Decision Of Interest - Regulatory Takings Industry Suffers Setback With High Court's Tahoe Decision Volume XVI, Number 7

Originally published in New York Real Estate Law Reporter

The expectations of the regulatory takings industry have suffered at least a temporary setback last month with the 6-3 U.S. Supreme Court decision in Tahoe-Sierra Preservation Counsel Inc. v. Tahoe Regional Planning Agency (7RPA), 2002 U.S. LEXIS 3028.

For two decades, commencing with justice William Brennan's four-judge dissent in San Diego Coast Electric Co. v. San Diego, 450 U.S. 621, 636 (1981), the Supreme Court, on Fifth Amendment grounds, has engaged in a sustained judicial assault on regulatory initiatives of planners. Now, in the Tahoe-Sierra case, the high court has belatedly recognized "the good faith of the planners" and the value of not "rush[ing] through the planning process or...abandon[ing] the practice altogether."

Property owners had brought an inverse condemnation proceeding against TRPA for imposing a 32-month moratorium on all development in the Lake Tahoe Basin, which is shared by California and Nevada. The theory was that it represented a per se taking of property under the precedent established in Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992), one of the San Diego progeny. The San Diego dissent in its conclusion had posed the paralyzing question: "After all, if a policeman must know the Constitution, then why not a planner?"

Lucas held that a legislative permanent proscription against beachfront development took away all economic use from the property.

Since it was not part of South Carolina's background nuisance common law, it was an unconstitutional categorical taking, to be remedied only by state payment of just compensation. The planners had guessed wrong on whether their exercise of police power was a "taking," even though their analysis of property damage from storms like Hurricane Hugo may well have been on the mark. Rather than pay more than $1 million to the victorious property owner, the state permitted him to develop his two beachfront lots.

The paralyzing question posed in San Diego was again at issue in Tahoe-Sierra. Even dissenting Justice William H. Rehnquist agreed that "Lake Tahoe is a national treasure and I do not doubt that [TRPA's] efforts at preventing further degradation of the lake were made in good faith in furtherance of the public interest. But as is the case with most governmental action that furthers the public interest, the Constitution requires that the costs and burdens be borne by the public at large, not by a...