The Murr Case: Of Lot Mergers and the Future of Land Use Regulation

On Monday, the Supreme Court will hear oral argument in a seemingly minor zoning case, Murr v. State of Wisconsin. In reality, the case involves a fundamental challenge to public authority to protect our communities and private property. In particular, if the Court were to rule in favor of petitioners, it would make it vastly more difficult for communities to compel large-scale developers to comply with zoning and other land use laws.

Here’s the back story. In 1972, the Secretary of the Interior approved a request by the Governors of Wisconsin and Minnesota to include the Lower St. Croix River in the national Wild and Scenic Rivers system based on its outstanding scenic and recreational values. Despite this national designation, state and local land use agencies control development along the river’s banks. The Murr case arises from the efforts by St. Croix County, Wisconsin, to protect the scenic banks of the Lower St. Croix River from overdevelopment and, more specifically, the application of an obscure “lot merger” zoning rule.

More than 50 years ago, prior to the Wild and Scenic designation, Margaret and William Murr purchased a small building lot on the Wisconsin side of the river, conveyed ownership of the lot to the family plumbing company, and built a small cabin on the lot. A few years later the Murrs bought a second lot next door to their first lot in their own names. Ever since, the Murr family has enjoyed the combined lots as a summer retreat.

In the 1980s, the plumbing company (for reasons not explained in the case file) conveyed the first lot back to the Murrs, meaning that both lots were owned by the Murrs personally. Under the state and county zoning rules adopted in the 1970s (following the Wild and Scenic River designation), this step by the Murrs had important consequences. Each of the Murrs’ lots was too small to meet the zoning’s minimum lot size requirement and therefore was a “substandard” lot. In addition, since the substandard lots were now held in common ownership, they were legally “merged” into one lot, meaning that the Murrs could maintain their existing cabin or replace the cabin with a new house, but they could not build an additional home on what had been the second substandard lot or sell it to someone else so they could do so.

The Murrs eventually gave the property to their children. In 2005, the children (the plaintiffs in the present case) sought to build a house on the second substandard lot and learned, apparently to their surprise, about the lot merger rule in the zoning regulations and the restriction on further development of the merged lots.

The Murr children sued in Wisconsin courts, claiming a “taking” of their private property. The courts rejected the claim at each step in the trial and appellate process. The Murrs, now represented by the Pacific Legal Foundation, will try to make their case before the Supreme Court.

The Court has long said that the purpose of the Takings Clause (“nor shall private property be taken for public use, without just compensation”) is to prevent the government from singling out individuals to bear special burdens that “in all fairness and justice” should be borne by the public as a whole. Applying that principle, the Court should reject the Murrs’ takings argument.

In general, when communities adopt new zoning regulations, owners of small, pre-existing lots cannot comply with the new minimum lot size requirements. Faced with the choice of enforcing the new zoning rules and barring development of substandard lots, or granting an exception to the rules and allowing development of substandard lots, local governments typically choose the second option.

This policy is generally perceived as fair because the owner who purchased her lot before the rules were established could not foresee what new rules might be created in the future. And denying an exception would likely leave the owner with no economic use for the lot. But this leniency also has social and economic costs; the owner of a substandard lot receives special, favored treatment compared to other property owners, and granting the exception undermines the goals of the zoning to protect the community and homeowners.

Just as communities typically give special treatment to owners of substandard lots, zoning rules also usually include a so-called “lot merger” provision, an exception to the exception so to speak, withdrawing the leniency accorded to an owner of a substandard lot when the owner owns two adjacent substandard lots. That is the scenario in Murr.

Lot merger provisions are both sensible and fair. When an owner owns two adjacent substandard lots, and the combined lots meet the minimum lot size requirement for the area, the owner can readily comply with the minimum lot size requirement in the same way as neighbors subject to the same regulation. On the other hand, not applying a lot merger rule would allow the owner to build not just one but two structures not in conformity with the zoning and in the process undermine the zoning rules still further.

 Notwithstanding the logic supporting lot merger rules, the Murr children will argue before the Supreme Court that they have a right to build on both substandard lots and that if the lot merger rule blocks them from doing so, they are entitled to “just compensation” under the Takings Clause for the lost opportunity to build on the second lot. While the Supreme Court has never addressed this specific issue, every lower court to consider a takings claim based on a lot merger rule has rejected it. It would be remarkable if the Supreme Court in Murr rejected this judicial consensus, especially given how long lot merger rules have been around and how sensibly, indeed one could say elegantly, they balance the interests of the community and different property owners.

But the Murr case has significance that extends far beyond the previously obscure topic of lot mergers. That is why numerous parties have filed amicus briefs in the Murr case, with the Chamber of Commerce, the National Association of Home Builders, and Cato Institute lining up in support of the Murrs, and the National Association of Counties, the American Planning Association, and the National Trust for Historic Preservation siding with the state and the county. The potential importance of this case also may explain the extraordinary delay between the grant of the petition for certiorari on January 15, 2016, and the scheduled oral argument on March 20, 2017, a year-plus delay which strongly suggests controversy among the justices over this case.

The larger issue raised by the Murr case is how, in general, the courts should define the “relevant parcel” in takings cases. Courts resolve takings claims by weighing, among other factors, the magnitude of the economic burden (if any) imposed by a regulation. If the relevant parcel is defined narrowly by referring to the plaintiff’s specific property interest subject to regulatory restriction, the economic burden will appear more severe and the claim will be more likely to succeed. If the parcel is defined more broadly, the apparent economic burden will be more modest, and the claim will be less likely to succeed. In Murr, the children claim that the relevant parcel is the one substandard lot they are barred from developing by the lot merger rule; the state and the county contend that the relevant parcel is the two lots combined. The outcome of the case will turn on the Court’s resolution of this parcel issue.

In arguing for a narrow parcel definition, the Murr children, and especially their amici allies, seek to establish a new approach to defining the relevant parcel that would alter the outcomes of vast numbers of takings cases arising from land use regulations. Under current law, if a developer owns 100 acres and is barred by a local floodplain regulation from developing one acre, and the developer challenges the restriction as a taking, courts will generally define the relevant parcel as 100 acres and conclude that the economic impact of the regulation is relatively modest because the developer can still develop 99 of the 100 acres. The Murrs and their allies are arguing that, if the developer has subdivided the 100 acres into 100 different lots, the developer should ordinarily be permitted to define the relevant parcel as any one of the subdivided lots, including the specific lot within the floodplain, greatly increasing the apparent economic burden of the regulation.

Many years ago Justice Oliver Wendell Holmes said that “government could hardly go on” if the public had to pay financial compensation under the Takings Clause every time it regulates the use of private property. If the Court were to embrace the novel, extreme parcel theory being advanced by the Murrs and their amici, developers could routinely bring successful takings claims based on zoning and other traditional land use regulations. Which is why this seemingly minor case has the potential to be one of the most important land use cases ever decided by the U.S. Supreme Court.

The author filed an amicus brief in the case on behalf of a group of economists supporting the county and state position.