Reciprocity of Advantage: The Antidote to the Antidemocratic Trend in Regulatory Takings

Abstract

most important thing we do is not doing. (1) I. INTRODUCTION Ask any American, even the staunchest advocate for the primacy of individual property rights over the interests of the collectivity, and that person will take for granted at least three propositions: first, that democracy is preferable to oligarchy, monarchy, or despotism; second, that the system of government in the United States, from the federal level down to the local level, is a democratic one; and third, that policy-making in a democratic government should reside in a popularly elected legislature. To what extent, however, do the courts promote these democratic ideals in reviewing government regulation of economic activity? Unfortunately, through the expansion of the doctrine of takings, the democratic regulation of economic affairs is in some jeopardy. How did this happen? The explanation lies in the Supreme Court's recent interpretations of the Takings Clause of the Fifth Amendment. (2) Under that Clause, the of property requires government compensation. (3) While the Framers of the Constitution intended the Takings Clause to apply only to direct physical appropriation of property, (4) since the Supreme Court's 1922 decision in Pennsylvania Coal Co. v. Mahon, (5) the Court has mandated compensation for regulation that severely limits use or value of property. The Court's innovation in Mahon was equating a regulation that destroys the entire value of property, known as a total taking, with direct appropriation. After Mahon, however, the Court did not issue another regulatory takings decision until 1978 in Penn Central Transp. Co. v. City of New York. (6) Penn Central ultimately proved to be the seed for judicial activism in economic policy-making unseen since the era of Lochner v. New York, (7) in which judges struck down health and safety regulations under the Due Process Clause in reliance on a laissez-faire philosophy of government. The expansion of government liability for takings begun in Penn Central has produced a disturbing anti-democratic trend in the formulation of economic policy. (8) In Penn Central and other cases, the Supreme Court has moved away from a standard for takings liability that had been the regulatory equivalent of a direct appropriation of property. In particular, the Court has adopted two tests for takings that depart from such equivalency. First, in Penn Central, the Supreme Court established a partial regulatory takings test. A property owner may claim compensation for a partial regulatory taking where the regulation reduces but does not eliminate all value of the property, usually leaving substantial value remaining in the property as a whole. The partial takings test under Penn Central involves the consideration of three factors: (1) the economic impact of the regulation; (2) the extent to which the regulation interferes with investment-backed expectations; and (3) the character of the government action. (9) Because a partial regulatory taking allows a claimant to receive compensation for regulation that does not produce the equivalent effect of a direct appropriation, the validity of partial takings in the text and original intent of the Takings Clause is questionable. Second, in 1980 in Agins v. City of Tiburon, (10) which in turn relied on Penn Central, the Court introduced a means-ends test under the Takings Clause, similar to the test traditionally applied in due process analysis. Under due process analysis, courts examine whether the means of legislation fit the ends, and whether the ends are legitimate. In applying the due process means-ends test, the courts determine whether a regulation is arbitrary or capricious, having no rational basis. But instead of deferring to the judgment of legislatures and administrative permitting agencies as required under the rational basis test, the courts have, in several cases, relied on Agins to impose a higher standard of judicial review on regulation under the Takings Clause. …