central. [51]  Importantly, the Court advised that it was not holding that the temporary nature of a land use restriction always precludes a finding that the restriction effects a taking -- only that it is one of many factors to be considered under a Penn Central-type inquiry, and that as such, it should not be given exclusive significance one way or the other. [52]

The Dissenting Opinions

     In a dissenting opinion joined by Justices Scalia and Thomas, Chief Justice Rehnquist questioned the majority's reasoning in three respects. First, he pointed out that by confining its takings analysis to the 32-month period during which the two moratoria imposed by TRPA were in effect from August 1981 until the adoption of the regional plan in April 1984, and refusing to consider the fact that the prohibition on use of the property continued until 1987 due to the district court's injunction, the majority "ignores much of the impact of [TRPA's] conduct on [the landowners]." [53]  In his view, even though that injunction was issued by the district court, TRPA itself was responsible for the continued deprivation of use because the injunction was based on the failure of TRPA's 1984 Regional Plan to comply with the Compact and its regulations. Thus, he concluded that "[b]ecause [TRPA] caused petitioners' inability to use their land from 1981 through 1987, that is the appropriate period of time from which to consider their takings claim." [54]

     Having redefined the issue as requiring a determination of "whether a ban on all economic development lasting almost six years is a taking," the Chief Justice next assailed the majority's rationale for distinguishing a "temporary" from a "permanent" prohibition on use as the basis for refusing to apply the categorical taking rule of Lucas. Noting that the deprivation deemed permanent in Lucas actually lasted less than two years, as compared to the six-year duration of the "temporary" TRPA moratorium, he characterized the majority's decision as having created a rule under which "the takings question turns entirely on the initial label given a regulation"; consequently, the mere designation of a development ban as "temporary" by the government "is conclusive even though in fact the moratorium greatly exceeds the time initially specified." [55]  Moreover, he contended that even if some distinction between temporary and permanent takings was otherwise plausible, it would not affect the applicability of the categorical taking rule established in Lucas, because that rule was based on the fact that a total deprivation of economically viable use is the "practical equivalent" of a physical appropriation, which must be compensated regardless of whether it is temporary or permanent. [56]  In his view, the majority's focus on how the moratorium affected the value of the property, rather than on the undisputed finding that it denied all economically beneficial or productive use of the land, was a misapplication of Lucas. [57]

     Finally, the Chief Justice disagreed with the majority's concern that applying the categorical rule of Lucas to temporary moratoria would require that all other short-term land use planning delays be deemed compensable takings. Citing language from First English and Palazzolo, where the Court had recognized that normal delays in the government's processing of permit applications, rezoning requests, variances, and the like are not regarded as temporary takings, he posited that such short-term restrictions should be treated as falling within the exception carved out by Lucas for inherent limitations on use "that background principles of the State's law of property and nuisance already place upon land ownership." [58]  As he explained, "the short-term delays attendant to zoning and permit regimes are a longstanding feature of state property law," while "a moratorium prohibiting all economic use for a period of six years is not one of the longstanding, implied limitations of state property law." [59]  Because state statutes that authorize such moratoria typically limit their duration to periods ranging from six months to no more than two years, he asserted that the six-year prohibition of use suffered by the petitioners "cannot be said to resemble any 'implied limitation' of state property law," and therefore "it is a taking that requires compensation." [60]

     Writing separately, in an opinion joined by Justice Scalia, Justice Thomas dissented specifically to the majority's rationale that a temporary moratorium does not constitute a taking of the "parcel as a whole," because it merely deprives the owner of a "temporal slice" of the land's useful life and does not permanently destroy its value. Characterizing the "parcel as a whole" concept as a "questionable rule," Justice Thomas expressed the belief "that First English put to rest the notion that the 'relevant denominator' is land's infinite life," because a total deprivation of use, even if temporary, is "the equivalent of a physical appropriation," and thus a taking under the reasoning of Lucas. [61]  He also scoffed at the majority's theory that a temporary moratorium cannot effect a taking because the temporary restriction causes only a "diminution in value," which will be recovered once the moratorium is lifted. Aside from the fact that the majority's assurance of future value is "cold comfort to the property owners," some of whom may not survive the moratorium, he maintained that it misconceived the proper analytical role of value in the takings determination: "[S]uch potential future value bears on the amount of compensation due and has nothing to do with the question whether there was a taking in the first place." [62]


Conclusion

     The Court in Tahoe-Sierra rejected the application of a per se taking rule to a temporary land development moratorium, but recognized that the landowner could demonstrate entitlement to compensation for a regulatory taking based on the ad hoc, factual Penn Central analysis. However, since the District Court in Tahoe-Sierra had already found the landowners could not establish a taking under Penn Central, there is at least some question whether the Penn Central approach provides a meaningful avenue under any circumstances for obtaining an effective remedy when a temporary development moratorium effects a taking of property. In any event, Tahoe-Sierra counsels that as long as governmental entities act diligently and in good faith to prepare plans and land development regulations, they will not be penalized by being held liable for a taking, even when those plans and regulations take some time to prepare and implement.

Endnotes:

1   505 U.S. 1003 (1992).
2   533 U.S. 606 (2001).
3   535 U.S. ___, 122 S. Ct. 1465 (2002).
4   438 U.S. 104 (1978).
5   1968 Cal. Stat. 998.
6   1968 Nev. Stat. 4.
7   Pub. L. 91148, 83 Stat. 360 (1969).
8   Tahoe-Sierra, 122 S. Ct. at 1470.
9   The Lake Tahoe Basin, which is the land area covered by the Compact and TRPA ordinances, occupies approximately 501 square miles in the states of California and Nevada. Tahoe-Sierra, 122 S.Ct. at 1471.
10   The Compact amendment also contained a finding that to ensure the effectiveness of the regional plan to be adopted, it was necessary to halt development temporarily. Thus, a prohibition on most development was in effect even before TRPA imposed the two moratoria that were the subject of the Court's decision. Id.
11   Ordinance 81-5, effective from August 24, 1981 until August 26, 1983.
12   Resolution 83-21, effective from August 27, 1983 until April 25, 1984.
13   Tahoe-Sierra, 122 S.Ct. at 1470.
14   Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 34 F.Supp. 2d2d 1226, 1236-37.
15   Id.
16   34 F.Supp. 2d at 1240. Due to the temporary nature of the regulations, evidence that the average holding time between lot purchase and home construction was twenty-five years, and because no specific evidence of harm was provided by the landowners, the District Court concluded that the landowners had not established a taking under Penn Central. Id.
17   482 U.S. 304 (1987),
18   34 F.Supp.2d at 1245-51.
19   216 F.3d 764 (9th Cir. 2000).
20   Id. at 773.
21   The landowners also had cross-appealed the District Court's holding that the TRPA's adoption of the 1984 plan had not resulted in a taking of their property between 1984 and 1987, when a new plan for the Lake Tahoe Basin was adopted by the TRPA. On cross-appeal, the Ninth Circuit rejected the landowners' claim that the adoption of the 1984 plan resulted in a taking of their property. The Ninth Circuit agreed with the District Court that the issuance of an injunction by California District Court staying the effectiveness of the 1984 plan, as well as the filing of separate lawsuits by the State of California and the League to Save Lake Tahoe, were the reason that the landowners were unable to develop during the 1984 through 1987 time period. The Ninth Circuit also rejected the landowners' argument that the TRPA should be held liable for a taking under the 1984 plan because it should have reasonably foreseen that it would be sued as a result of adopting the 1984 plan. The court noted that the record evidence supported the District Court's determination that the TRPA had no reason to believe it would be enjoined from implementing its 1984 plan, and further noted that there was no evidence in the record supporting the landowners' contention that the TRPA "sabotaged" its plan to cause an injunction to be issued. The court noted that the 1984 plan was enjoined for not being strict enough, so had the TRPA adopted a more lenient plan that met with the landowners' approval, an injunction was even more certain to be issued. Id. at 764, 784-85. Importantly, this issue was not encompassed within the Supreme Court's grant of certiorari, so the question of whether the 1984 plan resulted in a taking during the period between 1984 through 1987 was not before the Supreme Court. Tahoe-Sierra, 122 S. Ct. 1465, 1474,n.8.
22   Id. at 773-76.
23   Id. at 778.
24   Tahoe-Sierra, 523 U.S. ___, 122 S.Ct. 1465 (2002).
25   Id. at 1470.
26   Id. at 1474. As previously discussed in note 23, supra, the question of whether TRPA's adoption of its 1984 plan effected a taking in the period from 1984 through 1987 was not before the Court. Nor was the question of whether the 1987 plan worked a taking of the landowners' property before the Court. The District Court and Ninth Circuit both had concluded that taking claims resulting from TRPA's 1987 plan were time-barred by the applicable California and Nevada statutes of limitation, and that the landowners had not appealed that determination. Id. at 1474,n.7, n.8; 216 F.3d 764, 785-89.
27   The majority notes that the landowners did not challenge the Ninth Circuit's holding regarding the 1984 plan's lack of causation in their briefs because the Court had granted certiorari only on the question of whether the 1981 ordinance and 1983 resolution constituted compensable takings. Thus the majority characterized the dissent's theory of taking causation as "novel" and noted that it had neither been briefed nor discussed in oral argument. Tahoe-Sierra, 122 S.Ct. at 1474,n.8.
28   Id. at 1477, quoting Keystone Bituminous Coal Assn. v DeBenedictis, 480 U.S. 470, 495 (1987).
29   Id.
30   Id.
31   Id., quoting Penn Central, 438 U.S. 104, 124 (1978).
32   Id., quoting Palazzolo, 533 U.S. 606, 636 (2001).
33   Id. at 1479-80. The majority observed that because land use regulations are ubiquitous and most affect property in some manner, the practical effect of treating all land use regulatory impacts as per se takings would "transform government regulation into a luxury few governments could afford." Id.
34  260 U.S. 393 (1922).
35   Id. at 1481.
36   Id. at 1481, quoting Lucas, 505 U.S. at 1015.
37   Id.
38   Id.
39   Id., citing Andrus v. Allard, 444 U.S. 51 (1979).
40   482 U.S.304 (1987).
41   Tahoe-Sierra, 122 S.Ct. at 1482.
42   Id. The Court observed that First English had expressly identified "normal delays in obtaining building permits, changes in zoning ordinances, variances, and the like" as not constituting takings. Id., quoting First English, 482 U.S. at 321.
43   505 U.S. 1003 (1992).
44   Tahoe-Sierra, 122 S.Ct. at 1483. Lucas recognized that anything less than a complete elimination of the land's value as a result of a regulation would require a Penn Central analysis. Id., quoting Lucas, 505 U.S. at 1019-20 (emphasis added).
45   Id. at 1484.
46   Id.
47   Id. at 1484. The Court parenthetically noted that "mere fluctuations in value during the process of governmental decisionmaking, absent extraordinary delay, are 'incidents of ownership.' They cannot be considered as a 'taking' in the constitutional sense." Id., quoting Danforth v. United States, 308 U.S. 271,285 (1939).
48   The Court quoted Justice Holmes' admonishment in Pennsylvania Coal Co. v. Mahon that "[g]overnment 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." 260 U.S. 393, 413 (1922).
49   Id. at 1485, 1489.
50   Id.
51   Id.
52   Id. at 1486-87.
53   Id. at 1490.
54   Id. at 1490-91.
55   Id. at 1492.
56   Id. at 1493.
57   Id. at 1493-94.
58   Id. at 1494.
59   Id. at 1495.
60   Id. at 1496.
61   Id.
62   Id. at 1497.