Palazzolo v. Rhode Island

In 1959, Shore Gardens, Inc. (SGI) purchased substantial coastal property in Rhode Island (defendant). In 1971, a state agency adopted regulations designating 18 acres of SGI’s land as protected wetlands. Under the regulations, a landowner needed a special exception from the agency to fill protected wetlands. An exception could be granted only if for a compelling public purpose providing a benefit to the public as a whole. In 1978, SGI ceased to exist, and title to the property passed to its sole shareholder, Anthony Palazzolo (plaintiff). Palazzolo applied twice for an exception, seeking permission first to fill the entire 18 acres and then to fill 11 acres to build a private beach club. Both applications were denied. Palazzolo sued Rhode Island. He claimed that the regulations deprived him of the economically beneficial use of his property and were therefore an inverse condemnation, also known as a regulatory taking, in violation of the Fifth Amendment’s Takings Clause. At trial, evidence showed that an upland parcel of Palazzolo’s property could likely be developed for residential use. The state trial court, appellate court, and supreme court all rejected Palazzolo’s position, reasoning that Palazzolo could not allege a taking based on regulations already on the books when he acquired ownership of the property. The United States Supreme Court granted certiorari.