Lingle v. Chevron U.S.A., Inc. exposed a deep flaw in regulatory takings doctrine. Lingle rejected the Agins holding that if a regulation does not “substantially advance a legitimate state interest,” it is a compensable taking. That formulation, Lingle said, was based on substantive due process precedents and is better suited to a due process, rather than a takings, inquiry. The confusion is not confined to Agins, however; it pervades contemporary takings doctrine.
This Article traces the “muddle” in takings law to an ill-considered “phantom incorporation” holding in Penn Central Transportation Co. v. City of New York, which erroneously cited Chicago, Burlington & Quincy Railroad Co. v. City of Chicago (Chicago B & Q) for the holding that the Fifth Amendment Takings Clause applies to the states. In fact, Chicago B & Q was decided strictly on Fourteenth Amendment due process grounds, and made no mention of the Fifth Amendment or the Takings Clause. Nor did Chicago B & Q overrule Barron v. Baltimore, which had expressly limited the Takings Clause to the federal government—a precedent the Court would continue to cite as good law until the middle of the twentieth century.
From Chicago B & Q forward, just compensation law proceeded on two independent and parallel tracks: due process constrained the states, while the Takings Clause applied only to the federal government, reflecting basic federalism principles. Property law was state law in the first instance. Every state claimed as a foundational principle of its law that all property was held subject to, and limited by, the state’s police power to regulate to protect the public health, safety, morals, and welfare. Due process doctrine held that a valid police power measure could never be a “taking” because property rights simply ended where the police power began. Due process-based takings cases against states—including Pennsylvania Coal Co. v. Mahon—turned on the legitimate scope and limits of the police power. The federal government, lacking a general police power, had no comparable defense, and Fifth Amendment takings claims were decided on other grounds.
Penn Central—not Chicago B & Q—was the first Supreme Court case to apply the Fifth Amendment Takings Clause directly to the states. It did so without briefing or analysis of the implications of that holding. Conflating substantive due process and Takings Clause principles and precedents, Penn Central sowed doctrinal confusion, leading to “reverse incorporation” of substantive due process concepts into Takings Clause doctrine, eliminating the states’ police power defense, truncating the role of state law in takings adjudication, and undercutting federalism in our constitutional law of property. This Article urges adjustments in takings doctrine to recognize the police power as a “background principle” of state property law, consistent with historic understandings.