What Parcel? SCOTUS Hears Arguments in Case Poised to Clarify the Court’s Regulatory Takings Jurisprudence

The Supreme Court of the United States entertained arguments on Monday, March 20, 2017 in a case likely to fortify its Fifth Amendment regulatory takings jurisprudence. The case, Murr v. Wisconsin, is on appeal from Wisconsin’s high court and, when decided, should answer a question left open by the Court’s 1978 ruling in Penn Central Transportation Company v. City of New York. In Penn Central, the Court instructed that in determining whether a regulation has gone far enough to constitute a taking of private property, courts should not limit their analysis to the regulation’s effect on some discrete segment or portion of the subject property, but should instead consider the regulation’s interference with property rights “in the parcel as a whole.” The question of how reviewing courts should define that parcel, however, has gone unanswered for decades.

Enter the Murr children, whose parents purchased two adjacent tracts of land along the St. Croix River in the early 1960s. The Murr parents built a cabin on the first lot and maintained title to it in the name of their business. The second lot, purchased afterwards, was kept in their name and remained largely undeveloped. In 1976, a county ordinance was passed establishing new minimum lot size requirements for properties in the area. While this ordinance contained an exception for existing undersized lots, the exception did not apply to undersized lots that were adjacent to one another and under common ownership; instead, such lots would be merged into a single lot. Though both Murr lots were undersized, the ordinance initially posed no threat to their interests because they were owned separately. But in the mid-1990s, the Murrs transferred both lots to their children, thus bringing them under common-ownership. When the children sought to sell the undeveloped lot in 2004, they ran into trouble. The County took the position that because the two adjacent and undersized lots had come under common ownership, the lots had merged and could no longer be sold or developed independently. The Murr children filed suit and asserted that the ordinance amounted to an unconstitutional taking of the undeveloped lot in violation of the Fifth Amendment. Their position was rejected by the Courts of Wisconsin and, early in 2016, the Supreme Court agreed to take on the issue.

When decided, Murr could go a long way towards answering the important question posed above – what is the parcel? The Murrs offer the simplest answer to the question: the parcel should simply be identified by reference to recorded lot lines. The State of Wisconsin rejects such a rigid analysis and instead takes the position that the relevant “parcel” should be determined by considering a property owner’s reasonable expectations based on state property law as a whole. In Wisconsin’s view, the County ordinance – in existence for almost two decades when the Murr children assumed ownership of the lots – should have shaped the Murrs’ “reasonable expectations” that the two lots were really one and the same.

Wherever the Court comes down on the issue, the holding is sure to figure importantly into the Court’s takings jurisprudence moving forward. The attorneys in the Gibbons Real Property & Environmental Department will be keeping a close eye on any developments and will be sure to report any updates.