Epstein, Holmes, and Regulatory Takings Jurisprudence
Epstein, Holmes, and Regulatory Takings Jurisprudence
Abstract and Keywords
Chapter 4 investigates the issue of “regulatory takings” through an investigation of Oliver Wendell Holmes’ foundational case, Pennsylvania Coal Co. v. Mahon, Antonin Scalia’s Lucas v. South Carolina Coastal Council and the takings theory of Richard Epstein. Epstein’s theory, a key theory for the modern resurrection of takings jurisprudence, is outlined and utilized as an example of formalist and deductivist legal reasoning. Epstein emphasizes the importance of bright-line rules and critiques Holmes’ Mahon “matter of degree” style of reasoning as incoherent and theoretically weak. As opposed to this, the argument offered in the chapter critiques Epstein’s assumptions, showing them to be empirically and formally weak. Indeed, his argument is only as strong as every link in his argument, and many of the links are controversial and easy to dispute. In contrast, the basic reasoning shown in Holmes’ opinion exemplifies a stronger braided style of argument as Peirce advocated for.
Keywords: Holmes, Scalia, Epstein, takings, Mahon, Lucas, formalist
The information-rich jurisprudence of democratic experimentalism and Richard Posner has an important precedent in the legal thought of Oliver Wendell Holmes, Jr. And this means that American jurisprudence has within its tradition a powerful strand of support for a more empirical, experimental, and democratic conception of constitutional law. With Justice Brandeis, Holmes helped forge a strong and broad tradition of free-speech protection that is taken for granted by all Americans. His dissent in Lochner (to be analyzed later) is often pointed to as a central constitutional moment, possibly the greatest dissent of all time.1 Finally, there is at least one area of contemporary constitutional jurisprudence where a Holmes-written opinion is central and yet it is legitimate question as to whether this fact is something to celebrate or to condemn. The area is that of “regulatory takings.” The case is Pennsylvania Coal Co. v. Mahon. The Court in Mahon found that a land use regulation went “too far” and therefore constituted a taking of property that required “just compensation.” Holmes and an almost unanimous Court—save for a lone dissent penned by Brandeis—found a state land-use regulation passed under the aegis of Pennsylvania’s police powers as going so far that it, in effect, created a “regulatory taking,” analogous enough to the traditional takings criteria of expulsion or occupation to require compensation.
Holmes’s holding in the case has been used ever since by the Court to explain why takings can be found beyond traditional exclusion or seizure of property by the government. Holmes’s reasoning has also been strongly criticized by Richard Epstein, a leader in contemporary conservative foundationalist constitutional theory and the “takings revival” in (p.78) Supreme Court jurisprudence.2 The contrast between Holmes’s and Epstein’s reasoning starkly highlights the difference between a formal deductivist “links in a chain” understanding of jurisprudence and one that finds this methodology too limited, distorting, and rather emphasizing empirical analysis and, most central to this chapter, the braiding of reasons à la Peirce, Dewey, and the jurisprudence of democratic experimentalism.
In addition to the theoretic import, the contrast in reasoning method is also important because Mahon “has become a virtual surrogate for the original understanding of the Takings Clause,”3 and is considered “both the most important and most mysterious writing in takings law.”4 In relation to this, Mark Tushnet observes that “the modern Supreme Court has decided more cases involving takings and land use regulations than any other category of economic regulation.”5
So, Holmes’s opinion is a central one in American constitutional law and grounds the Court’s most active area of economic decision making. And yet, surprisingly, it is also considered poorly or incompletely reasoned by some of the legal theorists and justices most influenced by it such as Epstein and Scalia. Furthermore, as Frederic R. Kellogg notes, Mahon shows that despite standard contemporary readings, Holmes was not against all use of the Fourteenth Amendment to overrule state legislation.6 Therefore it is an important decision to face in order to understand Holmes’s own jurisprudence. Somewhat ironically, then, Holmes is notable for writing the most famous dissent in Supreme Court history, a dissent noted for its strong advocacy of judicial deference to legislation and rejection of the Supreme Court’s striking down of democratically passed economic regulation in Lochner, as well as Mahon, the foundational case in the contemporary area most active in striking down regulations and legislation affecting economic issues.
But, once again, for all the citation of Mahon as the founding legal precedent for the Court’s great takings revival the academy’s great prophet of the movement, and the broader contemporary movement in “conservative foundationalist constitutional theory,” Richard Epstein thinks that the influence of Holmes and the reasoning in Mahon has ultimately led the law of regulatory takings “into intellectual incoherence” because “Holmes’s ‘too far’ question turns a bright-line question into a matter of degree for no good reason.”7
This chapter will first outline Mahon and some of the most important regulatory takings cases following from it. Then it will turn to Epstein’s critique and, after outlining it, compare the demands of his theory with (p.79) that of Holmes’s. The ultimate conclusion will be that Epstein’s theory is, indeed, a conceptually coherent system, but one that must dogmatically ignore any disagreement with a significant number of controversial assumptions it rests upon to be accepted. Indeed, Epstein offers a striking example of legal analysis utilizing the methods of tenacity, authority, and a priori reasoning as outlined by Peirce. Furthermore, from the pragmatic perspective Epstein’s reasoning, rather than principled, is better seen as a “flight from the complexity of the world.”8
In contrast, for all the difficulties it presents, Holmes’s reasoning in Mahon properly resists reduction to such simplistic formulas and exemplifies a democratically inclined and multi-fibred method of analysis that allows room for experimentalist methodology. Therefore, Holmes’s opinion and his jurisprudence offer an influential precedent that points toward the possibility of a jurisprudence of democratic experimentalism and law as a democratic means. The aim will be to show that Holmes’s fact-based and democratically minded jurisprudence offers a coherent and more judicially constrained method of constitutional decision making than Epstein’s dogmatic, aggressively formalist and democratically dismissive stance.
The facts in Mahon were not in dispute.9 After being given notice of Pennsylvania Coal’s plans to mine coal under his residence in a manner that could cause surface subsidence, Mahon sued to prevent the company from acting on this intent. The deed executed in 1878, and that still governed the property, conveyed surface rights to the homeowner but expressly reserved to Pennsylvania Coal the right to mine all coal underneath. The deed also included an express waiver to all damages to the surface caused by mining the coal. This meant under Pennsylvania law that the company had contractually reserved an explicit ownership of a separate support estate.
Mahon argued that passage of Pennsylvania’s Kohler Act in 1921, which forbid, among other things, the mining of coal in a manner that causes subsidence of land where there is a structure used for human habitation, unless the property is owned by the company doing the mining, had eliminated Pennsylvania Coal’s right to mine. The Pennsylvania Court of Common Pleas found the statute unconstitutional. The Supreme Court of the State held the statute a legitimate exercise of the state’s police power. Pennsylvania Coal appealed to the United States Supreme Court. Holmes wrote (p.80) the majority opinion wherein the Court found the Kohler Act’s regulation to be an unconstitutional taking of property without just compensation. Brandeis filed a lone dissent.
Holmes began the opinion with a description of the effect of the Act: “As applied to this case, the statute is admitted to destroy previously existing rights of property and contract. The question is whether the police power can be stretched so far.”10 He then summed up the interpretive framework that would be applied:
Government hardly could go on if, to some extent, values incident to property could not be diminished without paying for every such change in the general law. As long recognized, some values are enjoyed under an implied limitation, and must yield to the police power. But obviously the implied limitation must have its limits, or the contract and due process clauses are gone. One fact for consideration in determining such limits is the extent of the diminution. When it reaches a certain magnitude, in most if not in all cases, there must be an exercise of imminent domain and compensation to sustain the act. So the question depends upon the particular facts. The greatest weight is given to the judgment of the legislature, but it is always open to interested parties to contend that the legislature has gone beyond its constitutional power.11
Holmes found that in this case the public interest was limited because it was litigation over the matter of a single private residence. He saw this as removing the case from the realm of public nuisance. Further, Holmes reasoned that because the act did not apply to land where the surface was owned by the company, this showed to him that the statute’s aim was to help or constrain specific property owners, and not to serve a general public interest. The issue of safety could be handled, he reasoned, through notice (as it had been handled). On the other hand, he noted that “the extent of the taking is great” because it not only completely took what was under Pennsylvania law a full estate in land, it also abolished an explicit contractual agreement. Therefore, as applied to Mahon, the Court found that “we should think it clear that the statute does not disclose a public interest sufficient to warrant so extensive a destruction of the defendant’s constitutionally protected rights.”12
Holmes then proceeded to discuss the general validity of the Act. Other parts of the Act disallowed mining that causes subsidence under public lands including streets and utilities. The Court found, though, that the legal result was the same: “It is our opinion that the act cannot be sustained (p.81) as an exercise of the police power, so far as it affects the mining of coal under streets or cities in places where the right to mine such coal has been reserved,” because “to make it commercially impracticable to mine certain coal has very nearly the same effect for constitutional purposes as appropriating it or destroying it.”13 Holmes then distinguished this from other cases, including a case where a court upheld as valid under police power a legislative requirement to leave a pillar of coal along the edge of adjoining property, with a similar requirement for the company on the other side of the property line. This requirement he found justified because it was for the safety of the mine’s employees and also because it secured “an average reciprocity of advantage” between the parties regulated. He continued:
The rights of the public in a street purchased or laid out by eminent domain are those that it has paid for. If in any case its representatives have been so short sighted as to acquire only surface rights without the right of support, we see no more authority for supplying the latter without compensation than there was for taking the right of way in the first place and refusing to pay for it because the public wanted it very much. The protection of private property in the Fifth Amendment presupposes that it is wanted for public use, but provides that it shall not be taken for such use without compensation. A similar assumption is made in the decisions upon the Fourteenth Amendment.14
Holmes went on to claim that when the “seemingly absolute protection” is noticed in practice to be qualified by the state’s police power, “the natural tendency of human nature is to extend the qualification more and more, until at last private property disappears.”15 According to Holmes the Constitution does not allow this.
From this analysis he derived an underlying rule: “The general rule, at least, is that, while property may be regulated to a certain extent, if regulation goes too far, it will be recognized as a taking.”16 What is, for Holmes, questionable is the citizen’s use of a statute in the face of “misfortunes” or “necessities” to shift the costs “to his neighbor’s shoulders.” What is unquestionable, on the other hand, is that “a strong public desire to improve the public condition is not enough to warrant achieving the desire by a shorter cut that the constitutional way of paying for the change.”17 Holmes noted that this is still a matter of degree, and therefore analysis requires, in order to arrive at a proper decision, not a general proposition but rather a fact-specific inquiry. He then concluded: “But the question at bottom is (p.82) upon whom the loss of the changes desired should fall. So far as private persons or communities have seen fit to take the risk of acquiring only surface right, we cannot see that the fact that their risk has become a danger warrants the giving to them greater rights than they bought.”18
The Mahon majority opinion is terse, commanding and Delphic in quality, as is somewhat to be expected from Holmes. Though lengthier and more detailed, Brandeis’s dissent is easier to summarize. He started by describing the property at issue in a different manner. “Coal in place is land, and the right of the owner to use his land is not absolute. He may not so use it as to create a public nuisance, and uses, once harmless, may, owing to changed conditions, seriously threaten the public welfare. Whenever they do, the legislature has power to prohibit such uses without paying compensation, and the power to prohibit extends alike to the manner, the character, and the purpose of the use.”19 This is because a “restriction imposed to protect the public health, safety or morals from dangers is not a taking” and, according to Brandeis, the Kohler act merely prohibits a noxious use.20 Therefore, the end of the statute is a proper public interest under the police power. Further, the means utilized is constitutionally acceptable as well because to keep the pillars of coal in place is appropriate to prevent subsidence. To support this, he cited multiple other cases that have held that regulatory restrictions under the police power do not necessarily become unconstitutional even if they deprive the owner of the only profitable use of the property.
Brandeis then returned to the issue of the property taken, this time in relationship to Holmes’s reference to “diminution of value.” This, he pointed out, depends how the property being evaluated is framed. If instead of considering the coal that the act requires to be left in place, the pillar, what is compared is the total value left in all of the land owned by the coal company, “the value of the coal kept in place may be negligible.”21 He also questioned whether the Court really did show proper deference to the Pennsylvania legislature or state courts in terms of the safety issues by raising doubts as to whether the Court had enough information to properly overturn the decision of institutions that have greater local knowledge. He then repeated his claim that the accepted law is that if public safety is truly in danger then the property or contract rights cannot win against the state’s police power regulation.
Therefore, Brandeis concluded, the legal question is whether public safety is, indeed, in danger. He turned to an analysis of the Kohler Act and argued that though it covers private houses it also covered public structures, public passageways such as streets, roads, and bridges, as well as railway (p.83) tracks, rights of way, pipes, conduits and wires, all of which were threatened by the mining regulated under the act. He also concluded that there were clear public interests in these related to safety and health that cannot, as the majority opinion mistakenly claimed, be remedied sufficiently through notice. Brandeis ultimately offered that the real principle underlying Holmes’s decision must be that of not finding an “average reciprocity of advantage” between the various parties. He agreed with Holmes that this test might be useful in the case of legislation aimed at giving benefits to adjoining owners or a neighborhood, such as abutting mining areas, but saw the Kohler Act as aiming at a more general harm. Therefore, for Brandeis, “where the police power is exercised not to confer benefits upon property owners but to protect the public from detriment and danger, there is, in my opinion, no room for considering reciprocity of advantage” unless “it be the advantage of living and doing business in a civilized community. That advantage is given by the act to the coal operators.”22
Later Supreme Court Regulatory Takings Jurisprudence
Mahon was more or less absent from Supreme Court jurisprudence for over fifty years. But, in the late 1970s this changed when it was rediscovered as the centerpiece of a “takings revival.” For instance, Penn Central, a case that is perhaps only second in importance to Mahon in regulatory takings, repeatedly cited Holmes’s Mahon opinion as its legal grounding.23
Penn Central involved a challenge to an attempt to use regulations to preserve a historic New York building. A landmarks preservation act was passed with the expressed aims of fostering civic pride in the beauty and accomplishments of the city’s past, enhancing tourist appeal, stimulating business, and generally protecting the educative, pleasure, and welfare benefits the landmarks provide. Though preservation was the central aim, the law expressly focused on ways to ensure the owners a “reasonable return” on their investments and maximum flexibility to use their property for purposes consistent with the preservation goals.
Final designation as landmark resulted in specific restrictions. There was a duty placed upon the owner to keep the exterior of the building in good repair and, second, a commission had to approve in advance any proposal to alter the exterior features. If the owner wanted to alter a landmark designated under the act, three procedures were available. The owner could apply to the Commission for “certificate of no effect,” a “certificate of ‘appropriateness,’” or seek acceptance of the project on grounds of “insufficient (p.84) return” in order to avoid undue economic hardship. If any of these applications were denied the owner could have recourse to judicial review. Designation also had a positive aspect in that it provided “transfer development rights” whereby development rights the owner would have had but for the landmark designation could be used on nearby property.
Penn Central, owners of New York’s Grand Central Terminal, an eight-story structure that was, “one of New York City’s most famous buildings,” and a “magnificent example of the French beaux-arts style,” asked the Commission under the “no effect” and “appropriateness” certificates to allow a fifty-three-to fifty-five-story office building to be built above the terminal. Two plans designed by Marcel Breuer were denied certification. Breuer II was rejected because it directly tore down parts of the terminal’s facade. Breuer I was rejected on non-structural reasons. Penn Central filed suit claiming property had been taken without just compensation.
The Court, through an opinion by Justice Brennan, started by explaining that the Fifth Amendment is at bottom “designed 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.” The opinion continued on to explain that the Court had been unable to develop any set formula for determining when “justice and fairness” would require that injuries caused by public regulations be compensated by the government because determination depends on particular circumstances and an ad hoc factual analysis. Brennan then identified several factors as particularly significant: “The economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations are, of course relevant considerations. So, too, is the character of the governmental action.”24 This statement has become the Penn Central test. As explained, a “taking” may more readily be found when the interference with property can be characterized as a physical invasion by government, than when interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good.”25 The Court continued, “More importantly for the present case, in instances in which a state tribunal reasonably concluded that ‘the health, safety, morals, or general welfare’ would be promoted by prohibiting particular contemplated uses of land, the Court has upheld land use regulations that destroyed or adversely affected recognized real property interests.”26
To Penn Central’s argument that the airspace above terminal is a discrete property interest that had been fully deprived them, the Court responded (p.85) that “‘taking’ jurisprudence does not divide a single parcel into discrete segments and attempt to determine whether rights in a particular segment have been entirely abrogated. In deciding whether a particular governmental action has effected a taking, this Court focuses rather both on the character of the action and on the nature and extent of the interference with rights in the parcel as a whole.”27 Penn Central also argued that because the regulation singled out specific property it represented discriminatory “reverse spot” zoning. The Court disagreed and rather emphasized that the plan was “comprehensive” and included four hundred landmarks and thirty-one districts. The Court then noted that the regulation in question left current use undiminished and allowed a “reasonable return” on property. Further, air rights were made transferrable so there was some mitigation of the regulation’s impact. Given this, the Court concluded that New York City’s Landmark Law had not brought about a taking of Penn Central’s property.
Rehnquist wrote a dissent in Penn Central that started by arguing that “the question in this case is whether the cost associated with the city of New York’s desire to preserve a limited number of ‘landmarks’ within its borders must be borne by all of its taxpayers, or whether it can, instead, be imposed entirely on the owners of the individual properties.”28 He then distinguished the Landmark Act from an acceptable zoning law: “Typical zoning restrictions may, it is true, so limit the prospective uses of a piece of property as to diminish the value of that property in the abstract because it may not be used for forbidden purposes. But any such abstract decrease in value will more than likely be at least partially offset by an increase in value which flows from similar restrictions as to use on neighboring properties.”29
Rehnquist went on, “In the words of Mr. Justice Holmes, speaking for the Court in Pennsylvania Coal Co. v. Mahon, there is ‘an average reciprocity of advantage.’ Where a relatively few individual buildings, all separated from one another, are singled out and treated differently from surrounding buildings, no such reciprocity exists.”30 Here, he observed, the cost to each owner may be significant, without necessarily bringing reciprocal benefits, forcing some to bear public burdens which should “in all fairness and justice” be borne by all. Rehnquist continued; “As Mr. Justice Holmes pointed out in Pennsylvania Coal Co. v. Mahon, ‘the question at bottom’ in an eminent domain case ‘is upon whom the loss of the changes desired should fall.’”31 Here he found the benefits widely distributed but the burdens all too property specific. Finally, Rehnquist turned once again to Mahon with the following concluding section of his dissent:
(p.86) Over 50 years ago, Mr. Justice Holmes, speaking for the Court, warned that the courts were “in danger of forgetting that a strong public desire to improve the public condition is not enough to warrant achieving the desire by a shorter cut than the constitutional way of paying for the change.” The Court’s opinion in this case demonstrates that the danger thus foreseen has not abated. The city of New York is in a precarious financial state, and some may believe that the costs of landmark preservation will be more easily borne by corporations such as Penn Central than the overburdened individual taxpayers of New York. But these concerns do not allow us to ignore past precedents construing the Eminent Domain Clause to the end that the desire to improve the public condition is, indeed, achieved by a shorter cut than the constitutional way of paying for the change.32
Two years after Penn Central, Rehnquist wrote the majority opinion in a case that implicated both the Takings Clause and the First Amendment, Pruneyard Shopping Center v. Robins.33 Pruneyard was a privately owned shopping center open to the public. High school students sought to solicit support for their opposition to a United Nations resolution against Zionism. They set up a card table in a corner of Pruneyard’s central courtyard to distribute pamphlets and ask shoppers to sign petitions. A security guard informed them that they would have to leave because the activity violated Pruneyard regulations. They left and filed a lawsuit to enjoin appellants from denying them access for the purpose of circulating their petitions. The question addressed by the Supreme Court was whether state constitutional provisions protecting free speech and petition rights on the private property of a shopping center open to the public violate the shopping center owner’s rights under the First, Fifth, and Fourteenth Amendments.
The Court started its analysis by noting that “one of the essential sticks in the bundle of property rights is the right to exclude others” but also that not every destruction or injury to property by governmental action is a taking.34 To determine whether a taking occurred “requires an examination of whether the restriction on private property forces some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.” And this entails a set of factors (the Penn Central test) such as, the character of the governmental action and the economic impact, as well as how much interference with reasonable investment-backed expectations there is. Quoting the Mahon principle that when “regulation goes too far, it will be recognized as a taking,” Rehnquist found that the student activities would not unreasonably impair the value or use of Pruneyard’s property and that Pruneyard had failed to (p.87) demonstrate that the right to exclude others was so essential to the use or economic value of their property that the state’s constitutional limitation of it amounted to a taking.
Marshall concurred and cited Munn as precedent for a broad right of the state to define property.35 He claimed that rights of property created by the common law cannot be taken away without due process, but the law may be changed at the will of the legislature because the purpose of statutes is to remedy defects in the common law and to adapt to changing circumstances. He warned that any decision holding otherwise “would represent a return to the era of Lochner.”36
Seven years later, in Keystone, a divided Court analyzed a 1966 Pennsylvania statute with great similarities to the Kohler Act. The Court’s majority opinion, delivered by Stevens, started with the following:
In Pennsylvania Coal Co., v. Mahon, 260 U.S. 393 (1922), the Court reviewed the constitutionality of a Pennsylvania statute that admittedly destroyed “previously existing rights of property and contract.” Writing for the Court, Justice Holmes explained: “Government hardly could go on if, to some extent, values incident to property could not be diminished without paying for every such change in the general law. As long recognized, some values are enjoyed under an implied limitation and must yield to the police power. But obviously the implied limitation must have its limits, or the contract and due process clauses are gone. One fact for consideration in determining such limits is the extent of the diminution. When it reaches a certain magnitude, in most if not in all cases there must be an exercise of eminent domain, and compensation to sustain the act. So the question depends upon the particular facts.” In that case, the “particular facts” led the Court to hold that the Pennsylvania Legislature had gone beyond its constitutional powers when it enacted a statute prohibiting the mining of anthracite coal in a manner that would cause the subsidence of land on which certain structures were located. Now, 65 years later, we address a different set of “particular facts,” involving the Pennsylvania Legislature’s 1966 conclusion that the Commonwealth’s existing mine subsidence legislation had failed to protect the public interest in safety, land conservation, preservation of affected municipalities’ tax bases, and land development in the Commonwealth.37
Invoking the later legislature’s detailed findings of fact, the Court’s opinion held that the situation was different enough to conclude that Mahon did not control and therefore the 1966 Act was not unconstitutional on its face.
(p.88) Briefly put, the 1966 Subsidence Act authorized a state agency to implement and enforce a “comprehensive program to prevent or minimize subsidence and to regulate its consequences.” The act covered mining that causes subsidence damage to public buildings, noncommercial buildings generally used by the public, dwellings used for human habitation and cemeteries. The agency’s formula for necessary support required in the range of 50 percent of the coal beneath structures protected to be left intact. In 1982, petitioners, an association of mine operators, filed action alleging a taking. They alleged that the Act deprived them of the “support estate,” an estate recognized by Pennsylvania law as a valuable “strand” in the bundle of rights defining ownership of property. The petitioners argued that the case was decided by a straightforward application of Mahon.
The majority opinion found that the similarities were less significant than the differences. First, the Court noted that in Mahon the case was that of a conflict between the owners of a single private house balanced against a large loss to the coal company. Second, Stevens read the more general part of Mahon as an “advisory opinion,” and one that was uncharacteristic of Holmes’s normally case-specific jurisprudence. This part of the opinion, he found, forwarded “two propositions.” First, that because the Kohler act served only private interests it was not a proper exercise of the state’s police power. Second, the statute’s effect was to make it “commercially impracticable” to mine “certain coal.”38
Two factors, Stevens explained, have become “integral parts” of the Court’s taking analysis. First, that land use regulation can be a taking if it does not “substantially advance” legitimate state interests. And, second, if it denies an owner economically valuable use of his land. The Court then found that the 1966 act was aimed at a “significant threat to the common welfare” of a level “akin to a public nuisance” and cited Harlan’s opinion in Mugler where he wrote that a “prohibition simply upon the use of property for purposes that are declared, by valid legislation, to be injurious to the health, morals, or safety of the community, cannot, in any just sense, be deemed a taking or appropriation of property.”39 The Court then noted that Holmes later joined the unanimous decision in Miller v. Schoene that did not find a taking in the case of a total destruction of property.40 This, the Court explained, shows that a comparison of values before and after a regulation is relevant but not conclusive. In fact, restraining uses of property that are “tantamount to public nuisances” satisfies the “reciprocity of advantage” reasoning shown in Pennsylvania Coal.41
As to the second commercial value factor, the Court found that the petitioners had not shown that the Act made it impossible for them to earn a (p.89) profit or had interfered with their investment-backed expectations. First, in the situation of a facial challenge, the test is simply whether or not the regulation denied the owner “economically viable use of his land.” In this case that had not been shown. According to the Court’s analysis the Act would require less than 2 percent of the total amount of coal in the mines to stay in place and some of this 2 percent might have been necessary to leave in place regardless of the law. Petitioners argued that it was the specific 2 percent that was taken, or, alternatively, the whole “support estate” that had been appropriated. Here, the Court cited Penn Central statement that the proper focus was on the parcel as a whole and destruction of one “strand” of the full “bundle” of property rights is not necessarily a taking, “because the aggregate must be viewed in its entirety.”42 Furthermore, the Court explained in the case of the separate support estate that “our takings jurisprudence forecloses reliance on such legalistic distinctions within a bundle of property rights” and rather uses a functional test which showed that “the support estate has value only insofar as it protects or enhances the value of the estate with which it is associated. Its value is merely a part of the entire bundle of rights.”43
Rehnquist’s dissent reached a sharply different conclusion. In it, Mahon is both described as central to regulatory takings jurisprudence and as under attack by the majority. As he put it, the case is “the foundation” of the Court’s regulatory takings jurisprudence, a foundation that the majority opinion “attempts to undermine” by treating most of it as advisory.44 He claimed that the differences between the issues in Keystone and those in Mahon were insignificant. First, the same public interests were invoked in both cases, and because of this the same reasoning, in particular Holmes’s statements that the “strong public interest” in preventing subsidence in Kohler was “insufficient” to overcome the takings requirement in the latter case, applied as well. Further, the “nuisance exception” was, according to the dissent, much narrower than the majority read it. This narrow reading was compelled by the policy aim of making sure that the public interests are not disproportionately loaded upon individual property owners. Therefore, nuisance regulations must be “discrete and narrow” and, more importantly, not applicable to cases that “allow complete extinction of the value of a parcel of property.”45 The Court’s refusal to recognize this as a separate segment of property was wrong, because the coal left is “an identifiable and separable property interest.” Rehnquist concluded, “This complete interference with a property right extinguishes its value, and must be accompanied by just compensation.”46
Scalia wrote the Court’s most notorious regulatory takings opinion (to (p.90) date) five years later, wherein it was found that a statewide environmental regulation was a taking under the constitution. In 1986, Lucas bought two beachfront lots in South Carolina for $975,000. In 1988, the South Carolina Legislature passed the Beachfront Management Act and, in effect, at least as found by the trial court, rendered the lots valueless. Lucas did not question the validity of the Act, but just demanded compensation as a taking.
Scalia’s opinion started the discussion of law as follows:
Prior to Justice Holmes’s exposition in Pennsylvania Coal Co. v. Mahon, it was generally thought that the Takings Clause reached only a “direct appropriation” of property, or the functional equivalent of a “practical ouster of [the owner’s] possession.” Justice Holmes recognized in Mahon, however, that if the protection against physical appropriations of private property was to be meaningfully enforced, the government’s power to redefine the range of interests included in the ownership of property was necessarily constrained by constitutional limits. If, instead, the uses of private property were subject to unbridled, uncompensated qualification under the police power, “the natural tendency of human nature [would be] to extend the qualification more and more until at least property disappear[ed].” These considerations gave birth in that case to the oft-cited maxim that, “while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.” Nevertheless, our decision in Mahon offered little insight into when, and under what circumstances, a given regulation would be seen as going “too far” for purposes of the Fifth Amendment.47
He then explained that the standard test is Penn Central’s ad hoc factual inquiry. There were, according to the Court’s take on the law, though, two areas where this inquiry was not needed, where there is physical invasion (at least where permanent), and where all economic or productive value is denied.48 The Court’s opinion then claimed:
Surely, at least, in the extraordinary circumstance when no productive or economically beneficial use of land is permitted, it is less realistic to indulge our usual assumption that the legislature is simply “adjusting the benefits and burdens of economic life,” in a manner that secures an “average reciprocity of advantage” to everyone concerned. And the functional basis for permitting the government, by regulation, to affect property values without compensation—that “Government hardly could go on if to some extent values incident to (p.91) property could not be diminished without paying for every such change in general law,”—does not apply to the relatively rare situations where the government has deprived a landowner of all economically beneficial uses.49
Scalia continued, “On the other side of the balance” is the “fact” that a regulation that leaves land without economic options poses “a heightened risk that private property is being pressed into some form of public service under the guise of mitigating serious public harm.”50 Therefore, Scalia created a bright-line categorical rule that “when the owner of real property has been called upon to sacrifice all economically beneficial uses in the name of the common good, that is, to leave his property economically idle, he has suffered a taking.”51 He allowed that the purpose of government regulation can be broader than harmful or noxious use and just needs to be reasonably related to policy aimed at broad public benefit and general in effects on property. Further, the Court even allowed a narrow exception to the new categorical rule. Even such a total elimination of value will not be a taking if the owner’s estate did not have the use in question in the title to begin with under the “restrictions that background principles of the State’s law of property and nuisance already place upon land ownership.”52
Blackmun’s impassioned dissent started with the following line: “Today the Court launches a missile to kill a mouse.” The Court’s decision, he claimed, “ignores its jurisdictional limits, remakes its traditional rules of review, and creates simultaneously a new categorical rule and an exception (neither of which is rooted in our prior case law, common law, or common sense).” He therefore dissented, he stated, not because he thought he could intercept the missile or save the “targeted mouse,” but rather to “limit the collateral damage.”53
He then proceeded to offer much more information about the case than Scalia did in the majority opinion. Blackmun’s descriptive facts about the property noted that about half of the last forty years the two Lucas plots were part of the beach or flooded twice daily. From 1957 to 1963 they were under water, and from 1963 to 1973 the shoreline was 100 to 150 feet into the land. Finally, from 1981 to 1983 the island they were on had experienced twelve emergency orders.
Further, he argued that the South Carolina Supreme Court had accepted two premises that were accepted by the U.S. Supreme Court until Lucas. First, each state “has the power to prevent any use of property it finds to be harmful to its citizens.” And, second, that “a state statute is (p.92) entitled to a presumption of constitutionality.”54 Here the legislature’s findings were not challenged by petitioner yet the Court allocated to the state the burden of showing the regulation was not a taking. He went on: “The Court offers no justification for its sudden hostility toward state legislators, and I doubt that it could.”55 Then he questioned why the creation of a new categorical rule, especially when previous cases all reject the claim that even total diminution of value by itself is enough to decide: “Instead, the cases depended on whether the government interest was sufficient to prohibit the activity, given the significant private cost.”56
Blackmun also pointed out, as Brandeis had in Mahon, that determining the “threshold” requirement—loss of all economic value—will depend on how the property is defined, but noted that there is no “objective” way to define this. Finally, he questioned the use of state’s common law of nuisance, “If judges in the 18th and 19th centuries can distinguish a harm from a benefit, why not judges in the 20th century, and if judges can, why not legislatures?”57
Stevens also vigorously dissented. He started by stating:
As the Court recognizes, Pennsylvania Coal Co. v. Mahon, provides no support for its—or, indeed, any—categorical rule. To the contrary, Justice Holmes recognized that such absolute rules ill fit the inquiry into “regulatory takings.” Thus, in the paragraph that contains his famous observation that a regulation may go “too far” and thereby constitute a taking, the Justice wrote: “As we already have said, this is a question of degree—and therefore cannot be disposed of by general propositions.”58
Stevens saw this as also showing that economic injury or “extent of the diminution” is merely one factor to be weighed. Indeed, there are cases that repeatedly acknowledge that complete destruction of a property’s value might not be a taking because comparison of value before and after is just one relevant factor. Plus, he noted that the categorical rule was arbitrary because all depended on the definition of the property right in question. Indeed, a developer could sell very narrow rights, severing one small strand from the overall bundle, so that any regulation at all could be a “total” taking. Further, and very significantly, he claimed that the narrowness and inflexibility of the “nuisance exception” brought back the discredited heightened legal scrutiny of legislation characteristic of Lochner.59 Finally, he thought that the Court’s opinion set up a rule that ignores the important factor of the character of the regulatory action. One aspect (p.93) of the character of legislation traditionally emphasized is its general and broad applicability. Stevens noted that the Beachfront Management Act is very general in that it covered the entire state. Therefore, he concluded, “in view of all of these factors, even assuming that petitioner’s property was rendered valueless, the risk inherent in investments of the sort made by petitioner, the generality of the Act, and the compelling purpose motivating the South Carolina Legislature persuade me that the Act did not effect a taking of petitioner’s property.”60
Epstein on Takings
To understand the resistant undercurrent to Mahon’s “matter of degree” and “too far” analysis of takings in Lucas, itself purportedly founded upon Holmes’s opinion, it is useful to turn to Epstein’s highly influential and much more categorical and deductive conception of takings. Before this, though, it is informative to briefly turn to his analysis of Mahon.
Epstein claims that Holmes’s Mahon opinion “lurches unhappily between brilliant insight and utter nonsense,” and this “because his instincts are not disciplined by any overriding theoretical approach.”61 He sees Holmes’s real problem as that of lacking a coherent philosophy and, because of that, not having enough of a commitment to constitutional structure. Indeed, “at every critical juncture, Holmes shrugged off hard choices with the observation that ‘every hard question is a matter of degree,’ thus treating an intellectual evasion as a judicial insight.”62
According to Epstein some of Holmes’s flaws due to lack of proper theory include the following: failure to see that one can only apply the “average reciprocity of advantage” principle to general laws; a centering of the law of takings upon a vague “too far” diminution of value test instead of on all of the value taken; the neglect to specify what particular property right is being evaluated for loss; the tendency toward balancing without explaining how to balance or even what exactly is being balanced; and the inclination to let decision making rest upon mistaken judicial deference following from an ungrounded skepticism.
In effect, Epstein demands of Holmes’s theory a fully formed legal test for takings with an acknowledged theory of government that gives a central place to the Takings Clause. Further, the test should rely upon determinant conceptual clarity and the use of clear “bright-line” rules. It should be highly protective of property and highly suspicious of legislative (p.94) intervention in the market. Therefore, though Holmes, according to Epstein, rightly found the Kohler act to be a taking, his analysis was too under-theorized, undisciplined and unprincipled. Ultimately, Holmes’s Supreme Court takings jurisprudence with his deferential and “matters of degree” stance is seen as incoherent because, in Epstein’s words, “it takes judicial energy and moral conviction to intervene, and Holmes has neither.”63
Epstein’s own takings theory is, admittedly, much more conceptually determinate than Holmes’s. And, indeed, it rests upon an internally coherent and quite detailed theoretical foundation. Most important, to both fully understand his critique of Mahon and the foundation of his own takings jurisprudence is to understand what he takes to be the only proper aim of government. This he makes clear in the following statement:
The entire program of state regulation becomes utterly incoherent in the absence of its proper end: unrestrained competition. Should regulators have any doubts about the primacy of competition, the entire system will necessarily fall of its own weight. There will be no prior established norm against which particular institutional arrangements can be checked; the choice of institutional arrangements and objectives thus becomes a pure political play.64
Proper market competition is the underlying value, and no other values are proper as ends of regulation.
From this foundation he argues through an appeal to the Coase theorem that a society founded upon markets with low transaction costs creates positive externalities wherein any negative externalities are offset by the overall gains. Basically, that is, if markets are functioning properly everybody is better off (or those that are not better off could be more than compensated from the gains to others).
Under Epstein’s theory not only is the aim of government clear, but its basic means are settled as well. Because for him the substantive correctness of his ideas of liberty, social welfare, etc., are beyond doubt and “admit of permanent solutions,” he claims that there is no need to waste time debating them.65 Therefore, “we do not leave these issues for the legislature to sort out because we know that its interests, or those of its many members, often deviate from what a robust system requires.”66
More specifically, in the regulation of private property Epstein demands a solution that takes it fully out of the political realm and avoids “needless debate” as well. Government is just created in order to protect the (p.95) previously existing rights of individual liberty and property. It is not that property rules descended from heaven fully formed. Rather, Epstein claims that though “the creation of private property that binds all individuals is necessarily social at its core,” it cannot continue to be socially “redetermined” after the initial creation because requiring group consent beyond the initial creation would entail prohibitive transaction costs. Therefore, any legislative changing of previously vested property rights, indeed all governmental action of any type, “should be examined under a presumption of error.”67
The “correct” understanding of the Takings Clause starts with a “proper respect for the primacy of private property and liberty of action,” which necessarily limits government regulation to only two specific areas; acts of aggression and monopoly power.68 Aggression is wholly made up of various types of wrongful force and fraud. Regulation of these harms is just a prospective version of the remedial common law of tort and criminal sanctions. The problem here, according to Epstein, is that once government is allowed to prevent even such a narrow group of harms there will inevitably be legislative overreaching.
To ensure that legislative and administrative branches “behave well” they must be subjected to external control. Courts, therefore, are necessary watchdogs and should use “intermediate scrutiny” to ensure that proper limits are maintained. The process is simple: if the aims of legislation are within an area of aggression, a proper police power end, then the presumption is in favor of the regulation. And if the regulation is legitimate, then no compensation is required. This presumption or legitimacy can be overcome, though, through a showing that the regulation is selectively applied, has “disparate impact,” or was passed for some “invidious motive.” If the aim is regulation of monopoly, then various remedies and regulations can be applied. For collusion, for example, an injunction may be sufficient. For cases of natural monopoly regulation analogous to that of rate-setting of common carriers is allowed.
Epstein claims that this “correct” understanding of the takings test is central, indeed truly foundational, quite simple to outline, and mostly easy to apply. Epstein further simplifies the matter by claiming that the test applies equally to both state and federal government because, in his opinion, this is consistent with the U.S. government’s “basic Lockean design.”69 The test in outline form goes as follows: first, is there a taking of private property? If not, then the inquiry stops. If so, is there any justification for taking the private property in question? If there is, within narrow boundaries, (p.96) then it is allowed without compensation. If it does not fit the allowed justifications, then is the taking for public use? If not, then it is disallowed. If there is a legitimate public use, then there must be proper compensation.
First, it must be established whether or not property is taken. Epstein offers a truly clear and bright-line rule to this problem. For him, private property is simply “the sum of the goods that the individual gets to keep outside of the control of the state.”70 Any and all property is covered under the Takings Clause. Epstein puts it this way: “The takings clause says, ‘Nor shall private property be taken for public use, without just compensation,’ it means, ‘nor shall private property, in whole or in part, be taken for public use, without just compensation.’”71 For Epstein, therefore, strictly speaking, there is no such thing as a partial or regulatory taking. Every stick in the bundle is a full property right, therefore every stick of the bundle is individually protected. For instance, takings would cover business goodwill, defamation by a state official, any tax or zoning law as well as contract rights. Therefore, Epstein concludes, what constitutes a taking “is a question that admits to a rigid logical answer,” because “all regulations, all taxes, and all modifications of liability rules are takings of private property prima facie compensable by the state.”72
Once private property is taken, the next step is to see if it is justified under the police power. The police powers of the state are there only to protect against private violations of pre-political natural rights boundaries. Just because the state needs resources for this necessary role of protection, it must be allowed to coerce its citizens. But to keep the government from going beyond this function it must be strictly limited.
First, he outlines the acceptable ends. As stated above, Epstein analogizes the police power area to that of self-defense in private law, a situation where harm is caused by the wrongful conduct of the other: “Where the harm threatens a large portion of the population, the state has the sum of their individual rights. The police power as a ground for legitimate public intervention is, then, exactly the same as when a private party acts on its own behalf.”73 In such acts of aggression, “the wrong of the citizen justifies conduct otherwise wrongful by the state as representative of and in defense of its other citizens.”74 Indeed, all the state really is allowed to do is protect the rights that each individual citizen has before entering the political realm. Therefore, the state can only control public nuisances collectively within the same bounds as the individuals could have controlled them on their own. The Court must throw out as unconstitutional any ends outside of this narrowly justified area.
(p.97) Second, the Court also must analyze the means. This, according to Epstein, requires an “intermediate standard of review” such as exemplified in Lochner instead of the modern practice of using the weak “rational relation” test.75 Generally, “the court should defer where it believes that a legislative decision is likely to be more accurate than its own, or more precisely, where it believes that the additional costs of its own extended supervision … is not justified by an incremental improvement in fitting means to ends.”76 If both the means and ends are deemed legitimate by the court, then the regulation is allowed without compensation.
If it does not fit the narrow nuisance justification for police powers, then the question is whether or not the taking is for public use. If not, then it is disallowed. Once again, Epstein’s take on what is legitimate public use is also very limited. For him public use most centrally includes “public goods”—that is, goods where exclusivity is unavailable and marginal costs for further units of the good are very low (his example is national defense). But limiting public use to public goods is too narrow even for Epstein. So, it also must include projects akin to that of roads, for example. These he analogizes to “common carriers” in private law. Here, general public access is sufficient to allow the regulation as long as just compensation is provided. Outside of these two areas there is a strong presumption against the aim. Most importantly, indirect public benefit is not enough.
Finally, if it is a genuine public good being aimed at then there must be compensation. First, explicit monetary compensation, when required, must be higher than market value. This is because market value does not take into consideration use values, or even such obvious factors such as relocation costs. But with general legislation there will often be implicit in-kind compensation. To evaluate this some of the “matters of degree” analysis creeps into Epstein’s analysis. Ultimately, implicit in-kind compensation analysis uses factors such as “direct measurement of the consequences of regulation, theoretical predictions of economic loss, disproportionate impact tests, and examination of local motive.”77
Epstein v. Holmes
Epstein’s takings theory certainly seems internally coherent and is based upon a fully worked out theoretical foundation. And whether or not Holmes has “moral conviction” there is no doubt that Epstein does. Indeed, Epstein has remarkably few doubts at all. He determines the one (p.98) and only proper aim of government and the uniquely optimal and specific means to bring about that end. In the realm of takings, a realm only slightly narrower than all of government activity for Epstein, the definition of property is found housed in common law. Using the common law as a foundation he then uses it to define property expansively and settle the rules once and for all. He gives a determinant and expansive reading of the Takings Clause, explaining that it means all parts of the property bundle individually and collectively, and then offers bright-line rules for legal application. He eliminates any recourse to the extent of the diminution of value because in his system any loss of value is enough to trigger the clause. Even in the case of remedial measures for nuisances that happen through factors such as changing conditions, Epstein defines the legislative powers in an exceedingly narrow fashion. And he gives the Court the last word on the whole system as the keeper of proper rights under rigorous judicial oversight. Overall, legislative acts are to be judged by the Court under a general suspicion of endemic overreaching. If a legislative act overcomes this suspicion by fitting into one of the police power or public use exceptions then it is presumptively good, though challengeable under an intermediate standard of review. He even gives us a proper precedent for this type of analysis, Justice Peckham’s majority opinion in Lochner. Finally, Epstein explains the intricacies of what just compensation means.
Epstein appears to believe the single-mindedness, internal coherence, formalist reasoning and precise line-drawing that characterizes his system are all legal virtues, and that the isolated plausibility of each individual piece makes the overall system stronger, therefore forming an unimpeachable framework for the Takings Clause.
On the other hand, coherence and precise line drawing may create a system that is so closely linked formally that it ceases to function at all with the elimination of any one of the links. For example, it seems highly questionable, to say the least, to think that there is any unanimity over the one and only proper end of government. Even if economic prosperity is a major goal of government it is difficult to believe it is the only legitimate goal. The same critique can be used on the identification of only one means—market competition. Even if one accepts that the market is generally superior to other forms of social organization, thinking of it as the only means beyond the narrow exceptions Epstein allows seems extreme. If his whole system of takings necessarily rests upon this type of foundation, it may be that theoretical subsidence is setting in already. It seems an act of theoretical hubris or imperiousness, a blatant use of the (p.99) method of tenacity and authority, to justify top-down rules that define even the judicial discussion of other options off the table. Epstein exemplifies, therefore, a very extreme and aggressive version of the “exclude in order to bind” version of constitutional decision making.
But even assuming that economic prosperity, defined specifically as Epstein defines it, is accepted as the sole proper aim of government, it does not follow necessarily that the common law is the only and best way to bring this about. Epstein references Coase’s theorem a lot for his claims. But Epstein underemphasizes what is a very important message of Coase’s work—that there are always transaction costs and it is an empirical, not solely theoretical question, as to how to optimize social welfare even through markets. Yes, Coase’s theorem can and has been used to critique uncritical government-centered solutions. But, and this is crucial, it can also be used to critique overly optimistic “frictionless” pictures of markets, an error that Epstein seems to find it difficult to avoid.78 Coase explicitly warns of this problem, lamenting that “in modern economic theory the market itself has an even more shadowy role than the firm.” Further, Epstein would be wise to contend with this statement of Coase, “for anything approaching perfect competition to exist, an intricate system of rules and regulations would normally be needed. Economists observing the regulations of the exchanges often assume that they represent an attempt to exercise monopoly power and aim to restrain competition. They ignore or, at any rate, fail to emphasize an alternative explanation for the regulations: that they exist in order to reduce transaction costs and therefore to increase the volume of trade.”79 So, if there is any dispute over proper means as to what will get us to the greatest amount of economic prosperity, once again the coherence of Epstein’s system becomes less of a virtue in that it treats an empirical question as a matter of theoretic definition. Epstein may already have achieved certainty, but his certainty in both the realms of means and of ends is not universally shared. More worrisome, his certainty allows him to enthusiastically propound a constitutional theory that renders any opposing voice without either political or legal recourse.
Imagine in further detail what his Constitution would look like. It is Court-centered, with the legislature’s role being severely limited and disciplined by the Takings Clause placed as the central foundational pillar for government. It takes as its positive precedent the reasoning exemplified in Lochner, one of the most infamous “antiprecedents” in U.S. Supreme Court history. Further, the Takings Clause is applied equally to both the federal government and the states therefore issues of federalism (p.100) are ignored. He claims this is warranted because of the Constitution’s Lockean roots. Of course, to think the Constitution instantiates Locke’s philosophy is plenty questionable. Then there is the reading of the property in question as any and every separate stick of the bundle—an extremely expansive definition of property covered.
Every step of this is questionable. First, as Jeremy Waldron has shown, a Lockean constitution might not be as court-centered or as anti-democratic as Epstein imagines. Locke might even be characterized as a “proto-theorist of deliberative democracy.”80 Furthermore, defining federalism out of the picture ignores the essential state-based location of property law.
Then there is his more general picture of property. First, common law is less helpful to his theory than Epstein thinks it is. He likes to quote Blackstone’s definition of property to show how clear and strong common law was with regards to property rights. But this is dubious support. For instance, in Daniel J. Boorstin’s investigation of Blackstone’s Commentaries he finds the treatment of property as purposefully “obscure,” “circular,” and “mysterious,” so as to keep it out of the gaze of the “vulgar” and “ill-intentioned.” Maybe more telling, it is described as Blackstone’s tool that “forced people to be free.”81
On top of this there is plenty of scholarship, of which Carol M. Rose’s work can serve as an example, where different traditions of property rights are identified and contrasted. Her example is a property tradition of republicanism and “propertarianism” whereby property, in its proper forms and not in excessive amounts, is thought to be useful in fostering civic virtue.82 This tradition conflicts with the one of defining property solely in terms of wealth acquisition. Her claim, interestingly, is that Holmes’s takings test allows for both types of property and so therefore “in takings doctrine, the tradition of property’s civic responsibility is embodied in a test that balances public benefits against private losses from a particular measure.”83
This analysis could help explain the result in Pruneyard that balanced the property rights of the shopping center owners with the free speech rights of the students whereas Epstein’s theory cannot. The ironic limit to this is Epstein’s evasion of the work of theorists like Charles A. Reich, whose classic article, “The New Property,” challenges just about every limit that Epstein would want to put on the concept of property.84 Finally even Scalia’s Lucas opinion acknowledges that the expansive definition of property advocated by Epstein is historically inaccurate as a description of property covered under the Takings Clause (therefore not part of the common law Epstein purportedly is relying upon).
(p.101) Epstein’s system offers the hope for a clear and uncomplicated test for whether or not a taking has occurred. But, if each of the links is a necessary component of the test, doubt as to the validity of any one of the links raises doubts as to the system itself. If the ideal is a formal deduction from the premises, then a missing necessary premise renders the conclusion unsupported. This may be enough to eliminate Epstein’s theory as an option given how extreme some of his premises are.
More appropriately for the argument of this chapter, though, his theory can also be critiqued through a “matters of degree” analysis. That is, instead of accepting the idea that the coherence of his whole system makes each component more plausible or that there is a need to find any one link to be completely wrong, what if the system was evaluated by the plausibility of each part multiplied by all the others? In other words, if Epstein’s theory rests upon ten discrete assumptions, each given the highly charitable 50 percent likely to be correct evaluation, the likelihood of the whole system being “robust” in its justification is the likelihood of .5 * .5 * .5 * .5 * .5 * .5 * .5 * .5 * .5 * .5. This means that as a complete and coherent system Epstein’s takings jurisprudence would have a likelihood of .000976. This is not the type of theory a “bettabilitarian” as Holmes liked to characterize himself as would want to bet on.
That Epstein’s theory seems plausible in the face of this possibility demands explanation. One explanation is that Epstein’s theory falls prey to the same mistake in reasoning as exemplified in the hypothetical “Linda” example offered in Thaler and Sunstein’s Nudge.85 Therein Linda is described as “single, outspoken, and very bright” as well as having participated in antinuclear demonstrations and been a philosophy major interested in discrimination and social justice. When test subjects were asked to rank possibilities for Linda they ranked as more probable that she was a “bank teller active in the feminist movement” rather than just a bank teller. This is a mistake that finds the combination of two events (a * b) more likely that either one individually. Thaler and Sunstein describe this as a “representativeness” bias based upon stereotype. Of course that Epstein has a bias toward a priori definitions and formalistic reasoning might bias him toward overconfidence in both the individual assumptions of his theory as well as the probability of them all being true together.
Holmes’s factor-based decision woven from multiple threads of inquiry starts to look quite intelligent in comparison. First, it acknowledges undisputed fact that property and contract rights were destroyed through legislation. Second, it doesn’t treat this as dispositive because there are cases of nuisance, and other police power cases, that have acknowledged that (p.102) there are wrongful uses of “property” that government should not necessarily protect. And what is wrongful or a nuisance can change because of context.
It is worth noting along these lines that Holmes, the Civil War veteran, had perhaps the greatest “antiprecedent” for trying to solve political issues through Court authority, Dred Scott, in his recent memory. Therein, Taney invalidated the Missouri Compromise and found slaves to be property protected by the Constitution. Indeed, an argument can be made that Dred Scott was the first regulatory takings case.86
It could also arguably be a case that shows why a categorical rule like that offered by Scalia in Lucas is not a very good idea. Holmes might, in light of the events that followed this earlier more “bright-line” application of property law, certainly be allowed a little skepticism toward the wisdom of any belief in the Court being able to settle social controversies through judicial fiat, let alone settling them correctly through a bright-line rule. So, Holmes allows for play in the joints, and settles for the investigation of multiple factors to analyze the case at hand such as diminution of value, the extent of the burden upon the regulated party, the obvious meaning of the constitution’s words, the property rights in question, the fact that they were expressly contracted for and who is feeling the pinch of the regulation as opposed to who is getting the benefit. He does not, though, expect to find easy categorical lines between property and other legal concepts, or to be able to solve this problem though facile definitions. And, of course, he does not try to arrest the evolving path of law at a specific moment in time.
Further, he gives this factor-based analysis some additional predictability by practicing judicial deference to legislative activity given its greater democratic pedigree. Because of this structuring appeal to deference, the balance weights strongly in favor of the validity of government regulation, and the analysis becomes acceptably predictable. As an example of deference there is Tyson, where Holmes wrote, “I think the proper course is to recognize that a state legislature can do whatever it sees fit to do unless it is restrained by some express prohibition in the Constitution of the United States or of the State, and that Courts should be careful not to extend such prohibitions beyond their obvious meaning by reading into them conceptions of public policy that the particular Court may happen to entertain. … The truth seems to me that, subject to compensation when compensation is due, the legislature may forbid or restrict any business when it has a sufficient force of public opinion behind it.”87 Here is strong deference to democracy and legislative activity, but notice the one requirement; that of “compensation when compensation is due.”
(p.103) As Kellogg notes (and Mahon shows), Holmes did not give a free ride to all police power regulation. So, for example, in Missouri Pacific Railway, Holmes held that a Nebraska statute that required the railway to build tracks to privately owned grain elevators was a taking because they were only private connections.88 Therefore Holmes advocated judicial deference, not judicial abdication. And Holmes allowed that there could be broader public purposes than those commonly recited under traditional police power doctrine.89
Holmes’s takings jurisprudence was structured upon a deference to majoritarian decision makers that was, in turn, founded upon the belief that “what prevents the friction between competing conceptions of the way of life should be from overheating and leading to violence is democracy.”90 As Jeremy Waldron would put it, the “circumstances of politics” demand that we show respect for persons through showing a proper “respect for the reality and implications of disagreement.”91 This is surely an intelligent response to the absolutism of Dred Scott, Lochner and, in our time, the type of reasoning that is exemplified in Epstein’s conception of takings and to a lesser extent in Scalia’s Lucas opinion.
Holmes famously wrote that “certitude is not the test of certainty.” In the same place he continued, “property, friendship and truth have a common root in time. One cannot be wrenched from the rocky crevices into which one has grown for many years without feeling that one is attacked in one’s life.”92 Having good reason to be wary of Court-created absolutes, Holmes could plausibly adopt a stance of judicial deference. Further, that combined with a “matters of degree” analysis could give legislatures great weight, but still find, at the extremes, moments where they wrongfully try to read sections of the Constitution out of the document.
In a letter to Franklin Ford on Supreme Court letterhead, December 29, 1908, Holmes wrote, “My own opinion often expressed through many years is that the only use of the phrase Police Power is to express the fact that you can’t carry out constitutional provisions to their logical extremes.” He then gave an example: “A law forbidding the building of houses more than 80 feet high I presume might be good under the police power, one forbidding you to build more than one foot would be a taking and would have to be paid for.”93 Such a matter of degree analysis maps on to the Court cases outlined above quite well, including such seemingly absolutist cases as Lucas, but without falling in to the vice of creating needless absolutes.
Mahon is a case that exemplifies a well thought-out, antifoundational, evolutionary, flexible, multi-factored, or braided analysis that largely rests (p.104) upon the particular facts of the case at hand. It is not an overly frustrating case unless one is mesmerized by a conception of law as best exemplified by bright-line rules and simple deductive tests where defining terms and applying general principles in absolute fashion is a categorical requirement. If rid of this dogmatic conception of what law is and must be, and its vestiges in the Court’s takings jurisprudence, then the cases analyzed above can be seen as exemplifying vigorous debate over precisely the factors that should be confronted every time in fact-patterns that are honestly difficult to legally decide. And, if one were to add an awareness of alternate conceptions of property and democracy-enhancing factor to Mahon’s reasoning, as Pruneyard could be read to do, then the democratic aspect of Holmes’s reasoning becomes even clearer. Holmes’s reasoning is therefore wrongly criticized by Richard Epstein. Indeed, Epstein’s theory exemplified not only the vices of a formal deductivist understanding of jurisprudence in an extreme manner, but also helps show the virtues of a legal analysis such as Holmes’s that finds the limits of this methodology too distorting and rather emphasizes empirical analysis and the braiding of reasons as advocated by Peirce, Dewey, and the jurisprudence of democratic experimentalism.
(1.) Holmes was also involved in some notable cases that are, in hindsight, thought of as mistakes. Of course there is Buck v. Bell, mentioned earlier, with its notorious acceptance of eugenics to limit reproduction of “imbeciles.” For a survey of his less popular cases see chap. 5 in Albert W. Alschuler, Law without Values: The Life, Work, and Legacy of Justice Holmes (Chicago: University of Chicago Press, 2000).
(2.) Suzanna Sherry, “Property Is the New Privacy: The Coming Constitutional Revolution,” Harvard Law Review 128 (2015): 1452.
(3.) William Michael Treanor, “Jam for Justice Holmes: Reassessing the Significance of Mahon,” Georgetown Law Journal 86 (1998): 814.
(4.) Bruce A. Ackerman, Property and the Constitution (New Haven, CT: Yale University Press, 1977), 156.
(5.) Mark Tushnet, The New Constitutional Order (Princeton, NJ: Princeton University Press, 2003), 61.
(6.) Frederic R. Kellogg, Oliver Wendell Holmes, Jr., Legal Theory, and Judicial Restraint (Cambridge: Cambridge University Press, 2007), 139.
(7.) Richard A. Epstein, Supreme Neglect: How to Revive Constitutional Protection of Private Property (Oxford: Oxford University Press, 2008), 107, 114. Two other central works of scholarship in the area, though more sympathetic with Holmes’s jurisprudence, also find the area to be close to incoherent. Joseph L. Sax, “Takings and the Police Power,” Yale Law Journal 74 (1964): 36; and Frank I. Michelman, “Property, Utility, and Fairness: Comments on the Ethical Foundations of ‘Just Compensation’ Law,” Harvard Law Review 80 (1967): 1173. See Sherry, “Property Is the New Privacy,” for an overview of this movement and Epstein’s central pace in it. As she puts it, his 1985 book on takings was the “movement’s first manifesto.” Epstein’s latest version of this argument is found in The Classical Liberal Constitution (Cambridge, MA: Harvard University Press, 2014).
(8.) “But when meaning giving takes the form of the a priori preference for sharp and definitive theories, it should not be considered thorough-mindedly practical—as it is, all too often, in today’s intellectual climate. Rather this form of theory pursuit is itself a tender-minded indulgence … a flight from the complexity of the (p.221) world, driven by the kind of fear that underlies the absolutist quest for certainty.” Thomas Grey, “What Good Is Legal Pragmatism?,” in Pragmatism in Law and Society, ed. Michael Brint and William Weaver (Boulder: Westview Press, 1991), 22.
(9.) By far the best exposition of the fact is in the first chapter of William A. Fischel’s Regulatory Takings. William A. Fischel, Regulatory Takings: Law, Economics, and Politics (Cambridge, MA: Harvard University Press, 1995).
(10.) Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922), 413. As shown in a useful analysis offered by Treanor, property under substantive due process before Mahon was analyzed under three distinct rationales: (1) police powers, (2) businesses affected with public interests, and (3) eminent domain. The first area was “classic police power” relating to public health, safety, or morals. Under this category, a regulation that barred activity that endangered public health, safety, or morals would withstand constitutional scrutiny if the legislature’s goal was the protection of public health, safety, or morals and the means chosen in the legislation were suited to achieve the goal. If so, then regulation was valid. Regulation of a nuisance would fit under this category. The classic statement of this position is in Mugler v. Kansas: “A prohibition simply upon the use of property for purposes that are declared, by valid legislation, to be injurious to the health, morals, or safety of the community, cannot, in any sense, be deemed a taking or an appropriation of property for the public benefit.” Lochner, according to Treanor, is the same type of case as Mugler, “as each turned on whether a regulation fell within the police power.” This type of analysis “turned on the use of a formalist, categorical rule.” The second area is that of businesses affected with a public interest. In Munn the Court held that regulation of rates charged by “businesses affected with a public interest” was constitutionally permissible. As Treanor explains, “With respect to businesses affected with a public interest, it was the regulation that was presumptively permissible. The limit to state power was that the regulation could not deny a reasonable rate of return. If it did, however, compensation was the remedy.” The problem under this category, though, was not only with figuring out reasonable rate of return but also what businesses were affected with a public interest. The third area was that of eminent domain. Here the original rule was that there had to be a physical seizure before compensation was owed. Treanor, “Jam for Justice,” 839.
(23.) Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978).
(33.) Pruneyard Shopping Center v. Robins, 447 U.S. 74 (1980).
(35.) Munn v. Illinois, 94 U.U. 113 (1877).
(37.) Keystone Bituminous v. DeBenedictus, 480 U.S. 470 (1987), 473–74, citations omitted.
(40.) Miller v. Scheone, 276 U.S. 272 (1928).
(47.) Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992), 1014–1015.
(p.223) (61.) Richard A. Epstein, “Pennsylvania Coal v. Mahon: The Erratic Takings Jurisprudence of Justice Holmes,” 86 Georgetown Law Journal 875 (1998): 891.
(67.) Richard A. Epstein, Design for Liberty: Private Property, Public Administration, and the Rule of Law (Cambridge, MA: Harvard University Press: 2011), 106.
(69.) Richard A. Epstein, Takings: Private Property and the Power of Eminent Domain (Cambridge, MA: Harvard University Press, 1985), 18.
(78.) See, for instance, the problem of the “tragedy of the anticommons.” Michael Heller, The Gridlock Economy: How Too Much Ownership Wrecks Markets, Stops Innovation, and Costs Lives (New York: Basic Books, 2008). As Suzanna Sherry put it correctly, Epstein seems too often to exhibit “a willful lack of engagement with the real world.” Sherry, “Property Is the New Privacy,” 1461.
(79.) R. H. Coase, The Firm, the Market, and the Law (Chicago: University of Chicago Press, 1988), 7, 9.
(80.) Jeremy Waldron, The Dignity of Legislation (Cambridge: Cambridge University Press, 1999), 82.
(81.) Daniel J. Boorstin, The Mysterious Science of the Law (Gloucester: Peter Smith, 1974).
(82.) Carol M. Rose, “Mahon Reconstructed: Why the Takings Issue Is Still a Muddle,” Southern California Law Review 57 (1984): 591. She gets this term from M. Cunliffe, in The Right to Property: A Theme in American History (1973) 11, 21.
(84.) Charles A. Reich, “The New Property,” Yale Law Journal 73 (1964): 733. See also Thomas C. Grey, “The Disintegration of Property,” in Nomos XXII: Property, ed. J. Roland Pennock and John W. Chapman (New York: New York University Press, 1980), 69. Therein Grey argues that the concept of property is so fragmented as to be incoherent. And in what surely is the definitive treatment of property in the United States in Stuart Banner concludes: “Property is not an end in itself but rather (p.224) a means to many other ends. Because we have never had unanimity on how to prioritize those other ends, we have never had unanimity on an understanding of property. Our conceptions of property have always been molded to serve our own particular purposes.” Stuart Banner, American Property: A History of How, Why, and What We Own (Cambridge, MA: Harvard University Press, 2011), 290.
(85.) Richard H. Thaler and Cass R. Sunstein, Nudge: Improving Decisions about Health, Wealth, and Happiness (New Haven, CT: Yale University Press, 2008), 26–27.
(87.) Tyson & Bro. v. Banton, 273 U.S. 418, 445–47 (1927). See also Truax v. Corrigan, 157 U.S. 312 (1921) where Holmes warns in his dissent of the “dangers of a delusive exactness” in Fourteenth Amendment issues that could get in the way of social experimentation and therefore the Court should stay out unless the legislature goes beyond constitution’s obvious meaning, and Springer v. Philippine Islands, 277 U.S. 183 (1928).
(88.) Missouri Pacific Railway Company v. Nebraska, 217 U.S. 196 (1910).
(89.) Robert Brauneis describes Holmes as rejecting both the “vested rights tradition” and that of conceptual essentialism. The vested rights tradition holds that because a right has been given, it has been “vested,” and therefore it is unjust to take it away. The obvious problem with the vested rights tradition is that there is no non-controversial version of it, because “if one asked the only truly uncontroversial form of the question, ‘Does this law create a new obligation in respect to a transaction already past,?’ every statute turned out to be retrospective.” If this version of rights protection is accepted, it seems quite clear that “government hardly could go on.” Of course the other option, the ahistorical approach attached to conceptual essences is anathema to both the discounting of categorical schematization and the evolutionary historical approach understanding exemplified in Holmes’s scholarship; indeed, if this ahistorical conceptual approach is accepted the “path” of the law becomes largely irrelevant. Most important for Brauneis is that Holmes’s analysis rests largely upon measuring the degree of legal change from culturally embedded “structural habits.” Like habits, the principles are not innate or natural, but are contingently acquired or developed over time; they are features of a particular legal culture or tradition. On the other hand, like habits, they may become so settled and involuntary in application that they seem natural and are difficult to discard.” Robert Brauneis, “The Foundation of Our ‘Regulatory Takings Jurisprudence’”: The Myth and Meaning of Justice Holmes’ Opinion in Pennsylvania Coal v. Mahon,” Yale Law Journal 106 (1996): 627, 646. See also, Robert Brauneis, “Treanor’s Mahon,” Georgetown Law Journal 86 (1998).
(90.) As quoted in Louis Menand, The Metaphysical Club (New York: Farrar, Straus and Giroux, 2001), 64.
(91.) Jeremy Waldron, The Dignity of Legislation. His more recent book where he directly critiques Epstein’s conflation of property rights and the Rule of Law (p.225) is Jeremy Waldron, The Rule of Law and the Measure of Property (Cambridge: Cambridge University Press, 2012).
(92.) Richard A. Posner, The Essential Holmes (Chicago: University of Chicago Press, 1992), 23, 181.