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September 13 2021

New Supreme Court Ruling on Government Takings

By: Alexander P. Henderson

The United States Supreme Court recently considered the subject of governmental takings in the case of Cedar Point Nursery v Hassid, which involved a state regulation granting union organizers access to agricultural employers’ land. The majority opinion of the Court, written by Chief Justice Roberts, differentiates the legal analysis that applies to physical appropriation of property from the legal analysis that applies to restrictions on the use of property under the Takings Clause of the Fifth Amendment to the United States Constitution. The Court ultimately decided that the state regulation constitutes a per se physical taking of private property for which the government must provide just compensation to the owners. The case appears to expand the legal meaning of “physical taking” in the context of Fifth Amendment jurisprudence, which could potentially subject a greater breadth of government actions to more exacting scrutiny when challenged under the Takings Clause.

The Cedar Point Nursery opinion describes two different standards that apply in Takings Clause cases. When a government action involves a physical appropriation of property, such as by eminent domain, physical possession, or an occupation of the property, a “per se physical taking” occurs, and the government is required to pay just compensation. On the other hand, when the government imposes a restriction on the use of property, the restriction is analyzed under a balancing test that the Court developed in the case of Penn Central Transportation Co v New York City, which measures factors “such as the economic impact of the regulation, its interference with reasonable investment-backed expectations, and the character of the government action” to determine whether the use restriction constitutes a “regulatory taking.”

According to the Cedar Point Nursery opinion, the California regulation constituted a per se physical taking because it appropriated the property owner’s “right to exclude” and gave union organizers the “right to physically invade” the property. Even though the regulation limited the amount of time that union organizers could exercise the right of access, the Court declared that “a physical appropriation is a taking whether it is permanent or temporary.” As explained by the Court, “[t]he duration of an appropriation—just like the size of an appropriation . . . —bears only on the amount of compensation.” Because the Court had determined the regulation to be a per se physical taking, which requires just compensation in any case, there was no need to consider the Penn Central factors.

In an effort to address fears that the Court’s decision may have dramatic consequences affecting government actions that involve entry onto or regulation of private property, the majority opinion distinguishes several types of activities from takings requiring just compensation. The Court first distinguishes between trespasses and takings by declaring that “[i]solated physical invasions, not undertaken pursuant to a granted right of access, are properly assessed as individual torts rather than appropriations of a property right.” However, as the dissent points out, the majority opinion does not clearly articulate a difference between an “isolated physical invasion” and a “temporary invasion.” The Court also seemed to exempt many generally-accepted government actions involving property from being designated as takings by characterizing them as “consistent with longstanding background restrictions on property rights.” Examples of such “background restrictions” referenced in the opinion include nuisance abatement requirements, entry onto land in the event of public or private necessity, and the privilege of law enforcement officials to enter property for the purpose of performing an arrest or conducting a reasonable search. The majority opinion characterizes such actions as the government “merely assert[ing] a ‘pre-existing limitation upon the land owner’s title.’” Furthermore, the Court explained that “the government may require property owners to cede a right of access as a condition of receiving certain benefits, without causing a taking,” but the ceded right must “bear an ‘essential nexus’ and ‘rough proportionality’ to the impact” of the benefit conferred upon the owner. Accordingly, government health and safety inspections are generally not takings because they are often a condition of receiving or maintaining a permit or license.

The California regulation that was declared a per se physical taking in Cedar Point Nursery is relatively extraordinary compared to the regulatory powers often exercised by local units of government. Fortunately, the Court seems to have distinguished most common forms of municipal actions that affect property rights from per se physical takings. Nevertheless, municipal authorities should consider constitutional principles when formulating policies that affect property rights. Although the standards set forth by the U.S. Supreme Court may seem intricate and convoluted, our municipal attorneys are prepared to assist clients with any questions or concerns regarding government actions that implicate property rights.