Murr v. Wisconsin: When the Government Redefines Property Rights in Order to Avoid Paying Just Compensation

In 1960, the Murr family purchased a 1.25-acre lot (Lot F) in a subdivision on the St. Croix River in Wisconsin. They built a recreation cabin on the lot. Three years later, the family decided to purchase an adjacent 1.25 acre lot (Lot E) as an investment. The family did not build on Lot E, and the parents later gave their children the property. When the children began to look into selling Lot E, the government said that they couldn’t. Why? Because regulations passed after both lots were purchased require a bigger “net project area” (the area that can be developed) than either lot had by itself. Because the lots were commonly owned, the government combined them into one unit and, consequently, prohibited the development or sale of what was once Lot E.

Combining the lots essentially eviscerated the independent value that Lot E once had. The Murrs filed suit against Wisconsin and St. Croix County, arguing that the governments’ action violated the Fifth Amendment Takings Clause by depriving the Murrs of the value of the property (Lot E) without just compensation. Regulatory takings cases like this one are analyzed under the Penn Central test, which applies its three factors to “the parcel as a whole,” thus making the definition of “the whole parcel” highly relevant and even determinative, as it was here. The governments’ defense in the Murr case is a tricky mathematical manipulation: By considering Lot E and Lot F together, the government argues that the taking is not unconstitutional because it affects only half of “the parcel.” But, the Murrs argue, if Lot E is analyzed individually, then the government took the whole thing.

Defining “the parcel as a whole” has been a long-disputed issue, so the Murrs, represented by the Pacific Legal Foundation, sought, and received, Supreme Court review after the Wisconsin Supreme Court declined to hear the appeal from the Wisconsin Court of Appeals, which is a pretty unique way for the Court to take a case. This gives property rights advocates hope that the Supreme Court will bring some clarity to the muddied waters that are the Penn Central test’s three factors. The government should not be allowed to combine lots simply because they have a common owner, and it should especially not be allowed to do so in order to avoid paying the “just compensation” required by the Fifth Amendment. The Cato Institute has filed a brief in support of the Murrs urging the Court to clarify Penn Central. Although the Court has attempted in a few other cases to clarify its test, it remains unclear what the factors even mean, how they are to be measured, how they relate to one another, and how they are to be weighted. Despite, or perhaps because of, the muddled nature of the test, the government wins the vast majority of regulatory takings cases.

Adopting a bright-line rule here in the narrow context of determining what constitutes “the parcel as a whole” would bring some clarity to the Penn Central test and help protect property rights. Any rule permitting the combination of adjacent parcels would exacerbate Penn Central’s problems by leaving the lower courts to determine when combination is permissible and when it is not. Already the lower courts disagree on this issue, leading to greater uncertainty and less protection for property rights. This destabilizes property owners’ reliance interests and discourages property investment. State and local governments across the country have been using the vagueness of Penn Central to facilitate taking private property without just compensation. By clarifying the “parcel as a whole,” the Court can curtail one type of eminent domain abuse.