Legal Process

30 November

• Whenever you've got takings, you're considering fairness and maybe the correction of political malfunction (i.e., in terms of just compensation). You need to figure out who are the winners and losers (i.e., regulations might benefit most people, but some might be more disadvantaged than benefited). This is the "average reciprocity of advantage" concept: the construct of total takings raises the possibility that when you balance the benefits and burdens of just compensation, there might be an advantage on average.
• Now the usual way of balancing benefits and burdens in the context of just compenstation is to have the political process make the determination. The adjudicative process makes the determination when there is a taking of private property (and they are also the ones who decide whether private property was taken). In other words, the defination of taking of private property is itself flexible. There are two questions: should just compensation be paid, but (more fundamentally) who decides whether just compensation should be paid. And for that, we need to weigh the political process vs the adjudicative process.
• Our standard 9-party diagram. (this is from last week)
  • Situation 1: 8 parties benefit $1K by the restriction, and 1 party loses $4K
  • Situation 2: 8 parties benefit by $500, and 1 loses by $8K

  Now we ask whether we'll get the restriction in three contextxs:

  	Situation 1	Situation 2
  Benefit-Cost Analysis	Restriction imposed	No Restriction Imposed
  Majoritarian Bias	Restriction imposed	Restriction imposed
  Minoritarian bias	No restriction imposed	No restriction imposed

• What happens when we add just compensation into that?

  Let's assume that the administrative cost of the decision is zero, and the political process makes the decision. The winners can afford to pay the loser, and still come out ahead. But if there's majority rule, they might like not to pay even better. So one of the reasons that the political process isn't trusted (i.e., why we have the takings clause) is the fear of majoritarian bias.

  But it's not enough just to say that the political process is untrustworthy here. We need to decide whether the adjudicative process is better. First off, it's possible that we don't have majoritarian bias, even though that's what the framers feared: maybe concentrated minorities are well-represented or over- represented. Think Penn Central. In a historical preservation district like Colonial Williamsburg, you can argue that the restrictions on architectural changes work out to an average reciprocity of advantage for the landowners. Penn Central argues that this is not likely for them: it's a restriction only on their building, not everybody around. Still, the court finds that there's no regulatory taking: Penn Central has always been well-represented, and could have protected itself.

  So: "If there's a taking of private property then there must be just compensation." We've seen how, on the margins, it can be hard to tell who is a real loser and who is not (see Causby and Batten). So that's one basis on which the court will decide whether there should be just compensation. But there' also the question of how suspicious of the political process the courts are. The less distrustful the courts are of the political process, the more likely the definition of "taking" or "private property" will narrow (i.e., the issue will be left to the political process). Larger just compensation tends to indicate stronger distrust, as does a more expansive definition of "taking of private property."

• When you see a regulatory taking, be on the lookout for the average reciprocity of advantage as a justifier
• The difference between Lucas and Tahoe is not so much distrust of the political process, as it is the fact that it becomes untenable (perhaps in terms of the administrative costs of making the decision) to determine just compensation when the chances of an average reciprocity of advantage increase. In Lucas there's one clear loser, whereas in Tahoe almost everyone both loses and wins somewhat.
• Constitutional cases always have two balances going on: should there be regulation of X, and who should decide whether there should be regulation of X.
• Note that just because the decision is left to the political process does not mean that there will be no just compensation. The political process is always allowed to pay compensation; it's just that they're not being forced to by judicial review.
• OK, back with the table and the various analyses. And what are the effects of Just compensation?

  Let's look at Situation 2, and compare the just-compensation scenario with the non-just-compensation scenario. We have our various parties, and we can add up the total: a net loss of $4K. If we've got majoritarian bias, and no requirement of just compensation, the regulation gets imposed. But if we require just compensation, then each landowner has to pay $1K to get their $500 of benefits, so if the regulation is imposed, 8 people lose $500, and the one gets left as is: nobody is a winner. What we've done is to make those who have the power internalize the costs of their actions.

  Phew! Now let's consider minoritarian bias, and let's look at Situation 1. Regardless of whether there's just compensation, obviously, the total is $4K. But if there's just compensation, there's no loser: one guy is left at $0, but everyone else gets $500. But the point is subtle: if there's one guy (E), who controls the political process, E doesn't mind eiher regulation, because he loses nothing and the cost of compensation falls largely on the majority. And there's even a potential for over-compensation... E controls the political process, so E can decide what the compensation is, and the only opportunity for review will be under equal protection/due process, and this will get minimal scrutiny. The takings clause doesn't give us guidance about the amount of compensation.

  The takings clause is a nice protection against majoritarian bias, maybe, but it's not much help with minoritarian bias, especially because just compensation is never applied frictionalessly.

  Just compensation has two benefits: fairness, and correction of political malfunction. But only in some contexts. And the courts are unlikely to extend regulatory takings very far, even if it substantially distrusts the political process (land usage decisions) and wants to protect the rights of property owners, because the Average Reciprocity of Advantage is hard to figure and because the costs of taking up the issue are high.

• Lingle
  This case is a no-brainer. The key is to consider the implication. If, as a separate grounds for declaring something to be a regulatory taking, it's enough to ask whether it substantially advances a legitimate state interest, there will be havoc. What regulations don't impact property? Land, human capital, etc.: this would be a back door to serious substantive due process across all regulations. They'll never do that: this case is an attempt to convert regulatory takings into substantive due process.

  So the court says this has nothing to do with the basis of regulatory takings. Which is partly true. This is regulation, after all. But we don't want takings to be a basis for review of all regulations, because it'll shift all decision-making to the courts.

  So this is a potentially massive shift in decision-making; so we're talking about comparative institutional analysis here, pretty openly.