The Rise and Rise of "Investment-Backed Expectations"

Urban Lawyer

Volumn 32, Issue 3, 2000, Pages 437-445

  Eagle, Steven J ^a  

^a GEORGE MASON UNIVERSITY   (United States)

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EID: 0000582934     PISSN: 00420905     EISSN: None     Source Type: Journal    
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References (54)

1. See Gary Lawson, The Rise and Rise of the Administrative State, 107 HARV. L. REV. 1231 (1994).
2. See Richard A. Epstein, Lucas v. South Carolina Coastal Council: A Tangled Web of Expectations, 45 STAN. L. REV. 1369, 1370 (1993) ("Neither [Justice Brennan] nor anyone else offers any telling explanation of why this tantalizing notion of expectations is preferable to the words 'private property'. . . .").
3. Frank I. Michelman, Property, Utility, and Fairness: Comments on the Ethical Foundations of "Just Compensation" Law, 80 HARV. L. REV. 1165 (1967).
4. 438 U.S. 104 (1978).
5. 505 U.S. 1003 (1992).
6. See Michelman, supra note 3, at 1211-12.
7. Vanhorne's Lessee v. Dorrance, 2 U.S. (2 Dall.) 304, 310 (C.C.D. Pa. 1795) (quoted in WALTER BERNS, TAKING THE CONSTITUTION SERIOUSLY 225-26 (1987)).
8. Id. at 266-68 (emphasis in original).
9. JENNIFER NEDELSKY, PRIVATE PROPERTY AND THE LIMITS OF AMERICAN CONSTITUTIONALISM 92 (1990) ("The great focus of the Framers was the security of basic rights, property in particular, not the implementation of political liberty.").
10. See JAMES W. ELY, JR., THE GUARDIAN OF EVERY OTHER RIGHT: A CONSTITUTIONAL HISTORY OF PROPERTY RIGHTS 13 (1992).
11. 260 U.S. 393 (1922).
12. Id. at 415.
13. See Michelman, supra note 3, at 1233.
14. Id. at 1412. Michelman's scheme for determining whether government should act and whether compensation then should be paid utilizes three concepts: efficiency gains (the excess of benefits produced by the governmental action over the costs it imposes), demoralization costs (the dollar value of the adverse effects upon losers and their sympathizers who observe the failure to compensate), and settlement costs (the dollar value of the time, effort, and resources necessary to reach a settlement that will prevent demoralization costs). For a lucid explanation of how the parts fit together, see WILLIAM A. FISCHEL, REGULATORY TAKINGS: LAW, ECONOMICS, AND POLITICS 141-58 (1995).
15. Penn Central Transp. Co. v. City of New York, 438 U.S. 104 (1978).
16. Id. at 130-131.
17. Id. at 124.
18. Id.
19. Id. at 129 n.26. The concession was ill advised. Penn Central was in bankruptcy and failed to emphasize the importance of its lost rental income from the office building. "No competent showing of Penn Central's 'reasonable return' with and without the building project was proffered." William A. Wade, Penn Central's Economic Failings Confounded Takings Jurisprudence, 31 URB. LAW. 277, 287 (1999).
20. Penn Central, 483 U.S. at 130.
21. RICHARD A. EPSTEIN, TAKINGS: PRIVATE PROPERTY AND THE POWER OF EMINENT DOMAIN 123 (1985).
22. See Michelman, supra note 3, at 1233-34. This seems patently incorrect. The reduction in value merely reflects the fact that some components of the "package of possibilities" have been removed by the new regulation.
23. Daniel R. Mandelker, Investment-Backed Expectations: Is There a Taking?, 31 WASH. U. J. URB. & CONTEMP. L. 3, 12-13 (1987).
24. See Daniel R. Mandelker, Investment-Backed Expectations in Taking Law, 27 URB. LAW. 215, 226 (1995) ("All expectations in privately held property are investment-backed by purchase or acquisition.").
25. This process is both as old as the practice by which medieval fields were owned in common for grazing purposes yet divided into private strips for agriculture, and as modern as the division of commercial real estate projects into intricate fee, leasehold, and mortgage ownership rights. See, e.g., Henry E. Smith, Semicommon Property Rights and Scattering in the Open Fields, 29 J. LEG. STUD. 131-69 (2000); David Alan Richards, "Gradable and Tradable": The Securitization of Commercial Real Estate Mortgages, 16 REAL EST. L.J. 99 (1987).
26. This process is both as old as the practice by which medieval fields were owned in common for grazing purposes yet divided into private strips for agriculture, and as modern as the division of commercial real estate projects into intricate fee, leasehold, and mortgage ownership rights. See, e.g., Henry E. Smith, Semicommon Property Rights and Scattering in the Open Fields, 29 J. LEG. STUD. 131-69 (2000); David Alan Richards, "Gradable and Tradable": The Securitization of Commercial Real Estate Mortgages, 16 REAL EST. L.J. 99 (1987).
27. 438 U.S. at 115, n.15 ("The Terminal's present foundation includes columns, which were built into it for the express purpose of supporting the proposed 20-story tower.").
28. Id. at 130.
29. Id. at 136. Indeed, Justice Brennan's adoption of the "tax block" as the appropriate unit of property in Penn Central was arbitrary and unexplained. 438 U.S. at 130-31. The New York Court of Appeals had deemed that the relevant denominator included all of the railroad's considerable other holdings in the vicinity of Grand Central Terminal, a view that Justice Scalia subsequently termed in dicta as "extreme" and "unsupportable." Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1016 n.7 (1992).
30. See, e.g., Kaiser Aetna v. United States, 444 U.S. 164, 175 (1979); PruneYard Shopping Center v. Robins, 447 U.S. 74, 83 (1980).
31. See, e.g., Ciampetti v. United States, 18 Cl. Ct. 548, 558 (1989).
32. See, e.g., Loveladies Harbor, Inc. v. United States, 28 F.3d 1171, 1179 (Fed. Cir. 1994) (demanding "distinct investment-backed expectations"); Creppel v. United States, 41 F.3d 627, 632 (Fed. Cir. 1994) ("One who buys with knowledge of a restraint assumes the risk of economic loss.").
33. Mandelker, supra note 23, at 5.
34. Id. at 5-6
35. Kaiser Aetna, 444 U.S. at 175.
36. 505 U.S. 1003 (1992).
37. Id. at 1027 (internal citation omitted) (emphasis added).
38. 35 Fed. Cl. 726 (1996). Unfortunately, the case has not been cited in a subsequent published opinion.
39. Id. at 734 (citation omitted).
40. Lucas, 505 U.S. at 1029.
41. See, e.g., Kim v. City of New York, 681 N.E.2d 312 (N.Y. 1997).
42. See Steven J. Eagle, The 1997 Regulatory Takings Quartet: Retreating From the "Rule of Law," 42 N.Y.L. SCH. L. REV. 345 (1998) ("New York Court of Appeals Year in Review" issue).
43. 467 U.S. 986 (1984).
44. Id. at 1006.
45. 475 U.S. 211, 227 (1986).
46. 483 U.S. 825 (1987).
47. Id at 833 n.2.
48. See, e.g., Kim v. City of New York, 681 N.E.2d 312 (N.Y. 1997); Grant v. South Carolina Coastal Council, 461 S.E.2d 388 (S.C. 1995); Hunziker v. State, 519 N.W.2d 367 (Iowa 1994). Cf. K & K Constr., Inc., 551 N.W.2d 413 (Mich. Ct. App. 1996), rev'd on other grounds, 575 N.W.2d 531 (Mich. 1998).
49. 189 F.3d 1355 (Fed. Cir. 1999).
50. Id. at 1361-62 (emphasis added).
51. Id. at 1361.
52. Lucas, 505 U.S. at 1034 (Kennedy, J., concurring).
53. Oliver Wendell Holmes, The Path of the Law, 10 HARV. L. REV. 458 (1897) "The prophecies of what the courts will do in fact, and nothing more pretentious, are what I mean by the law." Id. at 461.
54. MARK L. POLLOT, GRAND THEFT AND PETTY LARCENY: PROPERTY RIGHTS IN AMERICA 78 (1993) (quoting letter to Harold J. Laski, October 23, 1926, reprinted in THE HOLMES-LASKI LETTERS 888 (1953)).