Additional Issues in Cedar Point v. Hassid –

Supreme Court Decides to Hear Important Takings Case –

Yesterday I reported on the Supreme Court hearing at the Cedar Point Nursery hearing against Hassid, a major revenue case. In this post, I’ll cover a few additional issues raised by the case that I previously didn’t have the time or space for. I have summarized the facts and key constitutional issues from yesterday’s post, as well as here and here and here.

First, as Josh Blackman points out, there has been considerable debate among attorneys and judges as to whether or not the access rights that the California ordinance grants union organizers are considered a relief. I think it’s pretty obvious that the law is actually a relief in the sense that it gives organizers a recurring right to enter the property for specific purposes, albeit for a limited period of time. Specifically, it is a gross relief (a right tied to a specific person or group as opposed to owning a specific property nearby, which is a relief).

But I also think that this topic is irrelevant to the question before the court: whether California law creates a revenue per se. What matters is that the right given to union organizers is a recurrent physical invasion of property. The Supreme Court has long ruled that permanent, government-mandated physical occupation or invasion of property qualifies as income – even if it places modest burdens on the owner of the property. And it doesn’t matter whether the profession is a relief or some other right formally defined by common law. If the state creates a new type of permanent physical invasion that does not fit any previously known legal category, it would still be a challenge. The central question at Cedar Point is whether a recurring (3 hours per day, 120 days per year) but not literally continuous physical invasion is considered “permanent”. I think the answer is clearly “yes”. Whether or not that is the case, however, should not depend on whether the government has provided relief.

In my previous post, I addressed the question of whether a win for Cedar Point would lead the courts to conclude that state health and safety inspections are considered revenue (the answer is no). Law professor Aaron Tang claims that doing so would create similar problems with anti-discrimination laws preventing companies from not serving customers based on traits such as race or gender.

This is a slightly more complicated problem than health and safety inspections. But the answer is still “no”. Unlike California’s union organizer regulation (which requires access to organizers regardless of why the owner might want to exclude them), anti-discrimination laws do not require companies to allow any particular individual to enter. They only prohibit a few specific reasons for exclusion. It is therefore up to business owners to exclude as many people as they wish and in fact to exclude any customers who do not meet very strict criteria unrelated to the prohibited classifications. Perhaps an extremely comprehensive anti-discrimination law that excludes all or almost all possible grounds for exclusion would qualify as revenue. But few, if any, laws even come close.

If anti-discrimination laws were to count as revenue in any way, the practical effect would be very little. If a regulation qualifies as an intake, it does not mean that the government cannot issue it at all. It just means they have to pay compensation (usually defined as the “fair market value” of the property right seized by the government).

The fair market value excluding customers based on race, gender, or sexual orientation is actually zero or negative in most cases. Having a wider range of customers actually increases profitability for most businesses. One can imagine situations where customers of one group (e.g. African American) reduce the business of others (e.g. white racists) so much that the company suffers a net loss of profits. But such cases are likely to be rare in modern conditions and difficult to prove in court. In contrast, giving full union organizer access to a property, where the owner generally excludes non-employees, often incurs a real cost (although exactly how much will vary from case to case).

Finally, during the hearing, Judge Brett Kavanaugh suggested repeatedly that the problem at Cedar Point could be easily resolved by applying the 1956 Supreme Court ruling in NLRB v Babcock & Wilcox Co. In Babcock the Court ruled that the National Industrial Relations Act (NLRA), “

Judge Kavanaugh suggests that the Babcock Court ruled as it did to avoid constitutional issues as questions about the takings clause were raised in the parties’ pleadings. Perhaps that was really part of the motivation of the judges in 1956. But if so, the Tribunal believes there is no evidence to support this.

None of the other judges showed much interest in Kavanaugh’s Babcock theory; Justice Sotomayor mentioned it briefly, only to indicate that she does not believe it is true. So I would be surprised if the Tribunal would decide on that basis.

I would add that this is not the first time Kavanaugh has flirted with a crazy theory during the hearing on a major property rights case. During the 2019 Postdocument in Knick v Township of Scott, Kavanaugh was the only judiciary to show keen interest in the Trump administration’s strange “Klingon forehead” theory of how the case was to be settled. Ultimately, however, the Court footnote dismissed this argument, and Kavanaugh supported the majority opinion of Chief Justice Roberts (see my analysis in this article, pp. 158-59). Whether Kavanaugh will similarly return to the fold in this instance, or instead hold onto his weapons, remains to be seen.

NOTE: The owners of the property in this case are represented by the Pacific Legal Foundation. My wife, Alison Somin, works for PLF. But she is not involved in this case.