elements b power point slides class #32 monday, november 16, 2015 national button day

ELEMENTS B POWER POINT SLIDES

Class #32Monday, November 16, 2015

National Button Day

Music:MEAT LOAF

BAT OUT OF HELL (1977)

Class #32 Class #32 • Review Problem 3A(i) (Radium)• Michelman Continued• Penn Central & Demsetz Takings Story• Application of Prior Authority to Penn

Central Facts

FINAL EXAM QUESTION 3OPINION/DISSENT FORMAT

•Requires You to Describe and Defend Two Positions•Must Show that You Understand Range of Relevant Arguments Arising from Line of Cases•Must Understand Role of US Supreme Court

– Deciding One Case, BUT Setting Rules for Many – Can Choose to Affirm or Modify Precedent BUT

Must Defend

–Need to Resolve One or More Need to Resolve One or More Difficult Open Qs (Review Difficult Open Qs (Review Problems 3A-3C)Problems 3A-3C)

FINAL EXAM QUESTION 3Review Problem 3A (i)

(Radium)FROM EXAM QUESTION IIID (1998)•1979: State Opens Minimum-Security Prison Adjacent to Bart’s Vacant Lot•Findings of Fact

– B received vacant lot under terms of his father’s will.– Value reduced by > 2/3 ($2.2M(1970) $600K(1980)).– The prison constituted no threat to the health or safety to

present or future residents of B’s parcel.– No change in allowable uses of B’s parcel.

FINAL EXAM QUESTION 3Case Gov’t Act Affected

LandownerIntended Beneficiaries

Hadacheck LA Bans Brickyards

Brickyard Os Neighbors

Mahon PA Bans Undermining

Coal Cos. Surface Os

Miller VA Cedar Rust Act

Cedar Tree Os Apple Orchard Os

Penn Central

NYC Historic Preservation

Os of Historic Buildings

Tourist Biz; History Buffs

XQIIIDMinimum Security Prison

All Adjoining Landowners

All State Citizens

FINAL EXAM QUESTION 3Review Problem 3A(ii)

XQIIID: Big loss in value to B’s parcel when state opened prison on neighboring lot.

•Part (ii)Part (ii): Unconstitutional “Taking” if : Unconstitutional “Taking” if landowners’ property value is reduced landowners’ property value is reduced significantly but Os acquired the property in Q significantly but Os acquired the property in Q by gift/will/inheritance, so arguably made no by gift/will/inheritance, so arguably made no investment?investment?

– Discuss In Class Next Monday Discuss In Class Next Monday (Uranium/Radium)

– Assume TodayAssume Today: Analysis same as if B paid fair market value for parcel when he acquired it.

FINAL EXAM QUESTION 3Review Problem 3A(i)

(Radium)XQIIID: Big loss in value to B’s parcel when state opened prison on neighboring lot.

•Part (i)Part (i): Unconstitutional “Taking”? : Unconstitutional “Taking”? Landowners’ property value is reduced Landowners’ property value is reduced significantly BUT significantly BUT

– The state’s use causes no tangible harms to The state’s use causes no tangible harms to the landowners the landowners • Have to accept findings of factHave to accept findings of fact• Basically means loss of value caused by irrational Basically means loss of value caused by irrational

fearfear– AND The state places no limits on the AND The state places no limits on the

landowners’ use of their lots.landowners’ use of their lots.


(Radium)• Prison Big loss in ppty value to B’s

parcel BUT– No tangible harms to B– No limits on B’s use of own lot

EASY Qs• State Stopping Pubic Nuisance?• State Acting as Arbiter?• What are Benefits to B? Reciprocity?




HARDER Qs• Arguments from Mahon?• State Acting as Enterpriser re B?




BIG PICTURE HARD Qs• Should State Have to Pay If

– No Explicit Limits on B’s Ability to Use– Loss in Value from Irrational Fear (v.

Real Harm)

Class #32 Class #32 • Review Problem 3A(i)

• Michelman Continued • Penn Central & Demsetz Takings Story• Application of Prior Authority to Penn

Central Facts

Takings Theorist #3: Frank Michelman

Introduction to ConceptsIntroduction to Concepts - - DQ3.27-3.28 cont’d (me)DQ3.27-3.28 cont’d (me) - DQ3.29 (Uranium) - DQ3.29 (Uranium)

Takings Theorists: Frank Michelman DQ3.27-3.28

MMN = Cost/Benefit Analysisof Decision Whether to Compensate

•Once state has decided to regulate, there’ll be winners & losers. Compensate losers if …

– Costs of Compensating (= Settlement Costs) less than

– Costs of Not Compensating (= Demoralization Costs)


Cost of Compensating = Settlement Costs: Includes

•Cost of paying claimant & everyone like claimant& everyone like claimant•Costs of administering payment scheme

•Likely Highest When– Lots of claimants– Claims not same for each claimant and intangible or

otherwise hard to value

Takings Theorists: Frank Michelman DQ3.27-3.28Cost of Not Compensating =

Demoralization Costs: Includes•Upset to losing party & everyone similar•Upset to sympathizers•Likely Highest When

– Many people view gov’t act as unfair/arbitrary

– Relatively few people bear very high burdens not seen as relating to their own behavior


MMN = Cost/Benefit Analysisof Decision Whether to Compensate

•Do RoughRough Comparison of Settlement Costs (SC) & Demoralization Costs (DC)

– If SC>DC, no compensation (often widely dispersed small losses)

– If DC>SC, pay compensation (often small group of losers viewed as unfairly burdened)

Takings Theorists: Frank Michelman DQ3.27-3.28MMN = Cost/Benefit Analysis

of Decision Whether to Compensate•Once state has decided to regulate, there’ll be winners & losers. Compensate losers if …

– Costs of Compensating Costs of Compensating (= Settlement Costs = (= Settlement Costs = SC)SC)

LESS THAN– Costs of Not Compensating Costs of Not Compensating (= Demoralization (= Demoralization

Costs = DC)Costs = DC)

QUESTIONS?


Role of Efficiency Gains•Efficiency Gains are the net benefits of implementing the regulation in question.•Result of cost/benefit analysis legislature already should have done already should have done when deciding to adopt the regulation


• Efficiency GainsEfficiency Gains = net benefits of = net benefits of implementing regulation in question. implementing regulation in question. E.g., E.g., in in Hadacheck:Hadacheck:– Gains (Harm Prevented) b/c no

brickyards (health; property values) LESS

– Costs of Regulation (Harm to brick industry from having to shut down and relocate; harm from increase in cost of bricks; costs of implementation and enforcement)


• Efficiency GainsEfficiency Gains = net benefits of = net benefits of implementing regulation in question. implementing regulation in question. E.g., E.g., in in Miller:Miller:– Gains (Harm Prevented) to apple

orchards & state economy b/c cedar rust limited LESS

– Costs of Regulation (Harm to cedar owners & neighbors; costs of implementation and enforcement)


Role of Efficiency Gains•Efficiency Gains are the net benefits of implementing the regulation in question.•If Efficiency “Gains” are negative, If Efficiency “Gains” are negative, legislature shouldn’t pass regulation legislature shouldn’t pass regulation at all. at all.

Takings Theorists: Frank Michelman DQ3.27-3.28Role of Efficiency Gains

•Efficiency Gains are net benefits of implement-ing the regulation in question. If negative, legislature shouldn’t pass regulation at all. •ImportantImportant: Ordinarily, not part of : Ordinarily, not part of Takings analysis.Takings analysis.•Under Under Euclid & MillerEuclid & Miller, assessing , assessing efficiency gains is job for state efficiency gains is job for state legislature, not fed’l court.legislature, not fed’l court.

Takings Theorists: Frank Michelman DQ3.29 (Uranium)

Fairness PrincipleExplain in your own words.

Takings Theorists: Frank Michelman DQ3.29 (radium)

Fairness Principle•OK not to compensate, if affected parties ought to understand how not compensating in similar cases probably is more beneficial in long run.

– Like work of John Rawls on “justice” generally: Look at problem before you know which people in particular will be affected.

– Can’t measure this, so using principle = arguments about fairness and how people are likely to react

Takings Theorist #3: Frank Michelman

Application of Theory DQ3.30 (Uranium: apply to earlier DQ3.30 (Uranium: apply to earlier cases & “airspace solution”)cases & “airspace solution”)DQ 3.33 (Krypton: apply to P.C.)

Applying Michelman DQ3.30 (Uranium) & 3.33 (Krypton)

Settlement Costs•Easy to Identify Losers?•Administrative Costs of Paying Claims (Valuation/Distribution)•Value of Settlements (Number x Amount)

Apply to Facts of …

•Miller (MAF)•Hadacheck•Mahon•Airspace Solution•Penn Central (Krypton)

Applying Michelman DQ3.30 (Uranium) & 3.33 (Krypton)Demoralization

Costs•Likely Perception of Harm to Losers?•Likely Perception of Winners/Importance of State Interest?•Possible Variations in Spin?

Apply to Facts of …

•Hadacheck (MAF)•Miller•Mahon•Airspace Solution•Penn Central (Krypton)

Takings Theorists: Frank Michelman Application of Fairness

PrincipleOK not to compensate, if affected parties ought to understand how not compensating in similar cases probably is more beneficial in long run.•Likely similar analysis to Demoralization Costs •Michelman likely thinks reasonable people OK with cases like Hadacheck w extensive harm•Principle might operate differently in Mahon because of recognition of possible harms to society from overturning established contract rights.•Leave other cases for you

Class #32 Class #32 • Review Problem 3A(i)• Michelman Continued

• Penn Central & Demsetz Takings Story

• Application of Prior Authority to Penn Central Facts

DQ3.31: Penn Central & Demsetz Takings Story

• Reminder: This Analysis Provides Another Way to Think About Q of When Regulation Interferes Too Much w Property Rights– Who Should Bear Burden for Changing

Technology and/or Values?– Though Not a Tough Question if

“Change” is: “We’ve just discovered you’ve been poisoning us for years.”

Penn Central: Demsetz Takings Story

• Decision: Whether to alter historically significant building

• Old Rule: Os can do as they like.• Externalities: Harm to nearby tourist businesses

and tourism generally; harm to “history buffs” & civic pride

• Change in Circumstances: As time passes, historic buildings become more well-known/more popular/rarer

• Increased Externalities: Increase in [Perception of] Harms b/c more popularity; more reliance; loss of some historic buildings (Old Penn Station in 1963)

Jacqueline Kennedy Jacqueline Kennedy Onassis:Onassis:

"Is it not cruel to let our city die by degrees, stripped of all her proud monuments, until there will be nothing left of all her history and beauty to inspire our children? If they are not inspired by the past of our city, where will they find the strength to fight for her future? …

Jacqueline Kennedy Jacqueline Kennedy Onassis:Onassis:

"Americans care about their past, but for short term gain they ignore it and tear down everything that matters. Maybe… this is the time to take a stand, to reverse the tide, so that we won't all end up in a uniform world of steel and glass boxes."


• Decision: Whether to alter historically significant building

• Change in Circumstances: As time passes, historic buildings become more well-known/more popular/rarer

• Increased Externalities: Increase in [Perception of] Harms b/c more popularity; more reliance; fewer historic bldgs

• Change in Rule: Passage of Historic Preservation Laws

• Response: Os of historic buildings might claim “Taking” b/c of interference w Property Rights: (Penn Central is first challenge)


Policy Questions• For State Legislature (not you): Is Historic

Preservation a Good Way to Address Growing Externalities?

• For Federal Takings Analysis (you): Society decided relatively recently that historic preservation is important. – Fair to Os of historic bldgs to bear financial

burden? -OR -– Should gov’t pay them to preserve landmarks?

Questions on Demsetz & Questions on Demsetz & Penn CentralPenn Central??

Class #32 Class #32 • Review Problem 3A(i)• Michelman Continued • Penn Central & Demsetz Takings Story

• Application of Prior Authority to Application of Prior Authority to Penn Central Penn Central Facts (Krypton & Facts (Krypton & A A Quick Breath of OxygenQuick Breath of Oxygen) )

Penn Central: Penn Central: DQ3.32-3.33 DQ3.32-3.33 (Krypton)(Krypton)

Apply Prior Authority to PC Facts •To Practice Using Earlier Cases/Theorists•To Further Understand Earlier Cases/Theorists•To See What Arguments Lawyers Might Have Made to the US SCt When It Decided PC

•Like Treating PC Facts as Exam Question

Penn Central: IntroductionDQ3.31 (Krypton)

Quick Point From Last Time: Penn Central Loss•Osceola: Lost Rental Income (Correct)

• $1 Million/Yr during Construction• #3 Million/Yr Thereafter

•BUT Offset by loss of $700K $1M rental of displaced space.•Thus, little net loss during construction•BUT: Loss of at least $2 million/yr in net rental Loss of at least $2 million/yr in net rental income income afterafter construction completed (in 1968 $$) construction completed (in 1968 $$)


Apply Prior Authority to PC Facts •Sax/Miller

– Pure Arbiter/Miller Case?– Enterpriser Case?– Other Arguments from Sax or Miller

Penn Central: DQ3.33Apply Theorists to Facts of PC: Sax

•Arbiter v. Enterpriser: – Not Standard Arbiter Case b/c No Land Use

Conflict– Not Standard Ent. Case b/c Gov’t Doesn’t Want

to Run– Might Argue : More like Ent. b/c Gov’t Wants

Parcel Used Only for Particular Purpose that Serves Gov’t Interest

•Control Spillover Effects– Not Preventing Harm to Other Land Uses– BUT: Externalities to NYC from decision to

change bldg.



•Epstein & Related Arguments– Public Nuisance/Hadacheck Case?– Implicit Compensation/Reciprocity?

Penn Central: Penn Central: DQ3.40 DQ3.40 (Oxygen)(Oxygen)

The dissent claims that there was no “reciprocity of advantage” in Penn Central.

Can you make an argument that Justice Can you make an argument that Justice Rehnquist is wrong on this point?Rehnquist is wrong on this point?



•Epstein & Related Arguments– Public Nuisance/Hadacheck Case? NO– Other Arguments re Implicit Compensation

or Reciprocity?

Penn Central: DQ3.33Apply Theorists to Facts of PC:

Epstein•Stopping Public Nuisance: NO•Implicit Compensation

– Reciprocity? : • Normally not for Hist. Preservation• Penn Central does get some tourism benefits

– Other Compensation?• Tax Breaks: Probably Not Enough to Matter

(Not Raised)• TDRs: Could discuss; might depend on

actual value


Apply Prior Authority to PC Facts •Sax/Miller•Epstein & Related Arguments•Arguments from Mahon (beside reciprocity)?

– Too Far?– Value to Zero? – Other?

Penn Central: DQ3.32Arguments about Penn Central from

Mahon include:•Loss in Property Value = “Too Far”?

– Losing $2 Million/year– BUT retains value of building + reasonable rate

of return – Gets TDRs + tax breaks– Would need better data plus discussion re “too

far”•Value to Zero?

Penn Central: DQ3.32Arguments about Penn Central from

Mahon include:•Value to Zero?

– If look at whole parcel, NO– If look at air rights alone, MAYBE

• City might allow use of air rights if better design

• TDRs may allow moving value of air rights to new site

Penn Central: Penn Central: DQ3.32-3.33DQ3.32-3.33 (Krypton) (Krypton)

Arguments about PC from Prior Cases

One Common Way to Do This:

Compare Facts of Old Case to Facts of New Case/Hypo

Penn Central: Penn Central: DQ3.32-3.33 (Krypton)DQ3.32-3.33 (Krypton)

Compare Facts of Old Case to Facts of PC

•E.g., Compare Nectow to Penn Central: – PC: Less Interference w Ppty Rts (Value Left)– PC: Furthers Police Power (Welfare) (Nectow

Didn’t)– Thus, Better Case for Gov’t than Nectow



•E.g., Compare Hadacheck to Penn Central: – Gov’t Purpose? Stronger in Hadacheck– Interference with Property Rights? Hard Call

• Had: Basically can do anything except existing use; may have substantial loss on investment.

• PC: Basically can only do existing use; still have reasonable return on investment.



•If compare facts for all cases, should see that PC facts are between the other cases (like an exam Q):

– Smaller interference w property rights than Mahon or Nectow; greater interference than Miller (Hard to say re Hadacheck)

– Arguably less important purpose than Hadacheck or Miller; more important than Nectow or arguably Mahon (at least as described by Holmes)



•If compare facts for all cases, should see that PC facts are between the other cases (like an exam Q):•Suggests Theorists especially helpful to resolve. Note that US SCt in PC explicitly relies on both Sax and Michaelman. (Epstein not yet written).

elements b power point slides class #32 monday, november 16, 2015 national button day

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