Pratt v. State, Department of Natural Resources
1981 Minn. LEXIS 1403, 309 N.W.2d 767 (1981)
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Rule of Law:
A government regulation that serves both a public arbitration function and a prominent governmental enterprise function may constitute a compensable taking if it results in a substantial diminution in the market value of the property it affects.
Facts:
- For approximately 20 years, Sheldon Pratt owned three shallow, unmeandered sloughs (Island Lake, Rice Lake, and Tamarack Lake), along with all or virtually all of the surrounding shoreline.
- Pratt had purchased the properties for the exclusive purpose of privately harvesting wild rice.
- The sloughs were not suitable for general public recreation like boating, swimming, or fishing, but were ideal for growing wild rice.
- Beginning in 1960, Pratt used a mechanical picker to harvest the wild rice, which was more profitable than harvesting by hand.
- In 1973, the Minnesota legislature amended state statutes, changing the definition of 'public waters' from those capable of 'substantial beneficial public use' to those serving a 'beneficial public purpose.'
- This statutory amendment effectively reclassified Pratt's previously private sloughs as public waters.
- In 1975, the state informed Pratt that due to the reclassification, he was now subject to regulations for public waters, which prohibited the use of mechanical harvesters for wild rice.
Procedural Posture:
- Sheldon Pratt submitted a claim for damages to the Minnesota Legislative Claims Commission.
- The Commission deferred action and directed Pratt to seek a declaratory judgment.
- Pratt sued the State of Minnesota in Crow Wing County District Court (the trial court), seeking a declaration that the waters on his property were private.
- The trial court found the waters were public, but also concluded that the legislative reclassification constituted a compensable taking.
- The State's motion for a new trial was denied by the trial court.
- The State of Minnesota (appellant) appealed the trial court's order denying a new trial to the Minnesota Supreme Court.
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Issue:
Does a state's legislative reclassification of private waters as public, which subjects a landowner's pre-existing and exclusive use of those waters to a regulation prohibiting mechanical wild rice harvesting, constitute a compensable taking of property?
Opinions:
Majority - Simonett, J.
Yes, this may constitute a compensable taking if there is a substantial diminution in the market value of the property. The mere reclassification of the waters from private to public is not a taking, as the state holds title in its sovereign capacity, not as a proprietor. However, the reclassification triggers regulations that impair Pratt's pre-existing riparian rights to use the water for harvesting. The court applied the test from McShane v. City of Fairbault, which distinguishes between non-compensable 'arbitration' regulations and potentially compensable regulations that benefit a 'governmental enterprise.' The wild rice harvesting regulation has a dual purpose: an arbitration function (conservation) and a governmental enterprise function (preserving traditional harvesting for Native Americans to fulfill a 'moral obligation'). Because the governmental enterprise function is prominent and the regulation disproportionately burdens Pratt, a taking occurs if the regulation causes a 'substantial diminution in the market value' of his property. The case is remanded for a factual determination on the extent of this diminution in value.
Analysis:
This decision refines the regulatory takings doctrine by establishing that a regulation with a hybrid purpose—both arbitrating public interests and advancing a specific governmental enterprise—can trigger a takings claim. It moves beyond a rigid categorical test, confirming that a regulation need not serve an exclusively governmental enterprise function. By holding that a 'prominent' enterprise function is sufficient to potentially require compensation if value is substantially diminished, the court reinforces an ad hoc, fact-intensive inquiry that balances state police power against the constitutional protection of private property rights, particularly for landowners with unique, pre-existing economic uses.
