Palazzolo v. Rhode Island

In Palazzolo v. Rhode Island, 533 U.S. 606 (2001), Palazzolo and several associates owned commercially valuable waterfront property, which Rhode Island designated as coastal wetlands. In 1971, a state agency was created to protect the coastal property and it adopted restrictive land use regulations, designating properties such as Palazzolo's as wetlands and limiting their development. Several years after the promulgation of the restrictive legislation and regulations, Palazzolo became the sole owner of the property. He then filed applications with the state agency for permission to develop most of his wetland property and to fill about two-thirds of the property. The state agency denied the applications and Palazzolo unsuccessfully sought judicial review of the agency's decision. Palazzolo then filed an inverse condemnation suit in state court, claiming the wetland regulations, as applied to his property, violated the Fifth Amendment Takings Clause. The Rhode Island Supreme Court held that his taking claim was not ripe, he lacked standing to challenge regulations predating his ownership of the property, and his claim that he was deprived of all economically beneficial use of the property was contradicted by the evidence. The United States Supreme Court reversed the first two holdings above, holding that his taking claim was ripe because the state agency had denied multiple applications for development and he had standing to challenge the wetland regulations. The court further held that the postregulation acquisition of title was not fatal to the taking claim. "Were we to accept the State's rule, the postenactment transfer of title would absolve the State of its obligation to defend any action restricting land use, no matter how extreme or unreasonable. A State would be allowed, in effect, to put an expiration date on the Takings Clause. This ought not to be the rule. Future generations, too, have a right to challenge unreasonable limitations on the use and value of land." The United States Supreme Court held that a property owner whose permit applications were denied could assert an inverse condemnation claim even though the denials were based on regulations that had been adopted before the current owner acquired title to the property. The court based its decision on the fact that the takings claim was not ripe when the regulation was adopted and did not become viable until the permit applications were denied. "A blanket rule that purchasers with notice have no compensation right when a claim becomes ripe is too blunt an instrument to accord with the duty to compensate for what is taken." (Id. at p. 628.) "A challenge to the application of a land-use regulation ... does not mature until ripeness requirements have been satisfied ... ; until this point an inverse condemnation claim alleging a regulatory taking cannot be maintained. It would be illogical, and unfair, to bar a regulatory takings claim because of the post-enactment transfer of ownership where the steps necessary to make the claim ripe were not taken, or could not have been taken, by a previous owner." (Ibid.)