ELEMENTS B POWER POINT SLIDES Class #32 Monday, November 16, 2015 National Button Day

Music: MEAT LOAF BAT OUT OF HELL (1977)

Class #32 Review Problem 3A(i) (Radium) Michelman Continued Penn Central & Demsetz Takings Story Application of Prior Authority to Penn Central Facts

FINAL EXAM QUESTION 3 OPINION/DISSENT FORMAT Requires You to Describe and Defend Two Positions Must Show that You Understand Range of Relevant Arguments Arising from Line of Cases Must Understand Role of US Supreme Court – Deciding One Case, BUT Setting Rules for Many – Can Choose to Affirm or Modify Precedent BUT Must Defend – Need to Resolve One or More Difficult Open Qs (Review Problems 3A-3C)

FINAL EXAM QUESTION 3 Review Problem 3A (i) (Radium) FROM EXAM QUESTION IIID (1998) 1979: State Opens Minimum-Security Prison Adjacent to Bart’s Vacant Lot Findings of Fact – B received vacant lot under terms of his father’s will. – Value reduced by > 2/3 ($2.2M(1970)  $600K(1980)). – The prison constituted no threat to the health or safety to present or future residents of B’s parcel. – No change in allowable uses of B’s parcel.

FINAL EXAM QUESTION 3 CaseGov’t ActAffected Landowner Intended Beneficiaries HadacheckLA Bans Brickyards Brickyard OsNeighbors MahonPA Bans Undermining Coal Cos.Surface Os MillerVA Cedar Rust Act Cedar Tree OsApple Orchard Os Penn Central NYC Historic Preservation Os of Historic Buildings Tourist Biz; History Buffs XQIIID Minimum Security Prison All Adjoining Landowners All State Citizens

FINAL EXAM QUESTION 3 Review Problem 3A(ii) XQIIID: Big loss in value to B’s parcel when state opened prison on neighboring lot. Part (ii): Unconstitutional “Taking” if landowners’ property value is reduced significantly but Os acquired the property in Q by gift/will/inheritance, so arguably made no investment? Part (ii): Unconstitutional “Taking” if landowners’ property value is reduced significantly but Os acquired the property in Q by gift/will/inheritance, so arguably made no investment? – Discuss In Class Next Monday – Discuss In Class Next Monday (Uranium/Radium) – Assume Today – Assume Today: Analysis same as if B paid fair market value for parcel when he acquired it.

FINAL EXAM QUESTION 3 Review Problem 3A(i) (Radium) XQIIID: Big loss in value to B’s parcel when state opened prison on neighboring lot. Part (i): Unconstitutional “Taking”? Landowners’ property value is reduced significantly BUT Part (i): Unconstitutional “Taking”? Landowners’ property value is reduced significantly BUT – The state’s use causes no tangible harms to the landowners Have to accept findings of fact Have to accept findings of fact Basically means loss of value caused by irrational fear Basically means loss of value caused by irrational fear – AND The state places no limits on the landowners’ use of their lots.

FINAL EXAM QUESTION 3 Review Problem 3A(i) (Radium) Prison  Big loss in ppty value to B’s parcel BUT – No tangible harms to B – No limits on B’s use of own lot EASY Qs State Stopping Pubic Nuisance? State Acting as Arbiter? What are Benefits to B? Reciprocity?

FINAL EXAM QUESTION 3 Review Problem 3A(i) (Radium) Prison  Big loss in ppty value to B’s parcel BUT – No tangible harms to B – No limits on B’s use of own lot HARDER Qs Arguments from Mahon? State Acting as Enterpriser re B?

FINAL EXAM QUESTION 3 Review Problem 3A(i) (Radium) Prison  Big loss in ppty value to B’s parcel BUT – No tangible harms to B – No limits on B’s use of own lot BIG PICTURE HARD Qs Should State Have to Pay If – No Explicit Limits on B’s Ability to Use – Loss in Value from Irrational Fear (v. Real Harm)

Class #32 Review Problem 3A(i) Michelman Continued Penn Central & Demsetz Takings Story Application of Prior Authority to Penn Central Facts

Introduction to Concepts - DQ cont’d (me) - DQ3.29 (Uranium) Takings Theorist #3: Frank Michelman Introduction to Concepts - DQ cont’d (me) - DQ3.29 (Uranium)

Takings Theorists: Frank Michelman DQ MMN = Cost/Benefit Analysis of Decision Whether to Compensate Once state has decided to regulate, there’ll be winners & losers. Compensate losers if … – Costs of Compensating (= Settlement Costs) less than – Costs of Not Compensating (= Demoralization Costs)

Takings Theorists: Frank Michelman DQ Cost of Compensating = Settlement Costs: Includes & everyone like claimant Cost of paying claimant & everyone like claimant Costs of administering payment scheme Likely Highest When – Lots of claimants – Claims not same for each claimant and intangible or otherwise hard to value

Takings Theorists: Frank Michelman DQ Cost of Not Compensating = Demoralization Costs: Includes Upset to losing party & everyone similar Upset to sympathizers Likely Highest When – Many people view gov’t act as unfair/arbitrary – Relatively few people bear very high burdens not seen as relating to their own behavior

Takings Theorists: Frank Michelman DQ MMN = Cost/Benefit Analysis of Decision Whether to Compensate Rough Do Rough Comparison of Settlement Costs (SC) & Demoralization Costs (DC) – If SC>DC, no compensation (often widely dispersed small losses) – If DC>SC, pay compensation (often small group of losers viewed as unfairly burdened)

Takings Theorists: Frank Michelman DQ MMN = Cost/Benefit Analysis of Decision Whether to Compensate Once state has decided to regulate, there’ll be winners & losers. Compensate losers if … – Costs of Compensating (= Settlement Costs = SC) LESS THAN – Costs of Not Compensating (= Demoralization Costs = DC) QUESTIONS?

Takings Theorists: Frank Michelman DQ Role of Efficiency Gains Efficiency Gains are the net benefits of implementing the regulation in question. already should have done Result of cost/benefit analysis legislature already should have done when deciding to adopt the regulation

Takings Theorists: Frank Michelman DQ Efficiency Gains = net benefits of implementing regulation in question. E.g., in Hadacheck: Efficiency Gains = net benefits of implementing regulation in question. E.g., in Hadacheck: – Gains (Harm Prevented) b/c no brickyards (health; property values) LESS – Costs of Regulation (Harm to brick industry from having to shut down and relocate; harm from increase in cost of bricks; costs of implementation and enforcement)

Takings Theorists: Frank Michelman DQ Efficiency Gains = net benefits of implementing regulation in question. E.g., in Miller: Efficiency Gains = net benefits of implementing regulation in question. E.g., in Miller: – Gains (Harm Prevented) to apple orchards & state economy b/c cedar rust limited LESS – Costs of Regulation (Harm to cedar owners & neighbors; costs of implementation and enforcement)

Takings Theorists: Frank Michelman DQ Role of Efficiency Gains Efficiency Gains are the net benefits of implementing the regulation in question. If Efficiency “Gains” are negative, legislature shouldn’t pass regulation at all. If Efficiency “Gains” are negative, legislature shouldn’t pass regulation at all.

Takings Theorists: Frank Michelman DQ Role of Efficiency Gains Efficiency Gains are net benefits of implement- ing the regulation in question. If negative, legislature shouldn’t pass regulation at all. Important: Ordinarily, not part of Takings analysis. Important: Ordinarily, not part of Takings analysis. Under Euclid & Miller, assessing efficiency gains is job for state legislature, not fed’l court. Under Euclid & Miller, assessing efficiency gains is job for state legislature, not fed’l court.

Takings Theorists: Frank Michelman DQ3.29 (Uranium) Fairness Principle Explain in your own words.

Takings Theorists: Frank Michelman DQ3.29 (radium) Fairness Principle OK not to compensate, if affected parties ought to understand how not compensating in similar cases probably is more beneficial in long run. – Like work of John Rawls on “justice” generally: Look at problem before you know which people in particular will be affected. – Can’t measure this, so using principle = arguments about fairness and how people are likely to react

DQ3.30 (Uranium: apply to earlier cases & “airspace solution”) Takings Theorist #3: Frank Michelman Application of Theory DQ3.30 (Uranium: apply to earlier cases & “airspace solution”) DQ 3.33 (Krypton: apply to P.C.)

Applying Michelman DQ3.30 (Uranium) & 3.33 (Krypton) Settlement Costs Easy to Identify Losers? Administrative Costs of Paying Claims (Valuation/Distribution) Value of Settlements (Number x Amount) Apply to Facts of … Miller (MAF) Hadacheck Mahon Airspace Solution Penn Central (Krypton)

Applying Michelman DQ3.30 (Uranium) & 3.33 (Krypton) Demoralization Costs Likely Perception of Harm to Losers? Likely Perception of Winners/Importance of State Interest? Possible Variations in Spin? Apply to Facts of … Hadacheck (MAF) Miller Mahon Airspace Solution Penn Central (Krypton)

Takings Theorists: Frank Michelman Application of Fairness Principle OK not to compensate, if affected parties ought to understand how not compensating in similar cases probably is more beneficial in long run. Likely similar analysis to Demoralization Costs Michelman likely thinks reasonable people OK with cases like Hadacheck w extensive harm Principle might operate differently in Mahon because of recognition of possible harms to society from overturning established contract rights. Leave other cases for you

Class #32 Review Problem 3A(i) Michelman Continued Penn Central & Demsetz Takings Story Application of Prior Authority to Penn Central Facts

DQ3.31: Penn Central & Demsetz Takings Story Reminder: This Analysis Provides Another Way to Think About Q of When Regulation Interferes Too Much w Property Rights – Who Should Bear Burden for Changing Technology and/or Values? – Though Not a Tough Question if “Change” is: “We’ve just discovered you’ve been poisoning us for years.”

Penn Central: Demsetz Takings Story Decision: Whether to alter historically significant building Old Rule: Os can do as they like. Externalities: Harm to nearby tourist businesses and tourism generally; harm to “history buffs” & civic pride Change in Circumstances: As time passes, historic buildings become more well-known/more popular/rarer Increased Externalities: Increase in [Perception of] Harms b/c more popularity; more reliance; loss of some historic buildings (Old Penn Station in 1963)

Jacqueline Kennedy Onassis: "Is it not cruel to let our city die by degrees, stripped of all her proud monuments, until there will be nothing left of all her history and beauty to inspire our children? If they are not inspired by the past of our city, where will they find the strength to fight for her future? …

Jacqueline Kennedy Onassis: "Americans care about their past, but for short term gain they ignore it and tear down everything that matters. Maybe… this is the time to take a stand, to reverse the tide, so that we won't all end up in a uniform world of steel and glass boxes."

Penn Central: Demsetz Takings Story Decision: Whether to alter historically significant building Change in Circumstances: As time passes, historic buildings become more well-known/more popular/rarer Increased Externalities: Increase in [Perception of] Harms b/c more popularity; more reliance; fewer historic bldgs Change in Rule: Passage of Historic Preservation Laws Response: Os of historic buildings might claim “Taking” b/c of interference w Property Rights: (Penn Central is first challenge)

Penn Central: Demsetz Takings Story Policy Questions For State Legislature (not you): Is Historic Preservation a Good Way to Address Growing Externalities? For Federal Takings Analysis (you): Society decided relatively recently that historic preservation is important. – Fair to Os of historic bldgs to bear financial burden? -OR - – Should gov’t pay them to preserve landmarks? Questions on Demsetz & Penn Central?

Class #32 Review Problem 3A(i) Michelman Continued Penn Central & Demsetz Takings Story Application of Prior Authority to Penn Central Facts (Krypton & A Quick Breath of Oxygen) Application of Prior Authority to Penn Central Facts (Krypton & A Quick Breath of Oxygen)

Penn Central: DQ (Krypton) Apply Prior Authority to PC Facts To Practice Using Earlier Cases/Theorists To Further Understand Earlier Cases/Theorists To See What Arguments Lawyers Might Have Made to the US SCt When It Decided PC Like Treating PC Facts as Exam Question

Penn Central: Introduction DQ3.31 (Krypton) Quick Point From Last Time: Penn Central Loss Osceola: Lost Rental Income (Correct) $1 Million/Yr during Construction #3 Million/Yr Thereafter BUT Offset by loss of $700K  $1M rental of displaced space. Thus, little net loss during construction Loss of at least $2 million/yr in net rental income after construction completed (in 1968 $$) BUT: Loss of at least $2 million/yr in net rental income after construction completed (in 1968 $$)

Penn Central: DQ (Krypton) Apply Prior Authority to PC Facts Sax/Miller – Pure Arbiter/Miller Case? – Enterpriser Case? – Other Arguments from Sax or Miller

Penn Central: DQ3.33 Apply Theorists to Facts of PC: Sax Arbiter v. Enterpriser: – Not Standard Arbiter Case b/c No Land Use Conflict – Not Standard Ent. Case b/c Gov’t Doesn’t Want to Run – Might Argue : More like Ent. b/c Gov’t Wants Parcel Used Only for Particular Purpose that Serves Gov’t Interest Control Spillover Effects – Not Preventing Harm to Other Land Uses – BUT: Externalities to NYC from decision to change bldg.

Penn Central: DQ (Krypton) Apply Prior Authority to PC Facts Sax/Miller Epstein & Related Arguments – Public Nuisance/Hadacheck Case? – Implicit Compensation/Reciprocity?

Penn Central: DQ3.40 (Oxygen) The dissent claims that there was no “reciprocity of advantage” in Penn Central. Can you make an argument that Justice Rehnquist is wrong on this point?

Penn Central: DQ (Krypton) Apply Prior Authority to PC Facts Sax/Miller Epstein & Related Arguments – Public Nuisance/Hadacheck Case? NO – Other Arguments re Implicit Compensation or Reciprocity?

Penn Central: DQ3.33 Apply Theorists to Facts of PC: Epstein Stopping Public Nuisance: NO Implicit Compensation – Reciprocity? : Normally not for Hist. Preservation Penn Central does get some tourism benefits – Other Compensation? Tax Breaks: Probably Not Enough to Matter (Not Raised) TDRs: Could discuss; might depend on actual value

Penn Central: DQ (Krypton) Apply Prior Authority to PC Facts Sax/Miller Epstein & Related Arguments Arguments from Mahon (beside reciprocity)? – Too Far? – Value to Zero? – Other?

Penn Central: DQ3.32 Arguments about Penn Central from Mahon include: Loss in Property Value = “Too Far”? – Losing $2 Million/year – BUT retains value of building + reasonable rate of return – Gets TDRs + tax breaks – Would need better data plus discussion re “too far” Value to Zero?

Penn Central: DQ3.32 Arguments about Penn Central from Mahon include: Value to Zero? – If look at whole parcel, NO – If look at air rights alone, MAYBE City might allow use of air rights if better design TDRs may allow moving value of air rights to new site

Penn Central: DQ (Krypton) Arguments about PC from Prior Cases One Common Way to Do This: Compare Facts of Old Case to Facts of New Case/Hypo

Penn Central: DQ (Krypton) Compare Facts of Old Case to Facts of PC E.g., Compare Nectow to Penn Central: – PC: Less Interference w Ppty Rts (Value Left) – PC: Furthers Police Power (Welfare) (Nectow Didn’t) – Thus, Better Case for Gov’t than Nectow

Penn Central: DQ (Krypton) Compare Facts of Old Case to Facts of PC E.g., Compare Hadacheck to Penn Central: – Gov’t Purpose? Stronger in Hadacheck – Interference with Property Rights? Hard Call Had: Basically can do anything except existing use; may have substantial loss on investment. PC: Basically can only do existing use; still have reasonable return on investment.

Penn Central: DQ (Krypton) Compare Facts of Old Case to Facts of PC If compare facts for all cases, should see that PC facts are between the other cases (like an exam Q): – Smaller interference w property rights than Mahon or Nectow; greater interference than Miller (Hard to say re Hadacheck) – Arguably less important purpose than Hadacheck or Miller; more important than Nectow or arguably Mahon (at least as described by Holmes)

Penn Central: DQ (Krypton) Compare Facts of Old Case to Facts of PC If compare facts for all cases, should see that PC facts are between the other cases (like an exam Q): Suggests Theorists especially helpful to resolve. Note that US SCt in PC explicitly relies on both Sax and Michaelman. (Epstein not yet written).