1. ELEMENTS B1 & B2 POWER POINT SLIDES MUSIC: Meat Loaf, Bat Out of Hell (1977)
Class #36: Friday, November 18, 2016 National Vicchyssoise Day (& Mickey Mouse’s Birthday)

2. Takings Theorist #3: Frank Michelman Today : Intro to Theory DQ3. 27-3
Takings Theorist #3: Frank Michelman Today : Intro to Theory DQ (me) (cont’d) Mon: Applying Theory DQ3.30 & 3.33 (Oxygen)

3. Takings Theorists: Frank Michelman DQ3.27-3.28
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?

4. Takings Theorists: Frank Michelman DQ3.27-3.28
Role of Efficiency Gains
Efficiency Gains are the net benefits of implementing the regulation in question.
Result of cost/benefit analysis legislature already should have done before deciding to adopt the regulation

5. Takings Theorists: Frank Michelman DQ3.27-3.28
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)

6. Takings Theorists: Frank Michelman DQ3.27-3.28
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)

7. Takings Theorists: Frank Michelman DQ3.27-3.28
Role of Efficiency Gains
Efficiency Gains are the net benefits of implementing the regulation in question.
If Efficiency “Gains” are negative, legislature shouldn’t have passed regulation at all.

8. Takings Theorists: Frank Michelman DQ3.27-3.28
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.
Under Euclid & Miller, assessing efficiency gains is job for state legislature, not fed’l court.

9. Takings Theorists: Frank Michelman Role of Efficiency Gains
If Efficiency Gains less than both Settlement Costs and Demoralization Costs, in theory, shouldn’t proceed with regulation.
Could suggest this in a particular Takings case if both SC & DC seem very high, but very hard to know with precision.
Really a legislative Q, so shouldn’t be central to Takings Analysis

10. Takings Theorists: Frank Michelman DQ3.29
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

11. Takings Theorists: Frank Michelman: 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.
IMPORTANT: Asking about fairness of not compensating losers, not about fairness of underlying regulation.
QUESTIONS?

12. Both Classes Together Both Days
LOGISTICS: Mon & Tue
Both Classes Together Both Days
MON: Evaluations (Be Specific)
MON: Midterms Available at End of Class (Bring Grading #)
MON/TUE: Unit 3 Review Problems
MON/TUE: Check Course Page for Specific Panel Responsibilities

13. Penn Central Transportation Co. v. City of New York 1978 & DQ3
Penn Central Transportation Co. v. City of New York & DQ3.31: Demsetz Takings Story

14. The Blizzard of ‘78

15. 1978: Births & Deaths BORN: DIED Hubert Humphrey Margaret Mead
Louise Brown: 1st test tube baby
Clay Aiken * Erin Andrews
Kobe Bryant * James Franco
Nelly Furtado * Josh Hartnett
Katherine Heigl * Ashton Kutcher
Matthew Morrison * Usher
Chase Utley * Reggie Wayne
DIED
Hubert Humphrey
Margaret Mead
Golda Meir
Keith Moon
Norman Rockwell

16. 1978: Entertainment (Bonus Slide)
John Travolta
Saturday Night Fever (Grammy for album)
Grease (movie)
Vietnam movies (5 yrs after fall of Saigon)
Deer Hunter (best picture)
Coming Home (best actor & actress)
Premieres: Dallas; Evita; Garfield

17. 1978: Songs (Bonus Slide) Just the Way You Are (Billy Joel)
Copacabana (Barry Manilow)
Three Times a Lady (Commodores)
Sailing (Christopher Cross)
Paradise by the Dashboard Light (Meat Loaf)

18. 1978: International
Camp David Accords: Peace treaty between Israel & Egypt
Unrest in Iran & Nicaragua anticipates revolutions of ’79
US agrees to formally recognize People’s Republic of China
Panama Canal Treaties ratified by Senate; will end US control of Canal as of end of ’99

19. 1978: California I arrive at Stanford mid-September
Calif. Propositions 13 & 6 (11/7)
Jonestown Mass Suicide (11/18)
Killing of Harvey Milk/George Moscone by Dan White (11/27)

20. 1978: Other Memorable
1st US casinos outside Nevada open in Atlantic City
Affirmed wins Triple Crown (not again until 2015)
Red Sox & Yankees: Bucky Dent
Pope Paul VI  Pope John Paul I  (53 Days)  Pope John Paul II

21. 1978: U.S. Supreme Court
Regents of the Univ. of California v. Bakke (affirmative action)
Tennessee Valley Authority v. Hill (snail darter)
Penn Central Transportation Co. v. City of New York (Grand Central Station)

22. 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)

23. 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? …

24. 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."

25. 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)

26. 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?

27. Penn Central (1978) Application of Authorities Krypton: Sax Uranium: Epstein & Mahon

28. Penn Central: DQ3.33 (Krypton)
Apply Prior Authority to PC Facts
Sax
Pure Arbiter Case?
Enterpriser Case?
Controlling Spillover Effects?

29. Apply Theorists to Facts of PC: Sax
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.
NOTE: Similar Difficulties Applying Miller

30. Penn Central: DQ3.33 & 3.40 (Uranium)
Apply Prior Authority to PC Facts
Epstein & Related Arguments
Public Nuisance/Hadacheck Case?

31. Penn Central: DQ3.33 & 3.40 (Uranium)
Apply Prior Authority to PC Facts
Epstein & Related Arguments
Public Nuisance/Hadacheck Case? NO
Implied Compensation/Reciprocity:
DQ3.40: 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?

32. Apply Theorists to Facts of PC: Epstein
Penn Central: DQ3.33 & DQ3.40
Apply Theorists to Facts of PC: Epstein
Stopping Public Nuisance: NO
Implicit Compensation
Reciprocity? :
Normally not for Hist. Preservation
Penn Central does get some non-trivial tourism benefits at Grand Central
NOTE: Other Compensation from Ordinance
Tax Breaks: Probably Not Enough to Matter (Not Raised)
TDRs: Could discuss; might depend on actual value

33. Penn Central: DQ3.32 (Uranium)
Apply Prior Authority to PC Facts
Arguments from Mahon (beside reciprocity)?
Too Far?

34. Penn Central: DQ3.32 (Uranium)
Arguments about Penn Central from Mahon:
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 meaning of “too far”
Value to Zero?

35. Penn Central: DQ3.32 (Uranium)
Arguments about Penn Central from Mahon:
Value to Zero?
If look at whole parcel, NO
If look at air rights alone, MAYBE
BUT City might allow use of air rights if better design
BUT TDRs may allow moving value of air rights to new site
Why Not Interference w Contract Case?
Other Arguments from Mahon?

36. Penn Central: DQ3.32-3.33 (Krypton)
Arguments about PC from Prior Cases One Common Way to Do This: Compare Facts of Old Case to Facts of New Case/Hypo

37. Penn Central: DQ3.32-3.33 (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

38. Penn Central: DQ3.32-3.33 (Krypton)
Compare Facts of Old Case to Facts of PC
E.g., Compare Hadacheck to Penn Central:
Gov’t Purpose?
Almost Certainly Stronger in Hadacheck
Serious Concerns re Human Health > Economics
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.

39. Penn Central: DQ3.32-3.33 (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)

40. Penn Central: DQ3.32-3.33 (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).

41. Penn Central Transportation Co. v. City of New York (1978) DQ3
Penn Central Transportation Co. v. City of New York (1978) DQ3.37: Arbitrariness Claim (Radium)

42. Penn Central: Arbitrary? DQ3.37 (Radium)
Penn Central claimed designation of historical buildings arbitrarily singled out some property owners. Why Did Majority Disagree?

43. Penn Central: Arbitrary? DQ3.37 (Radium)
Majority: Not Arbitrary
(pp : “Secondly …)
Comprehensive Plan Here
No Singling Out: Rule applies to “vast numbers of structures” in NYC
Arbitrariness limited by judicial review of designation or decision

44. Penn Central: Arbitrary? DQ3.37 (Radium)
Majority: Not Arbitrary (pp : “Secondly …)
Comprehensive Plan Here
Hard to say gov’t action is “arbitrary” when PC didn’t exhaust other remedies:
Didn’t appeal designation as landmark
Didn’t appeal decision by Board to reject plans
Only tried 2 options for additional stories

45. Penn Central: Arbitrary? DQ3.37 (Radium)
Majority: Not Arbitrary (pp : “Secondly …)
Comprehensive Plan Here
Hard to say gov’t action is “arbitrary” when PC didn’t exhaust other remedies.
NOTE: US SCt not happy to be asked to decide constitutional Q that might be unnecessary, but Majority doesn’t explicitly reject claim for this.

46. Penn Central: Arbitrary? DQ3.37 (Radium)
Majority: Not Arbitrary (pp : “Secondly …)
Comprehensive Plan Here
Hard to say gov’t action is “arbitrary” when PC didn’t exhaust other remedies.
Not “arbitrary” just b/c falls more heavily on some landowners: regulatory burdens don’t have to be evenly distributed (citing Miller; Euclid; Hadacheck).

47. Penn Central: DQ3.37 Arbitrary?
Majority: Not Arbitrary
Same result on this claim as Hadacheck & Miller
Reminder: Arbitrariness won’t be an issue for you.
Leaves us with real Takings Question

48. Penn Central Transportation Co. v
Penn Central Transportation Co. v. City of New York (1978) Takings Analysis

49. Penn Central: Takings Analysis
Structure of Penn Central Takings Analysis
Overview
Relatively Clear Instances of Takings
Arguments from Purpose
Arguments re Harm to Property Owner
Means/End Testing

50. Penn Central: Takings Analysis
KEYS TO COLOR OF TEXT
Greens = Arguments of Claimant PC
Blues = Points Made by Majority
Reds = Points Made by Dissent
Purple = Points Made by Prior Authorities
Black = Commentary from Me
Yellow/Gold: Open Qs After Penn Central

51. Penn Central: Takings Analysis
Big Qs Left Open by Penn Central
Noxious Use
Meaning of Distinct Invest-Backed Expectations (DIBE)
DIBE & Hadacheck
Denominator Q
Heightened Scrutiny for Takings?

52. Penn Central: Takings Analysis
Structure of Penn Central Takings Analysis
Overview
Relatively Clear Instances of Takings
Arguments from Purpose
Arguments re Harm to Property Owner
Means/End Testing

53. Penn Central Takings Analysis: Overview
Majority Makes Clear: No Easy Answers
no “set formula”
“depends on particular circumstances”
essentially ad hoc factual inquiries
several relevant factors

54. Penn Central Takings Analysis: Overview
Majority Makes Clear: No Easy Answers
Not every case where gov’t action adversely affects property value (PV) is a Taking (p )
Taxing Power
Economic harm insufficiently tied to claimant’s reasonable expectations to be called “property” (e.g., from closing military bases)
Police Power cases like Miller & Hadacheck (more on later)

55. Penn Central: Takings Analysis
Structure of Penn Central Takings Analysis
Overview
Relatively Clear Instances of Takings
Arguments from Purpose
Arguments re Harm to Property Owner
Means/End Testing

56. Penn Central Takings Analysis: Relatively Clear Instances of Takings
More likely a Taking if there is a physical invasion of property by or because of gov’t (p.141)
Note: Based on type of interference rather than purpose or extent
Arguably Michelman reasons: Likely high demoralization costs for physical invasions

57. Penn Central Takings Analysis: Relatively Clear Instances of Takings
More likely Taking if physical invasion
Gov’t actions that may be characterized as acquisitions of resources to permit or facilitate uniquely public functions (Sax Enterprisers) (bottom p.142)

58. Penn Central Takings Analysis: Relatively Clear Instances of Takings
More likely Taking if physical invasion
Gov’t actions that may be characterized as acquisitions of resources to permit or facilitate uniquely public functions. (Sax Enterprisers)
US v. Causby (DQ3.38) arguably both:
Very low airline overflights invaded airspace
Use by military completely destroys value of farm

59. Penn Central Takings Analysis: Relatively Clear Instances of Takings
US v. Causby (DQ3.38): Taking where …
Very low airline overflights invaded airspace
Use by military completely destroys value of farm
Maj: Causby distinguishable from PC (pp )
No physical invasion of airspace by NYC
No appropriation of property by NYC for gov’t use or exploitation for gov’t purposes
Harm to PC not arising from gov’t entrepreneurial operations (Note: Dissent wouldn’t necessarily agree)

60. Penn Central Takings Analysis: Relatively Clear Instances of Takings
DQ3.38: Majority treatment of Causby suggests endorsement of Sax with narrow view of “Enterpriser”
Majority Characterizes PC: No appropriation of property [by NYC] for gov’t use or exploitation for gov’t purposes.
Arguable if “Enterpriser” read broadly (see application of Sax to PC in earlier slides)

61. Penn Central: Takings Analysis
Structure of Penn Central Takings Analysis
Overview
Relatively Clear Instances of Takings
Arguments from Purpose
Arguments re Harm to Property Owner
Means/End Testing

62. Penn Central Takings Analysis: Arguments from Purpose
Purpose: Where Were We Before Penn Central?
Hadacheck & Mahon: Can regulate to stop public nuisance.
Miller: To save one type of property, can limit or destroy another type
Sax & Epstein both think purpose is important
Indirectly enters into Michelman b/c affects people’s perception of situation and thus may be relevant to both Demoralization Costs & Fairness Principle

63. Penn Central Takings Analysis: Arguments from Purpose
Majority’s Discussion of Zoning (p )
US SCt had previously “upheld land-use regulations that destroyed or adversely affected recognized real property interests” where
State gov’t “reasonably concluded”
that forbidding particular land use
would promote HSWM
Reaffirms Hadacheck & Miller; gives many examples of permissible regulations.

64. Penn Central Takings Analysis: Arguments from Purpose
Pet’r Tried to Distinguish Hadacheck/Miller, etc.
Argued laws upheld in these cases all designed to stop “noxious uses” (essentially public nuisances) (see fn 30)
This is plausible reading of earlier cases :
Stopping public nuisance/noxious use = no Taking
Different rules for other kinds of gov’t actions.
E.g., BDS in Mahon dissent re public harm v. public benefit

65. Penn Central Takings Analysis: Arguments from Purpose
Dissent Agrees with Pet’r: Providing Benefit Different From Stopping Harm
“[T]he gov’t can prevent a property owner from using his property to injure others without having to compensate the O for the value of the forbidden use.” (p.149)
Describes Hadacheck & Miller as noxious use cases (fn8 p.149)
NOTE: Even the most Conservative Justices in 1978 don’t question results in Hadacheck & Miller

66. Penn Central Takings Analysis: Arguments from Purpose
Dissent Apparently Would Adopt Position Later Articulated By Epstein (Taking unless Public Nuisance or Reciprocity)
Dissent Sees Neither Here
DQ3.40: As we noted earlier, could see some reciprocity in tourist $$$ flowing to Pet’r; neither opinion recognizes (although Judge in NY Ct. App. had noted)
Important: Majority Implicitly Rejects Epstein Position by Disagreeing w Dissent

67. Penn Central Takings Analysis: Arguments from Purpose
[DQ3.39] (n.30): Majority seems to reject distinction between preventing harm & providing benefit.
In Hadacheck & Miller, uses lawful at time of regulation [relevance: Os not bad actors meriting punishment?]
Cases don’t turn on “noxious use” but that restrictions were “reasonably related” to implementing a policy “expected to produce a widespread public benefit”
Plus destruction of historic landmark is public harm.
Very 1L Law Prof Kind of Move: “Harm!?” Benefit!?”

68. Penn Central Takings Analysis: Arguments from Purpose
DQ3.39: Does Footnote 30 alter earlier cases?
If “noxious use” category gone, would seem to mean that readings of Hadacheck & Miller that rest on public nuisance idea are incorrect.
I’m skeptical that category is completely gone. You’d think preventing greater harms ought to give state more leeway to regulate land use.