Keystone Bituminous Coal Association v. DeBenedictis

480 U.S. 470

Case Year: 1987

Case Ruling: 5-4, Affirmed

Opinion Justice: Stevens

FACTS

Decades ago in Pennsylvania, coal companies sold parcels of land to private individuals under the condition that the companies could retain rights to the coal underneath the surface and mine it. These sales contracts also included provisions that the new landowners waive any right to claim compensation from the companies if mining operations caused damage to their property.

Concerned that underground mining was endangering public safety, land conservation, and other interests, the Pennsylvania legislature in 1966 passed the Bituminous Mine Subsidence and Land Conservation Act. Section 4 of the law prohibited underground mining that jeopardized the natural geological support for existing public buildings, dwellings, and cemeteries. The state Department of Environmental Resources (DER) enacted implementation regulations that required 50 percent of the coal beneath Section 4 structures to be kept in place to provide surface support. Section 6 of the act authorized the DER to revoke mining permits if the removal of coal caused damage to a Section 4–protected structure and the mining operator had not repaired the damage or satisfied any claims there from within six months.

In 1982 the Keystone Bituminous Coal Association, an organization of coal mine operators, brought legal action against Nicholas DeBenedictis, secretary of the Pennsylvania Department of Environmental Resources, and other state officials requesting a court injunction to prohibit enforcement of the act. The association claimed that Section 4 constituted a taking of private property that required compensation under the Fifth Amendment and that Section 6 amounted to an impairment of the liability waiver agreements in violation of the Contract Clause. The lower federal courts upheld the statute’s validity.

 

JUSTICE STEVENS DELIVERED THE OPINION OF THE COURT.

Petitioners assert that disposition of their takings claim calls for no more than a straightforward application of the Court’s decision in Pennsylvania Coal Co. v. Mahon [1922]. Although there are some obvious similarities between the cases, we agree with the Court of Appeals and the District Court that the similarities are far less significant than the differences, and that Pennsylvania Coal does not control this case....

The holdings and assumptions of the Court in Pennsylvania Coal provide obvious and necessary reasons for distinguishing Pennsylvania Coal from the case before us today. The two factors that the Court considered relevant have become integral parts of our takings analysis. We have held that land use regulation can effect a taking if it “does not substantially advance legitimate state interests, ... or denies an owner economically viable use of his land.” Agins v. Tiburon (1980); see alsoPenn Central Transportation Co. v. New York City (1978). Application of these tests to petitioners’ challenge demonstrates that they have not satisfied their burden of showing that the Subsidence Act constitutes a taking. First, unlike the Kohler Act, the character of the governmental action involved here leans heavily against finding a taking; the Commonwealth of Pennsylvania has acted to arrest what it perceives to be a significant threat to the common welfare. Second, there is no record in this case to support a finding, similar to the one the Court made in Pennsylvania Coal, that the Subsidence Act makes it impossible for petitioners to profitably engage in their business, or that there has been undue interference with their investment-backed expectations....

Unlike the Kohler Act, which was passed upon in Pennsylvania Coal, the Subsidence Act does not merely involve a balancing of the private economic interests of coal companies against the private interests of the surface owners. The Pennsylvania Legislature specifically found that important public interests are served by enforcing a policy that is designed to minimize subsidence in certain areas....

The District Court and the Court of Appeals were both convinced that the legislative purposes set forth in the statute were genuine, substantial, and legitimate, and we have no reason to conclude otherwise.

None of the indicia of a statute enacted solely for the benefit of private parties identified in Justice Holmes’ opinion are present here. First, Justice Holmes explained that the Kohler Act was a “private benefit” statute since it “ordinarily does not apply to land when the surface is owned by the owner of the coal.” The Subsidence Act, by contrast, has no such exception. The current surface owner may only waive the protection of the Act if the DER consents. Moreover, the Court was forced to reject the Commonwealth’s safety justification for the Kohler Act because it found that the Commonwealth’s interest in safety could as easily have been accomplished through a notice requirement to landowners. The Subsidence Act, by contrast, is designed to accomplish a number of widely varying interests, with reference to which petitioners have not suggested alternative methods through which the Commonwealth could proceed.

Petitioners argue that at least [Section] 6, which requires coal companies to repair subsidence damage or pay damages to those who suffer subsidence damage, is unnecessary because the Commonwealth administers an insurance program that adequately reimburses surface owners for the cost of repairing their property. But this argument rests on the mistaken premise that the statute was motivated by a desire to protect private parties. In fact, however, the public purpose that motivated the enactment of the legislation is served by preventing the damage from occurring in the first place--in the words of the statute--”by providing for the conservation of surface land areas.” The requirement that the mine operator assume the financial responsibility for the repair of damaged structures deters the operator from causing the damage at all--the Commonwealth’s main goal--whereas an insurance program would merely reimburse the surface owner after the damage occurs.

Thus, the Subsidence Act differs from the Kohler Act in critical and dispositive respects. With regard to the Kohler Act, the Court believed that the Commonwealth had acted only to ensure against damage to some private landowners’ homes. Justice Holmes stated that if the private individuals needed support for their structures, they should not have “take[n] the risk of acquiring only surface rights.” Here, by contrast, the Commonwealth is acting to protect the public interest in health, the environment, and the fiscal integrity of the area.... The Subsidence Act is a prime example that “circumstances may so change in time ... as to clothe with such a [public] interest what at other times ... would be a matter of purely private concern.” Block v. Hirsh (1921)....

The Court’s hesitance to find a taking when the State merely restrains uses of property that are tantamount to public nuisances is consistent with the notion of “reciprocity of advantage” that Justice Holmes referred to in Pennsylvania Coal.Under our system of government, one of the State’s primary ways of preserving the public weal is restricting the uses individuals can make of their property. While each of us is burdened somewhat by such restrictions, we, in turn, benefit greatly from the restrictions that are placed on others. These restrictions are “properly treated as part of the burden of common citizenship.” Kimball Laundry Co. v. United States (1949). Long ago it was recognized that “all property in this country is held under the implied obligation that the owner’s use of it shall not be injurious to the community,” Mugler v. Kansas [1887], and the Takings Clause did not transform that principle to one that requires compensation whenever the State asserts its power to enforce it....

The second factor that distinguishes this case from Pennsylvania Coal is the finding in that case that the Kohler Act made mining of “certain coal” commercially impracticable. In this case, by contrast, petitioners have not shown any deprivation significant enough to satisfy the heavy burden placed upon one alleging a regulatory taking. For this reason, their takings claim must fail....

Petitioners thus face an uphill battle in making a facial attack on the Act as a taking.

The hill is made especially steep because petitioners have not claimed, at this stage, that the Act makes it commercially impracticable for them to continue mining their bituminous coal interests in western Pennsylvania. Indeed, petitioners have not even pointed to a single mine that can no longer be mined for profit. The only evidence available on the effect that the Subsidence Act has had on petitioners’ mining operations comes from petitioners’ answers to respondents’ interrogatories. Petitioners described the effect that the Subsidence Act had from 1966–1982 on 13 mines that the various companies operate, and claimed that they have been required to leave a bit less than 27 million tons of coal in place to support 4 areas. The total coal in those 13 mines amounts to over 1.46 billion tons. Thus 4 requires them to leave less than 2% of their coal in place. But, as we have indicated, nowhere near all of the underground coal is extractable even aside from the Subsidence Act. The categories of coal that must be left for [Section] 4 purposes and other purposes are not necessarily distinct sets, and there is no information in the record as to how much coal is actually left in the ground solely because of [Section] 4. We do know, however, that petitioners have never claimed that their mining operations, or even any specific mines, have been unprofitable since the Subsidence Act was passed. Nor is there evidence that mining in any specific location affected by the 50% rule has been unprofitable....

The parties have stipulated that enforcement of the DER’s 50% rule will require petitioners to leave approximately 27 million tons of coal in place. Because they own that coal but cannot mine it, they contend that Pennsylvania has appropriated it for the public purposes described in the Subsidence Act.

This argument fails for the reason explained in Penn Central and Andrus [v. Allard (1979)]. The 27 million tons of coal do not constitute a separate segment of property for takings law purposes. Many zoning ordinances place limits on the property owner’s right to make profitable use of some segments of his property. A requirement that a building occupy no more than a specified percentage of the lot on which it is located could be characterized as a taking of the vacant area as readily as the requirement that coal pillars be left in place. Similarly, under petitioners’ theory one could always argue that a setback ordinance requiring that no structure be built within a certain distance from the property line constitutes a taking because the footage represents a distinct segment of property for takings law purposes. There is no basis for treating the less than 2% of petitioners’ coal as a separate parcel of property....

When the coal that must remain beneath the ground is viewed in the context of any reasonable unit of petitioners’ coal mining operations and financial-backed expectations, it is plain that petitioners have not come close to satisfying their burden of proving that they have been denied the economically viable use of that property. The record indicates that only about 75% of petitioners’ underground coal can be profitably mined in any event, and there is no showing that petitioners’ reasonable “investment-backed expectations” have been materially affected by the additional duty to retain the small percentage that must be used to support the structures protected by [Section] 4....

In addition to their challenge under the Takings Clause, petitioners assert that [Section] 6 of the Subsidence Act violates the Contracts Clause by not allowing them to hold the surface owners to their contractual waiver of liability for surface damage. Here too, we agree with the Court of Appeals and the District Court that the Commonwealth’s strong public interests in the legislation are more than adequate to justify the impact of the statute on petitioners’ contractual agreements.

Prior to the ratification of the Fourteenth Amendment, it was Article I, 10, that provided the primary constitutional check on state legislative power. The first sentence of that section provides:

“No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold or silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.” U.S. Const., Art. I, 10.

Unlike other provisions in the section, it is well settled that the prohibition against impairing the obligation of contracts is not to be read literally. W. B. Worthen Co. v. Thomas (1934). The context in which the Contracts Clause is found, the historical setting in which it was adopted, and our cases construing the Clause, indicate that its primary focus was upon legislation that was designed to repudiate or adjust pre-existing debtor-creditor relationships that obligors were unable to satisfy. Even in such cases, the Court has refused to give the Clause a literal reading. Thus, in the landmark case of Home Building & Loan Assn. v. Blaisdell [1934], the Court upheld Minnesota’s statutory moratorium against home foreclosures, in part, because the legislation was addressed to the “legitimate end” of protecting “a basic interest of society,” and not just for the advantage of some favored group....

In assessing the validity of petitioners’ Contracts Clause claim in this case, we begin by identifying the precise contractual right that has been impaired and the nature of the statutory impairment. Petitioners claim that they obtained damages waivers for a large percentage of the land surface protected by the Subsidence Act, but that the Act removes the surface owners’ contractual obligations to waive damages. We agree that the statute operates as “a substantial impairment of a contractual relationship,” and therefore proceed to the asserted justifications for the impairment.

The record indicates that since 1966 petitioners have conducted mining operations under approximately 14,000 structures protected by the Subsidence Act. It is not clear whether that number includes the cemeteries and water courses under which mining has been conducted. In any event, it is petitioners’ position that, because they contracted with some previous owners of property generations ago, they have a constitutionally protected legal right to conduct their mining operations in a way that would make a shambles of all those buildings and cemeteries. As we have discussed, the Commonwealth has a strong public interest in preventing this type of harm, the environmental effect of which transcends any private agreement between contracting parties....

... [T]he Subsidence Act plainly survives scrutiny under our standards for evaluating impairments of private contracts. The Commonwealth has determined that in order to deter mining practices that could have severe effects on the surface, it is not enough to set out guidelines and impose restrictions, but that imposition of liability is necessary. By requiring the coal companies either to repair the damage or to give the surface owner funds to repair the damage, the Commonwealth accomplishes both deterrence and restoration of the environment to its previous condition. We refuse to second-guess the Commonwealth’s determinations that these are the most appropriate ways of dealing with the problem. We conclude, therefore, that the impairment of petitioners’ right to enforce the damages waivers is amply justified by the public purposes served by the Subsidence Act.

The judgment of the Court of Appeals is Affirmed.

CHIEF JUSTICE REHNQUIST, WITH WHOM JUSTICE POWELL, JUSTICE O’CONNOR, AND JUSTICE SCALIA JOIN, DISSENTING.

More than 50 years ago, this Court determined the constitutionality of Pennsylvania’s Kohler Act as it affected the property interests of coal mine operators. Pennsylvania Coal Co. v. Mahon (1922). The Bituminous Mine Subsidence and Land Conservation Act approved today effects an interference with such interests in a strikingly similar manner. The Court finds at least two reasons why this case is different. First, we are told, “the character of the governmental action involved here leans heavily against finding a taking.” Second, the Court concludes that the Subsidence Act neither “makes it impossible for petitioners to profitably engage in their business,” nor involves “undue interference with [petitioners’] investment-backed expectations.” Neither of these conclusions persuades me that this case is different, and I believe that the Subsidence Act works a taking of petitioners’ property interests. I therefore dissent....

... I would hold that Pennsylvania’s Bituminous Mine Subsidence and Land Conservation Act effects a taking of petitioners’ property without providing just compensation. Specifically, the Act works to extinguish petitioners’ interest in at least 27 million tons of coal by requiring that coal to be left in the ground, and destroys their purchased support estates by returning to them financial liability for subsidence. I respectfully dissent from the Court’s decision to the contrary.