7th Cir. Axes “Judicial Takings” Theory in Lakefront Property Case

by: Michael Realbuto
7 Dec 2022

The Seventh Circuit U.S. Court of Appeals decided an interesting takings case this past cycle which involved several Indiana properties that abut Lake Michigan. In Pavlock v. Holcomb, the property owners asserted a relatively novel “judicial takings” theory that was ultimately rejected by the panel. The Court held that the lakefront owners could not sue their state government in federal court under a “judicial takings” theory to overturn a state supreme court decision that changed Indiana law regarding the distinction of private/public ownership of lakefront land. The background facts are as follows:

In 2018, the Indiana Supreme Court held that the State of Indiana holds exclusive title to Lake Michigan and its shores up to the lake’s ordinary “high-water mark.” Gunderson v. State, 90 N.E.3d 1171 (Ind. 2018). Gunderson, however, was an unwelcome development for the property owners in Pavlock who own lakefront property on Lake Michigan’s Indiana shores. Believing that their property extended to the low-water mark, the property owners sued in federal district court alleging that the ruling in Gunderson amounted to a taking of their private property in violation of the Fifth Amendment. They claimed the state supreme court was responsible for this alleged taking and they named a number of Indiana officeholders in their official capacities. The district court granted the State’s motion to dismiss for failure to state a claim. The Third Circuit affirmed the judgment of the district court because the named officials neither caused the property owners’ asserted injury nor were they capable of redressing it. Thus, the Court found that the owners lacked Article III standing.

“Judicial taking” theory stems from the United States Supreme Court’s plurality opinion in Stop the Beach Renourishment v. Florida Department of Environmental Protection, 560 U.S. 702 (2010). There, the Court affirmed a Florida Supreme Court decision upholding a beach renourishment program. Notwithstanding the holding, the Court opined that the Florida Supreme Court’s decision effected a “judicial taking” because the program placed dry sand between privately-owned beachfront properties and the water. Therefore, the sand disconnected beachfront owners from the water and created a public beach between the properties and the water. Justice Scalia’s proposed a new test to determine whether a “judicial taking” occurred: “[i]f a legislature or a court declares that what was once an established right of private property no longer exists, it has taken that property, no less than if the State had physically appropriated it or destroyed its value by regulation.” Stop the Beach Renourishment, 560 U.S. at 715.  While “judicial taking” theory was set forth by the High Court twelve years ago, no circuit court, including the Seventh Circuit in Pavlock, has recognized the theory.

We will be sure to keep an eye out for any traction relating to this often-overlooked theory …

One of the easiest ways for property owners to protect their rights is to retain experienced counsel as early as possible. For over 50 years, McKirdy, Riskin, Olson & DellaPelle, P.C. has concentrated its practice in eminent domain law and real estate tax appeals. Our firm has earned a reputation for persistently defending its clients’ constitutionally-recognized property rights. Please feel free to contact us for a free consultation.