This hypothetical claiming system looks like that of patent law, under which an invention’s bounds must be demarcated as a prerequisite to patent protection.  But envision for a moment that patent claiming would look more like that of copyright law.  Alexander Graham Bell would receive a patent for his invention of the telephone³ after having fixed (or perhaps commercialized) it in some form.  Assuming the invention complies with the threshold requirements of patent law, the set of protected embodiments would include all substantially similar implementations—a cordless telephone? a fax machine? Internet telephony?—a set to be enumerated on a case-by-case basis in any future infringement litigation, rather than at the time of patenting.  This determination would require courts to ascertain the essential properties of a patented invention.

This thought experiment seems to indicate that claiming the set of protected embodiments under patent law looks very different than copyright law.  And in a sense, it does.  Patent law has adopted a system of peripheral claiming, requiring patentees to articulate by the time of the patent grant their invention’s bounds,⁴ usually by listing its necessary and sufficient characteristics.  And copyright law has implicitly adopted a system of central claiming⁵ by exemplar, requiring the articulation only of a prototypical member of the set of protected works—namely, the copyrightable work itself fixed in a tangible form.⁶ Copyright protection then extends beyond the exemplar to substantially similar works,⁷ a set of works to be enumerated only down the road in case-by-case infringement litigation.

Investigating the claiming practices of patent and copyright law side by side thus illuminates two salient axes for claiming the set of works protected by an intellectual-property right: peripheral versus central and characteristic versus exemplar.  Peripheral claimants must delineate to the public the set’s bounds so that a third party could determine whether any particular embodiment is a set member, thus protected by the right.  By contrast, central claimants must describe only some central members of the set, which are clearly protected under the right and are used to determine whether other items are similar enough to the enumerated members to also fall within the same right.  Central and peripheral claiming might be seen as two points on a spectrum of how many members of the set must be described by the claim, with peripheral claims describing more members than central ones.  Either peripheral or central claiming can be done by exemplar or by characteristic.  Claiming by exemplar entails enumerating particular members of the set.⁸ In the case of peripheral claiming by exemplar, one would enumerate each set member, while for central claiming by exemplar, one would catalog only some set members.  Claiming by characteristic, on the other hand, requires a description of the essential properties of the set’s members.  For peripheral claiming by characteristic, one would describe the necessary and sufficient features common to all members of the set of protected embodiments.  And for central claiming by characteristic, one would express the features common to at least some central members of the set.  Claiming by exemplar and by characteristic can be seen as opposing points on a spectrum of how much distillation of the actual works’ characteristics is necessary.  The table illustrates how the fork might be claimed under each of the four claiming types.  Though scholarship mentions patent law’s peripheral claims⁹ and Clarisa Long and Henry Smith discuss patent law’s claiming requirements and copyright law’s lack thereof,¹⁰ until now these dual claiming dimensions have not been expressly appreciated.

¹¹¹²

The method of ascertaining the extent of the set of protected embodiments, for evaluating validity or infringement, depends on the claiming type.  For peripheral claiming by exemplar, one can determine whether a particular embodiment is protected by observing whether the embodiment matches any claimed exemplar.  Does the fork in question match a fork in the pictured set?  For peripheral claiming by characteristic, one must decide whether the embodiment possesses the claimed features.  Central claiming by exemplar requires divination of the essential features of each claimed exemplar, followed by a determination whether the embodiment is sufficiently similar in those features to a claimed exemplar.  And with central claiming by characteristic, one must decide whether the embodiment is sufficiently similar in its features to those claimed.

Despite patent law’s typical peripheral claims by characteristic, in practice, patent claiming is heterogeneous.  Patent law retains some vestiges of central claiming under which it used to operate,¹³ through the doctrine of equivalents, means-plus-function limitations, and dependent claims.  With some exceptions, the doctrine of equivalents allows a patentee to “claim those insubstantial alterations that were not captured in drafting the original patent claim but which could be created through trivial changes.”¹⁴ Means-plus-function limitations in claims permit a patentee to describe his invention in terms of the functions it typically performs rather than the parts of the invention that carry out those functions.¹⁵ With these claims, protection is statutorily extended beyond the inventions described in the patent’s specification that carry out the claimed function to any equivalents of those inventions.¹⁶ And a dependent claim—which incorporates an independent claim in the patent further limiting the independent claim¹⁷—has no “central claim”-like legal effect of extending protection beyond the described characteristics, but nonetheless has a “central claim”-like communicative effect of highlighting prototypes of the associated independent claim.  Moreover, patent law encourages some claiming by exemplar through its best-mode requirement and Markush claims.  Markush claims allow the grouping of exemplars in otherwise characteristic claims so long as they possess a “community of . . . characteristics which justify their inclusion in a common group.”¹⁸ And to fulfill the best-mode requirement, the inventor must disclose the best embodiment subjectively conceived by the time the patent application was filed,¹⁹ thereby effectively claiming one superior exemplar of the invention.

Just as patent claiming practice can be varied, so can copyright claiming.  By design, copyright law institutes central claims by exemplar; but through the approved use of licenses to permit others to make substantially similar works, copyright in operation involves expression of the bounds of works permissibly created under such licenses and delineation of characteristic features of the set of protected works.  In one striking example, NBC Universal recently licensed a French television company the right to create a French version of the criminal procedural television series, Law & Order: Criminal Intent, and this license incorporated the creator’s thousand-page manual detailing essential characteristics of a Law & Order production that must be followed, such as how many of the show’s characteristic “ching-ching” sounds could be used per act.²⁰ These expressions in legally binding contracts bring forms of peripheral claiming and claiming by characteristic into copyright law.

This description of patent and copyright claiming raises the question of which sorts of claiming work best for each.  The Constitution sets forth the goal of intellectual property laws: “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”²¹ Each of the four types of claiming can affect the costs of drafting claims, efficacy of content notice to the public of the set of protected embodiments,²² ascertainment of protectability, breadth of the set of protected works, and the protection of works grounded in after-developed technologies (technologies postdating claiming).

As to costs of claim drafting, keeping them low is important when the law seeks to encourage easy protection of intellectual property and high otherwise.  Drafting is costlier for peripheral than for central claims and for peripheral claims by exemplar than by characteristic because of the foresight needed. It is also costlier for central claims by characteristic than by exemplar if an embodiment, which could otherwise serve as a central claim by exemplar, already needs to be produced.

Clear content notice to the public of the set of protected embodiments is valuable so that the public can avoid improper use of the set’s members without permission and can, concomitantly, understand what is free for the taking, thereby furthering innovation.²³ The established view is that peripheral claiming provides better content notice than central claiming.²⁴ This view has rightfully come under attack because, among other things, ambiguities inherent in language can render claim construction unpredictable²⁵ and peripheral claims tend to contain highly abstract formulations, rather than colloquial terms, to ensure that a broader set of embodiments is protected.  As Doug Lichtman observes, a reader “might find it easier to read simple, concrete claim language (‘shoelace’) rather than more abstract expressions (‘mechanism by which to bind tightly around the foot’) that are in fact technically superior.”²⁶

Research in cognitive science also suggests that the established view might fail to account for how people process, comprehend, and construct categories and neglect the other dimension of claiming (exemplar or characteristic).  According to this research, people’s categories are formed and comprehended not with a list of necessary and sufficient criteria to test for membership, as the classical Aristotelian view would suggest,²⁷ but rather with prototypes against which to compare potential category members for sufficient similarity.²⁸ Though these studies were done in other contexts, they are valuable in suggesting how to communicate categorical information successfully.  To the extent this research generalizes to categories of inventions or artistic creations in intellectual property law, the necessary and sufficient features set forth by peripheral claiming by characteristic do not accord with the way people learn categories.  Content notice might be better—or just as good—with (well-constructed) central claims conveying prototypes or exemplars, or even peripheral claims by exemplar.  Even if central claims do not provide perfect content notice of categorical boundaries, the evidence indicates that they might do a good job at communicating the crux of the protected embodiments.  There might also be differences in the effectiveness of content notice depending on whether claiming by exemplar or characteristic is used.  Recent experiments suggest that when it comes to learning larger, more differentiated categories, learning by characteristic is prevalent early in the learning process but slowly gives way to exemplar learning.²⁹ By contrast, in learning smaller, less differentiated categories, learning by exemplar is dominant.³⁰ To the extent this research applies to intellectual-property categories—as intuition would suggest—when intellectual property law is protecting a small, poorly differentiated category, claiming by exemplar would be appropriate.  But claiming by characteristic would be more suitable for larger, better differentiated categories, and claiming by exemplar might also play a role in teaching categorical boundaries.

In addition to the varying degrees of difficulty and cost associated with claim drafting and content notice, the claiming systems differ in the ease of assessing whether the claimed set of embodiments is protectable.  This factor is closely related to content notice because the assessor—typically a government actor—needs to understand the set’s scope to ascertain protectability by the relevant intellectual property laws.  Notwithstanding their content-notice problems, peripheral claims are thought to enable the examiner to assess the novel or original features of the claimed set because the full extent of the set is expressly set out by the creator.  For central claims by characteristic, protectability of those set members not literally described by the central claim might not be assessed during examination.  And for central claims by exemplar, assessment of protectability of the full set is more difficult, as the examiner must deduce the essential features of the exemplar.  Of course, embodiments not literally encompassed by the central claim but falling within the set of protected embodiments will be adjudged separately down the line for protectability, if at all.

Another aspect one might think affected by the choice of claiming system is the breadth of the set of protected works.  Though one asks very different questions under each type of claiming to enumerate the corresponding set of protected embodiments, the interpreter does not necessarily arrive at significantly different breadths.  In construing peripheral claims, one can assign claim terms either narrow or broad meaning.³¹ In construing central claims, one can limit or broaden the set of embodiments that are sufficiently similar to the centrally claimed prototype.³² And just as with central and peripheral claims, there is elasticity in construing both characteristic and exemplar claims.  Of course, concern lies not only with the true breadth of the set, as determined by government officials, but with its operational breadth.  Given that there is uncertainty of the extent of the set of protected embodiments under peripheral or central claiming and characteristic or exemplar claiming, aversion to the risk of liability attracts licensees.³³ Licenses will be taken sometimes even when unnecessary—when a patent or copyright is invalid or the valid claims do not cover the licensed activity.  Operationally, such licensing leads to a set of protected embodiments broader than the law would otherwise allow.  Therefore, the better the content notice provided by the claims, as discussed above, the less broad the set of protected embodiments will tend to be operationally relative to actual breadth.

There is one likely exception to the notion that claiming choice does not per se affect the actual breadth of the set of protected embodiments, namely the extent to which works grounded in after-developed technologies are protected.  A peripheral claimant must think well beyond the manifestation of his invention to the future set of manifestations likely to be valuable enough to prevent others from using, even if not presently practicable.³⁴ A central claimant, on the other hand, can defer delineation of the full set of protected embodiments at the outset until the future when, by virtue of time’s passage, the unfolding of related innovation has become clearer.³⁵ Central claims, then, more easily allow for an expansion of protection beyond the claimed core in light of future innovation.

That the choice of claiming systems implicates the foregoing factors—factors essential to calibrating intellectual-property law to stimulate innovation—in different ways underscores the importance of choosing a claiming system with care.

Though previous scholarship principally defends the typical claiming forms for each patent and copyright law,³⁶ I undertake a thought experiment to analyze whether they are ideal for either type of intellectual property.  This task, in fact, is suggested by patent law’s incorporation of not insignificant elements of central and exemplar claiming and copyright practice’s use of peripheral and characteristic claiming.  I explore whether claiming in copyright and patent law can learn from one another.

Though patent law admirably incorporates all four types of claiming flexibly, it can be tweaked to stimulate innovation by adding claiming elements more reminiscent of copyright law.  I suggest that patent law’s typical peripheral claims by characteristic, adopted principally to provide content notice of the set of embodiments protected by a patent, do not provide sufficient content notice, which negatively affects the public’s ability to know what is in and out of the public domain, assessments of protectability (particularly when an issued patent is accorded a presumption of validity³⁷), and the operational breadth of the set of protected works.  To ameliorate these and other concerns, I propose—contrary to conventional wisdom³⁸—that ex ante patent-claim drafting be modified to include central claiming by characteristic.  And claiming by exemplar ought to serve a role in patent law.  Claims by characteristic can be supplemented by requiring the registration of certain exemplars—all commercial implementations, if any, by the patentee or licensee—claimed to be within the set of protected embodiments.  Exemplar registration, which would be available to the public and linked to the associated patent, would help sharpen the understanding of the bounds of the set of protected embodiments.  And it would occur in the situations in which exemplars are most useful, when the patented invention is commercialized and is therefore likely to be valuable—when content notice is important.  These modifications to patent claiming would better serve patent law’s purpose to stimulate innovation by making it easier for the public to identify that which must be licensed to be used and that which can be used freely for follow-up innovation.

Claiming in copyright law is more complicated.  Current claiming practice in copyright law is rigid, and it suffers from various defects, all tied to the poor content notice effected by the central claims by exemplar.  Those defects might suggest that copyright claiming ought to co-opt claiming by characteristic from patent law. But the structure and theory of copyright accentuate significant—perhaps insurmountable—barriers to making changes to the current claiming system.

As it stands, copyright’s central claims by exemplar provide little content notice to the public, leading risk-averse third parties either to take licenses even as to works not protected by copyright or avoid them completely, a situation that grants too heavy a copyright reward at the expense of generating further creativity.  From this vantage point, it would seem far more productive to require or at least provide significant incentive to copyright claimants ex ante to claim their works centrally by characteristic.  This claiming would merely entail, at insubstantial cost, a succinctly expressed pattern of the work at issue.  Such claims might provide significantly better ex ante notice in two ways.  First, the enablement of feature-by-feature comparisons would help indicate those works that would be considered substantially similar to the created work and thus protected under the copyright.  Second, such claims would help explicate which substantially similar works would nonetheless be permissible uses under the doctrine of fair use³⁹ by encouraging determinations of works that borrow from the copyrighted work in ways that do not implicate too many of the claimed features or transform it significantly.  These effects, on the view of one concerned with copyright’s poor notice, would increase overall production of creative works by providing the incentive to create copyrighted works and by encouraging creation by third parties beyond the copyright.

But that is far from the complete analysis.  Viewing the copyright system as a whole through a wider lens identifies significant, and perhaps insurmountable, theoretical and practical concerns with central claiming by characteristic.  First, there is a concern that requiring copyright holders to claim their works by characteristic, even if centrally, might cause copyright law to contravene the First Amendment by granting protection to ideas, rather than the expression copyright seeks to protect.⁴⁰ A second concern lies in whether artistic creators will feel at ease demarcating the essential pattern of their creation.  A related third concern is whether the described characteristics could capture the artistic essence of the work.  Consider the likely claim for a Jackson Pollock painting: a painting comprising varied colors of dripped, flung, or spattered paint.⁴¹ That description does not capture—and arguably cheapens—the artistic essence and effect of Pollock’s paintings.  Fourth, there is apprehension about the cost and viability of the administrative and legal support necessary to institute central claims by characteristic, due to the ex ante examination claims by characteristic might require, the number of claims to be written, and the legal support necessary to assist copyright holders.

All in all, I suggest that there has been a severe underinvestigation of claiming practice in intellectual property and that the handful of explorations of the topic have overlooked some of the important aspects of the taxonomical, descriptive, and normative features of intellectual property claims. To maximize innovation, it is imperative that claiming practice, a key factor of intellectual property systems, be explored and optimized.

Acknowledgments:

Copyright © 2010 University of Chicago Law Review.

Jeanne C. Fromer is an Associate Professor at Fordham Law School.

This raises important questions:  To what extent does current land use and property law protect existing uses?  To what extent does the Constitution demand this level of protection?  Are there normative justifications for protecting existing uses?  The answers turn out to be surprising.

Courts have developed a variety of doctrines that assume categorical protection for existing uses.  In fact, however, current constitutional rules do not compel it.  Moreover, there are no particularly good reasons to treat the existence of a use as the boundary line between property that can and cannot be regulated.  A more sensible approach to existing uses—and one that the Constitution in fact permits—is to treat them in the same way as prospective future uses.  There is no persuasive reason to afford greater legal protection to an existing decrepit shack in the woods than to a developer’s reasonable but not yet realized plans for the future.

 
I.
The Special Protection of Existing Uses

The law’s treatment of existing uses appears across a wide cross-section of land use doctrines.  The Standard Zoning Enabling Act, dating back to the 1920s, wrestled with the problem of existing uses,and implicitly took the view that the Constitution does not compel their protection.  Nevertheless, the subsequent evolution of zoning and land use law has largely assumed constitutional protection without explicitly addressing the issue.  In fact, much of the protection of existing uses in current law can be found in its exceptions—exceptions that, by their nature, assume some unstated background rule that existing uses are categorically different than prospective future uses.

This is most apparent in the law of prior non-conforming uses, that is, preexisting uses of property made impermissible by a subsequent zoning change.

To deal with prior non-conforming uses, many states have adopted amortization provisions that allow the application of zoning restrictions to prior non-conforming uses so long as the use is allowed to remain in place for some time.  If the property owner is given sufficient time to amortize her investment, the government can then require the property to come into conformity with new zoning regulations without paying compensation.  The constitutional issue often presented by amortization provisions is the duration of the amortization period required under the Due Process and Takings Clauses.  Strikingly, courts have almost entirely failed to ask why an amortization period is required at all.  The unstated assumption built into amortization rules is that existing uses are categorically protected from zoning changes in the absence of amortization. 

Another easy place to discern the special protection of existing uses is in the vested rights doctrine, which defines when a property owner has taken sufficient steps in developing her property so as to immunize it from new regulations.  The doctrine is implicated when a property owner has begun, but has not yet completed, some project before the government downzones the property or otherwise changes applicable land use regulations.  The constitutional issue here is usually deciding when the development rights vest—upon hiring an architect, obtaining permits, or pouring a foundation?  Under the vested rights doctrine, then, property rights are subject to a kind of existing use tipping point:  Once a property owner has done enough to establish a particular use on her property, it is suddenly protected from regulatory change.

The nuisance exception to takings liability is similar.  Core takings doctrine holds that the government can regulate away an existing use in order to prevent a harm.  The corollary is equally important but invariably left unstated:  If the government is not preventing a harm, it cannot eliminate an existing use.

In short, a number of important land use doctrines assume that existing uses are entitled to protection, but the basis for that protection is left unstated and is entirely unclear.

 
II.
The Illusory Constitutional Basis for Existing Use Protection

Instead of a coherent set of protections based on sound constitutional footing, existing use protection is generally an unexamined assumption that courts blindly follow.  Neither the Takings nor the Due Process Clauses provide the protection for existing uses that courts generally assume.

 
A.     The Takings Clause

The principal basis for takings liability comes from the Supreme Court’s Penn Central¹ test.  The factors for determining whether a regulation is a taking include its interference with distinct investment-backed expectations and the extent of the diminution in value it caused.  The first factor has the potential to provide the most significant protection for existing uses; however, it is now principally used to distinguish a property owner’s reasonable expectations from pie-in-the-sky development dreams.  In other words, the test today focuses more on the reasonableness of a property owner’s expectations, not on the extent of her investments, and therefore focuses on future uses and not existing ones.

Diminution in value, the second Penn Central factor, has become the cornerstone of takings jurisprudence, and it provides even less doctrinal justification for protecting existing uses.  Applying this factor, a regulation is a compensable taking if it reduces the value of the property by too much.  A regulation of an existing use is more likely to be a compensable taking than a regulation of a prospective future use because it will have a more significant impact on the value of the property.  But because the Penn Central test is applied in reference to the value of the property as a whole, it serves only to prevent the government from eliminating valuable existing uses on parcels of land that have little other value.  Where the existing use either does not add very much value to the underlying property—such as in the case of run-down, low-income housing in a gentrifying neighborhood—or where an existing use is but one part of a much larger property, the diminution in value test provides very little protection.

 
B.     Due Process Clause

The Due Process Clause is the other principal source of constitutional protection for private property.  For almost a century now, courts have had little appetite for striking down economic regulations on substantive due process grounds.  Land use, however, remains one area where courts have consistently been willing to invalidate regulations under substantive due process.

As the Supreme Court recently explained in Lingle v. Chevron,² the Due Process Clause prevents government regulations that are arbitrary or irrational, including regulations that have an insufficient means-ends fit.  Due process therefore prohibits the government from imposing harms that are disproportionately high compared to the benefits that are created.  Judicial review is highly deferential, and land use controls enacted pursuant to the government’s police power are entitled to a presumption of validity.  Some courts have found land use regulations irrational simply because of their impact on existing uses.  More typically, however, the due process inquiry into means-ends fit is only tangentially related to existing uses.  Indeed, in most situations, a municipality’s decision to eliminate an existing use is both perfectly rational and likely to succeed in achieving its goals.

Therefore, the due process inquiry itself does not appear to provide particularly strong protection for existing uses.  Its balancing of benefits and burdens is effective at proscribing arbitrarily short amortization periods or arbitrary distinctions in the development process that determine whether rights vest, but it does not explain why amortization periods are required at all or why vested rights are entitled to protection against legislative change.

 
III.
Normative Accounts of Existing Use Protection

If the Constitution does not compel categorical protection of existing uses, does (or should) the protection come instead from more general normative considerations?  The most likely normative justifications focus on:  (1) the nature and extent of the loss; (2) protecting reliance interests and the status quo; and (3) political economy.  None of these possible justifications for the categorical protection of existing uses withstands serious scrutiny, although each could justify protection in specific cases or contexts.

 
A.     Nature and Extent of the Loss

It is perhaps tempting to situate the protection of existing uses within the broader set of legal constraints against retroactive legislation.  While the Ex Post Facto Clause does not apply outside of the criminal context, deep rule-of-law concerns disfavor retroactive laws.  Failing to grandfather existing uses looks like retroactive lawmaking.  In actuality the line between retroactive and prospective laws does not necessarily track the line between existing uses and prospective ones.

It is surprisingly difficult to define what counts as a retroactive law.  Even prospective-only regulations can have a significant retroactive effect.  Leading academic accounts of retroactivity distinguish between strongly and weakly retroactive laws.  The former alter a legal status retroactively (for example, defining conduct as criminal after the fact); the latter change a legal status only prospectively, but rely on events that predate enactment of the law (for example, prospectively repealing the mortgage interest tax deduction).  In the land use context, imagine a new zoning ordinance that eliminates a particular existing use.  That zoning ordinance is not strongly retroactive because it only operates prospectively—that is, it does not impose civil or criminal penalties, say, for the existence of the use in the past.  It has a severe “weak” retroactive effect, however, because it interferes with the owner’s prior investment in the existing use.  But almost all land use regulations are retroactive in this sense.  Any land use regulation threatens to undermine settled expectations concerning the uses of property.

Antiretroactivity rules and norms are therefore either under- or over-inclusive when it comes to protecting existing uses.  If they only prohibit regulations that actually change preenactment legal statuses (that is, that are strongly retroactive), then they permit prospective regulations regardless of their impact on existing uses.  If they prohibit regulations that simply interfere with settled expectations (that is, that are weakly retroactive), then they do not distinguish between regulations of existing uses and regulations of undeveloped property where the owner reasonably expected to be able to build.  Retroactivity on its own does not explain, let alone justify, existing use protection.

Perhaps, alternatively, existing uses demand protection because of the nature of the losses they impose.  Simply put, the owner of an existing use is likely to value it more than an otherwise identical use that does not yet exist—a phenomenon that behavioral economists cast in terms of endowment effects.

While this account has considerable descriptive force, it is very difficult to justify treating these psychological connections differently from any other subjective value an owner may feel toward her property.  In other contexts, courts have reasoned that the difficulty—indeed, the seeming impossibility—of measuring subjective value with any precision militates in favor of ignoring it altogether.  There is really no conceptual difference between the subjective value resulting from the actual possession of property and the subjective value resulting from, say, property being in the family for a long time.  Furthermore, applying the subjective value intuition to justify protecting commercial property or abstract investments in property is far more of a stretch.

One may argue that these economic accounts miss some more fundamental aspect of existing uses and the connection that can develop between people and their property.  As Professor Margaret Radin has observed, these relationships can implicate the owner’s very personhood.³

Even if this is sometimes true, an existing use is at most a necessary but not sufficient precondition for property to implicate personhood.  It is simply not the case that all or even most existing uses involve personhood at all, let alone to an extent that demands protection.  The kinds of existing uses frequently at issue in land use disputes are commercial uses or property owned by corporations.  Personhood in such contexts simply is not—or at least not often—at issue.

 
B.     Protecting the Status Quo

Another kind of explanation for the protection of existing uses may come from property law’s more general role in promoting stability.  This claim, however, is problematic both descriptively and normatively.

First, descriptively, existing use protection could either protect stability in legal rules or in actual uses of property.  Neither are plausible, however.  The former provides no basis for singling out existing uses for special protection—stability in legal rules would resist any change in the law, regardless of the impact on existing uses.  But existing use cannot be about stability in the actual use of property either.  Indeed, the history of property law in this country is the history of promoting increasingly intensive uses.  It is not about stability but about encouraging productivity.  Existing use protection is only consistent with this history to the extent that it protects existing uses from less intensive uses, not more intensive ones—a distinction that simply does not exist in the doctrine.

Instead of protecting some kind of objective stability, perhaps existing use protection can be justified as protecting property owners’ subjective expectations about the use of property.  It is one thing to protect a property owner’s claim that she hoped, someday, to develop her property.  It is, perhaps, something else to protect the property owner who has already actually done so.  Viewed this way, existing uses have salience primarily because they are particularly good evidence of a property owner’s real expectations about the use of her property.

This account has some descriptive power, but again it does not justify categorical protection of existing uses.  Most profoundly, it does not explain why a property owner’s individual plans should be a relevant consideration for property protection in the first place.  When it comes to prospective future uses, the law does not even aspire to protect all genuine and reasonable expectations.  Developers are routinely required to scale back projects and offer concessions as part of the development process, regardless of the sincerity of their original expectations.  So long as that interference does not go too far, it is not impermissible and does not trigger takings liability.

 
C.     Political Economy

An entirely different kind of normative justification for existing use protection comes from the potential for systemic political malfunction.  Under one account, property protection should be at its highest when political protections are at their weakest.  The question, then, is whether owners of existing uses are likely to suffer from a predictable political failure.

If anything, owners of existing uses would seem to enjoy a predictable political advantage:  They are easy to identify and tend to have high stakes in regulatory changes affecting their uses, making them easy to mobilize into an effective special interest group.  In the rough-and-tumble of interest group politics, the class of existing owners appears far less susceptible to the kinds of political failures that can occur when costs are imposed on a diffuse, disinterested, and unorganized group.

There are admittedly some political process failures that may suggest a need to protect particular existing uses from exploitation. Most pressingly, governments can single out owners of specific kinds of disfavored existing uses to bear regulatory burdens. Zoning away adult businesses is perhaps the easiest example. But this same political dynamic exists whenever a municipality can single out any disfavored use.

Ultimately, however, it is difficult to generalize about the political power of owners of existing uses.  It is likely to depend on the nature of the government and the nature of the use.  This variety in the political story cannot justify the blanket protection that existing uses receive.

 
IV.
Existing Uses as a Proxy for Other Interests

The fundamental problem with the plausible justifications for categorical protection of existing uses is that the presence of an existing use does not always correspond to the various interests that existing use protection might claim to protect.  Importantly, though, this is not an argument that existing uses are irrelevant or never represent important and protectable interests.  Frequently, the presence of an existing use is a relatively good proxy for high transition costs or high subjective value.  Existing use protection can then perhaps be defended as an easy-to-administer bright-line rule.  Although overbroad, it prevents harms that are often—even if not always—associated with the elimination of an existing use.

If existing use protection were costless or sufficiently cheap, an admittedly overbroad prophylactic rule might make good sense.  But even without providing a full empirical accounting of the costs and benefits, there are some strong reasons to be skeptical of this prophylactic justification:  The costs are likely to be too high and the benefits too low.

Protecting owners from legal change—whether in the form of compensation or grandfathering—creates predictable and potentially perverse incentives.  One of the most obvious is the opportunity it creates for property owners to make investment decisions specifically to take advantage of temporarily favorable regulatory treatment.  In the face of a future regulatory change, property owners can lock in a current use by building or by vesting rights before the regulatory change takes effect.  This can precipitate a race to develop and can lead to inefficient over-investment in property.

Existing use protection can also lead to inefficient investment decisions simply by allowing property owners to ignore the risk of an adverse government action.  If property owners know that the government will compensate them for their existing uses, they may fail to account sufficiently for the risk of regulatory change.

Existing use protection may also make local governments less willing to experiment with zoning.  The less flexibility local governments retain to get out of unsuccessful zoning decisions, the less they will innovate where the outcome is uncertain.  If planners have to zone around existing uses, then a significant part of any zoning project will involve incorporating the existing uses, whether or not they make sense where they are.  Categorical existing use protection can hobble a local government’s zoning power by locking in the status quo and preserving incompatible neighbors.

In addition to these significant costs of existing use protection, many of the apparent benefits are largely illusory.  There are two principal problems.  The first, quite simply, is found in the exceptions to existing use protection.  Because courts generally accept as inviolable the implicit protection of existing uses, they instead focus on such theoretically unsatisfying questions as whether pouring a footing for a foundation is sufficient to vest development rights or whether environmental protection counts as preventing a harm or conferring a benefit.  If the benefit of categorical existing use protection is supposed to derive from the ease with which it can be applied, the myriad and murky exceptions substantially undermine this rationale.

The second problem with existing uses as a category is deciding what it actually includes.  How the use is characterized will determine whether or not a regulation even implicates the protection of an existing use.  The more narrowly an existing use is defined, the more any regulation will look like it eliminates that use.  If a local government requires homeowners with wells to hook into the municipal water supply, it could be seen as eliminating the existing well or merely as regulating the continuing use of the house.  Existing uses may not define an easily administrable category for property protection after all.

 
Conclusion

The normative justifications for current existing use protection are surprisingly unconvincing.  The costs are also substantial.  This is not to suggest, however, that existing uses are irrelevant and should simply be ignored.  Rather, it is to argue that blanket, categorical rules exempting existing uses from regulatory change protect too much.  Instead, courts and government actors should apply the same kind of inquiry to existing uses that they apply to prospective future uses.  The outcome may well be different if a use already exists, but not because there is anything sacrosanct about the existing use, and not because the analysis itself is any different.

Following this approach, governments still should not make a common practice of trampling over existing uses.  In many, if not most instances, governments should protect existing uses as part of the usual cost-benefit analysis that they undertake.  It is ultimately an empirical question whether a particular existing use should be protected in a particular case.  In other contexts involving such economic regulations, courts rarely interfere to second-guess legislative cost-benefit determinations.  There is little, if anything, conceptually different about existing uses that justifies special judicial protection.

Acknowledgments:

Copyright © 2009 New York University Law Review.

Christopher Serkin is Associate Professor at Brooklyn Law School and a 2009 Visiting Associate Professor at the University of Chicago Law School.

This Legal Workshop Editorial is based on the following Law Review Article: Christopher Serkin, Existing Uses and the Limits of Land Use Regulation, 84 N.Y.U. L. REV. 1222 (2009).

A more narrowly tailored way to protect property rights in the context of takings for private economic development focuses on the word “use” rather than the word “public” in the Fifth Amendment.³ Instead of requiring that takings be proposed for a purpose more “public” than private economic development, I would require that land taken for private economic development actually be used for the claimed public purpose.

My proposal would address two troubling aspects of current takings law.  First, current law allows for the taking of private land without assurance that a public benefit will ever be realized, such as with a taking justified by a development plan.  When the Court approves such a taking based on the public benefit promised by the plan, the owner has no remedy even if the proponent of the plan abandons the project and the public purpose is never realized.   This possibility has become reality in the aftermath of the takings at issue in Kelo.  Not only has no development occurred on the taken land, but Pfizer Inc. announced on November 9, 2009, that it will close the New London research facility that the development planned for the taken land was internded to complement.⁴ There is no prospect of public benefit being achieved on the taken land, and the former property owners have no claims.

Second, current law creates incentives that encourage inefficient takings, by which I mean takings where the political and legal costs are greater than the public benefit achieved.  These occur, at least in part, because the Court’s failure to require actual public use of taken land allows for takings based on exaggerated public benefits.  The following stylized analysis illustrates how the interaction between a government and a private developer seeking a taking leads to condemnations based on misinformation.

I.
The Problem of Inefficient Takings: A Simple Model

The process of taking land starts with a proponent, who I assume is a private developer.  After failing to convince a landowner to sell a parcel, the proponent proposes to a government that the land in question be taken via eminent domain.  The government responds by asking what public benefit will justify the use of this power.  The developer is unsure of the public benefit of the project, but she knows she needs the land to proceed and that current law will not force her to provide whatever public benefit she promises.  Additionally, the developer does not know how much benefit the government wants for the taking, and she wants to avoid underbidding.  The developer thus has every incentive to exaggerate her estimate of public benefit.

But why would the government accept these exaggerated claims of public benefit?  First, the government may actually believe the claims made by a private proponent, accepting them based on wishful thinking.  Officials, presumably feeling they have little to lose, may be willing to embrace exaggerated claims in hopes of fostering optimism and change.

Second, government officials may not be pursuing the public interest single-mindedly.  Instead, they may take their self-interest as well as the public interest into account when considering a proposed condemnation.  Government officials reviewing a request for a taking might be willing to embrace an implausible public benefit estimate for a number of self-interested reasons.  For example, officials concerned about their prospects for reelection might encourage development regardless of its likelihood of success so that voters will see them as taking action to address widely publicized problems such as urban blight.  After all, voters will not know the plausibility of the projects in the short term.  Another self-interested reason that government officials might accept inflated public benefit claims would be to garner political support from powerful interest groups, which could provide campaign financing and loyal constituents.

II.
The Solution: An Actual Use Requirement

My proposal solves this inefficient takings problem by focusing on changing the behavior of private actors while also making condemnees whole.  By forcing private developers to substantially deliver on their promises of public benefit or pay damages severe enough to deter, an actual use requirement would make real the imaginary currency of public benefit.  A developer would carefully consider all elements of a proposal that claims to yield a certain public benefit because she would be committed to substantially completing that proposal.  Completing an element of the plan that was supposed to provide a benefit—a hotel that would employ 100, for example—would be extremely expensive if the market could not support the element (for example, if demand for hotel rooms proved inadequate).  Thus, the developer would no longer have an incentive to exaggerate.

With an actual use requirement, the proponent would approach the government with an accurate estimate of the public benefit.  The public-minded government then could compare the condemnation cost with the public benefit using accurate information and make a good-faith takings decision.  The respective roles played by the legislative and judicial branches would not change, but each party would be better able to fulfill its current role because it would have more complete information.  A political branch remains empowered to make the political decision of how to expend public resources by taking land.  This is important not just because the Supreme Court demands it,⁵ but because the legislature, with its closer ties to the community in question and greater access to expert planners, is better positioned to evaluate a proposed development than the courts.

III.
The Remedy for Inefficient Takings

A fairly simple remedy would serve to deter inefficient takings.  When the public purpose that originally justified a taking is not substantially realized, the land must be returned to the condemnee, if practicable, in exchange for the compensation originally paid for the taking, and the condemnee must get damages to compensate her for the inconvenience of being forced from her property, as well as mental and emotional damages.

Unfortunately, the first part of this remedy—the return of condemned land in exchange for the original just compensation—will often be impracticable.  If the condemnee does not discover the development is falling short of its proclaimed purpose until the site of her former home has become a putting green, she cannot simply seek an injunction ordering the return of her home:  To issue an injunction would be disproportionate or wasteful.  Meanwhile, the condemnee may have moved to another city and no longer desire to return to her home years after being removed from it.  To account for this reality, condemnees would also have the option to keep the just compensation and only sue for the additional damages.

The damages component of this remedy is derived from remedies in tort where the cause of action arises under the Constitution.  Constitutional torts generally are awarded like common law torts, with damages designed to compensate for the injury resulting from the violation of a constitutional right.  Here, damages would total the amount necessary to compensate the condemnee for being forced from her property for a period of years, and they would in many cases include a significant emotional distress element.  Awards would vary case by case.  For example, a large emotional distress award might be appropriate in the case of someone like Wilhelmina Dery, the 91-year-old New London resident forced from the home of her birth by the Kelo taking.  However, a lesser award with no emotional damage component would be appropriate if a vacant lot had been taken.  This flexibility would partially compensate condemnees for subjective value, something not achieved by any current remedies.

IV.
The Trigger for the Actual Use Remedy

The development plan used to justify a taking would determine whether the actual use remedy is triggered.  The development plan already plays a key role in takings law:  When the Supreme Court approves an economic development taking, it does not rule that a certain public benefit justifies taking private land but rather that a development plan promising some benefit does.  To ensure the benefit promised by the plan is realized, an actual use requirement recognizes a condemnee’s continuing interest in her property until the public benefit laid out in the approved development plan is substantially achieved.  If the plan justifies the taking, then it should be the substantial achievement of the benefit promised by the plan within the time frame of the plan that extinguishes a condemnee’s right in the property.  Essentially, an actual use requirement treats a taking for economic development by a private party as contingent upon completion of the justifying development.

Requiring developers to follow through substantially on the justifying development plan is important for several reasons.  First, it provides an affirmative guarantee that a public benefit will be achieved from the taking.  Current statutory and contractual guarantees generally only prevent developers from straying from the plan justifying a taking; they do not require them to actually fulfill the plan.

Second, the plan sets the physical and temporal standards that must be met to prevent a taking from being unconstitutional.  Once the plan is fulfilled in good faith, the Fifth Amendment’s demands are met.  The plan’s success would be measured by the completion of its physical goals, such as building a 350-room hotel within a certain time frame.  The completion of the development plan, in most cases, should serve as an adequate proxy for the public benefits the plan will create.  A rational developer would be unlikely to expend the resources to build a facility with capacity it did not believe it could utilize.

Developers also would be free to sell the property they received by a taking.  However, the sale would be subject to the development plan that justified the taking; the constitutional right of condemnees would run with the land and plan, allowing condemnees to press their claim against the new developer.

Finally, the plan would control the timing of the constitutional right.  Development plans set out time frames for the achievement of the public benefit they promise.  The substantial achievement of this public purpose within the promised time frame would extinguish condemnees’ constitutional interest in the land, in effect ending the contingency of the transfer.  However, it bears emphasizing that actual use calls for substantial and not complete compliance with the development plan.  This is essential to provide courts and developers with the wiggle room to prevent wastefulness when complete compliance becomes impractical for unforeseen reasons despite the good faith efforts of the developer.  Whether a project is substantially complete would be a case-by-case inquiry.

V.
Responses to Possible Objections

The temporal element of my proposal could inspire objection.  A critic could argue that extending the possibility of suit until a public purpose is achieved would lead to uncertainty for governments and developers, waste for society, and headaches for the courts.  Developers and governments seeking only fair profit and the public good could end up having to pay damages if a well-intentioned project fails for reasons beyond their control.  Meanwhile, courts might have to confront the same parties multiple times as condemnees presented new challenges.

Regarding uncertainty, there is no question an actual use requirement would add to the risk faced by proponents and governments.  This risk is not unfair, however, because these parties would be aware of it before taking the land.  Among the many factors a developer would want to consider when proposing a taking would be whether the project would be worthwhile even when discounted by the remote possibility of a catastrophic event.  The proponent would only seek takings with benefits so large that they justify the risk.

In the event that a developer did seek and win approval for a taking, one could argue that forcing the developer to finish a project in the face of more socially advantageous alternatives would be wasteful.  However, an actual use requirement would permit solutions commonly used by businesses to deal with this situation, such as efficient breach.  A developer might very well opt out of her development plan if other opportunities were lucrative enough.  Of course, given the expense of the actual use remedy, breach would be efficient less often than under a standard contract.  But developers engaging in takings under an actual use regime would be well aware of the damages they face and thus would weigh this risk when considering whether to take on a project.

Moreover, an actual use requirement is not intended to provide a business environment on par with one that does not require the government’s coercive power to take land.  Rather, it is intended to protect constitutional property rights by giving developers the incentive to provide governments with accurate information on which to base their takings decisions.

Acknowledgments:

Copyright © 2009 New York University Law Review.

William A. Curran received his J.D. from New York University School of Law in 2009.

This Legal Workshop Editorial is based on Mr. Curran’s Student Note: William A. Curran, Preventing Real Takings for Imaginary Purposes: A Post-Kelo Public Use Proposal, 84 N.Y.U. L. REV. 1656 (2009).

The identification of intense preferences is clearly crucial when a market for the relevant entitlement does not exist or when there is a significant risk of market failure.  In such cases, we cannot rest assured that voluntary transactions would eventually transfer goods to those who desire them most.  Identification is important, however, also in circumstances where functioning markets exist.  Rules directly addressing the needs of individuals with strong preferences can economize on transaction costs and increase the resultant efficiency gains, while simultaneously avoiding the market’s inherent bias against those unable to pay.

The detection of intense preferences is a difficult task.  For example, people asked to verbally state the strength of their preferences may lie in order to improve their position.  The Law-and-Economics literature has largely focused on a narrow, though important, aspect of this identification issue.  Much attention has been devoted to the case of owners’ subjectively high valuation of land, primarily in the context of compensation for takings.  It was proposed, for instance, that compensation be determined according to owners’ self-valuations (declared either in advance, before any conflict has arisen, or after the government considers expropriation of the property).  Such devices as basing property taxes on self-assessments and requiring future sale prices to at least equal self-declared values would achieve truthfulness.  Alternatively, owners selling their property below their former evaluation would have to pay the difference to the government or to their favored charity.  This literature can be characterized by three features: It requires case-by-case inquires, involves monetary payments, and employs sanctions to ensure people’s truthfulness.

This Article argues that the land-valuation problem is but a specific manifestation of a much broader concern.  The need to identify intense preferences may arise in all fields of law and with respect to all types of entitlement.  More importantly, additional and fundamentally different methods can be used to discover strong preferences.  For example, identifiers can be generalized rather than case-specific, thus dispensing with the need for ad-hoc examination of individual cases.  That is to say, we can generalize about circumstances in which intense preferences are likely to exist and incorporate the relevant proxies—such as use value, possession, or declining marginal utility—into the legal rules themselves.  Furthermore, identifiers may entail burdens in-kind rather than monetary costs, thereby reducing a bias in favor of the rich.  Thus, instead of detecting strong preferences via individuals’ willingness to pay, we may reveal them through their readiness to sacrifice time, effort, or honor.  Finally, identifiers may adopt non-penalizing—instead of penalizing—approaches.  Detection of intense preferences can sometimes be achieved without taxing the subjective, unique utility that people obtain from entitlements.  Individuals need not hand over some (or all) of this special value as proof that strong preferences indeed exist.

The goal of the Article is twofold.  First, it demonstrates how legal rules can, and do, employ generalized and non-penalizing (“GNP”) devices to identify intense preferences.  Second, it argues for the superiority of GNP identifiers over other identification methods.

The major feature of GNP identifiers is that they do not tax, neither in money nor in kind, the exceptional utility that some individuals derive from entitlements.  GNP devices are based on observations, experience, or studies of human nature and behavior.  They represent judgments about what most people would feel or prefer in certain scenarios.  This type of identifier has not received systematic theoretical treatment and has not been sufficiently utilized in practice.  Prime examples of non-penalizing proxies for strong preferences are the following:

• Use value vs. exchange value: Preferences regarding property are likely to be more intense when an individual holds the property for her own (and continuous) use than when she holds it for exchange or when she subsequently chooses to part with it, for instance, by sale. It is possible to locate circumstances in which use value exists and to protect owners against involuntary injury to this value.
• Possession: Possession is often a good proxy for intense preferences. Therefore, by limiting the exercise of certain rights to possessors, one assures that only people with strong preferences are entitled to use them.
• Declining marginal utility: According to this well-known economic rule, the amount of extra utility enjoyed from every additional unit of a good usually declines as a person consumes more of the good. Thus, when allocating goods between individuals, we may sometimes reasonably assume that the incremental utility from having the good would be larger for persons with fewer units of the good.
• Redemption: Rights of redemption detect strong preferences because they are rights that only, or mostly, people with intense preferences would use. The actual redemption of an asset both identifies the strong preference and fulfills it.
• Reasons: Requiring individuals to provide reasons for their preferences may help assess both the intensity and authenticity of the preferences.

The above identifiers of intense preferences can be found in diverse legal fields and contexts.  They constitute a hidden common denominator of such dissimilar rules as those governing rights of first refusal, takings compensation, damages in contract law, self-help remedies, adoption, bankruptcy exemptions, secured transactions, and conscientious objection.  Current law has not exhausted the potential for crafting GNP identifiers, and additional rules of this kind can be adopted.  The full-length article in the Cornell Law Review offers various examples of such desirable new rules.

This Article further argues that GNP identifiers have various advantages that other techniques for detecting strong preferences lack, either wholly or in part.  The Article compares GNP devices with four alternative methods, all of which are used in practice:

• “Mouth“: Preference-intensity is revealed through people’s verbal statements alone, as in public opinion polls, contingent valuation questionnaires, and quality-adjusted life year surveys.
• “Mouth & Purse“: Strong preferences are identified through verbal statements backed up by monetary sanctions, as employed in self-assessment mechanisms for land valuation.
• “Generalized and Penalizing“: Generalizations regarding cases of strong preferences that utilize people’s readiness to bear in-kind sanctions. For instance, a strong preference for receiving welfare benefits can be conditioned on willingness to go through a grueling and humiliating bureaucratic process.
• “Case-Specific and Penalizing“: Case-by-case detection of intense preferences through individuals’ willingness to incur non-monetary burdens. A prime example is logrolling or vote trading, which identifies strong preferences on a certain issue by readiness to bear the cost of not realizing a weaker preference on another issue.

The Article demonstrates that the GNP technique is, overall, the superior identification method since it is the only one that scores highly on all six parameters of evaluation.  GNP identifiers treat people with dignity and respect and are in no way insulting or humiliating.  They afford equal treatment to individuals’ preferences by not imposing heavier burdens on people with intense preferences (vertical equity) and by treating all individuals with strong preferences equally (horizontal equity).  Furthermore, GNP identifiers are not biased in favor of more affluent people and also reduce the risk of lies.  Finally, the GNP method entails relatively low administrative costs and is capable of dealing with objectionable preference-intensities (such as excessively high intensities of preferences).  The other four methods fail on more than one of these grounds.

For all these reasons, the role played by GNP identifiers should be expanded by the law and rules utilizing them should be adopted whenever possible.  Generalized and Non-Penalizing identifiers are feasible, for example, whenever one can generalize that a certain proxy-such as use value, possession, declining marginal utility or redemption—succeeds in capturing cases in which systematically high preference—intensities are likely to exit.  GNP devices are especially suitable when all one needs is an affirmation that an intense preference exists, or a relatively “rough” comparison between stronger and weaker preferences, rather than an exact quantification of the preferences’ strength.  This may explain why “Mouth & Purse” techniques have been suggested in the literature with respect to compensation for takings of land.  In compensation scenarios, we ideally seek the “magic number,” which represents the individual’s true valuation of an asset or the precise extent of her losses.  Nevertheless, GNP identifiers—which compensate landowners with high subjective valuation by granting them some fixed percentage (e.g., 50%) above market price—may be superior even in this context.  The relative crudeness of such a compensation formula is offset by the many advantages of GNP devices.  Moreover, the significant shortcomings of penalizing identifiers have been ignored or downplayed, while the impressive advantages of GNP identifiers have been overlooked in the theoretical literature.  We should therefore create additional rules that utilize GNP techniques.  In closing, the Article demonstrates that the GNP method’s value is not limited to the detection of high intensity preferences, but can also apply to low intensity preferences.  Proxies for exceptionally low valuation of entitlements can also be incorporated into legal rules.  A good example is the proxy of “non-use,” which is a reliable identifier of weak preferences with respect to trademarks, rent-controlled housing, and servitudes.

Acknowledgments:

Copyright © 2009 Cornel Law Review.

Daphna Lewinsohn-Zamir is Louis Marshall Professor of Environmental Law at Hebrew University of Jerusalem.

Special thanks to Greg Alexander, Hanoch Dagan, Lee Fennell, Robert Ellickson, Amnon Lehavi, Barak Medina, Gideon Parchomovsky, Ariel Porat, Stephanie Stern, Joseph Singer, Doron Teichman, Eyal Zamir and participants in the Property Works in Progress Conference, University of Colorado Law School, and Faculty Workshops at Cornell Law School, Interdisciplinary Center (IDC) Herzliya, and Tel-Aviv University, for very helpful comments and suggestions. Thanks to Yehoyada Mande’el for excellent research assistance.

This Legal Workshop Editorial is based on the following full-length Article:   Daphna Lewinsohn-Zamir, Identifying Intense Preferences, 94 CORNELL L. REV. ___ (2009).

Demsetz’s market-centered approach struggles in different ways with features of land that distinguish it from other “commodities.”  The complexity of land—its intrinsic complexity, but even more importantly the complex ways in which human beings interact with it—undermines the positive claim that owners will focus on a single value, such as market value, in making decisions about their land.  Land’s status as an essential component in any human activity that requires physical space resists efforts to treat it like other commodities.  In Karl Polanyi’s words, “[t]he economic function is but one of many vital functions of land.”  Instead, Polanyi argued, land “invests man’s life with stability; it is the site of his habitation; it is a condition of his physical safety; it is the landscape and the seasons.” As a consequence of this complexity, many of the values we attribute to land do not operate in markets.  This has two consequences.  First, actors who are sensitive to these non-market values will sometimes act in ways that are contrary to the predictions of positive economic models built around the traditional rational actor.  Second, and more normatively, these values will be invisible to actors motivated primarily by a desire to maximize their wealth.  The result of this is that narrowly rational actors operating in an unregulated market are likely to act in ways that undermine land’s nonmarket values.

I add to this equation a consideration that I call “land’s memory.”  By this I mean the combined impact of the durability of land uses and the stabilizing consequences of human sociality, which calls into question the normative assessment that rational landowners are, left to their own devices, likely to be using their land wisely, or at least more wisely than other modes of decision making might hope to accomplish.  Demsetzian theorists have argued that future generations do not really pose a problem for their theories of land ownership because an owner’s wealth will depend on “how well he takes into account the competing claims of the present and the future.”  Accordingly, they have suggested, individual ownership provides an adequate (indeed, the best practicable) mechanism for considering the possible uses to which future generations will want to put land.  This is because the market for land will reward with greater wealth those owners who guess correctly about the future. 

The problem here is the possibility that market actors might excessively discount effects of their decisions that occur far in the future.  There’s substantial evidence that private actors employ relatively high discount rates.  And this raises two questions: (1) whether citizens acting through the political process (or some other collective mode of decision making) employ a lower discount rate; and, if so, (2) whether other features of collective modes of decision making generate enough error to outweigh any improvements that result from their greater ability to take into account the interests of future generations.  These are difficult and important questions, and I do not pretend to have the answers, but they are for the most part left unaddressed by proponents of the normative Demsetzian position.

These observations do not discredit the judicious use of economic analysis as a tool of land-use policymaking, but they do point toward the need for more sophisticated models of landowner behavior and the benefits of a richer normative theory of property, one that is capable of situating the output of that economic analysis within a larger moral framework.  Setting forth the broad outlines of one such theory as it applies to the law of land use is the second goal of Land Virtues.  An approach to property rooted in the Aristotelian tradition of virtue ethics, I argue, is capable of incorporating the valuable insights that have made economic analysis so appealing to land use theorists without distorting our moral vision or treating economic consequences as the only considerations that ought to matter.

Neither of the two principal competitors of normative economic analysis—Hegelian (or so-called “personhood” theory) or Lockean moral entitlement theory seems up to this task.  Libertarian accounts rooted in the Lockean tradition (such as Robert Nozick’s) are particularly ill-suited to situating this positive economic analysis, since they disclaim any concern for consequences in constructing their conception of ownership rights.

From within an Aristotelian, virtue theory of land use, the justification for legal intervention will not be limited to situations of market failure.  Rather, the law will have as an important goal affirmatively promoting human virtue and flourishing.  A virtue theory of property shares with normative economic theories the intuition that collective decision-making about land use should be reserved for situations in which legal intervention is likely to yield better (that is, more morally correct) decisions about how the land ought to be used.  But knowing how to divide decision making between private owners and collective authority in different contexts becomes a deeper and more difficult challenge than merely determining who is best positioned to engage in cost-benefit analysis.  Although I do not provide a comprehensive account of the contours of the proper domain of legal intervention, my principal goal is to argue, first, that the domain of appropriately collective land-use decision making is not coextensive with the economic concept of market failure and, second, that concepts developed within the Aristotelian tradition provide some promising tools for finding its boundaries.

Laws that override private decisions can accomplish three important goals.  First, by enforcing certain specific moral obligations, they can protect those, such as the poor and future generations, whose ability to flourish might be harmed by owners’ immoral decisions.  This is the goal of legal enforcement of moral norms that Demsetzian theorists are most likely to attempt to assimilate into their model.  They will recast harm to third parties as “externalities” that, in the presence of transaction costs, might not be internalized by market mechanisms.  This translation, however, will not fully capture the content of the virtue account.  In addition to the conceptual distortions introduced when moral wrongs are converted into “costs,” the reciprocal nature of the economic understanding of externalities means that the internalization of externalities can be accomplished, and the goals of efficiency served, by legal solutions that are, from the point of view of virtue theory, morally obtuse.  As theorists like Joe Singer and Eric Freyfogle have argued, in order to craft an intelligent legal response to property harms, we need to supplement the notion of externalities with a resort to moral norms.

The other goals of legally enforced moral norms are less at home within the economic framework insofar as those norms seek to modify, correct, or discourage the preferences that traditional legal economists aim primarily to satisfy.  Thus, a second, more indirect, goal of enshrining certain obligations of virtuous conduct into law would be to constrain the behavior of non-virtuous owners and, over time, to teach them to act virtuously of their own accord.  Such a mandate can have consequences that ripple well beyond the confines of a specific legal prohibition or prescription.  The notion that legally compelling someone to act as if they possessed a virtue might actually foster virtue is not far-fetched.  Consider the impact of Title II of the Civil Rights Act of 1964, which mandates a nondiscrimination norm for private owners of places of public accommodation.  A law prohibiting such private discrimination was at first criticized in prominent quarters as a violation of property rights and as a hopeless, paternalistic effort to force people to interact against their wishes.  Civil rights laws prohibiting discrimination in restaurants and hotels are now nearly universally accepted and have contributed to dramatic changes in racial attitudes.

Third, even those who are not vicious stand to benefit from laws mandating virtuous conduct: legal specification can help to clarify social obligations and to coordinate collective virtuous actions.  Well-crafted environmental statutes or regulations, for example, can help spread the word about best practices to landowners already inclined to act responsibly but lacking information about the remote consequences of their behavior.  Civil rights statutes provide another helpful illustration.  Scholars have noted that statutes prohibiting discrimination empowered proprietors and employers who did not particularly want to discriminate but who did so out of fear of reprisals for violating social taboos.  By ensuring that their less-virtuous competitors would not be able to obtain a competitive advantage by offering a segregated alternative, civil rights statutes reduced the cost of doing the right thing for those already predisposed to do it.

Rejecting market-oriented economic theories of landowner obligation in favor of a virtue-based approach does not lead to an embrace of unrelentingly collective or statist decision making about land use.  Even where we reach the conclusion that landowners’ self-interested calculations should give way to overriding moral considerations, the question whether to enforce coercively the demands of virtue through the force of law will turn, as virtue theorists have long understood, on a number of considerations.  It will turn, for example, on our evaluation of the likely behavior of landowners in response to differing forms of legal compulsion and persuasion aimed at ensuring that those obligations are met.  This evaluation will itself require an understanding of the character of the typical landowner and of the community in which she is situated.  This is an area of virtue jurisprudence in which sophisticated and empirically grounded positive economic analysis (as well as empirical analysis from within other social science disciplines) will have a great deal of value.

The answer will likewise depend on the mechanisms for political decision making at our disposal, and the degree to which we think actors’ political behavior within those mechanisms resembles and partakes of the same virtues and pathologies of private decisions or is instead subject to its own context-specific strengths and shortcomings.  Even where self-interest seems (as a descriptive matter) to reign in politics as thoroughly as it does in the market, we should not assume that the pattern of collective decision making observed at one time and place is set in stone, and cannot be changed for the better through concerted efforts to reform institutions or to educate and train decision makers to become more virtuous.  Again, attempts to answer these questions will gain a great deal from sophisticated, and non-ideological, empirical analysis, the sort of work that many contemporary economists are producing.

Finally, the independent value of individual autonomy, which is itself an important component of human flourishing, may require that we accept private decision making in certain contexts, even when we know it is likely to yield inferior results.  This is what the federal Fair Housing Act seems to do, for example, by exempting from its antidiscrimination norms small, owner-occupied units, or what Title II of the Civil Rights Act of 1964 arguably does by exempting private clubs. 

The task of determining when, how, and in what contexts (if ever) these various considerations control is a difficult puzzle that goes to the very heart of the proper division of labor between the community and private landowners.  It is a puzzle, however, that is too often ignored within contemporary land-use scholarship.

Acknowledgments:

Copyright © 2009 Cornell Law Review.

Eduardo M. Peñalver is Professor of Law, Cornell University Law School.

This Editorial is based on the following full-length Article:  Eduardo M. Peñalver, Land Virtues, 94 CORNELL L. REV. 821 (2009). Click Here for the Full Version

In “The Social Obligation Norm in American Property Law,” I do not argue against any of these grand claims so much as I ignore them.  My concerns lay elsewhere. I agree with Fennell that there is a major gap in current property theory literature, but it is not the one she identifies.  The gap is the failure, with some notable exceptions at both ends of the political spectrum,⁵ to provide any explicit and sustained analysis of the obligations that property owners owe to members of their communities and the normative foundations of those social obligations.  The property rules-liability rules literature does not address this topic except elliptically.  Nor does the information-costs model so elegantly spun out by Smith and Merrill confront this fundamental problem.

The thesis of the article is basically this: Human beings are inherently dependent on others to flourish as human beings.  This dependence creates for each of us an obligation, certainly moral and at times legal, to support, in ways that are appropriate to us and to the extent that it is appropriate to us, those social networks and social structures that facilitate the development of those human capabilities that make human flourishing possible.

The fundamental value grounding this social obligation thesis is human flourishing.  Human flourishing is the basis for property rights.  Life in community with others and access to certain kinds of resources are requisites to human flourishing.  Property rights and their correlative obligations are cognizable as social goods, worthy of vindication by the state, only insofar as they are consistent with community and human flourishing more generally.  In the interest of human flourishing, the state affords legal recognition to asserted claims to resources as legal entitlements.  Accordingly, the state does not take away when it abstains from legally vindicating asserted claims to resources when such claims are inconsistent with human flourishing or with community itself.  In such cases, the community merely does not give.  For the community, acting through the state’s laws, is what transforms pre-legal claims into legally recognized property rights in the first place.  That which is socially cognizable as property is only that form of access to resources that is consistent with human flourishing and community itself.  The social obligation norm, then, is, in effect, the law’s recognition of this straightforward conceptual entailment of the way the legal system justifies the institution of private property itself.  Another way of putting this point is to say that the very factor that makes the institution of private property a social good is also the very factor that renders its limits, i.e., human flourishing.

Human flourishing requires that individuals develop what Amartya Sen and, following Sen, Martha Nussbaum, call certain “capabilities.”  Capability, as they use the term, refers to the freedom or ability to choose to function or act in certain ways (although not necessarily to act in fact in those ways).  Human flourishing measured by what a person is able to do, not by what she has or even necessarily whether the satisfaction of her subjective preferences has been maximized.

There are bound to be disagreements about just what capabilities are essential to living a well-lived life, that is, a life worthy of human dignity.  Four such capabilities seem (relatively) uncontroversial to me.  These are: (1) life, including certain subsidiary values such health; (2) freedom, understood to include the freedom to make deliberate choices among alternative life horizons; (3) practical reasoning, that is, reasoning aimed at future action; and (4) sociability, that is, the ability to get along with others, to see their point of view, to have compassion, and to care about the well-being of others.

Individuals cannot acquire these capabilities or secure the resources to acquire them by themselves.  This is because the physical process of human development mandates our dependence on others for a great deal of the time during which we are cultivating the necessary capacities.  Even as human beings value and strive for autonomy, dependency and interdependency are inherent aspects of the human condition.  The idea that one sometimes takes away from scholarly discussions of individual autonomy is that the self-reliant moral agent springs fully formed into the world from birth and continues until death.  Quite the opposite is true.  From cradle to grave and at all points in between, we are dependent on others for the development of those capabilities without which the concept of autonomous moral agency would be meaningless.

Communities, of all sorts, including the state, are the mediating vehicles through which individuals acquire these essential human capabilities.  As rational autonomous agents, humans never cease to operate within and depend upon the matrices of the many communities in which they find themselves in association.  The communities in which people find themselves play crucial roles in the formation of their preferences, the extent of their expectations, and the scope of their aspirations.

Because the capabilities are essential to what it means to flourish in a distinctively human way, their development is an objective human good, something that we ought (insofar as we accept these particular capabilities as intrinsically valuable) to promote as a good in and of itself.  Every person is equally entitled, as a matter of human dignity, to flourish.  This being so, then every person must be equally entitled to those things essential for human flourishing, i.e., the capabilities that are the foundation of flourishing and the material resources required to nurture those capabilities.  In the absence of these capabilities and supporting resources, recognition of the entitlement to flourish is simply an empty gesture.  But not every society will be equally conducive to human flourishing.  The cultivation of the capabilities necessary for flourishing depends upon social matrices, and the condition of those matrices varies among societies, sometimes quite widely.  A society that fosters those capabilities that are necessary for human flourishing is morally superior to one that is either indifferent or (even worse) hostile to their manifestation.

If human capacities such as survival (understood to include physical health), the ability to engage in practical reasoning, and to make reasoned decisions about how to live our lives are components of the well-lived life, then surely we are all obligated to support and nurture the social structures without which those human capabilities cannot be developed.  Consequently, viewed from the standpoint of the capabilities necessary for human flourishing, how we participate in political and social communities cannot just be an expression of our preexisting autonomy; it cannot be solely a volitional act committed for instrumental reasons such as preference satisfaction.  Rather, it is an objectively grounded obligation rooted in our recognition of the value of the capabilities that are necessary for the well-lived life.  In short, then, we owe because we are dependent and because we are members. 

This obligation is certainly moral in character, but it is also a legal obligation.  I do not suggest that the moral and legal obligations are identical, but I do suggest that the state, as one of the communities to which we belong and upon which we are dependent for supporting the social systems and structures that develop the essential human capabilities, is entitled to make certain demands on the property of its members.⁶ As even some of the most stringent of property rights libertarians have acknowledged,⁷ the extreme need of some in the community trumps the property rights other people hold over their surplus resources.

From the perspective of the obligation to support the social systems and structures that foster human flourishing, the state is justified in demanding, either by way of direct redistributive measures or regulatory use restrictions, that property owners contribute in ways that are appropriate to them the resources necessary for the provision of life, including health, freedom, practical reasoning, including education, and sociability.  In short, if we accept the existence of an obligation to foster the capabilities necessary for human flourishing, and if we understand that obligation as extending to an obligation to share property, at least in surplus resources, in order to enhance the abilities of others to flourish, then it follows that, in the predictable absence of adequate voluntary transfers, the state should be empowered and may even be obligated to step in to compel the wealthy to share their surplus with the poor so that the latter can develop the necessary capabilities.

None of this is meant to suggest that the state’s power, even as it touches on the facilitation of the capabilities we are discussing, is unbounded.  The limits to the state’s proper domain are supplied by the same principles that justify its action: the demands generated by the capabilities that facilitate human flourishing—freedom, practical rationality, and sociality, among others.  Another way of putting the point is that there are limits to state power that are intrinsic to the social obligation norm itself.  For example, autonomy interests will limit the social obligation norm when there are no equivalently weighty countervailing interests.  The well-known case of Jacque v. Steenberg Homes, Inc.⁸ illustrates this limitation.  In that case, homeowners, Lois and Harvey Jacque, sued Steenberg Homes for damages for intentional trespass to the Jacque’s land.  Steenberg delivered a mobile home by plowing a path across the Jacques’ snow-covered field despite strenuous protests from the Jacques.  Although other means of accessing the delivery location were available, Steenberg used the path across the Jacques’ land because that was the easiest route for him.  The jury awarded the Jacques $1 in nominal damages and $100,000 in punitive damages.  On appeal, the Wisconsin Supreme Court held that when a jury awards nominal damages for intentional trespass, punitive damages may also be awarded.

The Jacques had strong capability-related reasons for excluding Steenberg Homes.  The most important of these interests are the Jacques’ autonomy and privacy.  The common law historically, and properly, attached great weight to the interests of homeowners in protecting their privacy and associational autonomy by recognizing a robust right of homeowners to exclude the public from entering upon their property without permission.  Although this right has long been subject to certain limited exceptions, such as the privilege of firefighters to enter for purposes of protecting the home, the right to exclude has generally been strongest with respect to the home.  From the perspective of social obligation theory, with its focus on human capabilities necessary for the well-lived life, this emphasis on privacy of the home makes good sense.  The home is the central locus for developing and experiencing all, or nearly so, of the capabilities necessary for human flourishing.    

Another important limit on state power is the principle of subsidiarity.  This is the notion that the state ought not arrogate to itself functions that can be performed just as well, if not better, by smaller, more intimate communities.

Traces of an implicit social-obligation norm, one that is informed by a concern for human flourishing, are scattered throughout American property law.  Several of these are evident in more recent doctrinal developments.  An obvious example concerns public access to beaches.  Courts in a few recent cases have strikingly expanded the scope of the public’s right to access privately owned beaches.⁹ Relying on the public trust doctrine, they have seen fit to permit members of the public to have access to privately owned dry-sand portions of the beach for recreational purposes under certain conditions.

This doctrinal development, although certainly altering the traditional common-law rule on the right to exclude, is both explicable and justifiable in terms of the human flourishing-based social obligation theory.  Recreation is an important aspect of health, which itself is a vital dimension of the capability of life.  Providing all persons, including (perhaps one should say especially) poor people, with reasonable access to basic modes of recreation and relaxation would materially contribute to the goal of being capable of living lives worth living.  Recreation also supports sociability as a good.  Sociability encompasses subsidiary goods such as friendship and social participation.  Indeed, affiliation may explain, or partly explain, many of the circumstances in which courts have recognized some version of a reasonable access rule that limits the common-law right to exclude.

Of course, the beach owner has legitimate capability interests at stake as well.  This is especially true if the owner lives on the parcel where the affected beach is located.  Under those circumstances, the case may begin more closely to resemble Jacque v. Steenberg Homes, which I previously said was correctly decided from the perspective of the social obligation theory.  In such circumstances, the owner’s autonomy and privacy interests weigh heavily in the capability calculus.  As I previously indicated, the home is the central locus for developing and experiencing all, or nearly so, of the capabilities necessary for human flourishing, so if the beach is indeed the site of the beach owner’s home, she will have a strong case for excluding members of the public.  The “reasonable access” standard adopted in the New Jersey cases might permit the court to enjoin the public from using the owner’s dry-sand portion of the beach in order to accommodate her capability interests.  Or it might adopt a more granular approach to regulating the public’s exercise of its access right.  Britain’s recently enacted “right to roam” statute¹⁰ might serve as something of a model for such an approach.  This statutory jus spatiandi, which extends over open land, private as well as public, throughout Great Britain, is subject to all manner of reasonable behavior restrictions that are designed to protect the owner’s privacy and autonomy interests.  The public right of access to privately owned beaches might be cabined in a similar fashion and for the same purpose under the social obligation theory.

Professor Joseph Singer has observed, “Owners have obligations; they have always had obligations.  We can argue about what those obligations should be, but no one can seriously argue that they should not exist.”¹¹ He is right.  It is high time that property scholars explicitly debate questions concerning the scope and foundations of the obligations that property owners owe to their communities.  I’ve argued that property is about more than individual freedom or cost-minimization.  It is also about human flourishing, which cannot be reduced to cost terms, and supporting the communities that enable us to live well-lived lives.  It is to those ends that the social obligations of ownership exist.  Other property analysts will surely disagree.  Fine.  But let’s get the debate going, explicitly and rigorously.
 

Acknowledgments:

Copyright © 2009 Cornell Law Review.

Gregory S. Alexander is A. Robert Noll Professor of Law, Cornell University Law School.

This Editorial is based on the following full-length Article:   Gregory S. Alexander, The Social-Obligation Norm in American Property Law, 94 CORNELL L. REV. 745 (2009). Click Here for the Full Version

 
I.
Public Use versus Public Ownership

And so we begin:  “[N]or shall private property be taken for public use, without just compensation.”²  Of the boundless interpretive issues that arise, one indisputable point of direct relevance to Bell’s article is that “public use” is not synonymous with “public ownership.”  It follows therefore that there can be takings for public use that result in private ownership. The trick is to identify these cases, and explain why they make sense. To see how this works, it is useful to tie the public use issue in takings law to the general law of common carriers. This general law has been frequently discussed under the elusive rubric, drawn from Sir Matthew Hale, of “property affected with the public interest.”³ Hale’s view, which came to dominate, held that it was proper to subject property affected with the public interest to regulation on the key issues of access and rates.

These two venerable phrases, both of which contain the word “public,” are linked together in an instructive way. The public use for which condemnations are unambiguously allowed are those condemnations, as Bell notes, that are done for the benefit of, or at the instance of, railroads and grist mills. Historically, these institutions typically had an obligation to serve all comers at reasonable and nondiscriminatory rates, precisely because they exercised monopoly power owing to their strategic locations. The condemnations were routinely allowed in large measure because the assembly problem of which Bell speaks is much more acute with respect to these activities over which an entrepreneur has limited locational choice. As the Mill Act cases of the last third of the nineteenth century⁴ make clear, only so many dams can be spaced along the river, and each of them has to flood farmland owned by many separate parties.⁵ And the assembly problems faced by the long and skinny railroads that have not received government land grants present the holdout problems to which Bell rightly refers.

Yet there is a second side to this issue. Once the assembly is completed with the eminent domain power, the rules governing property affected with the public interest allow for state regulation to control monopoly power. An essential portion of that program was access to the public at large. The two parts of the picture thus worked hand in hand. The private owner has to make his property available for public use. The Clause is well drafted not to require public ownership, which would have the horrific consequence that all railroads, mills, electricity companies, and so on, which relied on public condemnation, would have to be state-owned. Think what one may of the various systems of regulation; usually they beat total nationalization hands down, if only because they face the risk of erosion through technological changes.

 
II.
The Historical Evolution of Public Use

So far Bell has to be right in insisting that private takings have long been an essential portion of the legal landscape. But it is a giant leap to assume that Kelo and its progeny represent an orderly continuation of a development that has a strong constitutional and historical pedigree. In fact, the historical evolution of the public use doctrine leading up to Kelo shows the poverty of its internal analysis.

As Bell rightly notes, the two related notions that mark this first generation of private-ownership public-use cases are a combination of holdout and necessity. The key question is whether those grounds are sufficient to justify a government taking for private use when the ultimate party is not an industry affected with the public interest, bound by some obligation of universal service. The early twentieth-century cases were grudgingly uneasy about this point, but in the end they relented so that private easements of necessity in difficult terrain could be granted to parties who would otherwise be at the mercy of a few nearby landowners. The owner of scrubland must be forced to surrender an easement so that the owner of a mine—whose assets are not mobile—can reach a railroad track that is built after the mine is put into operation. The doctrine here is in more evident tension with the text, but the outcome is justified on the ground that holdouts and externalities are the two greatest weaknesses of voluntary markets. Thus, the coercive power of the state should be allowed to overcome the former, so long as it does not wipe out the property interests of the servient tenement, who is of course protected by the just compensation requirement.

Putting the problem in this way shows historically that the class of private takings was not infinitely expandable. On the other side of the line would be taking land from one person and giving it to another when no holdout or assembly problem was involved at all. Yet that is precisely the movement that started in the 1930s when the advocates of public housing started insisting that they raze neighborhoods in order to make way for large, forbidding projects that looked more like fortresses than homes. Here it is, to say the least, bad policy to engage in these massive forms of social intervention, especially since there is no reason at all to build huge government housing projects that are destined to become the slums of the next generation. Such large-scale government interventions have largely been abandoned today. Under a sensible public use requirement, it would never have been tried.

The giddy optimism of New Deal judges brushed aside the carefully circumscribed extension of public use congenial to classical liberal judges. So while the public use requirement could not prevent Robert Moses from laying waste to neighborhood after neighborhood for cross-town highways, it could have stopped construction of massive housing projects. Unfortunately, the planning movement reached its zenith in 1954 in Berman v Parker,⁶ where Justice Douglas, in celebration, signaled that the courts were getting out of the business of superintending local planning authorities,⁷ to borrow a phrase, “with all deliberate speed.”  He was therefore all too happy to allow the local Washington, DC planners to throw an owner out of his department store on the ground that his neighborhood was blighted, even if his store was fine. What misplaced faith in land use planning!

 The trend accelerated in 1984 with the decision in Hawaiian Housing Authority v Midkiff,⁸ when Justice O’Connor uttered a word that she came to truly regret (but not entirely repudiate) in holding that any “conceivable” public purpose would do.⁹  One such purpose was counteracting the supposed oligopolistic tendencies in Hawaiian land law, when the real villain was Hawaii’s insanely restrictive zoning ordinances that kept new housing units from coming online. So in Midkiff the law moves from overcoming the bona fide blockade to blessing a carefully staged play in which a tenant could condemn his landlord’s interest in real property at the end of a short-term lease, so long as he put the money in escrow with public authorities before they pulled the trigger. The public, of course, just shrugged at this version of strong-arm behavior because no one cared about large companies that lost their reversionary interests. If anything, they probably cheered on the state for helping the little guy.

 
III.
At Last Kelo

Kelo is of course worlds apart from Midkiff in the popular eye. Unlike the earlier decisions, the wise elders of New London targeted ordinary people for eviction from their homes for the sake of a real estate project that was misconceived from the start. That is a theme to which populists can easily relate, because it is easy to condemn developers when all the hanky-panky was done by public actors. The key analytical question, however, asks how the facts of Kelo match up with the extended holdout rationale that Bell locates at the core of modern takings laws. Badly in fact: Kelo did not present any holdout question at all. Ms. Kelo was a modern day Greta Garbo: all she wanted was to be left alone, which is why throughout her long ordeal she posted a “not for sale” sign in front of her property.

Ah, the answer may come, this was just a way to play the holdout game at its highest. Not really. To play the holdout game a landowner has to have some leverage over a developer that wants to put up an integrated project. It is for that reason that eminent domain powers are often invoked in order to erect athletic facilities like the approved misbegotten arena at Atlantic Yards in Brooklyn.

Unfortunately, the vaunted planners in New London were, and to this day remain, the gang that could not shoot straight. They had no idea what use they wanted to make of Ms. Kelo’s house on the periphery of their site. Indeed, they had no plans to fill up the empty contiguous lands that they had acquired from abandoned government projects in transactions that had no eminent domain source at all. Justice O’Connor generated lots of hurrahs when she protested that after Kelo,  ”[n]othing is to prevent the State from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory.”¹⁰ We should be so lucky. Unfortunately, the Ritz-Carlton was never in play in Kelo. The true disgrace of public governance is that the city replaced a perfectly serviceable home with nothing at all—which is why Ms. Kelo’s site stands vacant to this day. The empty land stands in mute tribute to the fancy efficiency justifications for Kelo. Mark Moeller and I were not proud in the amicus brief we wrote in Kelo. We urged the Supreme Court to take the low visibility road of delaying the taking of the houses until the City of New London could figure out what to do with the vacant land. But it did not work out that way in part because the City must have felt pressure to spend the huge state subsidy it received for running the project. There was no “bargaining flaw” to correct in Kelo—just an ill-conceived bailout.

Nor should we take comfort in thinking that we can actually generate consistent revenue if a local government can gobble up whatever land it wants. Justice O’Connor made clear her distaste of takings executed for revenue enhancement purposes¹¹ (a position that the Michigan Supreme Court took in 2004 in Wayne v Hathcock,¹² which reveals a far more prescient attitude on eminent domain). She could have added that the City’s revenue gambit really won’t work. Sure, it may increase the revenue in the short term, but the live specter of strategic condemnations will lead other landowners to hold back on customized improvements that could easily be condemned for a “market” value that is far lower than their customized value to the owner. Who needs to stifle development in all cases to condemn some parcels of land in a few?

 
IV.
Conclusion

In fact, the efficiency case is one that speaks strongly to the stability of property rights, which means that we should go easy on eminent domain even when there is a bona fide public use. Bell makes reference to notion of “pliability rules,” which, in essence, allow local governments to mix and match injunctive relief for landowners with compensation for their losses. No doubt some cases will call for the application of both remedies. But by taking a leaf from the work of Calabresi and Melamed,¹³ Bell repeats their mistake of thinking that local governments should be free to mix and match these remedies at will. That is not a good idea. In general, the right impulse is to stick with strong ownership rights except when there are real holdout problems for the construction of public projects. Shopping malls and housing projects need not apply, for while individual developers may have grandiose ambitions, others are willing to work on a small canvas that permits voluntary assembly. Some affirmatively want to steer clear of the fancy plans of Michael Heller, Rick Hills, Amnon Lehavi, and Amir Licht, which propose allowing individual developers to file area-wide development plans on whatever scale they see fit, so long as they give public notice to the world so that other bidders can join in the fray.¹⁴  This is all too clever by half. There is enough hysteria in the air now. What we need is a set of public reassurances that the adventurism in Kelo will not be repeated so that good people can sleep well at night.

Acknowledgments:

Copyright © 2009 University of Chicago Law Review.

Richard A. Epstein is James Parker Hall Distinguished Service Professor of Law, University of Chicago Law School.

The legal community found the ruling less than surprising—it is well known that economic development may justify takings, even where the government subsequently transfers the taken property to another private actor. But even those generally familiar with the law still hold to the general belief that, as numerous cases have pronounced, the legal system does not tolerate “private eminent domain.” Even where such takings are mediated by government action, courts have no hesitation in pronouncing that “it has long been accepted that the sovereign may not take the property of A for the sole purpose of transferring it to another private party B, even though A is paid just compensation.”²

The truth is quite different.

Not only are private takings constitutional, they have long existed and continue to exist in the American legal system. Private takings—that is, takings carried out by nongovernmental actors—can be found in numerous eighteenth- and nineteenth-century laws that established mechanisms for nongovernmental entities such as ordinary corporations to take private property by eminent domain. Railroads, for instance, were often granted the power to take (for compensation) private lands that lay along the route of the intended rail line. Even today, the law permits many kinds of private takings. In addition to takings by utilities, railroads, loggers, and the like, the law also permits certain kinds of takings by ordinary private individuals. For instance, in Colorado, landowners may seize, for compensation, an easement over neighbors’ lands when they have a sufficient interest in the benefited property to entitle them to condemnation, as well as a practical necessity for the private way.³ Additionally, many governmental takings today are functionally private takings. Kelo, for instance, involved a New London, Connecticut urban renewal plan that included the takings of private residences for land to be transferred to private developers for office space.

Extant private takings can be divided into three categories. In instances of delegated private takings, the state directly authorizes certain types of private actors to take property by eminent domain. For instance, Alabama permits the exercise of eminent domain by electric companies, operators of water systems and sanitary sewer systems, and television satellite systems under the same rules as public takings.⁴ A second category involves a particular relationship or asset that warrants private takings. Private ways of necessity, like those recognized in Colorado, fall into this category. A third type of private taking is mediated by the government case by case. Here, as in Kelo, the state identifies a valuable private or private-public project and uses its power of eminent domain to transfer property to a private owner. For instance, New York’s Empire State Development Corporation recently approved the condemnation of land in midtown Manhattan (on Sixth Avenue, between 42nd and 43rd Streets) in order to turn it over to a private developer for building a fifty-one-story office tower for Bank of America.⁵

Understanding why private takings are not an anomaly provides an important insight into the nature and purposes of takings law, as well as its true boundaries.

Private takings, properly understood, serve the same function as ordinary public takings. The government’s power to take is generally justified on the grounds that the government needs certain assets in order to exercise its powers, and the government is sometimes prevented from acquiring the property through ordinary marketplace transactions by some bargaining flaw. For instance, the government may need the power of eminent domain to assemble land for an airport because the project might otherwise be foiled by holdouts—owners who refuse to sell in the hopes of extorting a portion of the project’s social benefit even though the owners have received what they would otherwise consider a good offer. Exactly the same circumstances—a potential buyer who values the property more than its current owner, but is unable to purchase it due to bargaining problems—can occur in the private sector. If the power to take property for compensation is a good solution for the bargaining breakdown in the public context, it is an equally good solution in the private context.

In fact, private takings may sometimes be an even better solution than public takings. Ironically, this is because private takers are likely to be more explicitly motivated by the bottom line than public decisionmakers. Under current law, the only substantial mechanism available for disciplining takers and discouraging excessive takings is the compensation requirement. In the private market, forcing the taker to pay compensation (preferably at the full subjective value of the property to its owner) should eliminate takings where the taker values the property less than its current owner. After all, what private taker would willingly pay more for a property than the value of the benefit she could realize from ownership? A government taker, by contrast, may be ready to overpay for political reasons; quite simply, there may be cases where a taking is worthwhile politically while senseless economically. In other words, due to rent-seeking by government agents or interest groups, there are times when the discipline of markets is more effective than the discipline of politics in curbing undesirable takings.

The trick to finding cases where private takings would be worthwhile is identifying situations where bargaining failures are likely to foil worthwhile transfers, while imposing a compensation requirement that prevents welfare-harming transfers. Specifically, a private taking power should be structured to be available only where the dual conditions of an appropriate taking are met: (1) the taker is the preferred owner of the property right (for reasons of justice or efficiency), and (2) strategic difficulties block the just or efficient transfer of property rights in the marketplace. To accomplish this aim, current usage of private takings provides a good guide. Private takings powers can be delegated to particular individuals, granted on the basis of certain relationships or assets, or authorized for a transaction or class of transactions.

Delegated private takings are the easiest to understand, and the hardest to police. Utility companies are the primary beneficiaries of such delegations today; in previous eras, public carriers such as railroads also generally received such powers. Such generous empowerments of private actors possess considerable potential for overbreadth. Not every acquisition of property by a utility involves strategic barriers that bar voluntary transactions, and not every acquisition of property by a utility or public carrier moves such property to its most efficacious owner.

Private takings authorized by asset or transaction are more promising. Where there is a high likelihood of a certain party enjoying unusually high benefits from an asset—in other words, where there is an obvious “ideal owner”—a private takings mechanism can potentially provide a lower-transaction-cost means of transferring the object to that ideal owner. This can be the case, for example, in “cybersquatting,” where entrepreneurs preemptively register popular internet domain names—often trademarked names—with the purpose of transferring the name at a profit to a third party (the owner of the trademark, or of the business associated with the name to be registered) and extorting a high price in the process. Private takings may be an appropriate means of preventing extortion in the ownership and transfer of domain names.

The most fruitful potential use of private takings is in specified transactions where bargaining failures are likely. The clearest example is the classic takings problem of land assembly. Land assembly is traditionally seen as the prototypical case in which takings are necessary to overcome strategic barriers to voluntary transactions or other transaction costs. Bargaining with each potential seller entails costs even in ordinary circumstances; in the case of land assembly, the costs are exacerbated by holdouts and other strategic bargaining practices. It is little wonder, then, that many land assembly projects have required public assistance in the form of case-by-case state exercises of the power of eminent domain. Nor is it surprising that legal academics, such as Michael Heller, Rick Hills, Amnon Lehavi, and Amir Licht have suggested various quasi-private takings mechanisms for assembling land. An alternative would be to grant a private takings power in land assembly projects, keyed to the size of the project, the number of landowners, and similar factors. For instance, would-be private takers might be required to file a public notice with zoning authorities 180 days before any proposed land assembly project, specifying the proposed area to be taken and the proposed compensation scale to be paid to landowners. In order to be eligible to file the notice, the private taker would need to specify a project that includes at least a minimum number of different owners—say, twenty—and perhaps a minimum spread of value—for example, with no individual owner possessing more than 15 percent of the total value. The filing would initiate a period in which competing bidders could offer to acquire the same collection of properties; a competing bid at a higher price would supplant the original bid and restart the clock. The ultimate taker would be required to acquire more than a minimum share of the land (perhaps 51 percent of both the built-up area and the land mass) in voluntary transactions before any land could be taken involuntarily. Finally, those owners whose land was taken in involuntary transactions would have a right of appraisal.

While these sorts of private takings may seem unsuited to a society that values private property, upon closer analysis they should be viewed as congruent with the way legal entitlements are protected throughout the legal system.

This is because legal entitlements are rarely entitled to absolute protection. As Guido Calabresi and Douglas Melamed noted so many years ago, the legal system offers two general types of protection for legal entitlements: property rule protection, which permits owners to refuse to transact and name their own prices; and liability rule protection, which permits other parties to seize the entitlement and pay a price determined by a court (or other third party).⁶ The legal system also frequently mixes and matches, adopting pliability rules that specify switching protection, from property rule to liability rule protection and vice versa, under specified circumstances.

Assets are often protected only by liability rule or pliability rule. For instance, while a railroad company may have undoubted legal ownership over a terminal, the rarely-used “essential facilities” doctrine in antitrust law may specify that under certain circumstances, the company will lose its property rule protection and be forced to permit others to use the terminal, in exchange for payment.

Takings are articulated pliability rules. A taking, in this context, temporarily relieves an owner of her property rule protection, and permits the taker to take the property as if it were only protected by a liability rule. After the taking, property rule protection returns to the asset, now in the hands of the taker. Viewing takings as an institutionalized pliability rule permits us to see its place in a larger scheme of legal protections that need not be restricted to the government. When the state creates a takings power, it simply adds to the existing rules by which legal entitlements are protected. A takings power, then, may be viewed not as an act that wrenches away property rights and places an asset outside the world of property protection. Rather, it may be seen as an act within the larger superstructure of property.

Caution is in order. Private takings—even if viewed as a property regulation rather than an extension of the regulatory power to seize through eminent domain—are no more intrinsically efficient than any other property regulation. An improperly structured pliability rule, a misplaced liability rule, or any other poor protection scheme may block efficient transfers of entitlements or encourage inefficient ones. Determining when and how to extend rights of private takings must therefore be analyzed with reference to the many factors—especially transaction costs—that have driven entitlement protection analysis over the years.

Acknowledgments:

Copyright © 2009 University of Chicago Law Review.

Abraham Bell is Professor of Law, Bar Ilan University Faculty of Law.

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The Legal Workshop features “op-ed” versions of the articles published by the member journals. These concise and lively pieces are written for a generalist audience, combining the best elements of print and online publication.

Each Legal Workshop Editorial undergoes the same rigorous editorial treatment and quality screening as the journals’ print content, but readers are able to offer comments and esteemed academics have the option of submitting response pieces, which are checked for citations and substance.

By aggregating the work of multiple law reviews, The Legal Workshop is able to provide frequently updated content. New article-based content is posted every Monday and most Wednesdays and Fridays. The Legal Workshop provides a one-stop forum for readers wishing to stay abreast of contemporary legal scholarship.
 

Founding Members:

New York University Law Review
Stanford Law Review
Cornell Law Review
Duke Law Journal
Georgetown Law Journal
Northwestern University Law Review
University of Chicago Law Review
 

Acknowledgments:

The generous pro bono work of David Sando, an attorney with Skadden, Arps, Slate, Meagher & Flom LLP, has been and continues to be essential to The Legal Workshop.

The idea for The Legal Workshop was originally conceived by Joe Ross, Volume 59 President of the Stanford Law Review. He and Erin Delaney, then Editor-in-Chief of the New York University Law Review, first solicited potential members for The Legal Workshop in the spring of 2007.

Editors at NYU and Stanford who have played a special role in carrying the torch include Thomas Haymore, Ben Kingsley, Matt Lawrence, Lincoln Mayer, Michael Montaño, Sam Nitze, Sean Nutall, and William Rawson.
 

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