Floor Statement - Omnibus Property Rights Act

Statement by Sen. Orrin G. Hatch before the United States Senate:
Introduction of the "Omnibus Property Rights Act"

Mr. President, I am pleased today to once again introduce the "Omnibus Property Rights Act." Many members of the Senate have as a paramount concern the protection of individual rights protected by our Constitution.

One particular right—the right to own and use private property free from arbitrary governmental action—is increasingly under attack from the regulatory state. Indeed, despite the constitutional requirement for the protection of property rights, the America of the late twentieth century has witnessed an explosion of federal regulation that has jeopardized the private ownership of property with the consequent loss of individual liberty.

Under current federal regulations, thousands of Americans have been denied the right to the quiet use and enjoyment of their private property. Arbitrary bureaucratic enforcement of federal and state regulatory programs has prevented Americans from building homes and commercial buildings, plowing fields, repairing barns and fences, clearing brush and fire hazards, felling trees, and even removing refuse and pollutants, all on private property.

Fairness and simple justice demand that Americans owning property be entitled to the full use of their property. Ensuring compensation for regulatory takings is the first step toward restoring the fundamental right to own and use private property guaranteed by the Takings Clause of the Fifth Amendment to our Constitution. That is why I am once again introducing legislation—the Omnibus Property Rights Act—to protect private property owners from overzealous regulators. This bill, similar in substance and procedure to the bills I introduced last Congress, represents the most comprehensive legislative mechanism to date to foster and protect the private ownership of property.

The omnibus bill contains four different approaches contained in different titles.

The first substantive title of the bill encompasses property rights litigation reform. This title establishes a distinct federal Fifth Amendment "takings" claim against federal agencies by aggrieved property owners, thus clarifying the sometimes incoherent and contradictory constitutional property rights case law. Property protected under this section includes real property, including fixtures on land, such as crops and timber, mining interests, and water rights. This title is triggered when a taking, as defined by the Supreme Court, occurs. Moreover, it allows for compensation when the property, or "affected portion" of property, is reduced in value by 50 percent or more.

It has been alleged that this bill would impede government's ability to protect public health, safety, and the environment. This is not true. This first title contains a "nuisance exception" to compensation. It codifies that part of the 1992 Supreme Court decision in Lucas v. South Carolina Coastal Council, which held that restrictions on property use based on "background principles of the state's law of property and nuisance" need not be compensated. Thus, by adopting the Supreme Court's recent Lucas holding, the Omnibus Property Rights Act provides that only innocent property holders are to be compensated for government takings. Those that demonstrably misuse their property to pollute or to harm public health and safety are notentitled to compensation under the bill's nuisance provision.

Finally, this title also resolves the jurisdictional dispute between the federal district courts and the Court of Federal Claims over Fifth Amendment "takings" cases—sometimes called the "Tucker Act shuffle"—by granting each court concurrent jurisdiction.

A second title in essence codifies President Reagan's Executive Order 12630. Under this title, a federal agency must conduct a private property "taking impact analysis" before issuing or promulgating any policy, regulation, or related agency action which is likely to result in a taking of private property.

A third title establishes an agency administrative appellate and compensation procedure for takings of real property during enforcement and administration of both the Endangered Species Act and the wetlands preservation program under section 404 of the Clean Water Act. These Acts present special enforcement problems and an agency appellate and compensation procedure allows the agency and the aggrieved party the option to avoid litigation.

A fourth title provides for alternative dispute resolution in arbitration proceedings.

The bill provides for a complete election of remedies. If a decision of an agency appeal is unreasonably delayed, an aggrieved party may drop the appeal and litigate according to the terms of the Act. The four titles of the Omnibus Property Rights Act together function to provide the property owner with mechanisms to vindicate the fundamental constitutional right of private ownership of property, while instituting powerful internal incentives for federal agencies both to protect private property and include such protection in agency planning and regulating.

It is very significant that the nonpartisan Congressional Budget Office, after a year of research, concluded in a study dated March 8, 1996, that the incentives built into the very similar bills I introduced last Congress would have encouraged agencies to act more responsibly, that the administrative cost of the bill would be quite small, and that compensation costs would be even smaller.

Despite some critics' charges that these very similar bills would be too costly, CBO found that the costs of both the omnibus bills will diminish to an insignificant level over time. This is predicated on the CBO finding that the each of the omnibus bills contain powerful incentives, which over time will reduce costs. These include: (1) the bills' bright line legal standards, which better enable agencies to avoid takings disputes; (2) the takings impact assessment requirement, which requires agencies to analyze the affect of proposed regulations on property rights; and (3) the requirement that compensation be paid from the agency's budget, which inevitably will act as a deterrent to unconstitutional and unlawful takings. Based on extensive research, CBO estimated that each Omnibus bill should cost no more than $30 or $40 million a year for the first five years of implementation, thereafter diminishing to insignificant amounts.

Importance of Private Property

The private ownership of property is essential to a free society and is an integral part of our Judeo-Christian culture and the Western tradition of liberty and limited government. Private ownership of property and the sanctity of property rights reflects the distinction in our culture between a preexisting civil society and the state that is consequently established to promote order. Private property creates the social and economic organizations that counterbalance the power of the state by providing an alternative source of power and prestige to the state itself. It is therefore a necessary condition of liberty and prosperity.

While government is properly understood to be instituted to protect liberty within an orderly society and such liberty is commonly understood to include the right of free speech, assembly, religious exercise and other rights such as those enumerated in the Bill of Rights, it is all too often forgotten that the right of private ownership of property is also a critical component of liberty. To the seventeenth century English political philosopher, John Locke, who greatly influenced the Founders of our Republic, the very role of government is to protect property: "The great and chief end therefore, on Men uniting into Commonwealths, and putting themselves under Government, is the preservation of their property." [J. Locke, Second Treatise ch. 9, § 124, in J. Locke, Two Treatises of government (1698)].

The Framers of our Constitution likewise viewed the function of government as one of fostering individual liberties through the protection of property interests. James Madison, termed the "Father of the Constitution," unhesitantly endorsed this Lockean viewpoint when he wrote in The Federalist No. 54 that "[government] is instituted no less for the protection of property, than of the persons of individuals." Indeed, to Madison, the private possession of property was viewed as a natural and individual right both to be protected against government encroachment and to be protected by government against others.

To be sure, the private ownership of property was not considered absolute. Property owners could not exercise their rights as a nuisance that harmed their neighbors, and government could use, what was termed in the eighteenth century, its "despotic power" of eminent domain to seize property for public use. Justice, it became to be believed, required compensation for the property taken by government.

The earliest example of a compensation requirement is found in Chapter 28 of the Magna Carta of 1215, which reads, "No constable or other bailiff of ours shall take corn or other provisions from anyone without immediately tendering money therefor, unless he can have postponement thereof by permission of the seller." But the record of English and colonial compensation for taken property was spotty at best. It has been argued by some historians and legal scholars that compensation for takings of property became recognized as customary practice during the American colonial period. [See W. Stoebuck, "A General Theory of Eminent Domain," 47 Wash. L. Rev. 53 (1972)].

Nevertheless, by the time of American independence, the compensation requirement was considered a necessary restraint on arbitrary governmental seizures of property. The Vermont Constitution of 1777, the Massachusetts Constitution of 1780, and the Northwest Ordinance of 1787, recognized that compensation must be paid whenever property was taken for general public use or for public exigencies. And although accounts of the 1791 congressional debate over the Bill of Rights provide no evidence over why a public use and just compensation requirement for takings of private property was eventually included in the Fifth Amendment, James Madison, the author of the Fifth Amendment, reflected the views of other supporters of the new Constitution who feared the example to the new Congress of uncompensated seizures of property for building of roads and forgiveness of debts by radical state legislatures. Consequently, the phrase "[n]or shall private property be taken for public use, without just compensation" was included within the Fifth Amendment to the Constitution.

Current Protection of Property Rights Fall Short.

Judicial protection of property rights against the regulatory state has been both inconsistent and ineffective. Physical invasions and government seizures of property have been fairly easy for courts to analyze as a species of eminent domain, but not so for the effect of regulations which either diminish the value of the property or appropriate a property interest.

This key problem to the regulatory takings dilemma was recognized by Justice Oliver Wendell Holmes in Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922). How do courts determine when regulation amounts to a taking? Holmes' answer, "if regulation goes too far it will be recognized as a taking," 260 U.S. at 415, is nothing more than an ipse dixit. In the 73 years since Mahon, the Court has eschewed any set formula for determining how far is too far, preferring to engage in ad hoc factual inquiries, such as the three-part test made famous by Penn Central Transportation Co. v. City of New York, 438 U.S. 104 (1978), which balances the economic impact of the regulation on property and the character of the regulation against specific restrictions on investment-backed expectations of the property owner.

Despite the valiant attempt by the Rehnquist Court to clarify regulatory takings analysis in Nollan v. California Coastal Comm'n, 483 U.S. 825 (1987), Lucas v. South Carolina Coastal Council, 112 S.Ct. 2886 (1992), and in its recent decision of Dolan v. City of Tigard, No. 93-518 (June 24, 1994), takings analysis is basically incoherent and confusing and applied by lower courts haphazardly. The incremental, fact-specific approach that courts now must employ in the absence of adequate statutory language to vindicate property rights under the Fifth Amendment thus has been ineffective and costly.

There is, accordingly, a need for Congress to clarify the law by providing "bright line" standards and an effective remedy. As Chief Judge Loren A. Smith of the Court of Federal Claims, the court responsible for administering takings claims against the United States, opined in Bowles v. United States, 31 Fed. Cl. 37 (1994), "[j]udicial decisions are far less sensitive to societal problems than the law and policy made by the political branches of our great constitutional system. At best courts sketch the outlines of individual rights, they cannot hope to fill in the portrait of wise and just social and economic policy."

This incoherence and confusion over the substance of takings claims is matched by the muddle over jurisdiction of property rights claims. The "Tucker Act," which waives the sovereign immunity of the United States by granting the Court of Federal Claims jurisdiction to entertain monetary claims against the United States, actually complicates the ability of a property owner to vindicate the right to just compensation for a government action that has caused a taking. The law currently forces a property owner to elect between equitable relief in the federal district court and monetary relief in the Court of Federal Claims. Further difficulty arises when the law is used by the government to urge dismissal in the district court on the ground that the plaintiff should seek just compensation in the Court of Federal Claims, and is used to urge dismissal in the Court of Federal Claims on the ground that plaintiff should first seek equitable relief in the district court.

This "Tucker Act shuffle" is aggravated by section 1500 of the Tucker Act, which denies the Court of Federal Claims jurisdiction to entertain a suit which is pending in another court and brought by the same plaintiff. Section 1500 is so poorly drafted and has brought so many hardships, that Justice Stevens, in Keene Corporation v. United States, 113 S.Ct. 2035, 2048 (1993), has called for its repeal or amendment.

Title II of the Omnibus Property Rights Act addresses these problems. In terms of clarifying the substance of takings claims, it first clearly defines property interests that are subject to the Act's takings analysis. In this way a "floor" definition of property is established by which the federal government may not eviscerate. This title also establishes the elements of a takings claim by codifying and clarifying the holdings of the Nollan, Lucas, and Dolan cases.

For instance, Dolan's "rough proportionality" test is interpreted to apply to all exaction situations whereby an owner's otherwise lawful right to use property is exacted as a condition for granting a federal permit. And a distinction is drawn between a noncompensable mere diminution of value of property as a result of federal regulation and a compensable "partial" taking, which is defined as any agency action that diminishes the fair market value of the affected property by 50 percent or more. The result of drawing these "bright lines" will not end fact-specific litigation, which is endemic to all law suits, but it will ameliorate the ever increasing ad hoc and arbitrary nature of takings claims.

Finally, I once again want to respond to any suggestion that may arise that this Act will impede government's ability to protect the environment or promote health and safety through regulation. This legislation does not, contrary to the assertions of some, emasculate the government's ability to prevent individuals or businesses from polluting. It is well established that the Constitution only protects a right to "reasonable" use of property. All property owners are subject to prior restraints on the use of their property, such as nuisance laws which prevents owners from using their property in a manner that interferes with others.

The government has always been able to prevent "harmful or noxious uses" of property without being obligated to compensate the property owner, as long as the limitations on the use of property "inhere in the title itself." In other words, the restrictions must be based on "background principles of state property and nuisance law" already extant. The Omnibus Property Rights Act codifies this principle in a nuisance exception to the requirement of the government to pay compensation.

Nor does the Omnibus Property Rights Act hinder the government's ability to protect public health and safety. The Act simply does not obstruct the government from acting to prevent imminent harm to the public safety or health or diminish what would be considered a public nuisance. Again, this is made clear in the provision of the Act that exempts nuisance from compensation. What the Act does is force the federal government to pay compensation to those who are singled out to pay for regulation that benefits the entire public.

In other words, it does not prevent regulation, but fulfills the promise of the Fifth Amendment, which the Supreme Court in Armstrong v. United States, 364 U.S. 40, 49 (1960), opined is "to bar Government from forcing some people alone to bear public burdens, which in all fairness and justice, should be borne by the public as a whole."

I hope that all senators will join me in supporting this long overdue legislation

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