On Friday, the U.S. Supreme Court set oral argument for March 20, 2017 in the case of Murr v. Wisconsin, in which the Court is being asked to determine what constitutes the “relevant parcel” in determining whether a regulatory taking of private property has occurred.  The Court’s decision in Murr, expected this summer, may significantly affect private parties’ ability to bring takings claims when government actions render portions—as opposed to the entirety—of the parties’ property unusable or undevelopable.

Two parcels of property located along Lake St. Croix in Wisconsin are the subject of Murr.  The two waterfront parcels, each of which are just over an acre in area, were platted in 1959.  The Murr family purchased one of the parcels (Lot F), and subsequently purchased the other parcel (Lot E) in 1963.  The Murrs built a family cabin on Lot F, and Lot E has remained vacant ever since.  The Murrs held title to Lot F in their family business, while they held title to Lot E under their personal names.  In 1994, the family business conveyed Lot F to their six children, and in 1995, Lot E was also conveyed to the children.  Four of the Murr children are now the owners of both Lots E and F.  When the children sought to sell Lot E for development in order to fund improvements to Lot F, they were surprised to learn that Lot E could not be developed under county regulations.

In 1975, St. Croix County adopted regulations requiring that there be a net project area of at least one acre for a new residential project.  Lot E is 1.25 acres, but the net project area is 0.5 acres—after subtracting floodplains, slope areas, road right-of-ways, and wetlands as required by the ordinance.  Thus, Lot E is not developable under current county regulations.  The 1975 law also provided that a lot existing before January 1, 1976 could be developed as a single-family residence, but only if the lot “is in separate ownership from abutting lands.”  Because the Murr family owns an abutting lot, they cannot take advantage of the grandfathering provision.  Moreover, the ordinance prohibits the Murr family from selling Lot E separately from Lot F.

The Murrs sought a variance from the ordinance, arguing that, because the lots were actually in separate ownership—i.e. the family business owned one, while the family owned the other—in 1976, the grandfathering provision should apply to them.  The county denied the variance request, and the Wisconsin Court of Appeals affirmed.  The Wisconsin Supreme Court denied review.  The Murrs then filed a regulatory taking claim in Wisconsin state court.

In analyzing the regulatory taking claim, the Wisconsin court applied the U.S. Supreme Court’s 1978 decision in Penn Central Transportation Co. v. City of New York, in which the Supreme Court analyzed what constitutes the “relevant parcel” for purposes of the Takings Clause of the Fifth Amendment to the U.S. Constitution.  Penn Central held that a taking should be analyzed as to its “interference with rights in the parcel as a whole.”  Moreover, the Court’s Takings Clause cases have generally found that a regulatory taking occurs only where the parcel as a whole is deprived of all or substantially all of its economically beneficial use or value.

The Murr family argued that it had been deprived of one of its separate, whole parcels.  In support of their argument, they noted that the parcels were separate legal lots, taxed separately, purchased separately, and never developed together.  The Wisconsin court rejected their argument, finding that Lots E and F together constituted the parcel as a whole.  Further, the Wisconsin Court of Appeals found that, because the regulation did not take away all practical and beneficial use of the two parcels together, the regulation in question did not constitute a taking.

The Wisconsin Supreme Court again denied review of the case, and the Murrs filed a petition for writ of certiorari with the U.S. Supreme Court in August 2015.  The Supreme Court granted the petition in January 2016.

The Supreme Court’s eventual decision in Murr will clarify its prior holding in Penn Central and, if the Court decides in the Murr family’s favor, may open the door to more regulatory taking claims where government regulations impair the use or value of private landowners’ rights on legally divided but commonly held property.  For example, it is not clear from current law whether a landowner who holds, say, two parcels on opposite sides of the street would have a successful regulatory taking claim where one of the parcels is rendered undevelopable by zoning or other laws.

Property rights advocates are watching this case closely, as a decision in favor of the Murr family would open the door for financial compensation for those whose properties have been negatively impacted by government regulation.  Conversely, local governments and regulators are concerned that a victory for the Murrs would limit the government’s ability to impose zoning and other regulations without exposure to potential compensation claims, result in massive increases in takings litigation, and give rise to strategic gamesmanship by private property owners in order to take advantage of possible regulatory takings claims against zoning and other authorities.