Untangling Horne; Resuscitating Nollan

Not atypically, the Supreme Court in Horne interprets the canonical Nollan narrowly as a case about developer exactions. Viewed that way, Nollan does not speak to the issue in Horne: the raisins that the government took from the owners were not surrendered in exchange for explicit permission to engage in an activity the government either did or could forbid.

But Nollan stands for a far broader principle: the government should not be induced to reject a policy instrument that necessitates taking steps that would otherwise constitute a compensable taking in favor of an alternative policy instrument that does not give rise to a compensation obligation if (a) it meets the same purpose as the non-compensable action would have met and (b) the owner is neutral toward, or prefers, the policy instrument that includes a traditional taking.

In Nollan itself, the Court is clear that the state should not be discouraged from using its preferred policy instrument to protect public view of the ocean (allowing development of a bigger, view-blocking structure and seizing a viewing easement on the landowner’s property) rather than an inferior instrument (refusing to permit development) by being forced to compensate when it seizes the easement. If an owner accepts the state’s offer to surrender the easement–rather than merely refusing to develop–we know that the deal is Pareto superior.

In Horne, the federal government should not be induced to use an inferior policy instrument that does not give rise to a duty to compensate (ex ante production quotas or ex post restrictions on raisin sale) rather than a superior one (seizing raisins once market conditions are known) by being forced to compensate only if it uses the instrument that involves a traditionally compensable physical seizure.

Though it is generally easiest to tell in exaction cases that the owner prefers the state’s favored policy choice when the owner surrenders property in exchange for a permit, it is simple to tell in Horne as well because the owners retain a contingent interest in the profits earned on the sale of seized raisins, and any rational grower would prefer that to a simple sale restriction.