Petition for Writ of Certiorari — Bridge Aina Le'a, LLC, Petitioner v. Hawaii Land Use Commission

Supreme Court briefJul 17, 2020

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APPENDIX A

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

BRIDGE AINA LE‘A, LLC,

Plaintiff-Appellant/CrossAppellee,

STATE OF HAWAII LAND USE COMMISSION; VLADIMIR P. DEVENS, in

his individual and official capacity; KYLE CHOCK, in his individual

and official capacity; NORMAND

ROBERT LEZY, in his individual

and official capacity; DUANE

KANUHA, in his official capacity;

CHARLES JENCKS, in his official

capacity; LISA M. JUDGE, in her

individual and official capacity;

NICHOLAS W. TEVES, JR., in his

individual and official capacity;

RONALD I. HELLER, in his individual and official capacity,

Defendants-Appellees/CrossAppellants.

Nos. 18-15738

18-15817

D.C. No.

1:11-cv-00414SOM-KJM

OPINION

Appeal from the United States District Court

for the District of Hawaii

Susan O. Mollway, District Judge, Presiding

Argued and Submitted October 21, 2019

Honolulu, Hawaii

Filed February 19, 2020

Before: SUSAN P. GRABER, MILAN D. SMITH, JR.,

and PAUL J. WATFORD, Circuit Judges.

Opinion by Judge Milan D. Smith, Jr.

COUNSEL

Bruce D. Voss (argued), Matthew C. Shannon, and

John D. Ferry III, Bays Lung Rose & Holma, Honolulu,

Hawaii, for Plaintiff-Appellant/Cross-Appellee.

Ewan C. Rayner (argued), Deputy Solicitor General;

David D. Day, Deputy Attorney General; William J.

Wynhoff, Supervising Deputy Attorney General; Clyde

J. Wadsworth, Solicitor General; Department of the

Attorney General, Honolulu, Hawaii; for DefendantsAppellees/Cross-Appellants.

OPINION

M. SMITH, Circuit Judge:

This case stems from the reversion of the land use

classification of 1,060 acres of largely vacant and barren, rocky lava flow land in South Kohala, on the island

of Hawaii. In 2011, Defendant-Appellee and CrossAppellant the State of Hawaii Land Use Commission

(the Commission) ordered the land’s reversion from its

conditional urban use classification to its prior agricultural use classification. This reversion followed some

twenty-two years during which various landowners

made unfulfilled development representations to the

Commission to obtain and maintain the land’s urban

use classification. Plaintiff-Appellant and CrossAppellee Bridge Aina Le‘a, LLC (Bridge), one of the

landowners at the time of the reversion, challenged the

reversion’s legality and constitutionality in a state

agency appeal, and in this case.

The cross-appeals here come to us following a final

judgment in a jury trial with a verdict for Bridge and

the district court’s denial of a post-judgment motion

for judgment as a matter of law (JMOL). Although the

parties raise several issues, we need decide only two.

First, we must decide whether the State1 was entitled

to JMOL on Bridge’s claims that the reversion was a

regulatory taking in violation of the Fifth Amendment.

After an eight-day jury trial, the jury found that the

reversion was such a taking. The State urges us to reverse on the ground that Bridge’s evidence did not establish a taking. Second, we must decide whether the

Hawaii Supreme Court’s adjudication of Bridge’s equal

protection challenge in the state agency appeal barred

We use the term “the State” to refer collectively to the

Commission and the commissioners whom Bridge sued in their

official capacities. See Hafer v. Melo, 502 U.S. 21, 25 (1991) (“Suits

against state officials in their official capacity . . . should be

treated as suits against the State.”). The commissioners whom

Bridge named in their official capacities are: Vladimir P. Devens,

Kyle Chock, Normand R. Lezy, Lisa M. Judge, Nicholas W. Teves,

Jr., Ronald I. Heller, Duane Kanuha, Thomas Contrades, and

Charles Jencks. Bridge sued all but the last two commissioners—

neither of whom voted for the reversion—in their individual

capacities as well. Commissioner Contrades died during the

pendency of this litigation before the district court.

the same issue Bridge alleged here. See DW Aina Le‘a

Dev., LLC v. Bridge Aina Le‘a, LLC, 339 P.3d 685 (Haw.

2014). Bridge contends that the Hawaii Supreme

Court neither decided the same equal protection issue

Bridge raised in this lawsuit, nor issued a final judgment on the merits in which Bridge had a full and fair

opportunity to litigate the issue.

We reverse the denial of the State’s renewed

JMOL motion because, as a matter of law, the evidence

did not establish an unconstitutional regulatory taking. We vacate the judgment and remand. We affirm

the district court’s dismissal of Bridge’s equal protection claim.

FACTUAL AND PROCEDURAL BACKGROUND

The Reclassification History of the 1,060

Acres

A. The Conditional Urban Reclassification

For over forty years before the reclassification, the

1,060 acres at issue were vacant and part of a larger

3,000 acre-parcel zoned for agricultural use. This classification generally restricted the landowner to certain

statutorily specified uses. See Haw. Rev. Stat. § 2052(d)(1)–(16) (setting forth the general uses for agricultural land); see also id. § 205-4.5 (elaborating on

permissible uses of agricultural land depending on soil

ratings). The landowner also could petition to obtain a

permit for “certain unusual and reasonable uses.” Id.

§ 205-6(a).

In 1987, non-party Signal Puako Corporation (Signal), the then-landowner, decided that it would seek

to develop a mixed residential community on the 1,060

acres as the first phase of a development project on

the entire 3,000 acres. To do so, Signal petitioned the

Commission to reclassify 1,060 acres as urban pursuant to Hawaii’s land use reclassification procedure. See

Haw. Rev. Stat. § 205-4(a). If the land were zoned for

urban use, Signal could pursue “activities or uses as

provided by ordinances or regulations of the county

within which the urban district is situated.” Id. § 2052(b).

The Commission approved the petition in a January 1989 order (the 1989 Order). In doing so, the Commission exercised its authority to “modify the petition

by imposing conditions necessary . . . to assure substantial compliance with representations made by the

petitioner in seeking a boundary change.” Id. § 2054(g). In relevant part, Condition One required Signal

to make 60% of the proposed 2,760 residential units

affordable, for a total of 1,656 affordable housing units.

Condition Nine required Signal to develop the land in

substantial compliance with representations made to

obtain reclassification. The 1989 Order did not specify

any deadlines, nor did the order specify any penalties

for noncompliance. Nevertheless, the conditions the

Commission imposed ran with the title to the land.

Id.

At some point, non-party Puako Hawaii Properties

(Puako), an entity in which Signal was a partner, took

title to the 3,000 acres. Puako proposed a mixed

residential community which would have fewer total

housing units than Signal’s proposal and for which

construction would end by 1999. Puako therefore petitioned to modify the 1989 Order.

The Commission approved Puako’s petition in a

July 1991 order (the 1991 Order) with conditions. Like

the 1989 Order, the 1991 Order required Puako to

make 60% of the residential units affordable housing.

But the 1991 Order reduced the required affordable

housing units to 1,000 units given the reduction to the

proposed development’s total number of units. The

1991 Order again imposed a condition requiring Puako

to develop the land in substantial compliance with its

representations. This time, the Commission specified

that “[f ]ailure to so develop the Property may result

in reversion of the Property to its former classification

or change to a more appropriate classification.”2

This language tracked a 1990 amendment to the Commission’s statutory authority to impose reclassification conditions

pursuant to Hawaii Revised Statute § 205-4(g). The statute specifies that “[t]he commission may provide by condition that absent

substantial commencement of use of the land in accordance with

such representations, the commission shall issue and serve upon

the party bound by the condition an order to show cause why the

property should not revert to its former land use classification or

be changed to a more appropriate classification.” Haw. Rev. Stat.

§ 205-4(g); see also DW Aina Le‘a Dev., 339 P.3d at 709 (“This sentence was added to [ ] § 205-4(g) in 1990. The legislative history

indicates that the legislature sought to empower the [Commission] to void a district boundary amendment where the petitioner

does not substantially commence use of the land in accordance

with representations made to the [Commission].” (citations and

emphasis omitted)).

Notwithstanding Puako’s representations, the

1,060 acres remained undeveloped by 1999. Bridge

acquired the entire 3,000 acres at this time—inclusive

of the 1,060 acres of conditionally reclassified urban

land—for $5.2 million plus closing costs under its thenname Bridge Puako, LLC.

B. The Post-Acquisition Amendments to the

Conditions

In September 2005, nearly six years after acquiring the land, Bridge moved to amend the 1991 Order

in part. Like the prior landowners, Bridge proposed a

mixed residential community. Bridge, however, argued

that the cost of complying with the 1991 Order’s affordable housing condition was too high. According to

Bridge, it would be economically infeasible to develop

the property without a lower level of required affordable housing units. Bridge contended that an appropriate benchmark would be the 20% level set by a thenrecent County of Hawaii affordable housing ordinance.

The Commission amended the affordable housing

condition in a November 2005 order (the 2005 Order).

Condition One set the affordable housing unit requirement at 20%, requiring Bridge to build a minimum of

385 units. For the first time, the Commission set a

deadline for the condition. Specifically, Bridge had to

provide occupancy certificates for all affordable housing units by November 17, 2010. The Commission affirmed all other conditions of the 1989 Order, as

amended by the 1991 Order.

Throughout 2006 and 2007, Bridge appeared before the Commission to assure the Commission of its

compliance with the conditions, including through the

apparent construction of wells, roads, and other infrastructure. According to Bridge, however, further progress “was hampered somewhat” by the requirement

that Bridge prepare an environmental impact statement for the project in accordance with Sierra Club v.

Department of Transportation, 167 P.3d 292 (Haw.

2007).

C. The Order to Show Cause (OSC)

As early as September 2008, several commissioners expressed concerns that Bridge’s status reports

“showed ‘no activity’ with respect to the conditions

imposed by the 1991 decision and order, as amended in

2005.” DW Aina Le‘a Dev., 339 P.3d at 693. In December

2008, the Commission ordered Bridge to show cause

why the land should not revert to its prior agricultural

use classification. The Commission explained that it

had reason to believe that Bridge and its predecessors

had failed to satisfy multiple reclassification conditions and had not fulfilled various representations.

The Commission held the first OSC hearing in

January 2009. Notwithstanding the potential impact

ongoing OSC proceedings might have on the use of the

land, Bridge agreed to sell the 1,060 acres to non-party

DW Aina Le‘a Development, LLC (DW). Pursuant to a

February 2009 written agreement, Bridge was to convey the land in three phases in exchange for a total of

$40.7 million.3 Bridge and DW would enter into a joint

agreement, in which Bridge would develop the nearly

2,000 agricultural use acres remaining in its possession. Bridge would retain the right to plan for the overall 3,000 acres, including the placement of a sewage

treatment plant, school, and park on the agricultural

land.

On April 30, 2009, the Commission reconvened to

discuss the OSC. Bridge represented to the Commission that it was in the process of transferring the 1,060

acres to DW, which would assume the responsibility

of constructing the 385 affordable housing units. The

State Office of Planning advocated for reversion, noting that Bridge indicated that it could not complete

the 385 affordable housing units by the November

2010 deadline. Various commissioners expressed dismay at what they viewed as unfulfilled promises made

to obtain the reclassification.

At the conclusion of the hearing, the Commission

held a voice vote on the OSC (the 2009 Voice Vote), in

which seven commissioners voted to revert the zoning

of the 1,060 acres to agricultural use. The Commission

never put the result of the vote into a final written

order.

This agreement replaced the prior 2008 sale agreement

between Bridge and non-party Relco Corporation (Relco). Bridge

and Relco amended that agreement before it closed so that Relco

could give its interest to DW. Relco, however, was DW’s managing

entity.

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After the 2009 Voice Vote, DW did not make any

payments due pursuant to the February 2009 sale

agreement. Nevertheless, in the month following the

vote, DW intervened in the OSC proceedings and advised the Commission that any reversion would make

development impossible, including providing the 385

affordable housing units. DW moved to stay any decision and order pending consideration of additional information, including an overall conceptual plan for

the project and an affordable housing unit site plan.

The Commission agreed to stay the proceedings in

June 2009.

In August 2009, Bridge and DW co-petitioned the

Commission to rescind the OSC, contending that they

had performed, or were in the process of performing,

all the conditions the OSC cited. They also contended

that the 2009 Voice Vote “put an immediate and substantial cloud over the Project, making it extremely

difficult in this economic environment to secure shortterm or long-term financing to develop and complete

the Project.” Nevertheless, Bridge and DW represented

that DW would still pursue completion of the 385 units

by November 17, 2010, and that the units “will be provided” if the Commission rescinded the OSC. The Commission rescinded the OSC in September 2009, subject

to the single “condition precedent” of requiring the construction of sixteen affordable units by March 31, 2010.

Following the OSC’s rescission, Bridge and DW

modified their sale agreement in December 2009 to

change the timing of purchases but they retained the

previously agreed-upon $40.7 million price. DW would

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buy a 60-acre affordable housing parcel for $5 million,

effective December 11, 2009. DW also would pay

Bridge “development expenses” of some $1.191 million

for that parcel. The final closing date for the remaining

1,000 acres was set for February 28, 2010, by which

point DW would have paid Bridge an additional $35.7

million. Consistent with this agreement, DW purchased the 60-acre parcel from Bridge in December

2009.

D. The Resumption of OSC Proceedings and

the Reversion Order

On June 10, 2010, DW informed the Commission

that it had completed the sixteen affordable housing

units by the March 2010 deadline. In response, the

State Office of Planning informed the Commission that

the units were not habitable because they lacked water, a sewage system, electricity, and paved road access.

The Commission held a compliance hearing in

July 2010, at which both Bridge and DW appeared. DW

admitted that it lacked the money to build on the remaining 1,000 acres. The State Office of Planning requested that the Commission reopen the OSC and

advocated for reversion so that a “bona fide developer”

could make a new proposal. All commissioners voted to

reinstate the OSC, scheduled an OSC hearing, and entered a finding that the condition precedent had not

been satisfied. About two weeks thereafter, the Commission issued an order reinstating the OSC and reiterating the 2005 Order’s November 17, 2010 deadline

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to obtain 385 affordable housing unit occupancy certificates. Bridge contends that after the reinstatement,

DW failed to make the additional $35.7 million in payments for the remaining urban land as contemplated

by the modified December 2009 agreement.

Bridge and DW moved to bar action on the OSC,

arguing that the Commission’s enforcement actions,

starting with the OSC, violated various Hawaii statutes and administrative rules. At the conclusion of a

second OSC hearing, however, five commissioners

voted to revert the land. With the approval of a sixth

commissioner, the Commission issued a final reversion

order (the Reversion Order) on April 25, 2011.

The Reversion Order found that Bridge and DW

had failed to comply with the 2005 Order’s affordable

housing condition, specifically noting that Bridge and

DW had not completed 385 affordable housing units

by the deadline and were unlikely to do so in the near

future. Although the order acknowledged that Bridge

and DW had constructed sixteen affordable housing

units, the order determined that there was no infrastructure connected to them. The order outlined violations of the 1991 Order’s substantial compliance

condition based on representations made to the Commission between 2005 and 2010. The order also found

that Bridge’s and DW’s procedural due process rights

were not violated because they had received a full and

fair opportunity to present their case. The order declined to resolve Bridge’s equal protection challenge.

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At the time of the Reversion Order, DW had purchased only the 60-acre affordable housing parcel

while Bridge still owned the remaining 1,000 acres.

The closing dates for the remaining 1,000 urban acres

had passed several months earlier without DW making the additional $35.7 million in agreed-upon payments to Bridge.

II.

The Direct Agency Appeal of the Reversion

Order

Bridge and DW appealed the Reversion Order to

a Hawaii circuit court. Although the court declined to

preliminarily stay the Reversion Order, the court issued an amended final judgment in June 2012 in

Bridge’s favor. The court determined that the Commission had violated various Hawaii statutory procedural

requirements in issuing the Reversion Order. The

court also determined that the process by which the

Commission issued the order violated Bridge’s and

DW’s federal and state constitutional due process and

equal protection rights. Thus, the circuit court vacated

the Reversion Order and voided the OSC.

On appeal, the Hawaii Supreme Court affirmed in

part and vacated in part the circuit court’s judgment.

The Hawaii Supreme Court acknowledged the Commission’s authority to revert the land use classification,

as well as the propriety of the December 2008 OSC.

DW Aina Le‘a Dev., 339 P.3d at 711, 713. The court,

however, affirmed the circuit court’s determination

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that the Reversion Order violated applicable statutory

procedural requirements.

The Hawaii Supreme Court explained that a reversion may or may not be subject to certain procedural requirements. Id. at 709–10. If a petitioner fails

to substantially commence use of the land in accordance with its representations, then the Commission

may revert a land use classification pursuant to Hawaii

Revised Statute § 205-4(g) subject to a limited procedure. Id. at 710. However, if a petitioner has substantially commenced use, the Commission must follow the

requirements of Hawaii Revised Statute § 205-4(h).

Id. at 689, 714. The court determined that Bridge and

DW had substantially commenced use after the Commission rescinded the OSC because DW actively prepared development plans and constructed sixteen

affordable housing units by March 31, 2010. Id. at 712–

14. Thus, the Commission had to find within 365 days

of the OSC’s initial issuance and by a “clear preponderance of the evidence” that reversion was reasonable,

did not violate Hawaii Revised Statute § 205-2 and was

otherwise consistent with the policies and criteria set

forth in Hawaii Revised Statute §§ 205-16 and 205-17.

Id. at 714; see also Haw. Rev. Stat. § 205-4(h). The Commission had failed to do so. DW Aina Le‘a Dev., 339

P.3d. at 714.

The Hawaii Supreme Court vacated the remainder of the circuit court’s judgment. With respect to

the due process ruling, the Hawaii Supreme Court

concluded that Bridge and DW had received notice

and a meaningful opportunity to be heard before the

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reversion. Id. at 716. Noting that “the land had

changed hands numerous times,” that the Commission

“had amended the original reclassification order on

multiple occasions,” and the “long history of unfulfilled

promises made in connection with the development of

this property,” the court determined that the reversion

was not “arbitrary and unreasonable.” Id. at 717. With

respect to equal protection, the court could not find

that the Commission lacked a rational basis for its

treatment of Bridge and DW “[g]iven the long history

of this property and the [Commission’s] dealings with

the landowners over the course of many years.” Id. at

718. The court otherwise reasoned that the Commission acted pursuant to its broad statutory authority to

impose conditions and its related authority to enforce

such conditions. Id. The court remanded for proceedings consistent with its decision. Id.

III. The Proceedings in this Case

Although Bridge and DW together pursued the

agency appeal, Bridge alone sued the Commission and

commissioners in Hawaii state court in June 2011.4

Bridge’s eleven-count complaint for declaratory, injunctive, and monetary relief raised federal and state

DW sued the Commission in Hawaii state court in 2017,

asserting federal and state constitutional taking claims. After the

case’s removal to federal court, a district court dismissed DW’s

claims as barred by the Hawaii statute of limitations. Our court

has certified to the Hawaii Supreme Court a question regarding

the proper statute of limitations for a taking claim raised pursuant to Hawaii law. See DW Aina Le‘a Dev., LLC v. Haw. Land Use

Comm’n, 918 F.3d 602, 609 (9th Cir. 2019) (certification order).

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constitutional due process, equal protection, and taking claims. Bridge sued all commissioners in their official capacities and sued the six commissioners who

had voted for the Reversion Order in their individual

capacities as well. Alleging that the $40.7 million DW

agreed to pay for the 1,060 acres was the land’s fair

market value, Bridge claimed “not less” than $35.7

million in damages.

The State removed the case to federal court and

moved to dismiss. Before ruling on that motion, the

district court ordered a stay of the proceedings pending

the agency appeal, an order which the parties crossappealed to our court. After the Hawaii Supreme

Court’s decision, we remanded to the district court.

Bridge Aina Le‘a, LLC v. Chock, 590 F. App’x 705 (9th

Cir. 2015) (unpublished).

On remand, the district court granted the State’s

motion to dismiss, which concerned only some of

Bridge’s claims. The court dismissed Bridge’s due process and equal protection claims, reasoning that the

Hawaii Supreme Court’s decision barred re-litigation

of the same issues. Applying the doctrine of quasijudicial immunity, the court dismissed Bridge’s individual capacity claims against the commissioners who

voted for reversion. Ultimately, only Bridge’s taking

claims proceeded to trial on the theory that the reversion was an unconstitutional regulatory taking pursuant to the analyses in Lucas v. South Carolina Coastal

Council, 505 U.S. 1003 (1992), and Penn Central Transportation Company v. City of New York, 438 U.S. 104

(1978).

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A jury trial was held between March 13 and 23,

2018. After Bridge put on its case-in-chief, the State

moved for JMOL on the grounds that Bridge had not

established either a Lucas or Penn Central taking and,

even if it had, Bridge should receive only nominal damages because Bridge lacked admissible evidence of just

compensation. The district court granted the motion as

to nominal damages but denied it as to taking liability.

Using the 1,060 acres subject to the Reversion Order

as the relevant property denominator at the court’s

instruction, the jury found that a taking occurred pursuant to both Lucas and Penn Central. The district

court entered judgment for Bridge and awarded $1 in

nominal damages.

Following the entry of judgment, the State renewed its JMOL motion and alternatively requested a

new trial using 3,000 acres as the property denominator. The parties cross-appealed the judgment during

the pendency of the renewed motion, and the appeals

became effective upon the district court’s denial of that

motion. The State timely appealed the denial.

JURISDICTION AND STANDARDS OF REVIEW

We have jurisdiction over the appeals from the final judgment pursuant to 28 U.S.C. § 1291. We also

have jurisdiction over the appeal from the previously

nonfinal orders that have merged with the final judgment, Hall v. City of Los Angeles, 697 F.3d 1059, 1070–

71 (9th Cir. 2012), and over the denial of the renewed

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JMOL motion, Wadler v. Bio-Rad Labs., Inc., 916 F.3d

1176, 1185 (9th Cir. 2019).

We review de novo the denial of a renewed JMOL

motion. Reese v. County of Sacramento, 888 F.3d 1030,

1036 (9th Cir. 2018). “ ‘[W]hen reviewing a motion for

judgment as a matter of law, we apply the law as it

should be, rather than the law as it was read to the

jury,’ even if the party did not object to the jury instructions.” Fisher v. City of San Jose, 558 F.3d 1069, 1074

(9th Cir. 2009) (en banc) (alteration in original) (quoting Pincay v. Andrews, 238 F.3d 1106, 1109 n.4 (9th Cir.

2001)). A renewed JMOL motion “is properly granted

only if the evidence, construed in the light most favorable to the nonmoving party, permits only one reasonable conclusion, and that conclusion is contrary to the

jury’s verdict.” Castro v. County of Los Angeles, 833

F.3d 1060, 1066 (9th Cir. 2016) (en banc) (internal quotations and citation omitted). “A jury’s verdict must

be upheld if it is supported by . . . evidence adequate to

support the jury’s conclusion, even if it is also possible

to draw a contrary conclusion.” Pavao v. Pagay, 307

F.3d 915, 918 (9th Cir. 2002).

We review de novo the dismissal of a claim pursuant to Federal Rule of Civil Procedure 12(b)(6), United

States ex rel. Anita Silingo v. WellPoint, Inc., 904 F.3d

667, 676 (9th Cir. 2018), as well as the district court’s

issue preclusion ruling, Garity v. APWU Nat’l Labor

Org., 828 F.3d 848, 854 (9th Cir. 2016) (citation omitted).

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ANALYSIS

The State’s Renewed JMOL Motion on

Bridge’s Taking Claims

Our core focus in this appeal is the district court’s

denial of the State’s renewed JMOL motion on Bridge’s

Lucas and Penn Central taking challenges to the reversion pursuant to the Fifth Amendment’s Takings

Clause.5 As we explain, as matter of law, Bridge’s evidence failed to establish a taking pursuant to either.

Accordingly, it is unnecessary for us to consider the

other taking issues that the parties raise on appeal.

A. The Fifth Amendment Regulatory Takings Framework

“The Takings Clause of the Fifth Amendment

states that ‘private property [shall not] be taken for

public use, without just compensation.” Knick v. Twp.

of Scott, 139 S. Ct. 2162, 2167 (2019) (alterations in

original). By its terms, the clause “does not prohibit the

Bridge also asserted takings claims pursuant to the Hawaii

Constitution, which provides that “[p]rivate property shall not

be taken or damaged for public use without just compensation.”

Haw. Const. art. 1, § 20. The Hawaii Supreme Court has endorsed

federal regulatory takings jurisprudence in determining whether

government action is a taking in violation of the Hawaii Constitution. Leone v. County of Maui, 404 P.3d 1257, 1270–71 (Haw.

2017) (acknowledging the Lucas and Penn Central tests). Because

Bridge raises no distinct and separate arguments regarding its

state law takings claims and given the Hawaii Supreme Court’s

reliance on the federal regulatory takings framework, our Lucas

and Penn Central analyses apply equally to Bridge’s state law

takings claims.

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taking of private property,” but instead requires “compensation in the event of [an] otherwise proper interference amounting to a taking.” First English

Evangelical Lutheran Church of Glendale v. County of

Los Angeles, 482 U.S. 304, 314, 315 (1987). A classic

taking occurs when the “government directly appropriates private property or ousts the owner from his domain.” Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 539

(2005).

Beyond a classic taking, the Supreme Court has

recognized that “if regulation goes too far it will be

recognized as a taking.” Pa. Coal Co. v. Mahon, 260 U.S.

393, 415 (1922). There are three types of regulatory action the Court has recognized, “each of which ‘aims to

identify regulatory actions that are functionally equivalent to the classic taking.’ ” Cedar Point Nursery v.

Shiroma, 923 F.3d 524, 530–31 (9th Cir. 2019) (quoting

Lingle, 544 U.S. at 539). Two types of regulatory actions—Loretto and Lucas takings—are per se takings.6

Id. at 531. Penn Central takings are the third type of

regulatory taking. Id.

Generally, courts determine whether a regulatory

action is functionally equivalent to the classic taking

using “essentially ad hoc, factual inquiries, designed to

A Loretto taking occurs “where government requires an

owner to suffer a permanent physical invasion of her property.”

Lingle, 544 U.S. at 538 (citing Loretto v. Teleprompter Manhattan

CATV Corp., 458 U.S. 419 (1982)). This “relatively narrow” per se

rule requires the government to provide compensation, however

minor the physical invasion. Id. Bridge’s land did not suffer a permanent physical invasion, and thus Loretto does not apply.

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allow careful examination and weighing of all the relevant circumstances.” Tahoe-Sierra Pres. Council, Inc.

v. Tahoe Reg’l Planning Agency, 535 U.S. 302, 322

(2002) (citations and internal quotation marks omitted). These inquiries are set forth in the three Penn

Central factors: (1) “[t]he economic impact of the regulation on the claimant,” (2) “the extent to which the

regulation has interfered with distinct investmentbacked expectations,” and (3) “the character of the governmental action.” Penn Central, 438 U.S. at 124.

Certain regulatory actions, however, are treated

categorically as a taking without the necessity of the

Penn Central inquiry. The Lucas rule “applies to regulations that completely deprive an owner of ‘all economically beneficial us[e]’ of her property.” Lingle, 544

U.S. at 538 (alteration in original) (quoting Lucas, 505

U.S. at 1019). Government regulations that constitute

such a taking are typically those that require land to

be left substantially in its natural state. Lucas, 505

U.S. at 1018. This is a “relatively narrow” and relatively rare taking category, Lingle, 544 U.S. at 538,

confined to the “extraordinary circumstance when no

productive or economically beneficial use of land is

permitted,” Lucas, 505 U.S. at 1017 (emphasis in original).7 Compensation is required in such a case unless

the government can show that underlying principles of

One review of some 1,700 taking cases in state and federal

courts decided over 25 years identified only 27 cases in which a

landowner successfully brought a Lucas claim, i.e. 1.6%. See Carol

N. Brown & Dwight H. Merriam, On the Twenty-Fifth Anniversary of Lucas: Making or Breaking the Takings Claim, 102 IOWA

L. REV. 1847, 1849-50 (2017).

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state property or nuisance law would have led to the

same outcome as the challenged regulation. See TahoeSierra, 535 U.S. at 330; Lucas, 505 U.S. at 1029.

Here, the jury made dual findings that there was

an unconstitutional taking of Bridge’s property pursuant to both Lucas and Penn Central. The district court

determined that either finding independently supported the verdict.

We underscore at the outset that when “a regulation ‘denies all economically beneficial or productive

use of land,’ the multi-factor analysis established in

Penn Central is not applied” because Lucas supplies

the relevant rule. Esplanade Props., LLC v. City of

Seattle, 307 F.3d 978, 984 (9th Cir. 2002) (quoting Lucas,

505 U.S. at 1027). When “a regulation places limitations on land that fall short of eliminating all economically beneficial use, a taking nonetheless may have

occurred, depending on” the Penn Central framework.

Palazzolo v. Rhode Island, 533 U.S. 606, 617 (2001) (citing Penn Central, 438 U.S. at 124). Thus, if the jury

could find that the reversion deprived Bridge of all economically beneficial uses of the 1,060 acres, then Penn

Central was inapplicable. Only if the reversion fell

short of a total taking was application of Penn Central

necessary. We apply this approach in considering the

State’s arguments.

B. Lucas Taking

Although the State raises several challenges to

the jury’s Lucas finding, the State’s core challenges to

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that finding are that the land retained substantial residual value in its agricultural use classification and

that this classification still allowed Bridge to use the

land in economically beneficial ways. We agree and

thus decline to reach the State’s alternative challenges

to the jury’s Lucas finding.

We recognize that shortly after the Supreme Court

announced the Lucas rule, we remarked that “the term

‘economically viable use’ has yet to be defined with

much precision.” Outdoor Sys., Inc. v. City of Mesa, 997

F.2d 604, 616 (9th Cir. 1993). Acknowledging the lack

of precision in this concept, we stated that “the value

of the subject property” is “relevant” to the Lucas inquiry, but we rejected “focusing solely on property

values.” Del Monte Dunes at Monterey, Ltd. v. City of

Monterey, 95 F.3d 1422, 1433 (9th Cir. 1996), aff ’d, 526

U.S. 687 (1999). Pointing to this passage in Del Monte

Dunes, Bridge urges us to reject the State’s arguments

regarding the role of value in the Lucas context.

Subsequent developments in the Supreme Court’s

takings decisions, however, lead to three observations

that guide our resolution of the parties’ arguments

here. First, the Court has made clear that “[i]n the

Lucas context, . . . the complete elimination of a property’s value is the determinative factor.” Lingle, 544

U.S. at 539 (emphasis added). As the Court has underscored, “the categorical rule in Lucas was carved out

for the ‘extraordinary case’ in which a regulation permanently deprives property of all value.” Tahoe-Sierra,

535 U.S. at 332. “Anything less than a ‘complete elimination of value,’ or a ‘total loss’ . . . would require the

24a

kind of analysis applied in Penn Central.” Id. at 330

(quoting Lucas, 505 U.S. at 1019 n.8). Second, although

value is determinative, use is still relevant. See Murr

v. Wisconsin, 137 S. Ct. 1933, 1949 (2017) (concluding

that the challenged regulations did not deprive the

landowners of all economically beneficial use because

“[t]hey can use the property for residential purposes”

and “[t]he property has not lost all economic value”).

Finally, the Court has clarified that a token interest

will not defeat a Lucas claim. See Palazzolo, 533 U.S.

at 631 (“Assuming a taking is otherwise established,

a State may not evade the duty to compensate on the

premise that the landowner is left with a token interest.”). Guided by these observations, we conclude that

Bridge’s evidence did not satisfy Lucas.

1. The Land Retained Substantial Economic Value

We turn first to the land’s value. Bridge relied on

the expert testimony of Steven Chee to opine on the

fair market value of the 1,060 acres in the urban and

agricultural land use classifications before and after

reversion. Chee expressly assumed that the 2009 Voice

Vote on April 30, 2009 reverted the land. Although this

assumption is demonstrably wrong, this testimony is

the only valuation evidence in the record. We therefore

address the argument as Bridge frames it.

Chee appraised the fair market value of the 1,060

acres by determining the highest and best use of the

land in each classification, a metric “shaped by the

25a

competitive forces within the market where the property is located.” First, Chee opined that the land had

a value of $40 million on April 29, 2009 in an urban

classification based on land banking until market conditions improved given the significant off-site work

necessary before the land could be developed and

the ongoing impacts of the Great Recession. Second,

Chee opined that the land had a value of $6.36 million

on April 30, 2009 in an agricultural classification.

Although Chee did not presume that reclassification

would be obtained, the agricultural use valuation accounted for land banking while simultaneously attempting to regain the former urban classification.8

The difference reflects an 83.4% diminution in value.

The State contends that this evidence shows that

the land retained substantial residual value in an agricultural use classification and that any diminution

in value was less than the land’s total value. We agree.

Absent more, there is no Lucas liability for this less

than total deprivation of value. See Appolo Fuels, Inc.

v. United States, 381 F.3d 1338, 1347 (Fed. Cir. 2004)

(concluding that a 92% loss of value in one part of the

land and a 78% loss in another part “is manifestly insufficient” under Lucas); Cienega Gardens v. United

States, 331 F.3d 1319, 1344 (Fed. Cir. 2003) (concluding

We understand Chee’s evidence to account for a realistic

probability that the urban classification would be regained based

on Chee’s trial testimony that an appraiser will consider the possibility of rezoning if it “looks highly realistic.” In actuality, we

also know that Bridge did regain the conditional urban classification roughly a year after the reversion because of the circuit

court’s judgment.

26a

that Lucas requires a loss of “100% of a property interest’s value”); Cooley v. United States, 324 F.3d 1297,

1305 (Fed. Cir. 2003) (“Contrary to the trial court’s

holding, the record shows that the 1993 denial apparently destroyed less than all of Cooley’s property’s

value, which constitutes a non-categorical taking. The

categorical takings directives of Lucas do not apply.”).

In rejecting the State’s arguments, the district

court reasoned that value was relevant to but not dispositive of the Lucas inquiry by relying on our discussion on value versus use in Del Monte Dunes. This was

error because, as we have explained, the Supreme

Court’s precedents underscore that value is determinative. See Lingle, 544 U.S. at 539; Tahoe-Sierra, 535

U.S. at 330. We have stated as much in a decision

that the district court acknowledged but interpreted

as irrelevant. See Horne v. U.S. Dep’t of Agric., 750 F.3d

1128, 1141 n.17 (9th Cir. 2014) (“Lucas plainly applies

only when the owner is deprived of all economic benefit

of the property. If the property retains any residual

value after the regulation’s application, Penn Central

applies.” (citation omitted) (emphasis in original)),

overruled on other grounds by Horne v. Dep’t of Agric.,

135 S. Ct. 2419 (2015).

The district court also wrote off the substantial residual value that Bridge’s evidence found in the land’s

agricultural use classification by pointing to our observation in Del Monte Dunes that if “no competitive market exists for the property without the possibility of

development, a taking may have occurred.” 95 F.3d at

1433. The district court read this passage to mean that

27a

the jury could find that Lucas applied here if no competitive market existed for the land without a change

in the regulation. Bridge reprises this reasoning here.

Del Monte Dunes does not control here. There, we

determined that “the mere fact that there is one willing buyer of the subject property, especially where that

buyer is the government, does not, as a matter of law,

defeat a taking claim” when the “government action

relegates permissible uses of property to those consistent with leaving the property in its natural state

(e.g., nature preserve or public space).” Id. at 1433.

Thus, the fact that the government purchased the land

subject to the challenged regulation that the government put in place did not defeat a Lucas theory. Unlike

in Del Monte Dunes, the Commission neither attempted to buy the subject property, nor was Bridge

captive to a single buyer exercising its regulatory

power. Moreover, the Commission thought that reversion would encourage Bridge to sell the property so

that a new developer could make a new proposal, suggesting that Bridge could have sold the land in a competitive market with a possibility of a regulatory

change.

In the end, the relevant inquiry for us is whether

the land’s residual value reflected a token interest or

was attributable to noneconomic use. See Palazzolo,

533 U.S. at 631 (concluding that a 93% loss in value

was insufficient for Lucas because the value was attributable to economic use, specifically residential use);

Lost Tree Vill. Corp. v. United States, 787 F.3d 1111,

1115–17 (Fed. Cir. 2015) (concluding that the Lucas

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rule applied to a 99.4% deprivation because the residual value was attributable to noneconomic uses). We do

not think either situation applies here.

The land’s $6.36 million value in an agricultural

use classification was neither de minimis, nor did the

value derive from noneconomic uses. Bridge’s expert

valued the land in a competitive market using pricing

for similarly situated properties, and expressly accounted for the possibility of regaining the urban use

classification. Lucas does not apply when “substantial

present value” stems from “future use” of the land. See

Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg’l Planning Agency, 216 F.3d 764, 781 n.26 (9th Cir. 2000),

overruled on other grounds by Gonzalez v. Arizona, 677

F.3d 383 (9th Cir. 2012). Thus, the land’s value in the

agricultural use classification precludes a Lucas finding here.

2. The Reversion Did Not Deprive Bridge

of All Economically Viable Uses of the

Land

As a secondary matter, the permissible uses of

land classified as agricultural reinforce our conclusion

that the reversion did not completely deprive Bridge

of all economically viable uses of the 1,060 acres as a

matter of law. “[T]he existence of permissible uses determines whether a development restriction denies a

property owner economically viable use of his property.” Del Monte Dunes, 95 F.3d at 1432 (emphasis

added); Outdoor Systems, 997 F.2d at 616. “[W]here an

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owner is denied only some economically viable uses, a

taking still may have occurred” pursuant to the Penn

Central analysis, but not pursuant to the Lucas rule.

Del Monte Dunes, 95 F.3d at 1432 (emphasis added).

Hawaii law permits an array of uses for land classified as agricultural. See Haw. Rev. Stat. § 205-2(d)(1)–

(16).9 In addition, a landowner may obtain a permit

for “certain unusual and reasonable uses within agricultural . . . districts other than those for which the

district is classified.” Id. § 205-6(a). There are no express limitations on such specially permitted uses.10

These uses include: (1) crop cultivation activities and uses;

(2) farming activities or uses related to animal husbandry and

game and fish propagation; (3) aquaculture (i.e., the production of

aquatic plant and animal life within ponds); (4) wind-generated

energy production for public, private, and commercial use; (5) biofuel production for public, private, and commercial use; (6) solar

energy facilities; (7) bona fide agricultural activities and uses that

support such activities, including accessory buildings; (8) wind

machines and wind farms; (9) small-scale meteorological, air

quality, noise, and other scientific and environmental data collection; (10) agricultural parks; (11) agricultural tourism conducted

on a working farm, or a farming operation; (12) agricultural tourism activities; (13) open area recreational facilities, (14) geothermal resources exploration, (15) agricultural-based commercial

operations registered in Hawaii; and (16) hydroelectric facilities.

See Haw. Rev. Stat. § 205-2(d).

Trial testimony showed that prior examples of specially

permitted uses in an agricultural district included: rock quarrying operations; cinder and sand mining facilities; concrete batching plants; construction waste facilities; landfills; public and

private sewage treatment plants; gardens and zoos; schools (prekindergarten to college); memorial parks, including crematoria,

commercial facilities, including post offices and gas stations; private storage facilities; construction yards; maintenance facilities;

and telecommunications facilities and structures.

30a

Against this statutory backdrop, we do not see how this

case is like Lucas. The mere reclassification of the

1,060 acres from urban use to an agricultural use did

not prohibit all development, nor did it require leaving

the land in an idle state. See Lucas, 505 U.S. at 1008.

Although Bridge offered evidence suggesting that

many of the statutorily permitted uses would not have

been economically feasible, Bridge did not address all

of the statute’s permitted uses or account for any of

the uses for which the Commission had granted special

permits in the past, such as a sewage treatment plant

or rock quarrying. Some of the specially permitted

uses may have been especially suitable for this land.

Bridge intended to place a sewage treatment plant on

the adjacent 2,000 acres of agriculturally zoned land.

Bridge’s own witnesses also recognized that the land

was “good for growing rocks.” Based on the evidence

that Bridge presented, we do not think that the jury

could have reasonably found that the reversion deprived Bridge of all economically feasible uses of the

land.

Bridge otherwise draws our attention to the Commission’s findings in the 1989 and 1991 Orders that

the soils were rated poorly and were not adequate for

grazing to suggest that there were no viable uses in an

agricultural use zone. By definition, however, “[a]gricultural districts include areas that are not used for,

or that are not suited to, agricultural and ancillary activities by reason of topography, soils, and other related

characteristics.” Haw. Rev. Stat. § 205-2(d). Thus, the

Commission’s findings are simply not evidence that

31a

the land lacked economically viable uses in an agricultural classification.

Ultimately, we think that the notion underlying

Bridge’s Lucas theory is that the inability to pursue a

particular development and to obtain its value was a

total taking. This view is unsupported by the law. See

Palm Beach Isles Assocs. v. United States, 231 F.3d

1354, 1364 (Fed. Cir. 2000) (order) (“[M]ost land use

restrictions do not deny the owner of the regulated

property all economically viable uses of it.”); Hoehne v.

County of San Benito, 870 F.2d 529, 532–33 (9th Cir.

1989) (“A government entity is not required to permit

a landowner to develop property to the full extent it

may desire. Denial of the intensive development desired by a landowner does not preclude less intensive,

but still valuable development.”). Accordingly, we conclude that the State was entitled to judgment as a matter of law on Bridge’s Lucas theory, and we turn to the

Penn Central analysis.

C. Penn Central Taking

Penn Central requires that we consider: (1) “[t]he

economic impact of the regulation on the claimant,” (2)

“the extent to which the regulation has interfered with

distinct investment-backed expectations,” and (3) “the

character of the governmental action.” 438 U.S. at 124.

Our consideration of these factors aims “to determine

whether a regulatory action is functionally equivalent

to the classic taking.” Guggenheim v. City of Goleta,

638 F.3d 1111, 1120 (9th Cir. 2010) (en banc) (internal

32a

quotation marks omitted). The first and second Penn

Central factors are the primary factors. Lingle, 544

U.S. at 538–39. “The outcome [of this inquiry] . . . depends largely upon the particular circumstances [in

the] case” at hand. Palazzolo, 533 U.S. at 633 (O’Connor, J., concurring) (quoting Penn Central, 438 U.S. at

124) (internal quotation marks omitted). When we apply the Penn Central factors to the trial evidence, we

conclude that the jury could not reasonably find for

Bridge.

1. The Reversion Order’s Economic Impact

Our first consideration is the challenged regulation’s economic impact on the property owner. Lingle,

544 U.S. at 528. “[W]e ‘compare the value that has

been taken from the property with the value that remains in the property.’ ” Colony Cove Props., LLC v.

City of Carson, 888 F.3d 445, 450 (9th Cir. 2018) (quoting Keystone Bituminous Coal Ass’n v. DeBenedictis,

480 U.S. 470, 497 (1987)), cert. denied. 139 S. Ct. 917

(2019). Although there is “no litmus test,” id. at 451,

our value comparison again aims “to identify regulatory actions that are functionally equivalent to the

classic taking in which government directly appropriates private property or ousts the owners from his

domain,” Lingle, 544 U.S. at 539.

Bridge attempted to show the reversion’s economic impact by relying on Chee’s valuation testimony

and on testimony regarding the disruption to the sale

33a

agreements between Bridge and DW. We address each

in turn.

a. The Valuation Opinion

As we have explained, Chee calculated the fair

market value of the land using the day of the 2009

Voice Vote as the relevant point at which the land reverted. Chee calculated the land’s value as $40 million

on the day before the vote and as $6.36 million on the

day of the vote. The parties agree, uncritically, that

Chee’s opinion shows that the land suffered an 83.4%

diminution in fair market value. On this account, the

reversion would have resulted in a loss of $33.6 million

in the land’s value. We conclude, however, that, as a

matter of law, Chee’s calculation suffers from a number

of defects for the purposes of Bridge’s taking claim.

First, Chee’s valuation opinion did not properly

ascertain economic impact for the purposes of Bridge’s

taking claim because it assumed that the April 30,

2009 Voice Vote reverted the land.11 We have already

explained that it is not proper to measure economic

impact based on a “hypothetical economic result” that

We observe that it appears that Chee’s calculation of the

land’s value prior to voice vote failed to account for Bridge’s November 2010 deadline to complete the 385 affordable housing

units. Chee calculated the land’s urban value as $40 million based

on the “highest and best use” of “ ‘land banking’ the property until

overall market conditions improved,” specifically waiting to gauge

“the full fallout of the Great Recession.” Thus, Chee’s highest

and best use valuation of the land in its urban classification also

appears to have inflated the land’s value.

34a

assumes a state of affairs that did not exist. See MHC

Fin. Ltd. P’ship v. City of San Rafael, 714 F.3d 1118,

1127 (9th Cir. 2013) (rejecting the district court’s comparison of the effect of a 1999 rent control ordinance

with a “hypothetical economic result assuming that

there was no rent control ordinance in effect at all”).

The reversion did not occur until some two years after

the 2009 Voice Vote and thus the vote could not be the

proper reference point.

Second, the vote’s effect on the land’s fair market

value during the ongoing OSC proceedings is not evidence of a taking. We understand that Bridge could

account for what it contends cast a “dark cloud” over

the project by using the vote as the reference point

for its valuation calculation. Nevertheless, “[m]ere

fluctuations in value during the process of governmental decisionmaking, absent extraordinary delay, are

incidents of ownership. They cannot be considered as a

taking in the constitutional sense.” Tahoe-Sierra, 535

U.S. at 332 (quoting Agins v. City of Tiburon, 447 U.S.

255, 263 n.9 (1980)); First English, 482 U.S. at 320

(same). Chee’s valuation evidence falters for this reason as well.

Third, even if we assume that Chee properly calculated the land’s value, the asserted 83.4% diminution in value substantially overstates the relevant

diminution in value Bridge could have suffered for the

purposes of weighing this factor. See MHC Fin., 714

F.3d at 1127 (taking issue with valuation evidence

based on a hypothetical state of affairs but nevertheless assuming it could show economic impact). “[T]he

35a

duration of the restriction is one of the important factors that a court must consider in the appraisal of a

regulatory takings claim.” Tahoe-Sierra, 535 U.S. at

342. When we account for the reversion’s temporary

duration, the resulting relevant diminution is much

smaller than 83.4%.

We observe that, consistent with the nature of its

temporary taking claim, Bridge did not attempt to pursue at trial damages that would reflect the full 83.4%

diminution it asserted.12 Instead, Bridge sought damages by taking (1) the diminution in the land’s value

attributed to the government action, (2) multiplied by

the time period of the temporary taking, and (3) further multiplied by Bridge’s rate of return. Using an

overstated taking period from the date of the 2009

Voice Vote to the Hawaii Supreme Court’s November

2014 decision, Bridge asserted that the relevant time

period for its damages was 5.68 years. Seeking to apply

a 10.12% rate of return to the $40 million valuation,

In a temporary regulatory taking case, just compensation

damages are modified because “the landowner’s loss takes the

form of an injury to the property’s potential for producing income

or an expected profit,” not the loss of the property itself. Wheeler

v. City of Pleasant Grove, 833 F.2d 267, 271 (11th Cir. 1987). In

these circumstances, “[t]he landowner’s compensable interest . . .

is the return on the portion of fair market value that is lost as a

result of the regulatory restriction. Accordingly, the landowner

should be awarded the market rate return computed over the period of the temporary taking on the difference between the property’s fair market value without the regulatory restriction and its

fair market value with the restriction.” Id. (citing Nemmers v.

City of Dubuque, 764 F.2d 502, 505 (8th Cir. 1985)).

36a

Bridge claimed damages of $19.54 million. That is a

roughly 48% diminution in value.

More critically, Bridge’s claimed damages still

overstate the relevant diminution in value for the purposes of this factor. The reversion lasted roughly a year,

from the Reversion Order’s issuance in April 2011 until the Hawaii state circuit court’s judgment vacating

the order in June 2012.13 See DW Aina Le‘a Dev., 339

P.3d at 704. When we account for the reversion’s actual

one-year duration, Bridge’s damages are at most $6.72

million if we use the higher 20% rate of return that

Bridge hoped to receive on its total investment (an issue we discuss in further detail below). Bridge’s loss

thus amounts to an approximately 16.8% diminution

in value, a number far lower than the 83.4% figure on

which it relied at trial. This economic impact weighs

against the conclusion that the reversion constituted

a taking. See Colony Cove Props., 888 F.3d at 451 (concluding that a 24.8% diminution was “far too small to

establish a regulatory taking”); Laurel Park Cmty.,

LLC v. City of Tumwater, 698 F.3d 1180, 1189 (9th Cir.

2012) (finding that a “less than 15%” economic loss

with respect to one property and no effect on two other

properties “does not support a takings claim”).

Bridge treats the Hawaii Supreme Court’s decision as the

decision that invalidated the Reversion Order. We know of no

principle of Hawaii law that would render ineffective the Hawaii

circuit court’s judgment vacating the Reversion Order. The general rule is that “an appeal does not vacate the judgment appealed

from.” Solarana v. Indus. Elecs., Inc., 428 P.2d 411, 417 (Haw.

1967). Thus, the circuit court’s judgment is the relevant end point.

37a

For these reasons, we conclude that the valuation

evidence, properly understood, weighs strongly against

a taking pursuant to the first Penn Central factor.

b. The Disrupted Sale Agreements

Bridge also relied on the disruption of the land

sale agreements between it and DW to show economic

impact. John Baldwin, the CEO of Bridge Capital and

Bridge’s parent company as well as Bridge’s manager,

testified that DW failed to purchase the remaining

1,000 acres for the $35.7 million price stated in the

February 2009 sale agreement because of the vote.

Apparently, the vote affected DW’s ability to borrow

money to finance the purchase. Baldwin further testified that DW failed to make any more payments to

Bridge pursuant to the modified December 2009 agreement—which retained the same $35.7 million price for

the remaining 1,000 acres—after the OSC’s reinstatement.

There is a fundamental problem with using the

claimed disruptions to the February 2009 and December 2009 sale agreements as evidence of the Reversion

Order’s economic impact. DW’s contractual default under the February 2009 agreement after the 2009 Voice

Vote occurred some two years before the 2011 Reversion Order. DW’s default under the modified December

2009 agreement also occurred after the OSC’s reinstatement in July 2010, several months before the

Reversion Order’s issuance. The Reversion Order thus

could not have caused the contractual defaults that

38a

pre-dated it by several months. See Esplanade Props.,

307 F.3d at 984 (citing Tahoe-Sierra, 216 F.3d at 783 &

n.33) (recognizing that a regulatory taking plaintiff

must establish both causation-in-fact and proximate

causation). Moreover, the record otherwise shows that

Bridge’s focus on the disruptions to these agreements

overstated the reversion’s impact on its contractual relationship with DW. After the Hawaii Supreme Court’s

decision, DW agreed to pay Bridge $14 million more

than the previously agreed upon $40.7 million to purchase the land. Thus, the contractual defaults during

the reversion’s temporary duration do not affect our

economic impact analysis.

2. The Extent of Any Interference with

Any Reasonable Investment-Backed

Expectations

We must consider next “the extent to which the

regulation has interfered with distinct investmentbacked expectations,” Penn Central, 438 U.S. at 124,

that Bridge had for the 1,060 acres at the time of its

acquisition, see Colony Cove Props., 888 F.3d at 452;

Laurel Park Cmty., 698 F.3d at 1189. Although this

factor raises “vexing subsidiary questions” about its

proper scope and application, Lingle, 544 U.S. at 539,

certain principles guide us.

For one, we must “use ‘an objective analysis to

determine the reasonable investment-backed expectations of the [o]wners.’ ” Colony Cove Props., 888 F.3d at

452 (quoting Chancellor Manor v. United States, 331

39a

F.3d 891, 907 (Fed. Cir. 2003)). Our focus is on interference with reasonable expectations. See Concrete Pipe

& Prods. v. Construction Laborers Pension Trust for

Southern California, 508 U.S. 602, 646; Ruckelshaus

v. Monsanto Co., 467 U.S. 986, 1005 (1984). “ ‘Distinct

investment-backed expectations’ implies reasonable

probability, . . . not starry eyed hope of winning the

jackpot if the law changes.” Guggenheim, 638 F.3d at

1120 (quoting Penn Central, 438 U.S. at 124). Thus,

“unilateral expectation[s]” or “abstract need[s]” cannot

form the basis of a claim that the government has

interfered with property rights. Ruckelshaus, 467 U.S.

at 1005 (citation omitted).

Second, “what is ‘relevant and important in judging reasonable expectations’ is ‘the regulatory environment at the time of the acquisition of the property.’ ”

Love Terminal Partners, L.P. v. United States, 889 F.3d

1331, 1345 (Fed. Cir. 2018) (quoting Commonwealth

Edison Co. v. United States, 271 F.3d 1327, 1350 n.23

(Fed. Cir. 2001) (en banc)). “[T]hose who do business

in the regulated field cannot object if the legislative

scheme is buttressed by subsequent amendments to

achieve the legislative end[.]” Concrete Pipe & Prods.,

508 U.S. at 645 (quoting FHA v. The Darlington, Inc.,

358 U.S. 84, 91 (1958)).

With these principles in mind, we must determine

what reasonable investment-backed expectations Bridge

had and to what degree the Reversion Order interfered

with them.

40a

The record shows that Baldwin testified that

Bridge hoped to make annually at least 20% from “the

total investment,” meaning every dollar put into the

property.14 Even if this hoped-for return was reasonable, the reversion could not have meaningfully interfered with it during the reversion’s one-year duration.

Bridge did not expect any profit from its purchase of

the property unless and until the Commission

amended the 1991 Order’s affordable housing condition. Bridge also did not expect that an amendment to

the affordable housing condition would translate into

immediate profits. Indeed, Bridge represented to the

Commission that $86 million in initial infrastructure

costs and over $200 million in total development costs

had to be spent before the construction and sale of any

housing units could begin. At the time of the reversion,

the project was nowhere near this level of investment—indeed only sixteen affordable housing units

existed—and thus Bridge could have had no reasonable expectation of making the 20% annual return on

the total investment at that time.

The State and Bridge largely focus on whether

Bridge could have reasonably expected that the Commission would amend the 1991 Order’s affordable

housing condition requiring the construction of 1,000

The district court denied the State’s JMOL motion in part

by relying on evidence that Bridge anticipated receiving a 20%

return on its initial investment. On appeal, Bridge passingly refers to this in the factual background of its answering brief to

the State’s cross-appeal and does not argue it in its Penn Central

analysis. Nevertheless, we address it here.

41a

affordable housing units.15 Pointing to our distinction

in Guggenheim, 638 F.3d at 1120–21, between reasonable expectations and speculative possibilities, both

sides find support for the (un)reasonableness of

Bridge’s expectation in the $5.2 million that Bridge

paid for the 1,060 acres. We will assume that Bridge

reasonably expected an amendment to the 1991 Order’s affordable housing condition, but we do not see

what it proves. The Commission did not predicate the

Reversion Order on a purported failure to build the

1,000 affordable housing units that the 1991 Order

required prior to amendment, but instead on the reclassification conditions that Bridge conspicuously

ignores.

Bridge further argues that the jury was entitled

to find that Bridge had a reasonable expectation that

the Commission would not revert the land to its prior

zoning for agricultural use once Bridge purchased

the property, obtained the amendment, and substantially commenced use of the land. The substantial commencement of use point stems from the Hawaii

Supreme Court’s determination that DW’s active preparations for the land and completion of sixteen affordable housing units by March 2010 was substantial

commencement of use. But again, we do not see what

this proves. Substantial commencement of use did

The propriety of the Commission’s affordable housing conditions is not at issue in this case. As Bridge avers on appeal, “the

‘challenged regulation’ giving rise to Bridge’s takings claim is not

the affordable housing condition in effect when Bridge purchased

the Property.”

42a

not eliminate the possibility of reversion; it simply

changed the circumstances pursuant to which the

Commission could exercise its reversion authority. See

DW Aina Le‘a Dev., 339 P.3d at 714.

What we find dispositive are the conditions of the

1989 and 1991 Orders requiring the landowner to substantially comply with representations made to obtain

reclassification. The 1991 Order made clear that the

Commission might issue an OSC why the land should

not revert for failure to substantially comply with representations made to obtain reclassification. Hawaii

law expressly authorized the Commission to impose

this condition, and such conditions ran with title to the

land. Haw. Rev. Stat. § 205-4(g). Critically, the substantial compliance condition turned on the landowner’s

own representations to the Commission.

Bridge expressly committed to build 385 affordable

housing units as a part of the amendment to the order

governing the land’s conditional urban use classification. Based on Bridge’s representations to the Commission, the 2005 Order required Bridge to build these

units by November 2010. At no point in arguments

before us does Bridge acknowledge this deadline, let

alone Bridge’s and DW’s repeated representations to

the Commission as part of seeking the OSC’s rescission

that they would complete the 385 affordable housing

units.

The operative conditions in place at the time of

the OSC and the Reversion Order, and Bridge’s failure

to meet them, dispel the notion that Bridge could

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reasonably expect that the Commission would not enforce the conditions. See MHC Fin., 714 F.3d at 1127–

28 (finding that plaintiff could not satisfy this factor in

the context of challenging a 1999 rent control ordinance because the plaintiff “had even less reason to

expect that the rent control regime would disappear

altogether” given a prior 1993 rent control ordinance

in effect when plaintiff bought its property). The Commission properly issued the OSC based on the suspicion that Bridge would not meet the conditions. See

DW Aina Le‘a, Dev., 339 P.3d at 713 (“The [Commission] did not err in issuing the OSC. Bridge and DW do

not contend otherwise.” (citation omitted)). And, in fact,

Bridge did not complete the 385 affordable housing

units by the deadline to do so, which lapsed several

months before the Reversion Order’s issuance. Thus,

we do not see how the Reversion Order interfered with

any reasonable expectations that Bridge could have

formed regarding enforcement or reversion. Accordingly, we conclude that, as a matter of law, this factor

weighs strongly against finding a taking.

3. The Character of the Government’s

Action

Finally, we consider the Reversion Order’s character. “[T]he character of the governmental action—for

instance whether it amounts to a physical invasion or

instead merely affects property interests through some

public program adjusting the benefits and burdens of

economic life to promote the common good—may be

relevant in discerning whether a taking has occurred.”

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Lingle, 544 U.S. at 539 (internal quotation marks omitted). The government generally cannot “forc[e] some

people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a

whole.” Id. at 537 (quoting Armstrong v. United States,

364 U.S. 40, 49 (1960)). Even if this factor weighs in

favor of finding a taking, this factor is not alone a sufficient basis to find that a taking occurred. See Laurel

Park Cmty., 698 F.3d at 1191.

The district court concluded that Bridge’s evidence

provided the jury with an ample basis to find for Bridge

on this factor. The court reasoned that the Reversion

Order’s effect was concentrated because it directly affected the owners of the 1,060 acres. The court also

reasoned that credible testimony showed that the

Commission intended to cause Bridge to sell the property. In addition, the court observed that the “decision

to revert the Property’s classification was the first

time in the [Commission’s] 50-year history that it had

taken such action,” and that the Hawaii Supreme

Court ultimately invalidated the reversion. Much of

this evidence was insufficient to establish that this

factor weighed in Bridge’s favor.

For one, we recognize that government action that

singles out a landowner from similarly situated landowners raises the specter of a taking. See Lingle, 544

U.S. at 542–44. The concentrated effect of the reversion

here, however, was reflective of the confines of a generally applicable Hawaii law land use reclassification

procedure. See Haw. Rev. Stat. § 205-4(a) (permitting a

landowner to petition). We cannot find in this generally

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applicable scheme that this factor weighed in Bridge’s

favor.

Second, the Hawaii Supreme Court’s invalidation

of the reversion as a matter of Hawaii statutory procedural requirements does not carry the constitutional

significance that either Bridge or the district court ascribed to it. The reclassification history is critical to the

reversion challenged here. See Buckles v. King County,

191 F.3d 1127, 1139 (9th Cir. 1999) (observing that a

taking claim must be considered “ ‘in light of the context and . . . history’ of the land use decisions related

to [the] property.” (ellipsis in original) (quoting City of

Monterey v. Del Monte Dunes at Monterey, Ltd., 526

U.S. 687, 721 (1999))).

As the Hawaii Supreme Court observed when it

rejected Bridge’s assertion that the Commission violated Bridge’s substantive due process rights, the “reversion was not ‘clearly arbitrary and unreasonable,’

given the project’s long history, the various representations made to the [Commission], and the petitioners’

failure to meet deadlines.” DW Aina Le‘a Dev., 339 P.3d

at 689, 717. The court otherwise acknowledged that,

despite their repeated assurances to the Commission

that they would complete the 385 affordable housing

units by November 2010, “Bridge and DW did not satisfy the affordable housing condition, and did not

comply with numerous other representations made to

the [Commission].” Id. at 717. The Hawaii Supreme

Court’s rejection of Bridge’s equal protection challenge

echoed this reasoning. Id. at 718. The same underlying

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history blunts the force of Bridge’s assertion that the

reversion’s character established a taking.

4. The Balance of the Penn Central

Factors

Although we construe the evidence in the light

most favorable to the jury’s verdict, we conclude that

no reasonable jury could find that Bridge’s evidence

satisfied the Penn Central test. Even if we assume

that the character of the government’s action weighs

in favor of finding a taking, the first and second factors

weigh decisively against such a finding. Because

Bridge’s own evidence established a diminution in

value that is proportionately too small and because

the reversion did not interfere with Bridge’s reasonable investment-backed expectations for the land, no

reasonable jury could conclude that the reversion effected a taking pursuant to the Penn Central analysis.

D. The Outcome of the Taking Liability

Analysis

Our analysis of Bridge’s taking theories requires

us to reverse the district court’s denial of the State’s

renewed JMOL motion. Bridge’s evidence could not establish that a taking occurred pursuant to either Lucas

or Penn Central. Thus, the district court should have

granted the State’s motion. We vacate the judgment

for Bridge and the nominal damages award and remand with instructions for the district court to enter

judgment for the State. As a consequence of this

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determination, we need not address any other taking

issues the parties raise on appeal.

II.

The Dismissal of Bridge’s Equal Protection

Claim

Next, we must determine whether the Hawaii

Supreme Court’s decision in Bridge’s agency appeal

barred Bridge’s equal protection claim in this case.

Hawaii law governs whether we afford preclusive effect to the Hawaii Supreme Court’s decision. See Hiser

v. Franklin, 94 F.3d 1287, 1290 (9th Cir. 1996) (“[A]

federal court must give to a state-court judgment the

same preclusive effect as would be given that judgment

under the law of the state in which the judgment was

rendered.” (quoting Migra v. Warren City Sch. Dist. Bd.

of Educ. 465 U.S. 75, 81 (1984))). Thus, if Hawaii law

precludes Bridge from litigating the equal protection

claim in state court, then Bridge cannot pursue the

same claim here. Caldeira v. County of Kauai, 866 F.2d

1175, 1178 (9th Cir. 1989).

Pursuant to Hawaii law, the “judgment of a court

of competent jurisdiction is a bar to a new action in

another court between the same parties or their privies concerning the same subject matter.” Santos v.

State Dep’t of Transp., 646 P.2d 962, 965 (Haw. 1982)

(per curiam). A judgment has preclusive effect pursuant to the doctrine of issue preclusion if four requirements are met:

(1) the issue decided in the prior adjudication

is identical to the one presented in the action

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in question; (2) there is a final judgment on

the merits; (3) the issue decided in the prior

adjudication was essential to the final judgment; and (4) the party against whom [issue

preclusion] is asserted was a party or in privity with a party to the prior adjudication.

Bremer v. Weeks, 85 P.3d 150, 161 (Haw. 2004) (alteration in original); see also Dorrance v. Lee, 976 P.2d 904,

909 (Haw. 1999).

The district court determined that all requirements were met. Bridge disputes the first and second

requirements and further argues that it did not have a

full and fair opportunity to litigate its equal protection

challenge in the agency appeal. We reject each argument in turn.

A. Identical Issues

We can find no material difference between the

equal protection issue Bridge raised in the agency appeal and the one raised in this suit. In the agency appeal, Bridge asserted that the Commission violated

its equal protection rights because the Commission did

not treat other developers the same way it treated

Bridge. In its complaint here, Bridge alleged that the

Commission lacked a rational basis to treat Bridge

differently than it treated other developers. These are

undoubtedly the same issue. Bridge’s further contention that the Hawaii Supreme Court decided only

whether the Commission had a rational basis to enforce the reclassification conditions ignores that the

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court determined that any differential treatment did

not lack a rational basis. See DW Aina Le‘a Dev., 339

P.3d at 717–18.

Furthermore, we disagree with Bridge that Hawaii

law requires the availability of identical remedies in

both proceedings for an earlier judgment to have preclusive effect. In Citizens for the Protection of the North

Kohala Coastline v. County of Hawai‘i, 979 P.2d 1120

(Haw. 1999), the Hawaii Supreme Court decided that

issue preclusion did not bar the suit there because

different standards governed the issue of standing

to challenge an agency action pursuant to different

Hawaii statutory provisions. See Tax Found. of Haw. v.

State, 439 P.3d 127, 149 (Haw. 2019) (“[I]n Citizens, we

pointed out the difference between standing requirements for HRS § 91-14 agency appeals and HRS

§ 632-1 declaratory judgment actions[.]”). The court

observed that the statutory provisions provided different forms of relief to bolster the conclusion that

issue preclusion did not bar the later suit, not to fashion a new identical remedies requirement for Hawaii

issue preclusion law. See Citizens for the Protection of

the North Kohala Coastline, 979 P.2d at 1128 (citing

Pele Def. Fund v. Puna Geothermal Venture, 881 P.2d

1210, 1216 n.13 (Haw. 1994) (further explaining that

in a § 91-14 agency appeal, “the court only has power

to grant relief in accordance with HRS 91-14(g)”)).

Thus, we reject Bridge’s challenge to the identical issue

requirement.

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B. Final Judgment on the Merits

We also reject Bridge’s contention that the Hawaii

Supreme Court’s decision was not a final judgment on

the merits. Insofar as the decision concerned Bridge’s

federal equal protection rights, the decision became

final when the time expired for Bridge to seek review

by the United States Supreme Court. See E. Sav. Bank,

FSB v. Esteban, 296 P.3d 1062, 1068 (Haw. 2013); see

also 28 U.S.C. § 2101 (setting 90-day time period

within which to file a writ of certiorari with the United

States Supreme Court). We are not aware of Bridge

ever pursuing any such appeal.

Contrary to Bridge’s view, the Hawaii Supreme

Court’s remand for further proceedings consistent with

its opinion does not render the judgment nonfinal. The

Hawaii Supreme Court expressly vacated the circuit

court’s judgment on the issue of equal protection, and

remanded for the circuit court to effectuate that vacatur. That remand could not have resulted in a different

resolution of Bridge’s equal protection challenge because no issue of law or fact regarding that challenge

remained unresolved. See Robinson v. Ariyoshi, 658

P.2d 287, 297 (Haw. 1982). Moreover, Bridge has never

identified any further agency appeal proceedings in

the more than five years since the Hawaii Supreme

Court’s judgment. Thus, the court’s decision was a final

judgment on the merits.

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C. Full and Fair Opportunity to Litigate

As a final matter, we consider whether Bridge

lacked a full and fair opportunity to litigate its equal

protection challenge in the agency appeal. Federal

courts will not afford preclusive effect to a prior state

court judgment if the party lacked a full and fair opportunity to litigate the issue on the merits. See Allen

v. McCurry, 449 U.S. 90, 101 (1980); Ross v. Alaska, 189

F.3d 1107, 1112–13 (9th Cir. 1999).16 “[N]o single

model of procedural fairness, let alone a particular

form of procedure, is dictated by the Due Process

Clause.” Kremer v. Chem. Constr. Corp., 456 U.S. 461,

483 (1982). Instead, “ ‘state proceedings need do no

more than satisfy the minimum procedural requirements of the Fourteenth Amendment’s Due Process

Clause in order to qualify for the full faith and credit

guaranteed by federal law.’ ” Ross, 189 F.3d at 1112

(quoting Kremer, 456 U.S. at 481). The proceedings at

issue here met that standard.

Bridge contends that it lacked a full and fair opportunity to litigate its equal protection challenge in

the agency appeal because the Hawaii Supreme Court

excluded from the evidence the dockets from the Commission’s proceedings involving other property owners

on which Bridge sought to rely to show differential

treatment. DW Aina Le‘a Dev., 339 P.3d at 689, 714–15.

This parallels a requirement of Hawaii issue preclusion

law, pursuant to which the plaintiff must have had a full and fair

opportunity to litigate the relevant issue on the merits in the

earlier case. Dorrance, 976 P.2d at 911; Foytik v. Chandler, 966

P.2d 619, 627 (Haw. 1998).

52a

Bridge did not lack the opportunity to present this evidence, but instead failed to properly introduce this evidence into the agency appeal record. Id. at 715 & n.18

(finding that Bridge and DW failed to request judicial

notice). Bridge’s failure to do so does not undermine

the judgment’s fairness. See Kremer, 456 U.S. at 483,

485 (having “little doubt” that the state’s procedures

were constitutionality sufficient and concluding that

the plaintiff ’s “fail[ure] to avail himself of the full procedures provided by state law does not constitute a

sign of their inadequacy”).

It is otherwise clear that Bridge received a full and

fair opportunity to raise the equal protection challenge

in the agency appeal. Bridge raised, briefed, and argued the challenge during the proceedings before the

Commission and on appeal before the circuit court and

defended the issue before the Hawaii Supreme Court.

See DW Aina Le‘a Dev., 339 P.3d at 689, 704–06, 717–

18. Bridge thus received a full and fair opportunity

pursuant to both Hawaii law and the federal exception

to issue preclusion. See Ross, 189 F.3d at 1112–13 (finding that the plaintiff received a full and fair opportunity to litigate an issue in a prior Alaska state court

proceeding when the plaintiff was able to raise as well

as fully brief and argue the issue); Dorrance, 976 P.2d

at 911 (making a similar finding under Hawaii law).

We therefore affirm the district court’s issue preclusion

ruling that bars Bridge from re-litigating the equal

protection issue in this case.

With no remaining viable claims, it is unnecessary

for us to address Bridge’s appeal from the district

53a

court’s dismissal of the individual capacity claims

Bridge raised against the commissioners who voted

to revert. Trans-Canada Enters., Ltd. v. Muckleshoot

Indian Tribe, 634 F.2d 474, 476 n.2 (9th Cir. 1980) (declining to address judicial immunity “[i]n view of our

holding that no claim for federal relief ” existed).

CONCLUSION

The district court erred in denying the State’s

JMOL motion because Bridge’s evidence did not establish a taking pursuant to either Lucas or Penn Central,

and we reverse the denial. Consequently, we vacate the

judgment for Bridge on the taking claims and remand

with instructions for the district court to enter judgment for the State. We affirm the dismissal of Bridge’s

equal protection claim. We decline to address all other

issues raised on appeal as unnecessary.

AFFIRMED IN PART, REVERSED AND VACATED IN PART, and REMANDED with instructions

to enter judgment for Defendants-Appellees/CrossAppellants. Costs are awarded to Defendants-Appellees/

Cross-Appellants.

54a

APPENDIX B

AO 450 (Rev. 5/85) Judgment in a Civil Case

===========================================================================================

UNITED STATES DISTRICT COURT

——————— DISTRICT OF HAWAII ——————

Bridge Aina Le’a, LLC

Plaintiff(s),

Hawaii, State of , Land

Use Commission et al

Defendant(s).

AMENDED JUDGMENT

IN A CIVIL CASE

Case: CV 11-00414SOM-KJM

FILED IN THE

UNITED STATES

DISTRICT COURT

DISTRICT OF HAWAII

March 30, 2018

At 12 o’clock and

17 min p.m.

SUE BEITIA, CLERK

[🗸] Jury Verdict. This action came before the Court

for a trial by jury. The issues have been tried and

the jury has rendered its verdict.

[ ] Decision by Court. This action came to trial before the Court. The issues have been tried and a

decision has been rendered.

IT IS HEREBY ORDERED and ADJUDGED

that Plaintiff is awarded $1 in nominal damages

with respect to the takings claims in Count I and

II AGAINST Defendants Land Use Commission

55a

and the Individual Defendants in their Official

Capacities.

March 30, 2018

Date

SUE BEITIA

Clerk

/s/ Sue Beitia by CB

(By) Deputy Clerk

56a

APPENDIX C

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF HAWAII

) Civ. No. 11-00414

BRIDGE AINA LE‘A, LLC,

) SOM-KJM

Plaintiff,

) ORDER DENYING

vs.

) STATE OF

STATE OF HAWAII LAND

) HAWAII’S

USE COMMISSION; VLADI- )

RENEWED

MIR P. DEVENS, in his indi- )

MOTION FOR

vidual and official capacity;

) JUDGMENT AS A

KYLE CHOCK, in his individ- )

MATTER OF LAW

ual and official capacity;

) OR, IN THE

THOMAS CONTRADES,

) ALTERNATIVE,

in his individual and official )

FOR A NEW TRIAL

capacity; LISA M. JUDGE,

)

in her individual and official )

capacity; NORMAND R. LEZY, )

in his individual and official )

capacity; NICHOLAS W.

)

TEVES, JR., in his individual )

and official capacity; RONALD )

I. HELLER, in his individual )

and official capacity; DUANE )

KANUHA, in his official ca- )

pacity; CHARLES JENCKS, )

in his official capacity; JOHN )

DOES 1-10; JANE DOES 1-10; )

DOE PARTNERSHIPS 1-10; )

DOE CORPORATIONS 1-10; )

DOE ENTITIES 2-10; and

)

DOE GOVERNMENTAL

)

UNITS 1-10,

)

Defendants.

57a

ORDER DENYING STATE OF HAWAII’S

RENEWED MOTION FOR JUDGMENT

AS A MATTER OF LAW OR, IN THE

ALTERNATIVE, FOR A NEW TRIAL

(Filed Jun. 27, 2018)

INTRODUCTION.

Defendant State of Hawaii Land Use Commission

(the “State” or “Land Use Commission”) has renewed

its request for judgment as a matter of law, alternatively requesting a new trial. For the reasons that follow, the court denies these requests.

II.

BACKGROUND.

The factual background of this case has been discussed in the court’s previous orders and is incorporated by reference. See, e.g., ECF No. 131; ECF No. 283;

ECF No. 318.

On March 19, 2018, at the close of Bridge Aina

Le‘a’s case-in-chief, the State moved for judgment as a

matter of law. ECF No. 361. On March 20, 2018, the

court orally granted the motion in part, agreeing to

limit any recovery by Bridge Aina Le‘a to nominal

damages given court rulings excluding proffered evidence on just compensation. See ECF No. 365. The

court denied the motion in all other respects. See id.

Ultimately, the jury found that the State had taken

Bridge Aina Le‘a’s property without just compensation

under both Lucas and Penn Central analyses. See ECF

No. 373. The court entered judgment awarding

58a

nominal damages to Bridge Aina Le‘a on March 30,

2018. ECF No. 377.

On April 20, 2018, the State filed a Renewed Motion for Judgment as a Matter of Law or, in the Alternative, for a New Trial (“Renewed Motion”). ECF No.

385. The State claims it is entitled to judgment as a

matter of law on four grounds: (1) the Land Use Commission’s reversion order did not affect Bridge Aina

Le‘a’s limited property interests; (2) there cannot be a

taking stemming from an erroneous finding of fact by

an agency in a quasi-judicial proceeding; (3) the evidence does not establish a Lucas taking as a matter of

law; and (4) the evidence does not establish a Penn

Central taking as a matter of law. See id. at PageID #s

9293-9313. In the alternative, the State requests a new

trial on two grounds: (1) the court’s jury instruction

concerning the appropriate denominator was erroneous; and (2) the verdict is against the great weight of

the evidence. See id. at PageID #s 9213-16. Bridge Aina

Le‘a filed a Memorandum in Opposition on May 18,

2018, ECF No. 401, and the State filed a Reply on June

1, 2018, ECF No. 403.

III. LEGAL STANDARD.

A. Rule 50(b) (Renewed Motion for Judgment as a Matter of Law).

If a portion of party’s motion for judgment as a

matter of law is not granted by the court, then, “[n]o

later than 28 days after the entry of judgment, . . . the

movant may file a renewed motion for judgment as a

59a

matter of law.” Fed. R. Civ. P. 50(b). “Because it is a renewed motion, a proper post-verdict Rule 50(b) motion

is limited to the grounds asserted in the pre-deliberation [ ] motion.” EEOC v. Go Daddy Software, Inc., 581

F.3d 951, 961 (9th Cir. 2009); Freund v. Nycomed Amersham, 347 F.3d 752, 761 (9th Cir. 2003).

The standard for granting judgment as a matter

of law under Rule 50 “mirrors” the standard for granting summary judgment. Reeves v. Sanderson Plumbing

Prods., Inc., 530 U.S. 133, 150 (2000) (quoting Anderson

v. Liberty Lobby, Inc., 477 U.S. 242, 250-51 (1986)). “A

district court can grant a Rule 50[ ] motion for judgment as a matter of law only if ‘there is no legally sufficient basis for a reasonable jury to find for that party

on that issue.’ ” Krechman v. Cty. of Riverside, 723 F.3d

1104, 1109 (9th Cir. 2013) (quoting Jorgensen v. Cassiday, 320 F.3d 906, 917 (9th Cir. 2003)). The moving

party must show that the evidence, construed in the

light most favorable to the nonmoving party, permitted

only one reasonable conclusion, and that conclusion is

contrary to jury’s verdict. See Pavao v. Pagay, 307 F.3d

915, 918 (9th Cir. 2002); Enovsys LLC v. AT&T Mobility

LLC, No. CV 11-5210 SS, 2015 WL 11089498, at *4 n.5

(C.D. Cal. Nov. 16, 2015) (explaining that “the moving

party bears th[is] burden” even when the non-movant

“had the burden [of proof ] at trial” (citing Anderson,

477 U.S. at 250)).

The court may not assess the credibility of witnesses and must draw all reasonable inferences in the

nonmovant’s favor. See Krechman, 723 F.3d at 1110.

The court’s “job at this stage is not to determine

60a

whether the jury believed the right people, but only to

assure that it was presented with a legally sufficient

basis to support the verdict.” Berry v. Hawaii Exp.

Serv., Inc., No. 03-00385 SOM/LEK, 2006 WL 1519996,

at *2 (D. Haw. May 24, 2006) (quoting Harvey v. Office

of Banks & Real Estate, 377 F.3d 698, 707 (7th Cir.

2004)).

B. Rule 59(a) (Motion for a New Trial).

Rule 59(a) of the Federal Rules of Civil Procedure

provides that a court may grant a new trial “for any

reason for which a new trial has heretofore been

granted in an action at law in federal court.” Fed. R.

Civ. P. 59(a)(1)(A). The court is “bound by those grounds

that have been historically recognized.” Zhang v. Am.

Gem Seafoods, Inc., 339 F.3d 1020, 1035 (9th Cir. 2003).

Precedential grounds for a new trial include a verdict

that “is contrary to the clear weight of the evidence, is

based upon false or perjurious evidence, or [implicates]

a miscarriage of justice.” Molski v. M.J. Cable, Inc., 481

F.3d 724, 729 (9th Cir. 2007) (quoting Passantino v.

Johnson & Johnson Consumer Prods., Inc., 212 F.3d

493, 510 n.15 (9th Cir. 2000)). In ruling on a motion for

a new trial, “[t]he judge can weigh the evidence and

assess the credibility of witnesses, and need not view

the evidence from the perspective most favorable to the

prevailing party.” Landes Const. Co., Inc. v. Royal Bank

of Canada, 833 F.2d 1365, 1371 (9th Cir. 1987) (quoting

Air-Sea Forwarders, Inc. v. Air Asia Co., 880 F.2d 176,

190 (9th Cir. 1989)). A new trial can be granted due to

an erroneous evidentiary ruling only if the ruling

61a

“substantially prejudiced” the complaining party.

Ruvalcaba v. City of Los Angeles, 64 F.3d 1323, 1328

(9th Cir. 1995).

IV. ANALYSIS.

A. The State Is Not Entitled to Judgment

as a Matter of Law.

The State is not entitled to judgment as a matter

of law on any of the grounds put forward in its Renewed Motion.

1. The State Has Not Identified Evidence Indicating that Bridge Aina

Le‘a Possessed Only a Token Property Interest Unaffected by the Reversion.

The Ninth Circuit uses “a two-step analysis to determine whether a ‘taking’ has occurred: first, we determine whether the subject matter is ‘property’

within the meaning of the Fifth Amendment and, second, we establish whether there has been a taking

of that property, for which compensation is due.”

Engquist v. Oregon Dep’t of Agric., 478 F.3d 985, 1002

(9th Cir. 2007). This analysis begins with the factual

question of what property rights, if any, a plaintiff

owns. See Philips v. Marion Cty. Sheriff ’s Office, 494

Fed. App’x 797, 799 (9th Cir. 2012). On this antecedent

issue, the court instructed the jury as follows:

62a

The first step in deciding whether Bridge Aina

Le‘a’s property has been taken is to determine

what property rights Bridge Aina Le‘a owns.

Think of property rights as a bundle of sticks.

One stick represents, for example, the right to

possess land. One stick represents the right to

use the land. One stick represents the right to

sell one’s interest in the land. One stick represents the right to develop the land, and so on.

A person may possess one stick, but not the

whole bundle. Your job is to determine what

sticks Bridge Aina Le‘a owns.

I instruct you that Bridge Aina Le‘a owns the

right of title to the land in issue. You may consider whether Bridge Aina Le‘a owns any

other rights.

Once you have determined what rights Bridge

Aina Le‘a owns, you must consider whether

those rights have been taken. In making your

determination, you must consider only Bridge

Aina Le‘a’s interests in the property. You may

not base your decision on a determination

that the Land Use Commission’s action affected a third party’s property interests, except insofar as the impact on the third party’s

interests also materially affected Bridge Aina

Le‘a’s interests in the property.

ECF No. 372, PageID #s 7453-54. This instruction was

given with the agreement of the parties.

According to the State, the evidence presented at

trial is susceptible to only one reasonable conclusion:

that Bridge Aina Le‘a’s property interests were so

63a

“limited” that they could “not [have been] affected by

the reversion” of the 1,060-acre property from urban

use to agricultural use. ECF No. 385-1, PageID # 9293.

In making this argument, the State notes that Bridge

Aina Le‘a “sold the 1,060 acres and its development

rights to [separate] entities owned by Robert Wessel[s]

prior to the reversion of the property in 2011.” Id. at

PageID # 9294 (citation omitted). If Bridge Aina Le‘a

had indeed completely “sold the property,” the Land

Use Commission’s reversion order presumably could

not have affected Bridge Aina Le‘a’s property interests.

Id. But see ECF No. 401, PageID #s 9602-03 (arguing

otherwise).

The jury was not persuaded. After deliberating,

the jury found that Bridge Aina Le‘a’s property interests were taken and, in so doing, necessarily determined that Bridge Aina Le‘a retained more than a

token interest in the 1,060-acre property at the time of

the reversion. See ECF No. 373. The jury’s determination is supported by adequate evidence.

The State’s position that Bridge Aina Le‘a “sold

the property” is, absent qualification, factually unsupported. Nothing in the record indicates that the property was completely sold. In fact, the State concedes

that Bridge Aina Le‘a owned the “right of title to the

land in issue” at all relevant times. See ECF No. 385-1,

PageID # 9294 (citation omitted). That concession directly contradicts the State’s position that Bridge Aina

Le‘a’s sale of the property left it with nothing that

could have been affected by the reversion. See id.

64a

The State’s real claim seems to be that Bridge

Aina Le‘a sold some of its property interests, and the

remaining interests were not adversely affected by the

Land Use Commission’s reversion order. The State refers to testimony indicating that DW Aina Le‘a, a separate entity, executed a purchase and sale agreement

under which it “gained possession of the property and

had all development rights prior to the reversion.” Id.

Even taking the State’s characterizations of the record

at face value, they support, at most, the conclusion that

Bridge Aina Le‘a sold two sticks out of its ownership

bundle: the right to develop the property and the right

to exclude DW Aina Le‘a. Even assuming that this conclusion is correct, the jury could have reasonably concluded that Bridge Aina Le‘a retained other property

rights, including title to the land; the right to exclude

entities other than DW Aina Le‘a; and the right to sell

these residual interests. The jury, moreover, could have

reasonably inferred that the reversion order diminished the value of Bridge Aina Le‘a’s residual interests.

For example, if otherwise barren property cannot be

developed, it is not a stretch to think that the right to

exclude someone from the land is close to worthless.

The State has failed to demonstrate an entitlement to judgment as a matter of law based on the idea

that the State had no property interest affected by the

reversion. It has not identified evidence indicating that

Bridge Aina Le‘a sold its ownership of the property

outright, or that its residual property interests following the transaction with DW Aina Le‘a were so “limited” as to be immune from the reversion order, or that

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the State’s view of the record is the only reasonable

view. See Mathis v. Pacific Gas & Elec. Co., 75 F.3d 498,

501 (9th Cir. 1996) (“Judgment as a matter of law is

appropriate ‘if the evidence and its inferences considered as a whole and viewed in the light most favorable

to the nonmoving party, can support only one reasonable conclusion – that the moving party is entitled to

judgment not withstanding the verdict.’“ (quoting Kern

v. Levolor Lorentzen, Inc., 899 F.2d 772, 775 (9th Cir.

1990))).

2. Bridge Aina Le‘a Properly Asserted a

Temporary Regulatory Takings Claim.

Bridge Aina Le‘a’s takings claim, which concerns

a zoning order later invalidated in state court, appears

to fit comfortably within the Supreme Court’s established jurisprudence on temporary regulatory takings.

See, e.g., Lucas v. S.C. Coastal Council, 505 U.S. 1003,

1008-14 (1992); First English Evangelical Lutheran

Church v. Los Angeles, 482 U.S. 304, 310, 318 (1987);

see also Res. Invs., Inc. v. United States, 85 Fed. Cl. 447,

468-69, 480-84 (2009). The State, however, argues that

takings claims are defective when based on erroneous

findings of fact by administrative agencies that sit in a

“quasi-judicial capacity.” ECF No. 385-1, PageID #s

9294-25. The State’s argument is not entirely clear, but

as this court understands it, it is without merit.

The State may be attempting to mischaracterize

Bridge Aina Le‘a’s takings claim. See ECF No. 401,

PageID # 9604. According to the State, the “situation

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here is that the Land Use Commission, in reverting the

property, found that there was no ‘substantial commencement’ on the project. . . . The Supreme Court of

Hawaii held that the finding of fact was erroneous.

Plaintiff [wrongly] contends this is a taking.” ECF No.

385-1, PageID #s 9294-95. But Bridge Aina Le‘a’s takings claim is not simply based on an erroneous factual

finding; it is based on a reversion order issued by the

Land Use Commission. See ECF No. 1-2, PageID #s 44,

48-50; cf. Lingle v. Chevron U.S.A., Inc., 544 U.S. 528,

543 (2005) (explaining that an “inquiry” into a “regulation’s underlying validity” “is logically prior to and distinct from the question whether a regulation effects a

taking”). The State conflates the reasoning behind the

order – the subject of separate litigation – with the effect of the order itself. It is the effect of the order that

is the focus of takings analysis; if the Land Use Commission had engaged in the same fact-finding but decided not to issue the reversion order, there would be

no takings claim. See, e.g., Murr v. Wisconsin, 137 S. Ct.

1933, 1942 (2017) (asking if government action “goes

too far” and is unduly “burdensome” in its impact on

property, not whether the action is factually supported

and properly reasoned); cf. ECF No. 385-1, PageID

# 9296 (conceding on behalf of the State that “there is

no difference for [ ] takings analysis between the reversion being upheld or vacated”). There is nothing unusual or improper about Bridge Aina Le‘a’s temporary

regulatory takings claim.

Alternatively, the State may be arguing that agencies should be immune from takings claims whenever

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their actions are based on erroneous findings of fact.

See ECF No. 385-1, PageID # 9295. Neither precedent

nor common sense supports such a rule, which would

validate shoddy fact-finding by agencies. Takings

claims can be brought regardless of whether government action is improperly reasoned or has been judicially nullified. See First English, 482 U.S. at 318;

Res. Invs., 85 Fed. Cl. at 468-69, 480-84; see also ECF

No. 401, PageID # 9605 (“[T]he LUC cannot leverage

its wrong . . . ‘substantial commencement’ determination into an absolution for violating Bridge’s constitutional rights.”).

Finally, the State may be attempting to extend to

the sovereign the “quasi-judicial immunity” given to

agency officials “who perform functions closely associated with the judicial process.” See Bridge Aina Le‘a,

LLC v. State of Hawaii Land Use Comm’n, 125 F. Supp.

3d 1051, 1074 (D. Haw. 2015) (quoting Duvall v. Cty. of

Kitsap, 260 F.3d 1124, 1133 (9th Cir. 2001)); see also

ECF No. 401, PageID # 9603 (so interpreting the

State’s argument). The law does not recognize such an

extension, as the State appeared to recognize earlier in

this litigation. In its Motion to Dismiss filed on July 27,

2011, the State, while arguing that the Land Use Commissioners could invoke quasi-judicial immunity,

seemed cognizant that the liability of the Land Use

Commission (and thus the State) was governed by a

different immunity doctrine. See ECF No. 14-1, PageID

#s 165, 194 (arguing that “the Commissioners in their

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individual capacity are entitled to absolute quasi[-]

judicial immunity” and that “the LUC, as an agency of

the State, has sovereign immunity”).

The State’s initial understanding was correct. Sovereign immunity, not quasi-judicial immunity, governs

whether State agencies can be sued for Takings Clause

violations. In extending quasi-judicial immunity to certain “agency officials,” the Ninth Circuit has observed

that “[p]ermitting suits against [ ] quasi-judicial decision makers would discourage knowledgeable individuals from serving” their government, as the threat of

individual liability might undermine their “independent and impartial exercise of judgment.” Buckles v.

King Cty., 191 F.3d 1127, 1133, 1137 (9th Cir. 1999)

(emphases added) (quoting Antoine v. Byers & Anderson, Inc., 508 U.S. 429, 435-36 (1993)). These observations do not translate to a suit against a State agency.

Moreover, the Ninth Circuit has held that State

agencies cannot invoke sovereign immunity when they

are sued in state court for Takings Clause violations.

See Jachetta v. United States, 653 F.3d 898, 909 (9th

Cir. 2011) (explaining that, under the Takings Clause,

a State is constitutionally “required to provide” just

compensation “notwithstanding sovereign immunity”

(quoting DLX, Inc. v. Kentucky, 381 F.3d 511, 528 (6th

Cir. 2004))). The present action was removed from the

state court it originated in to the federal forum by the

State. See ECF No. 1, PageID # 2.

This court will not announce a novel doctrine of

“quasi-judicial sovereign immunity” that would permit

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an end-run around this constitutional guarantee. See

ECF No. 401, PageID # 9603 (“The State’s proposed,

legally unsupported expansion of judicial or quasijudicial immunity to the LUC as an entity, and therefore to the State itself, would destroy the rights that

the self-executing Takings Clause . . . [is] supposed to

guarantee.”).

The State draws a tenuous analogy between an

agency’s factual error and a court’s mistaken “findings

of fact,” which the State says cannot “effect[uate] a taking.” See ECF No. 385-1, PageID # 9295. This analogy

is unhelpful for three reasons.

First, as noted, Bridge Aina Le‘a’s takings claim

concerns the effect of an administrative order, not any

erroneous fact-finding that preceded it.

Second, the State assumes that an open legal

question – whether judicial orders can effectuate takings – will be resolved against takings plaintiffs. But

“[t]he contours and viability of the theory of so-called

‘judicial takings’ – where a court decision may be

deemed to have effectively taken property rights from

an individual – [remain] unclear even in the courts of

this country.” Jonna Corp. v. City of Sunnyvale, No. 17CV-00956-LHK, 2017 WL 2617983, at *6 (N.D. Cal.

June 16, 2017) (quoting Eliahu v. Israel, No. 14-cv01636-BLF, 2015 WL 981517, at *5 n.5 (N.D. Cal. Mar.

3, 2015)).

Third, even if a court agreed with the State’s argument that judicial takings are impossible, the agreement would almost certainly be with respect to actual

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courts. A broader holding extending to administrative

or other nonjudicial actions would clash with numerous decisions explaining, for example, that the denial

of an individual’s permit application can effectuate a

taking. See, e.g., Del Monte Dunes at Monterey, Ltd. v.

City of Monterey, 920 F.2d 1496, 1500 (9th Cir. 1990);

see also MacLeod v. Santa Clara Cty., 749 F.2d 541,

544-45 (9th Cir. 1984) (“The law is well settled [ ] that

the application of a general zoning law to particular

property effects a taking if ‘the ordinance . . . denies an

owner economically viable use of his land.” (quoting

Agins v. City of Tiburon, 447 U.S. 255, 260 (1980))).

The State fails to show that it is entitled to judgment as a matter of law on this ground.

3. The Jury’s Finding of a Lucas Taking Is Supported by Adequate Evidence.

According to the State, the evidence at trial failed

to show a Lucas taking. See ECF No. 385-1, PageID

# 9296. The jury had good grounds for disagreeing. See

ECF No. 373.

A Lucas taking occurs when “a regulation [ ] ‘denies all economically beneficial or productive use of

land.’ ” Murr, 137 S. Ct. at 1942 (quoting Palazzolo v.

Rhode Island, 533 U.S. 505, 617 (2001)). By contrast,

there is no Lucas taking when “a regulation impedes

the use of property without depriving the owner of all

economically beneficial use.” Id. at 1943 (emphasis

added); see also, e.g., Sierra Med. Servs. Alliance v.

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Kent, 883 F.3d 1216, 1226 (9th Cir. 2018). On the issue

of Lucas takings, this court instructed the jury as follows:

Under Taking Analysis No. 1, you must determine whether the action of the Land Use

Commission, before it was invalidated in the

state courts, denied Bridge Aina Le‘a all economically beneficial or productive use of its

land.

If you find that, while the Land Use Commission’s reversion order was in effect, Bridge

Aina Le‘a would not have been able to make

any economically viable use of its property

without a change in the law, you must find for

Bridge Aina Le‘a with respect to Taking Analysis No. 1. However, if you find that there were

permissible uses of Bridge Aina Le‘a’s property even with the development restriction in

place, and if you further find that those uses

were economically beneficial or productive,

then you must find in favor of the Land Use

Commission with respect to Taking Analysis

No. 1.

Evidence that the land had positive economic

value notwithstanding the action of the Land

Use Commission may be strong evidence of

the availability of economically beneficial or

productive uses. However, a determination

that the land had positive economic value

does not, on its own, necessarily mean that no

taking has occurred under Taking Analysis

No. 1. For example, a taking may occur when

a regulation forbids development on a

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property and no competitive market exists for

that property without the possibility of development, or if a landowner cannot sell the

property to someone to use in accordance with

the regulation.

ECF No. 372, PageID #s 7457-58. This instruction was

given with the agreement of the parties.

The State asserts five reasons that no Lucas taking occurred as a matter of law. None has merit.

a. Bridge Aina Le‘a Satisfied Its

Burden of Proof Under Lucas

with Respect to the Economic

Impact of the Reversion.

According to the State, a Lucas plaintiff must present evidence demonstrating the economic nonviability of every possible permissible use of its land. See

ECF No. 385-1, PageID #s 9298-99. The State claims

that Bridge Aina Le‘a did not meet this burden, because at trial it “failed to consider” the economic value

of “approximately 200” “unusual uses” that might be

permitted in the agricultural district pursuant to “special permits.” See id. Such “unusual uses” included:

rock quarrying operations; cinder and sand

mining facilities; concrete batching plants;

construction waste facilities; landfills; public

and private sewage treatment plants; gardens

and zoos; schools; memorial parks; crematoriums; agricultural tourism facilities; commercial facilities; offices; gas stations; solid waste

recycling facilities; private storage facilities;

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telecommunication facilities and structures;

and power generation facilities (fossil fuel and

renewable, including solar, wind, geothermal,

hydropower, and biofuel[)].

Id. at PageID #s 9298-99. Bridge Aina Le‘a did not present evidence specifically addressing the economic

value of each of these potentially permissible uses; the

State claims Bridge Aina Le‘a therefore “failed to meet

its burden of proof of showing the non-existence of economically beneficial uses.” Id. at PageID # 9298.

The State would saddle Bridge Aina Le‘a with a

Sisyphean task. Takings law requires less. Bridge Aina

Le‘a presented evidence that a wide variety of potential permissible uses were not economically viable, including uses expressly permitted by statute or common

or prevalent within the geographic area. See ECF No.

401, PageID #s 9607-09. Its expert, Bruce Plash, testified that “all uses permitted in the Agricultural District” by statute were not economically viable. See id.

at PageID # 9608 (describing Plash’s testimony). He

also testified that “there were no agricultural operations on site or anywhere near the Property.” See id.

Bridge Aina Le‘a also put forward general evidence

concerning the nature of the land. That evidence indicated that the land was akin to “a giant asphalt parking lot covered with big rocks,” that it had “very poor”

soil, and that it was “not suitable for agriculture.” See

id. at PageID #s 9607-08 (quoting ECF No. 382-10,

PageID #s 7998, 8040). This presentation of evidence

was sufficient.

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When a party has the burden of proving a negative, it is not unusual for a court to accept a less-thanexhaustive showing. See, e.g., Celotex Corp. v. Catrett,

477 U.S. 317, 325 (1986) (holding that the burden of

providing the absence of genuine issues of material

fact may “be discharged by ‘showing’ – that is, pointing

out to the district court – that there is an absence of

evidence to support the nonmoving party’s case”);

United States v. Chevron Corp., No. C 94-1885 SBA,

1996 WL 444597, at *3 (N.D. Cal. May 30, 1996) (adopting a “shared burden” approach to an attorney-client

waiver issue to “alleviat[e] the onerous burden . . . to

prove a negative”). To require more would, in many circumstances, be to demand the impossible. See Weimerskirch v. Comm’r of Internal Revenue, 596 F.2d 358, 361

(9th Cir. 1979) (recognizing the “practical” difficulty of

attempting “to prove a negative” (quoting Elkins v.

United States, 364 U.S. 206, 218 (1960))); United States

v. Fei Lin, 139 F.3d 1303, 1308 (9th Cir. 1998) (noting

“the difficulties inherent in requiring [a party] to prove

a negative” (citing United States v. Dominquez-Mestas,

929 F.2d 1379, 1384 (9th Cir. 1991))).

Of course, if a takings defendant believes that a

permissible and economically viable use has been overlooked, it may present evidence concerning that use.

See, e.g., Res. Invs., 85 Fed. Cl. at 490. If that presentation is successful, the plaintiff ’s Lucas claim will fail.

See, e.g., Sierra Med. Servs. Alliance, 883 F.3d at 1226

(holding that there was no Lucas taking because the

regulation at issue did not “require the Plaintiffs `to

sacrifice all economically beneficial uses’ of their

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property” (quoting Lucas, 505 U.S. at 1019-20)). In this

case, however, the State put forward no evidence concerning the economic viability of any alternative use.

It merely observed that “Hawaii law allows owners of

agricultural land to obtain permits for unusual uses”

and that Bridge Aina Le‘a “failed to consider” them. See

ECF No. 385-1, PageID # 9298 (emphasis omitted) (citing Haw. Rev. Stat. § 205-6). The State presented no evidence, whether by expert or lay testimony, that any of

these hypothetical uses was “economically viable.” See

ECF No. 401, PageID # 9606; see also Res. Invs., 85 Fed.

Cl. at 490 (faulting the defendant’s failure “to establish

that its proposed alternatives were economically viable

for plaintiffs, i.e., that these uses would be profitable

rather than result in a net loss”).

The State’s reference to special permits does not,

as the State would have it, “destroy[ ] plaintiff ’s Lucas

claim.” See ECF No. 385-1, PageID # 9298. Bridge Aina

Le‘a’s presentation of evidence concerning the economic nonviability of all statutorily permitted uses, in

combination with the State’s failure to present any evidence concerning the economic viability of potential

“unusual” uses, adequately supports the jury’s finding

of a Lucas taking. Cf. Res. Invs., 85 Fed. Cl. at 489 (rejecting the defendant’s proffer of “nominal uses” and

“uses in name” only, which “turn out to be mere attorney argument without support in the record,” and noting that “this court is bound to ‘discount proposed

[economically viable] uses that do not meet a showing

of reasonable probability that the land is both physically adaptable for such use and that there is a

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demand for such use in the reasonably near future’ ”

(alteration in original) (quoting Loveladies Harbor, Inc.

v. United States, 21 Cl. Ct. 153, 158 (1990))).

b. Lucas Claims Are Not Negated by

the Existence Of Permissible Uses

that Could Generate Revenue

Only at a Net Loss.

According to the State, Lucas claims fail if there

are any “permissible uses” that can “generate revenue

and be productive,” regardless of whether the uses are

also “profitable.” ECF No. 385-1, PageID # 9297, 9299.

The State’s proposal makes a nullity of the Lucas test.

According to the State, Bridge Aina Le‘a’s Lucas

claim should fail in the wake of Bruce Plash’s uncontradicted testimony that some permissible uses in the

agricultural district, like wind farming, could “generate[ ] revenue” while losing money. Id. at PageID #s

9297-99. But uses resulting in losses are not automatically “economically beneficial uses.” See Sierra Med.

Servs. Alliance, 883 F.3d at 1226 (emphasis added)

(quoting Lucas, 505 U.S. at 1019-20)); see also, e.g.,

Murr, 137 S. Ct. at 1943 (describing Lucas takings as

regulations that deprive “the owner of all economically

beneficial use” (emphasis added)); Tahoe-Sierra Pres.

Council, Inc. v. Tahoe Reg’l Planning Agency, 535 U.S.

302, 330 (2002) (similar); Palazzolo, 533 U.S. at 617

(similar); Res. Invs., 85 Fed. Cl. at 490 (faulting the defendant for failing “to establish that its proposed

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alternative[uses] . . . would be profitable rather than

result in a net loss”).

It is hard to imagine any zoning ordinance that

would run afoul of the State’s test. Consider an ordinance that banned the “construction of occupiable improvements” on land, see Lucas, 505 U.S. at 1008-09,

and also prohibited living on the land. Even in this

highly restricted situation, there might be some “permissible” uses that could “generate revenue.” See ECF

No. 385-1, PageID # 9297. The landowner, for example,

might purchase rare Picasso paintings to lay on the

land and sell viewing rights for one dollar. This “Picasso use” would generate ticket revenue, probably at

an enormous net loss. Under the State’s view of Lucas,

the landowner would have no Lucas claim. This reading of Lucas would make a nullity of the very concept

of a Lucas taking. Even if Lucas claims are rarely viable, they cannot be impossible to establish.

“[T]he term ‘economically viable use’ has yet to be

defined with much precision.” Del Monte Dunes at

Monterey, Ltd. V. City of Monterey, 95 F.3d 1422, 1432

(9th Cir. 1996) (quoting Outdoor Sys., Inc. v. City of

Mesa, 997 F.2d 604, 616 (1993)), aff ’d, 526 U.S. 687

(1999). The Ninth Circuit, however, has consistently

understood the term to imply positive market value.

For example, the Ninth Circuit has adopted a test applied by the Second Circuit that asks “whether the

property use allowed by the regulation is sufficiently

desirable to permit property owners to sell the property

to someone for that use.” Id. at 1433 (emphasis added)

(quoting Park Ave. Tower Assocs. v. City of New York,

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746 F.2d 135, 139 (2d Cir. 1984)). Put another way, the

key question is whether a “competitive market exists”

for the present uses. Id. at 1433; see also Park Ave.

Tower Assocs., 746 F.2d at 139. The Ninth Circuit’s focus on positive market value strongly implies that it

does not understand “economically beneficial use” to

include a use resulting in an economic loss. Nothing

the Supreme Court has said disrupts this basic understanding. See City of Monterey v. Del Monte Dunes,

Ltd., 535 U.S. 687 (1999).

In advancing its view of Lucas law, the State cites

Palazzolo v. Rhode Island, 505 U.S. 606 (2001). In

Palazzolo, the Supreme Court allowed dismissal of a

Lucas takings claim involving Rhode Island’s wetlands

regulations on the ground that the regulations did not

deprive Palazzolo of “all economically beneficial use” of

his property. Id. at 630. The Court noted that Palazzolo

retained the ability “to build a substantial residence on

[his] 18-acre parcel,” and accepted the lower court’s

finding that this “development value” was worth

“$200,000.” Id. at 630-31. The State attempts to recast

Palazzolo as nullifying a Lucas claim on the sole

ground that “houses could have been built on property.”

See ECF No. 385-1, PageID # 9298 (citing Palazzolo,

533 U.S. at 631). The State overlooks the positive economic value of the use – some $200,000 – that the Supreme Court expressly observed was more than “a

token interest.” See Palazzolo, 533 U.S. at 631.

Palazzolo in no way suggests that the ability to

build a home, at whatever cost, will invariably defeat

a Lucas claim. The State points out that Bridge Aina

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Le‘a may have been able to construct a number of residences on the 1,060-acre property despite the agricultural classification. See ECF No. 385-1, PageID # 9298.

But see ECF No. 401, PageID #s 9610-11 (arguing otherwise). Even if that is so, other evidence (as the State

concedes) indicated that the construction of such residences “would not be profitable.” See ECF No. 385-1,

PageID # 9298 (discussing the testimony of Bruce

Plasch). Putting in power, water, and sewer lines would

have been costly, and cutting through solid lava rock to

lay a foundation would not have been easy. The jury

could have reasonably believed that the cost of constructing houses would have been prohibitive. The

State is not entitled to judgment as a matter of law on

this issue.

c. Lucas Does Not Require that

Property Be Left Entirely Without Value.

The State also claims that Bridge Aina Le‘a’s Lucas claim fails because the evidence demonstrated

“that the property retained millions of dollars of worth

in the agricultural district.” ECF No. 385-1, PageID

# 9300. The State’s argument rests on another mischaracterization of takings law: a false belief that Lucas

takings demand “a ‘complete elimination of [economic]

value.’ ” See id. (quoting Tahoe-Sierra, 535 U.S. at 330).

Economic worthlessness is undoubtedly sufficient

to establish a Lucas taking. See Lucas, 505 U.S. at

1007, 1016 n.7. As the Supreme Court explained in

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Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 535 U.S. 302 (2002), “compensation is required when a regulation deprives an owner

of ‘all economically beneficial uses’ of his land.” 535

U.S. at 330. “Under that rule, a statute that ‘wholly

eliminate[s] the value’ of [a] fee simple title clearly

qualifie[s] as a taking.” Id. (quoting Lucas, 535 U.S. at

330).

But demonstrating economic worthlessness is not

necessary to stake out a Lucas claim. See ECF No. 401,

PageID # 9606. The Ninth Circuit has explained that

“[f ]ocusing the economically viable use inquiry solely

on market value or on the fact that a landowner sold

his property for more than he paid” is “inappropriate.”

Del Monte Dunes at Monterey, 95 F.3d at 1432-33. “Although the value of the subject property is relevant

to the economically viable use inquiry, our focus is primarily on use, not value.” Id.; see also, e.g., TahoeSierra Pres. Council, Inc. v. Tahoe Reg’l Planning

Agency, 216 F.3d 764, 780 (9th Cir. 2000) (explaining

that positive economic value “provides strong evidence

of the availability of ‘economically beneficial or productive uses’ ”), aff ’d, 535 U.S. 302 (2002).1 “Indeed, several courts have found a taking even where the ‘taken’

A portion of the Ninth Circuit’s Tahoe-Sierra decision was

later overruled on other grounds by the en banc decision in Gonzalez v. Arizona, 677 F.3d 383 (9th Cir. 2012). That portion does

not affect the analysis relied on here. See id. at 390 n.4 (overruling

Tahoe-Sierra, 216 F.3d at 786-88, to the extent it suggested a

position contrary to Gonzalez with respect to the doctrine of law

of the case).

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property retained significant value.” Del Monte Dunes

at Monterey, 95 F.3d at 1433 (citations omitted).

Economic value can be positive despite the absence of an economically beneficial use if there is no

possibility for development absent a change in the law.

That is why the Ninth Circuit maintains that the ability to sell property is an economically beneficial use

only when “the property use allowed by the regulation

is sufficiently desirable to permit property owners to

sell the property to someone for that use”; if “no competitive market exists for the property without the possibility of [a legal change permitting] development, a

taking may have occurred.” Del Monte Dunes at Monterey, 95 F.3d at 1433 (emphases added) (quoting Park

Ave. Tower Assocs., 746 F.2d at 139). In this case, the

jury could have reasonably concluded that any residual market value was not the result of some extant,

permissible, and economically beneficial use, but derived instead from the chance that the land would be

reclassified as urban. Thus, despite the land’s positive

market value in the agricultural district, the jury’s

finding of a Lucas taking is still supported by adequate

evidence.

The Ninth Circuit’s decision in Horne v. U.S. Department of Agriculture, 750 F.3d 1128 (9th Cir. 2014),

rev’d on other grounds, Horne v. Department of Agriculture, 135 S. Ct. 2419 (2015), is not to the contrary.

Horne dealt with a complex regulatory scheme that required raisin producers to divert a portion of their

yields to a raisin reserve maintained by the Department of Agriculture. See id. at 1132. Whenever the

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agency sold these reserves, usually in noncompetitive

markets, the producers received a pro rata share of the

sales less administrative costs. See id. Sometimes that

pro rata share was “significant; in other years it [was]

zero.” Id. In a portion of the Horne decision that was

not reviewed by the Supreme Court, the Ninth Circuit

concluded that the raisin regulations did not effectuate

a Lucas taking.2 The Ninth Circuit stated in a footnote

that “[i]f the property [affected by a regulation] retains

any residual value after the regulation’s application,

Penn Central applies.” Id. at 2419 n.17. This statement

came after the Ninth Circuit had already determined

that the regulations did not cause the Hornes to “lose

all economically valuable use of their [ ] property.” Id.

at 1140 (emphasis added). Consequently, Horne is not

a case in which the Ninth Circuit relied solely on residual value to deny a Lucas taking claim – and the

reasoning in Del Monte Dunes was binding on the

Horne panel in any event.

d. Retrospectively Temporary Regulations Can Effectuate Lucas

Takings.

According to the State, Bridge Aina Le‘a’s Lucas

claim also fails because the Hawaii Supreme Court

The Supreme Court reversed the Ninth Circuit’s determination that there was no taking on the ground that the Ninth Circuit had wrongly rejected the plaintiff ’s Loretto theory. See

Horne, 135 S. Ct. at 2427-28. The Supreme Court did not consider

the separate Lucas taking theory, which the Hornes had not relied on when petitioning for certiorari. See id.

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nullified the Land Use Commission’s reversion order.

See ECF No. 385-1, PageID # 9303. This argument is

based on the State’s broad reading of the Supreme

Court’s decision in Tahoe-Sierra, which the State characterizes as holding that that any “temporary” government regulation cannot be challenged under Lucas. See

id. (citing 535 U.S. at 302).

The State is ignoring an important distinction between facially temporary regulations and retrospectively temporary regulations. In Tahoe-Sierra, the

Supreme Court held that regulations with built-in expiration dates generally cannot effectuate Lucas takings (also known as categorical or per se takings). See

535 U.S. at 320 (holding that a “temporary moratorium” on development, set to expire on the adoption of

a land use plan, could not qualify for Lucas treatment).

The Ninth Circuit has yet to decide whether, in a postTahoe-Sierra world, a temporally unbounded regulation that is amended, repealed, or annulled in court

can effectuate a Lucas taking. But the Ninth Circuit’s

decision in Tahoe-Sierra (which was affirmed by the

Supreme Court), as well as the Supreme Court’s decisions in First English, Lucas, and Tahoe-Sierra, indicate that such “retrospectively temporary regulations”

can still result in categorical takings.

The Supreme Court confronted a retrospectively

temporary land-use regulation in First English Evangelical Lutheran Church v. Los Angeles, 482 U.S. 304

(1987). The unusual posture of the case required the

Court to assume that the regulation “took” plaintiff ’s

property by denying him “all use” of it. Id. at 311-12.

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The Court also assumed that the provision remained

in effect until it was “ultimately invalidated by the

courts.” Id. at 310. Given these assumptions, First English held that the eventual “abandonment by the government [of the regulation, following its judicial

invalidation, still] require[d] payment of compensation

for the period of time during which [the] regulation[ ]

den[ied] [the] landowner all use of his land.” Id. at 318.

The analysis in First English was necessarily restricted to the issue of just compensation. But the

Court still suggested that a retrospectively temporary

regulation denying “all use” of property would effectuate a categorical taking. Analogizing the land-use regulation at issue to cases such as Kimball Laundry Co.

v. United States, 338 U.S. 1 (1949), in which “the government [ ] temporarily exercised its right to use private property,” the Court declared that such

“ ‘[retrospectively] temporary’ takings . . . are not different in kind from permanent takings.”3 First English,

482 U.S. at 318.

Five years later, in Lucas v. South Carolina

Coastal Council, 505 U.S. 1003 (1992), the Supreme

Court once again confronted retrospectively temporary

government action, this time expressly holding that

This court has inserted the bracketed word “retrospectively” in the quotation to match the parlance used in this Order.

First English defined “ ‘temporary’ regulatory takings” as “regulatory takings which are ultimately invalidated by the courts.”

482 U.S. at 310. It was not until Tahoe-Sierra that retrospectively

temporary regulations were distinguished from facially temporary regulations.

85a

such action effectuated a categorical taking. The challenged statute, at the time it was enacted, “flatly prohibited” the “construction of occupiable improvements”

on a barrier island known as the Isle of Palms, where

Lucas had property. Id. at 1008-09. The lower court determined that this statute rendered Lucas’s parcel

“valueless”; this finding went unchallenged in the Supreme Court. Id. at 1009. While the appeal was pending, the South Carolina legislature amended the

statute to permit some future development on the Isle

of Palms. The Supreme Court held that the statute still

effectuated a categorical taking, explaining that such

an amendment had no effect on whether there had

been a temporary categorical taking during “the 19881990 period” when the original statute was in effect.

Id. at 1010-14 (citing First English, 482 U.S. 304).4

The litigation in Tahoe-Sierra, unlike First English and Lucas, involved a facially temporary development moratorium on property near Lake Tahoe. The

Ninth Circuit noted that there was “no evidence that

owners or purchasers of property in the basin anticipated that the temporary moratorium would continue

indefinitely.” 216 F.3d at 782. The Ninth Circuit assumed arguendo that the temporary moratorium “prevented all development in the period during which it

was in effect.” Id. at 780 n.20. The court held that the

moratorium nonetheless “did not effect a categorical

The Supreme Court’s citation to First English suggests

that, had it been asked to consider the issue, it would have held

that the retrospectively temporary regulation in that case effectuated a categorical taking.

86a

taking” because it “did not deprive the plaintiffs of all

of the [economic] value or use of their property.” Id. at

782.

In reaching this conclusion, the Ninth Circuit emphasized the limited duration of the regulation, explaining that the “temporary moratorium did not

deprive the plaintiffs of all `use’ of their property” and

had no effect on future uses whatsoever. Id. Moreover,

the temporary moratorium “did not render the plaintiff ’s property valueless” because the “anticipat[ion]”

that the moratorium would end ensured that the property retained “substantial present value” based on the

value of the future uses. Id. at 781.

The Ninth Circuit then drew a distinction between

facially and retrospectively temporary regulations:

This “economic reality is precisely what differentiates a permanent ban on development,

even if subsequently invalidated, from a temporary one. . . . [W]hen a permanent development ban (like the one at issue in Lucas) is

enacted, the value of the affected land plummets, on account of the fact that the ban bars

all future development of the property.”

Id. at 781 n.26 (emphasis added).

On certiorari, the Supreme Court seemed to rely

on the same distinction. The Court described Lucas as

having held that a “permanent `obliteration of the

value’ of a fee simple estate constitutes a categorical

taking.” Tahoe-Sierra, 535 U.S. at 331. It noted that

Lucas could “not answer the question whether a

87a

regulation prohibiting any economic use of land for a

32-month period has the same legal effect.” Id. at 33132 (emphasis added).

The Court then articulated a professedly “narrow”

holding that “a temporary regulation that, while in effect, denies a property owner all viable economic use

of her property” does not always effectuate a Lucas

taking. Id. at 307, 320. The Court again distinguished

Lucas, noting that “[a]s the statute read at the time of

trial, it effected a taking that ‘was unconditional and

permanent.’ ” Id. at 329-30 (citing Lucas, 505 U.S. at

1012).5 But “[l]ogically, a fee simple estate cannot be

rendered valueless by a temporary prohibition on economic use, because the property will recover value as

soon as the prohibition” lapses. Id. at 332 (emphasis

added). To permit recovery on a categorical theory

would mean violating the parcel-as-a-whole-rule; i.e.,

the rule that a regulation should be analyzed based on

its effect on the parcel “in its [temporal] entirety.” Id.

at 327.

The reasoning driving Tahoe-Sierra applies only

to facially temporary regulations, not to regulations

that are temporary only in retrospect. Setting aside

The Court focused on how the statute read “at the time of

trial.” Tahoe-Sierra, 535 U.S. at 329. But see Res. Invs., 85 Fed.

Cl. at 484 (holding in the context of a challenge to a permit denial

that was later invalidated that whether there was “a categorical

taking of the parcel as a whole, a partial taking [under Penn Central], or no taking at all depends only on the effect of that particular denial on plaintiffs’ property interests at the time of the

denial” (second emphasis added)).

88a

regulations with outlandish time horizons, it is impossible for a facially temporary regulation to destroy all

economically beneficial use of property, as future uses

will retain some present value. See id. at 332; TahoeSierra, 216 F.3d at 728. Thus, Tahoe-Sierra’s “narrow”

holding makes sense. The situation changes, however,

when a regulation is facially unbounded. Because such

a regulation will affect the permissibility of present

and future uses, it is possible that the landowner has

retained no permissible economically beneficial uses,

and a categorical takings claim may be viable. See

Tahoe-Sierra, 216 F.3d at 781 n.26; see also Res. Invs.,

85 Fed. Cl. at 480-84.

The Supreme Court has recognized that a later

amendment to a regulation or a judicial invalidation

cannot erase any taking “for the period of time during

which regulations deny a landowner all use of his

land.” First English, 482 U.S. at 318; see also Lucas, 505

U.S. at 1010-14; cf. Tahoe-Sierra, 535 U.S. at 328

(“[W]here the government’s activities have already

worked a taking of all use of property, no subsequent

action by the government can relieve it of the duty to

provide compensation for the period during which the

taking was effective.” (quoting First English, 482 U.S.

at 321)).

Similarly, only facially temporary regulations can

trigger violations of the parcel-as-a-whole rule. As the

Supreme Court explained in Tahoe-Sierra, a regulation with a 32-month duration can effectuate a categorical taking only if a court were to “effectively sever

a 32-month segment from the remainder [of the fee],

89a

and then ask whether that segment has been taken in

its entirety.” 535 U.S. at 331. Such “conceptual severance,” the Supreme Court observed, would violate the

parcel-as-a-whole rule. Id. By contrast, an unbounded

regulation “extinguish[es] present and future use interests.” Res. Invs., 85 Fed. Cl. at 481; see also TahoeSierra, 216 F.3d at 781 n.26. Accordingly, one need not

slice the parcel into temporal segments to conclude

that a categorical taking took place while the regulation was in effect.

In sum, Tahoe-Sierra is properly understood as

creating an exception to the rule outlined in First English and Lucas. The amendment, repeal, or nullification of government action cannot nullify the duty of the

government to provide compensation “for the period of

time during which regulations deny a landowner all

use of his land.” See First English, 482 U.S. at 318. But

since facially temporary regulations cannot, by definition, destroy the economic viability of future uses, they

cannot be Lucas takings.

The only other federal court to have articulated a

definitive position on this issue reached a similar conclusion.6 In Resource Investments, Inc. v. United States,

The Federal Circuit has addressed this issue in dicta, “refrain[ing] from ruling out the rare possibility that a temporary

categorical taking could exist.” Sartori v. United States, 67 Fed.

Cl. 263, 275 (2005); see also Seiber v. United States, 364 F.3d 1356,

1368 (Fed. Cir. 2004) (“[O]ur case law suggests that a temporary

categorical taking may be possible. In Boise Cascade[,] we explained that the Supreme Court may have only ‘rejected [the] application of the per se rule articulated in Lucas to temporary

development moratoria.’ ” (third alteration in original) (internal

90a

85 Fed. Cl. 447 (2009), the plaintiffs argued that a

permit denial constituted a categorical taking under

Lucas, even though the denial had been overturned in

court. See id. at 484. The defendants, like the State in

this case, replied that “there is no such thing as a temporary categorical taking.” Id. at 468. The court in

Resource Investments sided with the plaintiffs. It drew

a distinction between facially temporary regulations

and retrospectively temporary regulations, holding

that the latter can still undergird a Lucas claim:

[In Tahoe-Sierra, the regulations at issue]

were expressly temporary when enacted. . . .

This, as the Supreme Court explained, was

not a taking of the parcel of the whole because

the landowners’ future interests, though diminished in value, always remained intact.

Thus, at the moment the moratorium took effect, it effected a taking of property values for

a finite and limited segment of time rather

than permanently and indefinitely.

In contract, when [the statute at issue] took

effect in Lucas, it prohibited any and all further development of the affected property, extinguishing the present and future use

interests rather than merely diminishing

their value. Although the South Carolina Legislature might have abrogated the [statute] by

subsequent statute or amended it, . . . the

[statute] was not temporary at the time it was

enacted. . . . [Thus, the statute] would and

citations omitted) (quoting Boise Cascade v. United States, 296

F.3d 1339, 1350 (Fed. Cir. 2002))).

91a

could only be temporary in retrospect, as it

was permanent by its own text.

Id. at 480-81 (internal citations omitted) (emphases in

original). Because “subsequent events cannot change

what property interests the taking took when it accrued[,]” the court held that “applying Lucas to plaintiffs’ [retrospectively] temporary regulatory takings

claim would [not] violate Tahoe-Sierra.” Id. at 469, 484.

The reversion order at issue here, like the statute

in Lucas and the permit denial in Resource Investments, “was permanent by its own text.” See Res. Invs.,

85 Fed. Cl. at 481. It became “temporary in retrospect”

only after the Hawaii Supreme Court intervened. See

id. (emphasis omitted); see also ECF No. 401, PageID

# 9615. Bridge Aina Le‘a is not precluded from litigating its Lucas claim solely because the reversion order

was overturned in court.

e. The Court Properly Instructed

the Jury that the Denominator

Was the 1,060-Acre Parcel.

The State’s final argument concerning Bridge

Aina Le‘a’s Lucas claim is that this court “erred in instructing the jury” that it should examine the impact

of the reversion order on the reclassified 1,060-acre

tract, rather than assessing whether the “entire 3,000

acre tract” owned by Bridge Aina Le‘a was deprived of

any economically viable use. ECF No. 385-1, PageID

# 9301. This argument requires some unpacking, but is

similarly without merit.

92a

The State’s argument implicates what is known as

the “denominator problem” in takings law, which asks

what “the proper unit of property [is] against which to

assess the effect of the challenged governmental action.” Murr v. Wisconsin, 137 S. Ct. 1933, 1938 (2017).

In Murr, the Supreme Court articulated a number of

factors that a court should weigh in setting the proper

denominator.7 See id. at 1946-49. After considering

these factors, this court instructed the jury, over the

State’s objection, as follows:

In determining whether the Land Use Commission’s action amounted to a taking, you

should restrict your analysis to the parcel of

land that was the subject of the Land Use

Commission’s reversion order (approximately

1060 acres). You should not examine what, if

any, impact the Land Use Commission’s action had on any other parcel of land.

ECF No. 372, PageID # 7454.

The above instruction was this court’s modification, over the State’s objection, of the following instruction submitted by the State:

When performing your taking analyses, you

must first determine “whether reasonable

The denominator issue was not expressly discussed in the

State’s earlier motion for judgment as a matter of law, but the

State presents the issue as subsumed in the portion of its motion

challenging the State’s Lucas claim. The court’s recollection is

that the denominator issue was first actually discussed when jury

instructions were settled. The State had included in its proposed

instructions its suggested denominator instruction.

93a

expectations about property ownership would

lead the plaintiff to anticipate that its land

should be treated as one parcel, or, instead, as

separate tracts.” To make this determination,

you should consider three factors.

First, you must “give substantial weight to the

treatment of the land, in particular how it is

bounded or divided, under state and local law.

The reasonable expectations of an acquirer of

land must acknowledge legitimate restrictions affecting his or her subsequent use

and dispensation of the property.”

Second, you “must look to the physical characteristics of the” plaintiff ’s [ ]property. These

include the physical relationship of any distinguishable tracts, the parcel’s topography,

and the surrounding human and ecological

environment.” You may consider whether “the

property is located in an area that is subject

to, or likely to become subject to, environmental or other regulations.”

Third, you “should assess the value of the

property under the challenged regulation,

with special attention to the effect of the burdended land on the value of other holdings.

Though a use restriction may decrease the

market value of the property, the effect may

be tempered if the regulated land adds value

to the remaining property, such as by increasing privacy, expanding recreational space, or

preserving surrounding natural beauty.”

ECF No. 323, PageID #s 6786-87 (quoting Murr, 137

S. Ct. at 1945-46.)

94a

The State believes that the court erred by either

1) failing to submit the denominator question and the

Murr factors to the jury, or 2) by not holding that the

denominator as a matter of law was the “entire 3,000

acre” parcel owned by Bridge Aina Le‘a, approximately

2,000 acres of which is classified as agricultural land.

See ECF No. 385-1, PageID #s 9302, 9314-15. The State

asks the court “to rectify [these] error[s]” by either declaring that the entire 3,000 acres is the proper denominator – which the State believes would negate Bridge

Aina Le‘a’s Lucas claim – or by ordering a new trial

and submitting the Murr factors to the jury. Id.

The court is not persuaded that it erred. The court

resolved the denominator question itself, rather than

submitting it to the jury because the “relevant parcel

determination is a question of law based on underlying

facts.” See Lost Tree Vill. Corp. v. United States, 707

F.3d 1286, 1292 (Fed. Cir. 2013) (citing Palm Beach

Isles Assocs. v. United States, 208 F.3d 1374, 1380 (Fed.

Cir. 2000)). In Murr, the Supreme Court described the

denominator question as an issue for courts to resolve,

and indeed resolved the question itself. See 137 S. Ct.

at 1950. Murr further analogized the denominator

problem to the issue of defining “property rights under

the Takings Clause.” Id. at 1944-45. That is another

“question of law for the judge” that is based on underlying facts. Phillips v. Marion Cty. Sherriff ’s Office, 494

Fed. App’x 797, 799 (9th Cir. 2012); see also Sierra Med.

Servs. Alliance v. Kent, 883 F.3d at 1223-25 (holding in

a takings case and as a matter of law that an interest

in reimbursement is a Fifth Amendment property

95a

interest). This court did not err in declining to submit

the ultimate Murr balance to the jury. See ECF No.

385-1, PageID # 9315.

The State also complains that this court resolved

the denominator question “without any motion by

plaintiff.” ECF No. 385-1, PageID # 9314. When a case

implicates a denominator problem, the timing of its

resolution will sometimes depend on the nature of any

factual disputes in the case. In some cases, it will be

possible for a court to resolve denominator issues before evidence is presented at trial. See, e.g., Kaiser Dev.

Co. v. City & Cty. of Honolulu, 649 F. Supp. 926, 948 (D.

Haw. 1986) (holding on summary judgment that in

“this case, Queen’s Beach is to be considered as a separate parcel for the purposes of determining whether

there has been a taking”), aff ’d, 898 F.2d 112 (9th Cir.

1990) (affirming for the “reasons stated” in the district

court’s opinion). But because the Murr balance depends on underlying facts, it is not always possible to

perform that balancing before trial. Cf. Am. Sav. &

Loan Ass’n v. Marin Cty., 653 F.2d 364, 367 (9th Cir.

1981) (reversing the district court’s denominator decision because there had been no resolution of the underlying “factual issue” of whether the two parcels

would have been “treated separately” had plaintiff

“submit[ted] a development plan”).

In this case, the parties did not raise the denominator issue before trial, and the question came before

the court when the court addressed the State’s proposed jury instruction on the issue. See ECF No. 323,

PageID # 6786. By that time, the court had heard

96a

evidence presented at trial. Based on that evidence, the

court instructed the jury that the proper denominator

was the 1,060-acre parcel. See ECF No. 372, PageID

# 7454. In so doing, the court followed the procedure

outlined by the Seventh Circuit in United States v.

105.40 Acres of Land, More or Less, in Porter County,

State of Indiana, 471 F.2d 207 (1972), under which “the

district judge should – upon proper consideration of evidence – decide the factual question whether the [ ] parcels . . . were functionally separate parcels . . . [and]

should then instruct the jury . . . consistent with [her]

preliminary factual determination.” Id. at 212.

Besides questioning the court’s decision to select

the denominator itself, the State also takes issue with

what denominator the court selected. See ECF No. 3851, PageID # 9301 (“Under Murr, the denominator of the

property is the entire 3,000 acre project area, not

merely the 1,060 acre urban portion”). The court is not

persuaded that its selection was in error.

In setting the denominator, a court must ultimately decide “whether reasonable expectations about

property ownership would lead a landowner to anticipate that his holdings would be treated as one parcel,

or, instead, as separate tracts.” Murr, 137 S. Ct. at

1945. “The inquiry is objective, and the reasonable expectations at issue derive from background customs

and the whole of our legal tradition.” Id. The plaintiff

bears the burden of showing that parcels “have been,

or would be, treated separately[.]” See Am. Sav. & Loan

Ass’n, 653 F.2d at 372.

97a

Three factors affect the appropriate denominator.

“First, courts should give substantial weight to the

treatment of the land, in particular how it is bounded

or divided, under state law.” Murr, 137 S. Ct. at 1945.

In so doing, courts should look to “whether and to what

degree the State’s law has accorded legal recognition

and protection to the particular interest in land with

respect to which the takings claimant alleges a diminution” and further weigh whether the State’s treatment of the land “accord[s] with other indicia of

reasonable expectations about property.” Id. at 194647. Whether the land was treated separately and how

any boundary lines were drawn prior to the “landowner’s acquisition . . . [are among] the objective factors that most landowners would reasonably consider

in forming fair expectations about their property.” Id.

at 1946. If the State law differentiates between parcels,

that weighs in favor of narrowing the denominator; if

the State treats them as an undifferentiated whole,

that weighs in favor of expanding the denominator. See

id. at 1948.

“Second, courts must look to the physical characteristics of the landowner’s property.” Id. at 1946.

“These include the physical relationship of any distinguishable tracts, the parcel’s topography, and the surrounding human and ecological environment.” Id. The

more physical similarity, the more a landowner might

reasonably “anticipate that his holdings would be

treated as one parcel” rather than as separate parcels.

Id. at 1946, 1948-49.

98a

“Third, courts should assess the value of the property under the challenged regulation, with special attention to the effect of burdened land on the value of

other holdings.” Id. at 1946. If “the market value of the

[surrounding] properties may well increase . . . [due to]

development restraints,” that “may counsel in favor of

treatment as a single parcel.” Id. In other words, a

court should ask if there is “a special relationship between the holdings” such that “the regulated lands add

value to the remaining property” by, for example, “increasing privacy, expanding recreational space, or preserving surrounding natural beauty.” Id.

These factors, especially the first requirement that

a court give “substantial weight to the treatment of

land . . . under state law,” id. at 1946, coincide with how

the Ninth Circuit has historically resolved denominator issues. One touchstone in Ninth Circuit precedent

has been that a denominator should be split if 1) state

law “adopt[s] different zoning designations for each

parcel” and 2) the parcels are “treated separately”

when “development plans are submitted and considered.” Am. Sav. & Loan Ass’n, 653 F.2d at 370-71. American Savings and Loan Association v. County of Marin,

653 F.2d 364 (9th Cir. 1981), drew this rule-of-thumb

from the Supreme Court’s 1928 decision in Nectow v.

City of Cambridge, 277 U.S. 183 (1928), in which:

a landowner owned a tract of 140,000 square

feet. Of that, 29,000 square feet were zoned

residential and the rest were unrestricted.

The landowner contended the residentially

zoned land had been taken. In judging the

99a

validity of the ordinance as a police power

measure, the court considered the smaller

tract separately from the larger tract.

Am. Sav. & Loan Ass’n, 653 F.2d at 370 (discussing

Nectow).

The Ninth Circuit applied the American Savings

rule in Kaiser Development Co. v. City & Cty. of Honolulu, 649 F. Supp. 926 (D. Haw. 1986), aff ’d, 898 F.2d

112 (9th Cir. 1990).8 Recognizing that “differential zoning tend[s] to require [ ] separate evaluation for takings purposes,” the Ninth Circuit agreed with the

district court’s conclusion that, “under the facts of this

case, Queen’s Beach is to be considered as a separate

parcel for the purposes of determining whether there

has been a taking.” 649 F. Supp. at 947 n.30, 948 (citing

Am. Sav. & Loan Ass’n, 653 F.2d at 371). The district

court explained:

Queen’s Beach is non-contiguous since it is

separated from the rest of Hawaii Kai by a

road; Queen’s Beach has not been developed

by Bishop as part of the residential community of Hawaii Kai; Bishop and Kaiser have

always considered Queen’s Beach a separate

area on which they seek to build a resort. Most

importantly, the City has treated Queen’s

Beach separately for zoning and planning purposes. The City has zoned Queen’s Beach for

preservation uses, while most of the rest of

The citations refer to the district court’s opinion because

the Ninth Circuit affirmed “for the reasons stated by Judge King.”

See Kaiser Dev. Co., 898 F.3d at 113.

100a

Hawaii Kai is zoned residential, and Queen’s

Beach has consistently had a different land

use designation from the rest of Hawaii Kai.

Under the General Plans of 1960 and 1964,

under the DLUMs of 1964 and 1966, under

the 1973 revised City Charter, and under the

1983 Development Plan, for example, Queen’s

Beach has been designated either commercial/resort or park/preservation, while the rest

of Hawaii Kai has been designated primarily

for residential use. In summary, under the

facts of this case, Queen’s Beach is to be considered a separate parcel. . . .

Id. at 947-48 (emphasis added).

Under Murr, American Savings, and Kaiser Development, the appropriate denominator is the 1,060

acres classified as urban, not also the 2,000 or so acres

that was classified as agricultural. The State, for periods relevant here, had adopted “different zoning designations for each parcel.” See Am. Sav. & Loan Ass’n,

653 F.2d at 370-71. The parties agree that the 1,060acre parcel was “the only part classified for Urban use

when Bridge [Aina Le‘a] bought the [3,000-acre] Property.” ECF No. 401, PageID # 9613; ECF No. 385-1,

PageID # 9302 (“[O]nly [the] 1,060 acres of land [w]as

urban”). The Land Use Commission’s sole attempt to

shift its classification was nullified by the Hawaii Supreme Court. See DW Aina Lea Dev., LLC v. Bridge

Aina Lea, LLC., 134 Haw. 187, 213-216 (2014). Thus,

the 1,060-acre parcel has been deemed separable from

the rest of the acreage. See Kaiser Dev. Co., 659 F. Supp.

at 948.

101a

The two parcels have also been “treated separately” when “development plans are submitted and

considered.” See Am. Sav. & Loan Ass’n, 653 F.2d at

370-71. Bridge Aina Le‘a’s development plans, its filings with the Land Use Commission, and the Land Use

Commission’s decisions and orders consistently distinguished between the two parcels and evinced a plan to

develop the 1,060-acre parcel separately. See ECF No.

382-11, PageID # 8063 (discussing Bridge Aina Le‘a’s

development plan pursuant to which “[t]he areas outside of the State Land Use ‘Urban’ District, which are

designated as ‘Agricultural’ by the State Land Use

Commission, will be developed as future phases and

therefore remain, for the most part, in their current

zoning and land use configuration” while the development in the urban district proceeds); see also, e.g., ECF

No. 382-1, PageID #s 7740, 7742; ECF No. 382-3,

PageID # 7773; ECF No. 382-6, PageID #s 7891-95;

ECF No. 382-11, PageID #s 8058-59. Based on the evidence presented at trial, it is clear that the urban lands

were treated “separately” for “planning purposes.” See

Kaiser Dev. Co., 649 F. Supp. at 948.

The State’s submission of “[n]ewly discovered evidence” in the form of an Environmental Impact Statement Preparation Notice (“EISPN”) submitted by

Bridge Aina Le‘a to the County of Hawaii Planning Department only serves to confirm these conclusions. See

ECF No. 385-1, PageID # 9315. The EISPN again distinguishes between the “approximately 1,933 acres of

the Project Area designated Agriculture” and the

“1,060 acres . . . in the Urban District.” See ECF No.

102a

385-2, PageID #s 9326, 9330. It describes development

plans that will “focus first on the Urban lands, and

later on the area [ ] in the Agricultural district.” See

ECF No. 385-2, PageID # 9329 (“[It is hoped] that development of the Urban area can proceed subject to

County approvals. The EIS can also serve as a source

of information for a petition to the State Land to reclassify land owned by Bridge in the Agricultural District to Rural, after which a petition to the County may

request zoning changes for that land.”).

The State emphasizes that the EISPN says that

there must be an Environmental Impact Statement

that “cover[s] the entire 3,000 acres.” ECF No. 385-1,

PageID # 9315 (citing ECF No. 385-2, PageID # 9326).

However, because the State differentiated the 1,060acre parcel from a zoning and developmental perspective, the Ninth Circuit’s decision in American Savings

indicates that it “must be analyzed as a separate parcel.” See 653 F.2d at 372 (emphasis added); cf. also

Murr, 137 S. Ct. at 1945 (“[C]ourts should give substantial weight to the treatment of the land . . . under

state law.” (emphasis added)).

An examination of the additional Murr factors

confirms this conclusion. The third Murr factor asks

whether the challenged regulation would “add value to

the [adjoining] property.” Murr, 137 S. Ct. at 1946. The

State points to no evidence in the record that it would.

This is not a case in which maintaining “development

restraints” on the 1,060-acre parcel will protect “unobstructed skyline views” on the adjoining 2,000 acres.

See id. at 1946, 1949. Because the adjoining acreage is

103a

largely undeveloped and classified as agricultural

land, see ECF No. 385-2, PageID # 9329, its market

value likely either decreased or remained unchanged

given the reversion order. Undeveloped property is presumably worth more (in economic terms) when it is

next to developed property than when it is next to undeveloped property. Individuals in a development may

value neighboring undeveloped land as “recreational

space.” See Murr, 137 S. Ct. at 1946; cf. ECF No. 38211, PageID #s 8059 (discussing Bridge Aina Le‘a’s plan

to install a “residential community” on the urban acreage and to install “golf courses” on the “agricultural

lots”). The third factor, like the first factor, weighs in

favor of splitting the denominator – or is at the very

least neutral.

The only Murr factor that may weigh in favor of

the State is the second factor, which looks at the physical characteristics of the landowner’s property. As the

State points out, the “entire 3,000 acres are contiguous

and constitute one area of land.” ECF No. 385-1,

PageID # 9302. The State also notes that there “is no

difference in the geographic or topological characteristics between the urban and agricultural portions.” Id.

Bridge Aina Le‘a did not dispute these characterizations of the evidence in the record in its Memorandum

in Opposition. See ECF No. ECF No. 401, PageID #s

9612-13. But contiguity and topological similarity do

not, without more, justify expanding the denominator.

Murr, American Savings, and Kaiser Development emphasize differential zoning and planning treatment.

This case remains one in which “reasonable

104a

expectations about property ownership would lead a

landowner to anticipate that his holdings would be

treated . . . as separate tracts.” Murr, 137 S. Ct. at

1945; see also Lost Tree Vill. Corp., 707 F.3d at 1293-95

(“[E]ven when contiguous land is purchased in a single

transaction, the relevant parcel may be a subset of the

original purchase where the owner develops distinct

parcels at different times and treats the parcel as distinct economic units.”).

At points, the State’s Renewed Motion attempts to

recast Murr’s analysis into an inquiry about what “the

project area” is. See, e.g., ECF No. 385-1, PageID # 9302

(arguing that the correct denominator is the “3,000

acres” because Bridge Aina Le‘a “purchased the entire

3,000 acres” and its “plans to develop the area viewed

the project area as consisting of 3,000 acres”). But the

lodestar of denominator analysis is not what the “project area” is; it is whether a reasonable landowner

would anticipate that his holdings would be treated

separately. See Murr, 137 S. Ct. at 1945. A reasonable

landowner in Bridge Aina Le‘a’s position certainly

would.

The court did not err in instructing the jury that

the 1,060-acre parcel was the proper denominator. The

jury’s finding of a Lucas taking is supported by adequate evidence as a result.9

The State also argues that the Ninth Circuit’s decision in

Colony Cove Properties, LLC v. City of Carson, 888 F.3d 445

(2018), is “instructive” vis-à-vis Bridge Aina Le‘a’s Lucas claim.

See ECF No. 392, PageID # 9413. The court cannot discern how

105a

4. Bridge Aina Le‘a’s Finding of a Penn

Central Taking Is Supported by Adequate Evidence.

The jury’s verdict is independently supported by

its finding that a taking occurred under a Penn Central

analysis. See Palazzolo, 533 U.S. at 632-33 (discussing

Penn Central Transp. Co. v. City of New York, 438 U.S.

104 (1978)); ECF No. 373. The court instructed the jury

concerning Penn Central as follows:

To determine whether the Land Use Commission’s action was a taking under Taking Analysis No. 2, you should consider three factors:

(1) The economic impact of the regulation on

Bridge Aina Le‘a,

(2) The extent to which the regulation has interfered with distinct investment-backed

expectations, and

(3) The character of the governmental action.

You must weigh these three factors to decide

whether the Land Use Commission’s action

went too far in its impact on Bridge Aina

Le‘a’s property. If, after considering these factors, you find by a preponderance of the evidence that the action went too far, you should

resolve Taking Analysis No. 2 in favor of

Bridge Aina Le‘a. If, on the other hand, you do

that might be so. Colony Cove concerned a takings claim under

Penn Central and does not appear to have any bearing on the validity of the jury’s Lucas verdict. See 888 F.3d at 450-55.

106a

not find by a preponderance of the evidence

that the action went too far, you should resolve Taking Analysis No. 2 in favor of the

Land Use Commission.

These are factors, not a set formula. No factor

by itself is necessarily determinative or conclusive. Primary among these factors are the

economic impact of the regulation on the

claimant and, particularly, the extent to which

the regulation has interfered with distinct investment-backed expectations.

ECF No. 372, PageID # 7459. This instruction was

given with the agreement of the parties.

Contrary to the State’s assertions, see ECF No.

385-1, PageID #s 9304-13, the jury reasonably concluded that all three Penn Central factors weigh in favor of Bridge Aina Le‘a.

a. Economic Impact.

The first Penn Central factor concerns the “economic impact of the regulation on the claimant.” Penn

Central, 438 U.S. at 124. The court instructed the jury:

you must consider the economic impact of the

Land Use Commission’s action in reverting

the property on Bridge Aina Le‘a.

Diminution in property value, standing alone,

cannot establish a taking under Taking Analysis No. 2.

The economic impact of the regulation on

Bridge Aina Le‘a may be measured by the

107a

change, if any, in the fair market value to

Bridge Aina Le‘a’s interest in the property

caused by the regulatory imposition.

Bridge Aina Le‘a must show that the Land

Use Commission’s action caused the economic

impact, not Bridge Aina Le‘a itself, a third

party, or independent circumstances.

ECF No. 372, PageID # 7461. This instruction was

given with the agreement of the parties.

The State claims that the evidence failed to show

a “legally sufficient economic impact.” ECF No. 385-1,

PageID # 9306. According to the State, “there is no evidence that the [Land Use Commission’s] action affected Bridge in any way.” Id. The State is mistaken on

multiple levels.

First, the State appears to rely, at least in part, on

its prior assertion that Bridge Aina Le‘a “sold the property” and retained only a token interest in the land.

ECF No. 385-1, PageID # 9293. As the court has already explained, the jury could have reasonably concluded that Bridge Aina Le‘a’s property interests in the

land were substantial and that its interests

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This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.