The scope of “background principles”

The Second Circuit’s August 1, 2014, decision in 1256 Hertel Ave. Associates, LLC v. Calloway, illustrates a not uncommon problem in takings law – how the straightforward application of the Supreme Court’s established takings rules sometimes leads to, or at least suggests, problematic outcomes, and how creative courts sometimes avoid the problem. Read the rest of this entry »

Lost Tree Revisited

The “parcel as a whole rule” has long been one of the few ironclad rules one could count on in takings litigation.   But in a controversial decision issued on January 1, 2013, in Lost Tree Acres v. United States, the U.S. Court of Appeals for the Federal Circuit adopted a novel approach to the parcel issue that seemed to knock everything into a cocked hat.  But it turns out the U.S. Department of Justice believes there is still more to talk about in the Lost Tree case.

The case arose from the U.S. Army Corps of Engineers’ denial of a CWA section 404 permit to fill approximately 5 acres of tidal wetlands and submerged lands on the Atlantic coast of central Florida for residential development.   The parcel at issue is a tiny fraction of a larger 1300-acre real estate holding the plaintiff purchased and developed over a period of several decades.  Thus, the 5-acre parcel was the last potentially developable portion of an essentially complete, highly successful real estate development.  Notwithstanding the fact that a court would normally treat the entire 1300-acre holding as the relevant parcel as a whole, the Federal Circuit ruled that the 5-acre property was the relevant parcel, essentially because plaintiff had “ignored” the possibility of developing this particular parcel for most of the development process and only focused on it when an unexpected opportunity arose to use wetlands mitigation credits in connection with the possible development of this last parcel.  The Federal Circuit denied the United States’ interlocutory rehearing petition on the parcel issue.  On remand, the claims court, applying the Federal Circuit’s narrow definition of the relevant parcel, found a taking and entered a judgment in favor of plaintiff for $4.2 million (plus interest).

Now, the United State has filed a brief appealing the final judgment.   While the parcel ruling represents law of the case for the purpose of review by a panel of the Federal Circuit, the Department of Justice brief  “preserves” the government’s “disagreement with the earlier panel ruling,” observing that the “ruling remains subject to further appellate review,” apparently referring to potential en banc review or possibly even review in the U.S. Supreme Court.  The brief argues in part:

The panel based its holding on Lost Tree’s subjective treatment

of Plat 57 as a “distinct economic unit[ ],” A24, rather than the objective

factors—e.g., physical contiguity, unity of purchase, and mutual

enhancement of value—that the Supreme Court has considered when

defining the parcel-as-a-whole. The panel opinion allows a developer to

artificially sever the regulated portion of a project from the unregulated

portion merely by developing the unregulated portion first and then

alleging a “temporal severance” between different phases of the project.

A24–25. In effect, the panel’s ruling permitted Lost Tree to “defin[e]

the property interest taken in terms of the very regulation being

challenged,” a “circular” approach that the Supreme Court and other

courts have “consistently rejected.” Tahoe-Sierra, 535 U.S. at 331; see

also, e.g., Zealy v. City of Waukesha, 548 N.W.2d 528, 533 (Wisc. 1996).


The proceedings on remand highlighted the flaws in the panel’s holding.

It is perverse that Lost Tree’s vociferous denial of investment backed

expectations—a factor of “particular significance” to the takings

inquiry, Penn Central, 438 U.S. at 124—was precisely what allowed the

company to circumvent Penn Central and “shoehorn its claim into [the

Lucas] analysis” before the trial court. Concrete Pipe, 508 U.S. at 643;

see, e.g., A782 (plaintiff’s summary judgment reply brief) (“Lost Tree did

not have any economic expectations for Plat 57 until 2001–02, and

therefore before that time Lost Tree could not and did not consider the

value of Plat 57 to be part of a ‘single economic unit’ with other property

in the vicinity.”).

Of course, the United States’ brief also cites several other asserted errors by the trial court, which might, depending on their resolution, obviate the need to reconsider the parcel issue.

This should be interesting to watch.







Is Government Failure to Act a Taking?

Can government inaction – as opposed to affirmative government action – give rise to takings liability?  A recent decision by the Wisconsin Court of Appeals, in Fromm v. Village of Lake Denton, is the latest decision to embrace the general understanding that a government failure to act cannot support a viable claim under the Takings Clause.   Read the rest of this entry »