On June 23, 2021, the United States Supreme Court released its opinion in Cedar Point Nursery v. Hassid, setting an important new precedent on regulatory takings. Under the Fifth and Fourteenth Amendments, private land may not be taken through governmental action without payment of just compensation. Over the years a body of precedent has been established whereby takings are divided into three categories: (i) actions involving a physical invasion or taking of the landowner’s property; (ii) actions depriving the landowner of all economically feasible use of their land; and (iii) other governmental action whereby the landowner’s use of the property is diminished in some respect but nonetheless some economically viable use remains. This latter category is commonly referred to as a “regulatory taking.”
The leading precedent on regulatory takings is the 1978 case of Penn Central Transportation Co. v New York City involving a proposed development extending the height of Grand Central Terminal in New York City. The proposed development was barred by the City on the basis it would compromise the architectural integrity of this historic structure. Penn Central asserted this amounted to a taking of its property rights. It was undisputed that there was no physical invasion and that an economically viable use of the property remained notwithstanding the City’s denial of Penn Central’s proposed expansion. The US Supreme Court ruled that in this situation the proper test involves a balancing of the landowner’s “reasonable investment backed expectations” and the government’s interest in historic preservation, regulating land use, or promoting “health, safety and welfare.”
This test usually tilts in favor of sustaining the governmental action and the Penn Central case was no exception. Similarly, both the US District Court and the Ninth Circuit held that the California law requiring Cedar Point Nursery to allow labor organizers access to its property in order to solicit its laborers to join the union amounted to a use restriction subject to the Penn Central analysis and rejected Cedar Point’s claim. Key to the lower courts’ decisions was that access was limited to one (1) hour before work, one (1) hour at lunchtime and one (1) hour after work and could be invoked only during four (4) months of the year. In the lower courts’ view, this limited invasion did not unduly interfere with Cedar Point’s operation and did not amount to a compensable taking.
The US Supreme Court began its analysis by stating that controlling access to one’s property is one of the essential attributes of property ownership. It held that the California law amounted to the taking of an easement whereby Cedar Point was compelled to permit access to its property against its will to the labor organizers. The fact that the right was of a temporary nature only impacted the quantum of compensation due to Cedar Point and not its entitlement to just compensation under the Fifth and Fourteenth Amendments. Since a property interest was being appropriated through governmental action, there was a per se taking and the Penn Central balancing test did not apply. Accordingly, the lower court decisions were reversed and Cedar Point’s entitlement to just compensation for a taking of its property was upheld.
Cedar Point Nursery v. Hassid signals a potentially significant turning point in takings jurisprudence whereby the US Supreme Court is taking a more expansive view of property rights and limiting the applicability of the “regulatory taking” analysis under the Penn Central case. Predictably, the decision provoked a vigorous dissent by three (3) Justices who asserted that the decision would result in an inability on the part of governmental agencies to conduct routine health inspections and the like. This seems rather unlikely but time will tell how far the Supreme Court takes the Cedar Point rationale. Regardless, this case provides a powerful precedent in favor of landowners seeking to vindicate property rights from government action.
Please contact any member of our land use litigation team comprised of John Walk, Andy Sherrod, Jaime Wisegarver and Alec Boyd to further discuss.
Luis F. Ruiz