Anthony Kennedy. Photo: Diego M. Radzinschi/NLJ

The U.S. Supreme Court on Friday ruled in favor of Wisconsin in a property rights dispute, finding that zoning changes made by the state did not amount a “regulatory taking” for which owners of two small lots near the St. Croix River should be compensated.

The case of Murr v. Wisconsin is a seemingly small-gauge disagreement over two parcels of property that the Murr family purchased more than 50 years ago and later gave to their children. The children wanted to sell one of the parcels, but authorities said that under newer zoning standards, the lots were too small and could not be developed separately.

The family made a claim for compensation under the Fifth Amendment, but the Wisconsin Court of Appeals ruled that, when the properties are viewed together, the zoning regulation did not deprive the family of all use of the property.

The 5-3 ruling by Justice Anthony Kennedy is a blow to conservative property rights advocates who were hoping for a decision that would clarify and define regulatory takings in a way that would make takings claims against regulators easier to make. 

“This is an unfortunate decision for the Murrs, and all property owners,” said John Groen, general counsel of the Pacific Legal Foundation, who argued for the Murr family in the case. “We are disappointed that the court did not recognize the fundamental unfairness to the Murrs of having their separate properties combined, simply to avoid the protection of the takings clause.”

Kennedy wrote, “A central dynamic of the court’s regulatory takings jurisprudence … is its flexibility. This has been and remains a means to reconcile two competing objectives central to regulatory takings doctrine. One is the individual’s right to retain the interests and exercise the freedoms at the core of private property ownership. … The other persisting interest is the government’s well-established power to adjus[t] rights for the public good.”

Chief Justice John Roberts Jr. dissented, joined by Justices Clarence Thomas and Samuel Alito Jr. Roberts said the majority’s approach gives too much weight to regulators. “The result is that the government’s goals shape the playing field before the contest over whether the challenged regulation goes ‘too far’ even gets underway.” Justice Neil Gorsuch did not participate in the case.

Murr developed into a closely watched property case that interested national organizations including the U.S. Chamber of Commerce on the side of the Murr family, and the National Trust for Historic Preservation siding with the state.

The underlying issue is a nearly 40-year-old property precedent Penn Central Transportation v. City of New York, which stopped short of offering clear guidelines to determine when government regulations turn into a taking under the Fifth Amendment.

One of the problems it did mention was how to define the unit of property at issue in deciding whether a regulation amounted to a taking. Instead of dividing up a property for takings analysis, the Penn Central decision focused on “the property as a whole,” which critics say dilutes the impact of the harm the property owner suffers in one part of the property.

Uncertainty over how to define “property as a whole” has led lower courts to “too often engage in an overly complicated and rights-restrictive ‘balancing’ in regulatory takings cases,” the Chamber brief stated. The National Trust, for its part, urged the court not to disturb the Penn Central formulation, asserting that it has led to reasonable regulations, and warning that a change would encourage owners to divide their property into small lots, thereby “artificially increasing the likelihood that a court would find a taking as a result of a regulatory land use law.”

Kennedy’s opinion sided with the “property as a whole” approach, finding that “the state court was correct to conclude that petitioners cannot establish a compensable taking. They have not suffered a taking … as they have not been deprived of all economically beneficial use of their property.”

The decision was a win for Wisconsin Solicitor General Misha Tseytlin, Harvard Law School professor Richard Lazarus, and assistant to the U.S. solicitor general Elizabeth Prelogar, who all argued in favor of Wisconsin’s merger of the parcels. Prelogar was recently recruited to assist with special counsel Robert Mueller’s Russia probe.

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