Dissent in Penn Central Transportation Co. v. New York City
438 U.S. 104 (1978) (1978) · Supreme Court of the United States
Penn Central established the multi-factor balancing test that remains the primary framework for analyzing regulatory takings claims under the Fifth Amendment. The three Penn Central factors — economic impact on the claimant, interference with investment-backed expectations, and the character of the government action — continue to be the default test for determining when a government regulation 'goes too far' and constitutes a taking requiring just compensation.
What was the dissent in Penn Central Transportation Co. v. New York City?
Justice Rehnquist dissented, joined by Chief Justice Burger and Justice Stevens, arguing that the landmarks law imposed a disproportionate burden on Penn Central by singling out the terminal for special restrictions that benefited the public. Rehnquist contended that the cost of preserving a landmark should be spread across the community through eminent domain and compensation rather than borne by individual property owners. He argued the TDRs were an inadequate substitute for just compensation.
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Case Overview
Facts
New York City's Landmarks Preservation Law designated Grand Central Terminal as a historic landmark. Penn Central Transportation Co. entered into a lucrative agreement to build a 55-story office tower above the terminal. The Landmarks Preservation Commission denied Penn Central's application to construct the tower, finding the proposed addition would destroy the aesthetic quality of the terminal. The city's law provided transferable development rights (TDRs) that could be used on nearby parcels Penn Central owned.
Majority Holding
The Supreme Court held 6-3 that the landmarks law did not effect a taking. The Court established a multi-factor balancing test for regulatory takings that considers the economic impact on the claimant, the extent to which the regulation interferes with distinct investment-backed expectations, and the character of the government action. Applying these factors, the Court found that Penn Central could still earn a reasonable return on the terminal and that the TDRs provided additional compensation.
Majority Reasoning
Justice Brennan's majority opinion acknowledged that there was no set formula for determining when regulation becomes a taking and that the inquiry is essentially ad hoc and factual. The Court rejected Penn Central's argument that the airspace above the terminal should be treated as a separate property interest, holding instead that takings analysis must consider the parcel as a whole. Brennan emphasized that the landmarks law substantially related to the promotion of the general welfare, similar to zoning, and that Penn Central had not been denied all beneficial use of the property. The availability of TDRs, while not full compensation, mitigated the economic impact. The Court distinguished this case from physical invasions, which are more readily found to be takings.
The Dissenting Opinion
Justice Rehnquist dissented, joined by Chief Justice Burger and Justice Stevens, arguing that the landmarks law imposed a disproportionate burden on Penn Central by singling out the terminal for special restrictions that benefited the public. Rehnquist contended that the cost of preserving a landmark should be spread across the community through eminent domain and compensation rather than borne by individual property owners. He argued the TDRs were an inadequate substitute for just compensation.
Key Quotes
“The question of what constitutes a 'taking' for purposes of the Fifth Amendment has proved to be a problem of considerable difficulty... this Court, quite simply, has been unable to develop any 'set formula' for determining when 'justice and fairness' require that economic injuries caused by public action be compensated.”
“In deciding whether a particular governmental action has effected a taking, this Court focuses rather both on the character of the action and on the nature and extent of the interference with rights in the parcel as a whole.”
“'Taking' jurisprudence does not divide a single parcel into discrete segments and attempt to determine whether rights in a particular segment have been entirely abrogated.”
Impact and Legacy
The Penn Central balancing test has become the default framework for regulatory takings analysis, applied in thousands of federal and state court decisions. The case's ad hoc, multi-factor approach has been both praised for its flexibility and criticized for its unpredictability. The concept of TDRs received judicial recognition as a potential mitigation tool, influencing land use planning nationwide.
Exam Relevance
Penn Central is one of the most frequently tested cases in Property law. Exam questions typically present a regulatory scheme and ask students to apply the three-factor balancing test. Students must be prepared to analyze economic impact, investment-backed expectations, and the character of the government action in a variety of factual settings, and to distinguish Penn Central from the categorical taking rule of Lucas.
Study Tips
- Memorize the three Penn Central factors: (1) economic impact, (2) interference with investment-backed expectations, (3) character of the government action.
- Understand the 'parcel as a whole' concept and why the Court rejected segmenting the airspace from the terminal below.
- Be prepared to contrast the ad hoc Penn Central balancing test with the categorical approach in Lucas.
- Know the role of transferable development rights (TDRs) as a potential mitigation factor in takings analysis.
Read the Full Case Analysis
View the complete brief for Penn Central Transportation Co. v. New York City including full reasoning, doctrine, and study resources.
More Property Dissents
Pierson v. Post
3 Cai. R. 175 (N.Y. Sup. Ct. 1805) (1805)
Justice Livingston dissented, arguing that the case should have been submitted to a panel of experienced hunters rather than decided by reference to ancient legal authorities. He contended that a rule granting rights to the pursuer with a reasonable prospect of capture would better incentivize the socially useful activity of fox hunting and discourage the kind of unsportsmanlike interception Pierson engaged in.
Kelo v. City of New London
545 U.S. 469 (2005) (2005)
Justice O'Connor's dissent argued that the majority's decision effectively eliminated any meaningful limit on government takings, as virtually any lawful use of property would generate some incidental public benefit such as taxes and jobs. She warned that the decision would disproportionately harm politically weak communities whose properties would be taken for the benefit of those with more political influence. Justice Thomas wrote a separate dissent arguing for a return to the original public meaning of 'public use,' which he contended required actual use by the public.
Lucas v. South Carolina Coastal Council
505 U.S. 1003 (1992) (1992)
Justice Blackmun dissented, arguing that the majority created an arbitrary categorical rule based on the degree of value diminution. He contended that the state's interest in protecting the coast from erosion and storm damage was a legitimate exercise of the police power that should be analyzed under the Penn Central framework. Justice Stevens also dissented, criticizing the categorical approach as disconnected from the underlying policy concerns of takings law.
Van Valkenburgh v. Lutz
304 N.Y. 95, 106 N.E.2d 28 (1952) (1952)
The dissent argued that Lutz's 30-plus years of continuous, open, and notorious occupation of the lot — including building structures, cultivating gardens, and using the property as his own — clearly satisfied all the requirements for adverse possession. The dissenters contended that the majority's interpretation was overly technical and that Lutz's statements in the earlier proceeding should not be dispositive when viewed in context.
Nahrstedt v. Lakeside Village Condominium Association
8 Cal.4th 361, 878 P.2d 1275 (1994) (1994)
Justice Arabian dissented, arguing that the majority's rigid test sacrificed individual rights to community conformity. He contended that the restriction should be judged by its reasonableness as applied to the specific facts, and that banning indoor cats that cause no disturbance was unreasonable and an unwarranted intrusion on the owner's use of her property.
Stambovsky v. Ackley
169 A.D.2d 254, 572 N.Y.S.2d 672 (N.Y. App. Div. 1991) (1991)
Justice Smith dissented, arguing that the majority's decision was inconsistent with New York's adherence to caveat emptor and that the buyer had a duty to investigate the property. The dissent contended that the majority was creating a new exception to caveat emptor that would generate uncertainty about what kinds of non-physical conditions sellers must disclose.