Deterrence and distribution in the law of takings

Harvard Law Review

Volumn 112, Issue 5, 1999, Pages 997-1025

  Heller, Michael A ^b   Krier, James E ^a  

^a UNIVERSITY OF MICHIGAN LAW SCHOOL   (United States)

^b NONE

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EID: 0347594512     PISSN: 0017811X     EISSN: None     Source Type: Journal    
DOI: 10.2307/1342273     Document Type: Review

References (123)

1. See, e.g., Michael A. Heller, The Boundaries of Private Property, 108 YALE L.J. (forthcoming April 1999) (manuscript at 140 n.199, on file with the Harvard Law School Library) (collecting colorful quotations on the daunting messiness of takings law).
2. 118 S. Ct. 1925 (1998). Throughout this essay, our discussion of Phillips draws from a companion, piece that considers the case in closer detail than is necessary here. See generally Michael A. Heller & James E. Krier, Making Something Out of Nothing: The Law of Takings and Phillips v. Washington Legal Foundation, 7 SUP. CT. ECON. REV. (forthcoming 1999).
3. U.S. CONST. amend. V; see Phillips, 118 S. Ct. at 1928. The Fifth Amendment is made applicable to the states through the Fourteenth Amendment. See Chicago, Burlington & Quincy R.R. Co. v. Chicago, 166 U.S. 226, 239 (1897).
4. See Frank I. Michelman, Property, Utility, and Fairness: Comments on the Ethical Foundations of "Just Compensation" Law, 80 HARV. L. REV. 1165 (1967).
5. See id. at 1219. It is unsurprising that most commentators think about the Takings Clause in terms of efficiency and justice, because for several decades now judges and scholars have regarded those two values as the criteria by which to evaluate just about any legal outcome. See, e.g., Guido Calabresi & A. Douglas Melamed, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, 85 HARV. L. REV. 1089, 1093 (1972)
6. (suggesting that the reasons behind the settling of entitlements in one party or another are "economic efficiency, distributional preferences, and other justice considerations"). Michelman provides an analysis of efficiency and justice in the particular context of takings. See Michelman, supra note 4, at 1181-82 (arguing that collective action must be judged in terms of allocative efficiency and distributive justice); id. at 1168 n.4 (arguing that allocation is judged in terms of efficiency and distribution is judged in terms of fairness). Other takings literature reflects a similar analytic posture. See, e.g., WILLIAM A. FISCHEL, REGULATORY TAKINGS: LAW, ECONOMICS, AND POLITICS 216-17 (1995)
7. (arguing that the takings issue "involves fairness as well as efficiency"); Stephen R. Munzer, Compensation and Government Takings of Private Property, 33 NOMOS 195, 190-200 (1991) (arguing that the theory of takings rests on a pluralist theory of property comprising principles of efficiency, justice, and desert).
8. RICHARD A. POSNER, ECONOMIC ANALYSIS OF LAW 58 (4th ed. 1992);
9. see also William A. Fischel & Perry Shapiro, Takings, Insurance, and Michelman: Comments on Economic Interpretations of "Just Compensation" Law, 17 J. LEGAL STUD. 269, 269-70 (1988) (arguing that the compensation requirement serves the purpose of "disciplining the power of the state, which would otherwise overexpand unless made to pay for the resources that it consumes").
10. Cf. A. Mitchell Polinsky & Steven Shavell, Punitive Damages: An Economic Analysis, 111 HARV. L. REV. 869, 877-78 & nn.13-14 (1998) (discussing other uses of the terms "general" and "specific" deterrence and collecting citations).
11. See, e.g., Saul Levmore, Just Compensation and Just Politics, 22 CONN. L. REV. 285, 306-07 (1990).
12. See 2 JAMES KENT, COMMENTARIES ON AMERICAN LAW 275 (Da Capo Press, 1971) (1827).
13. 364 U.S. 40 (1960).
14. Id. at 49.
15. As Justice Souter said in Phillips, "[A] court seeks to place a claimant 'in as good a position pecuniarily as if his property had not been taken.'" Phillips v. Washington Legal Found., 118 S. Ct. 1925, 1936 (1998) (Souter, J., dissenting) (quoting United States v. 564.54 Acres Land, 441 U.S. 506, 510 (1979) (quoting Olson v. United States, 292 U.S. 246, 255 (1934))).
16. Our development and application of uncoupling in the takings context is novel, but the general idea of separating two things ordinarily tied together has appeared before. For example, several states require defendants to pay part of punitive damages awards not to plaintiffs, but to state treasuries or to special funds (where the amounts become available for specific or general distributions). See, e.g., BMW of North America, Inc. v. Gore, 517 U.S. 559, 614-18 (1996) (Ginsburg, J., dissenting) (collecting references to thirteen states that allocate part of punitive damage awards to general revenues or to special funds directed to victim assistance, public medical assistance, civil reparations, the state university system, a school for the deaf and blind, or low-income attorney services, among other uses); see also A. Mitchell Polinsky, Detrebling Versus Decoupling Antitrust Damages: Lessons from the Theory of Enforcement, 74 GEO. L.J. 1231 (1986) (discussing the idea of uncoupling the amount of antitrust damages paid by a defendant from the amount of damages paid to the plaintiff). In some rather unusual instances, we might need variations on the standard method of general distribution, mechanisms that sidestep any actual payment by the government, yet still advance the purposes of the Takings Clause. Phillips could be a case in point, and we shall consider it in that connection later. See infra pp. 1018-22.
17. See POSNER, supra note 6, at 64 (noting how hard budget constraints can discipline public officials).
18. Long-standing scholarly tradition places theoretical innovations in Box 4, but surely they may appear, as they do here, in other boxes, like our Box 2 and our Box 3. See Calabresi & Melamed, supra note 5 (discovering Box 4); James E. Krier & Stewart J. Schwab, Property Rules and Liability Rules: The Cathedral in Another Light, 70 N.Y.U. L. REV. 440 (1995) (exploring Box 4).
19. See infra p. 1022.
20. Recall that his title is Property, Utility, and Fairness: Comments on the Ethical Foundations of "Just Compensation" Law. See Michelman, supra note 4.
21. See id. at 1214.
22. See id.
23. See id.
24. When 5 > D, the question remains whether the absence of compensation is consistent with the demands of justice. Drawing on early work by John Rawls, Michelman concludes that the fairness of a denial of compensation turns largely on the same considerations that enter into a utilitarian calculation. An uncompensated taking is fair in any instance when a claimant "ought to be able to appreciate how such decisions might fit into a consistent practice which holds forth a lesser long-run risk to people like him than would any consistent practice which is naturally suggested by the opposite decision." Id. at 1223. As William Fischel has noted, "The conditions in which the landowner bites his lip and agrees that he should be able to see that noncompensation is in the interests of all people like himself turn out to be almost the same as the conditions in which settlement costs exceed demoralization costs . . . ." FISCHEL, supra note 5, at 199. It is unnecessary for us to take any position on whether and when some view of justice and fairness might require compensation notwithstanding that S > D. Our aim, rather, is to accommodate conflicting purposes in ways that the conventional approach cannot.
25. Fischel notes: Michelman's analysis does allow that demoralization rises as benefits fall relative to costs, and increasing demoralization is an argument for compensation. But the unstated presumption in that case is that the government will pay if that happens. The government is not deterred by compensation; it is not induced to reevaluate the merits of the project. FISCHEL, supra note 5, at 151.
26. Id. at 146; see also id. at 151 (noting that "governments required to pay for regulations can quickly change their minds about the need for regulation").
27. While Michelman focuses on specific distribution, he nevertheless does point out, in a little-discussed section of his article, the possibility of "settlement methods too artificial or innovative for judicial adoption." Michelman, supra note 4, at 1253-55. He continues: "A court, it seems, must choose between denying all compensation and awarding 'just' compensation. . . . Here is a situation in which a legislature can impose a useful fairness discipline which eludes the grasp of courts." Id.
28. 260 U.S. 393 (1922).
29. Id. at 413.
30. Id.
31. 272 U.S. 365 (1926).
32. See id. at 397 (finding no taking despite the plaintiff's allegation of a 75% reduction in property value). But cf. Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1027-31 (1992) (holding regulations that wipe out the value of real property to be takings per se unless the regulated uses amount to common law nuisances).
33. See supra p. 1002 fig.1. We will restrain ourselves from introducing yet another matrix at this point, but we should mention two other logically obvious possibilities. Where a regulation imposes large losses that are concentrated on a few people, both specific deterrence and fairness concerns point us toward a Box 4 ordinary taking. The analysis is more complicated when regulations impose large losses on a large number of people. Efficiency is obviously an issue because there are large total costs, and justice is obviously an issue because there are large individual losses. At the same time, high settlement costs are likely to rule out specific distributions. The next section suggests some of the factors that should inform our thinking about such cases. In any event, the cases are unlikely to arise as a practical matter, because ordinary political processes should tend to weed out programs that create a lot of misery for a lot of people.
34. If burdened parties do not receive specific distributions, who will litigate to ensure appropriate levels of Box 2 deterrence payments by the government? At present, public interest law groups seem willing to bring suit in some cases of the type we have in mind, even when specific distributions are very improbable (Phillips is an example). Moreover, the opportunity to compel a general distribution should work as an incentive, often a sufficient one, for aggrieved parties to sue. Beyond that, judicial awards of contingency fees based on the size of (and paid from) the general distribution could provide powerful incentives to litigate, especially by way of class actions. Measures like the foregoing are unlikely to induce much litigation in cases involving losses that are small per capita and in the aggregate, but those are precisely the cases not worth judicial time and effort in any event.
35. Pennsylvania Coal, 260 U.S. at 415 (considering regulations on property use that benefit property owners at the same time).
36. 481 U.S. 704 (1987); see also Heller, supra note 1, at 152-54 (analyzing Hodel).
37. 29 U.S.C. §§ 2201-2210 (1994).
38. Hodel, 481 U.S. at 715-16.
39. Id. at 716-17.
40. 458 U.S. 419 (1982).
41. See id. at 421.
42. The majority argued that one and a half cubic feet were at stake, while the dissent claimed it was only one-eighth of a cubic foot, see id. at 443 (Blackmun, J., dissenting), a pretty silly dispute. As for the monetary value, subsequent to the Supreme Court decision the New York courts noted that the victorious landlord had never shown that "just compensation" exceeded the one dollar the statute had specified and the Commission had found to be "reasonable compensation." Loretto v. Group W. Cable, 135 A.D.2d 444, 448 (N.Y. App. Div. 1987) (denying the landlord's claim for attorney's fees as the prevailing party).
43. Loretto, 438 U.S. at 435. Temporary invasions, in contrast, are "subject to a more complex balancing process," id. at 435 n.12, though even then an actual physical intrusion is regarded as "an unusually serious" consideration, id. at 426. As one can see, the Court attempted, unsuccessfully in our view, to distinguish permanent physical occupations from temporary limitations on the right to exclude, such as the limitations in Prune Yard Shopping Center v. Robins, 447 U.S. 74, 77-79 (1980), in which shopping mall owners were forced to admit picketers, and Kaiser Aetna v. United States, 444 U.S. 164, 166-69 (1979), in which property owners were forced to admit boaters.
44. According to the Court, impinging on the right to exclude "is perhaps the most serious form of invasion of an owner's property interests." Loretto, 458 U.S. at 435. The Court explained: "The power to exclude has traditionally been considered one of the most treasured strands in an owner's bundle of property rights." Id. 42 See FISCHEL, supra note 5, at 151 (noting that for regulators "regulations are often rational substitutes for the physical acquisition of property"). Fischel's observation about substitution suggests why there should be no compensation in a case like Loretto, even if transaction costs might be low because the number of landlords is relatively small. No matter how low transaction costs were in that case, they probably exceeded any demoralization costs occasioned by the absence of compensation. Beyond that, the New York legislation seems to be efficient (the benefits from network externalities exceed the aggregate burdens, which are trivial even if a large number of landlords are involved), and one could hardly suppose that landlords are a politically vulnerable group. Neither fairness nor efficiency calls for any deterrence, and the substitution observation argues against any distribution, which would create a perverse incentive for government agencies to choose less efficient regulatory alternatives.
45. 239 U.S. 394 (1915).
46. See id. at 405.
47. See id.
48. See id. at 406-07.
49. See id. at 409-10.
50. See id. at 414.
51. The Court limited the rule to common law nuisances (at least in cases where the challenged regulation wipes out property value entirely) in Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1029-31 (1992), discussed below at p. 1012.
52. The specific deterrence point is more complex, in part because courts are reluctant to examine the motives behind legislation. Hadacheck asserted that the zoning ordinance put him and another brickyard owner out of business as a favor to competitors, who could then maintain a lucrative monopoly. See Hadacheck, 239 U.S. at 407.
53. 276 U.S. 272 (1928).
54. See id. at 278-89.
55. Id. at 279.
56. Id. at 277. Fischel is of the view that high transaction costs would have made it infeasible to compensate the cedar tree owners in Miller. See FISCHEL, supra note 5, at 153-54. But he is hardly positive, and, reading his account, we are not so sure either. Of course, Fischel overlooks the possibility that a general distribution might have been devised - not for the sake of deterrence, but for the sake of fairness. Although our Box 3 no taking/compensation category calls for compensation by way of specific distribution, see supra p. 1002 & fig.1, there is no reason why a general distribution could not be used in appropriate instances instead. The point of our matrix is to expand the resolutions available for takings cases, so we are the last people who wish to be bound by our boxes.
57. 201 N.W.2d 761 (Wis. 1972).
58. And they probably would have received it in any number of states. See generally Charles C. Marvel, Annotation, Local Use Zoning of Wetlands or Flood Plain as Taking Without Compensation, 19 A.L.R.4TH 756 (1983) (noting a division among the states on the question whether wetlands regulation works a taking, and collecting cases).
59. Recall Justice Black's admonition in Armstrong that individual property owners should not be forced to "bear public burdens which, in all fairness and justice, should be borne by the public as a whole." Armstrong v. United States, 364 U.S. 40, 49 (1960).
60. 505 U.S. 1003 (1992).
61. Id. at 1027.
62. See id. at 1029-31.
63. The standard example is Spur Industries v. Del E. Webb Development Co., 494 P.2d 700 (Ariz. 1972), which held that a feedlot was a nuisance but that, as a matter of fairness, others who came to the nuisance should bear the costs of moving the operation or shutting it down, see id. at 708.
64. Hence the coming to the nuisance doctrine might be of no avail in a case like Miller v. Schoene, in which the Court said: "We need not weigh with nicety the question whether the infected cedars constitute a nuisance according to the common law; or whether they may be so declared by statute." Miller v. Schoene, 276 U.S. 272, 280 (1928) (citing Hadacheck v. Sebastian, 239 U.S. 394, 411 (1915)).
65. Gregory Alexander reports to us that the German system already offers a limited version of what we propose: In Germany, only the High Constitutional Court (Bundesverfassungsgericht) has jurisdiction to determine whether land-use measures are unconstitutional under Article 14, the property clause, of the German Constitution (Grundgesetz, or Basic Law). That Court has in several cases determined that a regulation does not violate Article 14 because it comes within the scope of the Article's "social obligation of ownership" (Sozialbindung) clause. That does not necessarily end the matter, however, for the Supreme Civil Court (Bundesgerichtshof) may subsequently determine that compensation is due as a matter of non-constitutional law. . . . The first case in which this occurred (no constitutional violation, but compensation is due) is the famous "wet gravel" (Nassauskiesung) case. E-mail message from Gregory Alexander, Professor of Law, Cornell University, to James E. Krier (Aug. 14, 1998) (on file with the Harvard Law School Library). On the "wet gravel" case, contrast BVerfGE 58, 300 with BGHZ 91, 20. See generally Gregory S. Alexander, Constitutionalizing Property: Two Experiences, Two Dilemmas, in PROPERTY AND THE CONSTITUTION: THE PUBLIC DIMENSION OF PRIVATE PROPERTY (Janet McLean ed., forthcoming 1999) (discussing these cases).
66. 118 S. Ct. 1925 (1998).
67. See generally Heller & Krier, supra note 2 (manuscript at 1-4, on file with the Harvard Law School Library) (detailing the facts of Phillips).
68. See Phillips, 118 S. Ct. at 1928. In the lower courts, the plaintiffs also argued that the Texas IOLTA program deprived them of First Amendment rights of freedom of speech and association by forcing them "to financially support, and thereby associate with, various recipient organizations whose purported objectives [they] find objectionable." Washington Legal Found, v. Texas Equal Access to Justice Found., 873 F. Supp. 1, 9 (W.D. Tex. 1995). The district court ruled against the plaintiffs in part because "at least as far as the client is concerned, such a claim is necessarily predicated upon the Plaintiffs' claim that the funds generated from the IOLTA accounts are, in fact, the property of the client," id. at 9, a claim the court also rejected, see id. at 10.
69. See Washington Legal Found., 873 F. Supp. at 11.
70. See id. at 7.
71. The highest courts of seven states expressly held that the program was not a taking; another thirty-seven state supreme courts, including that of Texas, used their rule-making authority to adopt IOLTA programs, while five states adopted the programs by legislation. See Brief of Amici Curiae Alabama Law Foundation, Inc. et al. in Support of Petitioners, Phillips, 118 S. Ct. 1925 (No. 96-1578), available in 1997 WL 476500, at *7-*8; see also ABA Comm. on Ethics and Professional Responsibility, Formal Op. 348 (1982) (endorsing the ethical propriety of IOLTA programs).
72. See Washington Legal Found. v. Massachusetts Bar Found., 993 F.2d 962, 976 (1st Cir. 1993) (upholding the Massachusetts IOLTA program against a challenge by the same public interest law foundation that brought Phillips); Cone v. State Bar, 819 F.2d 1002, 1006-07 (11th Cir. 1987) (upholding Florida's IOLTA program in a case where the client trust earned six cents per month, an amount insufficient to yield net interest for the client).
73. See Washington Legal Found, v. Texas Equal Access to Justice Found., 94 F.3d 996, 1004 (5th Cir. 1996).
74. Id.
75. See Phillips, 118 S. Ct. at 1934.
76. See id.
77. See id. (Souter, J., dissenting) (joined by Justices Breyer, Stevens, and Ginsburg); id. at 1937 (Breyer, J., dissenting) (joined by Justices Souter, Stevens, and Ginsburg).
78. See Heller & Krier, supra note 2 (manuscript at 7-9, on file with the Harvard Law School Library) (defining contextual severance and comparing the technique to the familiar move of conceptual severance). "Conceptual severance" refers to the technique of identifying the relevant property for constitutional analysis by severing particular property interests from other interests that could logically be considered in conjunction with them. See Margaret Jane Radin, The Liberal Conception of Property: Cross Currents in the Jurisprudence of Takings, 88 COLUM. L. REV. 1667, 1676 (1988) (defining "conceptual severance");
79. see also Frank Michelman, Takings, 1987, 88 COLUM. L. REV. 1600, 1601 (1988) (noting that the same phenomenon might also be called "entitlement chopping"). In the case of IOLTA programs, a judge could employ conceptual severance to find that the IOLTA interest is a discrete piece of property that was wholly taken, rather than a part of a larger principal that was reasonably regulated.
80. The clause mentions "public use" too, but this requirement was not an issue in Phillips and is pretty much a throw-away in any event, at least in the federal courts. See JESSE DUKEMINIER & JAMES E. KRIER, PROPERTY 1112-16, 1214-15 (4th ed. 1998) (discussing "public use");
81. cf. Jed Rubenfeld, Usings, 102 YALE L.J. 1077, 1078-79 (1993) (arguing that the "public use" phrase is the key to understanding takings). Oddly, the remaining words of the Takings Clause, "nor," "shall," "be," "for," and "without," have not generated much analytical action.
82. Private property is, as Jeremy Bentham said, nothing but "a basis of expectation[,] the expectation of deriving certain advantages from a thing," and that expectation "can only be the work of law." 1 JEREMY BENTHAM, THEORY OF LEGISLATION 137-38 (Boston, Weeks, Jordan & Co. 1840). Hence the problem facing the Court in Phillips: if the Court were to say that the interest is private property, then private property it would be; otherwise not The resulting circularity can be avoided by at least two methods, one adopted by Chief Justice Rehnquist for the majority, the other by Justice Souter in dissent.
83. The Court held that instances in Texas law in which interest does not follow principal were "insufficient to dispel the presumption of deference given the views of a federal court as to the law of a State within its jurisdiction." Phillips, 118 S. Ct. at 1931. That "two of the three judges" on the federal court of appeals panel were Texans, id., apparently outweighed the inclinations of the Texas Supreme Court (the justices of the Texas Supreme Court were petitioners in Phillips) on this aspect of Texas law.
84. Board of Regents of State Colleges v. Roth, 408 U.S. 565, 577 (1972), quoted in Phillips, 118 S. Ct. at 1930.
85. Phillips, 118 S. Ct. at 1931.
86. Beckford v. Tobin, 27 Eng. Rep. 1049, 1051 (Ch. 1749), quoted in Phillips, 118 S. Ct. at 1930. In criticizing the majority's way of thinking about the meaning of "private property," Justice Breyer wrote, "The slogan 'interest follows principal' no more answers that question than does King Diarmed's legendary slogan, '[T]o every cow her calf.'" Phillips, 118 S. Ct. at 1938 (Breyer, J., dissenting) (citation omitted) (alteration in original); cf. Felix Cohen, Dialogue on Private Property, 9 RUTGERS L. REV. 357, 365-69 (1954) (elaborating on cows, calves, and the nature of private property).
87. The balance of the majority opinion was devoted to dismissing counterarguments on the property issue made by the petitioners and by the United States as amicus curiae. In response to the argument that the "property" at issue had no value, the Court observed that "property is more than economic value." Phillips, 118 S. Ct. at 1933. Even if the value of the interest at stake were zero, then, the property right in that interest might still be deserving of constitutional protection, though how it would be protected is unclear. See id. Finally, the Court countered arguments that the government created the value of the interest by noting that it was the lawyers who pooled the funds. See id.
88. Id. at 1934 (Souter, J., dissenting).
89. Id. at 1935.
90. Id. Accordingly, for Justice Souter, the best method would have been "to consider what is property only in connection with what is a compensable taking," id., and since the court of appeals had done otherwise, the case should have been sent back to it for application of the correct approach, see id. at 1937. In the other dissenting opinion, Justice Breyer expressed agreement with Justice Souter's views but went on to say that even if one accepted, for the sake of argument, the majority's method of analyzing the property question, the majority had its substantive conclusions wrong. See id. at 1937-39 (Breyer, J., dissenting). Justice Souter agreed. See id. at 1937 (Souter, J., dissenting).
91. Justice Souter was concerned to "avoid spending time on what may turn out to be an entirely theoretical matter," id. at 1935, but he failed to realize that the majority's approach actually saves time in any instance where it leads to a conclusion that no "private property" interest is at stake, just the result Justice Breyer would have reached in employing the majority's method, see id. at 1939 (Breyer, J., dissenting).
92. The Takings Clause, after all, "measure[s] any required compensation by the claimant's loss," as Justice Souter reminded the Court in his dissenting opinion. Id. at 1936 (Souter, J., dissenting). Justice Breyer made a similar observation, noting that in takings cases the government is required to pay the current value of the property taken, not the added value that might result from what the government subsequently does with the property. See id. at 1939 (Breyer, J., dissenting).
93. See supra note 30.
94. Pooling cases arise when the government attempts to overcome a tragedy of the commons or of the anticommons by bundling fragmented property interests: In a commons, by definition, multiple owners are each endowed with the [right] to use a given resource, and no one has the right to exclude another. When too many owners have such [rights] of use, the resource is prone to overuse -a tragedy of the commons. . . . In an anticommons, . . . multiple owners are each endowed with the right to exclude others from a scarce resource, and no one has an effective [right] of use. When there are too many owners holding rights of exclusion, the resource is prone to underuse - a tragedy of the anticommons. Michael A. Heller, The Tragedy of the Anticommons: Property in the Transition from Marx to Markets, 111 HARV. L. REV. 621, 623-24 (1998);
95. see also Michael A. Heller & Rebecca S. Eisenberg, Can Patents Deter Innovation? The Anticommons in Biomedical Research, 280 SCIENCE 698, 700 (1998) (arguing that patent policy may create too many fragmented rights and may require later government intervention to facilitate pooling).
96. See Brief of Amici Curiae Alabama Law Foundation, Inc. et al. in Support of Petitioners, Phillips, 118 S. Ct. 1925 (No. 96-1578), available in 1997 WL 476500, at *s-*6 (detailing the cost savings from pooling in the generation and distribution of interest earned on client funds) (citing ABA Task Force and Advisory Board on Interest on Lawyer Trust Accounts, Report to the Board of Governors 22-24 (July 26, 1982)).
97. Phillips, 118 S. Ct. at 1933.
98. Note that states can generate scale efficiencies more easily than can individual clients, but the cumulative net interest is not necessarily an overall efficiency gain for society. Just as IOLTA programs shifted $100 million in interest to states, so could the states have collected the same amount using targeted taxes on banks, lawyers, clients, or other consumers of the public goods that the legal system provides its users. Depending on the costs of these alternative methods of collecting and redistributing funds for legal services, IOLTA programs may or may not be socially efficient. This feature of IOLTA makes Phillips the odd pooling case; normally, pooling will result in efficiency gains. Regulatory schemes that exploit scale economies will usually impose monetary harm on a number of people; each individual's burden shifts the marginal cost curve upward but does not affect its shape. The more each individual is harmed, the larger the pool necessary before cumulative benefits exceed total costs; at the extreme, per capita harms can be so high that the program in question will be inefficient no matter how large the pool of contributors becomes. At the same time, though, some regulatory programs may yield marginal benefits that increase at a faster rate than they do in, say, IOLTA programs. For example, the value of government provision of some goods may benefit from network effects, in which "the utility that a user derives from consumption of [the] good increases with the number of other agents consuming the good." Michael L. Katz & Carl Shapiro, Network Externalities, Competition, and Compatibility, 75 AM. ECON. REV. 424, 424 (1985) (defining "network effects").
99. This discussion pertains to mandatory IOLTA programs only. If lawyers can opt out, as many states now allow, then clients could indirectly opt out by choosing a nonparticipating lawyer. Voluntary and opt-out programs involve giving, not taking; with respect to them, just compensation is irrelevant.
100. Phillips, 118 S. Ct. at 1938 (Breyer, J., dissenting).
101. See Phillips, 118 S. Ct. at 1934 (deferring discussion of the taking and just compensation issues).
102. Justice Souter explained that courts would "measure any required compensation by the claimant's loss, not by the government's (or the public's) gain." Id. at 1936 (Souter, J., dissenting). And, drawing an analogy to land valuation cases, Justice Breyer noted that "the government must pay the current value of condemned land, not the added value that a highway it builds on the property itself creates." Id. at 1939 (Breyer, J., dissenting).
103. See supra note 66 (noting the plaintiffs' First Amendment concerns).
104. Phillips, 118 S. Ct. at 1930 (quoting Yee v. Escondido, 503 U.S. 519, 522 (1992)).
105. See id.
106. Though the tax treatment of client-voice and opt-out options would differ, takings analysis should not be tied to such concerns. With a client-voice system, the Internal Revenue Service would probably impute IOLTA interest to clients as income; with an opt-out system, there would be no imputed income. See id. at 1933 (citing the relevant IRS interpretations).
107. See Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922).
108. See, e.g., Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1022-28 (1992) (limiting the nuisance exception to common law nuisances); Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470, 491-93 (1987) (viewing as "tantamount to public nuisances" the very uses that were not regarded as nuisances in Pennsylvania Coal); Penn Central Transp. Co. v. New York City, 438 U.S. 104, 133 n.30 (1978) (questioning the distinctive character of the nuisance exception).
109. See, e.g., DUKEMINIER & KRIER, supra note 77, at 1157, 1165, 1177, 1208 (noting the Court's inconsistent application of conceptual severance).
110. See, e.g., First English Evangelical Lutheran Church v. County of Los Angeles, 482 U.S. 304, 318 (1987) (conflating temporary and permanent physical invasions); Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 428 (1982) (distinguishing between permanent and temporary physical invasions).
111. See, e.g., Penn Central, 438 U.S. at 137 (implying that transferable development rights cannot be, but on the other hand may be, just compensation); DUKEMINIER & KRIER, supra note 77, at 1167 (discussing the paradox in the Court's approach).
112. See, e.g., Village of Euclid v. Ambler Realty Co., 272 U.S. 365, 384, 397 (1926) (holding that a 75% diminution in the value of property is acceptable).
113. See, e.g., Lucas, 505 U.S. at 1019 n.8 (distinguishing between total deprivation of value and deprivations only slightly less than total).
114. See, e.g., Loretto, 458 U.S. at 434-33 (holding that permanent physical invasions are takings even when they have "only minimal economic impact on the owner").
115. See, e.g., Phillips, 118 S. Ct. at 1933 (observing that a taking may be found even when the property in question has no "positive economic or market value," and applying the observation to a zero amount of interest).
116. See, e.g., Eastern Enters, v. Apfel, 118 S. Ct. 2131, 2155 (1998) (Kennedy, J., concurring in the judgment and dissenting in part) (criticizing the Court's extension of takings doctrine to a situation involving no "specific property right or interest"); Hodel v. Irving, 481 U.S. 704, 716-17 (1987) (suggesting that the right to exclude and the right to devise are "essential sticks in the bundle of rights that are commonly called property," whereas the right to sell is perhaps not); Heller, supra note 1 at 103-04, 139-40 (discussing conflicts in the Court's definition of private property).
117. See Nollan v. California Coastal Comm'n, 483 U.S. 825, 841 (1987) (closely scrutinizing the relationship between a regulatory measure and the ends it claims to advance).
118. See Dolan v. City of Tigard, 512 U.S. 374, 391 (1994) (announcing a "rough proportionality" test).
119. Id. at 410 (Stevens, J., dissenting).
120. 118 S. Ct. 2131 (1998).
121. See Coal Industry Retiree Health Benefit Act of 1992, 26 U.S.C. §§ 9701-9722 (1994 & Supp. II 1997).
122. See Eastern Enters., 118 S. Ct. at 2146-53.
123. Id. at 2156 (Kennedy, J., concurring in the judgment and dissenting in part).