Property II Professor Donald J. Kochan

1. Property IIProfessor Donald J. Kochan Spring 2009 Class 55 20 April 2009

2. Today’s Readings • Regulatory Takings/Exactions • Pages 1042-1066 • Nollan • Dolan • Extended Class – Oral Arguments in Nollan and Dolan with analysis by Kochan (class runs until 6) – extended attendance required

3. Nollan • Beachfront property and permitting • Public Access (governmental purpose/justification is the public’s ability to “see” the beach” and to overcome the “pyschological barrier” that a larger home would create to persons knowing there was a public beach on the other side) • Condition for public easement to access the beach in order to approve a building permit for a larger home • Basic Scenario: “Exacting” something from an applicant before the government will permit them to do a particular act on their property: (1) Government creates a regulation that requires someone to seek permission (2) Person seeks permission (3) Regulator says we will give you permission but only if you give us, the public, some of your sticks – and if you do not we will deny that permission

4. Nollan • Government argument: Greater power to deny allows the lesser power to grant but place conditions, without it being a taking • The Court agrees, BUT here is the key passage (emphasis added): “The evident constitutional propriety disappears, however, if the condition substituted for the prohibition utterly fails to further the end advanced as the justification for the prohibition. When that essential nexus is eliminated, the situation becomes the same as if California law forbade shouting fire in a crowded theater, but granted dispensations to those willing to contribute $100 to the state treasury. While a ban on shouting fire can be a core exercise of the State's police power to protect the public safety, and can thus meet even our stringent standards for regulation of speech, adding the unrelated condition alters the purpose to one which, while it may be legitimate, is inadequate to sustain the ban. Therefore, even though, in a sense, requiring a $100 tax contribution in order to shout fire is a lesser restriction on speech than an outright ban, it would not pass constitutional muster. Similarly here, the lack of nexus between the condition and the original purpose of the building restriction converts that purpose to something other than what it was. The purpose then becomes, quite simply, the obtaining of an easement to serve some valid governmental purpose, but without payment of compensation. Whatever may be the outer limits of "legitimate state interests" in the takings and land-use context, this is not one of them. In short, unless the permit condition serves the same governmental purpose as the development ban, the building restriction is not a valid regulation of land use but ‘an out-and-out plan of extortion.’”

5. Nollan Why is this case distinct? (from the majority opinion (emphasis added)): “Had California simply required the Nollans to make an easement across their beachfront available to the public on a permanent basis in order to increase public access to the beach, rather than conditioning their permit to rebuild their house on their agreeing to do so, we have no doubt there would have been a taking. To say that the appropriation of a public easement across a landowner's premises does not constitute the taking of a property interest but rather (as JUSTICE BRENNAN contends) "a mere restriction on its use," post, at 848-849, n. 3, is to use words in a manner that deprives them of all their ordinary meaning. Indeed, one of the principal uses of the eminent domain power is to assure that the government be able to require conveyance of just such interests, so long as it pays for them. J. Sackman, 1 Nichols on Eminent Domain 2.11. (Rev. 3d ed. 1985), 2 id., 5.015.; see 1 id., 1.429., 2 id., 6.14. Perhaps because the point is so obvious, we have never been confronted with a controversy that required us to rule upon it, but our cases' analysis of the effect of other governmental action leads to the same conclusion. We have repeatedly held that, as to property reserved by its owner for private use, "the right to exclude [others is] `one of the most essential sticks in the bundle of rights that are commonly characterized as property.'" Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 433 (1982), quoting Kaiser Aetna v. United States, 444 U.S. 164, 176 (1979). In Loretto we observed that where governmental action results in "[a] permanent physical occupation" of the property, by the government itself or by others, see 458 U.S., at 432 -433, n. 9, "our cases uniformly have found a taking to the extent of the occupation, without regard to whether the action achieves an important public [483 U.S. 825, 832]   benefit or has only minimal economic impact on the owner," id., at 434-435. We think a "permanent physical occupation" has occurred, for purposes of that rule, where individuals are given a permanent and continuous right to pass to and fro, so that the real property may continuously be traversed, even though no particular individual is permitted to station himself permanently upon the premises.”

6. Nollan • Court finds no “essential nexus” between viewing the beach and the existence of the easement, and so invalidates the condition/exaction as constitutionally impermissible • Access might be “a good idea” but cannot be accomplished by these means of conditioning the permit, at least under the government’s purported justifications • Dissent argues, inter alia, that the majority is too rigid demanding with its nexus test too “precise” a fit Opinion from FindLaw: • http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=US&vol=483&invol=825

7. Dolan • Permit application for development regarding expansion of store • CDC required dedications based on existing development regulations, including a floodplain plan and a pedestrian/bicycle recreational trail easements and deications • Stated governmental purposes: reduction of flooding and traffic congestion control ; planning issues • Owner seeks a variance and is denied

8. Dolan • Know these terms and know the differences: • Prohibitions • Exceptions • Variances • Conditions • Dedcations • Exactions

9. Dolan • Essential Nexus Issues • Focus on discussion regarding right to exclude in the opinion, including the Kaiser Aetna and Pruneyard cases • Note the importance placed on the sufficiency of the government’s findings in order to establish the required nexus to demand an exaction

10. Dolan • From the majority opinion (emphasis added): “Cities have long engaged in the commendable task of land use planning, made necessary by increasing urbanization particularly in metropolitan areas such as Portland. The city's goals of reducing flooding hazards and traffic congestion, and providing for public greenways, are laudable, but there are outer limits to how this may be done. ‘A strong public desire to improve the public condition [will not] warrant achieving the desire by a shorter cut than the constitutional way of paying for the change.’ Pennsylvania Coal, 260 U.S., at 416.” Opinion from FindLaw: http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=000&invol=U10365

11. Exactions and Perverse Incentives:The Power to Giveand the Power to Deny • Public Choice Theory • Rent Extraction • Discretion – Greater with the Lesser Theory • How do Standards of Judicial Review affect the Incentives of Regulators?

12. Non-Required Supplemental Reading on Rent-Extraction • Think of it as legalized extortion; if you have the discretion to deny, you have the ability to extract • When the government requires its permission, and when you need a permit to proceed, and when they have discretion to grant or deny that permit, they have the power to extract certain promises from you or else you do not get their permission and cannot satisfy your preferences because the coercive arm hold you back • Unless and until you accede to demands you cannot act • The groundbreaking article on this is Fred S. McChesney, Rent Extraction and Rent Creation in the Economic Theory of Regulation, 16 J. Legal Stud. 101 (1987).

13. Pedagogical Reasons for Listening to Oral Arguments • A glimpse into the Supreme Court of the United States and its Justices – www.supremecourtus.gov • See what preceded the decisions you have read • Analyze how the arguments involved in those cases were presented and analyzed • Examine the audio for purposes of learning oral advocacy skills (you can learn from the good and the bad on these tapes); analyze how the attorneys respond to questions and see how to do it well and what not to do • Professor Kochan will provide analysis during those arguments played in class, on substance and advocacy and lawyering skills, including a discussion of pre-argument briefing

14. Required Oral Arguments Nollan (to be played in class) http://www.oyez.org/cases/1980-1989/1986/1986_86_133/argument/ Dolan (to be played in class) http://www.oyez.org/cases/1990-1999/1993/1993_93_518/argument/

15. Supplemental Oral Argument Listening in Takings Cases Suitum (supplemental) http://www.oyez.org/cases/1990-1999/1996/1996_96_243/argument/ Palazollo (supplemental) http://www.oyez.org/cases/2000-2009/2000/2000_99_2047/argument/ First English (supplemental) http://www.oyez.org/cases/1980-1989/1986/1986_85_1199/argument/ *Consider visiting www.oyez.orgto listen to important cases for your other classes

16. Concluding Remarks • Understand why exactions are a unique category, then compare them to the other regulatory takings categories • Return to Class 30 and 31 discussion of regulation and of the permission principle • Be sure to consider exaction hypos that will be discussed in class