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Tuesday, June 27, 2017

Murr v Wisconsin: A Restatement and Complication of the Whole Parcel Rule

As promised, we've put together a more in depth analysis of the U.S. Supreme Court's opinion in Murr v. Wisconsin (the takings case).

No one has ever accused the Supreme Court of making Fifth Amendment regulatory takings law easy to understand. Following this robust tradition, Justice Kennedy penned the latest installment in a head scratching regulatory takings analysis with his majority opinion in Murr.

Murr starts with the purchase of two adjoining properties, Parcel E and Parcel F, in the early 1960s, later conveyed in the mid 1990s. Both parcels sit in the Lower St. Croix River watershed and are both subject to federal and state development regulations that make each lot undevelopable, but through operation of state law, the parcels are merged to make one larger development parcel. Merger rules like this are common and well established across the United States, and this becomes an important factor in Justice Kennedy’s analysis. However, what should have been a fairly straight line from past Supreme Court regulatory takings analysis derived from Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992) and Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978), becomes a whole new elaboration and analytical framework on Penn Central’s “whole parcel rule”, a point raised in Chief Justice Roberts’ dissent.

Regardless, Murr is still a victory for local governments and balances the inherent tension in the Supreme Court’s regulatory takings analysis between private property rights and government’s ability to promote orderly growth and development; it just does so in a convoluted way. Justice Kennedy’s decision establishes a new analytical framework to determine what is the “denominator” in understanding the property affected by a regulation. Recall, the Supreme Court addressed this issue in Penn Central. The railroad company wanted to build an office tower over Grand Central Station. New York City’s historic preservation requirements prohibited the construction of the tower. Penn Central tried to assert that the City’s regulation resulted in a taking of its air rights above the station. The Court declined to adopt the railroad’s "unbundling" of property rights, explaining that any takings analysis must look at the parcel as a whole. Lucas’ total taking was derived from this formulation, where the challenged regulation leaves no economic value in the property. However, if any part of the property still retains economic value, a taking claim can be defeated.

In the wake of Murr, to understand “What is the proper unit of property against which to assess the effect of the challenged governmental action?” three interrelated factors must be considered:

  1. How is the land defined under state law and what are the reasonable restrictions that affect that development and dispensation of the land?
  2. What are the physical characteristics of the land and the surrounding human and ecological environment?
  3. What is the value of the property under the challenged regulations, particularly with regard to whether the regulated land adds value to the remaining property, such as increased privacy?

Among the questions raised by Murr are whether these factors are in addition to Penn Central’s multi factor analysis or stand independently, only applicable in merger situations?

There are certainly others, but in the immediate aftermath, it is clear Murr preserves local governments ability to define developable areas on parcels of land and preserves the merger tool as a way to accommodate property owners while ensuring for orderly development patterns.

Post Authored by David Silverman, Ancel Glink


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