Rediscovering Property

 
 

Has the Supreme Court rediscovered the institution of property? In a recent unanimous affirmation of property owners’ rights, the Court gives us reason to hope.

On Wednesday, March 21, the United States Supreme Court unanimously rebuffed an attempted power grab by a federal regulatory agency. The case, Sackett v. EPA, may have only modest doctrinal importance, but it does suggest that the Court is committed to property rights to a degree that, until recently, was in doubt.

A Classic David vs. Goliath Conflict

The Sacketts planned to build a residence on a lot that they had reportedly purchased for $23,000. They complied with local laws and received assurances from a federal agency that no federal permits were required. After they had begun construction, however, a second federal agency, the Environmental Protection Agency (EPA), appeared and ordered them to stop, insisting that the construction encroached upon protected wetlands.

The Sacketts tried to contest the EPA’s assessment. They denied that their land, which is located near but not adjacent to a lake, is in fact situated on wetlands. As the Supreme Court noted in its majority opinion, the Court has never clearly defined which lands count as wetlands; indeed, one Justice called the relevant federal statute “notoriously unclear.” Thus, the Court acknowledged, affected landowners “lack guidance” and must “feel their way on a case-by-case basis.”

Yet despite this ambiguity, the Sacketts had no legal recourse to contest the EPA’s view of the matter. The EPA denied their request for a hearing, and two federal courts ruled that federal law provides no mechanism for a pre-enforcement challenge. As the Sacketts’ lawyers pointed out, this situation left the Sacketts with an “unenviable choice”: they could restore the property to its original condition, apply for a permit that they believed they were not required to obtain, and pay the associated costs, or they could expose themselves to an enforcement action by the EPA and the associated fines, which could run up to $75,000 per day. Either way, they ran the risk of incurring expenses far in excess of the value of their house lot.

This Hobson’s choice would have rendered the EPA the de facto adjudicator—prosecutor, judge, and jury—of the Sacketts’ rights had the Pacific Legal Foundation, a public interest litigation organization, not agreed to take the case. And when the Supreme Court agreed to hear the case, the Sacketts’ fortunes brightened considerably.

Efficient Regulation Does Not Conquer All

Strikingly, the Supreme Court ruled unanimously in favor of the Sacketts. The legal significance of the Court’s ruling is quite narrow, for the Court did not decide the case on constitutional grounds. It interpreted two federal statutes, one that entitled the Sacketts to judicial review of the EPA’s decision, and another that did not forbid such review. But other implications of the decision are more far-reaching. For one, the Court’s ruling has the potential to influence interpretations of other federal regulatory schemes. One expert earlier speculated that although the Sackett case deals with the EPA’s authority to regulate wetlands, the decision might “have broader application to laws that employ similar enforcement mechanisms.”

Furthermore, the decision contains an important rejection of the federal government’s dim view of property rights. The EPA argued that authorizing landowners to seek judicial review of the EPA’s decisions would have a chilling effect on the EPA’s enforcement efforts: the EPA would be less likely to issue orders halting land development if those orders could be overturned by a court. The Supreme Court allowed that this was true, but found it irrelevant. The presumption of judicial review embodied in federal law, the Court stated, “is a repudiation of the principle that efficiency of regulation conquers all.” The Court found no reason to believe that Congress had intended to give the EPA the authority to strong-arm property owners “into ‘voluntary compliance’ without the opportunity for judicial review—even judicial review of the question whether the regulated party is within the EPA’s jurisdiction.”

The Problem of Individualized Assessments

Justice Alito wrote a separate concurring opinion to explore the broader implications of the dispute. He began his opinion by reproving the federal government’s position, which “would have put the property rights of ordinary Americans at the mercy of [EPA] employees.” In a nation that “values due process, not to mention private property,” it is “unthinkable” that the EPA should have the authority to bully property owners by levying fines that could potentially accumulate well into the “millions.” Yet the Court’s ruling is not enough, in Alito’s view. The majority’s decision is “better than nothing,” but until Congress clarifies the extent of the EPA’s authority, most property owners will have no choice “but to dance to the EPA’s tune.”

Here Justice Alito touched upon a significant issue that goes beyond the EPA’s governance of wetlands. When legislators vest regulatory authority in executive officials but do not promulgate clear, ex ante standards to govern the discretion of those officials, they threaten the institution of property (and the rule of law generally). The problem is widespread and the federal government is not the only culprit. Local governments often authorize land use officials to make so-called individualized assessments against landowners, such as eminent domain condemnations, grants and denials of conditional use permits, and landmark designations. These assessments are made on a case-by-case basis and, much like the EPA’s wetland determinations, are seldom governed by clear rules. As a result, they are unpredictable and prone toward arbitrariness and corruption. They are sometimes used to mask unlawful discrimination, including discrimination against religious landowners.

In recent years, Congress and the states have made modest efforts to address this problem, but it is not clear that these efforts have had much effect. Congress enacted a federal statute in 2000 authorizing federal courts to scrutinize land use regulations that discriminate against religious landowners. But the Supreme Court had already struck down a similar religious liberty law enacted by Congress and, perhaps for this reason, many lower federal courts have taken creative measures to avoid using the more recent law. Many states have enacted statutes limiting the ability of local governments to take land by eminent domain, but these statutes generally leave open exceptions that swallow the rule. For example, local governments may take property that they deem to be “blighted,” a term that is usually very broadly defined to give local officials discretion in determining whether to condemn a particular parcel. A small number of states have made meaningful reforms, requiring local officials to provide express reasons for their regulatory decisions and authorizing state courts to scrutinize the results. But much work remains to be done.

A Shift in Momentum?

Sackett v. EPA is just one skirmish in the larger contest over property. The Court has sanctioned many government offensives against the institution of property and, in the process, it has forced implausible readings upon both constitutional and statutory texts. For example, the Constitution permits governments to take private property by eminent domain only for “public use,” but the Court allows takings for any public “purpose,” including conveyance to a private developer in the (often vain) hope that economic prosperity will result. And though many states authorize local governments to regulate land use only to achieve particular goals, the Court has long forbidden lower courts to enforce those putative limitations on regulatory power unless the landowner clearly shows that the burden on his property right is wholly arbitrary. The Court’s ruling in Sackett does nothing to disturb these precedents.

Nevertheless, momentum in a contest sometimes shifts decisively at a moment when little appears to be at stake. The EPA asked for the unfettered authority to force property owners of limited means to abandon their development efforts. By rejecting the EPA’s argument, the Court defended the role that property owner sovereignty plays in promoting the common good. Private property serves important human values—values that the government cannot always subject to its own interests without undermining human flourishing. Of course, disputes will continue over the appropriate boundary between property owner sovereignty and government regulation. Private property owners are sometimes rightly divested of certain property rights, especially when they exercise their rights in ways that cause harm. But had the Court granted the EPA untrammeled power to declare what constitutes “harm,” it would have left the boundary between property and regulation unwatched. Left to fend for themselves, most property owners would have had no defense.

That did not happen. Perhaps the Court is rediscovering the institution of property.

Adam MacLeod is an Associate Professor at Faulkner University’s Thomas Goode Jones School of Law.

 

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