SCOTUS – “Merger” of Lots not a “taking” – Murr v. Wisconsin

The Supreme Court of the United States today issued its decision in MURR ET AL. v. WISCONSIN ET AL. CERTIORARI TO THE COURT OF APPEALS OF WISCONSIN No. 15–214. (Argued March 20, 2017—Decided June 23, 2017).  Long awaited by municipalities throughout the country, the issues in the case afforded SCOTUS with an opportunity to revisit takings jurisprudence. The Court affirmed the “parcel as a whole” approach to a takings challenge in the context of zoning provisions triggering a “merger” of lots, and whether the application of merger provisions results in a compensable taking.

The Court concluded that the State Court of Appeals was correct to analyze petitioners’ property as a single unit in assessing the effect of the challenged governmental action:

“Considering petitioners’ property as a whole, the state court was correct to conclude that petitioners cannot establish a compensable taking.  They have not suffered a taking under Lucas, as they have not been deprived of all economically beneficial use of their property. See 505 U. S., at 1019.  Nor have they suffered a taking under the more general test of Penn Central, supra, at 124.  Pp. 17–20. 2015 WI App 13, 359 Wis. 2d 675, 859 N. W. 2d 628, affirmed.

KENNEDY, J., delivered the opinion of the Court, in which GINSBURG, BREYER, SOTOMAYOR, and KAGAN, JJ., joined.  ROBERTS, C. J., filed a dissenting opinion, in which THOMAS and ALITO, JJ., joined.  THOMAS, J., filed a dissenting opinion.  GORSUCH, J., took no part in the consideration or decision of the case.”

IMLA (International Municipal Lawyers Association) filed a brief in the case which was cited by the Court.   IMLA Executive Director Chuck Thompson writes:

I’m happy to report that the court cited to our brief (filed with SLLC and others) listing the fact that many communities have laws regulating in this area.

“Petitioners’ insistence that lot lines define the relevant parcel ignores the well-settled reliance on the merger provision as a common means of balancing the legitimate goals of regulation with the reasonable expectations of landowners. Petitioners’ rule would frustrate municipalities’ ability to implement minimum lot size regulations by casting doubt on the many merger provisions that exist nationwide today.  See Brief for National Association of Counties et al. as Amici Curiae 12–31 (listing over 100 examples of merger provisions).”

As most of you know, we asked for help identifying these types of laws and you delivered. This is the type of result that validates everything you do to help in the Amicus effort.  Lisa Soronen led this great effort for the State and Local Legal Center and our interests were well represented in our brief by Professor Banner who wrote a terrific amicus brief.”  –  Charles W. Thompson, Jr.,Executive Director and General Counsel, International Municipal Lawyers Association, Inc.

IMLA Associate General Counsel Amanda Kellar, summarized the decision as follows:

On Friday, in a victory for local governments, the Supreme Court issued its decision in Murr v. Wisconsin an important regulatory takings case in which the SLLC brief which IMLA joined was cited twice by the majority.  This case presents the question of what the proper unit of property is by which to assess a governmental action in the regulatory takings context.
 
In this case, the appellants’ parents held title to two contiguous non-conforming lots (E and F) in two distinct titles; i.e., one in their names and one in their company’s name. Taken together, lots E & F include a buildable area of only 0.98 acres. The lots are located along the lower St. Croix River and lot F contained a cabin and lot E was undeveloped.  In 1995, the appellants took title to both lots.
 
A Wisconsin statute and St. Croix County ordinance dating from around 1970, contains a merger provision and prohibits the individual development or sale of adjacent non-conforming lots under common ownership that are each less than one acre total. But the ordinance treats adjacent lots of less than an acre as a single, buildable lot if they are separately owned. Once they took the lots under common ownership, the Murrs sought and were denied a variance to separately use or sell lots E and F.  Thus, they could use the lots only as one single buildable lot.
 
The Murrs brought suit, claiming that the ordinance resulted in an unconstitutional regulatory taking because, they argue, lot E serves no purpose or use and has no value because it cannot be sold.  The Wisconsin Court of Appeals held that the local ordinance had effectively merged lots E and F and that there was no taking in the case.
 
Justice Kennedy writing for a 5-3 majority, ultimately agreed with the lower court, but articulated a new standard that courts should utilize in order to determine what the property is at issue in the regulatory takings context.  The Court emphasized that a “central dynamic of the Court’s regulatory taking jurisprudence…it its flexibility” and the need to “reconcile two competing objectives.”  Specifically, “the individual’s right to retain the interests and exercise the freedoms at the core of property ownership” with “the government’s well established power to ‘adjust rights for the public good.’”
 
As the Court put it, the question they sought to answer was “[b]ecause our test for regulatory taking requires us to compare the value that has been taken from the property with the value that remains in the property, one of the critical questions is determining how to define the unit of property ‘whose value is to furnish the denominator of the fraction.’” To answer this question, the Court instructed that three factors must be considered: (1) the treatment of the land under state and local law; (2) the physical characteristics of the land; and (3) the prospective value of the regulated land.
 
The Court concluded that in this case, these three factors all weighed in favor of finding that lots E and F had been validly merged and should be considered as a single piece of property for the purposes of the takings analysis.  In citing to the SLLC brief, the Court noted that the merger provision at issue in this case is “a legitimate exercise of government power, as reflected by its consistency with a long history of state and local merger regulations that originated nearly a century ago.” The second factor also weighed in favor of treating the lots as merged, particularly because they were located along the river, which is an area that the petitioners could have anticipated would be regulated.  And the third factor also supported the conclusion that the lots should be treated as a unified parcel because the value of the combined lots was $698,300 as opposed to the value of each single lot at only $373,000 for lot F and $40,000 for lot E.
 
In rejecting the petitioner’s argument for a bright-line approach that lot lines should control the inquiry, the Court again cited to the SLLC  brief, which listed 100 examples of merger provisions from around the country, noting that the petitioner’s rule “would frustrate municipalities’ ability to implement minimum lot size regulations by casting doubt on the many merger provisions that exist nationwide today.”
 
The Court recognized that the question in this case could not be resolved by any “simple test,” but instead instructed courts to “define the parcel in a manner that reflects reasonable expectations about the property with the central purpose of the Takings Clause: to ‘bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.’”
 
Chief Justice Roberts, with whom Justices Alito and Thomas joined, criticized the majority’s test as allowing the government’s regulatory interests to come into play twice in the takings analysis: “first when identifying the relevant parcel, and again when determining whether the regulation has placed too great a burden on that property.”  This the Chief argued results in “clear double counting to tip the scales in favor of the government…”
 
This case is a great win for local governments and  preserves a municipality’s authority to place reasonable limits on the use of property without requiring the payment of compensation for every incidental infringement of property rights.  We are grateful to our excellent pro bono author in this case, Stuart Banner and for all of your efforts in support of the amicus brief.