News Service July 3, 2001

Landowners Gain New Protections in High Court's Ruling

By Eric Pianin
Washington Post Staff Writer
Friday, June 29, 2001; Page A18

The Supreme Court yesterday granted new protections to landowners who
maintain that environmental regulations diminish the value of their
property, ruling that government can be required to compensate them for
interfering with their ability to develop the land.

The ruling concerned cases in which property owners buy land knowing that it
is subject to environmental or zoning limits -- such as restrictions on
developing wetlands or fragile beaches. In a splintered decision that
involved shifting majorities on different aspects of the case, five justices
said even when such limits are already in place, they can amount to a
"taking" from the new owner and require compensation by the government.

Writing the majority opinion, Justice Anthony M. Kennedy said the government
may not be relieved "of its obligation to defend any action restricting land
use, no matter how extreme or unreasonable."

The ruling was not a clear-cut victory for property owners, because the
court concluded that the Rhode Island property owner who had brought the
case had not succeeded in demonstrating he had been deprived of all economic
use of his waterfront property.

But property rights groups hailed the decision as a breakthrough in their
efforts to curtail government encroachment on environmentally sensitive
privately held land. Some environmental groups and legal experts warned that
the ruling could embolden developers to flood the courts with litigation
challenging environmental and zoning rules and seeking millions of dollars
in compensation.

"This increases opportunities for developers and other land owners to sue
state and local governments over land use and environmental regulations, and
it will inevitably impose a further chill on environmental protection
efforts at all levels of government," said John Echeverria, director of the
environmental policy project at the Georgetown University Law Center.

Gary Garczynski, first vice president of the National Association of Home
Builders and a builder-developer in Northern Virginia, said the ruling
reaffirms the constitutional rights of property owners.

"I think the court made it clear that government has an obligation to treat
property owners fairly and pay for land when there's a taking, and
regulations pile up and spin out out of control," he said.

The decision is part of a line of cases in which property rights advocates
have pressed the high court to adopt a broad view of the Constitution's
"takings" clause, which requires that government pay "just compensation" to
property owners for any "taking" of their land.

Property rights advocates have argued, for the most part unsuccessfully,
that restrictions on land use can amount to such takings and therefore
require payments -- a result that would make it difficult for state and
local governments to enact such limits. Pacific Legal Foundation lawyers
intervened in the case to challenge the notion -- widely adopted in lower
court decisions -- that property owners cannot win regulatory takings claims
if they bought their land after regulations became effective.

The case was brought by Anthony Palazzolo, the owner of 18 acres of
undeveloped salt marshes in the town of Westerly, nestled on the edge of the
Rhode Island coastline. The property helps prevent the flooding of Winnapaug
Pond, a quarter mile inland from the Atlantic Ocean.

The marshes also serve as a refuge and spawning ground for shellfish, fish
and birds. In 1965, the state enacted legislation permitting a state agency
to restrict the development of coastal wetlands such as Palazzolo's and then
created a Coastal Resources Management Council in 1971. Palazzolo became
sole shareholder in the property in 1978.

Palazzolo had tried to fill in the wetlands at various times over several
decades, proposing to build either a 74-house subdivision or a recreational
beach facility. After the state repeatedly rejected his applications,
Palazzolo sued, alleging that the state's actions were an unconstitutional
"taking" of his property that deprived him of all economically beneficial
uses.

A state trial court ruled against Palazzolo October 1997 and the Rhode
Island Supreme Court unanimously upheld the the decision on Feb. 25, 2000,
finding that Palazzolo's claim was not "ripe for review." The Rhode Island
court said that he had not demonstrated he had been deprived of all
beneficial use of his property, and that he had no reasonable expectations
he could develop a subdivision on this property.

Yesterday, the high court offered a splintered ruling in which shifting
majorities ruled that the case, indeed, was ripe for review. But it
concurred with the lower court that Palazzolo had failed to demonstrate
fully that he had been deprived of all economic use of the land -- and
remanded the case to resolve that issue.

But on the critical question of whether Palazzolo had the right to challenge
environmental regulations predating 1978, when he assumed full ownership of
the property, the court ruled that states should not be free to "shape and
define property rights and reasonable investment-backed expections" while
denying subsequent owners the right to claim injury from lost value.

Kennedy was joined by five other justices in whole or in part -- Chief
Justice William H. Rehnquist, Sandra Day O'Connor, Antonin Scalia, Clarence
Thomas and John Paul Stevens. Three justices -- Ruth Bader Ginsberg, David
H. Souter and Stephen G. Breyer -- dissented, with Ginsberg writing that
Palazzolo had not demonstrated his case was "ripe" for appeal.