January 24, 2022

Environmental, Natural Resources, & Energy Law Blog

Inspections, Exceptions, and Expectations: Cedar Point and its Expansion of Regulatory Takings - Adam Smith

Near the end of its last term, the United States Supreme Court released a significant decision regarding labor organization in agricultural workplaces.[1] The decision, Cedar Point Nursery. v. Victoria Hassid has been received as a shift in the Court’s takings jurisprudence and a continuation of the Court’s recent decisions reducing the power of labor unions. Less discussed up to this point has been the decision’s possible effect on administrative regulations—including environmental regulations—that authorize inspections of private property. Although the majority opinion seeks to minimize these concerns, its holding appears to significantly undermine current inspection regimes and signals a path for additional challenges to such regimes in the future.

 

Background

In Cedar Point, California agricultural growers challenged regulations promulgated under the state’s Agricultural Labor Relations Act of 1975 which granted union organizers a right to access to agricultural employers’ property for the purpose of talking with employees and encouraging them to organize.[2] The regulation authorized access for four 30-day periods each year, with access of up to three hours each day.[3] The regulation was issued immediately after the statute was passed, and in 1976 the California Supreme Court upheld the specific provisions authorizing the right of access for union organizers. [4] The petitioners, two California agricultural operators, sought injunctive and declaratory relief from the regulation on the grounds that it constituted a per se taking by appropriating an easement for union organizers. The District Court denied relief, and the Ninth Circuit affirmed. In a 6-3 decision, the Supreme Court reversed, holding that the regulation violated the employers’ right to exclude individuals from their property and as such constituted a per se taking under the Fifth and Fourteenth Amendments.

 

Distinction from Takings Jurisprudence

The decision represents a significant shift in the Court’s takings jurisprudence, which had appeared relatively settled less than ten years ago. Prior to the twentieth century, takings under the Fifth Amendment referred only to appropriation of property by the state through condemnation or exercise of imminent domain. With the growth of the administrative and regulatory state, however, the concept of compensable takings expanded to include circumstances where a regulation “goes too far” in restricting a landowner’s use or enjoyment of their property. [5] In Penn Central Transport Company v. New York City, the Court held that determining whether a regulation constitutes a taking generally requires a fact-specific analysis considering the character of the governmental action, its economic impact, and its interference with reasonable investment-backed expectations.[6] As exceptions to this rule, the Court has held that a permanent physical occupation of a landowner’s property will constitute a per se taking as will a regulation that deprives an owner of all economically beneficial use of their land.[7]

As recently as 2012, this framework appeared settled. In Arkansas Game and Fish Commission v. United States, the Court considered whether the temporary flooding of state-owned forest land could constitute a taking where the flooding destroyed timber stocks and disrupted the landowners’ enjoyment of the property.[8] The Court unanimously held that such temporary invasions might constitute a taking, but remanded and directed a fact-specific inquiry of the factors outlined in Penn Central.[9] Importantly, the decision characterized the Court’s previous holdings regarding permanent physical occupations as standing for the proposition that “temporary physical invasions should be assessed by case-specific factual inquiry.”[10]

In Cedar Point, however, the Court asserted the opposite position: that a temporary physical occupation constitutes a per se taking as it infringes on the property owner’s right to exclude.[11] In dismissing the suggestion that Arkansas Game and Fish Commission should control, the Court denied that it had remanded the case for consideration of the Penn Central factors and instead suggested that Arkansas Game and Fish Commission had turned on the unique considerations of temporary flooding and the distinction between trespass and takings.[12]

 

Implications for Inspections

Criticism of the Cedar Point decision has likened the case to other recent decisions restricting the rights of organized labor and has framed it within larger narratives of exploitation of minority communities for the benefit of landed capital.[13] Indeed, the majority opinion appears to dismiss outright the broad societal benefits of labor organization, asserting that the regulation ensuring access for union organizers was “not germane to any benefit provided to agricultural employers or any risk posed to the public.”[14] Critics have also observed that the decision as a whole seems to fly in the face of the landmark 1964 civil rights case, Heart of Atlanta Motel v. United States, where the Court unanimously rejected a claim that requiring a public accommodation to serve African Americans constituted a taking because it interfered with property owner’s right to exclude.[15]

Recent commentary, however, has not yet discussed the decision’s implications for regulatory inspections, including inspections authorized under environmental statutes. In his dissent to the Cedar Point decision, Justice Breyer details a variety of federal and state regulations authorizing government inspections which he suggests may be subject to the Court’s new per se takings rule, “ranging from examination of food products to inspections for compliance with preschool licensing requirements.”[16]

The majority seeks to dismiss these concerns by pointing to one of three exceptions to its per se rule: namely that a physical invasion will not constitute a taking when the government’s right of access comes as a condition of the landowner receiving certain benefits, such as a permit, license, or registration.[17] Under this “government-benefit” exception, the majority asserts “government health and safety inspection regimes will generally not constitute takings” (emphasis added).[18] A closer examination, however, reveals that the Court’s qualified reassurance should provide little comfort to the concerns raised by the dissent. Indeed, the plain language of the exception and the specific precedents and examples cited by the majority suggest that any limitations it seeks to provide are flimsy at best.

 

Inspections without Permits

The majority’s description of the government-benefit exception is misleading on its face because many health and safety inspection regimes are not predicated upon the inspected party receiving any particularized benefit, especially in the environmental context. The Comprehensive Environmental Response, Compensation and Liability Act authorizes the Environmental Protection Agency (EPA), or authorized state or tribal officials, to enter and inspect any place where a hazardous material is stored or released.[19] Likewise, the Resource Conservation and Recovery Act provides a right of access for authorized inspectors to any establishment where hazardous wastes are or have been managed.[20] These rights of access attach to commercial and non-commercial parties alike, and they do not require that the property owner obtain a permit, license, registration, or any other particularized benefit from the government. Like the social benefits of labor organization that the majority dismisses out of hand, the benefits of these regulations run to society as a whole in the form of safety from hazardous waste. Under the plain language of Cedar Point, however, a property owner might successfully argue such inspections constitute per se takings because they had requested no permit and received no particularized benefit.[21]

 

Inspections with Permits

The majority also seems to signal how lower courts might find takings even where a permit has been issued. In articulating the government-benefit exception, the Court cites first to the 1984 case Ruckelshaus v. Monsanto Co. as standing for the proposition that government infringement on a property interest will not constitute a taking where a property owner has a received a benefit.[22] It then offers a list of four specific statutes that authorize government inspections, which the Court asserts are representative of those that will not constitute takings under the government-benefit exception.[23] This framing is problematic because both Monsanto and the statutes referenced are easily distinguishable from common government inspection scenarios, suggesting the scope of the government-benefit exception may be much narrower than the majority lets on.

In Monsanto, the Court considered whether requiring applicants who were seeking to register privately developed pesticides under the Federal Insecticide, Fungicide, and Rodenticide Act to provide trade secrets to the EPA constituted a regulatory taking.[24] Applying the Penn Central factors, the Court held that no taking had occurred, explaining that even though the claimant had a cognizable property interest in their trade secrets for the purpose of the Fifth Amendment, the fact that the claimant was aware that their data would be disclosed meant there was a limited “investment-backed expectation” in that property interest.[25] Importantly, the Court also suggested that the fact that use and sale of pesticides has long been a “source of public concern and the subject of government regulation” further undermined the claimant’s takings claim.[26]

These unique facts are easily distinguished from more common inspection scenarios. The claimant in Monsanto was a sophisticated party seeking a government permit carrying significant economic value. Such a claimant stands in contrast to the vast number of small business owners who engage in activities subject to broadly applicable environmental regulations. For example, a property owner who has obtained a general permit under the National Pollutant Discharge Elimination System for de minimis discharges of agricultural waste into adjacent wetlands has arguably received a comparatively smaller benefit to the registration authorization in Monsanto. Such a landowner might argue that their situation is sufficiently different from Monsanto that the majority’s government-benefit exception should not apply and that inspections under the Clean Water Act should constitute a per se taking under the basic holding of Cedar Point.

Likewise, the statutes the Court indicates would be excepted from its per se rule are also easily distinguishable from common inspection regimes. The Court lists statutes authorizing inspections of pesticides, nuclear materials, pharmaceutical distributors, and hydropower facilities as not constituting takings.[27] This hardly covers the breadth of authorized inspections cited by Justice Breyer. Rather, these examples seem to support the Court’s observation in Monsanto that fields that are “source[s] of public concern” may be more readily subject to government regulation. The logical implication is that other fields might not fall under this exception and therefore be subject to the Court’s per se takings rule.

Indeed, the Court has made just such a distinction in its jurisprudence on public welfare offenses. The Court has held that certain products, like corrosive liquids, drugs, and hand grenades, are of such a “dangerous and deleterious” nature, that anyone possessing them can be presumed to know they are regulated.[28] Such products are distinguished from those that carry no expectation of regulation.[29] Applying this distinction to government inspections, one can imagine the Court identifying certain activities—like those involving pesticides, nuclear materials, pharmaceuticals or hydropower—as being of a kind where inspections are presumed, and other activities as being of a kind where government inspection might constitute a taking. A landowner operating a Christmas tree farm, for instance, might argue that state regulatory inspections constitute a taking under Cedar Point—even where the landowner has received a permit—since the activity carries no expectation of inspection and is not a source of public concern.

 

Conclusion

The majority in Cedar Point insists the dissent not worry about its holding’s implications for government inspections, saying such inspections will generally be excepted from its new per se takings rule. Considering the decision’s dramatic break with the Court’s previous takings jurisprudence, this qualified reassurance should be cause for alarm. The Court’s government-benefit exception provides flimsy protection to existing government inspection regimes—including those authorized by environmental protection statutes—and the majority’s decision sends clear signals to lower courts and litigants on how to further narrow the exception’s already limited scope. Future challenges to inspections regimes and a continuing expansion of the Court’s interpretation of regulatory takings should surprise no one.

 

[1] Cedar Point Nursery v. Hassid, 141 S. Ct. 2063 (2021).

[2] Id. at 2069.

[3] Id.

[4] Agricultural Relations Board v. Superior Court of Tulare County, 546 P.2D 687, 702 (1976).

[5] See Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922).

[6] Penn Cent. Transp. Co. v. New York City, 438 U.S. 104, 123 (1978)

[7] See Loretto v. Teleprompter Manhattan Catv Corp., 458 U.S. 419 (1982); South Carolina Coastal Council v. Lucas, 505 U.S. 1003 (2002)

[8] Arkansas Game and Fish Commission v. United States, 568 U.S. 23 (2012)

[9] Id.

[10] Id. at 38 (discussing Loretto, supra note 5).

[11] Cedar Point, supra note 1.

[12] Cedar Point, supra note 1, at 2079.

[13] See Mark Joseph Stern, “The Supreme Court’s Latest Union-Busting Decision Goes Far Beyond California Farmworkers,” Slate 23 June 2021; see also “Property Rights Against Democracy: Implications of Cedar Point Nursery” panel discussion including Niko Bowie, Veena Dubal, Amy Kapczynski, 22 October 2021, retrieved from: https://lpeproject.org/events/cedar-point/

[14] Cedar Point, supra note 1.

[15] Erin Mayo Adam, “The Supreme Court struck down a key United Farm Workers win. The decision has some infamous echoes.” Washington Post, 2 July 2021. Retrieved from https://www.washingtonpost.com/politics/2021/07/02/supreme-court-struck-down-key-united-farm-workers-win-decision-has-some-infamous-echoes/; see Heart of Atlanta Motel v. United States 379 U.S. 241 (1964).

[16] Cedar Point, supra note 1, at 2087.

[17] Cedar Point, supra note 1, at 2078-80 (explaining the other two exceptions: 1) trespasses, which do not constitute takings, and 2) government entries on property justified by background principles in law, including necessity and to effect enforcement of criminal law).

[18] Cedar Point, supra note 1, at 2079.

[19] CERCLA, Sec. 104; 42 U.S.C. §9604

[20] RCRA, Sec. 3007; 42 U.S.C §6827

[21] Although the majority carves out a separate exception to its per se rule for government searches under the Fourth Amendment, this would not cover regulatory inspections, which do not require a warrant. See Cedar Point, supra note 1; Donovan v. Dewey, 452 U.S. 594 (holding warrant is not necessary for inspections under Federal Mine Safety and Health Act); Marshall v. Barlow’s Inc 436 U.S. 307 (outlining requirements for “administrative warrant” that is required for inspections under OSHA); Johnston, Funk, Flatt, “Legal Protections of the Environment” p 575.

[22] Cedar Point, supra note 1;

[23] Id. (citing 7 U.S.C. §136g(a)(1)(A), 16 U.S.C. §823b(a), 21 U.S.C. §374(a)(1), and 42 U.S.C. §2201(o).).

[24] Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984).

[25] Id. at 1005.

[26] Id. at 1007.

[27] Cedar Point, supra note 23.

[28] United States v. International Minerals & Chemical Corp., 402 U.S. 558 at 565 (1971); see also United States v. Freed, 401 U.S. 601 (1971).

[29] See Liparota v. United States, 471 U.S. 419 (1985); see also Staples v. United States, 114 U.S. 1793 (1994).