Supreme Court Issues Significant Decision Regarding Regulatory 'Takings'

Co-Written By Mr Lawrence R. Liebesman

In a multi-faceted decision with multiple concurring and dissenting opinions,

the U.S. Supreme Court ruled on June 28, 2001, that the government may be

required to compensate landowners for regulatory "takings" that

interfere with their ability to develop their land. Palazzolo v. Rhode Island,

No. 99-2047 2001 WL 721005. The Court's decision hinged on two key issues: (1)

whether the property owner's claim was "ripe" for review, and (2)

whether the property owner's acquisition of title after the date of enactment

of the restrictive environmental regulations had deprived him of the ability to

file a "takings" claim. The Court ruled in the property owner's

favor on these two issues. Nevertheless, it remanded the case to the Rhode

Island courts because the property owner had not yet established whether it

could develop the "uplands" portion of his property (and therefore

whether it had been denied all "economically beneficial use" of its

property).

History of the Case

The case was brought by Mr. Palazzolo, the owner of 18 acres of coastal

wetlands on the Rhode Island coast. Mr. Palazzolo had invested in a corporation

that had bought the land in 1959. When the corporation failed to pay its income

taxes, title to the property passed, by virtue of state law, to Mr. Palazzolo,

the sole shareholder. This passage of title occurred after the Rhode

Island Coastal Resources Management Council (the Council) had been

created and had adopted regulations declaring salt marshes to be protected

coastal wetlands.

The corporation that originally held title, and later Mr. Palazzolo, spent

the better part of four decades wrangling with the town to obtain permission to

develop the land. Initially, they submitted plans to subdivide the land into 74

lots, and later they submitted plans to build a private beach club on the

property. In connection with these plans, Mr. Palazzolo filed various

applications with the state to obtain permission to fill in the wetlands, but

these applications were all ultimately denied.

After repeated denials of his plans, Mr. Palazzolo filed an inverse

condemnation action in the Rhode Island state court, alleging that the state's

wetlands regulations had deprived him of "all economically beneficial

use" of his property, without compensation, in violation of the Fifth and

Fourteenth Amendments. The lower courts denied Mr. Palazzolo's takings claims,

determining that his claims were not "ripe" for...