# Amicus Curiae Brief — RCK Properties, Inc. v. United States, 120 S. Ct. 373 (1999) (No. 99-286)

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1999

## Text

Supreme Ceurt, UG
EFILED

In the
Supreme Court of the United States

-
. 4

FOREST PROPERTIES, INC.,
Petitioner,
v.

UNITED STATES,
Respondent.

rs
~ 4

On Petition for Writ of Certiorari to the United States
Court of Appeals for the Federal Circuit

A.
- 4

BRIEF AMICUS CURIAE OF PACIFIC LEGAL
FOUNDATION IN SUPPORT OF PETITIONER

,™
—_

JAMES S. BURLING
Counsel of Record
Pacific Legal Foundation
10360 Old Placerville Road,

Suite 100

Sacramento, California 95827
Telephone: (916) 362-2833
Facsimile: (916) 362-2932

Counsel jor Amicus Curiae
Pacific Legal Foundation

i
QUESTIONS PRESENTED

1. May government deny a Clean Water Act § 404 permit
thereby taking a parcel of real property and avoiding the payment
of just compensation by claiming that the parcel is not the
relevant parcel but rather part of a larger parcel when in fact it
was a separate parcel acquired at a different time and by a
different method, is under different ownership, is located in a
different political jurisdiction, and is subject to an entirely
different permit process?

2. May a property purchaser be denied just compensation
because of notice of a preexisting governmental permit scheme,
especially one that does not indicate the property owner has any
reason to believe its permit application would not be granted or
that, if not, just compensation would not be paid?

TABLE OF CONTENTS

QUESTIONS PRESENTED ... cc scccccccccccveccces

TABLE OF AUTHORITIES .....ccsccccsssccvcceses

INTEREST OF AMICUS CURIAE .......cccccccvees
STATEMENT OF THE CASE .....ccccsscccccsccces
REASONS FOR GRANTING THE WRIT ............-. 3
SUMMARY AND INTRODUCTION ..........-5455. 3

I. WHEN GOVERNMENT TAKES PRIVATE
PROPERTY FOR A PUBLIC USE, IT OUGHT
TO PAY JUST COMPENSATION, EVEN IF
THE OWNER OWNS OR OWNED OTHER
PROPEREY 6s ccc ckdune Feuewueeeees veeevene

A.

A Taking of All Use of a Portion of an
Owner’s Property Warrants as Much
Protection as a Physical Invasion ............

The Lower Courts Do Not Agree on
Whether the Denial of All Use of a Portion
of a Single Parcel Is a Compensable Taking ....

A Few Courts Have Divided a Single Parcel
for the Purpose of a Takings Analysis .........

Courts Are Divided on How to Treat

a Landowner Who Has Already

Developed Other Land Near the Land

That Is Affected by a Prohibition ...........

The Federal Circuit Is One of Several
That Is in Conflict with the Logic of
i) Le GOP Tee a ee ee

7

9

iti

TABLE OF CONTENTS—Continued

Page
F. The Federal Circuit’s Holding in Forest
Properties \s Inconsistent With Those
Courts That Have Adopted the Doctrine
of Conceptual Severance... 6s ccccccccess 13

G. ‘Toward a Coherent Determination of the
Relevant Parcel--the Machipongo Example ... 14

Il. “NOTICE” OF A REGULATION DOES
NOT OBVIATE A TAKING .................. 17

A. The Government Should Not Be Rewarded
With a Windfall Just Because the Owner of
Property at the Time a Regulation Is
Adopted Is Not the One to Bring an As-

Applied Takings Claim ................... 17
B. The Federal Circuit Contradicts
This Court’s Holding in Lucas ............. 19

i ic6nes cna ee be ae eneeeteduh<¥enee et 20

iV

TABLE OF AUTHORITIES
Page
Cases
Agins v. City of Tiburon, 447 U.S. 255 (1980) .......... 4
American Savings and Loan Association v. County
of Marin, 653 F.2d 364 (9th Cir. 1981) .......... 9-10
Aptos Seascape Corp. v. County of Santa Cruz,
tie fF 8 0 ree errr 11
Babbitt v. Youpee, 519 U.S. 234 (1997) ..........04.. 14
Boise Cascade Corporation v. Board of Forestry,
ree oe er eee 8
Carson Harbor Village Ltd. v. City of Carson,
7F Fee Gs CEE bao cece rcekedsasiswes 19
Clajon Production Corp. v. Petera,
Fe Foe SCE es BED 0 do ob ce cocedaccessas 8
Creppel v. United States, 41 F.3d 627
ee Gale HE Dewi eaw owes heueeeerevesceces eat
Del Monte Dunes at Monterey, Lid. v. City of
Monterey, 95 F.3d 1422 (9th Cir. 1996),
Ce ee PPP ET EP ELT TT Eee 19
Fifth Avenue Corp. v. Washington County,
ge ree Y
First English Evangelical Lutheran
Church of Glendale v. Los Angeles
CO, See Ss PIED occ cccecebesGicnsenva 3

Florida Rock Industries, Inc. v. United States,
18 F.3d 1560 (Fed. Cir. 1994), cert. denied,
SR ae Se ED 'o-c4 0 Gb Oo 6a ee ber ckacaess 7-8

Vv

TABLE OF AUTHORITIES—Continued
Page
Florida Rock Industries, Inc. v. United States,

791 F.2d 893 (Fed. Cir. 1986), cert. denied,
ee ee ee ee ee 7

Good v. United States, 1999 WL 673336
(Fed. Cir. Aug. 31, 1999) (Case No. 97-5138) ....... 17

Hodel v. Irving, 481 U.S. 704 (1987) .............5.. 14

K & K Construction Co. v. Department of Natural
Resources, 575 N.W.2d 531 (Mich.), cert.
I, Si as PEE 6 85 V8.6 6 Cbd Keke tances 12

Kaiser Aetna v. United States,
oo Pt ee er re ae rr 5

Kaiser Development Co. v. City and County of
Honolulu, 649 F. Supp. 926 (D. Haw. 1986),
aff'd, 898 F.2d 112 (9th Cir. 1990)................ 10

Karam v. State of New Jersey Department of
Environmental Protection, 70S A.2d 1221 (N.J.
Super. 1998), affirmed by adopting appellate
opinion, 723 A.2d 943 (N.J. 1999), petition for
cert. filed, 67 U.S.L.W. 3774 (May 20, 1999)
CE FU SPL: Sade dwewsbb ke bceee ce eye 12,19

Keystone Bituminous Coal Association v.
DeBenedictis, 480 U.S. 470 (1987) .............44. 5

Loretto v. Teleprompter Manhattan CATV Corp.,
A RT | ee ere 5

Loveladies Harbor, Inc. v. United States, 28 F.3d
jut, $> % Per epee errr 10-11

Lucas v. South Carolina Coastal Council,
Fae Ws POEUN co dv cesetdecceces 5-6, 12, 17, 20

vi

TABLE OF AUTHORITIES—C ontinued
Page
Machipongo Land and Coal Co. v.

Commonwealth of Pennsylvania,
719 A.2d 19 (Penn. 1998) 2.0... 0.0. cece eee ee 15-16

Manocherian v. Lenox Hill Hospital, 84 N.Y.2d
385, 643 N.E.2d 479 (N.Y. 1994), cert. denied,
15D GS CR. FSGS Capea 6b hresw en eees cbhekue tenes 13

Nectow v. Cambridge, 277 U.S. 183 (1928) ............ i)

Nollan v. California Coastal Commission,
4E3 U.S. Gis CHGS hevvndetdbcewetvevisesssO 1,3

Penn Central Transportation Company v.
New York City, 42 N.Y.2d 324,

eo PE & fee ty fy) ei tte 12
San Diego Gas & Electric Co. v. City of

San Diego, 450 U.S. 621 (1981)... ........ cece wees 6
Seawall Associates v. City of New York, 74 N.Y.2d

92, 542 N.E.2d 1059 (N.Y. 1989) ..... cc cccccees 13

Suitum v. Tahoe Regional Planning Agency,
RE ee Te ee er eer er a |

Twain Harte Associates, Lid. v. County of
Tuolumne, 217 Cal. App. 3d 71 (1990) «2... ....4.. 1]

United States v. Riverside Bayview
Homes, Inc., 474 U.S. 121 (1985) ..... 2.2... eee 18

Vatalaro v. Department of Environmental
Regulation, 601 So. 2d 1223, rev. denied,
tt ww ee! | Ue eee 19

vil

TABLE OF AUTHORITIES—Continued
Page

Volkema v. Department of Natural
Resources, 542 N.W.2d 282 (Mich.
App. 1996), aff'd, 42 N.W.2d 282,
cert. denied, 119 S. Ct. 590 (1998)... .........00455. 12

Whitney Benefits, Inc. v. United States,
926 F.2d 1169 (Fed. Cir.), cert. denied,
Pe ey SN cb e004 sb bs cet be cebetccdecses &

Williamson County Regional Planning
Commission v. Hamilton Bank of Johnson

Cay Ga Gees BOS CUD Bi hovers caccsicccecees 18
Rules of the Court
United States Supreme Court Rule 37 ................. |
SD SPUD bb ov cews en ah dbbvés 60 tbedeceoveseedes |
Miscellaneous

Steven J. Eagle, The 1997 Regulatory Takings
Quartet: Retreating from the “Rule of Law,”
42 N.Y.L. Sch. L. Rev. 345 (1998) ............. 19-20

John F. Fee, Unearthing the Denominator
in Regulatory Takings Claims, 61 U.
Cah Ss Hes MEUPENUED coc cccceceseceesiocs 14-16

]

INTEREST OF AMICUS CURIAE'

Pacific Legal Foundation is a nonprofit public interest legal
foundation that specializes in defending property rights and other
individual liberties. Since its inception 26 years ago, PLF has
had extensive litigation experience in cases involving individuals
adversely affected by the government regulation of private

property.

Attorneys for Pacific Legal Foundation have represented
other property owners before this Court when regulatory agencies
have taken rights in property without the payment of just
compensation, see, ¢.g., Suitum v. Tahoe Regional Planning
Agency, 520 U.S. 725 (1997), Nollan v. California Coastal
Commission, 483 U.S. 825 (1987), and have participated as
amicus curiae in almost all of the major Takings Clause cases
before this Court in the past 20 years. Pacific Legal Foundation
attorneys are also currently representing Mr. Bailey Jones in a
petition for certiorari before this Court in Jones vy. City of
Berkeley, Supreme Court Docket No. 98-1774, another case in
which an appellate court denied a property owner relief for a
regulatory taking. Because of the Foundation’s experience in the
field of regulatory takings, it can add a unique perspective that
will assist this Court’s consideration of this case.

Pursuant to Supreme Court Rule 37, written permission
from all parties for Pacific Legal Foundation to file this brief has
been lodged with the Clerk of this Court.

STATEMENT OF THE CASE

Forest Products, Inc. (FPI), acquired an equitable interest in
9.4 acres of property that were suitable for single-family home
development. (This equitable interest is a protected property

' Pursuant to Supreme Court Rule 37.6, Amicus Curiae Pacific Legal
Foundation affirms that no counsel for any party in this case authored
this brief in whole or in part; and furthermore, that no person or entity
has made a monetary contribution specifically for the preparation or
submission of this brief.

2

right according to California law.) The land was similar in many
respects to property that had already been developed in the area.

The property is in an environmentally significant area.
Petitioner’s Appendix (App.) at B10. FPI worked hard to make
the area--along with an adjacent 54-acre upland parcel--suitable
for development. In its final plan, FPI agreed to 25 mitigation
measures including avoidance of the rare plants, a scaled-back
development proposal, the setting aside of 16 acres of the uplands
as “open space” and wetlands mitigation. App. at B10-11.

Although it received the necessary state and local permits,
FPI had to obtain a permit from the United States Army Corps of
Engineers. The Corps asserted jurisdiction over the wetlands and
found that FPI’s final proposal would involve the fill of “7 acres
of vegetated shallows” and 1.6 acres of wetlands. App. at B16.
Because single-family homes are not “water-dependent,” and
because the Corps found that the property could be put to some
unspecified “alternative uses,” it denied a permit that was neces-
sary to build the homes. App. at B15-17. In other words,
building single-family homes in a wetland is out of the question.

FPI was able to develop the upland property that it owned
in fee but not the 9.4-acre parcel. Trial testimony indicated that
FP! was unable to make economically viable use of the 9.4 acres,
it lost several million dollars, and that its equitable title is
worthless. App. at AS-6, B20. FPI sued for a taking. /d. at B20.

The trial court found if it had focused on the 9.4-acre parcel
in which FPI had only an equitable interest, it “would most likely
have proceeded to analyze this case as a Lucas-type categorical
taking.” App. at B35. Instead, it forewent the categorical
approach and measured the loss of economically viable use by
looking at FPI’s total landholdings in the area-the 9.4-acre parcel
combined with the 54-acre parcel. Because FP! was able to make
use of the 54-acre parcel, FP! was also able to make enough use
of the total 63 acres of land (the 9.4 acres owned as an equitable
interest and the 54 acres owned in fee) to obviate a finding of a
regulatory taking, categorical or otherwise. App. at B54-55. The

3

court also found that, at the time FP! purchased its option to buy
in 1988,

the public was clearly on notice that the development
of wetland areas was subject to compliance with
section 404 of the Clean Water Act... . Indeed FPI
also had actual knowledge that the lakebottom
property was subject to the section 404 permit
application.

Id. at B47-48. Therefore FPI did not have any “reasonable
investment-backed expectation” to develop the property. See id.
at BSO.

The Court of Appeals affirmed. It found that the trial court
did not commit “clear error” when it directed its takings analysis
at the total 63 acres of land rather than the 9.4-acre parcel for
which the permit had been denied. The court also found that FP!
should be denied recovery because “[o]ne who buys with
knowledge of a restraint assumes the risk of economic loss.”
App. at Al2 (citing Creppel v. United States, 41 F.3d 627, 632
(Fed. Cir. 1995)).

REASONS FOR GRANTING THE WRIT
SUMMARY AND INTRODUCTION

Twelve years ago, this Court laid down the law in Nollan v.
California Coastal Commission, 483 U.S. 825, and First English
Evangelical Lutheran Church of Glendale v. Los Angeles
County, 482 U.S. 304 (1987), and explained that there was such
a thing as a regulatory taking and that money damages would
have to be paid in the event that a government agency takes
property through regulation. But this Court has left it to the lower
courts to define when a taking has actually occurred. The lower
courts have failed to reacii any consensus. Some landowners get
fairly compensated; most do not. Some courts have enunciated
clear standards; most have not. This case presents an opportunity
for this Court to clarify two of the more bedeviling questions in
takings jurisprudence. First, what happens when a landowner

4

faces something less than a total wipeout of his property
holdings? And second, what difference does it make to a govern-
ment’s ability to obtain property without paying just
compensation if the landowner knew of a regulatory regime
before acquiring the property? This amicus brief will explain that
this Court should grant FPI’s Petition for Writ of Certiorari
(Petition) in order to put an end to the confusion among the lower
courts and to ensure that the Constitution’s promise that property
Shall not be taken for public use without the payment of just
compensation becomes something more than a hollow promise.

WHEN GOVERNMENT TAKES PRIVATE
PROPERTY FOR A PUBLIC USE, IT OUGHT TO
PAY JUST COMPENSATION, EVEN IF THE
OWNER OWNS OR OWNED OTHER PROPERTY

A. A Taking of All Use of a Portion of an Owner’s Property
Warrants as Much Protection as a Physical Invasion

A taking can occur when a regulation deprives an owner of
the “economically viable use of his land.” Agins v. City of
?buron, 447 U.S. 255, 260 (1980). In analyzing what has
bee wie known as the “relevant parcel” or the “denominator
probh m,” this Court recognizes that, if a trial court were to
examin in a takings analysis only the discrete segment of
property. «is affected by a use prohibition, then it is more likely
that the cour: vill find a taking. Concomitantly a deprivation of
“economically v:.ble use” is less likely to be found if a court were
to examine the larg,*r land holdings of a landowner because, so
long as the owner can use some property, the owner has not been
deprived of economically viable use of all of his property. Thus
government regulators encourage courts to consider as the
“relevant parcel” the entirety of the affected parcel. Some
government advocates even suggest that courts should also
consider other lots owned by the landowner now or in the past
that are adjacent to or in the vicinity of the segment of land
actually impacted by the use prohibition.

a EN ee aE RR EIEN

5

This Court put the issue this way in Keystone Bituminous
Coal Association v. DeBenedictis, 480 U.S. 470 (1987):

Because our test for regulatory taking requires us
to compare the value that has been taken from the
property with the value that remains in the property,
one of the critical questions is determining how to
define the unit of property “whose value is to furnish
the denominator of the fraction.”

Id. at 497 (citation omitted).

In Lucas v. South Carolina Coastal Council, 505 U.S. 1003,
1015 (1992), this Court found that, when a regulation prohibiting
the construction of a single-family home in a residential
neighborhood denied “all economically beneficial or productive
use of land,” it was a “categorical” taking. In this Court’s
terminology, a “categorical” taking is one where the denial of all
economically viable use is a given and where no countervailing
concerns--such as the owner’s reasonable expectations or the
public interest advanced by the use prohibition--can negate the
need to pay just compensation for the taking. But this Court
expressly left open the question of whether a denial of all use of
a part of a parcel might constitute a regulatory taking. 50S U.S.
at 1016 n.7.

Quite naturally, government agencies argue that, the larger
the ratio between the total parcel and the area affected by the use
prohibition, the less likely it will be that there has been a
“categorical” taking of all use. But why should this be? For the
only other type of “categorical” takings--physical invasions--this
Court has made it plain that any physical invasion of any size is
a taking that can lead to the compensation requirement.

It is well known that, if government authorizes a “physical
invasion” of private property, it is a taking, no matter how smal!
a portion of the property may be affected. In both Kaiser Aetna v.
United States, 444 U.S. 164, 179-80 (1979), and Loretto v.
Teleprompter Manhattan CATV Corp., 458 U.S. 419, 435-40

6

(1982), this Court found that a physical invasion was a per se
taking, even though the interest in land affected by the invasion
was small (Kaiser Aetna) to minuscule (Loretto). Accord Lucas,
50S U.S. at 1014. And it is black letter law that, if the
government takes even a tiny portion of one’s property for a
public works project, the government must pay just
compensation. So why should it be any different if the
government destroys the use and value of a portion of property
through regulation rather than invasion? Indeed, the distinction
between physical invasion, formal condemnation, and regulatory
takings was questioned by Justice Brennan in 1981. Dfssenting
over this Court’s refusal to reach the merits in San Diego Gas &
Electric Co. v. City of San Diego, 450 U.S. 621 (1981), Justice
Brennan wrote:

Police power regulations such as zoning
ordinances and other land-use restrictions can destroy
the use and enjoyment of property in order to promote
the public good just as effectively as formal condem-
nation or physical invasion of property.

Id. at 652 (footnote omitted) (Brennan, J., dissenting). In other
words, if compensation must be paid when government action
results in a physical invasion of property, or if it builds on a
discrete segment of property, then why not if through regulation
the government converts a segment of private land into a de facto
and de jure refuge for wildlife, wetlands, or open space?

Government agencies counter, however, by arguing with
some justification that, if every prohibition on using a portion of
a parcel of property were to constitute a taking, then
government's ability to control inappropriate land uses would be
made more difficult. This tension between the interests of the
affected property owners and the need for efficient operation of
government has pervaded the case law on regulatory takings. For
the simple question of what is the relevant parcel when
government prohibits the use of only a discrete segment of land,
the lower courts are hopelessly split. The split is even more

7

pronounced when the question becomes more complicated, as
when multiple lots are involved or when some lots have already
been sold off. Fortunately, there is a coherent and logical
solution to this dilemma that has been suggested by one
commentator and which has been adopted by one lower court.
With this case, this Court can put an end to the unsatisfying state
of conflict in the lower courts and adopt a meaningful standard.
This brief will next describe the state of the conflict in the
relevant parcel doctrine and then suggest a workable solution.

B. The Lower Courts Do Not Agree on
Whether the Denial of All Use of a Portion
of a Single Parcel Is a Compensable Taking

In Florida Rock Industries, Inc. v. United States, 791 F.2d
893 (Fed. Cir. 1986), cert. denied, 479 U.S. 1053 (1987)
(Florida Rock 1), the Federal Circuit Court of Appeals was
confronted by a single 1,560-acre parcel subject to the Corps of
Engineers’ restrictions. The landowner argued that all 1,560
acres of its wetland mining property had been taken after a permit
to mine 98 acres was denied. 791 F.2d at 895-96, 904-05. The
government argued that there was no taking because the use of
only 98 acres had been denied--leaving the “parcel as a whole”
largely unaffected by the denial. /d. at 904. The Federal Circuit
rejected both arguments, holding that (1) it would be unfair to
award compensation for the 1,458 acres for which the applicant
had no immediate plans, id. at 904-05, and (2) the court would
focus on the 98 acres to see if there had been a taking. /d. at 904.

Several years after Florida Rock I, the Federal Circuit
responded to the government’s new argument that the takings
denominator should include more than the mineral rights and
surface resources needed for mining. The court disagreed:

By taking some portion of Florida Rock’s economic
use of the property--its power to disturb the overlying
wetlands, and with it the common law property right
to mine its subsurface minerals--the Government

8

appears to have destroyed part of the value of Florida
Rock’s holdings.

Florida Rock Industries, Inc. v. United States, 18 F.3d 1560,
1572 (Fed. Cir. 1994), cert. denied, 115 S. Ct. 898 (1995)
(Florida Rock IV). The court said this could be a taking. /d. It
also noted that in appropriate circumstances a subset of the
bundle of rights can be taken through inverse condemnation. See
id. at 1572 n.32. See also Whitney Benefits, Inc. v. United States,
926 F.2d 1169, 1174 (Fed. Cir.), cert. denied, 502 U.S. 952
(1991) (the court rejected the government’s suggestion that there
was no taking because the coal owner could farm about half of its
property.)

The Tenth Circuit in Clajon Production Corp. v. Petera,
70 F.3d 1566 (10th Cir. 1995), however, expressly rejected the
Florida Rock IV holding. Clajon involved an attempt to bring a
takings challenge to hunting regulations in Wyoming that limited ~
wild game licenses sold to hunters from out-of-state. The plain-
tiff, who owned a ranch and derived income from out-of-state
hunters, complained that this was a taking of a property right in
hunting. 70 F.3d at 1577. In ruling against the landowner, the
Tenth Circuit expressly rejected the Federal Circuit’s language in
Florida Rock IV that it can be appropriate to focus more narrowly
on the property interest actually taken:

However, we believe that the relevant denominator
must be derived from the entire bundle of rights
associated with the parcel of land. . .. Thus, we reject
the Florida Rock approach.

Id. (citations omitted).

More recently, in Boise Cascade Corporation v. Board of
Forestry, 935 P.2d 411 (Ore. 1997), a landowner was prohibited
from logging 56 acres on a 64-acre tract because of a spotted owl
nest. The Oregon Supreme Court held that the landowner could
State a claim for a regulatory taking. Jd. at 415-16. Thus the
court segregated the 56 acres of owl habitat from the remaining

9

8 acres of harvestable timber and considered the timber on the 56
acres to be the relevant parcel.

The lesson from these cases is that some courts have been
quite willing to focus on what has actually been taken out of a
single parcel. But in the case of Forest Properties, the Federal
Circuit is in conflict with itself and the Supreme Court of Oregon.
And while the Tenth Circuit is in conflict with Florida Rock,
there is no apparent conflict with Forest Properties.

C. A Few Courts Have Divided a Single Parcel
for the Purpose of a Takings Analysis

In American Savings and Loan Association v. County of
Marin, 653 F.2d 364 (9th Cir. 1981), the county placed two
contiguous sections of an owner’s property into two distinct
zoning classifications. First, there was a 48-acre section called
Strawberry Spit zoned as “urban open space” with a 5-acre mini-
mum lot size. Another 20-acre section known as “Strawberry
Point” was zoned to allow four “multiple residential units” per
acre. Id. at 367. The owner alleged a taking of Strawberry Point.
In response, the county advocated a “single parcel” theory under
which both the point and the spit would be considered together
in a takings analysis.

The court rejected as inapplicable cases where property was
treated as a single unit for takings purposes because in those
cases “the entire subject property was covered by a uniform
restriction.” Jd. Instead, the court noted that in Nectow v.
Cambridge, 277 U.S. 183 (1928), this Court “considered the
smaller tract separately from the larger tract.” American Savings,
653 F.2d at 370.

The Ninth Circuit also agreed with dicta in Fifth Avenue
Corp. v. Washington County, 581 P.2d 50, 60 (Ore. 1978), where
“the [Oregon Supreme] court divided the property analytically
into two parcels” depending on whether they were zoned as
developable or not. American Savings, 563 F.2d at 370.

10

Most significantly, the American Savings court concluded
by holding that if the appellant can show that

the Spit and Point have been, or would be, treated
separately when its development plans are submitted
. . . [then] the Spit must be analyzed as a separate

parcel for takings purposes.
Id. at 372.°

But in Forest Properties, although the Corps regulated only
the 9.4 acres of the lake bottom parcel, the court did mot consider
it to be a “separate parcel for takings purposes.”

D. Courts Are Divided on How to Treat a Landowner
Who Has Already Developed Other Land Near the
Land That Is Affected by a Prohibition

In Loveladies Harbor, Inc. v. United States, 28 F.3d 1171
(Fed. Cir. 1994), the landowner started off in the 1950’s with 250
acres. After some 199 acres had been subdivided and sold off,
the owner sought to develop the remaining 51. New Jersey
required the owner dedicate 38.5 acres as a wetland preserve in
order to get a state permit. When the Corps denied a permit on
the remaining 12.5 acres, the owner sued for a taking.

The government argued that the relevant parcel must be the
original 250 acres or, in the alternative, the 51 acres. The Federal
Circuit had no trouble holding that the 199 acres that were
developed and sold before the imposition of the current regula-
tory environment should not be considered in the denominator.

* Accord Kaiser Development Co. v. City and County of Honolulu,
649 F. Supp. 926 (D. Haw. 1986), aff'd, 898 F.2d 112 (9th Cir.
1990). (“Most importantly, the City has treated Queen’s Beach
separately for zoning and planning purposes. . . . [U]nder the facts of
this case, Queen’s Beach is to be considered a separate parcel for the
purposes of determining whether there has been a taking. 649 F.
Supp. at 947-48.).

1]

Id. at 1181. As for the 38.5-acre parcel, the court suggested it
would be “ungrateful in the extreme” to count the 38.5 acres in
the denominator. /d.

Similarly, in Twain Harte Associates, Ltd. v. County of
Tuolumne, 217 Cal. App. 3d 71 (1990), the county had applied
different zoning criteria to different portions of an 8.5-acre
parcel. After most of the 8.5-acre parcel had been developed, the
county rezoned an undeveloped 1.7-acre plot to open space. In
response to a taking allegation, the county argued that there was
no economic deprivation and no taking because the “8.5-acre
parcel has . . . undoubted monetary benefit” from the past
development. /d. at 85. The court first noted that “the nature of
a particular land use regulation has been recognized as potentially
creating separate parcels for ‘taking’ purposes.” /d. (citing Aptos
Seascape Corp. v. County of Santa Cruz, 138 Cal. App. 3d 484,
495-96 (1982); Nectow; and Fifth Avenue). The court concluded:

the law does not demand the entire 8.5 acre parcel be
treated as a whole in an “as applied” inverse
condemnation analysis.

Id. at 87.

In contrast to Twain Harte and its own decision in
Loveladies, the Federal Circuit decided in Forest Properties to
lump 9.4 acres of lake bottom property with an adjoining 53-acre
segment of uplands. The court concluded that it was proper to
look “to the economic reality of the arrangements, which
transcended these legalistic bright lines.” App. at A10-11. But
the economic reality in Loveladies was that the owner was able
to develop nearly 200 acres and still receive compensation for the
taking of 12.5 acres. The economic reality in Twain Hart was
that the owner was able to develop 6.8 acres and still receive
consideration for the remaining 1.7 acres. The “economic
reality” is no different here-except that in contrast to Twain Hart
and Loveladies, the Federal Circuit has included other holdings
in the takings denominator.

12

E. The Federal Circuit Is One of Several That Is in
Conflict with the Logic of This Court in Lucas

In Lucas, this Court expressly rejected as “extreme” and
“unsupportable” the notion advocated by the New York Court of
Appeal in Penn Central Transportation Company v. New York
City, 42 N.Y.2d 324, 333-34, 366 N.E.2d 1271, 1276-77 (1977),

where the state court examined the diminution in a
particular parcel’s value . . . in light of total value of
the takings claimant’s other holdings in the vicinity.

Lucas, 505 U.S. at 1016 n.7. Despite the logical incongruity of
the idea that owners of lots of property should be treated worse
than owners of only a small amount of property, the idea that the
ownership of other clearly separate parcels diminishes the impact
on a regulated parcel has been adopted by the Federal Circuit in
Forest Properties.

The Federal Circuit is not the only court to make this error.
The Michigan Supreme Court in K & K Construction Co. v.
Department of Natural Resources, 575 N.W.2d 531 (Mich.),
cert. denied, 119 S. Ct. 60 (1998), the court combined a 55-acre
parcel with two other parcels of 16 and 3.4 acres for purposes of
determining whether there was a taking. The court reasoned that
the parcels were owned in whole or in part by the same owner of
the 5S-acre parcel and that there was a unified plan of
development. The same reasoning was followed in Volkema v.
Department of Natural Resources, 542 N.W.2d 282 (Mich. App.
1996), aff'd, 42 N.W.2d 282, cert. denied, 119 S. Ct. 590 (1998).

The Michigan example was also followed in Karam v. State
of New Jersey Department of Environmental Protection,
705 A.2d 1221 (N.J. Super. 1998), affirmed by adopting appel-
late opinion, 723 A.2d 943 (N.J. 1999), petition for cert. filed,
67 U.S.L.W. 3774 (May 20, 1999) (Case No. 98-1866). In
Karam, the appellate court examined the history of a lot
comprised of an upland and wetland unit and found the two
portions to be a single unit for a takings analysis.

13

These cases all follow the logic of the notion that this court
rejected in Lucas: the more real property one owns, the more the
government can take without having to pay for it. Would this
Court have countenanced the uncompensated taking of one of
David Lucas’ lots if he had been allowed to build on his second
lot?

F. The Federal Circuit’s Holding in Forest Properties
Is Inconsistent With Those Courts That Have
Adopted the Doctrine of Conceptual Severance

In Seawall Associates v. City of New York, 74 N.Y.2d 92,
542 N.E.2d 1059 (N.Y. 1989), the New York Court of Appeals
addressed a challenge to New York City’s law regulating the
conversion of single-room occupancy housing. The city had
suggested that the property owners could have no claim to a
taking or denial of economically viable use after comparing the
value of the rights affected by the law with the total “bundle” of
the owners’ property interests. 542 N.E.2d at 1067. The court
did not agree:

But the permanent abrogation of one of those rights,
without regard to its comparative value in relation to
the whole, may well be sufficient to constitute a
taking.

Id. The court elaborated by citing with favor

various comments on the theory of “conceptual sever-
ance” [i.e., assessing only the value of the rights taken
without regard to its relationship to the value of the

whole property].
Id. Accord Manocherian v. Lenox Hill Hospital, 84 N.Y .2d 385,
398-400, 643 N.E.2d 479 (N.Y. 1994), cert. denied, 115 S. Ct.

1961 (1995) (finding the destruction of a reversionary interest to
constitute a regulatory taking).

This Court has also on occasion found a taking when only
one strand in the bundle of property rights was affected. In both

14

Hodel v. Irving, 481 U.S. 704 (1987), and Babbitt v. Youpee,
519 U.S. 234 (1997), the Court struck down congressional
attempts to force the transfer of small fractional interests to the
tribes upon an owner’s death.

In the case of Forest Properties, the court below declined
to consider separately (or sever horizontally) the 9.4 acres of
wetlands from the separately owned and regulated 54-acre upland
parcel. In this case, the “horizontal” severance is much more
severe than the conceptual severance that some courts have
embraced. The difference in results is illogical.

G. Toward a Coherent Determination of the
Relevant Parcel--the Machipongo Example

Much more faithful to the Takings Clause of the
Constitution is a model for analyzing the takings denominator
that was proposed by a commentator and which has been
expressly followed by at least one court. A better way to analyze
the takings denominator is to conclude that

any identifiable segment of land is a parcel for
purposes of regulatory taking analysis if prior to
regulation it could have been put to at least one
economically viable use, independent of the
surrounding land segments.

John F. Fee, Unearthing the Denominator in Regulatory Takings
Claims, 61 U. Chi. L. Rev. 1535, 1557 (1994).

The key language here is “independent of ihe surrounding
land segments.” With this qualifier, the specter of governments
being forced to pay for setbacks and similar regulatory restric-
tions is substantially lessened. Under this standard,

it must be shown that there existed prior to regulation
at least one economically viable use for the land, the
value of which is derived independently of the
immediately surrounding land interests.

Id. at 1558. As Fee explains:

15

In many situations, an identifiable segment of land
may be put to no economically viable use, other than
to expand or beautify a building or business operation
existing on a neighboring segment of land.

Id. at 1559. A restriction on the use of such a segment of land,
such as with a typical setback, would not be typically
compensable under this “independent of the surrounding land
segments” qualifier. The only exception would be if this segment
were significant enough that by itself it could be economically
useful for a purpose unrelated to the use of the neighboring
segment. “Under no circumstances,” Fee concludes,

should an owner of a city lot be compensated for what
is in fact a diminution in value of the entire lot by
alleging that the buffer zone has been completely
taken.

Id. at 1559-60.

The test proposed by Fee was adopted by a Pennsylvania
appellate court in Machipongo Land and Coal Co. v.
Commonwealth of Pennsylvania, 719 A.2d 19 (Penn. 1998). In
Machipongo, the Owners of a coal deposit alleged that the
designation as “unsuitable for mining” (UFM) of 157 acres, out
of a total of 2,037 acres, constituted a taking of at least 1,344,800
tons of coal. Another coal owner alleged that 27 acres of 1,350
acres had been taken by the UFM designation.

The court first rejected the commonwealth’s theory that the
appropriate bright-line test should be to consider together all
“contiguous land under a common owner.” The court rejected
the test for two reasons: first it was facially unfair to treat owners
of larger parcels less favorably for the sole reason that such
owners have more property. Second, the court noted that owners
who had “sold off” portions of their property would be arbitrarily
better off than those owners who had not yet sold off their land.

The court also rejected the approach suggested by the
landowners: “defining the property interest by the regulation.”

DEEL ES COR TE

16

Under that test, virtually any segment of land affected by a
prohibitory regulation, such as a setback ordinance, would result
in a verdict of a taking. This, the court felt, would not reach a
proper balance of the public’s interest with the interests of the
private property owner.

A third approach rejected by the court was what it called a
“multi-faceted approach.” This test considers “investment-
backed expectations,” whether any land had already been sold off
or developed, “the dates of acquisition,” “the extent to which the
test has been treated as a single unit,” and “the extent to which
the protected land enhances the value of the remaining land.”
The problem with this approach, the court wrote, is that it “fails
to offer either regulators or property owners any certainty as to
whether a regulation will result in a taking.” 719 A.2d at 27-28.

Instead, the court adopted the “defining the property interest
by regulation” test as modified by Fee’s suggestion that only
segments that are economically viable independent of
surrounding segments be considered. It employed the Fee
analysis by asking the following questions:

¢ whether the regulated land had value prior to the
regulation;

¢ whether the regulated land has a separate use
from the non-regulated contiguous parcel(s)—i.e.,
whether it may be profitably used if it is the
only parcel; and

° if the regulated land has value separate from the
contiguous land, whether all of its economic
benefit is gone.

Fee, Unearthing the Denominator in Regulatory Takings Claims,
61 U. Chi. L. Rev. at 28.

If this Court were to grant FPI’s Petition, it could put an end
to the rampant conflicts in the lower courts by adopting the

ane

17

workable and fair test that has been utilized by the Pennsylvania
court.

“NOTICE” OF A REGULATION
DOES NOT OBVIATE A TAKING

A. The Government Should Not Be Rewarded With
a Windfall Just Because the Owner of Property at
the Time a Regulation Is Adopted Is Not the One
to Bring an As-Applied Takings Claim

In its decision below, the Federal Circuit held that “[o]ne
who buys with knowledge of a restraint assumes the risk of
economic loss.” App. at Al3 (quoting Creppel v. United States,
41 F.3d at 632).° That certainly is the result of the court’s
decision but, when it comes to bringing an as-applied challenge
to a regulatory program, the real question is why should any
landowner bear this “risk of economic loss.” It is, after all, the
government that has created the restraint, not the landowner at
the time the regulation was adopted and not the purchaser of the
property who brings an as-applied challenge. The end result of
the Federal Circuit’s rule is that the government is getting
something for nothing.”

Suppose that a government regulation establishes a permit
process for the use of real property--the use of which would not

‘A similar result was reached by the Federal Circuit in Good v.
United States, 1999 WL 673336 (Fed. Cir. Aug. 31, 1999) (Case
No. 97-5138), finding that owner has no reasonable investment-
backed expectations to develop heavily regulated property which he
bought in 1973 because the owner was “not oblivious” to the trend of
ever-increasing environmental regulation that resulted in statutes
being adopted after the purchase.

* If it were not for the court’s error regarding the relevant parcel, this
would have been a categorical taking. App. at B35. The relevancy
of expectations in the context of a categorical taking is questionable
after this Court’s decision in Lucas. See Lucas, 505 U.S. at 1015.

18

be considered a nuisance or otherwise barred by background
principles of a law. The regulation falls short, on its face, of
denying all use and value of a parcel of real property. Is that a
taking? Of course not. This Court has found that the mere
passage of a discretionary permitting requirement does not,
without more, constitute a taking. United States v. Riverside
Bayview Homes, Inc., 474 U.S. 121, 126 (1985) (“the mere
assertion of regulatory jurisdiction . . . does not constitute a
regulatory taking”).

In many instances the owner at the time the regulation is
adopted may be able to file one or more applications to use the
property--only to have each application unequivocally denied.
But in other instances an owner may not be able to ripen a claim
through the application process. This is especially true for the
owner of a smaller lot, or an owner who is too old or too poor. It
may be that such an owner’s only recourse is to sell the property.

Suppose further, that the actual application--through the
permit process—of this regulation prohibits all use of the property
such that there is no value remaining. Who should bear the cost
of the prohibition--the owner at the time the regulation is
adopted, the subsequent owner who applied for a permit one or
more times, or the government that denied the permit?

It is true that the subsequent purchaser may have acquired
the regulated property at a discount. But so what? The new owner
is assuming certain expenses, risks, and transaction costs in
pursuing the permit process and takings claim. The question here
is not whether any just compensation damages are fairly allocated
between the original owner and the subsequent purchaser, but

* This Court has also made it quite plain that courts should not hear
an as-applied takings claim unless and until the owner has availed
himself of the appropriate permitting procedures. Until that happens,
the claim is simply not ripe. See, e.g., Williamson County Regional
Planning Commission v. Hamilton Bank of Johnson City, 473 U.S.
172, 186-94 (1985) (describing need to obtain “final decision” from
administrative agency).

act he i NE. ml I sent

19

whether the government will have to pay any damages at all to
anyone at all. Under the Federal Circuit’s rule, the answer is no.
Because the owner at the time the regulatory scheme was adopted
was not the same person who made the permit applications, the
government gets the benefits of a regulatory taking with none of
the costs.”

B. The Federal Circuit Contradicts
This Court’s Holding in Lucas

In a recently published article, Professor Steven J. Eagle 1s
highly critical of the notion that just compensation is not available
when the application of a regulation takes private property just
because the owner purchased the land subject to an existing
regulatory scheme. See Steven J. Eagle, The 1997 Regulatory
Takings Quartet: Retreating from the “Rule of Law,” 42 N.Y.L.
Sch. L. Rev. 345, 376 (1998). One of Professor Eagle’s principal
criticisms is that this doctrine artfully rewrites this Court’s
holding in Lucas.

° As with so many other areas of takings law, the courts below are in
substantial conflict on how to resolve the issue of who should pay
when a subsequent owner of real property brings an as-applied
takings challenge. See, e.g., Karam v. State of New Jersey, supra
(“the right of a property owner to fair compensation when his
property is zoned into inutility by changes in the zoning law passes to
the next owner despite the latter's knowledge”); Carson Harbor
Village Ltd. v. City of Carson, 37 F.3d 468 (9th Cir. 1994) (an “as
applied” but not a “facial” takings challenge can be brought by a
purchaser of regulated property); Vatalaro v. Department of
Environmental Regulation, 601 So. 2d 1223, 1229, rev. denied,
613 So. 2d 3 (Fla. 1992) (“no taking occurred until DER denied
Vatalaro’s permit application and determined the property was
suitable only for limited passive recreational use”), see also Del
Monte Dunes at Monterey, Ltd. v. City of Monterey, 95 F.3d 1422
(9th Cir. 1996), affirmed, __ S. Ct. __ (1999) (takings claims
proceeds despite the fact that land was purchased with knowledge of
permitting requirements). FPI’s Petition cites to several cases that are
contrary to these. See Petition at 24-24.

:
+
|

20

Focusing on several holdings from New York that reach the
same conclusion as the Federal Circuit, Eagle suggests that the
idea that the nght to bring an inverse condemnation claim against
the application of a regulation must be transferable with the
property. Otherwise, the court

converts an important component of the fee simple--
the right to use one’s land--into a personal right that
has to be exercised during life or else vanishes.

Id. at 368. The impact of such a rule is especially apparent when
the prior owner was a decedent who “through infirmity or other
reason, could not challenge a confiscatory regulation prior to the
decedent’s death.”” /d. This conversion of the fee simple into
something else contradicts this Court’s admonition in Lucas that

the government’s power to redefine the range of
interests included in the ownership of property was
necessarily constrained by constitutional limits.

505 U.S. at 1014.
CONCLUSION

To resolve the conflicts among the lower courts, and to
ensure that property owners are not deprived of just compen-
sation when they suffer regulatory takings, this Court should
grant FPI’s Petition for Writ of Certiorari.

DATED: September, 1999.

Respectfully submitted,

JAMES S. BURLING
Counsel of Record
Pacific Legal Foundation
10360 Old Placerville Road, Suite 100
Sacramento, California 95827
Telephone: (916) 362-2833
Facsimile: (916) 362-2932

Counsel for Amicus Curiae
Pacific Legal Foundation

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386005_1043%3A4. Public record. Not legal advice.