In an ideal world, the law would shield people from aggression by others, allowing them to peacefully use their lives, liberties, and property as they desire.
In our actual world, however, many people cannot resist the urge to turn the law into a sword – into a weapon they can use against anyone who doesn’t live or act in “the right” way.
Examples of such legal plunder and coercive busybodyism pop up constantly. Here’s one that recently came to my attention.
The Perfect Puppy is a family owned business in Rhode Island. It sells healthy, well cared-for puppies. Pet stores in Rhode Island are subject to health and safety regulation by the state, and Perfect Puppy has never been fined or cited for any violation.
The owners wanted to open a new store in East Providence. In April 2014, the owners applied to the state for a license for a new store, which was issued on May 21. They also executed a one-year lease for the necessary retail space – 2800 square feet at 1235 Wampanoag Trail in East Providence.
It looked as though Perfect Puppy was good to go, but on May 20, the day before the State issued its license, the East Providence City Council introduced an ordinance which banned the sale of dogs or cats by any pet store or other kind of retail business. The ordinance was approved in the City Council’s June 3 meeting.
The city’s hastily enacted law made Perfect Puppy’s lease and license worthless and the owners had to close the planned East Providence store, suffering financial losses as a consequence.
I think it’s bad enough that East Providence politicians can use regulations as a sword against a harmless little pet store merely because some local busybodies don’t want that kind of business in “their” town. But East Providence wants to do its dirty work for free – not compensating the owners for their damages.
And therefore, we have litigation. Perfect Puppy, Inc. v. City of East Providence is now before the First Circuit Court of Appeals. The suit seeks to compel the city to pay for having taken Perfect Puppy’s property and for the owners’ legal costs.
Pacific Legal Foundation is representing the owners and in its brief (along with local counsel Lesley Rich) states, “The City may have authority to ban pet stores, but when its law eviscerates an existing business and the vested property interests on which it rests, it must pay just compensation.” The owners are out of pocket around $25,000 for the lease and estimate their lost income from the inability to operate the store at $150,000.
Perfect Puppy is what is known as a regulatory takings case. Under the Fifth Amendment, when governments take property for public use, they must pay the owners just compensation. That applies not only where, through eminent domain, the government actually takes title away, but also in cases where regulations so diminish the value of property that it has been confiscated de facto. The Supreme Court ruled in Lucas v. South Carolina Coastal Council (1992) that when regulations deny the owner all economically beneficial use of property, the government must pay compensation because it has effectively taken it.
But does that apply to the deprivation of value in a lease or license to operate? Under Rhode Island law, the answer seems clear – yes. Perfect Puppy’s interests in the East Providence store are regarded as “property” for its Fifth Amendment claims.
The City makes a counter-argument, however. Perfect Puppy could still operate the store for some other purpose, such as selling pet supplies, and therefore the owners have not been deprived of all beneficial use under Lucas.
In response, the plaintiff’s brief observes, “the idea that Perfect Puppy could viably operate a puppy supply store in a City outlawing puppy sales is not credible.”
Moreover, I would add, forcing the owners to do business in a distantly related market where they have no experience or advantage and would face competition from large chain stores is patently unreasonable.
Finally, counsel for the store point out, the state license was for the sale of live animals. The ordinance destroyed the value of that license.
Here is why it is important that Perfect Puppy prevail on its takings claim.
Government officials must be accountable for their actions, including the costs they impose on property owners. Too often, they are able to make decisions that leave some residents happy (in this instance, those who think it’s bad to sell pets) while dumping the entire cost on just a few or even a single business. That encourages the “factionalism” that Madison warned about and emboldens those who want to use government as their weapon for social engineering.
If the court holds in favor of Perfect Puppy, taxpayers in East Providence will want to know why a considerable sum of their tax dollars had to be paid to a pet store that was prevented from opening. City politicians might have a hard time explaining that.