Palazzolo v. Rhode Island,
533 U.S. 606 (2001)

Case Details:

In 1959, a corporation purchased coastal property in Rhode Island for development purposes. In 1971, before the corporation had been able to develop the property, Rhode Island enacted legislation that precluded the filling-in and development of salt marshes along its coast. In 1978, the corporation defaulted on its taxes and lost its corporate charter. Title to the property then passed to its sole shareholder. Still wishing to develop the property, the former shareholder (now sole owner) applied for a permit to fill marshland. After the coastal management agency denied the application, the owner filed a takings action.

The Rhode Island Supreme Court denied relief to the owner and, among other things, held owner had no standing to challenge regulatory actions that predated his ownership; owner did not have a viable Lucas claim because the property retained at least $200,000 in value; and, under Penn Central, because the regulatory action predated owner’s taking title, owner could not have had a reasonable investment backed expectation when he took the property.

In a plurality opinion, the United States Supreme Court reversed the Rhode Island Supreme Court on several issues (and remanded the case for further Penn Central analysis). A majority (5-4) held that a subsequent taker of property–who had notice of an adverse regulatory action when taking the property-is not automatically precluded from filing a just compensation action. However, the Court did not achieve a majority on how advance notice should operate in a takings analysis. Justice O’Connor endorsed the rule, but wrote separately, stating that advance notice, although not decisive, should remain a factor in the analysis. Justice Scalia also endorsed the rule, but wrote separately, saying advance notice should never be relevant to the issue of standing. Under Justice Scalia’s view, subsequent takers of regulatory-restricted property always have standing to seek just compensation under such regulations, regardless of the subsequent taker’s knowledge of the regulations at the time title transferred.

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