Voluntary Action Cannot be a Taking (Naturally)

Illustrating the principle that voluntariness is a defense to a takings claim, the U.S. Court of Appeals for the Eleventh Circuit recently ruled that a Florida hospital could not challenge a cap on reimbursements for providing medical treatment to federal detainees because the hospital voluntarily subjected itself to the requirement to provide medical care according to these terms. The decision in Baker County Medical Services, Inc. v. U.S. Attorney General was issued on August 14, 2014. Read the rest of this entry »

The asserted “right to defend” coastal property

The California Court of Appeals has issued an interesting decision rejecting a takings claim based on restrictions imposed by the California Coastal Commission on landowners’ alleged “right to defend” their properties from coastal erosion. Following a serious storm that destroyed erosion control structures protecting two neighboring properties on the coastal bluff in Encinitas, California, the Commission granted the owners permission to construct new coastal erosion structures.  However, the Commission took the (relatively new and unusual) step of limiting the permits for the new structures to twenty years, giving rise to the takings issue in the case. Read the rest of this entry »

Government Warnings Are Not Takings

Last week, in Dimare Fresh, Inc. v. United States, the U.S. Court of Federal Claims affirmed that, after all, there really are some categorical limits to takings liability. The case arose from a public advisory issued by the Food and Drug Administration identifying certain types of tomatoes as the apparent source of a salmonella outbreak – a link that was ultimately demonstrated not to exist.   Tomato producers sued under the Takings Clause seeking just compensation for the economic losses they suffered following collapse of the market for tomatoes as a result of the FDA’s public warning.  The claims court, citing a persuasive pile of precedent, dismissed the claim, relying on the following principle:  “A regulatory takings claim is not plausible and cannot proceed when the government action at issue has no legal effect on the plaintiff’s property interest. Advisory pronouncements, even those with significant financial impact on the marketplace, are not enough to effect a taking of property under the Fifth Amendment.” Plaintiff’s counsel has vowed an appeal.

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.