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"Regulatory Takings" under the Fifth Amendment

On February 26, 2001, one year and one day from the date of the Rhode Island Supreme Court decision in the same case, the United States Supreme Court heard oral argument in a case that could have significant impact on the treatment of "regulatory takings" under the Fifth Amendment to the United States Constitution. In Palazzolo v. Rhode Island (99-2047), the Supreme Court is urged by Petitioner to set reasonable parameters on establishing the availability of compensation under the Takings Clause when regulation goes too far.

The Petitioner, Mr. Palazzolo, has owned the subject property directly and indirectly (through a corporation he held shares in) since 1961. He purchased the 18 acres near the Rhode Island shore when it was nearly all undeveloped marshlands. In the mid-seventies the state changed the designation of the property from "marshlands" to "wetlands." The development of wetlands is essentially prohibited by recently enacted environmental regulations. A short time later, the property ownership transferred officially from the corporation to Mr. Palazzolo individually.

Although the upland portion of the property has been developed, the State will not permit Mr. Palazzolo to place any fill upon the 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 envirnomental regulations 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.

The United States Supreme Court agreed to hear the case on those three issues. More specifically, the Court heard argument and received numerous briefs from amici on the following questions:

    1. Is a regulatory taking categorically barred whenever the enactment of the regulation predates the claimant's acquisition of the property?

    2. Is a claim ripe for consideration if the owner has failed to file additional applications seeking permission for "less ambitious uses" of the property?

    3. Does the mere fact that the property retains some relatively small value and use after imposition of a regulation prevent the occurrence of a compensable taking?

Please join us at our forum, We The People, to discuss the potential ramifications of this case.

U.S. Supreme Court Docket Sheet

Supreme Court of Rhode Island Decision from FindLaw

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