Petition for Writ of Certiorari — Florida Rock Industries, Inc. v. United States, 115 S. Ct. 898 (1995) (No. 94-511)
Supreme Court brief1995
Ask Donna
What actually matters in this document.
Text
Supreme Court, U.S.
LED
Fa FIL
) 94 511 SEP 19 1994
No, OFFICE OF THE CLERK
In The
Supreme Court of the United States
October Term, 1994
¢
FLORIDA ROCK INDUSTRIES, INC.,
Petitioner,
THE UNITED STATES,
Respondent.
*
Petition For A Writ Of Certiorari
To The United States Court Of Appeals
For The Federal Circuit
¢
PETITION FOR A WRIT OF CERTIORARI
S
JoHN A. DeVautt, III
Counsel of Record
C. WarreEN Tripp, JR.
Counsel
Jane A. LESTER
Counsel
Bepe tt, Dittmar, DeEVAuLT &
Pittans P.A.
The Bedell Building
101 East Adams Street
Jacksonville, Florida 32202
(904) 353-0211
For Petitioner
COCKLE LAW BRIEF PFINTING CO., (800) 225-6964
OR CALL COLLECT (402) 342-2831
QUESTION PRESENTED
Whether just compensation is required under the
Fifth Amendment with respect to property which, by
virtue of the imposition of federal wetlands regulation,
has lost all viable economic use, but retains a residual
“value” based on possible resale to a speculator.
il
LIST OF PARTIES TO THE PROCEEDING BELOW
The caption of the case in this Court contains the
names of all parties to the appeal to the United States
Court of Appeals for the Federal Circuit.
RULE 29.1 LISTING
Petitioner Florida Rock Industries, Inc. has no parent
companies or nonwholly owned subsidiaries.
iii
TABLE OF CONTENTS
Page
eg 8 Be yt: ee i
LIST OF PARTIES TO THE PROCEEDING
TGA od a 55 04 e ssid bh 004935) unveeedac ii
Ee COME 6 dnc dbevveswacudcaesvseveneacce ii
EE EE RROD a ese k ces cescceteasvecvsaces iii
Ge iss. 8 be). iv
A 1
STATEMENT OF JURISDICTION................... 2
CONSTITUTIONAL AND STATUTORY PROVI-
8: SE 2
puruaeemeres SOP SFE CASE... 2.6 ccc c csc sccccceas 4
eka hs phon eas veoh bonekvss ae cs +
ee I TU, isc cecccanyecenvscvesuses 5
REASONS FOR GRANTING THE PETITION ....... 8
I. The Federal Circuit’s Opinion Rejects the Viable
Economic Use Analysis Mandated by this
Citas Let adn awe tade+ebivevaee ead sds anes 9
II. The Court Should Grant Certiorari Notwith-
standing the Pendency of a Final Judgment.... 14
ee es ag Che dosed cnwdvatesesens 17
a ee a App. 1
iv
TABLE OF AUTHORITIES
Page
Cases
American Construction Co. v. Jacksonville, T. & K. W.
Sak, SOD UD. Gre CONE 6 66 60 ae den ewdssevedennas 16
Connolly v. Pension Benefit Guaranty Corp., 475 U.S.
RE DOME 6:4 ccccavdnhiunensvaweneeseeebeeseesteans 10
Dickman v. Commissioner of Internal Revenue, 465
Si Se WE 5 bh heave kweednc hue decue ven bankees 12
Dolan v. City of Tigard, 114 S.Ct. 2309 (1994) ......... 9
First English Evangelical Lutheran Church v. County
of Los Angeles, 482 U.S. 304 (1987) ................ 11
Florida Rock Industries, Inc. v. United States, 18 F.3d
Be CE. GO BOR. 6 o's aes evs cnanettesseen sa passim
Florida Rock Industries, Inc. v. United States, 21
Cai Ee SEU ca bak avecannanceness es 2, 5, 7, 13, %
Florida Rock Industries, Inc. v. United States, 791
F.2d 893 (Fed. Cir. 1986)............ a. 4, 5, 6, 10, 15
Florida Rock Industries, Inc. v. United States, 8 Cl.Ct.
| ROPE EPTEeT TSOP rT Cree ee 2, 4 5, 6
Forsyth v. City of Hammond, 166 U.S. 506 (1897) ..... 14
Gillespie v. United States Steel Corp., 379 U.S. 148
Co SE Pee Teer Tee rere Te eee Tree eter ree 14, 16
Goldblatt v. Town of Hempstead, N.Y., 369 U.S. 590
CREE 6b ane he 445 sK0 es uso AEE ETN dle eee eet orAeS 13
Hanover Star Milling Co. v. Metcalf, 240 U.S. 403
2 OPP rr er Err re tyre errr ry rey Pee yey me 16
Vv
TABLE OF AUTHORITIES - Continued
Kaiser Aetna v. United States, 444 U.S. 164 (1979)..... 11
Keystone Bituminous Coal Assoc. v. DeBenedictis, 480
OF Pee SOO 61 nak dd vceunsdvanveebatboranenrea es 11
Kirby Forest Industries, Inc. v. United States, 467
RPan. 2 ROPUE kod ops bewnasd bauveabubedesavedeseiie 11
LM U. TOE, Te UA F548 TAGE vn nec cv ceseciénass 15
Larson v. Domestic & Foreign Commerce Corp., 337
Sel GUE Ss vbr ecaccbescnyiadbcesnseeadned 14, 15
Lucas v. South Carolina Coastal Council, 112 S.Ct.
SPO GE ITE Ras oh cap ecnrvaebessedidweee nase 8, 9, 12
MacDonald, Sommer & Frates v. Yolo County, 477
Se Oe CA 6650 06 doe an iW Ei sae es ka beasienes 11
Michael v. United States, 454 U.S. 950 (1981) ......... 14
Nollan v. California Coastal Commission, 483 U.S.
GAD COMUNE bcs nse nt cdnneepae suds peeteueeustsnnanns 11
Olson v. United States, 292 U.S. 246 (1934)........... 13
Penn Central Transportation Co. v. City of New York,
Ge TR. FG Care ois cae eases ckheatanprsavans 10, 11
Pumpelly v. Green Bay Co., 113 Wall (80 U.S.) 166
(OOP BP kena 654 kbs 6as 6b dk oe OSS RRR REAR OReenh okie 12
Sharp v. United States, 191 U.S. 341 (1903)........... 13
United States v. Causby, 328 U.S. 256 (1946).......... 12
United States v. Dickinson, 331 U.S. 745 (1947) ....... 11
United States v. General Motors Corp., 323 U.S. 373
EEE EEEECTOTTOCETE CSC Cee eT Pye ee eee Te 12, 15
United States v. Riverside Bayview Homes, Inc., 474
Mts BER CRUE bis 6 snow eeaneseckaudeucbassays a % Ea
| | ———
vi
TABLE OF AUTHORITIES - Continued
Page
CONSTITUTION AND Laws
United States Constitution, Amendment V....... passim
Federal Water Pollution Control Act Amendments
of 1972, Pub.L.No. 92-500, 33 U.S.C. § 1251 et
PETE PTT TTLETT TTT Terre Yi Se a
Tucker Act, 28 U.S.C. § 1491 (1962) ......ccccceenes 4,9
SB CU BAS,. © Tac anc qnvies candantetentiiect ined 2, 14
Federal Courts Administration Act of 1992, Pub.L.
No. 102-572, 106 Stat. 4506 (1992).................. 4
Federal Courts Improvement Act of 1982, No.
yy ee EG ere rrr 4
OTHER AUTHORITIES
4 Nichols, Eminent Domain § 12B.04[2] (3d ed.)..... 13
“
In The
Supreme Court of the United States
October Term, 1994
— +
FLORIDA ROCK INDUSTRIES, INC.,
Petitioner,
v.
THE UNITED STATES,
Respondent.
+
Petition For A Writ Of Certiorari
To The United States Court Of Appeals
For The Federal Circuit
*
PETITION FOR A WRIT OF CERTIORARI
o
Florida Rock Industries, Inc. respectfully petitions for
a writ of certiorari to review the judgment of the United
States Court of Appeals for the Federal Circuit in this
case.
OPINIONS BELOW
The opinion of the United States Court of Appeals for
the Federal Circuit is reported at 18 F.3d 1560 (Fed. Cir.
1994) (App. 1-52). The orders of the Court of Appeals
denying cross-petitions for rehearing and denying cross-
suggestions for rehearing in banc are not reported. (App.
1
53-54, 55-56). The opinion of the United States Claims
Court is reported at 21 Cl.Ct.161 (1990) (App. 57-91).
The previous opinion of the Court of Appeals for the
Federal Circuit is reported at 791 F.2d 893 (Fed. Cir. 1986)
(App. 92-121). Certiorari was denied by The United States
Supreme Court, as is reported at 479 U.S. 1053 (1987). The
previous opinion of the United States Ciaims Court on
liability is reported at 8 Cl.Ct. 160 (1985) (App. 122-165);
the Claims Court’s order on valuation, entered following
the trial on damages, is not reported. (App. 166-167).
STATEMENT OF JURISDICTION
Petitioner seeks review from decision of the United
States Court of Appeals for the Federal Circuit on March
10, 1994. (App. 1-52). The cross-petitions for rehearing
were denied June 21, 1994 (App. 53, 55), and the cross-
suggestions for rehearing in banc were denied June 21,
1994. (App. 53, 55). The jurisdiction of the Supreme Court
is invoked under 28 U.S.C. § 1254.
CONSTITUTIONAL AND STATUTORY
PROVISIONS INVOLVED
Fifth Amendment, United States Constitution:
“nor shall private property be taken for public
use, without just compensation.”
Section 404 of the Federal Water Pollution Control
Act Amendments of 1972 (as amended):
“Permits for dredged or fill material.
ee ee
(a) Discharge into navigable waters at speci-
fied disposal sites.
The Secretary may issue permits, after
notice and opportunity for public hearings for
the discharge of dredged or fill material into the
navigable waters at specified disposal sites. Not
later than the fifteenth day after the date an
applicant submits all the information required
to complete an application for a permit under
this subsection, the Secretary shall publish the
notice required by this subsection.”
* * *
“(c) Denial or restriction of use of defined areas
as disposal sites.
The Administrator is authorized to prohibit
the specification (including the withdrawal of
specification) of any defined area as a disposal
site, and he is authorized to deny or restrict the
use of any defined area for specification (includ-
ing the withdrawal specification) as a disposal
site, whenever he determines, after notice and
opportunity for public hearings, that the dis-
charge of such materials into such area will have
an unacceptable adverse effect on municipal
water supplies, shellfish beds and fishery areas
(including spawning and breeding areas), wild-
life, or recreational areas. Before making such
determination, the Administrator shall consult
with the Secretary. The Administrator shall set
forth in writing and make public his findings
and his reasons for making any determination
under this subsection.”
33 U.S.C. § 1344(a) & (c).
*
ai ll
STATEMENT OF THE CASE
This is a suit seeking just compensation from the
United States under the Fifth Amendment for a regula-
tory taking. Petitioner, Florida Rock Industries, Inc.
(“Florida Rock”) brought suit in the United States Court
of Claims! pursuant to the Tucker Act, 28 U.S.C. § 1491,
following denial by the United States Army Corps of
Engineers of a Clean Water Act permit, 33 U.S.C. § 1344,
to dredge and fill wetlands in connection with the extrac-
tion of limestone.
A. The Property
In March 1972, Florida Rock, a company engaged in
mining, processing, and sale of crushed stone and aggre-
gates for use in construction, purchased a 1,560 acre tract
in western Dade County, Florida, where large under-
ground deposits of limestone exist and mining is com-
mon. (App. 94-95, 124). Florida Rock had all of the
necessary state and local permits or waivers to operate a
limestone quarry, and at the time, no federal statutes or
regulations applied. (App. 95, 125).
Subsequent to Florida Rock’s purchase of the subject
property, Congress amended the Clean Water Act, 33
U.S.C. § 1251 ef seq., and the Army Corps of Engineers
! Subsequent to the filing of Florida Rock’s Petition, the
Federal Courts Improvement Act of 1982, Pub.L. No. 97-164, 96
Stat. 25 (1982), changed the name of the United States Court of
Claims to the United States Claims Court. In 1992, the Federal
Courts Administration Act of 1992, Pub.L. No. 102-572, 106 Stat.
4506 (1992), changed the name of the United States Claims
Court to the United States Court of Federal Claims.
was granted expanded jurisdiction to issue permits to
discharge dredged or fill materials into “navigable
waters.” 33 U.S.C. § 1344. (App. 5, 125). In 1977, the
Corps issued regulations extending its permit jurisdiction
to wetlands such as those which exist in this subject
property. (App. 5, 125)?
Following a slump in the construction industry, Flor-
ida Rock first sought to commence mining in 1978,
unaware of the Corps’ recently acquired jurisdiction over
its property. (App. 125-126). On October 2, 1980, the
Corps denied Florida Rock’s dredge and fill permit appli-
cation to mine 98 acres because the proposed mining
would cause irremedial loss of a valuable wetlands par-
cel. The Corps concluded that the discharge of rock and
sand into the water would not be a menace to the drink-
ing water, but would cause temporary turbidity. (App. 5,
59, 66, 96-97, 103). The government’s stated policy inter-
est in denying the permit was the prevention of develop-
ment in the vast wetlands area at the western edge of
Dade County. (App. 66, 163 n.23).
B. Proceedings Below
Alleging that there were no viable economic uses that
could be made of its land without a dredge and fill
2 See generally United States v. Riverside Bayview Homes, Inc.,
474 U.S. 121, 123-24 (1985).
3 After removal of all limestone, the parcel would consist
mostly of a deep lake or pond, which would be environmentally
harmless, but would not retain the attributes of “wetlands.”
(App. 97).
permit, and that the United States had in effect imposed a
“preservation easement”on the area in question, Florida
Rock filed suit in the United States Court of Claims in
1982, asserting that the denial of the permit constituted a
regulatory taking of its property under the Fifth Amend-
ment. (Petition, App. 168-177).
The Claims Court, through then Chief Judge Alex
Koz.nski, held, following a trial, that any other economi-
cally viable use, such as residential construction or com-
mercial activity, would more dramatically affect the
wetlands than rock mining, making it “unthinkable that
the Corps would issue such a permit in light of its denial
of [Florida Rock’s] application.” (App. 127). As such, the
government's action deprived Florida Rock of all eco-
nomically viable use of the property resulting in a taking
requiring just compensation. (Id.).
The Federal Circuit reversed and held that a regula-
tion which deprives an owner of all “allowable and prac-
ticable immediate use” of the property, (App. 111),
nevertheless does not constitute a taking under the Fifth
Amendment where the property retains a “fair market
value” based on possible sales to investors who “bet” that
the very regulation upon which the taking claim is prem-
ised might in the future be altered. (App. 112-116). The
Federal Circuit remanded the case for a determination of
fair market value of the tract after the alleged taking
(App. 121) based upon the existence of a “real market” of
“well-informed ‘willing buyer[s]’” willing to “bet that
the prohibition of rock mining, to protect the overlying
wetlands, would some day be lifted.” (App. 113).
Following a second trial, the Claims Court again held
that the Corps of Engineers’ denial of a permit constituted
a taking and awarded just compensation under the Fifth
Amendment. (App. 90). Present Chief Judge Loren Smith,
on the basis of conflicting factual and expert testimony,
concluded that there was no market among “real and
knowledgeable investors aware of all restrictions on the
lands,” (App. 75), and that the highest and best use of the
44
site was for “ ‘future recreational/water management’ ” at
a nominal value of $500 per acre. (App. 79, 87 & n.10).
Thus, the court awarded as just compensation $1,029,000
for the 98-acre tract (the difference between $10,500 an
acre pre-regulation and $500 per acre after). (App. 90).
On appeal, the Federal Circuit again reversed the
taking determination holding that the trial court erred in
accepting evidence that the buyers in this market were
without knowledge of the restrictions imposed by the
‘lean Water Act. (App. 13-14, 15). Instead, the Federal
Circuit presumed that the “willing buyer[s]” upon whom
the government expert based his appraisal had
“ “all knowledge of legal restrictions,’ ” (App. 14 n.12),
and concluded that “there was an active though specula-
tive investment market for Florida Rock’s land at the time
of and following the permit denial.” (App. 15). As such,
the Clean Water Act regulation did not categorically pro-
hibit all economically beneficial use of the land, (App.
10-11, 30, 32), but instead caused only a “partial destruc-
tion of its value.” (App. 11). The Federal Circuit again
remanded t!is case back to the Court of Federal Claims,
for yet a third trial on liability (App. 19 n.15), to resolve
“when a partial loss of economic use of the property has
crossed the line from a noncompensable ‘mere diminu-
tion’ to a compensable ‘partial taking.’ ” (App. 25).4
+
REASONS FOR GRANTING THE PETITION
With this case, the Court has a clear, unimpeded, and
direct opportunity to guide property owners, government
land-use regulators, and courts on the proper application
of the Fifth Amendment’s guarantee of just compensation
for a regulatory taking of private property. The important
constitutional issue presented here is clear-cut and
squarely presented. The facts are extensively developed,
with evidence from two trials bearing on the question of
the extent to which denial of a Clean Water Act permit to
dredge and fill wetlands has prevented all economically
viable uses of Florida Rock’s property and frustrated
reasonable investment-backed expectations.
The Federal Circuit’s decision directly conflicts with
the Court’s holding in Lucas v. South Carolina Coastal
Council, 112 S.Ct. 2886, 2894-95 (1992), that full compensa-
tion is required by the Fifth Amendment for a categorical
taking where the government has deprived a landowner
of all economically beneficial uses by requiring land to be
left substantially in its natural state.
* Admitting that the trial court “will find itself with little
direct case law guidance,” (App. 25), the Federal Circuit pre-
dicted that “[o]ver time, however, enough cases will be decided
with sufficient care and clarity that the line will more clearly
emerge.” (App. 28).
Finally, the decision of the Federal Circuit is likely to
create confusion in the area of regulatory taking law,
embarking on a new and uncharted course by holding
that “partial takings” are compensable at a rate less than
the value of the fee, an unprecedented decision, which
now stands as binding precedent in all regulatory taking
cases involving the federal government. See Riverside
Bayview Homes, Inc., 474 U.S. at 128; Tucker Act, 28 U.S.C.
§ 1491.
For each and all of these reasons, this case is the
“right case for the enunciation of takings doctrine.” Dolan
v. City of Tigard, 114 S.Ct. 2309, 2331 (1994) (Souter, J.,
dissenting).
I. The Federal Circuit’s Opinion Rejects the Viable
Economic Use Analysis Mandated by this Court.
“lW]hen the owner of real property has been called
upon to sacrifice all economically beneficial uses in the
name of the common good, that is, to leave his property
economically idle, he has suffered a taking,” Lucas, 112
S.Ct. at 2895 (emphasis added), without regard to
whether or not the property owner retained the right to
possibly sell the property to third parties. The majority in
Lucas firmly rejected the argument of the concurring and
dissenting justices that no taking occurred because Lucas’
ocean front property possibly and theoretically retained
some resale value. See 112 S.Ct. at 2902-2903, 2908, 2919
n.3, 2925.
Under the Federal Circuit’s opinion in Florida Rock,
the Fifth Amendment has no application where regulated
property, with “no allowable and practicable immediate
10
use,” (App. 111), retains any market value, even though
that “value” is admittedly based on speculators betting
on the prospect that the very regulation which effects a
taking will in the future be altered. The Federal Circuit's
opinion, which denies Florida Rock compensation merely
because of the chance that its regulation-burdened prop-
erty might be sold to an unknowing speculator, would
eviscerate the Fifth Amendment's guarantee that govern-
44a’
ment may not “ ‘forc[e] some people alone to bear public
burdens which, in all fairness and justice, should be
borne by the public as a whole.’ ” Penn Central Transporta-
tion Co. v. City of New York, 438 U.S. 104, 123 (1978)
(citation omitted).
As aptly stated by Judge Kozinski:
Common sense suggests that regulatory
action will never entirely eliminate the market
value of the real property it affects. ... There are
invariably speculators willing to gamble that
even the most severe restrictions will eventually
be lifted. . . . If the existence of such a residual
market for the property could defeat a claim for
a regulatory taking, no regulatory taking could
ever be proved... . (App. 134).
What the Federal Circuit has done is to redefine the
economic impact element of this Court’s oft-stated three-
prong analysis in regulatory taking cases.° In determining
the economic impact of a regulation, the Court has tradi-
tionally focused upon the regulation’s impact on the
> E.g. Connolly v. Pension Benefit Guaranty Corp., 475 U.S.
211, 225 (1986) (quoting Penn Central Transportation Co. v. City of
New York, 438 U.S. 104, 124 (1978)).
11
property owner’s ability to productively use the regulated
property.© “Of the aggregate rights associated with any
6 Nollan v. California Coastal Commission, 483 U.S. 825,
835-36 (1987) (denial of a permit to build would constitute a
taking if “denial would interfere so drastically with the Nollans’
use of their property”); First English Evangelical Lutheran Church
v. County of Los Angeles, 482 U.S. 304, 318 (1987) (“‘temporary’
takings which . . . deny a landowner all use of his property, are
not different in kind from permanent takings, for which the
Constitution clearly requires compensation”); Keystone Bit-
uminous Coal Assoc. v. DeBenedictis, 480 U.S. 470, 495 & 517
(1987) (“‘[a] statute regulating the uses that can be made of
property effects a taking if it “denies an owner economically
viable use of his land”’”) (prohibition of “every use” constitutes
a taking “for the owner would still have been ‘deprive[d] of all
or most of his interest in the subject matter”) (Rehnquist, C.J.,
dissenting); MacDonald, Sommer & Frates v. Yolo County, 477 U.S.
340, 361 (1986) (“‘[p]olice 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 condemnation or physical invasion
of property’”) (White, J., dissenting); Riverside Bayview Homes,
Inc., 474 U.S. at 127 (“[o]nly when a permit is denied and the
effect of the denial is to prevent ‘economically viable’ use of the
land in question can it be said that a taking has occurred”); Kirby
Forest Industries, Inc. v. United States, 467 U.S. 1, 14 (1984) (“[w]e
have frequently recognized that a radical curtailment of a land-
owner’s freedom to make use of or ability to derive income from
his land may give rise to a taking within the meaning of the Fifth
Amendment, even if the Government has not physically
intruded upon the premises or acquired a legal interest in the
property”); Kaiser Aetna v. United States, 444 U.S. 164, 174 n.8
(1979) (“’[c]onfiscation may result from a taking of the use of
property without compensation quite as well as from the taking
of the title’); Penn Central Transportation Co., 438 U.S. at 133
(“the ‘taking’ issue in these contexts is resolved by focusing on
the uses the regulations permit”); United States v. Dickinson, 331
U.S. 745, 748 (1947) (“[p]roperty is taken in the constitutional
——
12
property interest, the right of use of property is perhaps
of the highest order.” Dickman v. Commissioner of Internal
Revenue, 465 U.S. 330, 336 (1984). Indeed, the Court in
Lucas instructed that
regulations that leave the owner of land without
economically beneficial or productive options for its
use — typically, as here, by requiring land to be
left substantially in its natural state - carry with
them a heightened risk that private property is
being pressed into some form of public service
under the guise of mitigating serious public
harm [requiring compensation]. 112 S.Ct. at
2894-95 (emphasis added).
“[W]hen the owner of real property has been called upon
to sacrifice all economicaliy beneficial uses in the name of
the common good, that is, to leave his property economi-
cally idle, he has suffered a taking.” 112 S.Ct. at 2895
(emphasis added). Thus, “[aJithough a comparison of
values before and after is relevant, .. . it is by no means
sense when inroads are made upon an owner’s use of it to an
extent that, as between private parties, a servitude has been
acquired”); United States v. Causby, 328 U.S. 256, 261 (1946) (“[iJf,
by reason of the frequency and altitude of the flights, [property
owners] could not use this land for any purpose, their loss
would be complete”); United States v. General Motors Corp., 323
U.S. 373, 378 (1945) (property denotes “the group of rights
inhering in the citizen’s relation to the physical thing, as the
right to possess, use and dispose of it”); Pumpelly v. Green Bay
Co., 13 Wall (80 U.S.) 166, 179 (1871) (“a serious interruption to
the common and necessary use of property may be...
equivalent to the taking of it, and that under the constitutional
provisions it is not necessary that the land should be absolutely
taken”).
as th neh na m=
13
conclusive.” Goldblatt v. Town of Hempstead, N.Y., 369 U.S.
590, 594 (1962).
The Federal Circuit, however, has recast the eco-
nomic impact analysis to one “measured by the change, if
any, in the fair market value caused by the regulatory
imposition.” (App. 17). Then, to compound the error, the
Federal Circuit permits a determination of post-regula-
tory fair market value to be based solely upon sales to
speculators betting that the regulation would change
without any present indication of doing so,” and to per-
sons without knowledge of the restrictions placed upon
the land. (App. 14 n.12). The Federal Circuit then some-
how extrapolates that a “speculative market” existed for
Florida Rock’s particular 98-acre tract following permit
denial, (App. 15, 16), without any admissible evidence for
support.®
Thus, where the regulation burdening the property is
shown to have eliminated all economically viable uses
7 In eminent domain cases, evidence of value based on a
use not within a “reasonable possibility” or depending upon
“events or combinations of occurrences which, while within the
realm of possibility, are not shown to be reasonably probable,”
is not admissible to inflate the price of property the government
is seeking to condemn, “for that would be to allow mere spec-
ulation and conjecture to become a guide for the ascertainment
of value.” Olson v. United States, 292 U.S. 246, 257 (1934).
8 The “offers” relied upon by the Federal Circuit to show
“value” after imposition of the regulation (App. 7, 12-13) were
rejected by the trial court as without any basis. (App. 75 n.7).
Moreover, mere unaccepted “offers” for purchase are inadmiss-
ible to establish market value. Sharp v. United States, 191 U.S. 341
(1903); 4 Nichols, Eminent Domain § 12B.04[2] (3d ed.).
14
now or in the foreseeable future, under the Federal Cir-
cuit’s holding, the government is relieved of the strictures
of the Fifth Amendment solely because the property may
retain some “fair market value” to speculators willing to
bet on the possibility that the regulations, without any
present indication of doing so, will change in the future.
Il. The Court Should Grant Certiorari Notwithstand-
ing the Pendency of a Final Judgment.
The significance and far-reaching effect of the deci-
sion of the Federal Circuit Court of Appeals, as well as
the fully developed record presented herein, should alle-
viate any concerns the Court may have with finality.
Whether the Court may rightfully take jurisdiction of this
case where there has been no final decree is a question of
power and propriety. Forsyth v. City of Hammond, 166 U.S.
506, 511 (1897). That the Court has the power is clearly
established. Forsyth, 166 U.S. at 511; 28 U.S.C. § 1254(1). It
is the nature of the court of appeals’ judgment which is
relevant to the Court’s discretionary assessment of the
propriety of immediately reviewing an interlocutory deci-
sion.
As a guide in this determination, the Court has held
that it may appropriately review an interlocutory order
such as the one issued by the Federal Circuit herein,
when there is an important and clear-cut issue of law
which is fundamental to the further conduct of the case
and which would otherwise qualify as a basis for cer-
tiorari. See Michael v. United States, 454 U.S. 950, 951
(1981) (White, J., dissenting); Gillespie v. United States Steel
Corp., 379 U.S. 148, 153-54 (1964); Larson v. Domestic &
Vian CAPS AE nM) Dg ean S KS IC TED ei a ER RRS AR ty
15
Foreign Commerce Corp., 337 U.S. 682, 685 n.3 (1949); Land
v. Dollar, 330 U.S. 731, 734 n.2 (1947); United States v.
General Motors Corp., 323 U.S. 373, 377 (1945).
Particularly instructive and relevant is the eminent
domain case of United States v. General Motors Corp., supra,
in which the Court accepted certiorari from the Court of
Appeals’ decision which reversed the trial court’s deter-
mination of “just compensation” under the Fifth Amend-
ment, created its own formula for determining just
compensation for the interest which the government con-
demned, and remanded to the district court for further
proceedings in accordance with the Court of Appeals’
ruling. Because the case presented an issue of first
impression on an important constitutional question of
ascertaining “just compensation” required by the Fifth
Amendment; because the lower courts were in conflict on
the question; and because the ruling was “fundamental to
the further conduct of the case,” this Court accepted the
case on certiorari. 323 U.S. at 374, 377.
Likewise, the decision of the Federal Circuit Court of
Appeals here presents a clear-cut constitutional issue of
first impression concerning the scope of the economic
impact determination in regulatory takings cases, and the
creation of the doctrine of “partial takings” by regulation.
The Court of Appeals has remanded the case to the trial
court for implementation of its new legal theory, with no
guidance or instructions. (App. 25, 28).9 Intervention by
9 In 1986, the Federal Circuit remanded this case to the trial
court for “determination of the taking question according to
right principles,” (App. 94), with little guidance or instruction.
The United States Claims Court interpreted the Federal Circuit
16
the Supreme Court at this juncture is necessary to “pre-
vent extraordinary inconvenience,” American Construction
Co. v. Jacksonville, T. & K. W. Ry., 148 U.S. 372, 384 (1893),
cost, and delay to the parties, Gillespie, 379 U.S. at 153;
eliminate conflict in the law, see Hanover Star Milling Co. v.
Metcalf, 240 U.S. 403, 408-409 (1915); and determine for all
the reach of the Fifth Amendment’s protection of private
property owners’ rights in the face of government regula-
tion.
as directing it “to determine whether there existed an actual
market among real and knowledgeable investors aware of all
restrictions on the land.” (App. 77). The Federal Circuit, on
appeal, found fault with the Claims Court’s interpretation of its
mandate (App. 11, 13-14 & n.12, 17), and used that as the basis
for reversal and further remand. The Court of Federal Claims is
again faced with having to interpret, in its “discretion,” (App.
19 n.15), the Federal Circuit’s opinion on remand.
17
CONCLUSION
The petition for a writ of certiorari should be
granted.
Respectfully submitted,
Joun A. DeVautt, Il
Counsel of Record
C. WarRREN Tripp, JR.
Counsel
JANE A. LESTER
Counsel
BepeLt, Dirrmar, DeVauLt &
Pittans P.A.
The Bedell Building
101 East Adams Street
Jacksonville, Florida 32202
(904) 353-0211
For Petitioner
TABLE OF CONTENTS
OPINION OF THE UNITED STATES COURT OF
APPEALS FOR THE FEDERAL CIRCUIT -
Ee harper App. 1
ORDER ON COMBINED PETITION FOR
REHEARING AND SUGGESTION FOR
REHEARING IN BANC FILED BY APPELLEE,
FLORIDA ROCK INDUSTRIES, INC. - JUNE
ey Ry bench eset es ces ee ne ae App. 53
ORDER ON COMBINED PETITION FOR REHEAR-
ING AND SUGGESTION FOR REHEARING IN
BANC FILED BY APPELLANT, THE UNITED
STATES — JUNE 21, 1994 ...........0ccc000s. App. 55
OPINION OF THE UNITED STATES CLAIMS
COMINT = FUL 39, WRG. occas cicenccnses App. 57
OPINION OF THE UNITED STATES COURT OF
APPEALS FOR THE FEDERAL CIRCUIT - MAY
SRM EE SEARS SEABED HAY App. 92
OPINION OF THE UNITED STATES CLAIMS
eee Oe MOE Wh DOP bc ds vccdce ces duca’ App. 122
ORDER OF THE UNITED STATES CLAIMS
COURT ON VALUATION - MAY 17, 1985..App. 166
gee Be Of i Re, + ee App. 168
App. 1
FLORIDA ROCK INDUSTRIES,
INC., Plaintiff-Appellee,
Vz
The UNITED STATES, Defendant-
Appellant.
No. 91-5156.
United States Court of Appeals,
Federal Circuit.
March 10, 1994.
Property owner brought action under Tucker Act, claim-
ing that Army Corps of Engineers’ denial of Clean Water Act
permit for limestone mining under wetlands amounted to
compensable taking. The Claims Court, 8 Cl.Ct. 160, entered
judgment in favor of owner, and government appealed. The
Court of Appeals, 791 F.2d 893, affirmed in part, vacated in
part, and remanded. On remand, the Claims Court, 21 CL.Ct.
161, again entered judgment in favor of owner, and further
awarded owner litigation costs and attorney fees, 23 Cl.Ct.
653. Government appealed. The Court of Appeals, Plager,
Circuit Judge, held that: (1) for purposes of determining fair
market value, prior decision did not require detailed inquiry
into motivation and sophistication of buyers of comparables;
(2) evidence did not support finding that all economic use or
value of property was taken by regulatory decision; and (3)
to determine whether compensable regulatory taking had
occurred, Court of Federal Claims would have to undertake
balancing of competing interests.
Vacated and remanded.
Nies, Chief judge, dissented and filed opinion.
App. 2
John A. DeVault, III, Bedell, Dittmar, DeVault & Pil-
lans, P.A., Jacksonville, FL, argued for plaintiff-appellee.
With him on the brief was C. Warren Tripp, Jr., of counsel.
Robert L. Klarquist, Atty., Dept. of Justice, Washing-
ton, DC, argued for defendant-appellant. With him on the
brief were Barry M. Hartman, Acting Asst. Atty. Gen.,
Environment & Natural Resources Div., John A. Bryson
and Fred R. Disheroon, Attys., Washington, D.C. Also on
the brief was Roger B. Clegg, Acting Asst. Atty. Gen.,
Environment & Natural Resources Div., Washington, DC.
Timothy C. Searchinger, Environmental Defense
Fund, of New York City, was on the brief for amicus
curiae, The Environmental Defense Fund, Inc., The Nat.
Wildlife Federation, Inc.
James S. Burling, Ronald A. Zumbrun and Robin L.
Rivett, Pacific Legal Foundation, Sacramento, CA, were
on the brief for amicus curiae, Pacific Legal Foundation.
Mary V. Dicrescenzo, Nat. Ass’n of Home Builders,
Washington, DC, was on the brief for amicus curiae, The
Nat. Ass’n of Home Builders, Nat. Ass’n of Realtors,
Intern. Council of Shopping Centers, Nat. Ass’n of
Indust. and Office Parks, Nat. Realty Committee, Nat.
Multi Housing Council and Florida Home Builders Ass'n.
With her on the brief was William H. Ethier, Cohn &
Birnbaum, Hartford, CT.
George W. Miller, Walter A. Smith, Jr. and Jonathan L.
Abram, Washington, DC, were on the brief for amicus
curiae, Whitney Benefits, Inc., Peter Kiewit Sons Co.
Before NIES, Chief Judge, NEWMAN and PLAGER,
Circuit Judges.
App. 3
PLAGER, Circuit Judge.
This is a regulatory taking case. It arose when the
plaintiff Florida Rock Industries Inc. (Florida Rock)
sought a permit under § 404 of the Clean Water Act! from
the Army Corps of Engineers (Corps) to mine the lime-
stone which lay beneath a tract of wetlands. The Corps
denied the permit on October 5, 1980. On May 25, 1982,
Florida Rock filed suit in the United States Court of
Federal Claims,? seeking monetary compensation from
the defendant United States (Government); Florida Rock
alleged that the Corps’ permit denial constituted an
uncompensated taking of private property for public use
in violation of the Fifth Amendment.? The Court of Fed-
eral Claims agreed, Florida Rock Indus., Inc. v. United
States, 8 Cl.Ct. 160 (1985) (Florida Rock I), and awarded
Florida Rock $1,029,000 plus attorney fees and simple
interest. On appeal, this court vacated the judgment that
a taking had occurred and remanded for further consider-
ation. Florida Rock Indus., Inc. v. United States, 791 F.2d 893
(Fed.Cir.1986), cert. denied 479 U.S. 1053, 107 S.Ct. 926, 93
L.Ed.2d 978 (1987) (Florida Rock II). On remand, the Court
of Federal Claims found that the permit denial deprived
Florida Rock of all value in its land, and so again con-
cluded that there had been a taking and reinstated the
1 Pub.L. No. 92-500 § 2, 86 Stat. 884 (Oct. 18, 1972), amend-
ing the Federal Water Pollution Control Act (codified as
amended at 33 U.S.C. § 1344 (1988)).
2 The Federal Courts Administration Act of 1992, Pub.L.
No. 102-572, § 902, 106 Stat. 4506 (1992), changed the name of
the United States Claims Court to the United States Court of
Federal Claims.
3 U.S. CONST. amend. V, cl. 4.
App. 4
$1,029,000 damages award, this time with compound
interest. Florida Rock Indus., Inc. v. United States, 21 Cl.Ct.
161 (1990) (Florida Rock III). The Government appeals
both the damages award and the choice of compound
rather than simple interest. We again find it necessary to
vacate the judgment that there has been a taking, and
remand for further consideiation consistent with this
opinion.
BACKGROUND
The detailed background of the case is described in
the several opinions referred to above as Florida Rock I-III.
We provide here only a brief overview before proceeding
to the heart of the matter: whether the Corps’ denial of
the § 404 permit effected a regulatory taking, thus requir-
ing the Government to pay just compensation. The
answer to that question depends on the impact the regu-
latory imposition had on the economic use, and hence
value, of the property.
In 1972, shortly before the enactment of the Clean
Water Act, Florida Rock purchased a 1,560 acre wetlands
parcel in Dade County, Florida, to the west of suburban
Miami. The purchase price was $2,964,000 (an average of
$1,900 per acre).4 Florida Rock obtained the parcel in
4 The average per acre prices, calculated on the overall
value of the 1,560 acre parcel, are provided here only to permit
rough comparison with other figures in the record for the 98
acre parcel at issue. The per acre value of the 98 acre parcel may
differ significantly from the per acre value of the 1,560 acre
tract; testimony in the record indicates that the market value of
the land is highly dependent on the size of the parcel offered
. Re en, he el ee
App. 5
order to extract the underlying limestone - a process
which destroys the surface wetlands.
During the 1970s, however, the ecological importance
of wetlands was increasingly appreciated. The Corps in
1977 enacted regulations requiring owners of wetlands
parcels to obtain permits under § 404 of the Clean Water
Act before engaging in dredging or filling activities. See
generally United States v. Riverside Bayview Homes, Inc., 474
U.S. 121, 123-24, 106 S.Ct. 455, 457, 88 L.Ed.2d 419 (1985).
Not long after, Florida Rock began mining operations on
the parcel, without having applied for a § 404 permit. The
Corps issued a cease and desist order on September 7,
1978. Florida Rock stopped mining, restored the area as
best it could, and began negotiating with the Corps for
the permit.
Initially, Florida Rock sought a permit for the entire
1,560 acres. The Corps responded that permits would be
issued only for parcels of a size to suffice for three years
of mining; in Florida Rock’s case, 98 acres would serve its
anticipated needs for three years. Florida Rock acqui-
esced in the Corps’ demand and applied for a permit
covering only the 98 acre parcel at issue here. After
considering the revised application, the Corps concluded
that the proposed mining would cause irremediable loss
of an ecologically valuable wetland parcel and would
create undesirable water turbidity. The permit application
was denied on October 2, 1980.
(the larger the parcel, the lower the per acre price), and on the
location of the parcel relative to the existing roads.
App. 6
Florida Rock, conceding the validity of the Corps’
actions,° filed suit in the United States Court of Federal
Claims, alleging that the permit denial was an uncompen-
sated regulatory taking of its land. In Florida Rock I, the
Court of Federal Claims found that the value of the parcel
before the taking was $10,500 per acre and that the value
after the taking was negligible because rock mining ~ in
the view of the court, the only viable economic use - had
been foreclosed. Florida Rock I, 8 Cl.Ct. at 164 (citing Hodel
v. Virginia Surface Mining and Reclamation Ass‘n, 452 US.
264, 295-96, 101 S.Ct. 2352, 2370, 69 L.Ed.2d 1 (1981)). The
Court of Federal Claims concluded that the permit denial
was a regulatory taking, for which the landowner must
be compensated. Florida Rock I, 8 Cl.Ct. at 165.
On appeal to this court, that judgment was vacated in
Florida Rock II. The Federal Circuit held that the Court of
Federal Claims in determining the after-taking value of
the affected property had erred in focusing on immediate
use — the proper focus should instead have been on a
determination of “fair market value.” Id., 791 F.2d at 903.
The case was remanded to the Court of Federal Claims
for further proceedings.
On remand, the Court of Federal Claims entertained
evidence seeking to establish the fair market value of the
° Florida Rock chose not to avail itself of the mechanism
provided by the Administrative Procedure Act, 5 U.S.C. § 706
(1988), for challenging in District Court the validity of the
Corps’ refusal to entertain an application for the entire 1,560
acre parcel and subsequent denial of the permit application for
the 98 acre parcel.
ex
ee tart
i 4 Cesta Seaman Poitaicetit rile, On, AE eae Veet Sxcaadey
App. 7
property subsequent to the permit denial. The Govern-
ment presented two assessors, Mr. Slack and Mr. Cant-
well, who had investigated contemporaneous land sales
in the area. Using the standard comparable sales valua-
tion method, one assessor concluded that the property
had a fair market value of $4,000 per acre, while the other
found a value of $4,615 per acre. In addition, Florida
Rock had received actual purchase offers in the range of
$4,000 per acre. The President of Florida Rock Industries,
Mr. Edward Baker, testified that he believed the property
to be worth $10,000 per acre, even after the Corps’ permit
denial (thus presumably explaining why all such pur-
chase offers were declined).
Finally, the Government presented a state court opinion
which had affirmed the state’s tax assessment of $4,089,950
for the 1,560 acre parcel, based on comparable sales of
nearby parcels during the 1979-1982 time period. (This
assessment figure for the larger parcel reflects an average
value of $2,621.76 per acre; see supra note 3.) Florida Rock
Indus., Inc., v. Bystrom, 485 So.2d 442, 444-45 (Fla.App.1986),
review denied, 492 So.2d 1332 (1986) (Bystrom). That assess-
ment was based on comparable sales which presumably
reflected the market's evaluation of present and future land
use restrictions. Id. at 444 and 447.°
6 The admissibility and significance of this state court deci-
sion was a matter of heated dispute between the parties, both at
trial and on appeal. The Government argued that, under the
doctrine of nonmutual defensive collateral estoppel (citing
United States v. Mendoza, 464 U.S. 154, 104 S.Ct. 568, 78 L.Ed.2d
379 (1984)), Bystrom was conclusive on the question of the fair
market value of the property, and, given the value of the prop-
erty thus established, there could be no taking. Florida Rock
App. 8
Florida Rock, on the other hand, read Florida Rock II
to require a detailed inquiry into the motivations and
sophistication of buyers of the comparable properties
upon which assessment was based. It crafted a survey -
viewed by the Court of Federal Claims to be “admittedly
novel,” Florida Rock III, 21 Cl.Ct. at 173 - and concluded
that virtually all the buyers of the comparable properties
were lacking in sufficient knowledge in order for their
purchases to qualify as truly comparable sales. Florida
Rock’s assessor, Mr. Failla, used the results of this survey
to justify discarding evidence that the average retail price
of parcels in the vicinity of Florida Rock’s land was
argued that the Court of Federal Claims was not bound by
holdings in a state tax assessment case, and that the general rule
that property tax assessments are not admissible as evidence of
fair market value in a condemnation proceeding (citing Miller v.
United States, 223 Ct.Cl. 352, 620 F.2d 812 (Ct.Cl.1980)) was fully
applicable. The trial judge agreed with Florida Rock, and con-
cluded that, since valuation for purposes of state taxation and
valuation for purposes of determining a taking under the Fifth
Amendment are not identical issues, the court was not bound by
the Bystrom court’s findings on that issue.
We find no error in the trial judge’s conclusion that the
value placed on the property in the tax case should not be
determinative of the fair market value for takings purposes. As
we explain below, it is not the tax assessor’s valuation which is
at issue here, but whether there was a market from which a fair
value could be established. At the very least, however, this
judicial proceeding provides a thorough review of several real
estate assessors’ analyses of the fair market value at the relevant
time, and provides the Court of Federal Claims with a judicial
determination based on a high degree of familiarity with the
Florida real estate market. As such, it is admissible and persua-
sive in support of the Government's argument that the 98 acre
parcel retained more than nominal fair market value after denial
of the permit.
iA ana PS IEE ah iS vi Alte
App. 9
$6,100 per acre, and concluded that the actual fair market
value of the tract following the permit denial was neglig-
ible. Implicit in this result is the assumption that no one
with full knowledge of the regulatory regime would be
willing to gamble that concern for the ecological impor-
tance of the wetlands would give way in the future to the
economics of development pressure from nearby Miami.
The Court of Federal Claims in Florida Rock III agreed
with Florida Rock’s view of the matter, and decided
accordingly.
DISCUSSION
A.
How to determine whether a regulatory taking under
the Fifth Amendment has occurred is a subject of on-
going debate.” The Supreme Court has provided various
? The literature is extensive; readers conversant with the
field will be familiar with much of it. Among symposia and
significant individual contributions in the last year are: Richard
Ausness, Wild Dunes and Serbonian Bogs: The Impact of the Lucas
Decision on Shoreline Protection Programs 70 Denv.U.L.Rev. 437
(1993); Catholic University Law Review: United States Court of
Federal Claims Symposium, Cath.U.L.Rev. 717 (contributions by
James E. Brookshire, Dennis J. Coyle, John A. Humbach, Glynn
S. Lunney, Jr., George W. Miller & Jonathan Abram, and Loren
A. Smith) (1993); David Mandelker, Of Mice and Missiles: A True
Account of Lucas v. South Carolina Coastal Council, 8J. Land Use &
Envtl. L. 285 (1993). Northwestern School of Law of Lewis and Clark
College: A Colloquium on Lucas, 23 Envtl. L. 869 (contributions by
Michael C. Blumm, William Funk, James L. Huffman, Donald
Large, Edward Sullivan, and Lawrence Waters) (1993); Jed
Rubenfeld, Usings, 102 Yale L.J. 1077 (1993) Stanford Law Review:
Symposium on Lucas v. South Carolina Coastal Council, 45
App. 10
articulations, influenced, as could be expected, by the
particular circumstances of the cases before it. One for-
mula that has emerged and has been repeated in several
cases requires that the court balance several pragmatic
considerations in making its regulatory takings deter-
mination. These considerations include: the economic
impact of the regulation on the claimant, the extent to
which the regulation interferes with investment-backed
expectations, and the character of the Government action.
(The leading case is Penn. Central Transp. Co. v. New York
City, 438 U.S. 104, 124, 98 S.Ct. 2646, 2659, 57 L.Ed.2d 631
(1978) (Penn Central)). In this appeal, it is the economic
impact of the regulation that is at issue.®
The recent Supreme Court decision in Lucas v. South
Carolina Coastal Council, 505 U.S. __, 112 S.Ct. 2886, 120
L.Ed.2d 798 (1992) (Lucas), teaches that the economic
impact factor alone may be determinative; in some cir-
cumstances, no balancing of factors is required. If a regu-
lation categoricaily prohibits all economically beneficial
use of land - destroying its economic value for private
ownership - the regulation has an effect equivalent to a
Stan.L.Rev. 1369 (contributions by Richard Epstein, William W.
Fisher, Richard Lazarus, and Joseph L. Sax) (1993); Windfalls and
Wipeouts: Environmental Regulation, Property, and the ‘Takings’
Clause after Lucas v. South Carolina Coastal Council, 17 Vt.L.Rev.
645 (1993); Walker, Common Law Rules and Land Use Regulations:
Lucas and Future Takings Jurisprudence, 3 Seton Hall Const.L.J. 3
(1993).
8 For a discussion of the various formulas, and a considera-
tion of the mix of ‘categorical’ or ‘per se’ rules and ‘balancing’
rules, see Mandelker, supra n. 7.
App. 11
permanent physical occupation.? There is, without more,
a compensable taking.'°
If, however, a regulation prohibits less than all eco-
nomically beneficial use of the land and causes at most a
partial destruction of its value, the case does not come
within the Supreme Court's ‘categorical’ taking rule. As
we explain below, we reject the trial court’s analysis that
led to its conclusion that all economically beneficial use
of the land was taken by the Government. We remand for
determination of what economic use as measured by
market value, if any, remained after the permit denial,
and for consideration of whether, in light of the properly
assessed value of the land, Florida Rock has a valid
takings claim.
B.
In Florida Rock II this court stated that, with regard to
the property at issue, although “there may be a question
what knowledgeable buyers would have paid, but that
they would have paid some substantial figure seems cer-
tain.” Id., 791 F.2d 893 at 903. The trial court on remand
was instructed: “if there is found to exist a solid and
9 See Hendler v. United States, 952 F.2d 1364 (1991), for a
discussion of the legal and historical interplay between physical
and regulatory takings.
10 Lucas, however, gives the government a defense based on
nuisance limitations that inhere in the owner's title. 505 U.S.
__, at __, 112 S.Ct. 2886, at 2900. A nuisance defense, by
definition, incorporates a degree of balancing.
ie ease eee ee See ace OO NO
App. 12
adequate fair market value (for the 98 acres) which Flor-
ida Rock could have obtained from others for that prop-
erty, that would be a sufficient remaining use of the
property to forestall a determination that a taking had
occurred or that any just compensation had to be paid by
the government.” Id. We did not discuss what residual
fair market value would be “adequate” to forestall a
taking determination.
We did explicitly indicate that the Court of Federal
Claims should give consideration to “a relevant market
made up of investors who are real but are speculating in
whole or major part.” Florida Rock II, 791 F.2d at 903
(citing Bystrom, 485 So.2d at 447; emphasis added). The
court noted the testimony of the Government’s assessor,
Mr. Cantwell, and said:
We are of the opinion that Mr. Cantwell’s testi-
mony, if considered and believed, established
the existence of a market in which Florida Rock
could have disposed of the property and miti-
gated the severity of the regulatory action here
involved.
Id. And while the court stated that “we take it for
granted, as Mr. Cantwell did, that the ‘willing buyer’ of
the market value formula has got to be one who is cor-
rectly informed about the physical character of the land,
as well as legal restrictions on its use...” id. at 902, we
also indicated that the market as a whole was not domi-
nated by persons engaged in fraudulent or illegal behav-
ior:
Since the tract was not listed for sale, the $4,000
per acre offer, the frequent inquiries, and the
Biter
App. 13
assessed value, must have reflected interest of
knowledgeable people, not foreigners or gulls."!
ld. In short, we understand Florida Rock II to hold that
purchases which are made by market speculators as well
as home builders and other developers are comparable
sales, with the caveat that particular sales might be dis-
carded by the assessor if those sales appear questionable
in light of the market as a whole.
Florida Rock, and the Court of Federal Claims on
remand in Florida Rock III, read Florida Rock II differently.
Our passing reference to buyers being “correctly
‘nformed” was read to require a detailed inquiry into the
motivation and sophistication of the buyers whose pur-
chases comprised the comparable sales used in the fair
market value assessment. The Court of Federal Claims
rejected the testimony of Mr. Cantwell — the same testi-
mony which we had noted with approval in Florida Rock
II - solely because Mr. Cantwell, with little exception,
assumed sufficient knowledge on the part of the pur-
chasers. Florida Rock II, 21 Cl1.Ct. at 172. Instead, the court
accepted the testimoiy of Florida Rock’s assessor, who
rejected all of the comparable sales values on the princi-
ple that none of the purchasers were sufficiently sophisti-
cated and knowledgeable. That was error — contrary to
our instruction in Florida Rock II, contrary to generally
11 Since state law generally does not preciude foreigners
from owning land, and since there is no established meaning to
the term ‘gulls’ (other than among ornithologists), we under-
stand this reference to be to the law governing fraudulent and
illegal land sales and to persons generally protected by that law.
App. 14
accepted understandings of market valuation, and finally,
contrary to the working assumptions of a free market.!2
There is no disagreement as to the facts regarding the
existence and nature of the market. Florida Rock’s study
identified in the immediate vicinity of the 98 acre tract
240 land sales during the period 1971 through 1987. A
significant number of those sales occurred in the early
1980s, despite the intervening change in the regulatory
environment. The average sales price per acre in 1980 was
$6,100. The price per acre varied predominantly as a
function of the overall lot size; smaller lots commanded
higher per acre prices. Florida Rock’s survey indicated
that roughly 80% of the buyers had purchased the land
12 The Court of Federal Claims acknowledged that “[u]sua-
lly, it may be adequate to presume all knowledge of legal restric-
tions on the part of purchasers in arms-length transactions.”
Florida Rock III, 21 Cl.Ct. at 173. We agree; Florida Rock II did not
require more. It is true that there is a statement in Florida Rock I
- that a willing buyer is one who is ‘correctly informed’ about
the legal restrictions on the use of the land — that, taken in
isolation and as a blanket requirement, is not a correct statement
of law. The market from which a fair market value may be
ascertained need not contain only legally trained (or advised)
persons who fully investigate current land use regulations;
ignorance of the law is every buyer’s right. It is also true that it
was this statement that gave Florida Rock’s lawyers a crack
through which they attempted to drive their novel approach to
what constitutes a fair market. And it was the trial judge’s
acceptance of this approach that requires today’s reversal.
When read as a whole, however, the opinion in Florida Rock II
does not support such a novel approach to the well-established
concept of a willing buyer. The opinion clearly focussed the
issue on the central question: the fair market value before and
after the imposition of the regulatory restraint, and the extent of
change, if any.
App. 15
for ‘investment’ purposes and that, overall, the pur-
chasers intended to hold the land for an average of 9 to
10 years.
Thus, there was an active though speculative invest-
ment market for Florida Rock’s land at the time of and
following the permit denial. Accord, Bystrom, 485 So.2d at
447-48. The fair market price which Florida Rock could
have commanded at that time remains, still, to be deter-
mined, but it was certainly much higher than the nominal
$500 per acre value accepted by the Court of Federal
Claims.
Florida Rock’s survey does indicate that most of the
buyers in this market did not have extensive knowledge
of the provisions of the Clean Water Act and its impact on
the development potential of those properties involving
wetlands. It is doubtful that any legal conclusions should
be drawn from this. Such broad-based disregard for cur-
rent land use regulations suggests that, while parties
contract in the shadow of the law, long term market
trends in real estate values are not necessarily correlated
to Government controls. The Government's appraisers
testified that detailed knowledge of regulatory con-
straints was relevant only when the goal of the pur-
chasers was immediate development. And as Mr. Slack
testified, “there was not really a demand for property this
far out [from Miami] at this time. People were not buying
it to do anything with it right then anyway.”
A speculative market may exist in land that is regu
lated as well as in land that is not, and the precise content
of regulations at any given time may not be particularly
important to those active in the market. As this court
App. 16
observed in Florida Rock II, 791 F.2d 893 at 902-03, yester-
day’s Everglades swamp to be drained as a mosquito
haven is today’s wetland to be preserved for wildlife and
aquifer recharge;!3 who knows what tomorrow’s view of
public policy will bring, or how the market will respond
to it.
We need not decide such speculative questions here. The
uncontroverted evidence of an active real estate market com-
pels the conclusion that the typical ‘willing buyer-willing
seller’ requirement of fair market value had been met; it
would be inappropriate for a court to substitute its own
judgment of value for that of the market. While an assessor
might be justified in adjusting the fair market value figure by
discarding aberrational values based upon sales between
related entities or fraudulent sales to widows and orphans,
an assessor may not discard an entire market as aberra-
tional.!4 ‘Aberrational’ means outside the norm established
13 See F.E. Maloney, S.J. Plager, and F.N. Baldwin, Water Law
and Administration — The Florida Experience 141-45 (1968) for a
discussion of the hydrologic cycle and the inter-relationship
between wetlands and the recharge of ground water acquifiers,
the major source of public water supplies in Florida.
14 Florida Rock did not introduce evidence that the market
was comprised of illegal or fraudulent sales. However, Florida
Rock cites Johnson v. Davis, 480 So.2d 625 (Fla.1985), to support
their argument that the parcel could not have been sold without
committing fraud. Johnson, which issued several years after the
permit denial, involved defects in the roof of a home which were
known to the seller but not disclosed to the buyer; the holding
of that case appears to be limited to material facts “which are
not readily observable and not known to the buyer.” Id. at 629.
That is quite a different matter from legal restrictions on the
subsequent use of the property which are necessarily part of the
public record and ascertainable from it.
App. 17
by general activity. The fact that many players in the market
chose to disregard the immediate potential for development
in favor of a long-term perspective — hardly unusual behav-
ior in Florida’s history of real estate investment — does not
make the market as a whole ‘aberrational.’ When the market
provides a well-substantiated value for a property, a court
may not substitute its own judgment as to what is a wise
investment.
[t was error to read Florida Rock II as requiring a
detailed inquiry into the motivation and sophistication of
the buyers of comparable parcels. Dollars are fungible; a
speculative market provides a landowner with monetary
compensation which is just as satisfactory as that pro-
vided by any other market. Should a landowner wish to
pick and choose her buyers, that luxury is not chargeable
to the federal fisc. To conclude otherwise would be tanta-
mount to concluding that there could never be a market
fueled by speculation - a conclusion at odds both with
common sense and with our directions in Florida Rock II.
i
Ultimately, the question that must be answered is
whether, as a result of the denial of certain economic
uses, there was a taking of Florida Rock’s property by the
Government. This question turns on “the economic
impact of the regulation on the claimant,” Penn Central,
438 U.S. at 124, 98 S.Ct. at 2659, measured by the change,
if any, in the fair market value caused by the regulatory
imposition. On the state of the record before us we are
unable to answer the question. The Court of Federal
Claims answered it with a straightforward ‘yes’ when the
App. 18
per acre value of the 98 acre parcel after the permit denial
was found to be only a nominal $500 per acre, as com-
pared to the $10,500 found by the trial court to be the per
acre value prior to the permit denial. This represented a
loss in value of roughly 95%. Florida Rock III, 21 Cl.Ct. at
1/5. The court in effect treated the permit denial as essen-
tially a ‘categorical’ taking of all economic use. See Lucas,
505 U.S. at __, 112 S.Ct. at 2893. “The second situation in
which we have found categorical treatment appropriate is
where regulation denies all economically beneficial or
productive use of land.” Id.
The Court of Federal Claims’ analysis was correct in
theory, but started from an incorrect premise — that the
value of the parcel after denial of the permit was a
nominal $500 per acre. When a figure closer to $4,000 per
acre is substituted, the correct outcome is no longer clear.
On remand, with a fair market value calculated in accor-
dance with this opinion, the Court of Federal Claims
must again return to the approach dictated by Florida
Rock II:
[T]he court should consider, along with other
relevant matters, the relationship of the owner’s
basis or investment, and the fair market value
before the alleged taking to the fair market
value after the alleged taking. In determining
the severity of the economic impact, the owner’s
opportunity to recoup its investment or better,
subject to the regulation, cannot be ignored.
Id., 791 F.2d at 905.
The Court of Federal Claims must reconsider the
assessments proffered by the parties and other evidence
App. 19
in the record, and determine a fair market value accord-
ingly.15 Should that determination establish, as the evi-
dence in the record suggests, that there was some (but not
a total) reduction in the overall market value of plaintiff’s
property as a result of the regulatory imposition, the
question will then be posed: does that reduction consti-
tute a taking of property compensable under the Fifth
Amendment?!¢
To answer this question requires the court to resolve
two preliminary issues. The first is whether a regulation
must destroy a certain proportion of a property’s eco-
nomic use or value in order for a compensable taking of
property to occur. The second is how to determine, in any
given case, what that proportion is.
Since the Supreme Court’s decision in Pennsylvania
Coal v. Mahon, 260 U.S. 393, 43 S.Ct. 158, 67 L.Ed. 322
(1922) (Pennsylvania Coal), the problem for courts has
been to determine the extent to which the Fifth Amend-
ment burdens the exercise of the police power through
regulation,!” that is, to determine when a particular regu-
lation somehow - in the words of Justice Holmes — goes
15 We do not by this intend to preclude the taking of addi-
tional evidence; that is a matter within the discretion of the
Court of Federal Claims.
16 Because the issue on appeal is the determination of the
value of the property as a whole before and after the regulatory
imposition, this case does not present the additional difficulties
created by parcelling the property interests affected. Compare
Lucas, 505 U.S. at ____, 112 S.Ct. 2886 at n. 7 with Penn Central, 438
U.S. 104 at 130, 98 S.Ct. 2646, at 2662.
17 The term “police power” is used herein to refer to the
power of the federal government to engage in activities not
unlike those engaged in by the states under their inherent
App. 20
“too far,” id. at 415, 43 S.Ct. at 160, and therefore effects a
taking.'® It is now clear that a regulation that constitutes
a total deprivation of economically beneficial use goes
“too far;” such a regulatory imposition results in a ‘cate-
gorical’ taking similar to a physical taking of property.19
Lucas, 505 U.S. __, 112 S.Ct. 2886.
The question remains, does a partial deprivation
resulting from a regulatory imposition, that is, a situation
in which a regulation deprives the owner of a substantial
part but not essentially all of the economic use or value of
the property, constitute a partial taking, and is it compen-
sable as such? This question has been much debated in
the literature since the Supreme Court’s decision
announcing that as a general proposition regulatory tak-
ings are compensable; the Court’s decisions to date have
not provided an answer.?°
sovereign powers, recognizing that the power in the federal
system is of Constitutional origin.
'8 It should be clear that the question in cases such as this is
not whether the Government has power to regulate the develop-
ment of wetlands. While challenges to the Government's power
to act through its various agencies are judicially reviewable, see
5 U.S.C. § 701 et seq., the Administrative Procedure Act, the
question of power to act is not before us. The only question here
is, when the Government chooses to act in the manner it did,
must it pay the just compensation mandated by the Fifth
Amendment.
'9 There is a limited governmental defense to a ‘categorical’
taking; see note 10, supra, and accompanying discussion.
20 Lucas, 505 U.S. __, n. 7, 112 S.Ct. 2886, n. 7 and accom-
panying text. For recent academic discussion of the problems of
partial regulatory takings, see Richard A. Epstein, Lucas v. South
Carolina Coastal Council: A Tangled Web of Expectations, supra n. 7
Saha naa mm
a OY
Pe nn ay phe tee eee
Sota. Po ea pee aie intend
SrePities 9655
App. 21
Nothing in the language of the Fifth Amendment
compels a court to find a taking only when the Govern-
ment divests the total ownership of the property; the
Fifth Amendment prohibits the uncompensated taking of
private property without reference to the owner’s
remaining property interests. In Lucas, the Supreme Court
touched upon the question of a partial regulatory taking,
see 112 S.Ct. 2893-95, but, concluding on the facts before it
that the case was one in which the owner was called upon
“to sacrifice all economically beneficial uses in the name
of the common good,” id. at __, 112 S.Ct. at 2895, the
Court found a categorical taking and thus did not have to
decide the partial taking question.?! Id. at ____n. 9, 112
S.Ct. at 2896 n. 9.
Justice Stevens, writing separately, criticized as arbi-
trary the notion that “[a] landowner whose property is
diminished in value 95% recovers nothing, while an
owner whose property is diminished 100% recovers the
land’s full value.” Id. at __, 112 S.Ct. at 2919, Stevens,
dissenting. In response, Justice Scalia, writing for the
Court, noted that Justice Stevens’s analysis “errs in its
assumption that the landowner whose deprivation ts one
(45 Stan.L.Rev. 1369, 1375, 1387-1392, (1993)); Rubenfeld, supra
n. 7, Part V, Subpart E. “Parceling and Partial Usings.”
21 Similarly, in Whitney Benefits, Inc. v. U.S., 926 F.2d 1169
(Fed.Cir.1991), this court held that the impact of the Surface
Mining Control and Reclamation Act of 1977 on plaintiff was a
total destruction of all economically viable use; the Govern-
ment’s arguments regarding possible alternative uses, such as
farming, were considered “completely off the mark.” Id., at
1174.
App. 22
step short of complete is not entitled to compensation.”
Id. at ___, 112 S.Ct. at 2894 n. 8.22
No such conceptual problem seems to exist when the
taking is by physical occupation. If a property owner
owns a 100 acre tract, and the Government takes 95 acres
for a public park, no one would argue that the five acres
remaining somehow precludes the property owner from
claiming entitlement to just compensation for the loss of
the 95. Indeed, if the Government took just 5 acres and
left the property owner with 95, there would be no ques-
tion that the owner was entitled to compensation for the
parcel taken (plus severance damages attributable to the
remaining tract).?3
Courts have held that even relatively minor physical
occupations are compensable. Loretto v. Teleprompter Man-
hattan CATV Corp., 458 U.S. 419, 102 S.Ct. 3164, 73
L.Ed.2d 868 (1982); Hendler v. United States, 952 F.2d 1364
(Fed.Cir.1991). Logically, the amount of just compensation
should be proportional to the value of the interest taken
as compared to the total value of the property, up to and
including total deprivation, whether the taking is by
physical occupation for the public to use as a park, or by
regulatory imposition to preserve the property as a
22 In addition to the analytical discontinuities that are cre-
ated by such an all-or-nothing rule, there are practical diffi-
culties as well. See Epstein, supra n. 14.
23 See, e.g., A.V. Kendall & S.J. Plager, Severance Damage in
Eminent Domain Proceedings, 10 U.Fla.L.Rev. 1 (1957).
App. 23
wetland so that it may be used by the public for ground
water recharge and other ecological purposes.4
The felt need for some kind of a special rule in
regulatory takings cases may stem from the difficult line
that has to be drawn between a partial regulatory taking
and the mere ‘diminution in value’ that often accom-
panies otherwise valid regulatory impositions. As
expressed by Justice Holmes in Pennsylvania Coal, “Gov-
ernment hardly could go on if to some extent values
incident to property could not be diminished without
paying for every such change in the general law. As long
recognized, some values are enjoyed under an implied
limitation and must yield to the police power. But obvi-
ously the implied limitation must have its limits, or the
contract and due process clauses are gone.” Id., 260 U.S.
24 Dissenting in San Diego Gas & Electric Co. v. San Diego,
450 U.S. 621, 652, 101 S.Ct. 1287, 1304, 67 L.Ed.2d 551 (1980),
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 condemna-
tion or physical invasion of property. From the prop-
erty owner’s point of view, it may matter little
whether his land is condemned or flooded, or
whether it is restricted by regulation to use in its
natural state, if the effect in both cases is to deprive
him of all beneficial use of it. From the government's
point of view, the benefits flowing to the public from
preservation of open space through regulation may
be equally great as from creating a wildlife refuge
through formal condemnation or increasing electric-
ity production through a dam project that floods pri-
vate property.
App. 24
at 413, 43 S.Ct. at 159. Gone as well, it is almost super-
fluous to add, would be the constraints imposed on the
Government by the takings clause.
One way to avoid this linedrawing problem would be
to declare that no regulatory taking is compensable under
the Fifth Amendment; the only available remedy for a
regulation that goes ‘too far’ is invalidation of the impo-
sition. That was the historic practice in the courts for
much of the twentieth century, but the Supreme Court
definitively rejected that practice in First English Evangeli-
cal Lutheran Church v. Los Angeles County, 482 U.S. 304, 107
S.Ct. 2378, 96 L.Ed.2d 250 (1987). The Fifth Amendment
“is designed ‘not to limit the governmental interference
with property rights per se, but rather to secure compensa-
tion in the event of otherwise proper interference amount-
ing to a taking.’ ” Preseault v. iCC, 494 US. 1, 11, 110 S.Ct.
914, 921, 108 L.Ed.2d 1 (1990) (quoting First English, 482
U.S. at 315, 107 S.Ct. at 2385; emphasis in both cases).?5
25 We note in passing that in both First English and Preseault
the Supreme Court applied the takings clause to property inter-
ests less compendious than a fee simple. First English concerned
a temporary prohibition on the use of land in a floodplain. The
Supreme Court did not hold, as the dissent would have us
today, that the Government’s temporary taking required that
the Government purchase the fee. Instead, the Supreme Court
held that the Fifth Amendment required compensation for what
was taken, viz. the use of the petitioner’s land for a limited
period of time. Preseault involved a reverter on an easement.
The Supreme Court held that the takings challenge was prema-
ture because the petitioner had not brought a claim under the
Tucker Act in the Court of Federal Claims. The Supreme Court
was not concerned that the interest with which the Government
had allegedly interfered was a contingent future interest.
yee
App. 25
Nothing in the Fifth Amendment limits its protection to
only ‘categorical’ regulatory takings, nor has the Supreme
Court or this court so held.?© Thus there remains in cases
such as this the difficult task of resolving when a partial
loss of economic use of the property has crossed the line
from a noncompensable ‘mere diminution’ to a compens-
able ‘partial taking.’
The trial court will find itself with little direct case
law guidance. As Pennsylvania Coal and subsequent
appellate court decisions have recognized, the question of
when a regulatory taking occurs cannot be answered as a
matter of absolute doctrine, but instead requires case by
case adjudication: “the question depends upon the partic-
ular facts.” Id., 260 U.S. 393 at 413, 43 S.Ct. at 158 at 159.
See also, inter alia, United States v. Caltex, 344 U.S. 149, 156,
73 S.Ct. 200, 203, 97 L.Ed. 157 (1952); United States v.
Central Eureka Mining Co., 357 U.S. 155, 168, 78 S.Ct. 1097,
1104, 2 L.Ed.2d 1228 (1958); Penn Central 438 U.S. 104 at
124, 98 S.Ct. 2646 at 2659, noting the “essentially ad hoc,
factual inquiries” in takings jurisprudence. But recourse
to the facts hardly solves the basic problem at hand -
there simply is no bright line dividing compensable from
noncompensable exercises of the Government’s power
when a regulatory imposition causes a partial loss to the
26 In Yancey v. United States, 915 F.2d 1534 (Fed.Cir.1990), a
federal government quarantine to control avian influenza had
caused the owner of a flock of healthy breeder turkeys to market
them for slaughter. The resulting loss to the owner was approx-
imately 75% of the breeder flock’s value. This court found a
compensable taking.
App. 26
property owner. What is necessary is a classic exercise of
judicial balancing of competing values.?7
When there is reciprocity of advantage, paradig-
matically in a zoning case, see, e.g., Euclid v. Ambler Realty
Co., 272 U.S. 365, 47 S.Ct. 114, 71 L.Ed. 303 (1926), then
the claim that the Government has taken private property
has little force: the claimant has in a sense been compen-
sated by the public program “adjusting the benefits and
burdens of economic life to promote the common good.”
Penn Central, 438 U.S. 104, 124, 98 S.Ct. 2646, 2659. Thus
shared economic impacts resulting from certain types of
land use controls have been held to be non-compensable.
Agins v. Tiburon, 447 U.S. 255, 262-63, 100 S.Ct. 2138, 2143,
65 L.Ed.2d 106 (1980) (shared ‘benefits and burdens’ of a
zoning ordinance); Penn Central, 438 U.S. 104 at 131, 98
S.Ct. 2646 at 2662 (same).
27 See Agins v. Tiburon, 447 U.S. 255, 260, 100 S.Ct. 2138,
2141, 65 L.Ed.2d 106 (1980) (“The determination that govern-
mental action constitutes a taking is, in essence, a determination
that the public at large, rather than a single owner, must bear the
burden of an exercise of state power in the public interest.”);
First Lutheran Church v. Los Angeles County, 482 U.S. 304, 318-319,
107 S.Ct. 2378, 2388, 96 L.Ed.2d 250 (1987) (“It is axiomatic that
the Fifth Amendment’s just compensation provision is
‘designed to bar Government from forcing some people alone to
bear public burdens which, in all fairness and justice, should be
borne by the public as a whole.’ ”) (citing Armstrong v. United
States, 364 U.S. 40, 49, 80 S.Ct. 1563, 1569, 4 L.Ed.2d 1554 (1960));
Penn Central, 438 U.S. 104 at 125, 98 S.Ct. 2646 at 2659 (“the
economic impact of the regulation on the claimant and, partic-
ularly, the extent to which the regulation has interfered with
distinct investment-backed expectations are, of course, relevant
considerations” in takings analysis).
App. 27
That the purpose and function of the regulatory
imposition is relevant to drawing the line between mere
diminution and partial taking should not be read to sug-
gest that when Government acts in pursuit of an impor-
tant public purpose, its actions are excused from liability.
To so hold would eviscerate the plain language of the
Takings Clause, and would be inconsistent with Supreme
Court guidance.?® It is necessary that the government act
in a good cause, but it is not sufficient. The takings clause
already assumes the Government is acting in the public
interest: “nor shall private property be taken for public use
without just compensation” (emphasis added).
It is for the trial court as an initial matter to deter-
mine whether the Government acted within its proper
role in the circumstances presented by the case of Florida
Rock. Marketplace decisions should be made under the
working assumption that the Government will neither
prejudice private citizens, unfairly shifting the burden of
a public good onto a few people, nor act arbitrarily or
capriciously, that is, will not act to disappoint reasonable
investment-backed expectations. The Government, in a
word, must act fairly and reasonably, so that private
parties can pursue their interests. At the same time, when
Government acts as the intermediary between private
interests to provide a mutually beneficial environment
from which all benefit and in which all can thrive, the
28 In Lucas, the South Carolina Supreme Court had held
that the State’s purpose in protecting oceanfront ecology
excused the State from liability for its regulatory imposition.
The Supreme Court held that was not the correct criterion for
takings jurisprudence. Lucas, 505 U.S. __, 112 S.Ct. 2886.
App. 28
shared diminution of free choice that results may not rise
to the level of constitutionally required compensation.
In addition, then, to a demonstration of loss of eco-
nomic use to the property owner as a result of the regula-
tory imposition — a fact yet to be properly determined in
this case — the trial court must consider: are there direct
compensating benefits accruing to the property, and
others similarly situated, flowing from the regulatory
environment? Or are benefits, if any, general and widely
shared through the community and the society, while the
costs are focused on a few? Are alternative permitted
activities economically realistic in light of the setting and
circumstances, and are they realistically available? In
short, has the Government acted in a responsible way,
limiting the constraints on property ownership to those
necessary to achieve the public purpose, and not allocat-
ing to some number of individuals, less than all, a burden
that should be borne by all?
Admittedly this is not a bright line, simply drawn.
Property owners and regulators, attempting to predict
whether a governmental regulation has gone too far, will
still need to use judgment and exercise care in making
decisions. In this sense our decision today continues the
tradition of ad hoc judicial decisionmaking in this area.
Over time, however, enough cases will be decided with
sufficient care and clarity that the line will more clearly
emerge.
The dissent rejects drawing the line between non-
compensable ‘mere diminution’ land use regulatory
restraints and compensable takings of property interests
App. 29
that involve less than all of the fee estate. The dissent favors
an all or nothing approach - if some critical threshold of
value loss is reached as a result of the regulatory imposition,
then the property owner is entitled to compensation for the
taking of the entire fee. This is, of course, another way to
handle the problem of partial takings, but there are serious
problems with the dissent’s approach.
If the dissent’s approach provided a bright line and
avoided the ad hocery problem, that might argue in its favor.
But it does not. Determining the threshold in any given case
which, under the dissent’s view would trigger full compen-
sation, requires the same sort of weighing and balancing of
indeterminate factors. Furthermore, the dissent endorses the
questionable policy of forcing the Government to pay for
something it does not want and has not taken. The dissent'’s
approach requires the Government to pay for the ‘fee’ in the
land —- ie., the entire bundle of rights - even though the
Government may be seeking only to restrict certain kinds of
development or certain uses. This has the potential of unfair-
ness to both the Government and the property owner. The
latter may wish to be paid for what she has lost but keep the
rest; and the Government should not be put to the obligation
of paying for more than it wants when it does not set out to
take it.29 The property owner is entitled to just compensation
for what is taken, no less, but no more.°°
29 This of course does not free the Government from paying
for a ‘categorical’ taking even though it may have thought it was
only restricting certain uses, if in fact the consequence of the
regulatory imposition is to take essentially all economic value.
See, e.g., Lucas.
30 “Of course, payment need only be made for what is
taken, but for all that the Government takes it must pay.” United
App. 30
The dissent is concerned that what is being taken is
‘value,’ not property.3! In fact, in a regulatory context
such as this it is both. By taking some portion of Florida
Rock’s economic use of the property - its power to dis-
turb the overlying wetlands, and with it the common law
property right to mine its subsurface minerals — the Gov-
ernment appears to have destroyed part of the value of
Florida Rock’s holdings. If that proves to be the case, and
if the application of the ad hoc tests previously described
sO warrant, the property interest taken belongs to the
Government, and the right to just compensation for the
interest taken belongs to Florida Rock.32
States v. Dickinson, 331 U.S. 745, 750, 67 S.Ct. 1382, 1385, 91 L.Ed.
1789 (1946).
°1 In Yancey v. United States, see supra n. 26, just compensa-
tion was required to be paid for a loss in value sustained by the
property owner. The Government did not take title to any of the
3,295 turkeys.
%2 Identification of a specific property interest to be trans-
ferred to the Government should pose little problem for prop-
erty lawyers. Property interests are about as diverse as the
human mind can conceive. Property interests may be real and
personal, tangible and intangible, possessory and non-
possessory. They can be defined in terms of sequential rights to
possession (present interests — life estates and various types of
fees — and future interests), and in terms of shared interests
(such as the various kinds of co-ownership). There are specially
Structured property interests (such as those of a mortgagee,
lessee, bailee, adverse possessor), and there are interests in
special kinds of things (such as water, and commercial con-
tracts). And property interests play across the entire range of
legal ideas: see, e.g., Tompkins v. Superior Court of San Francisco,
59 Cal.2d 65, 27 Cal.Rptr. 889, 378 P.2d 113 (1963) (did joint
occupancy of an apartment give one occupant the kind of pos-
Sessory property interest that carried with it the power to grant
Le BA AT a a hes we
Rae OR OES
e ETN Bi IE Yt hy 5 oe.
ee
App. 31
The Supreme Court did not have any difficulty in
finding that a property interest was taken when the Gov-
ernment authorized the installation of a small cable box
on an apartment building; the Government was not
required to buy the building. Loretto v. Teleprompter Man-
hattan CATV Corp., 458 U.S. 419, 102 S.Ct. 3164, 73
L.Ed.2d 868 (1982). Nor was there any difficulty in find-
ing a property interest taken — if it needs a label, call it a
limited co-tenancy with an easement for access - when
the Government sank wells on an owner’s property and
periodically entered to service the wells and to make tests
of the water. Hendler v. United States, 952 F.2d 1364
(Fed.Cir.1991). The fact that the source of any particular
taking is a regulation rather than a physical entry should
make no difference — the nature of legal interests defining
the property affected remains unchanged.
Finally, the dissent believes that Supreme Court pre-
cedent establishes that a Fifth Amendment claim that
specific property has been taken is an all or nothing
proposition. If taken to mean that a regulatory taking
cannot result in less than a taking of the property owner's
entire fee estate, we cannot agree. There has never been
any question but that the Government can take any kind
of recognized estate or interest in property it chooses in
an eminent domain proceeding; it is not limited to fee
interests. We see no reason or support for a different rule
in inverse condemnation cases, and that is true whether
the taking results from a physical or regulatory action.
to police legal entry to search without a warrant for the other
occupant’s marijuana stash).
App. 32
In this case we have concluded that the record does
not support a finding that the fee in the land, i.e., all
economic use or value, was taken by this regulation,
although that question is still an open one to be decided
by the facts of valuation properly found. Since loss of
economic use and value is the issue in this regulatory
taking case, it is not possible, absent a valid determina-
tion in the record of the ‘after imposition’ value of the
land, to know if a taking occurred, much less what the
Government must pay for it. We are compelled, therefore,
to remand the matter to the trial court for a determination
of that essential piece of information, and for an initial
determination as to its significance in order to decide
whether there is a compensable taking of property.
CONCLUSION
The judgment of the Court of Federal Claims is
vacated and the matter is remanded for further proceed-
ings consistent with this opinion.
VACATED AND REMANDED.
NIES, Chief Judge, dissenting.
On procedural and substantive grounds, | respect-
fully dissent from the majority’s remand for a determina-
tion of whether the United States must pay compensation
under the Fifth Amendment to the extent that the 98 acres
in issue lost a substantial part, but not essentially all, of
its economic use or value. The majority’s theory is con-
trary to Fifth Amendment “takings” jurisprudence as
App. 33
delineated by the Supreme Court and this court. Labell-
ing its lost use/value theory a “partial taking” (ipse dixit)
does not give it any legitimacy.
Inverse condemnation of land, like the affirmative
exercise of the power of eminent domain, requires the
transfer of the property found to be taken to the United
States. Value is not a transferable interest. Thus, a claim
for loss of value does not constitute a takings claim
within the meaning of the Fifth Amendment.
In response to the dissent, the majority opines that
any loss in value due to a regulatory restriction on land
use can be easily transmuted into a taking of a property
right in the land (Op. p. 1570, n. 26) and that such right
will belong to the government (Op. p. 1570). The major-
ity’s recognition that a successful claim of inverse con-
demnation of land transfers property rights is salutary.
However, the majority’s throw-in line on the transfer of a
property right to the United States does not change the
thrust of its opinion that damages must be paid to the
extent of loss of value in the fee to the 98 acres.
The majority’s partial taking theory, now vaguely
: tied to property rights, appears to borrow from the views
of then Justice Rehnquist in his dissent in Penn Central
Transp. Co. v. New York City, 438 U.S. 104, 138-153, 98 S.Ct.
2646, 2666-2674, 57 L.Ed.2d 631 (1978), and restated in
: Keystone Bituminous Coal Ass‘n v. DeBenedictis, 480 U.S.
470, 506-521, 107 S.Ct. 1232, 1252-1261, 94 L.Ed.2d 472
: (1986) that the taking of an identifiable property right
should be compensable. However, the Supreme Court, in
Penn Central (and in Keystone) rejected the division of the
App. 34
fee owner’s bundle of property rights into separate tak-
able rights. Penn Central, 438 U.S. at 130-31, 98 S.Ct. at
2662; Keystone, 480 U.S. at 470-501, 107 S.Ct. at 1232-1250.
These decisions and all others require one to focus on the
effect of a regulatory restriction on the totality of an
owner’s rights in the property. See also Concrete Pipe &
Prod. v. Const. Laborers Pen. Tr., __ U.S. __, __, 113 S.Ct.
2264, 2291, 124 L.Ed.2d 539 (1993) (citing Keystone). A
diminution in value from denial of an economic use (even
if the loss can be expressed in property right terms) is
insufficient to effect a taking under all Supreme Court
precedent so long as substantial other uses are left to the
owner. While the Supreme Court may rethink and change
its rulings, this court is not free to adopt positions in
conflict with decisions of the Court, anticipating that the
Court will be persuaded to adopt a dissenting Justice’s
view. In any event, the majority espouses compensation
for a partial taking of the fee, which is not the same as the
total taking of a severable interest. No support for the
partial taking theory can be found even in dissents.
With respect to procedural error after the first
remand, the issue in this case was limited to whether the
entire fee had been taken, which turned on whether the
property had a substantial value after the denial of the
permit. As this court specifically instructed in Florida Rock
II,
[I]f there is found to exist a solid and adequate
fair market value (for the 98 acres) which Flor-
ida Rock could have obtained from others for
that property, that would be a sufficient remain-
ing use of the property to forestall a determina-
tion that a taking had occurred or that any just
App. 35
compensation had to be paid by the govern-
ment.
791 F.2d 893, 903 (Fed.Cir.1986). This court in Florida Rock
II remanded for a determination of whether substantial
value remained. If it did, no taking occurred. The major-
ity sides with the government on that issue and holds
that the entire fee was not taken, which should have
ended this litigation under principles of law of the case.
Instead, the majority remands to allow Florida Rock to
prove a different claim, indeed, a claim once raised and
now subsumed in the judgment.! Therefore, the issue of a
“partial taking,” had it been argued on appeal by Florida
Rock, would be outside the scope of appellate review
because that party filed no cross appeal,? and it is not an
argument in support of the judgment. United States v.
American Ry. Exp. Co., 265 U.S. 425, 435, 44 S.Ct. 560, 563,
68 L.Ed. 1087 (1923).
This court has no license to shape a case more to its
liking by not only ignoring the law of the case but also
effectively taking an appeal for Florida Rock. The trial
' Florida Rock’s complaint in the Court of Federal Claims
originally sought, inter alia, damages for the diminution in value
of its land but, during the course of litigation, that issue
dropped out in the first trial, and no appeal of the viability of
that type of claim was taken. Rather, the issue litigated was
whether the United States had taken the entirety of the fee to the
98 acres. The majority brings a closed issue back into the
entirety of the case by its partial taking theory.
2 An appellee mus: file a cross appeal when issues it seeks
to raise constitute an attack on the judgment below but not
when the issues are merely alternative arguments in support on
the judgment. Moore, Moore's Federal Practice J 254.11[3] at 4-46
(1993).
App. 36
court ordered the government to pay $1 + million for the
98 acres and ordered Florida Rock to tender a deed to the
property. Florida Rock tied its fate to upholding that
judgment. Under the majority’s ruling that the entirety of
the fee was not taken, Florida Rock loses.
While the procedural issue is dispositive, I will also
address the merits of the majority theory of a “partial”
taking which conflicts with current Supreme Court prece-
dent and the precedent of this court.
I
No legal subject has received the attention of scholars
more than “takings” jurisprudence in recent years. A
flood of literature has been produced advocating various
theories of property and social responsibilities.2 Some
+ Jed Rubenfeld, “Usings,” 102 Yale L.J. 1077 (1993); Glenn
Sugameli, “Takings Issues in Light of Lucas v. South Carolina
Coastal Council; A Decision Full of Sound and Fury Signifying
Nothing.” 12 Virginia Env.L.J. 439 (1993); Erika Jones et al., “The
Fifth . ~endments Just Compensation Clause: Implications to
Regulatory Policy,” 6 Adm.L.J. of American U. 674 (1993); Hon.
John M. Walker, “Common Law Rules and Land Use
Regulations: Lucas and Future Takings Jurisprudence,” 3
Const.L.J. 3 (1993); Richard Epstein, “Lucas v. South Carolina
Coastal Council: A Tangled Web of Expectations,” 45 Stan.L.Rev.
1369 (1992); William W. Fisher III, “The Trouble with Lucas,” 45
Stan.L.Rev. 1393 (1992); Joseph L. Sax, “Property Rights and the
Economy of Nature: Understanding Lucas v. South Carolina
Coastal Council,” 45 Stan.L.Rev. 1433 (1992); Richard J. Lazarus,
“Putting the Correct Spin in Lucas,” 45 Stan.L.Rev. 1411 (1992);
Andrea L. Peterson, “The Takings Clause: In Search of
Underlying Principles Part I - A Critique of Current Takings
Clause Doctrine,” 77 Cal.L.Rev. 1299 (1989); Douglas W. Kmiec,
App. 37
espouse the view that property is held subject to com-
plete control as to its use by the state and federal govern-
ments.4 Others, at the opposite extreme, start from a
premise that owners have a right to use their property in
any manner, virtually without restriction, and, damages
must be paid for any governmental interference with
their use.> The more often the government must pay for
exercising control over private property, the less control
there will be. That is the reality.
The majority decision discusses “takings” law in a
conventional manner through sections A and B of its
analysis. But then it leads us into the camp of those who
“The Original Understanding of the Taking Clause Is Neither
Weak Nor Obtuse,” 88 Colum.L.Rev. 1630 (1988); William A.
Fischel, “Introductions: Utilitarian Balancing and Formalism in
Takings,” 88 Colum.L.Rev. 1581 (1988); Frank Michelman,
“Takings, 1987”, 88 Colum.L.Rev. 1600 (1988); Margaret Jane
Radin, “The Liberal Conception of Property: Cross Currents in
the Jurisprudence of Takings,” 88 Colum.L.Rev. 1667 (1988);
Susan Rose Ackerman, “Against Ad Hocery: A Comment on
Michelman,” 88 Colum.L.Rev. 1697 (1988); Richard A. Epstein,
“Takings: Private Property and the Power of Eminent Domain”
(1985); Margaret Jane Radin, “Property and Personhood,” 34
Stan.L.Rev. 957 (1982); Frank Michelman, “Property, Utility, and
Fairness: Comment on the Ethical Foundations of Just
Compensation Law,” 80 Harv.L.Rev. 1165 (1967).
4 Sax, supra, “Property Rights and the Economy of Nature:
Understanding Lucas v. South Carolina Coastal Council,” 45
Stan.L.Rev. 1433 (1992). Although not so stated, such theorists
would, in effect, superimpose the constitutional powers of Con-
gress on land rights much as the constitutional powers may
negate state immunity under the Eleventh Amendment.
5 Epstein, Takings: Private Property and the Power of Eminent
Domain, (1985).
App. 38
advocate damage awards for regulatory restriction (Op.
p- 1568). Its economic justification that the government
will now pay less for regulatory interference with private
property is specious. In the absence of governmental
restrictions rising to the very high level of a total “tak-
ing” of the property in issue required by Supreme Court
precedent, Connolly v. Pension Benefit Guaranty Corp., 475
U.S. 211, 225-228, 106 S.Ct. 1018, 1026-1027, 89 L.Ed.2d
166 (1985); Penn Central Transp. Co. v. New York City, 438
U.S. 104, 130-31, 136-38, 98 S.Ct. 2646, 2662, 2665-2666, 57
L.Ed.2d 631 (1978), the government does not now pay. It
may pay more in the few cases where a claimant can
satisfy those high standards, but it requires little imagina-
tion to envision the vast sums required for lost value/use
claims if the government must pay for mere impairment
of rights. Indeed, the objective of the theory is to preclude
government regulation® precisely because regulation will
entail too great a cost. Only in this respect will the theory
save the public fisc.
The majority does not analyze loss of value and
transfer of a property right separately under its partial
taking theory. Essentially it sees no distinction in a prop-
erty right, an economic use and a loss of value. However,
I will address lost value separately from property rights
because the concepts, which may be the ‘same under
“law-and-economics” theories, are not interchangeable in
established takings jurisprudence.
6 Id.
App. 39
A.
Loss of Value
The majority view that lost value of land in itself is
compensable is not the course set by the Supreme Court.
United States v. Causby, 328 U.S. 256, 66 S.Ct. 1062, 90
L.Ed. 1206 (1945), provides perhaps the clearest statement
that an inverse condemnation claim respecting land
rights requires an identification of the specific property
interest to be transferred to the government. Causby
involved a takings claim by reason of low military aircraft
flights over the plaintiffs chicken farm which destroyed
its use for that purpose. As held therein:
[T]he Court of Claims held, as we have noted,
that an easement was taken. But the findings of
fact contain no precise description as to its
nature. It is not described in terms of frequency
of flight, permissible altitude, or type of air-
plane. Nor is there a finding as to whether the
easement taken was temporary or permanent.
Yet an accurate description of the property taken is
essential, since that interest vests in the United
States. United States v. Cress, supra [243 U.S. 316],
328-329 [37 S.Ct. 380, 385, 61 L.Ed. 746 (1917)],
and cases cited.
Id. at 267, 66 S.Ct. at 1069 (emphasis added).
“Value” is not a property right under Florida law or
any state law that I can uncover. While much of takings
law is unclear, one principle is not. Rights in land depend
on the law of the particular state. Preseault v. ICC, 494 US.
1, 16 n. 9, 20-25, 110 S.Ct. 914, 924 n. 9, 108 L.Ed.2d 1
(1990) (majority and concurring opinions); Ruckelshaus v.
App. 40
Monsanto Co., 467 U.S. 986, 1001, 104 S.Ct. 2862, 2871, 81
L.Ed.2d 815 (1984) (“Property interests . . . are not created
by the Constitution. Rather, they are created and their
dimensions are defined by existing rules or understand-
ings that stem from an independent source such as state
law.”). Use of generalities respecting “property” law dis-
serves the development of coherent takings jurispru-
dence. The right taken must be identified not only
because, when transferred, it becomes the property of the
United States. Id.; Deltona Corp. v. United States, 228 Ct.
Cl. 476, 657 F.2d 1184, 1190 (1981), but also because
compensation is fixed at the fair market value of the
transferred property right. Yuba Natural Resources, Inc. v.
United States, 904 F.2d 1577, 1580 (Fed.Cir. 1990).”7 This
bedrock requirement means that, the United States hav-
ing purchased the fee or a property right, no second claim
that the government took that specific property is possi
ble.
In contrast, a lost value damage claim would impose
not even an easement on the land. Successive claims are
not only possible but likely. If loss of value alone created
a claim, Florida Rock not only would receive the darnage
award, but also would keep its land. In effect, takings
jurisprudence would become a novel type of Fifth
Amendment tort claim for regulatory injury to the land-
owner under which the United States must pay damages
while receiving no quid pro quo. This is not the law.
7 In a temporary taking, the proper measure of compensa-
tion is the value of the use of the property interest during the
taking, since the government returns the property interest to the
owner when the taking ends. Yuba, 904 F.2d at 1580-81.
App. 41
Inverse condemnation jurisprudence, like the direct
exercise of eminent domain power, is based to a large
extent on in rem concepts.® Thus, the theory of compensa-
tion simply for a loss in the land’s value, not for the
taking of a property right founded on Florida law, is
untenable.
The Supreme Court has long rejected the position that
a diminution in economic value of private lands caused
by government regulation of its use requires compensa-
tion. Penn Central Transp. Co. v. New York City, 438 U.S.
104, 131 98 S.Ct. 2646, 2662, 57 L.Ed.2d 631 (1978); Welch
v. Swasey, 214 U.S. 91, 29 S.Ct. 567, 53 L.Ed. 923 (1909). As
stated in Penn Centra!, “[Supreme Court precedent] uni-
formly reject[s] the proposition that diminution in prop-
erty value, standing alone, can establish a taking.” Penn
Central Transp. Co., 438 U.S. at 131, 98 S.Ct. at 2663 (citing
Euclid v. Ambler Realty Co., 272 U.S. 365, 47 S.Ct. 114, 71
L.Ed. 303 (1926) (75 percent diminution in value caused
by zoning law); Hadachek v. Sebastian, 239 U.S. 394, 36
S.Ct. 143, 60 L.Ed. 348 (1915) (87'/2 percent diminution in
value)). The taking issue “is resolved by focusing on the
uses the regulations permit.” Penn Central, 438 U.S. at
131, 98 S.Ct. at 2663.
8 “While the typical taking occurs when the government
acts to condemn property in the exercise of its power of eminent
domain, the entire doctrine of inverse condemnation is predi-
cated on the proposition that a taking may occur without such
formal proceeding.” First English Lutheran Church v. Los Angeles
County, 482 U.S. 304, 316, 107 S.Ct. 2378, 2386, 96 L.Ed.2d 250
(1986).
App. 42
Appellants in Penn Central argued that the NYC land-
mark law effected a taking because its operation had
significantly diminished the value of the Penn Central
Terminal site. Appellants further argued that any restric-
tion imposed on individual landmarks pursuant to the
Landmark Law constituted a taking requiring just com-
pensation. The Court found “no merit” in the argument.
Id.
Thus, it is clear that no claim under the Fifth Amend-
ment for a taking is stated by allegations that the prop-
erty in issue simply lost value.
B.
The Property Rights in Issue
In the instant case, while there is no allegation that
the government took a property right from the fee owned
by Florida Rock, the majority suggests throughout its
opinion that mining rights are the property rights in issue
whose loss require prorata compensation. Florida Rock’s
position in contrast is that the denial of the permit for
mining effectively took the entire fee by reason of the
denial of all economically viable use. This latter position
tracks precedent that government actions, which leave
some property rights in the owner may, nevertheless, so
severely interfere with private land use that they are
deemed equivalent to outright condemnation of the land
for public use. Pumpelly v. Green Bay Co., 80 U.S. 166,
177-180, 20 L.Ed. 557 (1871) (“taking” by flooding land by
dam construction).
App. 43
Lucas v. South Carolina, __ U.S. __, 112 S.Ct. 2886,
120 L.Ed.2d 798 (1992), is the latest in a series of “tak-
ings” cases issued since this case was previously on
appeal. The plaintiff pleaded the taking of the “fee simple
interest” to certain lands. Id. at ____n. 7, 112 S.Ct. at 2894
n. 7. Lucas is instructive that a taking of the fee may be
found even though the owner was left with some prop-
erty rights after the governmental action. The state regu-
lations at issue in Lucas prohibited any building on Lucas’
two oceanfront privately-owned lots. The regulations did
not strip the owner of all property rights, e.g., the right to
sell or devise the land. Nevertheless, the court held that
the denial of all economically viable use by state regula-
tion effected a categorical and total taking of the land
unless, under state law, the action amounted to abate-
ment of a “nuisance.”?
9 This exception appears inapt as applied to federal regula-
tion. The source of federal action is constitutional, as is the
requirement for compensation. Precedent respecting takings by
state action must be carefully parsed to determine whether the
principles are equally applicable to federal regulation. The
authority of Congress to impose use restrictions in this case
rests on the commerce clause which, it is true, may be exercised
to achieve purposes akin to a state’s police power. Brooks v.
United States, 267 U.S. 432, 436-37, 45 S.Ct. 345, 346, 69 L.Ed. 699
(1925). But it is not at all clear or logical that a state’s nuisance
law, which the Lucas court recognized as the basis for no com-
pensation respecting a state’s exercise of police powers, is also
the limit of the federal power to take property without compen-
sation. The noncompensable seizure of houses, cars, boats, air-
planes, or other private property in connection with drug
crimes seems to belie the majority’s assumption (Op. p. 1577 n.
10) that state nuisance law alone defines the interrelation of
commerce and the Fifth Amendment.
App. 44
The Lucas opinion begins with the recognition that a
claim that a governmental regulation took private prop-
erty for public use has generally required ad hoc factual
inquiries into the circumstances of each case, there being
no set formula for deciding that the action effected an
inverse condemnation. Id. at __, 112 S.Ct. at 2893. In
Connolly v. Pension Benefit Guaranty Corp., 475 U.S. 211,
224-25, 106 S.Ct. 1018, 1026, 89 L.Ed.2d 166 (1986) (citing
Penn Central Transportation Co., 438 U.S. at 124, 98 S.Ct. at
2659), the Court had provided the following guidance:
To aid in this determination, however, we have
identified three factors which have “particular
significance”: (1) “the 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.”
In Lucas, two discrete categories of regulatory action
were delineated as compensable without case-specific
inquiry namely, (1) regulation allowing physical “inva-
sion” of private property and (2) regulation denying all
economically beneficial or productive use of land. __
U.S. at __, 112 S.Ct. at 2893. Thus, where less than all
economically beneficial or productive use of land is lost
by reason of governmental regulation, one reverts to an
ad hoc inquiry to determine whether the property in issue,
here the fee, was taken.
In contrast, the majority divides the “ad hoc” inquiry
into two types of takings, total and partial. After finding
there is no categorical taking by physical invasion or
prevention of all economic use of land, the two situations
recognized in Lucas, the majority concludes that, under
mete
Val eth ee ae Re
App. 45
the ad hoc inquiry, the claimant may recover proportional
compensation for the impairment of economic use if it
passes a threshold beyond “diminution in value.”!° Con-
trary to the majority, in an ad hoc inquiry, the reduction in
value resulting from use restriction pertains to whether a
“taking” occurred. In making the “taking” determination,
such loss is a factor. Id., at__ n. 8, 112 S.Ct. at 2895 n. 8
(95 percent loss may not §
2]
et “benefit of categorical for-
mulation” but “keenly relevant to takings analysis”). The
loss in value, however, is not the property taken (as
discussed supra) nor the measure of compensation. Yuba,
904 F.2d at 1580.
Under Supreme Court precedent, a Fifth Amendment
claim that specific property has been taken is an all or
nothing proposition. Either the property in issue has been
taken and the fair market value at the time of the taking
must be paid, or the property is not taken and no com-
pensation is due. Tabb Lakes, Ltd. v. United States, 10 F.3d
796, 800-803 (Fed.Cir.1993). The answer is “yes” or “no,”
10 The majority supports its theory with citation to Loretto
and Hendler. Loretto v. Teleprompter Manhattan CATV Corp., 458
U.S. 419, 102 S.Ct. 3164, 73 L.Ed.2d 868 (1982); Hendler v. United
States, 952 F.2d 1364 (Fed.Cir.1991). Both are physical occupa-
tion cases decided under a categorical analysis, whereas the
majority’s taking theory is analyzed under an ad hoc analysis. In
a permanent physical occupation case, the size of the property
interest taken is irrelevant. Loretto, 458 U.S. at 434-35, 102 S.Ct.
at 3175. Had Loretto been analyzed under an ad hoc inquiry, the
result may well have been different. See id. at 452-53, 102 S.Ct. at
3185 (Blackmun, J. dissenting) (“[A]ny intelligible takings
inquiry must also ask whether the extent of the state’s inter-
ference is so severe as to constitute a compensable taking in
light of the owner’s alternative uses for the property.”).
App. 46
not “partially.” See Lucas, ___ U.S. at __ n. 8, 112 S.Ct. at
2895 n. 8 (“Takings law is full of those ‘all-or-nothing’
situations.”). Thus, under an ad hoc analysis, a 95 percent
loss of value in the land, for example, may be sufficient,
when considered with other factors, to require the gov-
ernment to purchase 100 percent of the interest in the
land, i.e. the fee. Conversely, the landowner asserting the
taking of the fee receives nothing, despite the loss in
value caused by the regulatory action, if the factors
weighed together do not mandate that the government
must become an “involuntary purchaser” of the fee. Flor-
ida Rock II, 791 F.2d at 905.
The majority states that in Lucas, the Supreme Court
touched upon but did not have to decide “the partial
taking question.” (Op. p. 1568-69). The Supreme Court
did note that precedent did not make it clear, even in a
categorical taking, how to determine “the property inter-
est against which the loss of value is to be measured.”
The court noted that “this uncertainty regarding the
denominator in our ‘deprivation’ fraction has produced
inconsistent pronouncements by the Court [citations
omitted].” Lucas, U.S. at__ n. 7, 112 S.Ct. at 2894 n. 7.
The majority seeks to shoehorn its “partial taking” theory
into this open question. It does not fit. The Lucas court
left open the question of how to determine the property
interest in issue, the denominator. One would still deter-
mine whether there is a total taking of that property
interest. The “partial taking” theory does not change the
denominator or even the numerator. The majority’s
denominator remains the fee and if an ad hoc inquiry
negates that the fee is taken, one simply would go on,
App. 47
(under the majority’s view) to consider proportional com-
pensation if a threshold of injury, more than “mere dimi-
nution”, is passed.!!
There can be no question that the “partial” taking
theory of the majority does not change the property in
issue (the denominator) from the fee to mining rights. If
the taking of mining rights were the issue, one would
; simply evaluate the mining rights at the time the permit
was denied. And there would be no need to remand to
determine if a taking of such rights occurred. One would
merely remand for their evaluation. Cf. Penn Central, 438
U.S. at 152, 98 S.Ct. at 2673 (Rehnquist, J. dissenting).
Mining is clearly precluded and such right has zero value
to Florida Rock after the action on the permit. The major-
ity, instead, engages in a complicated before and after
taking evaluation of the fee. But the loss in value of the fee
does not reflect the value of mining rights on the date of
permit denial. One must also take into account that the
land is zoned for five-acre residential development as
well. It is pure speculation whether the substantial resid-
ual value found by the majority reflects investment value
for future mining use or for future residential use.!2 What
the majority’s evaluation analysis makes clear is that its
11 Anomalously the majority remands for advice on the
legal standard of what percentage must be taken to rise to the
level of a partial taking.
12 Once mining rights are transferred to the government,
the majority’s theory of post-takings value based on offers to
buy the land because of possible change in regulations is thrown
entirely askew. There could be no change in regulations which
would give a subsequent owner the right to mine the mineral
estate which the majority agrees becomes government property.
App. 48
discussion of mining rights merely serves to obfuscate its
theory that a substantially less than total loss of value in
the fee must be compensated.
The majority’s partial taking theory finds no home in
an ad hoc analysis. As reaffirmed most recently in Concrete
Pipe & Proc., _.. US. at __, 113 S.Ct. at 2290:
[A] claimant's parcel of property could not first
be divided into what was taken and what was
left for the purpose of demonstrating the taking
of the former to be complete and hence compen-
sable. To the extent that any portion of property
is taken, that portion is always taken in its
entirety; the relevant question, however, is
whether the property taken is all, or only a
portion of the parcel in question. Accord, Key-
stone Bituminous Coal Assn. v. DeBenedictis, 480
U.S. 470, 497, 107 S.Ct. 1232, 1248, 94 L.Ed.2d
472 (1987) (“[O]ur 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, [and] one of the critical
questions is determining how to define the unit
of property ‘whose value is to furnish the
denominator of the fraction’ ”) (citation omit-
ted).
The ad hoc analysis answers the question whether the
entirety of the property in issue should be deemed confis-
cated even where the owner retains some rights. It gives
no guidance on how to determine what is the property in
issue, i.e., the denominator. It is simply the formula to
apply after the denominator is properly defined. That
“complex question” is not facilely answered by giving the
restricted interest a name.
|
|
App. 49
The law has been and continues to mandate that a
court may not look only to the part of the entirety of
property rights of a fee owner which a regulation
restricts, whether called a property right, an economic
use, or simply value. As Concrete Pipe informs us, there is
always a total taking of that interest and conversely, a
partial taking of the fee. This is, indeed, the precise
rationale for requiring an ad hoc analysis. One must weigh
the rights (and value) of the property in issue before
regulatory action against the rights (and value) therein
after regulatory restriction and find confiscatory dis-
parity between the two values for a taking to be found.
Thus, where only a portion of the acreage of a tract is
affected by denial of a wetlands permit, we have held
under an ad hoc analysis that no taking of the tract
occurred and no compensation was due. Deltona Corp. v.
United States, 228 Ct.Cl. 476, 657 F.2d 1184, 1192 (1981).'°
The difficult issue of what is the property in issue
(the denominator) was avoidable in Lucas because the
plaintiff claimed the fee was taken. Here as well. Respect-
ing the denominator, as indicated, we do not have a
question of the taking of a severable interest, 1.e., mining
rights from the bundle of rights in the land." Indeed,
13 Indeed, in this case, it is far from clear in my mind that
the 98 acres should be treated as a severed tract rather than part
of the 1500 + total acreage.
14 It may also be noted that there is no issue involving
frustration of Florida Rock’s mining business. This court in
Florida Rock II concluded that the trial court’s finding of a taking
based on the fact that Florida Rock was prevented from con-
ducting a profitable mining business made the case “improperly
one to recover for frustration of business purposes.” Id
App. 50
Florida Rock abandoned any issue other than the taking
of the fee in its entirety prior to the first appeal. Florida
Rock III, 21 Cl.Ct. 161, 169 n. 5 (1990). At this stage of
proceedings, nothing less is at stake than the entire fee
interest in the 98 acres. The majority’s ruling that the fee
was not taken under an ad hoc analysis mandates reversal.
I]
Inasmuch as the majority remands for determination
of the difference in value of the fee, before and after
permit denial, it is appropriate to point out the lega! error
in the $10,500 valuation figure as the value of the fee prior
to denial of the permit. One must focus on the fair market
value on the date of the denial, namely on October 2,
1982, because that is the date of the alleged taking. First
Lutheran, 482 U.S. at 321 n. 10, 107 S.Ct. at 2389 n. 10 (the
valuation of property taken must be calculated at time of
taking); Kirby Forest Indus., Inc. v. United-States, 467 U.S. 1,
10, 104 S.Ct. 2187, 2194, 81 L.Ed.2d 1 (1983) (just compen-
sation determined on the date property is taken); Tabb
Lakes v. United States, 10 F.3d 796, 803 (Fed.Cir.1993) (com-
pensation is measured from the time the taking occurs).
The pre-denial value ascribed to the fee by the trial
court of $10,500 is the value of the wetlands acreage with
no regulations. The trial court based the $10,500 figure on
the acquisition cost with upward adjustments. Florida
Rock Indus., Inc. v. United States, 21 Cl.Ct. 161, 169 n. 5
(1990) (Florida Rock III).
On the evidence of record, the $10,500 per acre figure
does not reflect the fair market value of the fee imme-
diately prior to the denial of the permit on Florida Rock’s
ni rd abana CA > ai
App. 51
property. The value of these lands prior to permit denial
had previously been diminished by the state and federal
regulations applicable to all wetlands. However, the regu-
lations in themselves constitute no taking. As specifically
held in United States v. Riverside Bayview Homes, Inc.:
A requirement that a person obtain a permit
before engaging in a certain use of his or her
property does not itself “take” the property in
any sense: after all, the very existence of a per-
mit system implies that permission may be
granted, leaving the landowner free to use the
property as desired. Moreover, even if the per-
mit is denied, there may be other viable uses
available to the owner. Only when a permit is
denied and the effect of the denial is to prevent
“economically viable” use of the land in ques-
tion can it be said that a taking has occurred.
474 U.S. 121, 127, 106 S.Ct. 455, 459, 88 L.Ed.2d 419 (1985).
Thus, any loss attributable to the regulations is non-
compensable. As evidenced by enactment of the FWPCA,
the nation has come to recognize that wetlands are neces-
sary resources which required special protection from
unbridled development. Contrary to the majority, the lim-
itations of development only under permit may be
imposed on this type of property without compensation.
Id.
Owners of such property have no right from owner-
ship to use lands with this natural resource unfettered.
Ownership of property carries responsibilities to the com-
munity as a whole as well as privileges. Like height
limitations or five-acre zoning laws or other similar
restrictions on use, the government's assertion of control
App. 52
generally over use of wetlands, which devalues all such
property to some extent, is not itself compensable. “Gov-
ernment hardly could go on if to some extent values
incident to property could not be diminished without
paying for every such change in the general law.” Penn-
sylvania Coal Co. v. Mahon, 260 U.S. 393, 413, 43 S.Ct. 158,
159, 67 L.Ed.2d 322 (1922). Thus, the fair market value of
the fee must be determined with these general restric-
tions on land use in place, not as if no regulations of
wetlands existed at all. Only with this adjustment is the
pre-taking value of the property properly determined.
Indeed, the evidence of sales of “comparable” lands in
the 1980’s, discussed by the majority in connection with
post-taking valuation, appears in fact to reflect the pre-
taking impact of general wetlands regulations on neigh-
boring property values.
The majority treats sales of wetland property. on
which no permit was denied as evidence of the value of
wetland property on which a permit was denied. Under
the majority’s rationale, the denial of the permit has no
effect on valuation. Actually, the majority is suggesting a
partial taking occurred based on a comparison between
the original value of the subject land and the later lower
value of other property, lower because depressed by gen-
eral regulations, but for which no permit. was denied.
That would mean the existence of general regulations
respecting wetlands effected the taking, which is contrary
to the Supreme Court’s decision in Riverside Layview,
supra. Moreover, the actual alleged act of taking under the
majority’s view can be simply ignored. Muddled though
land takings law may be, it is not so muddled that these
concepts can pass muster.
App. 53
United States Court of Appeals
for the Federal Circuit
Official Caption!
91-5156
FLORIDA ROCK INDUSTRIES, INC.,
Plaintiff-Appellee.
v.
THE UNITED STATES,
Defendant-Appellant.
Authorized Abbreviated Caption?
FLORIDA ROCK IND V US, 91-5156
(Filed June 21, 1994)
ORDER
A combined petition for rehearing and suggestion for
rehearing in banc having been filed by the APPELLEE,
and a response thereto having been invited by the court
and filed by the APPELLANT, and the petition for rehear-
ing having been referred to the panel that heard the
appeal, and thereafter the suggestion for rehearing in
banc and response having been referred to the circuit
judges who are in regular active service,
1 Required for use on petitions, formal briefs and appen-
dices, court opinions, and dispositive court orders. FRAP
12(a); 32(a).
2 Authorized for use only on items not requiring the Offi-
cial Caption as listed in note 1.
App. 54
UPON CONSIDERATION THEREOF, it is
ORDERED that the petition for rehearing be, and the
same hereby is, DENIED and it is further
ORDERED that the suggestion for rehearing in banc
be, and the same hereby is, DECLINED.
The mandate of the court will issue on June 28, 1994.
FOR THE COURT,
FRANCIS X. GINDHART, CLERK
Dated: June 21, 1994
By /s/ Diane M. Frye
Diane M. Frye
Chief Deputy Clerk
cc: ROBERT L. KLARQUIST
JOHN A. DE VAULT, Ill
FLORIDA ROCK IND V US, 91-5156
(CLM — 266-82 L)
App. 55
United States Court of Appeals
for the Federal Circuit
Official Caption!
91-5156
FLORIDA ROCK INDUSTRIES, INC.,
Plaintiff-Appellee
v.
THE UNITED STATES,
Defendant-Appellant.
Authorized Abbreviated Caption?
FLORIDA ROCK IND V US, 91-5156
(Filed June 21, 1994)
ORDER
A combined petition for rehearing and suggestion for
rehearing in banc having been filed by the APPELLANT
and a BRIEF IN SUPPORT OF APPELLANT having also
been filed by AMICI CURIAE NATIONAL WILDLIFE
FED., et al, and a response thereto having been invited by
the court and filed by the APPELLEE, and the petition for
rehearing having been referred to the panel that heard
the appeal, and thereafter the suggestion for rehearing in
banc, the brief of amici curiae, and response having been
! Required for use on petitions, formal briefs and appen-
dices, court opinions, and dispositive court orders. FRAP
12(a); 32(a).
2 Authorized for use only on items not requiring the Offi
cial Caption as listed in note 1.
App. 56
referred to the circuit judges who are in regular active
service,
UPON CONSIDERATION THEREOF, it is
ORDERED that the petition for rehearing be, and the
same hereby is, DENIED and it is further
ORDERED that the suggestion for rehearing in banc
be, and the same hereby is, DECLINED.
The mandate of the court will issue on June 28, 1994.
Circuit Judge wes would rehear the appeal in banc.
FOR THE COURT,
FRANCIS X. GINDHART, CLERK
Dated: June 21, 1994
By /s/ Diane M. Frye
Diane M. Frye
Chief Deputy Clerk
cc: ROBERT L. KLARQUIST
JOHN A. DE VAULT, III
FLORIDA ROCK IND V US, 91-5156
(CLM — 266-82-L)
p Mey
i le atte > ee “
ee eee ee |
a. nie ah Be
A am al ae te
PN ne a Nel Petal
eee aed
App. 57
FLORIDA ROCK INDUSTRIES,
INC., Plaintiff,
V.
The UNITED STATES, Defendant.
No. 266-82L.
United States Claims Court.
July 23, 1990.
Landowner brought Tucker Act action, claiming that
denial of Clean Water Act discharge permit for limestone
mining amounted to taking. The Claims Court, 8 Cl.Ct.
160, entered judgment in favor of landowner, and Gov-
ernment appealed. The Court of Appeals, 791 F.2d 893,
affirmed in part, vacated in part, and remanded. On
remand, the Claims Court, Smith, Chief Judge, held that:
(1) proposed use of property for limestone mining would
not have constituted nuisance; (2) Government failed to
establish that investment market for property following
denial of permit was comprised of investors with knowl-
edge of restrictions on land; and (3) denial of permit
constituted taking for which landowner was entitled to
damages in amount of full fair market value of property
at time of taking.
Ordered accordingly.
John A. DeVault, III, with whom were C. Warren
Tripp, Jr., Jane A. Lester, and John Tolson, Jacksonville,
Fla., for plaintiff.
Fred R. Disheroon, with whom was David Kaplan,
Washington, D.C., for defendant.
NIN VORA NE nN a
App. 58
OPINION
SMITH, Chief Judge.
This regulatory taking claim is before the court on
remand from the United States Court of Appeals for the
Federal Circuit, which affirmed in part and vacated in
part the opinion of the first trial court.! After considering
evidence presented at the original trial and additional
evidence presented after remand, the court finds that the
Army Corps of Engineers’ denial of a permit to fill plain-
tiff’s property resulted in a taking, and accordingly
awards just compensation as mandated by the fifth
amendment.
FACTS
The facts underlying this case have been succinctly
set forth by the appellate court, Florida Rock Indus. v.
United States, 791 F.2d 893, 895-96 (Fed.Cir.1986), and are
recited briefly below for the reader’s convenience. The
court relies on the findings of the district engineer of the
Army Corps of Engineers (the Corps), as did the Federal
Circuit.
Plaintiff, a large-scale miner of limestone, purchased
a tract of 1,560 acres in Dade County, Florida in 1972,
paying $2,964,000. The sole purpose for the acquisition
was the mining of limestone; no other use or sale was
ever considered. Because of a slump in the construction
industry in South Florida, plaintiff did not attempt to
1 The first trial was held before then-Chief Judge Alex
Kozinski.
App. 59
mine the subject property until 1978, nor did it attempt to
put the property to other use.
Shortly after the plaintiff’s acquisition of the prop-
erty but prior to the commencement of mining in 1978,
Congress passed Public Law 95-217, 91 Stat. 1567 (Dec.
27, 1977), amending the Clean Water Act, 33 U.S.C.
§ 1251(a) (1988) and expanding the jurisdiction of the
Corps to regulate activity affecting navigable waters. At
the same time, § 404 of this law established a mechanism
for applying for permits to discharge dredged or fill
material into waters covered by the Clean Water Act. 33
U.S.C. § 1344 (1988).
Upon learning of plaintiff’s mining activities, and in
the belief that a § 404 permit was required, the Corps
issued a cease and desist order, with which plaintiff com-
plied. Plaintiff then applied to the Corps for a permit
which would enable it to mine 98 acres. This would have
fulfilled its needs for a three-year period. Although plain-
tiff would have preferred a permit to mine the entire
1,560 acre tract, the Corps had indicated it would con-
sider applications covering no more than a three-year
need.
On October 2, 1980, the Corps denied plaintiff's
application covering the 98 acres, finding the permit
would not be in the public interest. No appeal was taken
under the Administrative Procedure Act, 5 U.S.C. §§ 701,
ff (1988), and no further applications were submitted.?
2 Nonetheless, plaintiff claimed that the entire parcel of
1,560 acres was taken as a result of the permit denial, because
logic would indicate that if the Corps would not allow the
i MMMM i
App. 60
PRIOR PROCEEDINGS
The history of the prior proceedings in this case has
been laid out at length in Senior Judge Nichols’ opinion
for the Federal Circuit, 791 F.2d at 896-97, and is summa-
rized briefly below.
Following the district engineer’s denial of plaintiff’s
permit application, plaintiff filed suit in the Claims
Court, seeking just compensation for a regulatory taking,
under the fifth amendment. The liability and damages
aspects were bifurcated, and separate trials were held
before Chief Judge Kozinski. At the conclusion of the trial
on liability, the Chief Judge delivered an oral opinion,
which later was modified and memorialized in a written
opinion. Florida Rock Indus. v. United States, 8 Cl.Ct. 160
(1985). An order on valuation was issued after a trial on
damages.
Chief Judge Kozinski found that, contrary to the
Corps’ finding, the activities proposed by plaintiff would
not have polluted the water; he also found that there was
no economically viable use for the property other than as
a site for mining limestone. Based on these findings, he
held that the government's action had resulted in a taking
requiring just compensation. In fixing the amount of com-
pensation to which plaintiff was entitled, Chief Judge
Kozinski was persuaded by plaintiff's argument that the
proper measure of damages was the immediate use value
mining of 98 acres, it would not permit the mining of the
remaining 1,462 acres. Chief Judge Kozinski ruled that the only
parcel before the Corps had been the 98-acre tract, and therefore
the only land that could be the subject of this taking litigation
was that tract. The Federal Circuit affirmed this holding.
App. 61
that had been lost, and in a subsequent order determined
that the 98 acres in dispute were worth $10,500 per acre,
or $1,029,000 for the tract.
The Federal Circuit affirmed Chief Judge Kozinski’s
finding that the most that could have been taken was the
98-acre parcel, but vacated much of the remainder of the
opinion and remanded for further proceedings. In doing
so, the Federal Circuit Court noted:
The trial judge failed to apply the evidence in a
manner correct in all respects to determine
whether he had an actual instance of a taking
before him. . . . We remand for determination of
the taking question according to right princi-
ples, as it would be improper for us to constitute
ourselves fact finders and weigh the evidence
ourselves.
791 F.2d at 894.
In addition to these general principles, the Federal
Circuit found several aspects of the trial court’s opinion
contrary to the law. In particular, the Federal Circuit held
that the trial court’s inquiry into whether the proposed
activity actually would have polluted the waters was an
improper exercise of jurisdiction over a matter appropri-
ate for review only by a district court under the Adminis-
trative Procedure Act. Id. at 898.
> Although the court ruled that the only land taken by the
permit denial was the 98 acres, it valued the entire 1,560-acre
parcel. In the valuation order, it was determined that as of the
date of taking, 1,240 acres were worth $7,500 per acre and 320
acres were worth $4,000 per acre, for a total of $10,580,000.
App. 62
The appellate court also disapproved of the trial
court’s method of valuing the property potentially taken
by looking at an immediate use value, as opposed to a
fair market value. Specifically, the court ruled that it was
clear error for the trial judge to exclude from consider-
ation defendant’s evidence of a potential investment mar-
ket for the property. The court stated:
Indeed, if there is found to exist a solid and
adequate fair market value (for the 98 acres)
which Florida Rock could have obtained from
others for that property, that would be a suffi-
cient remaining use of the property to forestall a
determination that a taking had occurred or that
any just compensation had to be paid by the
government.
Id. at 903. ~
Defendant for the most part is correct that the Fed-
eral Circuit vacated Chief Judge Kozinski’s findings.
However, there are at least two exceptions. The Federal
Circuit expressly affirmed the trial court’s determination
that the 98-acre parcel is the only property in dispute.
Additionally, the appellate court did not disturb his find-
ing that the pre-“taking” value of the property was
$10,500 per acre, and this court must accept that figure
for determining both liability and damages.‘ See, e.g.,
Fidelity & Deposit Co. v. USAFORM Hail Pool, 523 F.2d 744,
759 (5th Cir.1975), cert. denied, 425 U.S. 950, 96 S.Ct. 1725,
4 Additionally, the court has considered the method
adopted by Chief Judge Kozinski in determining this value and
finds that it is not clearly erroneous. As such, under the stan-
dard set forth in RUSCC 52(a), this prior determination will
stand.
App. 63
48 L.Ed.2d 194 (1976) (a trial court, when conducting
proceedings following a remand, cannot disregard its
previous factual findings if those findings were not dis-
turbed on appeal). The court disagrees with defendant
that no further evidence may be introduced on remand.
Had the Federal Circuit intended for this case to be
decided on the existing record, it would have remanded
with directions to dismiss. Without further evidence of
fair market values, it would be impossible for this court
to make a “determination of the taking question accord-
ing to right principles.” 791 F.2d at 894.
cere Seta etltels ACO ool DV Sica AD i PS i
Thus, the court is faced with the following questions
on remand: whether plaintiff had a legitimate entitlement
to the proposed use of its property; if so, whether the
Corps’ denial of a § 404 permit denied the plaintiff the
economically viable use of its land so as to constitute a
taking under the fifth amendment; and, if so, the amount
of compensation to which plaintiff is entitled. Central to
the outcome of the latter two questions is a determination
of the fair market value of plaintiff’s property after the
denial of its permit application.
Finally, it must be added that although the parties
hold differing views on the court’s role on remand, and
there is room for valid disagreement in interpreting some
appellate opinions in this area, the Federal Circuit could
not have been clearer when it concluded:
On remand, the court should consider, along
with other relevant matters, the relationship of
the owner’s basis or investment, and the fair
market value before the alleged taking, to the
fair market value after the taking. In determin-
ing the severity of economic impact, the owner’s
App. 64
opportunity to recoup its investment or better,
subject to the regulation, cannot be ignored.
Id. at 905.
DISCUSSION
Plaintiff’s Legitimate Entitlement to the
Proposed Use of its Property
Defendant has maintained throughout the course of
this litigation that even if plaintiff otherwise has suc-
cessfully demonstrated that the denial of its permit appli-
cation resulted in the loss of all economic value in its
property, it is not a taking because plaintiff had no legiti-
mate entitlement to use its property for the particular
activity it sought to conduct. Defendant grounds its argu-
ment on the proposition that the government need not
compensate “individual owners for pecuniary losses they
may sustain, by reason of their not being permitted, by a
noxious use of their property to inflict injury upon the
community.” Keystone Bituminous Coal Ass'n v. De Bene-
dictis, 480 U.S. 470, 489, 107 S.Ct. 1232, 1244, 94 L.Ed.2d
472 (1987) (relying on Mugler v. Kansas, 123 U.S. 623,
668-69, 8 S.Ct. 273, 300-01, 31 L.Ed. 205 (1887), in which
the state prohibited a brewery from manufacturing beer,
thereby rendering the brewery valueless). In other words,
a property owner has no right to use its property as a
nuisance.
In commenting on what has become known as the
nuisance exception to the general rule that just compensa-
tion is required when the government regulates the value
out of private property, the Court of Appeals for the
Federal Circuit stated that “no one has a legally protected
, a=
App. 69
right to use property in a manner that is injurious to the
safety of the general public.” Allied-General Nuclear Servs.
vy. United States, 839 F.2d 1572, 1576 (Fed.Cir.1988) (citing
Mugler). With respect to the application of the nuisance
exception to this case, the Federal Circuit noted, “we may
concede as a hypothetical, if Florida Rock produced on its
tract a fluid as septic as Kansas then considered beer to
be, and proposed to drain it into the Miami drinking
water, this could be stopped without compensation.” 791
F.2d at 900.
Although defendant's statement of the law is accu-
rate, it does not apply to this case. First and foremost, the
Federal Circuit noted that the Corps’ decision that plain-
tiff’s proposed activities would pollute the water was a
“necessary hook for jurisdiction of the Army engineers,
[and the pollution] is not claimed in the district engi-
neer’s decision to be by itself very serious.” Id. at 904.
The appellate court characterized Florida Rock as a
“moderate and pro forma polluter,” and distinguished it
from “one who wanted to put toxic wastes in drinking
water, [who] would encounter a balancing of public and
private interests most unfavorable to his position and not
likely to result in a compensation award.” Id.
Second, even if the Federal Circuit’s statements were
not binding on this court, the court on its own is not
persuaded that plaintiff's proposed activities would have
constituted a nuisance so as to deny plaintiff its rights to
just compensation.
Defendant introduced testimonial and documentary
evidence that plaintiff's proposed use of the property
would have endangered or destroyed scme wetlands.
App. 66
Defendant contends that based on this evidence plain-
tiff’s proposed activity would have increased the risk of
contamination of the Biscayne Aquifer, the sole source of
drinking water for the Dade County area, although even
defendant does not contend that limestone mining actu-
ally would have contaminated the aquifer. No evidence
was introduced at trial to support or even quantify this
risk.
Notwithstanding this argument, it is clear from the
court’s aerial visit of the site that the proposed use of
plaintiff's property would not have created any signifi-
cant increase in the risk of contamination posed to the
Biscayne Aquifer. The extensive quarries in the area of
plaintiff’s property belie any claim that a nuisance is
involved here. The court observed many operational
limestone quarries and existing limestone pits in close
easterly proximity to plaintiff's property. Furthermore,
defendant concedes that if plaintiff had begun to mine
before the 1972 amendments to the Clean Water Act went
into effect, plaintiff would have been grandfathered in,
and no federal permit would have been required.
Defendant’s use of the nuisance exception here only
obscures the real question, as well as the government's
own interests in denying plaintiff a § 404 permit. The
government’s stated policy interest is the prevention of
development in the vast wetland area at the western edge
of Dade County’s developed and developing sections.
The wetlands there serve to protect and enhance the
Biscayne Aquifer. As civilization has grown into this
region over the last 100 years, there has been an ever
greater amount of pressure on the Aquifer. This is so
App. 67
because the wetlands filter and recharge the Aquifer,
while development has the opposite effect.
No one knows how much danger to or pressure on
the Aquifer’s ability to remain safe have been created by
the last 100 years of development. However, it is not this
court’s function to decide the acceptable level of pressure
or danger. The state or federal authorities well may
decide that Dade County’s development should be
stopped forever at Krome Avenue or allowed to proceed
another 100 miles to the west. It is this court’s duty to
decide which regulatory restrictions require just compen-
sation under the fifth amendment.
Here, it is clear that the nuisance exception to the
fifth amendment’s requirement of just compensation is
inappropriate. Rock mining of the type planned for plain-
tiff’s property never has been considered a nuisance. In
fact, it is in this area, as the court observed, the precursor
of stylish, if not elegant, residential development. As the
pits are mined out they are turned into small lakes. The
surface ground formerly covering the limestone is used to
raise the ground level so that homes can be built several
feet above the mean high water line. This pattern of
development extends in a great north-south band along
the western edge of the developing Dade County. The
eastern edge of this band consists primarily of completed
and occupied residential development. The western edge
is populated by active limestone mining pits. Plaintiff’s
claim is occasioned by the fact that when it was about to
begin its mining the governmental policy put an absolute
limit on this western movement. This decision’s correct-
ness must be assumed in the context of a claim for just
compensation. However, it has little to do with nuisance
App. 68
theory, an area developed by the common law courts of
England hundreds of years past. Rock mining of the type
at issue here is not considered a nuisance in this area. It
certainly is not considered one several thousand feet
away, where rock mining is proceeding happily apace.
The government’s uses of this argument, if adopted,
would render the concept of a regulatory taking virtually
meaningless. It also would severely limit the protection
afforded by the fifth amendment, even in the case of a
taking by direct physical invasion.
For the foregoing reasons, plaintiff's proposed use of
its property would not have constituted a nuisance under
Keystone Bituminous, Mugler, and Allied-General Nuclear
Servs. Plaintiff therefore had a legitimate entitlement, but
for the wetlands restrictions, to use its property in the
manner proposed. As a result, if it is otherwise able to
establish that the denial of its permit resulted in a taking,
plaintiff should not be required to “sustain[ ] what may
well be a permanent obligation to maintain property for
public benefit, to carry the taxes and other expenses, and
not to receive business income from the property in
return.” 791 F.2d at 904.
This determination does not call into question the
findings of the legislature in enacting the Clean Water
Act, nor the determinations of the Corps or other agen-
cies that might have opposed the project. In fact, this
determination is consistent with the appellate court's
characterization of the Corps’ findings. According to the
Federal Circuit, “[t]he concern of the district engineer
[was] almost exclusively the continued existence of the
wetland, not the temporary and moderate pollution inci-
dent to the occurrence of actual mining. It would be
. . Sidinestico
- ‘ nh 5
Va es or ee ee
App. 69
forensic semantics to characterize his decision as one
against pollution. ... ” Id.
All valid statutes and regulations exist for the public
welfare. But the assertion that a proposed activity would
be a nuisance merely because Cofgress chose to restrict,
regulate, or prohibit it for the public benefit indicates
circular reasoning that would yield the destruction of the
fifth amendment. “The nuisance exception . . . is not
coterminous with the police power itself.” Penn Central
Transp. Co. v. New York City, 438 U.S. 104, 145, 98 S.Ct.
2646, 2669, 57 L.Ed.2d 631 (1978) (Rehnquist, C.J., dissent-
ing). It cannot be forgotten that the fifth amendment “is
designed not to limit the governmental interference with
property rights per se, but rather to secure compensation in
the event of otherwise proper interference amounting to a
taking.” First English Evangelical Lutheran Church v. Los
Angeles, 482 U.S. 304, 304, 107 S.Ct. 2378, 2380, 96 L.Ed.2d
250 (1987).
As defendant concedes, not all valid § 404 permit
denials are insulated from fifth amendment claims. In this
case, the court finds no support for defendant's proffered
characterization of the proposed use of this property as a
nuisance.
Denial of Economically Viable Use
of the Land
In Agins v. Tiburon, 447 U.S. 255, 260, 100 S.Ct. 2138,
2141, 65 L.Ed.2d 106 (1980), the Supreme Court indicated
that a regulation, in that case a zoning law, as applied to a
particular property may effect a taking if it does not
substantially advance legitimate state interests (citing
App. 70
Nectow v. Cambridge, 277 U.S. 183, 188, 48 S.Ct. 447, 448,
72 L.Ed. 842 (1928)), or if it “denies an owner economi-
cally viable use of his land” (citing Penn Central, 438 U.S.
at 138 n. 36, 98 S.Ct. at 2666 n. 36). See also United States v.
Riverside Bayview Homes, Inc., 474 U.S. 121, 106 S.Ct. 455,
88 L.Ed.2d 419 (1985).
There is no fixed formula for determining when a
regulation or its application denies an owner economi-
cally viable use of its land and thereby results in a taking.
Rather, the Supreme Court has characterized the analytic
process as one relying
instead on ad hoc, factual inquiries into the
circumstances of each particular case. . . . To aid
in this determination, however, we have identi-
fied three factors which have “particular signifi-
”
cance.” (1) “the 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 government action.”
Connolly v. Pension Benefit Guar. Corp., 475 U.S. 211,
224-25, 106 S.Ct. 1018, 1025-26, 89 L.Ed.2d 166 (1986)
(citations omitted). See also Keystone Bituminous, 480 U.S.
at 494-95, 107 S.Ct. at 1247 and cases cited therein.
In focusing on the extent to which the government's
action has denied plaintiff the economic viability of its
property the court may combine the first two of these
factors. See 791 F.2d at 905. As a part of this analysis, the
court must compare the value of the property before the
government action with the value after the government
action. “[I]f there is found to exist a solid and adequate
fair market value . . . which Florida Rock could have
Reed.
‘
wo etm A Bab ln red! Rak es Rt aaah le
2
+
é
im
4
App. 71
obtained from others for that property, that would be a
sufficient remaining use of the property to forestall a
determination that a taking had occurred. ...” Id. at 903.
This market may be composed of “investors who are real
but are speculating in whole or in part.” Id. The court,
however, may not consider “potential eiid uses or mar-
kets when the speculation is so remote or improbable that
one would not invest his money in it.” Id.
Before addressing the value of the plaintiff’s prop-
erty prior to and after the government action, a brief
comment on the character of the government action is
warranted, although little has been made of it by the
parties because of the particular facts and procedural
posture of this case.
Character of Government Action
Typically, an inquiry into the character of the govern-
ment action addresses whether the interference with
property involves physical invasion or interference by
regulation; interference of the former type has been more
likely to be considered a taking than the latter. See further
Keystone Bituminous, 480 U.S. at 488-89 n. 18, 107 S.Ct. at
1244 n. 18.
In this case, the government has drawn a line in time,
and has dictated that covered activity begun after a cer-
tain point is restricted. As defendant has conceded, if
plaintiff had attempted to mine its property earlier, it
probably would have been grandfathered in under the
then-existing statutory scheme. Moreover, as the court
noted earlier in this opinion, limestone mining operations
App. 72
that had begun prior to the amendments to the Clean
Water Act were ongoing at the time of trial.
It must be kept in mind that the “determination that
governmental action constitutes a taking, is, in essence, a
determination that the public at large, rather than a single
owner, must bear the burden of an exercise of state power
in the public interest.” Agins, 447 U.S. at 260-61, 100 S.Ct.
at 2141-42. Although it is permissible for a regulatory
entity to determine that conduct begun prior to the effec-
tive date of certain regulations is not affected, such a
determination may indicate, as it does in this case, that a
single plaintiff should not bear a burden that should be
borne by the public at large. Thus, to the extent the court
has been asked to contemplate the character of the gov-
ernment action in this case, it is a consideration that
weighs in plaintiff’s favor.
Value Before Government Action
In many cases, the economic impact of the regulation
is measured by comparing the fair market value of the
property before the government action with the fair mar-
ket value of the property after the government action.
Thus, the litigation on this issue often becomes a battle of
real estate appraisers. Typically, real estate appraisers
determine and adjust comparable sales to determine fair
market values; in the absence of comparable sales, how-
ever, other methods for establishing the fair market value
are accepted by the courts. See, e.g., Foster v. United States,
607 F.2d 943, 951, 221 Ct.Cl. 412, 426 (1979); Yaist v. United
States, 17 Cl.Ct. 246, 260 (1989) and cases cited therein.
4 2 Wek eee 3a dot eile
PD sean ae eee ean are =
App. 73
In this case, the court believes there were no compa-
rable sales available. In the absence of such proof, plain-
tiff presented credible and competent evidence of the
property’s pre-permit-denial fair market value by adjust-
ing the price it paid for the property in 1972 based on
changes in the local economic environment. The court
agrees with defendant that acquisition cost is rarely a
basis for establishing the value of land prior to an alleged
regulatory taking. In this case, however, the acquisition
cost was used merely as a starting point for determining
the value.°
Further, the court is convinced that although this
method may not be the ideal one chosen by appraisal
experts, it does provide an adequate basis for determin-
ing the fair market value of the property prior to the
government action. As such, Chief Judge Kozinski’s gen-
eral acceptance of plaintiff’s method, as modified some-
what by his calculations as explained in his oral ruling of
May 7, 1985, is not clearly erroneous. Because this finding
therefore meets the requirements of RUSCC 52(a), and
5 Contrary to defendant’s assertions, the adjustments from
1972 to 1978 did not have the effect of attributing to the United
States the costs of lost opportunity, taxes and inflation. Plaintiff
no longer argues that it may recover for the frustration of busi-
ness expectations, nor could this court accept such an argument.
See 791 F.2d at 903. Plaintiff’s adjustments merely reflect the
reality of the changing value of money and reaity over time; to
accept defendant’s argument would undercut the meaning of
any method of valuation, including the comparable sales
approach, since the reasons for paying a certain sum for a
particular piece of property include opportunity value, taxes,
and the value of money.
App. 74
because it was not disturbed on appeal, the pre-“taking”
value of plaintiff’s property is held to be $10,500 per acre.
Value After Government Action
The great majority of counsel’s time and effort spent
on remand has been directed at the question of the prop-
erty’s value after the denial of plaintiff’s permit applica-
tions.© Defendant argues that plaintiff has not proven that
all economically viable uses would require a fill permit,
nor has plaintiff shown that it applied for permits for
uses other than mining, nor has plaintiff shown that any
such permit applications have been denied. Defendant
asserts that plaintiff's taking claim is not ripe because
applications for relevant state permits never had been
made, citing Williamson County Regional Planning Commis-
sion v. Hamilton Bank, 473 U.S. 172, 186, 105 S.Ct. 3108,
3116, 87 L.Ed.2d 126 (1985) for the proposition that until
an owner has obtained a final administrative decision as
to how the applicable rules and regulations will be
applied to the property, a taking claim is premature.
However, with respect to the federal administrative pro-
cess, the Corps’ denial of plaintiff’s § 404 permit applica-
tion was final. With respect to the state permit
applications, there is no legal requirement for a party to
6 On remand, the court denied defendant’s motion to
exclude additional evidence, and heard additional testimony as
to the fair market value of the property after the permit denial.
Noting its continuing objection to the consideration of addi-
tional evidence, defendant argues that even with that new evi-
dence plaintiff has failed to establish that there is no remaining
economic use of plaintiff’s property after the permit denial. For
the reasons stated herein, the court disagrees.
Rg
8
= |
3
=
:
App. 75
expend time and money on what would clearly be an
unnecessary and futile exercise. Cf. Conant v. United
States, 12 Cl.Ct. 689, 692 (“It would serve no purpose to
require claimant to exhaust administrative procedures
before seeking judicial review when it is clear that resort
to administrative action would be futile.”).
It appears to the court, for several reasons including
defendant’s allegation that the highest and best use for
the subject property is investment, that the most impor-
tant of defendant’s arguments is that plaintiff has failed
to prove the absence of a market among real and knowl-
edgeable investors aware of all restrictions on the lands.”
7 In addition to its main arguments, defendant points out
that plaintiff’s principle, Mr. Edward Baker, believed the prop-
erty to be worth over $10,000 per acre after the permit denial.
Defendant also argues that plaintiff rejected three offers to pur-
chase the property for substantial value after the permit denial.
These offers consisted of a letter from an Arizona real estate
broker proposing to purchase the tract for approximately $3.5
million, a subsequent letter from the same broker proposing to
purchase the parcel in ten-acre tracts for $5 million over an
eight-year term, and a contract for the purchase of 160 acres for
$325,000 with 20% down and the balance to be paid over ten
years. There is no evidence that these offers were made by
knowledgeable investors, nor whether the offerors were capable
of consummating the purchase; plaintiff’s unrefuted testimony
was that it did not consider these offers to be “real.” Regardless
of the actual likelihood of these offers being real, however,
neither they nor Mr. Baker’s belief as to the value of the prop-
erty, whether considered on their own or together, proves the
existence of a “solid and adequate” market. Nor does the court
find any persuasive evidence that there is a market for the
property for purposes of hunting, recreation, or scientific study,
other than among government entities which might be inter-
ested in acquiring the wetlands at the nominal price discussed
infra.
App. 76
Although defendant is correct that plaintiff has the
burden of establishing the elements of its claim, including
the diminution in the property’s value, it would be pat-
ently unreasonable to require plaintiff to prove the total
absence of any value, and more relevant to this case, the
absence of a market for the property. This would require
plaintiff to prove a negative, a logically impossible task.
Moreover, it would be a hurdle which would make an
illusion out of the fifth amendment. Instead, plaintiff's
initial burden is to produce sufficient evidence of the
absence of real value to shift the burden to defendant.
Plaintiff in the instant case has met that burden.®
A brief review of what previously has transpired in
this case is necessary to understand fully the parties’
respective positions. The Federal Circuit noted that Chief
Judge Kozinski premised his determination that a taking
had occurred on a misinterpretation of the phrase “eco-
nomically viable use.” According to the appellate court,
791 F.2d at 901-03, the trial judge erroneously read into
the case law the qualification that there be no remaining
immediate use, and consequently excluded the testimony
of the defendant’s real estate appraiser that a market
existed among knowledgeable speculators who would be
“willing to forego immediate income in hope of long-term
gain.” Id. at 902. Instead, Chief
This text is long and has been trimmed here. Open the source document for the complete record.
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.