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02/28/2021

James Ely: A Brief History of Just Compensation in the Nineteenth Century
Michael Ramsey

James W. Ely (Vanderbilt University - Law School) has posted “all temperate and civilized governments;” A Brief History of Just Compensation in the Nineteenth Century (Brigham-Kanner Property Rights Journal, Volume 10, 2021) (60 pages) on SSRN.  Here is the abstract:

This article explores the origins of the “just compensation” principle, the rationale behind the compensation requirement, and attempts to define the scope of “just compensation” throughout the Nineteenth Century. It traces the sources of the compensation requirement when property is acquired by eminent domain to English common law and the influence of natural law theorists. Courts in the United States early took the position that payment of compensation was a fundamental principle of universal application even if written constitutions contained no express compensation provision. The Fifth Amendment takings clause was seen as simply an affirmation of this overarching principle.

The compensation norm was understood as a matter of “natural equity,” so that the burden of public projects was shared by the community as a whole rather than fall upon a single individual. Moreover, from the outset courts insisted that the determination of the amount of just compensation was a question for the judiciary, and that the legislature could not fix the measure of compensation.

The article examines at length the evolution of “just compensation” during the Nineteenth Century. Where an entire parcel was taken, courts gravitated to the fair market value as the appropriate standard for compensation. Yet ascertaining fair market value posed difficulties, and many commentators charged that this standard did not provide adequate compensation to owners. Partial takings presented even more complicated problems. Lawmakers commonly mandated that in such cases the alleged benefits resulting from a project to the remaining land should be offset against the loss suffered by the owner, thus reducing any monetary compensation. Critics argued that supposed advantages were often illusory or inequitably benefited the entire community not the particular owner. The article probes the constitutional issues, as well as the confusion and uncertainty, arising from the offset of benefits. It also considers and questions the contested subsidy thesis, which holds that the offset of benefits amounted to a subsidy to transportation companies, especially railroads, by minimizing the expense of acquiring rights of way by eminent domain.

Noting a gap between judicial rhetoric extolling the importance of private property and the frequent practice of awarding inadequate compensation when property was taken by eminent domain, the article concludes by suggesting that undercompensation was a legacy of the Nineteenth Century. In this connection, it looks at some recent cases in which courts stopped short of awarding full compensation.