Regulatory Takings: Pennsylvania Coal Co. v. Mahon

Why, precisely, did I have so much trouble with takings cases, particularly regulatory takings all those years ago? Why do I still heave a heavy sigh whenever I am faced with a new one? Well, back in the 1980s, when property movements were really getting their litigative feet under them, Carol Rose of Yale Law School wrote a wonderful essay titled, “Mahon Reconstructed: Why the Takings Issue is Still a Muddle.” (52 S. Cal. L. rev. 561, 1983-1984). After I reading this essay I ended up reading a lot of Professor Rose’s work. This essay, and one of her books in particular, Property and Persuasion: Essays on the History, Theory, and Rhetoric of Ownership, shaped my thinking about takings quite a lot. It was published by Westview Press, 1994 — it’s out of print now, but if you can find a used copy, I recommend it!

Since I am not a lawyer, I have never been particularly interested in making arguments about what I think a particular litigant deserves as relief or why they should receive it. I am interested, as a social scientist, in the way law develops over time; and in particular, how society is shaped by whatever the law says. I’m curious to know the degree to which the identity of actors such as property owners, lawyers, or administrative agency officials, is formed (sometimes impacted, sometimes indirectly influenced) by the law. Sometimes all this becomes very focused on whether the development of the law provides not only opportunities for making claims but also actually constructs the interests and issues that individuals (most likely owners in my research) are confronted with in their day-to-day experience with the government. The interest in government is the political scientist coming out, but the rest is all thanks to my training in sociolegal studies.

At any rate, takings proved especially complicated in this regard because property exists at such a very deep and fundamental level in our society. What I found so interesting about Carol Rose’s work was that, at least in this essay, she did not try to expound a new theory of takings that if adopted would solve all takings woes. Instead, she took a step back and asked why “takings” in law had become difficult to define. Put in her own words: she wondered the “possible reasons for the elusiveness of the meaning of ‘taking’ in our law” (p. 561). Instead of following a worn route through a law review article, one that would involve making an argument about what the courts “should” do, Professor Rose raised a question that was much more empirical in nature: how? How does the confusion concerning what a “takings” is actually arise out of the law? In formulating an answer, she had to take a look at the doctrine around what we today call regulatory takings to see when and where the “muddle” began. Her answer began with a case decided in 1922, Pennsylvania Coal Company v. Mahon (260 US 393, 1922).

Mahon is a case I love to teach, not least of all because my undergraduates and graduate students come to have a much better understanding of the term “undermine” after they become familiar with the facts of the case. Let me explain…

The decision in the court case, authored by the eminent Justice Oliver Wendell Holmes, came to the Supreme Court on appeal from the Supreme Court of the Commonwealth of Pennsylvania. Pennsylvania had passed the Kohler Act in 1921. The Act was designed to address a problem the state had long had: soil subsidence from mining coal. Large stretches of Pennsylvania are rich in anthracite coal deposits and so mining companies, including Pennsylvania Coal, had long been mining these areas. However, mining practices at the time often involved mining under (or undermining) roads, towns, and other areas, creating what some would call “surface support problems,” or what others might see as big, giant holes. The surface of the land when it lost too much of its support below would fall into the ground creating big holes. If a house, for example, were sitting on the pocket that collapsed then the house would fall, crashing into the hole. Whole towns, in fact, had been subject to subsidence — that is to say, they had begun to fall into holes created by undermining the surface to such an extent that there was not enough earth to hold it up anymore. If you’re trying to picture this, here’s a link that may help.

Mrs. Mahon’s father had purchased the surface of a residential lot in 1878 from Pennsylvania Coal. The company had retained the subsurface mineral rights. In the deed her father had waived all claims against Pennsylvania Coal due to subsidence of the surface. This meant that the coal company had retained both the subsurface mineral rights as well as the support rights to the land. This was perfectly acceptable in Pennsylvania law because the common law recognized three “estates” in mining property. An “estate” in land law means, in essence, an interest you can own. In Pennsylvania, as Professor Rose explains what the three interests were in Pennsylvania law: “first, an estate in the surface, second, an estate in the minerals below, and finally an estate in the support of the surface (the third estate)” (p. 563). In other words, if you purchased land from a mining company, you purchased only an interest in the surface, while the interests in the minerals and support of the surface remained with the original owner, i.e., mining company. This was intended to enable mining to continue, even as use of the surface was given to a new owner.

After a few decades of undermining (and watching citizens and local governments suffer its consequences) the state legislature attempted a remedy through legislation. The Kohler Act addressed the danger of subsidence by making it impossible to sever the surface estate from the estate in the support. Thus, the act passed by the state legislature was attempting to change a common law right in property that had long been recognized in Pennsylvania law.

Though Professor Rose does not make much of this, the political scientist in me is always fascinated by attempts made by one branch of government to change something another branch of government has maintained for a long time. The fact that the subsidence problem was widespread and was a major social and economic problem in Pennsylvania strikes me as clear from the court records, particularly given that the trial court had found that the act was likely unconstitutional, while the commonwealth’s Supreme Court found that the statute was “a legitimate exercise of the police power.” Again, the political scientist in me perks up: not only is one branch of state government attempting to change a longstanding position of another, but we have economic interests in mining going toe-to-toe with reformist attempts in the state legislature to exercise a power that is clearly given to the states in the federal constitution.

Wanna guess what happens? Here’s a hint, based on my anecdotal observations (not empirical research and data collection): when you have major economic interests doing battle with the police power in a state, the economic interests tend to win. Not always, but most of the time.

Back to the case: Mrs. Mahon and her husband took up residence on the lot her father had purchased, claiming title through the 1878 deed. When, in September 1921, the Mahons were informed that the company intended to undermine their land the Mahons sued under the recently passed Kohler Act. They were hoping to keep the company from mining in such a way that would cause their residence to fall into a hole created through soil subsidence. Here we have an attempt by individual owners to call directly upon a newly passed state statute in order to claim a brand new version of property rights in Pennsylvania in order to save a home from the damaging effects of behavior acted out by a corporate entity exercising its common law right. This is the sort of legal drama we make movies out of — if only we could understand the case…

So what happened? Justice Holmes wrote for the majority. He was a writer of some of the most cogent, eloquent, and interesting decisions of all time at the Supreme Court level, but in this case he wrote one of the most muddled, farcical and complicated decisions that has plagued us ever since. I recently told a student that all writers have a bad day from time to time. Frankly, I think Justice Holmes was having a very bad writing day (and his good friend, Justice Louis Brandeis, seemed to think so as well given his dissent — which will be subject of my post in two weeks).

Justice Holmes came up with what we call today the “diminution of value” test for regulatory takings of property. He said that exercises of the police power could devalue property without being a takings under the Fifth Amendment. Some diminution was okay, he said, but when that value is diminished too greatly it triggers the takings clause and that requires there be some sort of just compensation. How much is too much? Well, here is his sense of the situation:

“When it reaches a certain magnitude, in most if not in all cases there must be an exercise of eminent domain and compensation to sustain the act.” It’s my favorite line in the whole case. In her essay, Professor Rose also quotes a second restatement of the rule as it occurs at the end of the same paragraph: “[W]hile property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.”

Pausing for a minute, let’s recap Justice Holmes’s views: how much of value must be taken to trigger the takings clause? “A certain magnitude”. Must there be compensation in every case? No… But more often than not since “in most if not all” suggests that it might be most, but it may well not be all cases that trigger the takings clause. And in the second restatement of this rule, how much regulation is allowable? The answer is “to a certain extent”. When is there a taking? “if regulation goes too far”.

Clear as mud!

But let’s look at the full passage from the case where Justice Holmes makes these statements — it’s the last paragraph of the case, and the most important one:

“The general rule at least is, that while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking. It may be doubted how far exceptional cases, like the blowing up of a house to stop a conflagration, go — and if they go beyond the general rule, whether they do not stand as much upon tradition as upon principle. In general it is not plain that a man’s misfortune or necessities will justify his shifting the damages to his neighbor’s shoulders. We are in danger of forgetting that a strong public desire to improve the public condition is not enough to warrant achieving the desire by a shorter cut than the constitutional way of paying for the change. As we already said, this is a question of degree — and therefore cannot be disposed of by general propositions.”

If we parse that paragraph a little, it’s easy to conclude that Justice Holmes, while determining to strike down the Pennsylvania statute was also intentionally vague. It’s really the only explanation for a writer — any writer, let alone one so eminent — to be so very ambiguous. He steps away from creating a “general proposition” that can guide us in understanding “to what extent” a regulation must diminish value; and, he also steps away from saying “when” compensation may be required. He really only says that if it goes “too far”, then it triggers the takings clause and just compensation. The question arises, of course, who gets to decide what constitutes “too far” if we have no clear understanding of it from this decision? Clearly not the state legislature since their law was just struck down. It appears as though J. Holmes, intentionally or unintentionally, made this a question for the courts.

In her essay Professor Rose also pointed out something that is easily missed in this discussion: “what property is relevant in a takings discussion?” (566-567). Remember that we have, here, mineral rights, support rights and surface rights. Three different parts of the land that could be used and sold as separate bits of property. For Holmes, the only property that seemed to matter was the right to the support, which under the Kohler Act became part of the surface rights the Mahons possessed. In his view, the Kohler Act worked a takings of all the rights the company had — a complete diminution of value, as Professor Rose points out. That the act was designed to protect the surface rights of individuals living, working, and using the land in various ways what mattered to the Court was only the reduction in value to the mining company of its rights under the act. This meant that the changing value of the house on top of the land when it fell into the hole caused by subsidence was not really a part of his calculation.

Justice Holmes’ good friend, Justice Louis Brandeis dissented in this case. In my next post, I’ll give you a sense of what divided these two good friends on this particular issue. Mahon, however, became the basis for a long list of regulatory takings cases in the twentieth century, and if you look back at my discussion of Annicelli, you can see it lurking there in the background. But as you can see in Annicelli in the late twentieth century, as courts sought a principle that was easier to apply, they considered a complete diminution of value (which Holmes believed had occurred for the mining company) key to determining when a regulatory takings had occurred. That he left the door open to something less than complete becomes increasingly less important as the century wears on. After I’ve written about the dissent in this case, and as we move forward in time in regulatory takings cases, I’ll show you how this developed.

Property in Colonial America

Laura and I have been talking for quite some time about putting together a series of posts on property law here at DPP. As she noted a few weeks ago, this is a daunting prospect. Case law can be difficult, and the law of property is vast and particularly complicated, and made worse by the fact that the language of the law (the way judges, lawyers, and legal academics write – we call it “legalese”) is full of words and phrases not commonly used in everyday language.

With that said, this post will be the first in a series looking to render the Supreme Court’s jurisprudence on physical takings in language that any educated reader can grasp. To be clear at the outset, a physical taking is simply taking the title of property that belongs to an individual, group, corporation, state, etc., to press that property into the service of the public.

In a recent Supreme Court case (Arkansas Fish & Game Commission v. United States) Justice Ginsburg, writing for a unanimous Court, stated that there are two fundamental guidelines that mark out the broader contours of its Takings jurisprudence: 1) “The Takings Clause is ‘designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole’” , and 2) “’[w]hen the government physically takes possession of an interest in property for some public purpose, it has a categorical duty to compensate the former owner.’”

This is pretty clear statement of where the Supreme Court stands – and thus what the state of the law is – in 2014. This series of posts will ultimately tell the story of how takings law has gotten to where it is today, but we’ll get there by taking the long road. My plan is to begin with this brief introduction and a short discussion of ideas and practices regarding property rights in colonial America. Next time, I’ll discuss the provisions of the Constitution and the 5th Amendment that protect property rights. After that, we’ll address the Supreme Court’s first takings case, Barron v. Baltimore, the 14th Amendment, and perhaps a case or two from the post-Bellum period. In each of my following posts, I will focus on one or a few cases, until we’ve arrived at present day.

Here we go:

Colonial America and the Revolution

The belief that the government should protect individual rights has a long and rich history in Anglo-American thought. Since the colonial days, Americans have believed that freedom under government required strong protections for the rights of property.  Political theorists such as John Locke, Algernon Sidney, and Stephen Hopkins, argued that property was crucial to individual independence. In fact, this idea provided the rationale for (occasionally) restricting the right to vote to property holders in the early Republic.

Another influential thinker (and famous English jurist) of the day was William Blackstone, who recognized property as a right “inherent in every Englishman.” That is, for these thinkers, property rights are natural rights that preexist both government and society. For Blackstone, property rights “consist in the free use, enjoyment, and disposal of all his acquisitions, without any control or diminution, save only by the laws of the land.” Moreover, he says that respect for property in the law is so great “that it will not authorize the least violation of it; no, not even for the general good of the whole community” (cited in Amar 1998, 77). Thus for Blackstone (and many leading thinkers of the day – including many of the soon-to-be Founding Fathers) property rights are natural, inherent, and fundamental, and they cannot be violated by government.

Three eminent modern political scientists, Howard Gillman, Mark Graber, and Keith Whittington (GGW), summarize colonial attitudes toward property in their textbook on American Constitutionalism, arguing that at the eve of Revolution, Americans “believed that persons had three fundamental property rights: 1. Government could not confiscate property. 2. Government could take property for a public purpose only when government paid the fair value of that property to the original property holder. 3. Government could not tax a person without the consent of that person as manifested by the people’s representatives” (GGW 2013, 36-37).

These ideas about limitation on government (government cannot simply confiscate property), fairness, justice, and consent all mark departures from English tradition. These ideas about property are like much the Revolutionary Era thinking – they are in important part reactions against the practices of the British crown government. Under the British system, all property (even private property) is understood to be held at the pleasure of the king or queen.  Meaning, the owner’s title is limited because the monarch owns the whole domain, but allows people to hold parcels that are subject to recall if the sovereign deems it necessary. Therefore, under the British system, takings of property were not compensated (the King does not have to pay to use his own land – even if it also happens to be your land).

The American reaction to this system of takings is part-and-parcel of the larger reaction against Britain style sovereignty-in-government. A sovereign legislature, like that of England (after the sovereign monarch), could simply confiscate the property. In the American style of government, the people (or “the People”) are sovereign, not their agents in government. Individual rights are aimed at limiting government. Thus respect for an individual right of property operationalizes the sovereignty of the people. As Blackstone put it, “The public is now considered as an individual, treating with an individual for an exchange” (GGW 2013, 37). In other words, prohibition against confiscation and requirements for compensation are a direct expression of sovereignty of the people; they require government to treat individuals fairly and equally.

Now, I do not mean to suggest Americans simply threw a switch in 1776 and began compensating takings. As one would expect, the transition from a British-style system to a more American-style liberal system was piecemeal and imperfect. In fact, during the first decades of American independence, liberty was sometimes restricted in order to accommodate some perceived “common good.” For example, during the Revolutionary War, some communities confiscated privately owned horses and weapons in order to equip the Continental Army. Compensation for these confiscations “was almost always inadequate and sometimes not paid at all” (GGW 2013, 109).

So to briefly summarize, the key takeaways from this post are:

  1. Respect for property rights in America is older than the nation itself.
  2. Property rights are far from absolute in practice, and there is a long history of uncompensated takings in the name of some “public good.”

Suggested Reading:

Bailyn, Bernard. 1992. The Ideological Origins of the American Revolution, 2nd ed. The Belknap Press of Harvard University Press.

Ely, James W. 2008. The Guardian of Every Other Right, 3rd ed. Oxford University Press.

Gillman, Howard, Mark A. Graber, and Keith E. Whittington. 2013. American Constitutionalism, Volume II: Rights and Liberties. Oxford University Press.

Locke, John. 2002 [1689]. The Second Treatise of Government and A Letter Concerning Toleration. Dover: Mineola, NY.

Treanor, William Michael. 1985. “The Origins and Original Significance of the Just Compensation Clause of the Fifth Amendment.” Yale Law Journal 94: 694-716.

Wood, Gordon S. 1969. The Creation of the American Republic, 1776-1787. University of North Carolina Press.

* Author’s note: A special thanks to my wife, Ashley, for helping me translate the original draft of this post from legalese (or at least, academese) into something much more like normal English.