The United States Supreme Court closed its 2000 term with a favorable decision for property rights, albeit a somewhat lengthy set of confusing opinions that provides only a partial victory for the property owner. In Palazzolo v. Rhode Island (99-2047), the Supreme Court ruled: (i) 6-3 in favor of Petitioner’s ripeness claims; (ii) 5-4 in favor of Petitioner’s claim that a regulatory takings is not barred by the fact that his title was acquired after the effective date of the state-imposed restriction; and (iii) 5-4 that petitioner failed on his claim to establish a deprivation of value because the upland portion retained significant value.

The Supreme Court remanded the case for further consideration regarding the extent of the regulatory taking under the analysis set forth in the seminal case of Penn Central Transp. Co. v. New York City. The factors to be considered on remand include the regulation’s economic effect on the landowner, the extent to which the regulation interferes with reasonable investment-backed expectations, and the character of the government action.

Petitioner Anthony Palazzolo owned the subject property directly and indirectly (through a corporation he held shares in) and attempted to develop the 18 acres since 1961. Although the upland portion of the property can be developed, the State would not permit Mr. Palazzolo to place any fill upon the low-lying wetlands. Mr. Palazzolo sought relief in the Rhode Island courts on grounds that the restrictions constituted a regulatory takings for which he should be compensated under the Fifth Amendment to the United States Constitution which provides in relevant part: "Nor shall private property be taken for public use, without just compensation."

Last year the Rhode Island Supreme Court upheld the trial court decision on grounds that the claim was not ripe because Mr. Palazzolo failed to apply for less ambitious development plans. The court further ruled that Mr. Palazzolo lacked standing to pursue the claim because he acquired the property (in his individual interest from the corporation) after the adoption of the subject regulation and that he had no reasonable "investment-backed expectation" to develop the wetlands. Finally, the court found that his claim failed because he was not deprived of all beneficial use of the property.

Justice Kennedy, delivering the opinion of the slim majority of the U.S. Supreme Court, stated on the issue of land transfer interests that: "[w]ere we to accept the State’s rule, the postenactment transfer of title would absolve the State of its obligation to defend any action restricting land use, no matter how extreme or unreasonable. A State would be allowed, in effect, to put an expiration date on the Takings Clause. This ought not be the rule."

Unfortunately, perhaps the most interesting part of the case, couched in Petitioner’s terms as "whether the mere fact that the property retains some relatively small value and use after imposition of a regulation prevents the occurrence of a compensable taking," remains unanswered by this Court but hopefully will be resolved on remand.

As a footnote, for those interested in the sport of Justice critiquing, you need look no further than the separate concurring opinions of Justices O’Connor and Scalia. The "friendly" banter includes such comments Justice Scalia’s: "I write separately to make clear that my understanding of how the issues discussed in Part II-B of the Court’s opinion must be considered on remain is not Justice O’Connor’s." Perhaps equally as scathing is Justice O’Connor’s single footnote devoted to criticizing Justice Scalia’s concurring opinion. More fun next season, we hope.