Palazzolo v. Rhode Island

Citation. 533 U.S. 606 (2001)

Brief Fact Summary.

Rhode Island regulations prevented Palazzolo from developing his waterfront land into a beach club, and Palazzolo subsequently filed suit against the state.

Synopsis of Rule of Law.

Under the Fifth Amendment of the U.S. Constitution, the government cannot seize private property without providing just compensation.

If a law renders a property valueless, it can be an unlawful taking under the Fifth Amendment. Lucas v. South Carolina Coastal Council.

In Penn Central Transportation Company v. New York, the Court set forth principles upon which Takings Clause claims should be analyzed, including investment-backed expectations.

Facts.

In 1959, Palazzolo formed Shore Gardens, Inc. (SGI). SGI purchased a waterfront land parcel in Rhode Island. In 1971 Rhode Island promulgated regulations designating salt marshes like the ones on SGI’s property as protected coastal wetlands, on which development is limited. In 1978, SGI’s corporate charter was revoked, and title to the land passed to Palazzolo as the corporation’s sole shareholder. In 1983, Palazzolo applied to develop the marsh area of his land to develop a beach club. The Council—the agency that promulgated the regulations—denied Palazzolo’s applications. Palazzo then filed this action.

Issue.

Can a property owner challenge a regulation under the Takings Clause when the regulation was enacted before the property owner acquired the property?

Did the regulation preventing Palazzolo from developing his wetland property constitute a taking without compensation in violation of the Fifth Amendment?

Held.

Yes, a property owner can challenge a regulation under the Takings Clause even if they did not own the property when the regulation was enacted.

No, the regulation did not constitute an unlawful taking under the Fifth Amendment.

Case remanded for further consideration under the Penn Central principles.

Concurrence.

Justice O’Conner

Justice O’Conner agrees that property owners are not barred from challenging regulations as unlawful takings simply because a regulation was enacted before they acquired their property, but she emphasizes that the temporal relationship between the enactment of the regulation and the acquisition of the property is not wholly immaterial to the takings analysis. She argues that the temporal relationship is one factor that courts should consider when analyzing the Penn Central principle of investment-backed expectations.

Justice Scalia

The temporal relationship between the enactment of a regulation and a property owner’s acquisition of a property is immaterial in determining whether a regulation is an unlawful taking under the Fifth Amendment.

Justice Stevens, concurring in part and dissenting in part

Palazzolo did not have standing to bring this claim, because he did not own the property when the regulations where enacted.

Discussion.

Rhode Island argued that individuals that purchase land after a regulation is passed cannot challenge the regulation as a taking. The Court rejected this argument in part because it would allow the State to evade its obligations under the Takings Clause, and deprive individuals of their right to challenge limitations on land use and value. It would also deprive landowners of the ability to transfer the same interest they possessed before the regulation was enacted.

The regulations did not constitute a taking without just compensation, because Palazzolo would still be able to substantially develop other parts of his land, and he would not be left economically idle. Lucas. The state court found that his land retained $200,000 in development value even under the regulations.