Palazzolo v. Rhode Island
533 U.S. 606 (2001)

  • Palazzolo owned some waterfront property on a tidal marsh in Rhode Island.  He attempted to develop the property, but his proposals were rejected by the Rhode Island Coastal Resources Management Council because the land was designated as a “coastal wetland.”
    • Palazzolo had been trying to develop the property on and off for over thirty years.  At first, he’d just been an investor on a corporation that bought the land in 1959, but the corporation went bankrupt and he ended up owning the land directly in 1978.
      • Technically, a person and a corporation are two separate individuals, even if the corporation is wholly-owned by the person.
    • The Rhode Island Coastal Resources Management Council came into existence in 1971.
  • Palazzolo sued, claiming that the wetlands regulations constituted a taking under the 5th Amendment.
    • Palazzolo argued that the regulations deprived him of all economically beneficial use of the property, and constituted an inverse condemnation of the land.
    • See Lucas v. South Carolina Coastal Council (505 U.S. 1003 (1992)).
  • The Trial Court found for Rhode Island. Palazzolo appealed.
  • The Rhode Island Supreme Court affirmed. Palazzolo appealed.
    • The Rhode Island Supreme Court rejected Palazzolo’s arguments for two reasons:
      • Since he acquired title to the land in 1978, and the Council’s regulations were already in existence at that time, he had no right to challenge.
        • No reasonable investment expectations were affected by the regulation since it predated his ownership.
    • Second, the land still maintained some value, so he could not challenge on the basis of the total takings ruling in Lucas.
      • Although Palazzolo couldn’t build right on the water, he could build on the other side of the property, so the land wasn’t totally useless, it was still worth about $200k.
  • The US Supreme Court partially reversed and remanded for trial.
    • The US Supreme Court found that when a regulation places limitations on land that fall short of eliminating all economically beneficial use, a taking may have still occurred, depending on several factors including
      • The regulation’s economic effect on the landowner.
      • The extent to which the regulation interferes with reasonable investment-backed expectations.
      • The character of the government action.
    • The Court rejected the idea that you can’t sue because you purchased the land after the regulation came into effect.  If so, that would put an “expiration date” on the Takings Clause.
      • Technically, the right to challenge laws regarding the runs with the land, like other property rights do.  Therefore, Palazzolo had the same right to bring a lawsuit as the original corporation did.
      • The seller obviously loses the standing to sue once they sell the land, therefore, the standing to sue must be running with the land.
  • The US Supreme Court did not rule on the issue of whether the Council took 100% of part of the land (the conceptual severance argument), because Palazzolo didn’t bring it up.