November 4, 2005
Weekly Top Ten
More changes this week as some older articles drop off. Jim Salzman's article on Ecosystem Services, which I discuss here, makes an appearance on the list at Number 10.
1. (269) How City Hall Causes Sprawl: A Case Study, Michael Lewyn (George Washington University Law School)
2. (208) Suburban Sprawl, Jewish Law, and Jewish Values, Michael Lewyn (George Washington University Law School)
3. (183) Sprawl, Growth Boundaries and the Rehnquist Court, Michael Lewyn (George Washington University Law School)
4. (94) Home as a Legal Concept, Benjamin Barros (Widener University - School of Law)
5. (79) Efficient Trespass: The Case for 'Bad Faith' Adverse Possession, Lee Anne Fennell (University of Illinois College of Law)
6. (74) Property Rights in Spectrum: Taking the Next Step, Dale Hatfield (University of Colorado at Boulder) and Phil Weiser (University of Colorado at Boulder - School of Law)
7. (72) Testimony Before Pennsylvania House of Representatives State Government Committee Re: Eminent Domain, Benjamin Barros (Widener University - School of Law)
8. (52) Substituting Complements, Giuseppe Dari-Mattiacci and Francesco Parisi (Universiteit van Amsterdam - Amsterdam Center for Law and Economics, George Mason University School of Law)
9. (51) Leasing, Ability to Repossess, and Debt Capacity, Andrea L. Eisfeldt and Adriano A. Rampini (both from Northwestern University - Department of Finance)
10. (43) Creating Markets for Ecosystem Services: Notes from the Field, James Salzman (Duke University - School of Law)
November 3, 2005
Textbooks on Eminent Domain
A reader who will be teaching a seminar on eminent domain next semester wrote to ask for textbook suggestions. As far as I know, there aren't any takings casebooks out there. Steven Eagle's book on Regulatory Takings is more of a treatise. If you know of anything, please leave a comment. Also, if you've taught a takings or constitutional property seminar and would be willing to share your syllabus, please leave a comment or send me an e-mail. [As always, comments require approval before posting, so there might be some delay].
Hatfield and Weiser on Property Rights in Spectrum
Dale Hatfield (Univ. of Colorado at Boulder) and Phil Weiser (University of Colorado and Boulder School of Law) have posted Property Rights in Spectrum: Taking the Next Step on SSRN. Here's the abstract:
On the views of almost all commentators, the primary obstacle to recognizing property rights in spectrum is either a lack of economic sophistication or political will by the relevant policymakers. To such commentators, the FCC (or a court) could simply enforce property rights at the geographic boundary of a coverage area as well as at the boundaries (or edges) of different frequency bands. On such a view, if a spectrum licensee did not respect such boundaries - i.e., trespassed onto a neighboring geographic area or frequency band - the FCC (or a court) should issue an injunction to prevent such conduct.
This paper explains that the transition to a property rights model for spectrum is far more complex than commonly portrayed. First, unlike real property, radio spectrum does not allow for clear boundaries, as radio waves propagate in varying ways depending on a variety of circumstances and practical filtering constraints prevent total isolation between adjacent frequency bands. Second, if property rights are granted in a manner that would allow injunctions for trespass, it is quite possible that parties could bring actions solely to threaten an injunction and obtain a license along the lines of the much-criticized patent trolls. Finally, and most significantly, any workable system of property rights will need to rely on (at least to some degree) the predictive models - i.e., statistical predictions as to how often interference is likely to occur - that generally govern how spectrum is used today. Notably, any such reliance begs the question of how such models will be integrated into an enforcement system and with the reality of whether interference is actually present.
We do not have all of the answers worked out for how a property rights system for spectrum would work in practice. We do, however, believe that the overly simple assumptions underlying the claims of most property rights advocates could lead to unfortunate results and unintended consequences. To avoid such results, commentators - particularly those integrating technological, economic, and legal expertise - need to engage on the merits of a critically important policy challenge. Although we do not yet grasp all of the particulars of the ideal model for property rights in spectrum, we do believe that it will look quite different from its real property counterpart to which it is often inaccurately compared.
November 2, 2005
Google Maps in Property Class
Over at Concurring Opinions, Joseph Liu has a cool post on using Google Maps to illustrate property cases like Fontainebleau Hotel Corp. v. Forty-Five Twenty-Five, Inc.
Taking Drug Patents
I'll probably have more to say on this at some point in the future, but there has been some interesting discussion in the blogosphere about using eminent domain to take patents on drugs used to treat avian flu. If you are interested in this issue, check out an open letter to President Bush on the issue by Stephen Gordon at the Speculist and a comment on Gordon's letter by Tyler Cowen at the Marginal Revolution.
Agan and Tabarrok on What are Private Governments Worth?
Amanda Agan and Alexander T. Tabarrok (Both of George Mason University Economics Department) have posted What are Private Governments Worth? on SSRN. Here's the abstract:
Homeowners associations (HOAs) and other local private governments are expanding in number both in the United States and around the world. Local private governments are also expanding in scope, with many offering private security and a few even offering services such as day care, schools, and local courts to arbitrate homeowner disputes. How valuable are those services to association-members? Our data indicate that houses in HOAs in Northern Virginia are worth, on average, more than 5 percent more than similar houses in the same neighborhood but outside of HOAs. Given those large advantages, it is not surprising that HOAs are growing rapidly.
November 1, 2005
GELPI Conference: The Trouble With Conservation Easements
On the surface, conservation easements seem like a pretty good idea. What could conceivably be wrong with allowing private parties to agree to preserve land in an undeveloped condition? Well, as it turns out, lots of things.
Greg Bialecki (of the abundantly-named DLA Piper Rudnick Gray Cary US LLP) and Daniel Halperin (Harvard Law School) gave a presentation at the GELPI Conference on some of the issues raised by conservation easements. They were joined for the Q&A by Jeff Pidot (Maine AG's Office), who is the author of an excellent report issued by the Lincoln Institute for Land Policy titled Reinventing Conservation Easements: A Critical Examination and Ideas for Reform.
Bialecki and Halperin's discussion focused on the tax issues surrounding conservation easements. I often tell my business organizations students that tax issues shape almost every business transaction; it turns out that tax also drives conservation easement transactions. Bialecki explained that the gift of a conservation easement allows the donor to take a charitable deduction from their tax liabilities. Combined with state legislation that ironed out some enforcement issues, this tax treatment caused the number of conservation easements in the United States to explode.
Like any other tax deduction, gifts of conservation easements are subject to abuse. A series of articles by the Washington Post exposed some questionable conservation easement transactions that created a high deduction for the donor in relation to public benefit conferred by the easement. This led to Senate and IRS investigations. It is still an open issue as to whether there are only a few abuses or whether there is a more widespread problem with conservation easements.
Halperin, who is a tax professor, elaborated on the tax policy concerns raised by conservation easements. As the Treasury Department's Deputy Assistant Secretary for Tax Policy in 1979, Halperin had raised a number of concerns about conservation easements that seem very prescient today. The core problem is that there is no assurance that the cost to the public (the tax deduction) is equivalent to the benefit to the public (the restriction on the land created by the easement). It is very difficult to value a conservation easement. One approach would be to look to the reduction in value of the land caused by the easement. Halperin, however, said that the better measure is the benefit conferred to the public, using the analogy of a used car donated to a charity. The person donating the car might place a hypothetical value on it that is significantly higher than the price that the charity actually gets for the car. The public benefit of the charitable donation, and the deduction the donor can take under current tax law, is represented by the price the charity gets for the car. Of course, this approach still presents valuation difficulties, because with donated conservation easements there is no transaction that places a value on the easement.
Halperin also discussed conservation buyer transactions, where a land trust would buy property (say for $1 million), then place a conservation easement on the property. The land trust would then sell the property to a developer for $600,000 and the developer would make a charitable donation to the land trust of $400,000. These transactions have a smell test problem. Halperin explained that developers often prefer to do the transaction this way because the deduction is done as a direct gift to charity (which is likely to get less IRS scrutiny than a typical conservation easement donation) and because the donation is often made with appreciated securities, allowing the donor to avoid paying capital gains tax. Halperin also noted that these transactions can also be structured where the developer's parents pay for the donation to the charity, amounting to a non-taxed transfer from one generation to the next. All of this amounts to a significant loss of tax revenue, though exactly how much is anyone's guess -- Halperin said that no one, at the Treasury Department or elsewhere, has any idea how much revenue is lost to conservation easement donations.
On top of the tax issues, there are a host of other potential problems with conservation easements. For example, as things stand now, there is no standard for the type of land that can be made subject to a conservation easement. Conservation easements placed on ordinary land can contribute to sprawl and can place development pressure on more ecologically-sensitive land. In most areas, there also are no mechanisms in place to coordinate conservation easements with local land use regulation and planning. Indeed, in most states, there is no oversight or tracking whatsoever of conservation easements. All of these issues together show a strong need for reform of our current conservation easement system.
New Leiter Rankings
Brian Leiter's latest rankings of top law schools by faculty citation and student LSAT scores are available on a new site: Leiter's Law School Rankings.
October 31, 2005
GELPI Conference: Two Random Notes
I'll have a lot more to say about the substance of the GELPI Takings Conference, but thought I'd mention two brief points, one serious, one not.
First, the serious point. When I was a practicing litigator, I rarely cared much about what the Supreme Court had to say on a particular issue. The Court tends to speak in broad generalizations, and what often matters most in the real world are the more detailed statements made by lower courts interpreting the Court's precedents. If, for example, I was litigating a securities law issue in the Southern District of New York, the Second Circuit's holdings on that issue were likely far more important as a practical matter than any Supreme Court case.
Naturally, after one year in academia I had started to forget the importance of lower court opinions. Like most people who write on takings, I focus on the Supreme Court's takings cases. One of the great virtues of the GELPI Conference is that the presenters are a mix of academics and practitioners. In a number of the presentations, I was struck by the body of lower-court takings law from the Federal Circuit and various state courts, which at times reach startling conclusions in cases that putatively follow the Supreme Court's vague takings precedents. It was a good reminder that there is a lot of important law out there that should get academic attention but that is typically ignored in our single-minded focus on the Supreme Court.
The second, not serious point. I was staying at the Sheraton Commander hotel, where I saw lots of Harvard undergrads meeting their parents for dinner. I had a very frightening moment when I realized that the parents seemed much closer to my age than the students.
GELPI Conference: Frank Michelman Tries To Put Justice Scalia in a Box
Metaphorically speaking, that is. Michelman gave a talk at the GELPI Takings Conference raising an interesting issue about squaring the notion of public use articulated in Justice O'Connor's dissent in Kelo v. New London with that implicitly embodied by regulatory takings cases like Lucas v. South Carolina Coastal Council.
Michelman began by stating his view that Kelo was correctly decided as a matter of American Constitutional Law. He then noted that the issue of public use was rarely, if ever, discussed in regulatory takings cases (as opposed to cases, like Kelo, involving explicit exercises of eminent domain). He thought, though, that contrasting the Kelo dissent with cases like Lucas revealed a bind for someone who wants to argue for both a strict construction of public use and broad application of the regulatory takings doctrine as a limit on government regulation.
Litigants in regulatory takings cases usually have presumed that if a regulation is held to be a taking that the public use clause also would be satisfied. But for that to be so in an inverse-condemnation case like Lucas, Michelman said that the implicit meaning of "public use" must be "public purpose". In Lucas, South Carolina's Beachfront Management Act was held to be a regulatory taking of Lucas' property. At the end of the day, South Carolina ended up with the property after paying Lucas just compensation. This, said Michelman, must have been a taking for a public purpose, because the government did not actually intend to put the property to public use.
If this is correct, then it makes a notable contrast with the Kelo dissent. Michelman said that he wasn't accusing charging Justice O’Connor with error or inconsistency. Rather, he was suggesting that the comparison would be problematic to a strict constructionist or textualist like Justice Scalia, who joined O'Connor's dissent in Kelo and was the author of the opinion of the Court in Lucas. Michelman suggested that the two cases embodied inconsistent views of the scope of the public use clause that could only be explained with a normative understanding of the takings clause. This, he thought, put the strict constructionist Scalia in a box.
In the Q&A, I asked whether Justice Scalia could get out of the box by going back to the pre-First English view that the remedy for a regulatory taking is invalidation of the offending government action. Because the government never actually took anything under this view, wouldn't that resolve the public use issue? Michelman said that he didn't think that this would get Scalia out of the box because he thought that Scalia would want to permit South Carolina to engage in regulation like the Beachfront Management Act so long as it paid just compensation.
There was some discussion of whether Scalia could get out of the box by putting Lucas in the same public-use category as blight-clearance cases -- because the modern understanding of public use includes takings to prevent harmful uses, why not allow regulatory takings that also are intended to prevent harm? Michelman said that this wouldn't help Scalia because he rejected in Lucas the notion that prevention of harm standing alone could establish the constitutionality of a regulation.
Having thought about it for a few days, I'm not sure that this last point is correct. In Lucas, Scalia rejected the idea that the mere characterization of a regulation as harm preventing was sufficient to allow the government to use that regulation to render property valueless without incurring the obligation to pay just compensation. It seems to me that this is very different from asserting that the government cannot take property to prevent harm even if it does pay compensation.
I'm also not sure that the central premise of Michelman's analysis -- that the taking in Lucas was for a public purpose, not a public use -- is correct. South Carolina's Beachfront Management Act prevented Lucas from building on his property. If the Act was upheld, the land would remain vacant. If the Act was held to be a regulatory taking, a fair presumption at the time the case was before the Court would have been that South Carolina would pay compensation and leave the property vacant. This would seem to me to be as much a taking for public use as would be an explicit exercise of eminent domain to take property as a wilderness area. Put another way, I don't see anything inconsistent with even a strict notion of public use if the government takes property but ends up not doing anything with that property beyond preserving it in its natural state.
Of course, South Carolina ended up selling Lucas' property to private parties who developed the property. That, however, says more about the unwillingness of the South Carolina government to bear the burden that they put on Lucas than about the case as presented to the Supreme Court.
Comments are open, but as always require approval before posting, so there may be some delay. If you were at the conference and think I'm not representing Michelman's position accurately, please let me know.