Taking a Chance on… Takings

Chicago

William Greider's "The Right and US Trade Law: Invalidating the 20th Century" [Oct. 15] purports to explain the close connection between my "radical" views of the "takings" clause and the current litigation under Chapter 11 of NAFTA, which, among other things, requires signatory states to pay compensation whenever their laws involve expropriation and acts "tantamount to expropriation" of the private property of citizens. His article is a troublesome mixture of truth and half-truth laced with selective quotations from our phone conversation.

Greider portrays me as an extremist and antigovernment ideologue who invented the theory of regulatory takings in order to defeat environmental regulation. He is wrong on every count. The idea that regulations that stop short of seizure of property could count as takings goes back at least as far as Justice Oliver Wendell Holmes's 1922 opinion in Pennsylvania Coal v. Mahon, which held that a regulation of the use of private property could be treated as a compensable taking if it went "too far." Even Greider, one hopes, would regard it as a taking for the state to forbid a landowner to enter his own property or to use it for any purpose at all, even if it did not seize the land. Any constitutional provision worth its salt has to be read to cover not only the precise wrong it identifies (e.g., takings) but also the substitutes available to states to achieve the same unconstitutional end.

Once it is accepted–as mainstream US law has long recognized–that some regulations are tantamount to takings, the question arises, Which ones and why? To sort out Holmes's tangled knot, I have long championed a three-part approach that is far less radical (and more coherent) than Greider's garbled account of my views suggests. The first point is indeed a departure from established law. It says that there is no principled way to decide that some limitations on land use are takings and others are not. Partial restrictions can come at all levels, from small to large, and the continuum cannot be broken at an arbitrary point simply by saying that some are too big and others too small.

By the same token, however, the willingness to think of all government regulations as takings most emphatically does not mean that all should be invalidated unless explicit compensation has been paid. At no point, for example, does Greider so much as mention the central place that implicit in-kind compensation plays in my system as a means for reducing the instances for which compensation is required. Many broad-based regulations do not only hurt property owners; they also benefit them by imposing like restrictions on neighbors. These benefits should count as compensation under the takings clause. In general this approach tends to validate broad-based regulation that both benefits and burdens regulated parties in equal proportion but does not save the regulation that imposes (usually by design) far greater restrictions on some landowners than on others. Zoning laws, for example, can fall into either category. In some cases they impose uniform restrictions (on exterior design, for example) that benefit the regulated landowner, and these restrictions can be imposed without any cash compensation.

More important is the scope of police power dealing with health and safety. Greider writes misleadingly that the police power was an invention of the New Deal, but that is sheer historical myth. The invocation of the police power long predates the New Deal, and its proper articulation occupies a central place in my own "radical" exposition of the takings clause. In the Lochner decision, which invalidated a ten-hour workday for some (but not all) kinds of bakers, the question before the Court was if this statute fell within the state powers to regulate private property (and restrict private freedom of contract) to preserve public health and safety.

In my view the case was correctly decided on the ground that the statute was in reality only a disguised "labor" statute, designed not to protect health and safety but to place nonunion workers at a disadvantage against union workers, given that the ten-hour work restriction had a greater impact on their ability to do business. (Nonunion workers had one long shift from late afternoon to early morning and slept on the job in between. Union workers had two shifts.) The Nation itself vigorously defended the decision in a May 4, 1905, story titled "A Check to Union Tyranny." The result in Lochner is fully defensible without resorting to the woolly and overbroad standard Greider falsely attributes to me, namely, that the takings clause means that "government must pay those businesses or individuals whose property value is in some way diminished by public actions."

Understanding the police power is critical in evaluating NAFTA's provision on expropriation and state actions "tantamount to expropriation." For the record, these are the first words I have ever written on NAFTA, and close readers of Greider's article will note that it's only by inference and innuendo that I am made to appear to champion the broad reading of Chapter 11. The blunt truth, however, is that business interests who have pressed for compensation under NAFTA have not consulted me on the question–not surprising, as, contrary to Greider's nasty innuendo, I think Chapter 11 is a major policy mistake if it is read to require compensation whenever a state seeks to regulate or limit pollution. All nineteenth-century police power cases (including Lochner) held that pollution and nuisance prevention fell within the proper scope of the police power. I have extensively defended and developed that notion of legitimate state power in all my published writings.

That said, the only questions worth arguing are those about the means chosen to reach a legitimate end: Was the ban discriminatory because it applied only to foreign investment (in which case it should be struck down)? Or was it overbroad (in which case the state should be given a fair degree of latitude)? From what little I know of the facts, the MTBE ban seems entirely appropriate, unless there are less restrictive means that could protect state and local water supplies, which does not seem to be the case. One does not have to believe, however, that the state must have the police power to regulate all sorts of "social and economic" issues in order to check pollution.

Had Greider asked me about the particular case, he would have gotten this same emphatic answer. He could have written a far more powerful piece on NAFTA had he stated that the most determined defender of the takings clause lines up foursquare against the business interests that have relied on Chapter 11 to gut the state police power. But that would have required him to work through the implications of my position, which is inconsistent with his muckraking ambitions.

RICHARD A. EPSTEIN

Deming, Wash.

Isn't a logical extension of the "Epstein Doctrine" the position that activities by corporations having adverse impacts on the commonweal (health, environment, etc.) also constitute "takings"? And that government is the public's litigator?

CHARLES KNAUFT III

Oakland, Calif.

Government regulations are a "taking"? I say let's go for it–if business costs to society are also deemed a "taking." Let's eliminate all government regulation of business, but let's also stop the socialization of the costs of doing business. If a business pollutes, let it be sued by the government, or private persons in the name of the public, for "taking" the public's clean air and water. If its production machines cause serious injury or death, the business has "taken" the value of that person's life or limb and so must compensate him or her. If a large retail chain puts local mom-and-pops out of business, the chain should compensate them. Fair's fair, right?

CHARLES B. HOLZHAUER

Tucson, Ariz.

At just exactly what point will the trade-offs become unacceptable to the multinational corporate robber barons? Will they cease their depredations against the environment when it is so irreversibly compromised that even their own children begin to sicken and die? Under William Greider's able pen, the arcane and complex subjects of regulatory takings and NAFTA's Chapter 11 are rendered eminently understandable.

MARY PETERSDORF

  GREIDER REPLIES

Washington, D.C.

Professor Epstein's letter contains valuable news in his announcement that he too considers NAFTA's Chapter 11 "a major policy mistake" that poaches illegitimately on the government. Since he is a leading legal theorist on the right, this might be useful to critics, and perhaps environmentalists can recruit him as an expert witness. But don't count on it. A careful reader will note that Epstein's lawyerly style sprinkles dangling qualifiers and escape hatches throughout his assertions. When I asked him about Chapter 11, he brushed the question aside (then went off on the trade lawyers who–"talking about my work behind my back"–failed to consult him). Who knows, maybe my article persuaded him to distance himself from the Chapter 11 controversy, lest it drag down his own theory.

Epstein complains that I garbled the meaning of his doctrine. But I am not alone. When we spoke, he told me, "One of the dismaying things about the debate is that none of my opponents get my position right. In fact, most of my supporters don't get it right." Of course my article quoted Epstein selectively–how could it not?–but I doubt that printing his extended remarks would improve the portrait. "I'm not a zero-government guy. I'm a limited-government guy," he explained in our interview. "Once you allow any form of income redistribution to take place from any individual or group to any other for any reason the state thinks appropriate, then the game of limited government is over." "I am a fierce defender of the yellow-dog contract." "I want to undo the administrative state to the extent I think it's an instrument of faction and wealth redistribution without any productive increase." I described his theory as "radical" and "reactionary." I did not call him an "extremist." I did not say the police power was an "invention" of the New Deal, only that the Supreme Court reinterpreted the doctrine to justify the New Deal's economic and social regulation. What Epstein calls "sheer historical myth" is the standard understanding among legal scholars, including conservatives.

Epstein seems anxious to detoxify the most provocative elements in his theory by portraying his purpose as unexceptional reform–correcting certain logical anomalies in the constitutional meaning of "takings." The Fifth Amendment makes sense, he reasons, only if the requirement to compensate property owners is extended to cover partial injury from regulatory intrusions. Invoking Justice Holmes as his antecedent may be read as an inside joke–Holmes was among the progressive jurists who struggled many years to undo the property-first Lochner era that Epstein wishes to restore. More to the point, the Supreme Court, even the present one, has adhered to a contrary understanding, directly expressed in the Rehnquist Court's 1993 Concrete Pipe decision: "The mere diminution in the value of property, however serious, is insufficient to demonstrate a taking."

If Epstein's logic is so straightforward, why would the Justices be obtuse? Perhaps because they recognize the profound upheaval in governance that would result if the Court consecrates his theory. The federal judiciary, as even Epstein obliquely acknowledges, would be picking and choosing which zoning laws are legitimate. Furthermore, as dissenting Justice John Paul Stevens observed in the Palazzolo case this past summer, an Epstein takings victory for property owners requiring government compensation would constitute "a tremendous–and tremendously capricious–one-time transfer of wealth from society at large to all those individuals who happen to hold title to large tracts of land at the moment this legal question is permanently solved." It seems a bit late to try to sanitize the implications.

Epstein's protestation that his theory holds no threat to environmental laws involves one of those points neither his supporters nor his critics seem to get right, since they believe otherwise too. Both sides know that most of the domestic takings cases are in fact aimed at environmental regulation. Many are further aware of the disingenuous wrinkle at the core of Epstein's argument. Pollution laws are justifiable government action, he contends, so long as they are based on common-law nuisance doctrine–one property owner may not do harm to neighbors. Only, as Epstein assuredly knows, none of the major US environmental laws derive from the nuisance premise, because that would subject enforcement to an impossible thicket of litigious claims over who injured whom. Science knows that rising air pollution will cause more asthma victims, but proving which polluting factory caused someone's illness is an evidentiary test designed to defeat the objective. Likewise, wetlands are protected under the Clean Water Act not for aesthetic reasons, as he supposes, but because science knows the restorative, purifying powers of shallow marshes. Epstein followers like Edwin Meese call them "landing fields for ducks" and think developers should be compensated for not paving over this vital public-health resource.

Epstein mentions his in-kind compensation scheme to show he is a sensitive social thinker. Property owners who benefit from public regulation, he suggests, should have that gain deducted from their injury claims. But why stop there? Why not send a bill to the farmer whose land is suddenly made more valuable because government built a new highway alongside it? Perhaps we should require the wealthholders to pay more for the Pentagon budget, since military protection disproportionately benefits those with greater assets. These are intriguing questions, but the subtext of Epstein's logic is the familiar market fixation of the Chicago school. Society's collective actions are to be broken down into a labyrinthine accounting system of individual gain and loss. This would make new work for lawyers and accountants. It would also further cripple government, which is the professor's main idea.

Finally, the modern regulatory state is profoundly flawed and often ineffective, though not for the reasons Epstein cites. Major regulatory agencies are captured by their regulated industries. Laws are written with purposeful vagueness and loopholes, which will guarantee delayed enforcement often for decades. Business interests mobilize resources to stymie what the public seeks. Epstein would perhaps blame "factions" and say this is another reason to return to limited government. As I have written for many years, progressives ought to acknowledge the regulatory breakdowns more candidly and begin the search for new legal doctrine and governing mechanisms that might restore health to the defense of the common interest. That task is very difficult, I concede, while the right wing persists energetically in trying to invalidate what was accomplished in the twentieth century.

WILLIAM GREIDER