SPEAKERS CONTENTS INSERTS
Page 1 TOP OF DOC
89–877 PDF
2003
GAO'S RECENT REPORT ON THE IMPLEMENTATION OF EXECUTIVE ORDER 12630 AND THE STATE OF FEDERAL AGENCY PROTECTIONS OF PRIVATE PROPERTY RIGHTS
HEARING
BEFORE THE
SUBCOMMITTEE ON THE CONSTITUTION
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
OCTOBER 16, 2003
Serial No. 53
Printed for the use of the Committee on the Judiciary
Page 2 PREV PAGE TOP OF DOC
Available via the World Wide Web: http://www.house.gov/judiciary
COMMITTEE ON THE JUDICIARY
F. JAMES SENSENBRENNER, Jr., Wisconsin, Chairman
HENRY J. HYDE, Illinois
HOWARD COBLE, North Carolina
LAMAR SMITH, Texas
ELTON GALLEGLY, California
BOB GOODLATTE, Virginia
STEVE CHABOT, Ohio
WILLIAM L. JENKINS, Tennessee
CHRIS CANNON, Utah
SPENCER BACHUS, Alabama
JOHN N. HOSTETTLER, Indiana
MARK GREEN, Wisconsin
RIC KELLER, Florida
MELISSA A. HART, Pennsylvania
JEFF FLAKE, Arizona
MIKE PENCE, Indiana
J. RANDY FORBES, Virginia
STEVE KING, Iowa
JOHN R. CARTER, Texas
TOM FEENEY, Florida
MARSHA BLACKBURN, Tennessee
Page 3 PREV PAGE TOP OF DOC
JOHN CONYERS, Jr., Michigan
HOWARD L. BERMAN, California
RICK BOUCHER, Virginia
JERROLD NADLER, New York
ROBERT C. SCOTT, Virginia
MELVIN L. WATT, North Carolina
ZOE LOFGREN, California
SHEILA JACKSON LEE, Texas
MAXINE WATERS, California
MARTIN T. MEEHAN, Massachusetts
WILLIAM D. DELAHUNT, Massachusetts
ROBERT WEXLER, Florida
TAMMY BALDWIN, Wisconsin
ANTHONY D. WEINER, New York
ADAM B. SCHIFF, California
LINDA T. SÁNCHEZ, California
PHILIP G. KIKO, Chief of Staff-General Counsel
PERRY H. APELBAUM, Minority Chief Counsel
Subcommittee on the Constitution
STEVE CHABOT, Ohio, Chairman
STEVE KING, Iowa
WILLIAM L. JENKINS, Tennessee
Page 4 PREV PAGE TOP OF DOC
SPENCER BACHUS, Alabama
JOHN N. HOSTETTLER, Indiana
MELISSA A. HART, Pennsylvania
TOM FEENEY, Florida
J. RANDY FORBES, Virginia
JERROLD NADLER, New York
JOHN CONYERS, Jr., Michigan
ROBERT C. SCOTT, Virginia
MELVIN L. WATT, North Carolina
ADAM B. SCHIFF, California
CRYSTAL M. ROBERTS, Chief Counsel
PAUL B. TAYLOR, Counsel
MINDY BARRY, Full Committee Counsel
DAVID LACHMANN, Minority Professional Staff Member
C O N T E N T S
OCTOBER 16, 2003
OPENING STATEMENT
The Honorable Steve Chabot, a Representative in Congress From the State of Ohio, and Chairman, Subcommittee on the Constitution
Page 5 PREV PAGE TOP OF DOC
The Honorable Jerrold Nadler, a Representative in Congress From the State of New York, and Ranking Member, Subcommittee on the Constitution
WITNESSES
Ms. Anu Mittal, Director, Natural Resources and Environment Division, U.S. General Accounting Office
Oral Testimony
Prepared Statement
Mr. Roger Marzulla, Founder and General Counsel of Defenders of Property Rights
Oral Testimony
Prepared Statement
Mr. John Echeverria, Professor, Georgetown Law Center Environmental Law and Policy Institute
Oral Testimony
Prepared Statement
Mr. Steven Eagle, Professor, George Mason University School of Law
Oral Testimony
Prepared Statement
APPENDIX
Material Submitted for the Hearing Record
Page 6 PREV PAGE TOP OF DOC
Materials Submitted by Chairman Chabot
Materials Submitted by witness Mr. Marzulla
Materials Submitted by witness Mr. Echeverria
GAO'S RECENT REPORT ON THE IMPLEMENTATION OF EXECUTIVE ORDER 12630 AND THE STATE OF FEDERAL AGENCY PROTECTIONS OF PRIVATE PROPERTY RIGHTS
Thursday, October 16, 2003
House of Representatives,
Subcommittee on the Constitution,
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:13 a.m., in Room 2141, Rayburn House Office Building, Hon. Steve Chabot [Chairman of the Subcommittee] presiding.
Mr. CHABOT. The Subcommittee will come to order.
The House Subcommittee on the Constitution's responsibilities include conducting oversight regarding the state of constitutionally protected property rights. Toward that end, I requested that the General Accounting Office, the GAO, report on the implementation and enforcement of Executive Order 12630, which was issued in 1988 by President Ronald Reagan.
Page 7 PREV PAGE TOP OF DOC
The executive order requires Federal agencies to give due regard to the constitutional protections provided by the Fifth Amendment to private property rights, and to report on the takings implications of certain Federal agency actions. Those reports, called takings implications assessments, or TIA's, are designed to ensure that Federal agencies thoroughly assess, prior to taking action, whether or not a proposed regulation would violate the Fifth Amendment. The Fifth Amendment is violated when private property is taken for public use without just compensation. Such violations require paying just compensation from Federal taxpayer funds.
The executive order was issued to protect public funds by minimizing Government intrusion upon private property rights and to encourage Federal budgeting for the payment of just compensation. The executive order also instructs the Attorney General to develop guidelines for agencies to use in conducting TIA reports.
I wrote to the GAO and requested an investigation regarding the implementation and enforcement of the executive order in the Department of Agriculture, the U.S. Army Corps of Engineers, the Environmental Protection Agency, and the Department of the Interior. In order to determine the effectiveness of the enforcement of the order, I asked whether there were instances in which a TIA was, and was not done, and in which the Federal Government was still made to pay just compensation for the taking of private property.
On September 19th, 2003, the GAO issued its report, entitled ''Regulatory Takings: Implementation of Executive Order on Government Actions Affecting Private Property Use.'' The purpose of this hearing is to allow the GAO to present the findings of its report and to examine related issues.
Page 8 PREV PAGE TOP OF DOC
The GAO reviewed nearly 400 Federal Register notices to find cases in which it was noted that TIA's were conducted in three select years—1989, 1997, and 2002. The GAO also obtained from the Justice Department a list of all takings cases related to the four agencies that were decided or resolved during fiscal years 2000 through 2002.
Generally, the GAO found that implementation of the order was lax in many ways. Although the executive order's requirements have not been amended or revoked since 1988, the agencies no longer prepare annual compilations of just compensation awards or account for these awards in their budget documents.
Further, according to GAO, there were three instances in which takings lawsuits brought against the four agencies by property owners were concluded from 2000 through 2002, and in which the requirements of the executive order applied. However, as GAO concluded, ''The relevant agency assessed the takings potential of its action in only one of the three cases subject to the order's requirements.'' In that one case, Federal taxpayer funds were used to settle takings claims, despite the agency's conducting a TIA and concluding no takings implications existed. In the other two cases, no TIA's were conducted at all, and Federal taxpayer funds were paid to settle takings claims that were made following agency action.
In sum, of the relatively small sample of cases examined by the GAO, if takings assessments required by the executive order had been performed, and when performed, performed accurately, approximately $4.3 million in taxpayer funds might have been saved. Also, property owners might have been spared the grief of having to litigate their constitutionally protected private property rights.
Page 9 PREV PAGE TOP OF DOC
One can only speculate regarding the precise savings Federal taxpayers might enjoy were the requirements of the executive order followed across all covered agency actions and over all the years the order has been in effect. However, the results of the GAO's report are not comforting, and they indicate such potential savings may well have been in the many tens of millions of dollars.
The executive order also calls for periodic updates of the Justice Department guidelines regarding the order's implementation as changes in Supreme Court cases warrant. No such updates have been made, even though Federal agency officials have indicated such updates would be useful to them, and a Congressional Research Service attorney, who has written extensively on the issue of regulatory takings, has said that the guidelines should be updated to reflect more recent Supreme Court decisions.
I look forward to hearing from all our witnesses today. We appreciate your coming here.
I will now recognize the gentleman from New York, Mr. Nadler, for 5 minutes for the purpose of making an opening statement.
Mr. NADLER. Thank you, Mr. Chairman.
I apologize for being late, but I was at a Democratic Whip meeting debating the supplemental budget request on Iraq. I think that subject is perhaps certainly equally important and certainly more immediate than the subject of this hearing. And for the same reason, I'm going to have to leave at 11 o'clock, whether we're finished or not.
Page 10 PREV PAGE TOP OF DOC
Thank you, Mr. Chairman. The Constitution protects every American against the uncompensated taking of property for public purposes. While we may disagree at times about the appropriateness of any particular public purpose, whether that public purpose justifies the taking, what actually constitutes a taking, or what constitutes just compensation, no one would argue seriously against this fundamental principle in our Bill of Rights.
We also all agree that there are times when the regulation of private property so strips that property of its value as to entitle the owner to compensation. That much is not controversial. Where the matter gets really interesting is in determining just what constitutes a regulatory taking. Some would argue that even a small loss in the value of the property is the result of a regulation, or the loss of that property's highest and best use is a sufficient taking to require compensation.
The Supreme Court certainly has not said so, but there are several who would write into the statute books what the Constitution does not require. That is a question of policy. We have debated it before and we'll debate it again, but that's not why we're here today.
The question of regulatory takings is one that has vexed this Congress for many years, and one which has at times been called into the service of efforts to undermine the laws that protect our drinking water, that protect the air we breathe, the fisheries and crops we rely on, and the communities in which we live.
I continue to believe that no one has a right to use his or her property in a way that causes harm to others. You do not have—you do not have a property right to dump poison on the ground if you know or suspect that that poison will seep into everyone else's drinking water. The fact that this prohibition may preclude you from using your property as a profitable dump for toxic waste does not mean that the public, in essence, should have to pay you off to keep you from poisoning the wells. Even in my district in Brooklyn, you can get in big trouble for offering that kind of a deal.
Page 11 PREV PAGE TOP OF DOC
Too often, people claim that they have no responsibility for the effect on others of the way they use their property, and that demanding a responsible use of that property is theft. Too often, especially as a member of the Transportation and Infrastructure Committee, my other committee assignment, I have heard it suggested that a takings analysis should ignore the cost of the property owner's actions to the rest of society, in effect, that we should only look—that we should look only at what acting responsibly might cost the owner, even what it might cost him in lost opportunity.
Today we have a much narrower question before us. The findings of a recent study by the General Accounting Office concerning implementation of President Reagan's executive order requiring that agencies conduct takings implications analysis, especially as they pertain to regulatory takings.
While some of the positions taken in the executive order were viewed at the time as to be quite extravagant, the basic goal of avoiding inadvertent takings and unintended or unanticipated judgments is certainly worthwhile. It is hard to tell from the report whether these takings were the result of agency misunderstandings of the law, whether those misunderstandings, if they did occur, were a result of an obsolete Department of Justice guideline, whether agency negligence in not following the proper procedures was implicated, or whether, as is often the case, there was a public purpose served by the taking and the parties were compensated as part of the bargaining contemplated and mandated by the Fifth Amendment. It is not clear whether any of these takings were close judgment calls or errors or intentional.
I would also note that my colleagues on the other side of the aisle often complain that lawsuits are settled for their nuisance value and that's why we have to restrict lawsuits, because even if they lack merit, we can't rely simply upon the courts to dismiss them because they're so expensive that they're settled for the nuisance value and that's unjust. That's what many Members say.
Page 12 PREV PAGE TOP OF DOC
Looking at some of the substantial—I'm sorry. Looking at some of the insubstantial settlements listed in this report, I would wonder whether the Government was making a rational calculation that it could save the public first more by settling than by joint out litigation.
It is also not clear from this report whether there has been any value added for the taxpayers by the executive order. Clearly, the general counsels of the various agencies are not going to rely on guidelines in these cases, but will assess the legal implications of their actions on their own. To do otherwise would be malpractice. It is also not clear from the report the extent to which the agencies are or are not doing these analyses. The only thing that's clear is the finding that there was not much of a paper trail.
What does matter is whether the agencies are making mistakes of law on this important question. If they are not, and the report does not seem to indicate that they are, then this entire exercise really is of mostly academic interest. If the agencies are making mistakes, then we should look at those decisions and determine what is going wrong. The question to which this GAO report responds provides little help in doing so.
Mr. Chairman, I do think the question of regulatory takings is important, and that it is very important that our Federal agencies follow the law and understand that law as they work to enforce the laws Congress has charged them with enforcing. People may not like those regulations, but that is a question for a different day.
I want to join you in welcoming our panel today, and I look forward to their testimony. I thank you and I yield back.
Page 13 PREV PAGE TOP OF DOC
Mr. CHABOT. Thank you very much.
I will now introduce the panel we have here this morning. Our first witness is Anu Mittal—am I pronouncing that right?
Ms. MITTAL. Yes.
Mr. CHABOT. Thank you.
She is the Director of the Natural Resources and Environment Division of the U.S. General Accounting Office. She will present the GAO's findings in its report, entitled ''Regulatory Takings, Implementation of Executive Order on Government Actions Affecting Private Property Use.'' We thank you for coming this morning.
Our second witness is Roger Marzulla. Mr. Marzulla is a founder and general counsel of Defenders of Property Rights, the Nation's only national public interest legal foundation dedicated exclusively to protecting private property rights. Mr. Marzulla previously served as Assistant Attorney General in charge of the U.S. Justice Department's Land and Natural Resources Division, where he was responsible for all environmental land management and natural resources litigation on behalf of the Federal Government.
He was also responsible for the Presidential Executive Order on Governmental Interference with Constitutionally Protected Property Rights, signed by President Reagan in March, 1988, that is the subject of our hearing here today. He has participated in dozens of constitutional and regulatory cases in State and Federal courts, and he is co-author with his wife, Nancie, of Property Rights: Understanding Government Takings and Environmental Regulation. We welcome you here this morning, Mr. Marzulla.
Page 14 PREV PAGE TOP OF DOC
Our third witness is Professor John Echeverria of the Georgetown Law Center's Environmental Law and Policy Institute. He is the former General Counsel of the National Audubon Society and former General Counsel and Conservation Director of American Rivers.
He is a graduate of Yale Law School and the Yale School of Forestry and Environmental Studies, and we thank you for coming this morning as well.
Our fourth and final witness will be Steven Eagle, a Professor of Law at George Mason University School of Law, where he teaches property law, land use regulation, and constitutional law. Professor Eagle's principal research interest is the nature of private property rights and the extent to which they may be limited under the Government's police power and the power of eminent domain.
The second edition of his treatise, Regulatory Takings, was published in 2000, and is supplemented annually. Professor Eagle also chairs the Committee on Land Use and Zoning of the American Bar Association's Section of Real Property, Probate, and Trust Law, and he is an elected member of the American Law Institute.
Professor Eagle studied economics at the City College of New York and is a graduate of Yale Law School. We welcome all four witnesses here this morning.
As you are probably familiar, we have a 5-minute rule here and the lights will actually indicate the time. When the yellow light comes on, you will have a minute to wrap up. When the red light comes on, we would appreciate you ceasing as soon as possible after that, although if you have some parting ideas, you're welcome to add those. Then the panel here will have an opportunity to question the witnesses.
Page 15 PREV PAGE TOP OF DOC
We will start with you, Ms. Mittal.
STATEMENT OF ANU K. MITTAL, DIRECTOR, NATURAL RESOURCES AND ENVIRONMENT DIVISION, U.S. GENERAL ACCOUNTING OFFICE
Ms. MITTAL. Thank you, Mr. Chairman.
Mr. Chairman and Members of the Subcommittee, thank you for inviting us to testify on our recently completed work on regulatory takings. Our testimony today is based on the report that you issued last week.
As you know, in 1988, the President issued Executive Order 12630, entitled ''Governmental Actions and Interference with Constitutionally Protected Property Rights.'' The purpose of this executive order is to ensure that Government actions are undertaken on a well-reasoned basis with due regard for the potential financial impacts imposed by the Just Compensation Clause of the Fifth Amendment.
The executive order requires the Department of Justice to issue general guidelines so that Federal agencies have a uniform framework for implementing the executive order, and supplemental guidelines for each agency, as appropriate. The executive order also requires the Attorney General to update the guidelines, as necessary, to reflect fundamental changes in takings case law resulting from Supreme Court decisions.
Page 16 PREV PAGE TOP OF DOC
In addition, the executive order enumerates several requirements of the agencies, such as preparing annual compilations of awards of just compensation, accounting for takings awards in their annual budget submissions, designating an official responsible for implementing the order, and considering the takings implications of their proposed actions.
Mr. Chairman, as you requested, we reviewed the measures taken by the Department of Justice to implement the provisions of the executive order, and the efforts of four agencies—Agriculture, the Army Corps of Engineers, the Environmental Protection Agency, and Interior—to comply with the executive order's requirements. In addition, we determined the extent to which awards of just compensation have been levied against the four agencies and whether the agencies had assessed the potential takings implications of their actions before implementing them.
In summary, we found the following. Justice has not updated its 1988 guidelines, and agency officials and other experts differ on the need for an update. Justice officials told us that the guidelines have not been updated because there have been no fundamental changes in regulatory takings case law.
Officials at the four agencies we talked to, however, were divided on the need for an update. While Corps and EPA officials supported Justice's position, Interior and Agriculture officials said that it would be helpful if Justice could update the summary of key takings cases contained in the guidelines. Other legal experts with whom we spoke also believe that the guidelines should be updated, and they noted that regulatory takings case law has not remained static over the past 15 years.
Page 17 PREV PAGE TOP OF DOC
With respect to the supplemental guidelines required by the executive order, the Attorney General has issued them for three agencies—the Corps, EPA, and Interior—but not for Agriculture, because Justice and Agriculture could not agree on how to assess the potential takings implications of actions related to grazing and special use permits.
We also determined that the extent to which the four agencies have implemented key requirements of the executive order has changed over the life of the order. While all four agencies have designated an official to ensure that they are in compliance with this provision, they no longer prepare annual compilations of just compensation awards or account for these awards in their budget documents. This is because, in 1994, OMB advised the agencies that this information was no longer needed.
In addition, while officials at each of the four agencies told us that they fully consider the potential takings implications of their planned regulatory actions, they could provide us with limited evidence to support this claim, and our efforts to independently verify this claim netted limited results.
With regard to the number of takings cases brought against the agencies, we determined that, for cases concluded during fiscal years 2000 through 2002, few awards of just compensation were made against the four agencies. During this period, 44 regulatory takings cases were concluded against the four agencies. Of these 44 cases, 14 resulted in an award or settlement payment, but the executive order's requirements for takings implications assessments applied to only three of the 14 cases. For the other 11 cases, the regulatory action either predated the executive order or the matter at hand was excluded from the executive order.
Page 18 PREV PAGE TOP OF DOC
More importantly, we determined that the relevant agency had assessed the takings potential of its action in only one of the three cases, subject to the executive order.
Mr. Chairman, this completes my prepared remarks. I would be happy to answer any questions that you or the Subcommittee may have.
[The prepared statement of Ms. Mittal follows:]
mitt10.eps
mitt11.eps
mitt12.eps
mitt13.eps
mitt14.eps
mitt15.eps
mitt16.eps
mitt17.eps
Mr. CHABOT. Thank you very much.
Page 19 PREV PAGE TOP OF DOC
Mr. Marzulla, you are recognized for 5 minutes.
STATEMENT ROGER J. MARZULLA, FOUNDER AND GENERAL COUNSEL, DEFENDERS OF PROPERTY RIGHTS
Mr. MARZULLA. Thank you, Mr. Chairman.
Since the signing of the executive order in 1988 into the extent and nature of governmental compliance with that executive order, I take a special interest in this inquiry because of the position I held at the time, being designated by Attorney General Edwin Meese to spearhead the effort to draft both the executive order and the Attorney General's guidelines.
Today, the Defenders of Property Rights has issued a report which in some ways parallels the findings of the General Accounting Office, the Government's Accounting Office. And that report, Mr. Chairman, confirms that, regrettably, there is a massive noncompliance with the executive order throughout the Executive branch, and that the cost of that noncompliance is in the range of at least one billion dollars.
Every day, we at the Defenders of Property Rights hear from individuals who request help in dealing with governmental actions, regulations, orders, requirements, that have caused them to lose their property rights. I might add, Mr. Chairman, not one of the people I have talked to over the years, the thousands of people I have talked to, has been dumping toxic waste on his property and complaining about not being able to do so.
Page 20 PREV PAGE TOP OF DOC
The Founding Fathers recognized the fundamental role of property rights in a free society. They recognized that an individual who cannot retain the fruits of his or her labor is at risk of losing all of the individual liberties that are guaranteed by the Constitution. Today, unfortunately, Mr. Chairman, I think we must report that perhaps our most endangered liberty is private property rights.
The executive order, as the chair has noted, was instituted for two purposes. One, to protect our precious constitutional liberties, and two, to protect the taxpayer's purse. Failure to observe the requirements of that executive order, which we consider a ''look before you leap'' type of approach, has cost taxpayers' hundreds of millions, probably billions, of dollars.
I would note today that 19 States have adopted similar statutes—that is, statutes which have established the requirements of an executive order-type analysis as part of their regulatory programs. They have found beneficial results in protecting private property rights and protecting the public purse.
The findings of our report indicate that, as the GAO indicates, there are fundamentally no records of takings implication analyses being done. There are, in fact, no records of how much the Government has paid out for the failure to observe private property rights and the failure to pay just compensation. There are no reports to OMB, even though they are required, and even though the purpose of that requirement was to apprise the Congress of the extent to which agencies have been violating the Constitution, violating private property rights, and have been required to pay as a result.
Page 21 PREV PAGE TOP OF DOC
Fundamentally, we found that of the 400 cases both filed and resolved over the period from 1991 to August of 2003, the Government had judgments awarded of approximately $112 million against it. There were settlements, the amount of which we could not gather, but since it was about twice as many cases, we assumed that was about twice as much money, or about $225 million; that is to say, about a third of a billion dollars.
We must assume that all of those people who could not afford to hire lawyers, to file suit and go through the litigation process, to obtain their constitutionally-guaranteed right of just compensation, probably amount to at least three times, maybe four or five or six or ten times, the number who actually received the payment that the Constitution entitles them to.
We have three major recommendations for this Committee. The first is certainly to update the Attorney General's guidelines. The Supreme Court has decided a dozen or more important cases, and the guidelines themselves have not been updated to take account either of those cases or decisions of the Court of Appeals for the Federal Circuit, which has jurisdiction over all takings cases brought against the Federal Government.
Second, we recommend that the agency guidelines be updated in parallel with those of the Attorney General.
And finally, we recommend that Congress take action, recognizing that the executive order, as a voluntary requirement, is not working, to make it legally binding upon Government agencies.
Page 22 PREV PAGE TOP OF DOC
Mr. Chairman, I would be happy to answer any questions.
[The prepared statement of Mr. Marzulla follows:]
PREPARED STATEMENT OF ROGER J. MARZULLA
Mr. Chairman and Members of the Subcommittee:
Thank you for the opportunity of testifying today with respect to the federal government's implementation of Executive Order 12,630, ''Governmental Actions and Interference With Civil Constitutionally Protected Property Rights.'' I congratulate the Subcommittee on instituting the first inquiry in more than a decade into whether federal agencies are complying with their obligations under the Takings Executive Order, which is designed to protect individual constitutional liberties in property while saving money for the federal government. Regrettably, in a report issued today by Defenders of Property Rights, we conclude that widespread noncompliance with the Takings Executive Order has resulted in massive violation of constitutionally-guaranteed property rights, subjecting the federal government to liability for $1 billion or more.
I take special interest in this Subcommittee's investigation because, as an attorney with the United States Justice Department, I had the honor of being designated by former Attorney General Edwin Meese III to head up the team that helped draft the Takings Executive Order and the Attorney General's guidelines. Today, I serve as General Counsel to Defenders of Property Rights, the nation's only nonprofit legal foundation dedicated exclusively to the protection of our cherished constitutional right to own, use and possess private property. At Defenders of Property Rights, every day we receive urgent requests for help in vindicating constitutionally guaranteed property rights from homeowners and retirees, farmers and ranchers, small businessmen, and ordinary Americans who see government with impunity destroying their homes, their businesses and their dreams. The Takings Executive Order was designed to minimize this violation of constitutionally-protected property rights, but it can do so only if federal agencies comply with the analytic and planning tools which the Takings Executive Order provides.
Page 23 PREV PAGE TOP OF DOC
I. WHY CONSTITUTIONAL PROPERTY RIGHTS ARE IMPORTANT
If you believe in individual freedom, then you must believe in property rights. As the Supreme Court has said:
Property does not have rights. People have rights. The right to enjoy property without unlawful deprivation . . . is in truth a ''personal'' right. . . . In fact, a fundamental interdependence exists between the personal right to liberty and the personal right in property. Neither could have meaning without the other. That rights in property are basic civil rights has long been recognized.
Lynch v. Household Finance Corporation, 405 U.S. 538, 552 (1972).
The protection of rights in property lies at the heart of our constitutional system of government. The Founding Fathers, in drafting the Constitution, drew upon classical notions of legal rights and individual liberty dating back to the Justinian Code, Magna Carta, and the Two Treatises of John Locke, all of which recognize the importance of property ownership in a governmental system in which individual liberty is paramount. Concurrently, the constitutional framers drew upon their own experience as colonists of an oppressive monarch, whose unlimited powers vested him with the ability to deprive his subjects of their God-given rights of ''life, liberty, and property.''
The United States Constitution imposes a duty on government to protect private property rights. Thus, within the Bill of Rights, numerous provisions directly or indirectly protect private property rights. The Fourth Amendment guarantees that people are to be ''secure in their persons, houses, papers, and effects . . .'' The Fifth Amendment states that no person shall ''be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use without just compensation . . .'' The Fourteenth Amendment echoes the Due Process Clauses of the Fifth Amendment, stating that no ''State shall deprive any person of life, liberty, or property without due process of law . . .'' Additionally, the Contracts Clause of the Constitution indirectly protects property by forbidding states from passing any ''law impairing the Obligation of Contracts.''
Page 24 PREV PAGE TOP OF DOC
The protection of private property receives such strong emphasis in the United States Constitution because the right to own and use property was historically understood to be critical to the maintenance of a free society. To understand this concept, one must understand that property is more than just land. Property is buildings, machines, retirement funds, savings accounts, and even ideas. In short, property is the fruit of one's labor and the ability to use, enjoy, and exclusively possess the fruits of one's labor is the basis for a society in which individuals are free from oppression. Arguably, there can be no true freedom for anyone if people are dependent upon the State for food, shelter, and other basic needs. Under such a system, nothing is safe from being taken by a majority or a tyrant because the citizens, as government dependents, are powerless to oppose any infringement of their rights.
The United States Supreme Court has repeatedly explained that the primary purpose for protecting property rights is 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.''(see footnote 1) During the birth and growth of the administrative regulatory state, federal government agencies ignored these principles and implemented policies that deprived owners of the use and benefit of their property without providing compensation. Moreover, Congress consistently failed to codify property rights protection into federal law and the judicial system's maze-like procedures and hurdles made seeking redress for the infringement of private property rights in the courts impractical for many property owners. Thus, private property rights have become one of our most endangered liberties.
II. THE TAKINGS EXECUTIVE ORDER
Page 25 PREV PAGE TOP OF DOC
In June of 1987 the United States Supreme Court handed down two blockbuster cases, First English Evangelical Church v. County of Los Angeles(see footnote 2) and Nollan v. California Coastal Commission.(see footnote 3) The First English and Nollan cases sent a shock wave through the federal government, where new and far-reaching regulatory programs such as Superfund,(see footnote 4) the Clean Water Act,(see footnote 5) and the Endangered Species Act(see footnote 6)-all good ideas-could now not be implemented without paying for the private property rights taken in the process. Former United States Attorney General Edwin Meese III was among the first to realize that the government lacked any plan for avoiding unnecessary regulatory takings, or for paying those whose property had been taken by regulation. His concerns quickly reached the White House and the Office of Management and Budget-and the President.
Accordingly, in his legislative and administrative message to the Congress of January 25, 1988, President Reagan discussed the significance of these two landmark Supreme Court decisions, simultaneously reaffirming the central importance of property rights to our constitutional system and the need to plan for inevitable just compensation obligations of the government:
It was an axiom of our Founding Fathers and free Englishmen before them that the right to own and control property was the foundation of all other individual liberties. To protect these rights, the Administration has urged the courts to restore the constitutional right of a citizen to receive just compensation when government at any level takes private property through regulation or other means. Last spring, the Supreme Court adopted this view in Nollan v. California Coastal Commission. In a second case, the Court held that the Fifth Amendment requires government to compensate citizens for temporary losses that occur while they are challenging such a government regulatory ''taking'' in court. In the wake of these decisions, this Administration is now implementing new procedures to ensure that federal regulations do not violate the Fifth Amendment prohibition on taking private property; or if they do take a citizen's property for public use, to ensure that he receives constitutionally required just compensation.(see footnote 7)
Page 26 PREV PAGE TOP OF DOC
On March 15, 1988, President Reagan signed Executive Order 12,630, ''Governmental Actions and Interference With Constitutionally Protected Property Rights.''(see footnote 8) Executive Order 12,630 draws heavily upon the regulatory coordination function of the Office of Management and Budget established by Executive Order 12291(see footnote 9) and the Executive Order on federalism. Threads of the environmental assessment process under the National Environmental Policy Act are woven into the fabric of this Order, as are aspects of the budgetary planning process. Executive Order 12,630 reflects thoughtful consideration and vigorous debate throughout the affected government agencies, establishing a practical and workable procedure for implementing the Supreme Court's holdings in Nollan and First English.
The legitimacy of the Executive Order is premised both upon the duty of the government to respect constitutional protections afforded by the Bill of Rights and upon the management principle that government should not undertake programs without knowing and planning for their potential costs:
Responsible fiscal management and fundamental principles of good government require that government decision-makers evaluate carefully the effect of their administrative, regulatory, and legislative actions on constitutionally protected property rights. Executive departments and agencies should review their actions carefully to prevent unnecessary takings and should account in decision-making for those takings that are necessitated by statutory mandate.(see footnote 10)
Page 27 PREV PAGE TOP OF DOC
The Executive Order requires that ''[i]n formulating or implementing policies that have takings implications, each Executive department and agency shall be guided'' by the principles established in Nollan and First English. These ''general principles,'' set forth in Section 3 of the Executive Order, include the doctrines of nexus and proportionality established by Nollan and the self-actuating right to just compensation set forth in First English. Although some actions are exempted from coverage, most traditional government regulatory functions fall within the scope of the Order. The presidential Order singles out permitting processes and the creation of restrictions upon private property use, requiring that all departments and agencies observe the doctrines of nexus and proportionality and that they minimize processing delays.
Perhaps the most challenging of the Order's requirements, however, is the takings implications analysis (or ''TIA,'') which must be prepared ''before undertaking any proposed action regulating private property use for the protection of public health or safety'' or for other purposes. When regulations focus on public health and safety purposes, the TIA must identify ''with as much specificity as possible'' the public health and safety risk created by the proposed private property use, establish that the proposed governmental action ''substantially advances the purpose of protecting public health and safety against the specifically identified risk,'' establish that the proposed restrictions are ''not disproportionate'' to the landowner's contribution to the overall risk, and ''estimate, to the extent possible, the potential cost to the government in the event that a court later determines that the action constituted a taking.''(see footnote 11) To encourage thoroughness and candor, the TIA will normally be considered an internal deliberative document not subject to production under the Freedom of Information Act, and, in any event, the Executive Order ''is not intended to create any right or benefit, substantive or procedural, enforceable at law by a party against the United States, its agencies, its officers or any person.''(see footnote 12)
Page 28 PREV PAGE TOP OF DOC
Finally, the Order requires that the attorney general promulgate guidelines for the evaluation of risk and the avoidance of unanticipated takings ''to which each Executive department or agency shall refer in making the evaluations required by this Order or in otherwise taking any action that is the subject of this Order.''(see footnote 13) This guidance discusses the constitutional principles that Nollan and First English established and, to some degree, also identified issues on which the Supreme Court had not at that time opined. To avoid obsolescence, the Attorney General was ordered to periodically review and update the guidelines to reflect subsequent clarification of constitutional principles by the Supreme Court. Those guidelines were issued on March 18, 1988.(see footnote 14) They have not been reviewed or updated since.
III. FINDINGS OF OUR INVESTIGATION
To determine whether the Executive Order process, ostensibly in effect for fifteen years, had reduced government impairment of private property rights, we initially sought government records tabulating just compensation payments for inverse condemnation. We found none. We sought annual reports to the Office of Management and Budget, which agencies are required to file under the Executive Order, summarizing takings judgments entered against those agencies. Again, we found none. We sought records or reports of TIA, required under the Executive Order. We found one prepared by the Environmental Protection Agency in 1990. We sought anecdotal evidence, and learned that many agency officials of this and prior administrations had never even heard of Executive Order 12,630, and were doing nothing to comply with it. Finally, we decided to undertake an examination of court records to at least find out how much court-ordered just compensation had been paid in cases filed after January 1, 1991 (a date after the Executive Order for which a database was available) through August 1, 2003.
Page 29 PREV PAGE TOP OF DOC
Because avoiding unnecessary takings protects both constitutional rights and the public treasury, the Executive Order is an important tool for management of regulatory programs. Adherence to the requirements of the Executive Order should thus result in a sharp decline in non-condemnation takings of private property, and in the amounts of taxpayer money paid out in just compensation for such takings. To determine whether such a decline in takings and just compensation payments had occurred since issuance of the Executive Order, we undertook a review of more than 500 taking suits filed against the federal government since 1991. In brief, our findings were:
In that time period more than 500 new taking cases have been filed against the federal government in the Court of Federal Claims.
Of these nearly 400 have been resolved.
In those cases, the court has awarded $111,966,012.10 in just compensation.
Approximately 22.4% of the successful cases were awards against the Corps of Engineers.
Approximately 24.4% of the successful cases were awards against the Department of Interior and the Forest Service.
Approximately 6.1% of the successful cases were awards against EPA.
Another 80 cases were dismissed on joint motion of the parties, representing in most cases a settlement the amount of which could not be ascertained but which can be estimated at more than $200 million.
Page 30 PREV PAGE TOP OF DOC
Federal agencies, including the Corps of Engineers, Department of Interior, Forest Service and EPA, have made almost no effort to avoid unnecessary takings or to provide compensation for unavoidable takings of private property.
Since issuance of the Attorney General's guidelines in 1988, scores of important decisions on private property rights have been handed down by the United States Supreme Court, as well as the United States Court of Appeals for the Federal Circuit and the Court of Federal Claims.
We have provided the Subcommittee with copies of our report, and request that it be included in the record of this hearing. The report is also available at www.yourpropertyrights.org
IV. RECOMMENDATIONS
We urge Congress in the strongest terms to address this massive violation of the Takings Executive Order, and callous disregard for constitutional rights. Our recommendations are:
1. Immediately update the Attorney General's guidelines under the Executive Order to reflect important Supreme Court takings decisions over the past fifteen years, as well as, decisions of the Federal Circuit and Court of Federal Claims.
2. Immediately update the agency guidelines, at least those of the Corps of Engineers, Interior Department, Forest Service (which has none) and EPA (which are not publicly available).
Page 31 PREV PAGE TOP OF DOC
3. Pass legislation making the Executive Order legally enforceable, similar to NEPA, Small Business Regulatory Reform Act, and the Paperwork Reduction Act.
Thank you again for the opportunity to address this important constitutional issue. I would be happy to answer any questions the Subcommittee may have.
Mr. CHABOT. Thank you very much. We appreciate your testimony.
Mr. Echeverria.
STATEMENT JOHN D. ECHEVERRIA, EXECUTIVE DIRECTOR, GEORGETOWN ENVIRONMENTAL LAW AND POLICY INSTITUTE
Mr. ECHEVERRIA. Thank you, Mr. Chairman. I am the Executive Director of the Georgetown Environmental Law and Policy Institute. I appreciate the opportunity to testify today.
The GAO report does a thorough and competent job of addressing the questions which the Committee posed relating to the steps taken by the U.S. Department of Justice and several Federal agencies to carry out Executive Order 12630. Unfortunately, however, the GAO investigation did not address a more fundamental and important question: whether the executive order was fundamentally flawed from its inception and whether it should be simply scrapped today.
In my testimony submitted for the record, I explain why the executive order should be rescinded, and I would like to summarize several of my points.
Page 32 PREV PAGE TOP OF DOC
First, the takings impact assessment process is unworkable in many instances, given that the U.S. Supreme Court has said that takings cases should be decided based on an ad hoc, case-specific analysis. I point out that Mr. Marzulla has actually endorsed this viewpoint in a book he wrote, published in 1997, in which he compared takings impact analysis to taking a ''shot in the dark.'' I note that in making that statement he relied upon a statement by the Deputy Attorney General of Maryland, who referred to their own State assessment process as a waste of time.
Second, the 1988 executive order, rather than an effort to enforce the Constitution, was an attempt to promote an exaggerated and inaccurate version of regulatory takings doctrine. This conclusion is supported by the testimony of Charles Fried, the Solicitor General of the United States under President Reagan, who described the authors of the executive order as promoting a ''specific, aggressive, and it seemed to me, quite radical project.''
It is also supported by numerous analyses documenting how the executive order departed from established Supreme Court precedent. These include, in particular, a CRS analysis issued on December 19th, 1988, concluding on the one hand that, ''the majority of takings principles stated or implied in Executive Order 12630 overestimate the likelihood of a taking'', and on the other hand, ''the order does not list most of the factors that cut against the occurrence of a taking.''
Because it so badly misstates constitutional law, many observers have concluded, accurately I believe, that the executive order was simply an effort to undermine, through the back door, environmental and other public protections that the proponents of the executive order opposed on public policy grounds.
Page 33 PREV PAGE TOP OF DOC
Another problem the executive order appears to impose is a significant bureaucratic burden on Federal agencies to address a relatively modest fiscal issue. Mr. Marzulla has offered in a report, which I haven't had an opportunity to read, a very extravagant estimate of the size of takings. Certainly, the GAO report figures do not match Mr. Marzulla's estimates. I would note that the number of takings cases being filed in the Court of Claims is actually going down, not going up.
Finally, I want to observe that at least some of those urging this Committee to encourage the Department of Justice to revise its takings guidelines appear to be hoping to use the executive order, once again, to promote an exaggerated, one-sided view of takings law. Let me provide what I think is a vivid illustration.
In their prepared testimonies, both Mr. Marzulla and Professor Eagle argue that updated DOJ guidelines should reference not only Supreme Court cases but lower court cases, such as those of the Court of Federal Claims. Professor Eagle cites in particular one Claims Court decision, in a case called American Pelagic, and argues that its holdings should be incorporated directly into updated Department of Justice guidelines. This controversial case, which I believe was incorrectly decided and ignored relevant precedent, involves a takings claim based on a moratorium imposed by Congress on the entry of large factory fishing ships into U.S. fisheries. Professor Eagle fails to acknowledge that the case is being appealed by the Bush Justice Department as we speak.
Beyond that, the Attorney Generals of many coastal States in this country believe the decision poses a severe threat to their longstanding authority to manage fishery resources and, therefore, have taken the highly unusual step of filing a brief in the U.S. Court of Appeals for the Federal Circuit to support the U.S. appeal. These State Attorney Generals include, significantly for the purposes of this hearing, the Attorney General of Ohio and the Attorney General of New York.
Page 34 PREV PAGE TOP OF DOC
The fact that the professor would argue that the Department of Justice should embrace the ruling of a trial court which the Justice Department is appealing, and which a number of States vigorously reject, illustrates that what is going on here today is precisely what was going on when the executive order was first issued, not an effort to enforce the Constitution, not an effort to save the taxpayers' money, but an effort to promote a one-sided, exaggerated and inaccurate version of regulatory takings law.
With the Committee's permission, I would like to submit for the record the brief in the Pelagic case, submitted by the Attorney Generals of Ohio, New York, and 13 other States.
Mr. CHABOT. Without objection, so ordered.
Mr. ECHEVERRIA. Thank you very much for the opportunity to testify. I would be happy to respond to any questions.
[The prepared statement of Mr. Echeverria, with attachment, follows:]
PREPARED STATEMENT OF JOHN D. ECHEVERRIA
My name is John D. Echeverria. I am the Executive Director of the Georgetown Environmental Law & Policy Institute. I appreciate the opportunity to testify today in this oversight hearing based on the General Accounting Office's recent report, ''Regulatory Takings: Implementation of Executive Order on Government Actions Affecting Private Property Use.''
Page 35 PREV PAGE TOP OF DOC
The GAO report does a thorough and competent job of addressing the questions which the Committee posed relating to the steps taken by the U.S. Department of Justice and several federal agencies to carry out Executive Order 12630. Unfortunately, however, the GAO investigation did not address a more fundamental and more important question: whether the Executive Order was fundamentally flawed from its inception. Numerous academic and other commentators have severely criticized the Executive Order. In my judgment, those criticisms remain completely valid today; indeed they may have even greater force today. I submit that the Committee, rather than asking whether the guidelines implementing the Executive Order should be revised, should be asking whether Executive Order 12630 should simply be scrapped.
Federal officials, of course, have an obligation to consider the constitutional implications of their actions. This obligation extends to the Takings Clause, which mandates the payment of compensation, as well as to other provisions of the Constitution, starting with the First Amendment and proceeding through the Bill of Rights. The Executive Order, however, makes the mistake of singling out the Takings Clause for consideration through a type of elaborate bureaucratic process that, so far as I can determine, applies to no other provision of the Constitution, and which is essentially unworkable. Beyond that, for the reasons I discuss below, it does so according to standards that seriously distort the original understanding of the Takings Clause as well as settled Supreme Court precedent.
First, the Executive Order asks executive branch officials to conduct an analysis which, in many instances, is extremely difficult if not impossible to perform in any meaningful or useful fashion. The U.S. Supreme Court has largely rejected the use of clear, bright-line rules in deciding takings cases in favor of a relatively flexible, ad hoc approach. Thus, in one of its latest decisions, Tahoe-Sierra Preservation Council v. Tahoe Regional Planning Agency, 535 U.S. 302 (2002), the Supreme Court said that ''we have 'generally eschewed' any set formula for determining how far is too far, choosing instead to engage in 'essentially ad hoc, factual inquiries,''' Id. at 326, quoting Lucas v. South Carolina Coastal Council, 505 U.S.1003, 1015 (1992).
Page 36 PREV PAGE TOP OF DOC
Applying this ad hoc approach, even the most knowledgeable and conscientious agency staff has great difficulty determining whether proposed ''policies that have takings implications,'' in the terminology of the Executive Order, actually create a risk of takings liability and what the magnitude of the potential liability might be. Whether a specific government action might result in a taking in any particular circumstance will depend upon a number of factors, such as the nature of the regulatory regime in place when a specific owner purchased a specific property, the actual market values of the property with and without the restriction, and the magnitude of the owner's parcel as a whole. Because these and other relevant inquiries are so site- and owner- specific, it is very difficult, in the abstract, to reach any reliable determinations about whether new rules or policies might generate takings liabilities. Significantly, a primary focus of the Executive Order is broad government policies reflected, for example, in ''federal regulations, proposed federal regulations, proposed federal legislation'' and so on, in addition to site-specific regulatory decisions.
Importantly, Roger Marzulla of Defenders of Property Rights, reportedly one of the authors of the Executive Order, agrees with this point. In a book he wrote on the property rights issue, Mr. Marzulla (along with co-author Nancie Marzulla) criticized so-called ''planning bills,'' which have been introduced in Congress over the years to codify the Executive Order, or institute other types of takings impact assessment procedures, on the ground that they are unworkable. Mr. Marzulla wrote:
Planning bills do have a serious weakness, however. As Maryland [Deputy] Attorney General Ralph S. Tyler points out, 'no meaningful analysis can be done' of the liability at stake when so much depends not just 'upon the particular circumstances' of the case, but on the philosophy of the particular judge hearing the case. . . . When judges take this ad hoc approach to takings law, liability planning becomes a shot in the dark.
Page 37 PREV PAGE TOP OF DOC
Nancie G. Marzulla and Roger J. Marzulla, Property Rights: Understanding Government Takings and Environmental Regulation 174 (1997). If the Executive Order supports ''no meaningful analysis,'' and calls for making ''shots in the dark,'' then it logically follows that the Executive Order fails to deploy limited federal agency resources in a useful or effective fashion.
Given the fact that takings impact assessments under the Executive Order are predecisional documents, and therefore not available for public inspection, it is difficult to assess how the Executive Order has worked in practice. Nonetheless, I find some significance in the fact that, of the ten agency rules which GAO identified in which agencies found significant takings implications, nine were issued under the current Bush administration. Unless the Bush administration is imposing new regulatory constraints which go very far beyond anything issued under the Clinton administration, a possibility which I think we can safely discount, then these data probably reflect the greater ideological predisposition on the part of the Bush administration to identify potential takings in agency rule makings. The fact that the standards in the Executive Order, at least as applied to general agency rules and other policy statements, are apparently so malleable underscores the fact that, in many instances, a reliable, objective estimate of takings liability is virtually impossible under the Executive Order.
This is related to a second primary criticism of the Executive Order, which is that its true purpose was to undermine public health and environmental regulations through the back door by promoting an exaggerated and inaccurate version of regulatory takings doctrine. The most damning testimony on this point comes from Professor Charles Fried of Harvard Law School, who served as Solicitor General of the United States under President Ronald Reagan from 1985 to 1989, during the period when Executive Order 12630 was being developed and promulgated. In his memoirs recounting his professional experiences at the Department of Justice, Professor Fried described the deep interest in the property issue within the department during this period. He wrote:
Page 38 PREV PAGE TOP OF DOC
[A]ttorney General Meese and his young advisors—many drawn from the ranks
of the then fledgling Federalist Societies and often devotees of the extreme libertarian views of Chicago law professor Richard Epstein—had a specific, aggressive, and, it seemed to me, quite radical project in mind: to use the Takings Clause of the Fifth Amendment as a severe brake upon federal and state regulation of business and property. The grand plan was to make government pay compensation as for a taking of property every time its regulations impinged too severely on a property right—limiting the possible uses for a parcel of land or restricting or tying up a business in regulatory red tape. If the government labored under so severe an obligation, there would be, to say the least, much less regulation.
Charles, Fried, Order and Law 183.
Consistent with this description of the extreme constitutional theories held by some takings advocates within the Department of the Justice at the time, other scholars and other commentators have criticized the Executive Order specifically as an effort, not to state constitutional law, but affirmatively to misstate it. Thus, an exhaustive report issued by the Congressional Research Service issued on December 19, 1988, concluded that ''the majority of taking principles stated or implied in Executive Order 12630 overestimate the likelihood of a taking, and that the Order does not list most of the factors that cut against the occurrence of a taking.'' Another commentator observed that the Executive Order ''has little to do with judicial realities in defending governmental actions against private claims,'' (James M. McElfish, Jr., ''The Takings Executive Order: Constitutional Jurisprudence or Political Philosophy?, 18 ELR 10474 (1988)), and two other commentators stated that ''the document seeks to impose on federal agencies a view of takings law that is well beyond the point reached by the Supreme Court in inverse condemnation.'' Jerry Jackson and Lyle D. Albaugh, '' A Critique of the Takings Executive Order in the Context of Environmental Regulation,''18 ELR 10464 (1988).
Page 39 PREV PAGE TOP OF DOC
Because the Executive Order so severely misstated the law, it was difficult to avoid the conclusion that the true purpose of the Executive Order was not to enforce the Constitution, but rather to attack regulatory protections. On April 2, 1993, a number of prominent law scholars wrote to President Clinton urging him to rescind executive Order 12630. (Copy attached.) They wrote:
The Executive Order . . . represents a misguided effort to use the specter of government liability under the Fifth Amendment in order to frustrate regulatory activity that certain members of the Reagan administration opposed as a matter of policy. Fair minded people can—and certainly do—disagree on the kinds of regulatory programs this nation should adopt to protect public health and safety, environmental quality, and other aspects of the public welfare. But the Order and guidelines [issued by the U.S. Department of Justice] seriously overestimate the likelihood that such regulatory programs would result in a taking based on existing precedent. They therefore inappropriately translate important questions of policy into alleged questions of constitutionality.
See also Jerry Jackson and Lyle D. Albaugh, supra (''the Executive Order's true purposes are unstated: to expand the circumstances in which a taking will be considered to have occurred and to 'chill' the agencies from making regulatory decisions that may be construed as takings under existing inverse condemnation law as well as the expanded view of the law reflected in the Executive Order'').
It is understandable, of course, that some may disagree with the U.S. Supreme Court's reading of the Takings Clause. But it is also important to emphasize that the Founding Fathers intended for the Takings Clause to have a narrow scope and that the Supreme Court's current takings jurisprudence, if anything, goes beyond the original intent of the drafters of the Bill of Rights. No less an advocate of property rights than Justice Scalia has acknowledged that the Takings Clause was originally understood to apply only to direct expropriations of private property, and not to apply to regulations at all. See Lucas v. South Carolina Coastal Council, 505 U.S. 1003,1028 n.15 (1992) (''early constitutional theorists did not believe the Takings Clause embraced regulations of property at all''). See also Tahoe-Sierra Preservation Council v. Tahoe Regional Planning Agency, 535 U.S. 302, 321 (2002) (''The text of the Fifth Amendment itself provides a basis for drawing a distinction between physical takings and regulatory takings. Its plain language requires the payment of compensation whenever the government acquires private property for a public purpose, whether the acquisition is the result of a condemnation proceeding or a physical appropriation. But the Constitution contains no comparable reference to regulations that prohibit a property owner from making certain uses of her private property.'') The current Supreme Court does not question the existence of the regulatory takings doctrine nor am I questioning the existence of that doctrine. The point is simply that the regulatory takings doctrine has no foundation in the text and original understanding of the Takings Clause, and efforts to exaggerate the meaning of the Takings Clause, such as that reflected in Executive Order 12630, seek to take the law further afield from the Founders' original intentions.
Page 40 PREV PAGE TOP OF DOC
Against this backdrop the question of whether Executive Order 12630 should be updated is troubling. The question seems to assume that if the Executive Order has any problem, it is that the order is out of date. As I have explained, the fundamental problem is that the Executive Order simply misstates the law. The order does not need to be fixed; it needs to be scrapped.
A final problem with the Executive Order is that it appears to impose a significant bureaucratic burden on federal agencies to address a relatively modest fiscal issue. The GAO reports that in the three years it examined, the United States incurred liabilities of approximately $32,000,000, as a result of takings judgments and settlements of takings cases. Over 50% of these liabilities were the result of the settlement of one major case. Most of these liabilities arose from cases that were not subject to the Executive Order process, in part because they predated it. While $32,000,000 over three years is hardly a trivial amount, it is a very small amount compared to the much larger voluntary and involuntary liabilities the United States assumes on a routine basis in the context of a $1 trillion-plus annual budget. It is also a small amount to pay to ensure that important environmental and other programs can go forward consistent with the requirement of the Fifth Amendment. In this connection, it is important to emphasize that the Takings Clause does not prohibit takings, but only requires that the government pay compen-sation for a taking. When public takings liabilities are compensated, both Congress' policy objectives and the Fifth Amendment are vindicated. So long as the public's liabilities under the Takings Clause are limited, as they plainly are, one can logically ask, where's the beef?
It bears emphasis that a large number of regulatory reforms have been adopted in the administration of the federal endangered species act, wetlands, and other regulatory programs since Executive Order 12630 was instituted. Many of these reforms were initiated by the Clinton administration and many have been carried forward and expanded under the Bush administration. In the view of some, these administrative reforms have severely weakened our nation's environmental protections. Others disagree. What would be difficult for anyone to dispute, however, is that these reforms have made the nation's environmental laws far less burdensome for regulated property owners. As a result, the loudly voiced concerns that were part of the context in which Executive Order 12630 was developed have largely abated. Whatever property-rights protection agenda the Executive Order was intended to serve, it is, at a minimum, less useful and important for serving that purpose today.
Page 41 PREV PAGE TOP OF DOC
Finally, I want to address specifically one of the questions discussed in the GAO report: assuming the Executive Order is worthwhile at all, has the Supreme Court made such ''fundamental'' changes in the law of takings that the U.S. Department of Justice is under an obligation, under the terms of the Executive Order, to update its guidelines under the Executive Order. In my judgment, the answer to this question is no. In certain minor respects the Court can be viewed as having tinkered with takings law since the Executive Order was issued. If anything, the general trend of the decisions has been to narrow the scope of regulatory takings doctrine. For example, the Court since 1988 has reaffirmed the ''parcel as a whole'' rule, reaffirmed that a legitimate government action is a precondition for a valid taking claim (demonstrating that the so-called ''substantially advance'' takings test is not a takings test at all), and reaffirmed that the Nollan ''essential nexus'' test applicable to physical actions is limited to exaction cases. On the other hand, the Court's 1992 decision in Lucas v. South Carolina Coastal Council, could have been viewed, at least at one point, as having established a significant new per se rule governing certain regulatory takings claims. Subsequent Supreme Court decisions, however, have reduced Lucas to insignificance, if they have not effectively overruled it. In sum, there have been no ''fundamental changes'' in takings law mandating revision of the Attorney General guidelines under the Executive Order. I note that, according to the GAO report, the U.S. Department of Justice agrees with this assessment.
Thank you for the opportunity to testify.
Mr. CHABOT. Thank you.
Our final witness will be Steven Eagle. Mr. Eagle, you're recognized. Professor Eagle.
Page 42 PREV PAGE TOP OF DOC
STATEMENT STEVEN J. EAGLE, PROFESSOR, GEORGE MASON UNIVERSITY SCHOOL OF LAW
Mr. EAGLE. Thank you, Mr. Chairman.
My name is Steven Eagle. I am a professor at George Mason Law School. I teach and write in the area of property rights and government regulation. I appreciate this opportunity to testify before you. I have submitted a written statement which gives my views in detail.
I would say here, Mr. Chairman, that the GAO study reveals two important problems. The first is that the Attorney General has not complied with his duty to update the mandatory guidelines, to take into account recent Supreme Court developments. Second, the GAO has found little evidence to indicate that the four agencies it surveyed either have substantially complied with the guidelines or, frankly, Mr. Chairman, that they're even particularly interested in doing so. The findings of the GAO report seem to be consistent with the notion that the agencies may just be paying lip service to the requirement of the executive order.
As the Attorney General notes in the guidelines, officials must make decisions informed by general and specific principles of takings case law. As I mentioned in my written statement, there have been a number of significant Supreme Court decisions affecting property rights since the guidelines were promulgated in 1988. Among them, of course, is Lucas versus South Carolina Coastal Council, establishing that a complete deprivation of value is a categorical taking. While the Court has more recently made it clear that Lucas is limited to complete deprivations, it's not difficult to envision that a Government action, particularly one affecting the environment, might, as Lucas put it, deny an owner economically viable use of his land. The Court has not yet defined ''economically viable'', and Lucas remains a trap for regulators who may not be fully conversant with it.
Page 43 PREV PAGE TOP OF DOC
Likewise, different panels of the Federal Circuit have reached opposite conclusions on whether an owner who does suffer a complete deprivation nevertheless has to display investment-backed expectations. Lucas is clearly a fundamental change.
Of the Court's newest cases, Palazzolo versus Rhode Island and Tahoe-Sierra Preservation Council, both make it clear that Penn Central covers takings, not only complete takings. These cases clearly allow for a partial takings approach and partial takings damages. I would think that those who, like Professor Echeverria, find this approach novel, and who object to partial regulatory takings, surely would describe this as a fundamental shift.
Brown versus Washington Legal Foundation, which was very recently decided, made headlines for upholding the interest on lawyers' trust accounts, the (IOLTA) programs. However, like Lucas, it may be that Brown creates a new categorical taking, namely, Government's commandeering intangible property, not for purposes of regulating the owner's behavior but, rather, for benefit to the State. That, too, is fundamental.
The Del Monte Dunes effective enunciation of good faith as a requirement also is fundamental, and I think that permeates both the takings clause and the due process clause.
I could go on with other cases, Mr. Chairman. But I think the Supreme Court decides very few takings cases and they're all important. Furthermore, the DOJ lawyers who litigate these cases presumably are conversant with them. They could update the guidelines at fairly modest cost. The question then is why don't they want to update the guidelines? I think that critics who object to updating the guidelines do so, as Professor Echeverria has been very frank to admit, simply because they don't think the guidelines should exist to begin with.
Page 44 PREV PAGE TOP OF DOC
I think it is incomprehensible to me, Mr. Chairman, how the kind of relatively modest requirements of the executive order, which pale in comparison to the executive apparatus set up to deal with other kinds of individual rights, should be questioned as too expensive. The job of government in large part is to protect the rights of citizens, and whether or not very large amounts of money are taken from the Judgment Fund as a result of suits is only one of the concerns. Protecting the rights of citizens is quite another.
In going through the report, it's amazing to me how many instances show that things weren't done because of ''mere passage of time.'' Well, that doesn't work for me, Mr. Chairman, as an explanation. I think that we should have the guidelines revisited, the guidelines should contain comprehensive guidance, and yes, Mr. Chairman, not only should they refer to the Supreme Court's more recent cases, but they should also give some background, including lower court cases, and I think that lawyers litigating these issues should know about things like American Pelagic as well as other cases.
Mr. Chairman, I would be happy to answer any questions.
[The prepared statement of Mr. Eagle follows:]
PREPARED STATEMENT OF STEVEN J. EAGLE
Mr. Chairman, Representative Nadler, and distinguished members of the Subcommittee:
Page 45 PREV PAGE TOP OF DOC
My name is Steven J. Eagle. I am a professor of law at George Mason University, in Arlington, Virginia. I testify today in my individual capacity as a teacher of property and constitutional law. My principal research interest is the study of the interface of private property rights and government regulatory powers. I am the author of a treatise on property rights, entitled Regulatory Takings (third edition forthcoming in 2004), and write extensively on takings issues. I also lecture at programs for lawyers and judges and serve as chair of the Land Use and Zoning Committee of the American Bar Association's Section of Real Property, Probate and Trust Law. I thank the subcommittee for giving me this opportunity to appear.
The immediate occasion for the Subcommittee's evaluation of the state of federal agency protections of private property rights is the publication of the report prepared for it by the General Accounting Office on ''Regulatory Takings: Implementation of Executive Order on Government Actions Affecting Private Property Use'' (GAO Report).(see footnote 15) The Subcommittee asked that the GAO review implementation of Executive Order 12630, ''Governmental Actions and Interference with Constitutionally Protected Property Rights'' (EO, or EO 12630)(see footnote 16) by the Department of Justice. The Subcommittee also asked that the GAO review compliance with the EO by four governmental agencies, the Department of Agriculture, the U.S. Army Corps of Engineers, the Environmental Protection Agency (EPA), and the Department of the Interior (collectively, the ''four agencies'').
Unfortunately, Mr. Chairman, the GAO Report provides scant assurance that private property rights are being protected, or that government agencies are using prudent fiscal management. The Department of Justice has not updated its ''Guidelines for the Evaluation of Risk and Avoidance of Unanticipated Takings'' (Guidelines),(see footnote 17) in spite of significant changes in the Supreme Court's regulatory takings case law during the 15 years following its promulgation. Furthermore, as the GAO's understated subheading put it: ''Agencies Report That They Fully Consider the Takings Implications of Their Planned Actions but Provided Little Evidence to Support This Claim.''(see footnote 18)
Page 46 PREV PAGE TOP OF DOC
In my opinion, Mr. Chairman, the Department of Justice has failed to follow the EO's mandate that it update its guidelines to ''reflect fundamental changes in takings law occurring as a result of Supreme Court decisions.''(see footnote 19) Also in my view, the failure of the four agencies to provide records indicating compliance compels the promulgation of requirements that agencies undertake all mandated takings implication assessments in writing, preserve these assessments with the permanent records of the determinations that they support, and adequately log their compliance. Finally, Mr. Chairman, I suggest that if the Department of Justice and the four agencies do not demonstrate remediation of these deficiencies within a reasonable period of time, the Subcommittee should consider the introduction of legislation mandating the necessary correctives or even according affected citizens or the public standing to contest the adequacy of takings implication assessments (TIAs) in agency proceedings and courts of law.
The Purposes and Requirements of Executive Order 12630
EO 12630 was issued by President Reagan in 1988, and was impelled by the reasons specified in its preamble and in its first section, ''Purposes'':
[I]n order to ensure that government actions are undertaken on a well-reasoned basis with due regard for fiscal accountability, for the financial impact of the obligations imposed on the Federal government by the Just Compensation Clause of the Fifth Amendment, and for the Constitution, it is hereby ordered as follows. . . .(see footnote 20)
Page 47 PREV PAGE TOP OF DOC
Responsible fiscal management and fundamental principles of good government require that government decision-makers evaluate carefully the effect of their administrative, regulatory, and legislative actions on constitutionally protected property rights. Executive departments and agencies should review their actions carefully to prevent unnecessary takings and should account in decision-making for those taking that are necessitated by statutory mandate.(see footnote 21)
The purpose of this Order is to assist Federal departments and agencies in undertaking such reviews and in proposing, planning, and implementing actions with due regard for the constitutional protections provided by the Fifth Amendment and to reduce the risk of undue or inadvertent burdens on the public fisc resulting from lawful governmental action.(see footnote 22)
The EO mandated that the Attorney General promulgate the Guidelines, which were published contemporaneously with it. According to the Guidelines:
In planning and carrying out federal program policies and actions undertaken by statute and otherwise, government officials have the obligation to be fiscally responsible. In addition, they must respect the constitutional rights of individuals who are affected by those program policies and actions. Accordingly, officials must be aware of and avoid, to the extent possible and consistent with the obligations imposed by law, actions that may inadvertently result in takings. Where such taking risk cannot be wholly avoided, responsible government officials should, to the extent possible and consistent with the obligations imposed by law, minimize the potential financial impact of takings by appropriate planning and implementation. To do this, officials must make decisions informed by the general and specific principles of takings case law.(see footnote 23)
Page 48 PREV PAGE TOP OF DOC
The provisions of both the EO and Guidelines weave together the twin purposes animating the EO, protection for private property rights and the need for responsible financial planning. Prudent fiscal planning and financial accountability alone do not explain some of the EO's purposes. In issuing EO 12630, the President endeavored to ensure that federal departments and agencies operate ''for the Constitution,'' by giving ''due regard for the constitutional protections'' accorded property rights.(see footnote 24) This implies that governmental regulation of property must be solicitous of the Due Process, Just Compensation, and Public Use Clauses of the Fifth Amendment. As Justice William Brennan noted, ''Police power regulations such as zoning ordinances and other land-use restrictions can destroy the use and enjoyment of property in order to promote the public good just as effectively as formal condemnation or physical invasion of property.''(see footnote 25)
Although the Supreme Court has never adequately clarified its takings jurisprudence, for over 75 years Justice Oliver Wendell Holmes admonition has prevailed: ''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.''(see footnote 26) As the Court subsequently recognized in Armstrong v. United States, the Takings Clause was ''designed to bar Government from forcing some people alone to bear burdens which, in all fairness and justice, should be borne by the public as a whole.''(see footnote 27)
The EO's admonition that agencies act ''to prevent unnecessary takings'' is explained both in terms of avoiding unnecessary expenditures for just compensation and preventing the imposition of unnecessary hardship on citizens.(see footnote 28) Preservation of the public fisc benefits from accomplishing governmental purposes through alternatives less expensive than condemnation of private property. Avoiding unnecessary hardship refers to the fact that most individuals and businesses do not have their property up for sale at any given moment. They would not accept an unsolicited bid at fair market value, since the moving is both disruptive and expensive. Yet the constitutional measure of ''just compensation'' is ''fair market value.''(see footnote 29) For this reason, ''[c]ompensation in the constitutional sense is therefore not full compensation.''(see footnote 30) The willingness of an agency to pay just compensation means only it places a value on the property that exceeds the market price. It does not mean that the agency values the property more than its owner does. In many cases, therefore, the compelled transfer of property from citizen to government may make society the poorer. The EO seeks to avoid such a result where possible.
Page 49 PREV PAGE TOP OF DOC
The Attorney General's Guidelines are Substantially Out of Date
The Guidelines is a document of over 13,500 words, which, together with the EO, has as its purpose ''to assure that governmental decisionmakers are fully informed of any potential takings implications of proposed policies and actions.''(see footnote 31) The EO requires that ''The Attorney General shall, as necessary, update these guidelines to reflect fundamental changes in takings law occurring as a result of Supreme Court decisions.'' Yet, 15 years after the Guidelines were promulgated, the Department of Justice takes the position that no updating is necessary.(see footnote 32) The four agencies are evenly split on whether revision of the Guidelines would be helpful, with the EPA and the Army Corps of Engineers responding in the negative and the Departments of Agriculture and the Interior indicating that an update would be helpful to their staffs.(see footnote 33)
Neither the Department of Justice nor any of the four agencies asserted that revisions of the Guidelines would be harmful. If the even split among the four agencies is at all representative, it would seem that many government departments and agencies would find revisions beneficial. Likewise, given that attorneys in the Department of Justice litigate takings issues on a regular basis, the Guidelines could be redrafted at a modest cost.
The Guidelines explain the Supreme Court's takings case law. In doing so, they make extensive use of cases decided by inferior courts, principally the U.S. Court of Appeals for the Federal Circuit and the U.S. Court of Federal Claims (CFC) and its predecessors. By necessity, the Supreme Court makes general pronouncements based on cases presenting particular facts. These dicta are fleshed out in lower court opinions. It is difficult to conceive of a Department of Justice brief in a takings case that would cite only Supreme Court holdings and not refer to Federal Circuit and CFC cases applying those holdings in varied factual contexts.
Page 50 PREV PAGE TOP OF DOC
Even were the Department of Justice correct in asserting that Supreme Court precedent has not fundamentally changed, there would be a need to update the Guidelines. When the Guidelines were crafted in 1988, the Attorney General deemed a moderately detailed and nuanced presentation necessary to comport with the EO's mandate. Such a presentation remains necessary now. If there are reasons why the precedent of moderate detail and incorporation of lower court cases now is unsound, it is incumbent upon the Attorney General to elucidate them.
However, the fact is that there have been fundamental changes in the Supreme Court's takings doctrine since the Guidelines went into effect.
Analyses of Specific Supreme Court Decisions
The following analyses do not purport to be comprehensive. I attempt only to illustrate some of the principal changes in Supreme Court takings jurisprudence since 1988 that necessitate revisions of the Guidelines.
Penn Central Transportation Co. v. City of New York (1978).(see footnote 34) Penn Central is the source of the Court's principal regulatory takings test. It referred to regulatory takings determinations as ''essentially ad hoc, factual inquiries,'' in which ''several factors that have particular significance. 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. 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.''(see footnote 35)
Page 51 PREV PAGE TOP OF DOC
The Court's recent reaffirmation of the primary role of Penn Central emphatically does not mean that there have been no fundamental changes in the Supreme Court's takings jurisprudence. Penn Central is extraordinarily amorphous, and subsequent cases impose important limitations and qualifications upon it that will prove outcome determinative in some cases and vital for agencies to understand in many more. Some of these qualifications will be noted in the following discussions of post-1988 cases.
Lucas v. South Carolina Coastal Council (1992).(see footnote 36) Lucas established that a government regulation depriving an owner of all viable economic use of his or her property is a categorical taking, ''without case-specific inquiry into the public interest advanced in support of the restraint'' under Penn Central.(see footnote 37) The Court recently has made it clear that the retention of even relatively small remaining interests by owners exclude them from the benefit of the Lucas rule.(see footnote 38) Likewise, retention of the right to enjoyment following even a substantial moratorium on use is inconsistent with the total deprivation envisioned by Lucas.(see footnote 39) Nevertheless, Lucas is controlling where there is complete and permanent deprivation of use. It should be noted that two panels of the Federal Circuit have reached conflicting judgments as to whether owners invoking Lucas must meet the Penn Central investment-backed expectations in the uses they assert.(see footnote 40)
Dolan v. City of Tigard (1994).(see footnote 41) The Court in Dolan established that a government entity demanding an exaction of property in exchange for granting development approval must demonstrate a ''rough proportionality'' between the exaction and the problems created by the proposed development. The government would have the burden of coming forward with evidence that it had made an ''individualized determination'' of the need. However, Dolan purported to apply to ''adjudicative'' decisions involving individual parcels and not to ''legislative determinations classifying entire areas of the city.''(see footnote 42) The Court subsequently refused to consider why takings principles should be different depending upon whether the injury to the property owner resulted from an ''adjudicative'' or ''legislative'' determination.(see footnote 43) It also stated that the Dolan rough proportionality test is ''inapposite'' to cases involving denials of development instead of exactions.(see footnote 44)
Page 52 PREV PAGE TOP OF DOC
Suitum v. Tahoe Regional Planning Agency (1997).(see footnote 45) Suitum considered the ''ripeness'' for adjudication of an alleged regulatory taking resulting from an agency determination that the petitioner be forbidden to build upon her lot in the foothills above the lake, and given transferable development rights (TDRs) in mitigation. The agency insisted that the claim was not ripe for judicial review until the TDRs were sold, but the Court held that the TDRs could be appraised in the same manner as other assets. Suitum also described its regulatory takings ripeness test as ''prudential,'' presumably as distinguished from its being constitutionally required.(see footnote 46) While ''ripeness'' is an immensely vexing issue respecting challenges in federal court to alleged state regulatory takings,(see footnote 47) Suitum is useful in analyzing whether federal agency determinations are ripe for judicial review and supports the practical approach to ripeness later expanded upon in Palazzolo.(see footnote 48)
City of Monterey v. Del Monte Dunes at Monterey, Ltd. (1999).(see footnote 49) This case provides that a federal district court may refer to a jury the questions of whether there has been a taking and whether a governmental entity has accorded the property owner due process of law in applying its own regulations. Del Monte Dunes was the first case in which the Court upheld an award of regulatory takings damages. An important subtext is Court's almost palpable view-expressed in its adoption of the petitioner's view of the facts-that the city's repeated refusals to approve development plans satisfying all of its prior objections was pretextual. Del Monte Dunes thus imports to takings law a good faith doctrine. It is vital that government agencies be aware of it and it should be adumbrated in Guidelines revisions. Furthermore, the Solicitor General's office made repeated and strong attempts in Del Monte Dunes to get the Court to review its Agins ''substantially advance a legitimate governmental purpose'' doctrine, asserting that the concept is associated with substantive due process and is not a legitimate takings test. The Court declined to act.(see footnote 50)
Page 53 PREV PAGE TOP OF DOC
Palazzolo v. Rhode Island (2001).(see footnote 51) Palazzolo rejects the strong form of the regulatory takings notice rule. In Lucas, the Court excepted, from its holding that the complete deprivation of viable economic use constitutes a taking, the deprivation of uses to which the owner did not have an existing right under ''restrictions that background principles of the State's law of property and nuisance already place upon land ownership.''(see footnote 52) The Court refused to adopt Rhode Island's view that the purchase of land subsequent to the promulgation of environmental regulations precluded the owner from challenging those regulations under the Takings Clause. ''[A] regulation that otherwise would be unconstitutional absent compensation is not transformed into a background principle of the State's law by mere virtue of the passage of title. . . . A law does not become a background principle for subsequent owners by enactment itself.''(see footnote 53) However, Palazzolo does provide some undefined role for the notice rule. The concurring opinion of Justice Sandra Day O'Connor, whose vote was necessary for the Court's majority, stated that ''[t]he temptation to adopt what amount to per se rules in either direction must be resisted,'' and that the significance of preacquisition regulations must be determined by application of the Penn Central multifactor test.
Palazzolo also indicated that the Court will employ a common sense standard as to when agency determinations are sufficiently well settled as to be ''ripe'' for judicial review. The Court noted that here, its prior decisions ''make plain that the agency interpreted its regulations to bar petitioner from engaging in any filling or development activity on the wetlands. . . . Further permit applications were not necessary to establish this point.(see footnote 54)
Page 54 PREV PAGE TOP OF DOC
Finally, the Court refused to consider the owner's ''relevant parcel'' claim, since it had not been properly raised below. Palazzolo was remanded to the state courts for consideration of the landowner's Penn Central partial takings claim.
Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency (2002)(see footnote 55)
In order to preserve the clarity of Lake Tahoe, moratoria have been imposed precluding development of the landowners' parcels in the foothills surrounding the lake from 1981 through the present day. However, for procedural reasons, the Court considered only two moratoria in force during a 32-month period in 1981–1984. Likewise for procedural reasons, the petitioners brought only a Lucas claim, alleging that the ordinances, on their face, constituted a complete deprivation of property. They did not claim that the ordinances, as applied to them, constituted a partial taking under Penn Central. The Court refused to apply the Lucas rule to the 32-month period in which the petitioners had suffered a total deprivation, but rather held that the multifactor Penn Central test was appropriate, since the temporary deprivation should be considered in the context of the owners' use rights after the expiration of the moratoria along with other facts and circumstances.
The Court discussed ''seven theories'' under which a court might conclude that a temporary development moratorium might constitute a compensable taking. It noted that four of those were unavailable for procedural reasons. These included the arguments that ostensibly separate moratoria constituted one ''rolling'' moratorium, that the agency acted in bad faith under Del Monte Dunes, that the regulation did not advance a substantial state interest under Agins, and that fairness and justice would require compensation in light of the facts of the case under Penn Central. Notably, the Court added: ''It may well be true that any moratorium that lasts for more than one year should be viewed with special skepticism.''(see footnote 56)
Page 55 PREV PAGE TOP OF DOC
Brown v. Legal Foundation of Washington (2003).(see footnote 57) In Brown, the Court upheld a state ''interest on lawyers' trust accounts'' (IOLTA) program, under which lawyers were required to deposit client funds in bank accounts in which interest generated would benefit state designated legal services organizations. Not included in the IOLTA requirement were client funds that were capable of generating ''net interest'' after expenses were they deposited in separate bank accounts in the clients' names. While the Court affirmed that interest generated by clients' funds in the IOLTA accounts belonged to those clients,(see footnote 58) it reasoned that the inability of the small or short-term balances to generate ''net interest'' apart from the IOLTA program resulted in no taking. Of particular interest for present purposes is that the Court's agreement ''that a per se approach is more consistent with the reasoning in our Phillips opinion than Penn Central's ad hoc analysis.''(see footnote 59) The key was that the state was taking the interest for its own use rather than regulating the owner's use of it. ''When the government physically takes possession of an interest in property for some public purpose, it has a categorical duty to compensate the former owner.''(see footnote 60)
Brown is a new refinement of the distinction between Lucas categorical takings and Penn Central partial takings, and will have many applications in takings law.
Analysis of Specific Topics
The Role of Partial Regulatory Takings.
Page 56 PREV PAGE TOP OF DOC
Supporters of expanded governmental regulation over private property rights might argue that the reaffirmation of Penn Central in Palazzolo and Tahoe-Sierra indicates no fundamental change in the Supreme Court's post-EO regulatory takings jurisprudence. Yet it is clear that Palazzolo and Tahoe-Sierra support the understanding that Penn Central affirmatively provides for partial regulatory takings-a concept that some who might deny the existence of substantial change are unwilling to read into Penn Central itself.
In Palazzolo, the Court stated, far more clearly than it had in any prior case, that even if a regulation does not eliminate ''all economically beneficial use,'' and therefore does not result in a taking under Lucas, the regulation may still result in a regulatory taking under Penn Central. Prior to Palazzolo, some lower courts had applied one basic standard: that a regulation results in a taking if it eliminates essentially all of a property's value. Palazzolo conflicts with this approach by distinguishing between Lucas ''total taking'' claims and Penn Central claims. Palazzolo strongly suggests, though it does not decide the issue, that the evidence that Palazzolo's property retained a value of $200,000 was not sufficient, by itself, to defeat the Penn Central taking claim.
While Palazzolo clearly recognizes the existence of the so-called Penn Central test, the Court has not defined with any precision the scope of this type of taking claim or the standards governing its application. If, as discussed above, preacquisition notice must be a relevant factor in both a Lucas case and a Penn Central case, the differences between these two categories of takings may turn out to be rather slight. In any event, by providing new support for the Penn Central test, Palazzolo will generate many new questions about this test and how it should be applied.(see footnote 61)
Page 57 PREV PAGE TOP OF DOC
Determining the Relevant Parcel.
Penn Central said that courts analyzing regulatory takings cases should consider the ''parcel as a whole.''(see footnote 62) Lucas noted that ascertaining the relevant parcel was a ''difficult question,''(see footnote 63) and Palazzolo seemed to call for the rule's reexamination.(see footnote 64) One year later, Tahoe-Sierra endorsed the Penn Central parcel as a whole concept.(see footnote 65) Nevertheless, during the period between Penn Central and Tahoe-Sierra the lower courts have considered many factual nuances that go into a relevant parcel determination, examining the circumstances under which the property was acquired and parts of the property sold, the physical nature of the property, and the extent to which parts of the property have been put to coordinated use.(see footnote 66) Nothing in Tahoe-Sierra forecloses future analyses of this nature. Notably, while rejecting the notion of temporal severance of a freehold interest, Tahoe-Sierra leaves open the question of where there is a Lucas taking when a temporary development moratorium covers the entire remaining duration of a leasehold interest.
In sum, since 1988 the Supreme Court has noted in several cases the complexity of the relevant parcel problem and the lower courts have devised various rules to deal with the problem. These changes mark a significant shift not withstanding the Court's recent affirmation that ''parcel as a whole'' remains the initial baseline.
Investment-Backed Expectations,
Page 58 PREV PAGE TOP OF DOC
Both Palazzolo and Tahoe-Sierra have affirmed the importance of the Penn Central ''investment-backed expectations'' test. Justice O'Connor's pivotal concurrence in Palazzolo asserted that the Court's ''polestar . . . remains the principles set forth in Penn Central itself and our other cases that govern partial regulatory takings. Under these cases, interference with investment-backed expectations is one of a number of factors that a court must examine.''(see footnote 67) Tahoe-Sierra seconded this analysis.(see footnote 68) However, Palazzolo cautioned that the state supreme court, the decision of which it was reviewing, ''erred in elevating what it believed to be '[petitioner's] lack of reasonable investment-backed expectations' to 'dispositive' status. Investment-backed expectations, though important, are not talismanic under Penn Central.''(see footnote 69)
While the Court held in Palazzolo that expectations of purchasers are not necessarily bound by preexisting ordinances, it has not ruled on the role that such preacquisition rules should play. It also has not determined whether the expectations of property buyers should be constrained by the ''regulatory climate'' as well as by regulations in force.(see footnote 70) Given the plasticity of the expectations concept and the inherent circuity between legal rights based on expectations and expectations based on legal rights, it is crucial that federal agencies receive guidance on this issue that is up to date.
Character of the Regulation.
Page 59 PREV PAGE TOP OF DOC
As noted earlier, Penn Central stated that ''[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.''(see footnote 71) Yet regulation vs. physical invasion was a meaningful Penn Central test only for four years, until the Court held that permanent physical invasions constituted categorical per se takings.(see footnote 72) The Supreme Court's new Brown IOLTA case, discussed above, drew the distinction between regulations intended to constrain the property owner's conduct and regulations intended to confer a benefit on government.(see footnote 73)
In Eastern Enterprises v. Apfel,(see footnote 74) decided in 1998, a plurality of the Court found a statute unconstitutional as applied, given its character as imposing ''retroactive liability [that} is substantial and particularly far reaching.(see footnote 75) That Supreme Court cases such as Eastern Enterprises (and Brown) suggest that new content could be given the Penn Central characterization test was brought home in a recent Court of Federal Claims decision involving a very expensive and specialized fishing vessel that was the subject of legislation precluding it, and it alone, from entering service. (see footnote 76) ''The plurality opinion in Eastern Enterprises . . . suggests that, in considering the character of a governmental action alleged to constitute a taking, at least two [non-Penn Central] factors are also relevant: (1) whether the action is retroactive in effect, and if so, the degree of retroactivity; and (2) whether the action is targeted at a particular individual. Both factors are present here.''(see footnote 77)
Page 60 PREV PAGE TOP OF DOC
These important additions to the meaning of a basic Penn Central test should be incorporated in updated Department of Justice Guidelines.
The GAO has been Unable to Secure Evidence of Compliance with EO 12630
One of the most troubling aspects of the GAO Report is the fact that the four agencies being reviewed for compliance with EO 12630 did not demonstrate that they take its requirements seriously. This situation should be corrected through better management within the executive branch or by the Congress.
Guidelines and Statistics
The GAO Report contains numerous mentions of EO 12630 requirements that are not enforced, of paperwork that is lost, of regulatory processes that apparently wandered off during some passage of time, and of procedures that assertedly were performed but are undocumented.
The Report relates that, although the EO requires annual compilations of just compensation awards, the Office of Management and Budget (OMB) has informed departments and agencies that they need not bother, since such awards are paid by the Treasury's Judgment Fund and not by them.(see footnote 78) Yet aggregate totals of these awards provide valuable information about the state of private property rights, and the externalization of the cost of awards to the Treasury does not motivate agencies to reduce them. Even for the period before the OMB action, the agencies had difficulty in documenting their submissions ''because of the passage of time.''(see footnote 79)
Page 61 PREV PAGE TOP OF DOC
The Attorney General did not issue Supplemental Guidelines for the Department of Agriculture because of substantive disagreements relating to grazing permits on public lands. Beyond that, ''Justice and Agriculture officials also indicated that other issues may have been unresolved, but because of passage of time (nearly 10 years) and the purging of older files, they could not identify other possible reasons why Agriculture's guidelines were not completed.''(see footnote 80)
It also is not clear whether categorical exclusions from the TIA process makes potential abuses of property owners' rights difficult or impossible to discern. For instance, when the Department of Justice issued agency specific Supplemental Guidelines for the Army Corps of Engineers and EPA in early 1989 and Interior in 1993, it included categorical exclusions for matters such as nonlegislative actions to which affected owners consented (Interior), and denials ''without prejudice,'' in which owners could reapply (ACE).(see footnote 81) Given the arduous nature of appeals from agency determinations, ''consent'' to overreaching might be the logical option for a beleaguered property owner. Likewise, owners might have accepted ''non-prejudicial'' denials without refilling, rather than demonstrate the futility of continuing to refine and submit applications.
I am not asserting that the four agencies, or others, behaved in such an inappropriate manner. I do suggest, Mr. Chairman, that a sampling by GAO of agency actions excluded from the requirements of EO 12630 might discern whether such abuse exists.
Documentation of Individual Assessments.
Page 62 PREV PAGE TOP OF DOC
As might be expected, agencies that had trouble devising rules and compiling aggregate data did not document doing an adequate job in performing individual takings implication assessments (TIAs). According to the GAO, ''[t]he four agencies said that they fully consider the potential takings implications of their planned regulatory actions, but provided us with limited documentary evidence to support this claim.''(see footnote 82) ''Agencies provided us with a few written examples of takings implication assessments. Agency officials said that these assessments are not always documented in writing, and, because of the passage of time, those assessments that were put in writing may no longer be on file.''(see footnote 83) Even when written assessments are made, they might be expunged from the records.(see footnote 84)
Even with respect to notices of proposed and final rulemaking appearing in the Federal Register, ''relatively few'' notices mentioned the EO, and most of those contained only a ''simple statement that the EO was considered and, in general, that there were no significant takings implications.''(see footnote 85) The GAO analysis of 375 proposed and final rules published in the Federal Register found only 50 instances where any sort of TIA was mentioned, and only ten finding significant takings implications.(see footnote 86)
Analysis of Takings Awards and Settlements
According to information supplied the GAO by the Department of Justice, 44 regulatory takings cases brought against the four agencies were concluded during fiscal years 2000 through 2002. The just compensation awarded by the Court of Federal Claims in two cases totaled $4.2 million. In addition, the Department of Justice settled 12 additional claims, aggregating $32.3 million.(see footnote 87)
Page 63 PREV PAGE TOP OF DOC
The four agencies informed the GAO that only three of the 14 cases in which just compensation was awarded or a financial settlement made were subject to OE 12630. Of those, only in one case was a TIA performed.(see footnote 88) While these numbers are too small to be statistically meaningful, they are not comforting.
Possible Solutions to Ineffective Protection of Property Rights Under EO 12630
As my testimony has noted, Mr. Chairman, I believe that the Attorney General has been remiss in not updating the takings analysis of EO 12360, and that the Department of Justice and OMB have failed to put in place procedures to ensure that departments and agencies comport with the requirements of the EO.
Administrative Action
The most direct and cost efficient solution to this problem is for the Department of Justice Guidelines to be rewritten and for it, OMB, and the agencies involved to strengthen their rules. This would entail that TIAs be more detailed than sweeping and generalized statements that policies and decisions have no takings implications. On the other hand, in many situations it probably would not be necessary for individualized determinations to be made with respect to each property owner who potentially would be affected.
The challenge is to create some mechanism within agencies that would ensure fully adequate but not overly burdensome compliance. As a check to ensure that such a mechanism is working properly, the Department of Justice Guidelines and Supplemental Guidelines for individual agencies should provide for (1) written TIAs, agency logs, and aggregate data; (2) the retention of these records by the agencies and the submission of aggregate data to the Justice Department or other monitoring agencies; and (3) the periodic auditing of EO 12630 performance through random sampling and other quality control techniques.
Page 64 PREV PAGE TOP OF DOC
If executive branch agencies cannot effectively mandate these necessary tasks, it might be necessary for the Congress to enact remedial legislation.
Private Rights of Action
EO 12630 provides that it ''is intended only to improve the internal management of the Executive branch and is not intended to create any right or benefit, substantive or procedural, enforceable at law by a party against the United States, its agencies, its officers, or any person.''(see footnote 89) Thus, claims that an agency violated the EO fail as a matter of law.(see footnote 90)
If the steps I have outlined above prove unworkable, legislation might be enacted providing standing for either those directly affected by inadequate TIAs, or for citizens generally, to challenge inadequate the process in administrative and judicial proceedings. This would make the protection of private property rights more directly comparable to the protection of the environment under such statutes as the National Environmental Policy Act (NEPA), which requires federal agencies to assess the environmental consequences of, and alternatives to, their proposed actions and policies,(see footnote 91) and the environmental laws that provide for citizen enforcement as ''private attorneys general'' through the filing of federal lawsuits.(see footnote 92)
I recognize, Mr. Chairman, that some would object to making TIAs available on the grounds that they would give property owners and others a roadmap for suit against the United States. That is one of the reasons why I would reserve the provision of affected owner and citizen suits as a last resort if other measures fail. The object would be not to award damages, but to encourage compliance with constitutionally protected property rights.
Page 65 PREV PAGE TOP OF DOC
Conclusion
The subject matter of today's hearing is very important to protecting the rights of American citizens. I commend the Subcommittee for giving property rights, and EO 12630, the attention they deserve.
Mr. CHABOT. Thank you very much, Professor, and thanks to all the witnesses.
I recognize myself for 5 minutes for the purpose of asking questions. First, Ms. Mittal, if I could address you.
What changes to Executive Order 12630 would have made it easier for both GAO and Congress to evaluate the extent to which takings implications are being sufficiently analyzed by Federal agencies, or if they're analyzed at all? In other words, what procedures might make Federal agencies' evaluations of takings implication assessments more transparent to those interested in conducting oversight, like us and you, regarding the extent to which constitutionally protected private property rights are being protected by Federal agencies?
Ms. MITTAL. Just on the basis of the trouble that we had in even obtaining any sort of documentation, there are three or four very simple steps that the agencies could actually implement. I don't know if you would have to change the executive order or the guidelines. You could probably accommodate it either way.
Page 66 PREV PAGE TOP OF DOC
Basically, you know, just requiring that all takings implication assessments be in writing; that would help, so that there's a paper trail. Requiring that they be maintained in some sort of central file or administrative file, so that for oversight purposes somebody could actually get copies of them. Third, you should require the agencies to at least maintain them for a certain period of time.
What we were being told is they're not maintained in the files, they're thrown away, or they're not even put in writing. So these three things would definitely achieve that result. The takings implication assessments would be available, they would be available for review and oversight, and people could actually get copies of them.
The other thing that we would recommend is that the Federal Register notices—those were the things that we tried to look through, 375 of them, and only 50 of them actually indicated that a takings implication assessment was actually done. So maybe specifying the form and content of what a Federal Register notice should include, as well as the conclusions of the takings implication assessments, would be very helpful as well.
Mr. CHABOT. Thank you.
Professor Eagle, let me turn to you for a moment. If you had to prioritize the enactment of the various reforms that you have proposed, which do you think should be done first, and why? What's the most important?
Mr. EAGLE. Clearly, Mr. Chairman, I think that Miss Mittal's response is clearly the first step in what should be done. Before the Congress can accurately determine what further remedies are necessary, I would start with the mildest one, which is simply to hold the agencies to show that they've complied with existing regulations. If that fails, Mr. Chairman, I think it's incumbent upon Congress to go further.
Page 67 PREV PAGE TOP OF DOC
Mr. CHABOT. Thank you very much.
Mr. Marzulla, let me turn to you next. Your organization has issued a report in which it found that actions taken by the Army Corps of Engineers and the Department of Interior were particularly likely to result in taxpayer dollars going to pay compensation in takings claims.
What policies or actions within the jurisdiction of the Army Corps of Engineers and the Department of the Interior might explain that situation?
Mr. MARZULLA. Mr. Chairman, the wetlands program accounts for a very large proportion of the cases which have been brought and concluded, as well as the mining program and several other of the land management programs administered both by the Department of Interior and the Forest Service of the Department of Agriculture.
We therefore believe that, in addition to updating the Attorney General's guidelines, that the individual guidelines for those agencies must be revisited. Clearly they are not working. Every time a judgment is entered against the United States for failure to pay just compensation for property taken, the court is making a finding that this Government has not complied with its constitutional duty, that the system is broken. Therefore, updating those regulations, updating those guidelines, and requiring the takings implication assessments to be done will obviously tend to minimize the number of instances in which takings occur in which just compensation has to be paid, and in which citizens have to sue their Government in order to obtain their constitutional right.
Page 68 PREV PAGE TOP OF DOC
Mr. CHABOT. Thank you very much.
Let me follow up with one more question quickly here. In what sense do final court awards of just compensation represent only the tip of the iceberg regarding the extent to which Federal taxpayers are made to make payments for takings by Federal agencies, and the extent to which private property is taken without just compensation?
Mr. MARZULLA. Mr. Chairman, it is a very arduous process to obtain just compensation from the Federal Government. There is no procedure whereby an individual can go to an agency and request just compensation, in large part because the just compensation doesn't come out of an agency budget.
Why would the Corps of Engineers hand over millions of dollars to an individual, rather than say, ''Go sue the United States, the Justice Department will defend us for free. They've got all their lawyers over there, and if at the end of the day judgment is entered, not only does it get paid out of the Judgment Fund, but we don't even have to report it to OMB or anyone else. Even Congress doesn't know that money has been paid out because we disregarded the Constitution.''
So the requirement is clearly that the guidelines be updated, that the executive order be complied with, and we think that 15 years of noncompliance suggests that a statute is necessary to make sure that gets done.
Mr. CHABOT. Thank you very much.
Page 69 PREV PAGE TOP OF DOC
My time has expired. The gentleman from New York, Mr. Nadler, is recognized for 5 minutes.
Mr. NADLER. Thank you.
Professor Echeverria, if I'm pronouncing it correctly——
Mr. ECHEVERRIA. Yes.
Mr. NADLER. Good. You have been sitting there listening to these rather radical views for the last few minutes, taking notes. Could you just give us your thoughts on what you've heard from the last two speakers?
Mr. ECHEVERRIA. Certainly. Thank you, Congressman Nadler.
I was struck by Steven Eagle's presentation purporting to establish that the Supreme Court has issued a series of decisions working a fundamental change in constitutional law. One point that hasn't been brought out yet is the Department of Justice, as reported in the GAO report, has taken the position that there have been no fundamental changes in constitutional law warranting any revisions of the executive order, in accordance with the requirements of the executive order.
Mr. NADLER. They have made that affirmative finding.
Page 70 PREV PAGE TOP OF DOC
Mr. ECHEVERRIA. They made the affirmative statement to GAO, that in their view——
Mr. NADLER. The Ashcroft-Bush Justice Department.
Mr. ECHEVERRIA. Yes.
Mr. NADLER. Thank you.
Mr. ECHEVERRIA. My own review of the Supreme Court decision confirms that. The Supreme Court has not made any fundamental changes.
If there is one decision I would point to, that at one point in time might have led some people to say the Supreme Court is really going in a different direction, it would be the 1992 Supreme Court decision in Lucas versus South Carolina Coastal Council.
What I think is clear, though, from the subsequent Supreme Court decisions, particularly the Tahoe-Sierra decision and the Palazzolo decision, Lucas applies to a very small, if not infinitesimal category of cases. Lucas does not work a fundamental change, and that the Penn Central analysis, which has been in place since the 1970's, is the governing law of takings.
To the extent that Professor Eagle finds innovations in the law, it seems to me, just as he has with the Pelagic case, he is cherry-picking the law at the Supreme Court level, just as he did at the Court of Claims level, to find dictum and extraneous statements to support his view that the takings clause should be read more broadly than the Supreme Court.
Page 71 PREV PAGE TOP OF DOC
I think we should rely on the judgment of the Department of Justice, that there have been no fundamental changes warranting a change in the guidelines.
I guess the other point I wanted to emphasize is that the takings clause does not prohibit the Government from acting. The takings clause simply requires that the Government pay compensation as a condition of the Government going forward. So contrary to the view presented by Mr. Marzulla, one can view the cases in which the Government has protected a wetland, or taken some other action for public benefit, and has been required to pay compensation, as fulfilling two important objectives: one is fulfilling the objective of Congress in enacting a statute, and in vindicating the right to compensation provided under the Fifth Amendment.
The Court of Claims is a court, not an administrative agency. But as Roger and I both know, having participated in the Court of Claims conference the day before yesterday, it is the people's court. It is a very friendly court, it operates on a nationwide basis, it holds hearings close to the homes of the claimants and to the property at issue in the cases, it's procedures are very user friendly, and when compensation is warranted, that court is available to provide it.
Mr. NADLER. Thank you very much.
Ms. Mittal, the study that Mr. Marzulla describes in his testimony sounds very different from the findings in your study. Did you compare notes with him? Have you had a chance to assess his claims? How do you assess what he said about your study, or how he characterized your study?
Page 72 PREV PAGE TOP OF DOC
Ms. MITTAL. We just received Mr. Marzulla's study yesterday and we have not had the opportunity to look at his results in great detail and compare them to ours. So at this point I couldn't answer that question.
Mr. NADLER. I would note that we haven't seen it at all yet.
Second, Ms. Mittal, did any person in the agency that you studied indicate to you that they were not sure what the law required of them because the guidance has not been revised? Do the agency general counsels do their own research or do they rely on DOJ guidance, and is that guidance not specific enough according to the people in the agencies? Have you gotten such complaints?
Ms. MITTAL. We didn't get any complaints, per se. I mean, the guidelines are a starting point. All of the agency counsels agreed that they provide a general framework for doing a takings implication assessment and, therefore, all of the counsels are doing their own legal research to support whatever issue they're dealing with.
However, you know, the fact remains that two agencies are telling us, Agriculture and Interior, that it would be very helpful for their staff who do this research if the guidelines were updated.
Mr. NADLER. Did anyone say to you that, because the guidelines aren't specific enough, or had not been updated, that they thought they made a mistake in ruling?
Page 73 PREV PAGE TOP OF DOC
Ms. MITTAL. No, no one said that specifically to us.
Mr. NADLER. Thank you very much.
Mr. CHABOT. The gentleman's time has expired. The gentleman is free to make his 11 o'clock meeting, if he chooses, at whatever point.
The gentleman from Virginia, Mr. Scott, is recognized for 5 minutes.
Mr. SCOTT. Thank you, Mr. Chairman.
I guess my interests are a little bit more pragmatic because of the area that I represent, southeast Virginia, where wetlands are a very serious consideration in any kind of land development. We have had complaints from a lot of developers, and I think legitimate complaints, that they can't tell from 1 minute to the next what they can do with their property and what they can't. So let me just get a general idea from the witnesses.
What is the status of a person's entitlement to compensation if they try to build on something that didn't look like wetlands but turns out to be wetlands and they can't build; are they entitled to anything under the takings theory?
Mr. ECHEVERRIA. I'll take a quick stab at it.
The first point to make, I think, is they are likely not to be blocked from getting permission to fill the wetlands. One of the points highlighted in the GAO report is that some 99.9 percent of the applications to the Army Corps of Engineers for fill permits are granted. So——
Page 74 PREV PAGE TOP OF DOC
Mr. SCOTT. Not in my area. I'm sorry, but not in southeast Virginia. But go ahead.
Mr. ECHEVERRIA. Well, then there must be some areas of the country where 100 percent of the permits are granted. There must be many regions of the country where 100 percent of the permits are granted, because those figures cited in the GAO report are consistent with the historical numbers.
The second point is that, generally speaking, the answer to the question of whether or not there will be a taking, the answer is likely to be no, because the Supreme Court has said that a taking is going to arise only when a regulation eliminates all or substantially all the value of the property.
The Court has also affirmed that in evaluating that question, the courts must apply the so-called ''parcel as a whole'' rule. So if an individual owns 100 acres of land, and they've got one acre of wetland, and the Army Corps of Engineers says that serves an important flood control function as well as other public functions, and we decline to grant you permission to fill that, that kind of burden will not rise to the level of a constitutional taking under established standards.
Mr. SCOTT. But if all you own is the one acre, and they say you can't build at all, then what? Are you entitled to anything?
Mr. ECHEVERRIA. Then you have a—depending on some other circumstances, you would have a strong takings claim in that situation.
Page 75 PREV PAGE TOP OF DOC
Mr. SCOTT. One of the problems we've had is trying to get a map to show you what you can do and what you can't do. These maps change. You get one who pays $50,000 and one guy does a map, and somebody else comes right behind and there's another map. The water didn't change. I mean, it's just the map changed.
Are you entitled to any compensation if somebody comes back and says, ''Well, what you thought you could do and the map you had when you purchased the property has changed, and where you thought you could build, now you can't.'' Is that a situation for which you would be entitled to compensation?
Mr. MARZULLA. Congressman, may I address that question? The answer is, I hope so.
We have a case going to trial in the Court of Federal Claims on December 1st in which precisely that sequence occurred. That is, the Corps of Engineers did a delineation of the property on the basis of which the developer then purchased the property, knowing he could develop it.
The Corps then said, ''We made a mistake. Sorry. We're going to go out there and redelineate your property, and if we find that it is wetlands, and now you can't develop it as you intended to do. You have to give about 200 acres of your property over to the public as mitigation for being allowed to actually use your property.'' We will find out from the Court of Federal Claims.
Page 76 PREV PAGE TOP OF DOC
However, let me suggest that I would differ with Mr. Echeverria, the suggestion that everybody gets to fill all the wetlands and so there really isn't a problem out there. A disproportionate number of the takings decisions against the Federal Government arise from wetland permit denials. We could provide the Committee with a list of those cases.
One of the most difficult things for property owners to deal with is precisely the situation that you mentioned. For example, the recent decision by a number of Corps districts—not all of them, I might add. What's a wetland in one place isn't a wetland somewhere else.
The recent decision that if you have a man-made ditch, be it a roadside drainage ditch or whatever, and that ditch runs through perhaps miles and miles of private property, and culverts and pipes and so forth, but eventually empties into a tributary, to a navigable water that, in fact, the property adjacent to that man-made drainage ditch is a wetland under the jurisdiction of the Corps of Engineers, that's an issue that's going to make its way to the Supreme Court in the next year or two.
Mr. CHABOT. The gentleman's time has expired. Would he like an additional 2 minutes?
Mr. SCOTT. Yes, please.
Mr. CHABOT. Okay. The gentleman is recognized for an additional 2 minutes.
Page 77 PREV PAGE TOP OF DOC
Mr. SCOTT. I think the concern that I have is certainty in whether you can build. If you can't build, just let me know before I have invested $50,000 in maps and all that kind of stuff.
Is there anything in these executive orders, now or proposed, that would help in that certainty?
Mr. MARZULLA. A takings implication analysis should be done, Congressman, prior to either denying the permit or placing a condition upon the permit which would make it economically infeasible to build. So the answer is yes.
Mr. SCOTT. Some of that is a little after the fact, because you would like to know that when you purchase the property, whether or not, as in your situation, whether or not you can build on it. You would like to have some certainty and you don't like the map to change and have to spend $50,000 to get a new map, and then stay in court and argue about which map is the map.
Is there anything in these executive orders, now or proposed, that can help in the certainty that you will be able to do or not do what you want to do?
Mr. MARZULLA. To the extent that the Corps of Engineers changes its definition of what is a wetland, its methodology for determining what is a wetland, that change of policy should be subject to a takings implication assessment.
Mr. SCOTT. Is it? Is that the law now?
Page 78 PREV PAGE TOP OF DOC
Mr. MARZULLA. That is what the executive order requires. If you're asking me does the Corps do it? I would guess no.
Mr. SCOTT. So if the Government changes its policy and, therefore, it means that three-fourths of your land is now no longer possible for development, then that would be a takings because there has been a change in policy? Is that right?
Mr. MARZULLA. Yes. If there is a change in policy it's depending on the facts. Obviously, as Mr. Echeverria points out, the facts of each case have to be considered. But the facts that you just stated, that is, a change in policy which says it wasn't a wetland today, we're going to call it a wetland because we've changed the way we define wetland, that would certainly indicate a taking and I would think that would be a case worth looking into.
Mr. CHABOT. The gentleman's additional time has expired. But it looks like we have two more gentleman that would like to address that, so we'll let them both briefly comment, starting with Mr. Echeverria, and then Mr. Eagle.
Mr. SCOTT. I appreciate it, Mr. Chairman. Thank you.
Mr. ECHEVERRIA. Mr. Scott, I think your question really highlights why this executive order is largely unworkable. It doesn't address the issues that you raise.
It is certainly a legitimate question whether or not landowners know where wetlands are and where they are not. That issue needs to be addressed to the Army Corps of Engineers in terms of their procedures for delineating wetlands.
Page 79 PREV PAGE TOP OF DOC
But trying to address that through a takings impact assessment doesn't get you anywhere because, for example, if the Army Corps of Engineers says the on presence of such and such a kind of vegetation, or certain kinds of soils, we're going to decide that that does or does not indicate the presence of wetlands, that's kind of a scientific determination, a technical determination that they will make at a general level in relation to the entire Nation or entire State. And then the question might be, how would that affect individual landowners.
What Mr. Marzulla suggests is that the agency could do a takings impact analysis and say well, if we're going to define the presence of this kind of vegetation as indicative of wetlands, can we make any reasonable conclusions as to whether or not there are likely to be takings?
The answer is no. One cannot make any reasonable determinations because you're not going to know the circumstances of all the different landowners who might be affected, how many acres are involved, how many more wetlands acres or fewer wetlands acres will be involved, how much land the landowners own, all the different circumstances of the individual landowners.
So in order to get at the question you're raising, which I think is a very legitimate one, one does not want to waste agency resources in doing these kind of abstract, legal analyses of potential takings implications of broad policy changes.
Mr. CHABOT. We'll conclude with Professor Eagle.
Page 80 PREV PAGE TOP OF DOC
Mr. EAGLE. Mr. Chairman, I think that Mr. Scott's constituents are perfectly right to think that they should be bewildered because of the inconclusive state of the law. Indeed, one of the anomalous things I find about those who object to Supreme Court cases not being deemed fundamental is that they at the same time maintain the only Supreme Court standard is one that is so totally amorphous that one can hardly glean any rules out of it at all. Therefore, we're left totally in the dark.
For instance, even if one of Mr. Scott's constituents owns land, and at the time he acquired the land there was no regulation against development, and later on, even if the land would be completely deprived of all value, if there is a denial of a permit, there is case law in the Federal Circuit suggesting that that landowner at the time of purchase would have been responsible not only for knowing what the law was that could have precluded his development, but also for knowing what the ''regulatory climate'' was, what law not only exists but might exist in the future.
That's precisely the situation that I think impels the Department of Justice to give as much detail, as much information about the subsequent Supreme Court decisions and lower court interpretations of those to give as effective guidance to policy administrators and regulators on the ground as possible.
Mr. CHABOT. Thank you very much, Professor. The gentleman's time has expired.
Without objection, I would submit for the record citations to three law review articles discussing the original understanding of the takings clause as including regulatory takings.
Page 81 PREV PAGE TOP OF DOC
[The information referred to follows in the Appendix]
Mr. CHABOT. The gentleman from Virginia is recognized for the purpose of making a motion.
Mr. SCOTT. Mr. Chairman, I ask unanimous consent that all Members have five legislative days in which to revise and extend their remarks, and to submit additional materials for inclusion in the record, and submit additional questions to the witnesses for responses in writing for the record.
Mr. CHABOT. Without objection, so ordered.
I would like to again thank the panel for their testimony here this morning. We appreciate it very much.
If there is no further business to come before the Committee, we are adjourned.
[Whereupon, at 11:13 a.m., the Subcommittee adjourned.]
A P P E N D I X
Material Submitted for the Hearing Record
Page 82 PREV PAGE TOP OF DOC
A.eps
MATERIAL SUBMITTED BY MR. MARZULLA
B.eps
C.eps
D.eps
E.eps
F.eps
G.eps
H.eps
I.eps
J.eps
K.eps
L.eps
Page 83 PREV PAGE TOP OF DOC
M.eps
N.eps
O.eps
P.eps
Q.eps
R.eps
S.eps
T.eps
U.eps
V.eps
W.eps
X.eps
Page 84 PREV PAGE TOP OF DOC
Y.eps
Z.eps
A2.eps
MATERIAL SUBMITTED BY MR. ECHEVERRIA
pelagic1.eps
pelagic2.eps
pelagic3.eps
pelagic4.eps
pelagic5.eps
pelagic6.eps
pelagic7.eps
pelagic8.eps
Page 85 PREV PAGE TOP OF DOC
pelagic9.eps
pelagic10.eps
pelagic11.eps
pelagic12.eps
pelagic13.eps
pelagic14.eps
pelagic15.eps
pelagic16.eps
pelagic17.eps
pelagic18.eps
pelagic19.eps
pelagic20.eps
Page 86 PREV PAGE TOP OF DOC
pelagic21.eps
pelagic22.eps
(Footnote 1 return)
Armstrong v. United States, 364 U.S. 40, 49 (1960).
(Footnote 2 return)
482 U.S. 304 (1987).
(Footnote 3 return)
483 U.S. 825 (1987).
(Footnote 4 return)
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. §§ 9601–9675 (2003).
(Footnote 5 return)
Federal Water Pollution Control Act, 33 U.S.C. §§ 1251 et seq. (2003).
(Footnote 6 return)
16 U.S.C. §§ 1531 et seq. (2003).
(Footnote 7 return)
President's Legislative and Adminstrative Message to Congress, 24 WEEKLY COMP. PRES. DOC. 91 (Jan. 25, 1988)
(Footnote 8 return)
Exec. Order No. 12630, 53 Fed. Reg. 8859 (Mar. 18, 1988).
(Footnote 9 return)
Exec. Order No. 12291, 3 CFR 128 (1981).
(Footnote 10 return)
Exec. Order No. 12630, 53 Fed. Reg. 8859 (Mar. 18, 1988).
(Footnote 11 return)
Id.
(Footnote 12 return)
Id.
(Footnote 13 return)
Id.
(Footnote 14 return)
U.S. Attorney General, ''Guidelines for the Evaluation and Avoidance of Unanticipated Takings (June 30, 1988.).
(Footnote 15 return)
U.S. General Accounting Office Report 03–1015 (Sept. 19, 2003).
(Footnote 16 return)
53 Fed. Reg. 8859 (Mar. 15, 1988).
(Footnote 17 return)
Mar. 18, 1988, printed at 18 Envtl. L. Rep. 35168 (1988).
(Footnote 18 return)
GAO Report at 16.
(Footnote 19 return)
EO at §1(c).
(Footnote 20 return)
Id. at preamble.
(Footnote 21 return)
Id. at §1(b).
(Footnote 22 return)
Id. at §1(c).
(Footnote 23 return)
Id. at § V.A.5.
(Footnote 24 return)
Id. at preamble and §1(c).
(Footnote 25 return)
San Diego Gas & Electric Co. v. City of San Diego, 450 U.S. 621, 652 (1981) (Brennan, J., dissenting).
(Footnote 26 return)
Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415 (1922).
(Footnote 27 return)
364 U.S. 40, 49 (1960).
(Footnote 28 return)
EO at §1(b).
(Footnote 29 return)
United States v. 50 Acres of Land, 469 U.S. 24 (1984).
(Footnote 30 return)
Coniston Corp. v. Village of Hoffman Estates, 844 F.2d 461, 464 (7th Cir. 1988).
(Footnote 31 return)
Guidelines at §I.A. (emphasis added).
(Footnote 32 return)
GAO Report at 9.
(Footnote 33 return)
Id.
(Footnote 34 return)
438 U.S. 104 (1978).
(Footnote 35 return)
Id. at 124.
(Footnote 36 return)
505 U.S. 1003, 1015 (1992).
(Footnote 37 return)
Id. at 1015.
(Footnote 38 return)
Palazzolo v. Rhode Island, 533 U.S. 606 (2001). ''Assuming a taking is otherwise established, a State may not evade the duty to compensate on the premise that the landowner is left with a token interest. This is not the situation of the landowner in this case, however. A regulation permitting a landowner to build a substantial residence on an 18-acre parcel does not leave the property 'economically idle.''' Id. at 631.
(Footnote 39 return)
Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 535 U.S. 302 (2002).
(Footnote 40 return)
Good v. United States, 189 F.3d 1355 (Fed. Cir. 1999) (yes); Palm Beach Isles Assocs v. United States, 231 F.3d 1354, reh'g in banc denied, 231 F.3d 1365 (Fed. Cir. 2000) (no).
(Footnote 41 return)
512 U.S. 374 (1994).
(Footnote 42 return)
Id. at 385.
(Footnote 43 return)
Parking Ass'n of Georgia, Inc. v. City of Atlanta, 450 S.E.2d 200 (Ga. 1994), cert. denied, 515 U.S. 1116, 1116 (1995) (Thomas, J., dissenting).
(Footnote 44 return)
City of Monterey v. Del Monte Dunes at Monterey, Ltd., 526 U.S. 687, 703 (1999).
(Footnote 45 return)
520 U.S. 725 (1997).
(Footnote 46 return)
Id. at 733.
(Footnote 47 return)
Williamson County Reg'l Planning Comm'n v. Hamilton Bank, 473 U.S. 172 (1985). See John J. Delaney & Duane J. Desiderio, ''Who Will Clean Up the ''Ripeness Mess''? A Call for Reform so Takings Plaintiffs Can Enter the Federal Courthouse,'' 31 Urb. Law. 195 (1999).
(Footnote 48 return)
Suitum, 520 U.S., at 740–743.
(Footnote 49 return)
526 U.S. 687 (1999).
(Footnote 50 return)
Agins v. City of Tiburon, 447 U.S. 255 (1980). See Steven J. Eagle, ''Del Monte Dunes, Good Faith, and Land Use Regulation,'' 30 Envtl. L. Rep. 10100, 10107 (2000).
(Footnote 51 return)
533 U.S. 606 (2001).
(Footnote 52 return)
Lucas, 505 U.S. at 1029.
(Footnote 53 return)
Palazzolo, 533 U.S. at 629–630.
(Footnote 54 return)
Id. at 621.
(Footnote 55 return)
535 U.S. 302 (2002).
(Footnote 56 return)
Id. at 341.
(Footnote 57 return)
123 S.Ct. 1406 (2003).
(Footnote 58 return)
Phillips v. Washington Legal Foundation, 524 U.S. 156 (1998).
(Footnote 59 return)
Brown, 123 S.Ct. at 1419.
(Footnote 60 return)
Id. at 1418 (quoting United States v. Pewee Coal Co., 341 U.S. 114, 115 (1951).
(Footnote 61 return)
John D. Echeverria, ''A Preliminary Assessment of Palazzolo v. Rhode Island,'' 31 Envtl. L. Rep. 11112, 11114 (2001) (emphasis added).
(Footnote 62 return)
Penn Central, 438 U.S. at 131.
(Footnote 63 return)
Lucas, 505 U.S. at 1016 n.7.
(Footnote 64 return)
Palazzolo, 533 U.S., at 631 (''Some of our cases indicate that the extent of deprivation effected by a regulatory action is measured against the value of the parcel as a whole, but we have at times expressed discomfort with the logic of this rule. Whatever the merits of these criticisms, we will not explore the point here.'') (internal citations omitted).
(Footnote 65 return)
Tahoe-Sierra, 535 U.S. at 327.
(Footnote 66 return)
See, e.g., Ciampetti v. United States, 18 Cl.Ct. 548 (1989); Florida Rock Indus., Inc. v. United States, 18 F.3d 1560 (Fed.Cir. 1994); Palm Beach Isles Assocs. v. United States, 208 F.3d 1374 (Fed. Cir. 2000).
(Footnote 67 return)
Palazzolo, 533 U.S. at 633.
(Footnote 68 return)
Tahoe-Sierra, 535 U.S. at 327 n.23.
(Footnote 69 return)
Palazzolo, 533 U.S. at 634 (brackets in original).
(Footnote 70 return)
Good v. United States, 189 F.3d 1355, 1361 (Fed. Cir. 1999).
(Footnote 71 return)
438 U.S., at 124.
(Footnote 72 return)
Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982).
(Footnote 73 return)
Brown v. Legal Foundation of Washington, 123 S.Ct. 1406, 1418 (2003).
(Footnote 74 return)
524 U.S. 498 (1998).
(Footnote 75 return)
Id. at 534.
(Footnote 76 return)
American Pelagic Fishing Co., L.P., v. United States, 49 Fed.Cl. 36 (2001) (liability); 55 Fed.Cl. 575 (2003) (damages).
(Footnote 77 return)
Id. at 49 Fed.Cl. 50 (citing Eastern Enterprises, 524 U.S. at 532–37).
(Footnote 78 return)
GAO Report at 14–16.
(Footnote 79 return)
Id. at 15 n.21.
(Footnote 80 return)
Id. at 13 & n.18.
(Footnote 81 return)
GAO Report at 12–13.
(Footnote 82 return)
Id. at 16.
(Footnote 83 return)
Id. at 17.
(Footnote 84 return)
See, id. (noting that the Corps of Engineers internal policies require that TIAs be removed from the file once the agency has made a permit decision).
(Footnote 85 return)
Id. at 18.
(Footnote 86 return)
Id. at 19.
(Footnote 87 return)
Id. at 20.
(Footnote 88 return)
Id.
(Footnote 89 return)
EO 12630, §6.
(Footnote 90 return)
Duval Ranching Co. v. Glickman, 965 F.Supp. 1427, 1446 (D. Nev. 1997); McKinley v. United States, 828 F.Supp. 888, 893 (D. N.M.1993).
(Footnote 91 return)
See National Environmental Policy Act, 42 U.S.C. § 4332 (1994).
(Footnote 92 return)
See, e.g., Endangered Species Act, 16 U.S.C. § 1540(g)(1) (2000); Clean Water Act, 33 U.S.C. § 1365 (2000); Clean Air Act, 42 U.S.C. § 7604 (2000).