PROPERTY RIGHTS

Supreme Court to hear precedent-setting case

The Supreme Court on Monday will hear arguments in a high-stakes legal battle over a tiny waterfront lot that could affect how courts weigh whether government has illegally taken private property.

The owners of the waterfront land in Wisconsin claim that St. Croix County, through a decades-old environmental regulation, has taken their private property without compensation. Property rights advocates and several states have leapt to their defense, arguing that the case is important for maintaining rights for landowners across the country.

On the other side, Wisconsin and St. Croix argue that lower courts were correct in rejecting the claims. They are supported by the federal government and several other states.

John Echeverria, a takings expert at Vermont Law School, said Murr v. Wisconsin could end up becoming one of the most important property rights cases ever decided by the Supreme Court.

"How large-scale developers get to define their interests for the purposes of takings litigation is the major lurking issue in the case," he said.

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The six Murr siblings own two lots along the idyllic St. Croix River near the Wisconsin-Minnesota border.

Their late parents, William and Dorothy Murr, purchased one of the lots in 1960 and built a modest cabin on the property to spend summer vacations and host gatherings of the extended family.

Three years after building the cabin, the parents purchased the adjacent lot as an investment parcel to eventually hand down to their children. That approximately 1-acre lot next to the cabin has since remained vacant.

The Supreme Court case stems from the Murr siblings' decision in 2004 to approach St. Croix County in the hope of selling the vacant property to finance needed improvements on the cabin.

"It is outdated and is in need of serious repair," said Donna Murr, the youngest of the siblings and the spokeswoman for the family. "Rather than take out a mortgage to pay for the improvements on the cabin, we decided that we wanted to sell the investment parcel that my parents bought and gave to us years before."

But they were told they couldn't sell the property. Congress added the St. Croix River to the National Wild and Scenic Rivers program in 1972, and an ensuing county ordinance based on state regulations required a total area of at least an acre to develop. The 1975 ordinance, which required subtracting wetlands and floodplains from the total land area, meant the Murrs' vacant lot was too small to develop.

The ordinance contained a grandfather clause allowing single-family residences to be built on lots created prior to 1976, but only if the property wasn't under the same ownership as an adjacent lot. Because the Murrs owned the adjacent lot, the grandfather clause didn't apply.

And the ordinance prevented the Murrs from selling the vacant lot unless they combined it with the lot that contains the cabin.

"We learned that they were not going to allow us to separately sell or develop the vacant parcel, unless we tore down the existing cabin on the lot next door," Murr said. "Needless to say, we were stunned to hear this. That made no sense to us whatsoever."

The family sued, alleging an illegal taking of private property. The case made its way up to Wisconsin's highest court, which ruled against the Murrs, relying on precedent that requires courts to look at landowners' entire property — rather than breaking it into segments — when assessing government takings claims (Greenwire, June 15, 2016).

'Parcel as a whole'

The Supreme Court agreed to take up the dispute in January 2016. Justices on Monday will hear an hour and 10 minutes of oral arguments.

The key question justices will grapple with is how courts should weigh whether an uncompensated taking of private property has occurred in violation of the Fifth Amendment.

At the heart of the issue is a legal precedent that stems from a 1978 case, Penn Central Transportation Co. v. New York City, in which the owners of Grand Central Terminal alleged that they were entitled to compensation for a government taking because a historical preservation law barred certain development projects in the airspace above the terminal.

Justices then said courts shouldn't "divide a single parcel into discrete segments and attempt to determine whether rights in a particular segment have been entirely abrogated." Instead, they said, the Supreme Court should weigh the extent of interference with rights on the "parcel as a whole."

In Murr, Wisconsin argues that state laws shape the relevant parcel as a whole and that, when the Murr siblings took over ownership of the lots in 1995, they took the title of a single merged parcel.

Seen that way, the "taking" of the vacant lot isn't a significant loss, the state says.

St. Croix takes a slightly different approach along those same lines, arguing that merger provisions such as the 1975 ordinance are common in property law and that the Murrs should have known the implications of owning adjacent lots.

"If they were owned by two different people, then each would get a grandfather," said Richard Lazarus, a law professor at Harvard University who is representing St. Croix. "You don't get the advantage of the grandfather clause if you have two lots in joint ownership because then you don't have the hardship and then the lots are merged."

Under the Obama administration, the federal government also argued that Wisconsin courts correctly sided with the state and county, but it argued that courts should apply a case-by-case approach to determining whether a taking has occurred. Because the two Murr lots are contiguous, they should be seen as a single parcel in applying takings analysis, the government said. The Trump administration's Justice Department is expected to argue that view on Monday.

The Pacific Legal Foundation, though, disputes that the two lots were ever merged.

The 1975 regulation at issue was simply "an end-use ordinance that restricts the use of the property, and it does not merge the two properties together," said John Groen, a PLF attorney who is representing the Murrs. The family's lots "remain separate properties today, both legally and factually. It is simply the restrictions on the use of the properties that cause them to appear to be merged or effectively merged."

As such, PLF argues, the relevant property against which to weigh whether a taking has occurred is just the vacant lot.

"The state is arguing that here the single parcel is both properties, and that view, we contend, is simply wrong," Groen said.

The Supreme Court's delay in scheduling oral arguments in the case led to some speculation that the court was split 4-4 over the issue after Justice Antonin Scalia's death (Greenwire, Oct. 4, 2016).

But the court ended up scheduling arguments for Monday, before President Trump's nominee for the vacant seat will be in place. The arguments, in fact, will wrap up just as the confirmation hearing for Judge Neil Gorsuch to fill the seat is beginning.

Lazarus said he expects Justice Anthony Kennedy to be the swing vote in the case, as he has tended to be in property rights issues. If the court is indeed split, it could schedule a rehearing in the case once Gorsuch is confirmed.

Echeverria, who filed an amicus brief for economists in support of Wisconsin and St. Croix County, said it will be interesting to see how justices approach the slightly different arguments being advanced by the federal government, the state and the county — as well as how they view the Murrs' complaint.

"One way of viewing them is, gee, too bad you didn't get better legal advice," he said. "If they had competent legal advice, they probably wouldn't have fallen on these traps. ... It'll be a telling moment in the argument if the court says it looks like there's an old, stale legal malpractice case."

On the other hand, Echeverria said, the court may say, "Why can't these poor people build their house?"

States line up

The case has pitted coalitions of states against each other.

Led by Nevada, nine states filed an amicus brief arguing that it's critical for the Supreme Court to preserve property rights and that a ruling against the Murrs could allow the federal government to increase its ability to take state and private land without just compensation.

The states also say the case is important for maintaining the integrity of the system of titling and identifying separate lots.

Alaska, Arizona, Arkansas, Kansas, Oklahoma, South Carolina, West Virginia and Wyoming joined Nevada in the brief.

On the other side are California and eight other states, which argue that a decision in favor of the Murrs would impede the ability of states and localities to put in place necessary regulations.

Joining California were Hawaii, Illinois, Maine, Massachusetts, Minnesota, Oregon, Vermont and Washington.

Groen, the Murrs' attorney, said, however, that the case is not about the wisdom of land-use ordinances.

"Whether restricting the sale or development of separate parcels of property is a good idea or not — that's for legislators to decide," he said. "The question here goes to the takings claims and whether government should bear the burden of its regulations, or can the government shift that burden onto the Murrs."

Groen said the case would help protect other landowners who find themselves in situations similar to that of the Murrs. Echeverria, though, said the case could end up being a boon for big developers.

Suppose, Echeverria said, that a developer is challenging a local floodplain regulation affecting 1 acre on a 100-acre area that has been subdivided into 100 lots. Under current law, courts would define the relevant parcel against which to weigh whether a taking has occurred as the full 100-acre area and conclude that the economic impact would be minimal.

If the court agrees to define "parcel as a whole" as the Murrs and Pacific Legal Foundation are seeking, Echeverria said, courts would instead define the relevant parcel as the 1-acre lot and conclude that a regulatory taking has occurred.

"The court has never approached the takings issue that way," Echeverria said. "If the court would embrace that idea, it would greatly expand the scope of the takings clause and instantly make it more difficult for government to regulate."

One immediate effect of the case could be in deciding a separate pending property rights case in front of the Supreme Court.

In that case, Lost Tree Village Corp. v. United States, the government asked justices to review a lower-court decision that found the government liable for $4.2 million after it denied a real estate company permits to fill in wetlands.

The developer, Lost Tree Village, had argued that a coastal parcel in Florida would be worth $25,000 without the necessary permit and $4.8 million with it after being developed into a residential property.

But federal attorneys said the lower court erred by determining that the land in question should be isolated from the developers' other property for takings considerations.

The Obama administration had urged the Supreme Court to hear Lost Tree Village alongside Murr, but justices have left the case pending. Legal experts expect the court will dispense with it in accordance with the ruling in Murr.

'Mind-blowing'

Up to 21 members of the Murr family — the final number will depend on whether a family hockey game Sunday is completed on time — are planning to attend Monday's oral arguments. They intend to arrive as early as 5 a.m. to wait in line to score seats at the courthouse. They'll bring some pads to sit on and some decks of cards to pass the time until the midmorning arguments.

Donna Murr was the first to arrive in Washington. She flew in Wednesday to meet with members of the media beforehand.

At a coffee shop about 10 minutes' walk from the Supreme Court, Murr yesterday said she was a little overwhelmed at the national attention the case has received.

"In my mind, it could have all been settled on the local level with common sense and conversation," she said. "It's mind-blowing to me."

The family has still not started any of the improvements that need to be done on the cabin, as all of their efforts and resources have been concentrated on the court fight. Murr said the case has cost the family about $100,000 so far, split evenly among the six siblings — though PLF is representing the family for free in the Supreme Court fight. Three siblings have retired since the start of the legal battle.

If they're successful, the family will "sit down and gather our thoughts and decide how to proceed with the project," Murr said. The siblings intend to pass down the cabin to the next generation.

Meanwhile, the Murrs have continued to gather at the cabin in the summer and for holidays.

Murr said the family is looking forward to its next Fourth of July gathering. Every year, they organize a state-themed party at the cabin, in which the family members dress as people who come from a certain state and prepare a menu that matches.

They've already voted on this year's theme.

"Nevada was our No. 1 amicus," Murr said. "Gaming and food — a little Vegas flair. We're celebrating Nevada this year."

Twitter: @apeterka Email: areilly@eenews.net

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