Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-98-07209/USCOURTS-caDC-98-07209-0/pdf.json

Nature of Suit Code: 440
Nature of Suit: Other Civil Rights
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 14, 1999 Decided December 17, 1999

No. 98-7209

District Intown Properties Limited Partnership, et al.,

Appellants

v.

District of Columbia, et al.,

Appellees

Appeal from the United States District Court

for the District of Columbia

(No. 96cv00569)

Wallace A. Christensen argued the cause for appellants.

With him on the briefs was Stacey L. McGraw.

Lutz Alexander Prager, Assistant Deputy Corporation

Counsel, argued the cause for appellees. With him on the

brief were Jo Anne Robinson, Interim Corporation Counsel,

Charles L. Reischel, Deputy Corporation Counsel, and Melvin

W. Bolden, Jr., Counsel.

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John D. Echeverria, Paul W. Edmondson, Elizabeth S.

Merritt, and Laura S. Nelson were on the brief for amicus

curiae The National Trust for Historic Preservation and D.C.

Preservation League.

Before: Edwards, Chief Judge, Williams and Rogers,

Circuit Judges.

Opinion for the Court filed by Chief Judge Edwards.

Separate opinion filed by Circuit Judge Williams concurring in the judgment.

Edwards, Chief Judge: In 1961, District Intown Limited

Properties Partnership ("District Intown") purchased Cathedral Mansions South, an apartment building and landscaped

lawn on Connecticut Avenue across from the National Zoo.

District Intown subdivided this property into nine contiguous

lots in 1988. In March 1989, all nine lots were declared

historic landmarks. In July 1992, the Mayor of the District

of Columbia denied District Intown's request for construction

permits to build eight townhouses on eight of the nine lots,

finding that the construction was incompatible with the property's landmark status. Alleging that the District of Columbia's denial constituted a taking, District Intown and its

general partners sued under 42 U.S.C. s 1983 (1994) for just

compensation under the Takings Clause of the Fifth Amendment.

Upon cross motions for summary judgment, the District

Court granted summary judgment for the District of Columbia. See District Intown Properties Ltd. Partnership v.

District of Columbia, 23 F. Supp. 2d 30 (D.D.C. 1998). The

District Court held that the relevant parcel for the purposes

of determining whether a taking had occurred consisted of

the entire property, including the apartment building, not the

eight individual lots that District Intown sought to develop.

See id. at 35-36. The court then analyzed the alleged taking

under the Supreme Court's holdings in Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992), and Penn Central Transportation Co. v. City of New York, 438 U.S. 104

(1978). The District Court found that there was no categoriUSCA Case #98-7209 Document #484239 Filed: 12/17/1999 Page 2 of 27
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cal taking under Lucas, because District Intown had not been

deprived of all economic value in the relevant parcel. The

trial court further held that District Intown could not make

out a claim under Penn Central, because its reasonable

investment-backed expectations had not been disappointed

and it continued to receive economic benefits from the property.

We hold that the District Court correctly found that the

relevant parcel for the takings analysis consisted of the entire

property held by District Intown, i.e., the property as it was

originally purchased in 1961 and as it was held for 27 years

prior to the 1988 subdivision. All relevant objective and

subjective factors support this conclusion. When the property is viewed as a single parcel, there is no doubt that it has

not been rendered valueless. Indeed, even if each subdivided

parcel is considered separately, District Intown has not

shown a "total taking" under Lucas. In addition, the record

here does not show that District Intown's investment-backed

expectations were disappointed. This is not surprising, because District Intown could not have had any reasonable

investment-backed expectations of development given the

background regulatory structure at the time of subdivision.

Accordingly, we hold that District Intown did not present any

genuine issue of material fact in support of a takings claim

under Penn Central or Lucas. We therefore affirm the

District Court's judgment.

I. Background

In 1961, District Intown purchased in fee simple Lot 1 of

Subdivision Square 2106 on Connecticut Avenue, across from

the National Zoo. The property was known as Cathedral

Mansions South and consisted of an apartment building and

adjacent landscaped lawns. District Intown made no significant changes to the property until 1988, when it subdivided

Cathedral Mansions South into nine lots, designated as Lots

106 through 114. The subdivisions were recorded on June 30,

1988. Lot 106 contains the apartment building, and Lots 107

through 114 are each portions of the landscaped lawn. The

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record indicates that District Intown spent $2,819 to survey

the parcel and to record the subdivision. The record does not

reflect any other expenses.

On December 30, 1988, District Intown applied for permits

to build one townhouse on each of the eight landscaped lots.

The zoning and structural engineering divisions of the Department of Consumer and Regulatory Affairs approved the

permits on March 7, 1989. However, because the property is

located across from the National Zoo, the permits were

referred to the Commission on Fine Arts. See D.C. Code

Ann. s 5-410 (1994) ("Shipstead-Luce Act"). The ShipsteadLuce Act, in effect since the 1930s, empowers the Commission

on Fine Arts to communicate to the Mayor "recommendations, including such changes, if any, as in its judgment are

necessary to prevent reasonably avoidable impairment of the

public values belonging" to various buildings and parks. Id.

On March 31, 1989, the Commission on Fine Arts recommended against construction.

Beginning in 1987, before the property was subdivided, a

movement developed in the Woodley Park community in

support of designating the property a historic landmark.

This culminated on March 2, 1989, when the group filed a

landmark designation petition. This was five days before

District Intown received zoning approval for the construction.

The Historic Preservation Review Board ("Review Board")

approved the landmark designation on May 17, 1989. Because the landmark designation petition was pending when

District Intown's permits were approved for zoning, the permits were referred to the Review Board pursuant to the

District of Columbia's landmark laws, see D.C. Code Ann.

s 5-1001 et seq. (1994 & Supp. 1999), effective since 1979. On

July 19, 1989, the Review Board recommended that the

construction permits be denied. The permit applications

were dismissed without prejudice on December 20, 1991.

On January 31, 1992, District Intown filed new permit

applications identical in all respects to those previously dismissed. The permits were again referred to the Review

Board, which recommended denial because construction on

the lawn would be incompatible with its historic landmark

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status. Pursuant to D.C. Code Ann. s 5-1007(e), District

Intown requested a hearing before an agent designated by

the Mayor. The hearing was held on July 22 and 24, 1992.

The Mayor's agent agreed with the Review Board, stating

that "any construction destroying the lawn" would be incompatible with its landmark status. Decision and Order of

Mayor's Agent p 61 n.1, reprinted in Joint Appendix ("J.A.")

368. In addition, the agent purported to hold that the denial

of the construction permits did not work an economic hardship or constitute a taking, but the District of Columbia Court

of Appeals has since declared that the agent's holding was

outside his jurisdiction. See District Intown Properties, Ltd.

v. Department of Consumer and Regulatory Affairs, 680 A.2d

1373, 1379 (D.C. 1996) (decision of the Mayor's agent regarding alleged economic hardship would have no preclusive effect

in any future proceeding in which District Intown might claim

an uncompensated taking).

Thereafter, on March 22, 1996, District Intown filed this

s 1983 action. On cross motions for summary judgment, the

District Court entered summary judgment for the District of

Columbia on September 25, 1998. See District Intown Properties Ltd. Partnership, 23 F. Supp. 2d at 39. The court

found that the property (i.e., the "relevant parcel") for the

purposes of assessing whether a taking had occurred consisted of the original Lot 1 prior to its subdivision into nine lots.

See id. at 35-36. Because District Intown continued to

receive significant economic benefits from use of the relevant

parcel, the court found that appellants failed to demonstrate

that their property had been rendered "valueless," and their

claim to a taking under Lucas failed. See id. at 36-37. The

court then turned to the ad hoc analysis elucidated by Penn

Central and found that none of the ad hoc factors support

District Intown's takings claim. See id. at 37-39. This

appeal followed.

II. Analysis

A. Standard of Review

This court reviews a grant of summary judgment de novo.

See Aka v. Washington Hosp. Ctr., 156 F.3d 1284, 1288 (D.C.

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Cir. 1998) (en banc). A party is entitled to summary judgment if the record reveals that there is no genuine issue as to

any material fact and that the moving party is entitled to

judgment as a matter of law. See Fed R. Civ. P. 56(c). In

deciding whether there is a genuine issue of material fact, the

court must assume the truth of all statements proffered by

the non-movant except for conclusory allegations lacking any

factual basis in the record. See Greene v. Dalton, 164 F.3d

671, 675 (D.C. Cir. 1999). Summary judgment may be granted even if the movant has proffered no evidence, so long as

the non-movant "fails to make a showing sufficient to establish the existence of an element essential to that party's case,

and on which that party will bear the burden of proof at

trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). As

the "party challenging governmental action as an unconstitutional taking," District Intown bears a "substantial burden."

Eastern Enterprises v. Apfel, 524 U.S. 498, 523 (1998).

B. The Takings Analysis

The Takings Clause of the Fifth Amendment prohibits the

government from taking "private property ... for public use,

without just compensation." U.S. Const. amend. V. In a

regulatory takings case, the principal focus of inquiry is

whether a regulation "reaches a certain magnitude" in depriving an owner of the use of property. Pennsylvania Coal Co.

v. Mahon, 260 U.S. 393, 413 (1922); see also id. at 415 (asking

whether the regulation "goes too far"). The Supreme Court

has indicated that most regulatory takings cases should be

considered on an ad hoc basis, with three primary factors

weighing in the balance: the regulation's economic impact on

the claimant, the regulation's interference with the claimant's

reasonable investment-backed expectations, and the character

of the government action. See Penn Central Transp. Co., 438

U.S. at 124.

The meaning of the three factors identified in Penn Central

has been amplified by the Court, both in Penn Central and in

later cases. The regulation's economic effect upon the claimant may be measured in several different ways. See Hodel v.

Irving, 481 U.S. 704, 714 (1987) (looking to the market value

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of a property); Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470, 495-96 (1987) (looking to whether the

regulation makes property owner's coal operation "commercially impracticable"); Andrus v. Allard, 444 U.S. 51, 66

(1979) (looking to the possibility of other economic use besides sale, which was prohibited by the challenged regulation); Penn Central Transp. Co., 438 U.S. at 136 (focusing on

the ability to earn a reasonable rate of return). A reasonable

investment-backed expectation "must be more than a 'unilateral expectation or an abstract need.' " Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1005-06 (1984) (quoting Webb's

Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 161

(1980)). Claimants cannot establish a takings claim "simply

by showing that they have been denied the ability to exploit a

property interest that they heretofore had believed was available for development." Penn Central Transp. Co., 438 U.S.

at 130. And the character of the governmental action depends both on whether the government has legitimized a

physical occupation of the property, see Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 434-35

(1982), and whether the regulation has a legitimate public

purpose, see Keystone Bituminous Coal Ass'n, 480 U.S. at

485. Finally, under all three of these factors, the effect of the

regulation must be measured on the "parcel as a whole." See

Penn Central Transp. Co., 438 U.S. at 130-31.

The Supreme Court has indicated that it will find a "categorical" or per se taking in two circumstances. The first

circumstance includes regulations that result in "permanent

physical occupation of property." Loretto, 458 U.S. at 434-35.

This circumstance is not at issue in this case. The second

circumstance includes regulations pursuant to which the government denies all economically beneficial or productive use

of property. See Lucas, 505 U.S. at 1015. This so-called

"total taking" claim is at the heart of District Intown's

complaint here. Unfortunately, the facial simplicity of the

"total taking" standard belies the difficulty in its application.

As the Court acknowledged in Lucas, its "rhetorical force ...

is greater than its precision, since the rule does not make

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clear the 'property interest' against which the loss of value is

to be measured." 505 U.S. at 1016 n.7.

Under both Lucas and Penn Central, then, we must first

define what constitutes the relevant parcel before we can

evaluate the regulation's effect on that parcel. In the instant

case the question is: Does the relevant parcel consist of the

property as a whole or do the eight lots for which construction permits were denied constitute the relevant parcels?

This has been referred to as the "denominator problem."

E.g., Loveladies Harbor, Inc. v. United States, 28 F.3d 1171,

1179 (Fed. Cir. 1994). State law may offer some guidance on

how to define the relevant parcel, but, as the Court has noted,

state law is not always determinative. Compare Lucas, 505

U.S. at 1017 n.7 (suggesting that one may look to the influence of the State's property law--whether and to what extent

the State has recognized and extended legal recognition to

the particular interest alleged to have been deprived of all

economic value--on the claimant's reasonable expectations),

with Keystone Bituminous Coal Ass'n, 480 U.S. at 500 (refusing to treat the support estate as a separate parcel of

property simply because Pennsylvania law recognizes it as

such and noting that "our takings jurisprudence forecloses

reliance on such legalistic distinctions within a bundle of

property rights").

C. The Relevant Parcel

The definition of the relevant parcel profoundly influences

the outcome of a takings analysis. Above all, the parcel

should be functionally coherent. In other words, more should

unite the property than common ownership by the claimant.

Thus, a court must also consider how both the propertyowner and the government treat (and have treated) the

property.

The District Court used several factors to determine the

relevant parcel: the degree of contiguity, the dates of acquisition, the extent to which the parcel has been treated as a

single unit, and the extent to which the restricted lots benefit

the unregulated lot. See District Intown, 23 F. Supp. 2d at

35 (citing Ciampitti v. United States, 22 Cl. Ct. 310, 318

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(1991)). An analysis focused on these factors is eminently

sound and it mirrors the approach taken by other courts in

regulatory takings cases. See Forest Properties, Inc. v.

United States, 177 F.3d 1360, 1365 (Fed. Cir.) (stressing the

owner's treatment of property as a unit from the time of

purchase), cert. denied sub nom. RCK Properties v. United

States, 120 S. Ct. 373 (1999); K & K Constr. Co. v. Department of Natural Resources, 575 N.W.2d 531, 537 (Mich.)

(stressing contiguity, unity of ownership, and a common

development plan), cert. denied, 119 S. Ct. 60 (1998).

Applying these factors, the District Court correctly determined that all nine lots should be treated as one parcel for

the purpose of the court's takings analysis. The lots are

spatially and functionally contiguous. District Intown purchased the property as a whole in 1961 and treated it as a

single indivisible property for more than 25 years. District

Intown presented no evidence that, even after subdivision, it

treated the lawn lots separately from Lot 106, the lot that

contains the apartment building, for the purposes of accounting or management. The intentional act of subdivision is the

only evidence produced by District Intown that it has treated

the lots as distinct units. In fact, before the Mayor's agent,

District Intown did not come forward with evidence showing

that it had, for accounting purposes, treated the lawn maintenance fees separately from expenses associated with maintaining the apartment building. See Decision & Order of

Mayor's Agent p 40, reprinted in J.A. 364. While there is a

dispute as to whether the adjacent landscaped lawn increases

the apartment building's value, this is immaterial. Even if

Lot 106 were deemed to have the same value with or without

Lots 107 through 114, the application of the other three

factors strongly suggests that Lots 106 through 114 are

functionally part of the same property.

Appellants argue that the District Court was wrong to

treat all the lots as a single parcel because it contradicts

Lucas and two Federal Circuit cases. This argument falls

flat. District Intown first argues that the Lucas Court

termed "extreme" and "unsupportable" a similar decision by

the state court in Penn Central to treat multiple holdings as a

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single parcel for takings analysis. See Brief for Appellants at

15-16. This dictum, see Lucas, 505 U.S. at 1017 n.7, referred,

however, only to the state court's decision to treat all of Penn

Central's holdings in the vicinity of Grand Central Station as

part of the denominator for the purposes of deciding whether

plaintiffs could receive a reasonable return on their investment in Grand Central. See Penn Central Transp. Co. v.

New York, 366 N.E.2d 1271, 1278 (N.Y. 1977). The Penn

Central Court had no need to address this holding. The

Lucas dictum casts aspersions on the state court's elevation

of one factor, unity of ownership, over other factors in

determining the relevant parcel. The District Court engaged

in no such "extreme" conduct here; it did not look to all of

District Intown's holdings in the vicinity of Cathedral Mansions South to evaluate the economic effect of the regulation

at issue here; it looked to contiguous property that was

purchased and treated as a single unit by appellants.

Similarly, the two Federal Circuit cases cited by District

Intown do not undermine the District Court's definition of the

relevant parcel. See Brief for Appellants at 16 (citing Loveladies Harbor, 28 F.3d at 1171 and Florida Rock Indus., Inc. v.

United States, 791 F.2d 893 (Fed. Cir. 1986)). Neither of

these cases support appellants' position and, in fact, Loveladies Harbor supports the District Court's decision. In Florida Rock Industries, the court reviewed the Army Corps of

Engineers' uncompensated rejection of the plaintiff's application to mine limestone on 98 acres of the plaintiff's wetland

property. See Florida Rock Indus., 791 F.2d at 896. The

Federal Circuit affirmed the trial court's decision to consider

the 98 acres as the relevant parcel separate from the adjacent

1,462 acres of wetland. See id. at 904. The Federal Circuit's

justification for this decision, however, was that all the evidence and the findings indicated that the Army Corps of

Engineers would have rejected mining on all of the property,

so there was no point to including all 1,560 acres in the

relevant parcel. See id. at 904-05. Thus, Florida Rock

Industries is not analogous to the instant case; there is no

indication that the District of Columbia will prevent District

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Intown from continuing to use its property to obtain income

from its apartment building.

Loveladies Harbor lends support to the District Court's

decision to treat Lots 106-114 as one parcel. The plaintiff in

Loveladies Harbor sought to develop a total of 12.5 acres of

land, consisting of 11.5 acres of wetlands and one acre of filled

upland. See Loveladies Harbor, 28 F.3d at 1180. The Army

Corps of Engineers refused to grant the permit required to

fill the wetlands acreage. See id. at 1174. In reviewing

whether this denial constituted a taking the Federal Circuit

found that the trial court correctly concluded that the relevant parcel was the entire 12.5 acres, not just the 11.5 acres

to which the permit denial applied. See id. at 1181. Thus,

Loveladies Harbor argues against treating the property burdened by the regulation separately from contiguous property.

Moreover, the Loveladies Harbor Court emphasized that a

"flexible approach, designed to account for factual nuances,"

guides its analysis of the denominator problem. Id. These

factual nuances include "whether there remained substantial

economically viable uses for plaintiff's property after the

regulatory imposition," id. (citing Deltona Corp. v. United

States, 657 F.2d 1184 (Ct. Cl. 1981)), and "the timing of

transfers in light of the developing regulatory environment."

Id. Both of these factors support our conclusion in the

instant case that Cathedral Mansions South as a whole constitutes the relevant parcel.

Finally, Penn Central is instructive where, as here, appellants own a single piece of property that is divisible into

several legally recognized entities. Indeed, the Court was

rather blunt in saying that

"[t]aking" jurisprudence does not divide a single parcel

into discrete segments and attempt to determine whether

rights in a particular segment have been entirely abrogated.

Penn Central Transp. Co., 438 U.S. at 130. The Court also

made it clear that a party may not "establish a 'taking' simply

by showing that they have been denied the ability to exploit a

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property interest they heretofore had believed was available

for development." Id. The Court found this suggestion to be

"simply untenable." Id.

On the basis of the foregoing authority, it seems clear here

that we must analyze District Intown's property not as separate, potentially divisible and transferable parcels, but as one

contiguous parcel. Appellants note that the District of Columbia has taxed Lots 107 through 114 at a higher rate since

subdivision, reflecting the District of Columbia's assessment

that these lots are vacant developable land. They contend

that it is inconsistent for the District of Columbia to speak

from both sides of its mouth in this regard, claiming for tax

purposes that the lots are developable, but refusing to permit

development on the lots. We simply note that appellants

retain the right to recombine the parcels and treat them as

one property for the purposes of taxation, so no further

disadvantage will befall them on this score.

We are perplexed by our concurring colleague's criticism of

our approach to evaluating a takings claim. As the concurring opinion correctly notes, at bottom, the approach that we

follow and the result that we reach are in accord with

Supreme Court case law. Unless and until the Court instructs otherwise, we are obliged to judge within the bounds

of established precedent.

D. Analysis Under Lucas

Given that Lots 106 through 114 should be treated as a

single parcel, the District Court's denial of summary judgment on District Intown's Lucas claim is unremarkable. To

come within Lucas, a claimant must show that its property is

rendered "valueless" by a regulation. Lucas, 505 U.S. at

1009. District Intown presented no evidence to show that the

regulation deprived the property as a whole of all economically beneficial use.

Even were we to view Lot 106 as distinct from Lots 107

through 114, it seems plain that the District Court should

have granted appellees' motion for summary judgment.

Drawing all inferences in favor of District Intown, the record

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does not support the conclusion that Lots 107 through 114 are

rendered "valueless" by the regulation at issue. The record

contains a finding by the Mayor's agent that any construction

that destroyed the lawn would be incompatible with the

lawn's status as a historic landmark. See Decision & Order

of Mayor's Agent p 61 n.1, reprinted in J.A. 368. District

Intown argues from this that its case fell on all fours within

Lucas. District Intown seeks to extend Lucas beyond its

reach. The Lucas Court consciously recognized that it was

drawing an arbitrary line between total destruction of economic value and something marginally less than total destruction. See 505 U.S. at 1019 n.8 (pointing out that while the

line establishing a categorical deprivation as requiring a

complete diminution in value is arbitrary as it relates to

someone who only suffers a 95% deprivation in value, the

person whose deprivation is "one step short of complete" may

still seek compensation under the Penn Central balancing

test). District Intown propounded no evidence that the

lawns' economic value was totally destroyed as is required by

Lucas, nor did District Intown offer evidence of the plots' fair

market value after its construction permits were denied. Cf.

Florida Rock Indus., 791 F.2d at 905 (reversing the trial

court's finding that denial of permit constituted an uncompensated taking because the court failed to consider the property's fair market value after regulation).

The concurring opinion misconstrues the opinion for the

court when it suggests that, pursuant to our analysis, no

compensable taking could ever be found. As noted in the

foregoing discussion, we simply intend to highlight the limited

nature of the Lucas inquiry, and note that there would be no

"categorical" taking even were we to view the parcels as

separate under Lucas. We do not pass on how the parcels

would fare separately under Penn Central's ad hoc analysis.

E. Analysis under Penn Central

There are three main factors to be considered in Penn

Central's ad hoc inquiry: the character of the government

action, the regulation's economic effect on the claimant, and

the effect on investment-backed expectations. District InUSCA Case #98-7209 Document #484239 Filed: 12/17/1999 Page 13 of 27
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town does not appear to argue that the character of the

governmental action counsels finding a taking; this is not a

permanent invasion, but rather a general regulation with a

legitimate public purpose. As to the economic effects, District Intown offered no evidence that this regulation rendered

Lots 106-114 unprofitable to maintain; there is nothing in the

record to suggest that the apartment building does not bring

in a sufficient return for District Intown, and a claimant must

put forth striking evidence of economic effects to prevail even

under the ad hoc inquiry. See Penn Central Transp. Co., 438

U.S. at 131 (reviewing the Court's decisions upholding regulations despite diminution in a property's value of more than

75%).

Finally, District Intown did not present sufficient evidence

that it had a reasonable investment-backed expectation to

develop the lawns into apartment buildings. Here, as in

Penn Central, the regulation does not interfere with District

Intown's "primary expectation" concerning the use of the

parcel, because it "not only permits but contemplates that

appellants may continue to use the property precisely as it

has been used" for the past 28 years. Penn Central Transp.

Co., 438 U.S. at 136.

District Intown suggested at oral argument that it has

satisfied the requirement of demonstrating reasonable investment-backed expectations because it purchased property that,

at the time of purchase, was subdividable. This is not

sufficient to establish the existence of reasonable investmentbacked expectations. In this case, where the development

District Intown proposes departs from the property's traditional use, and the moment of purchase is so attenuated from

the moment of subdivision, the claimant surely must point to

some action beyond mere purchase to establish the reasonableness of its expectations.

Appellants also argue that their expectations of the property's use between the moment of purchase and the moment of

subdivision could have reasonably changed. This may be, but

when appellants subdivided they surely knew that the legal

regime had changed since they first bought their property.

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Moreover, they knew that any subdivided parcel would be

subject to that regime. Lucas teaches that a buyer's reasonable expectations must be put in the context of the underlying

regulatory regime. See 505 U.S. at 1030 (stating that the

Takings Clause does not require compensation when the

restriction is proscribed by background state law rules or

understandings). District Intown purchased and subdivided

its property subject to an existing regulatory regime that

establishes that District Intown could have had no reasonable

expectations of development at the time it made its investments.

At the time of purchase, District Intown could have reasonably expected the Shipstead-Luce Act to affect its rights of

development. For approximately 60 years, the ShipsteadLuce Act has restricted development on properties that, like

Cathedral Mansions South, abut or border upon the National

Zoo. See D.C. Code Ann. s 5-410. Were that not sufficient,

after 1979, D.C.'s historic landmark laws additionally limited

expectations of development. See id. s 5-1001 et seq. Thus,

at the time District Intown subdivided the property, it knew,

or should have known, that the property was potentially

subject to regulation under the landmark laws. Cf. Amicus

Curiae Brief at 15 (pointing out that almost the entire length

of Connecticut Avenue from M Street to almost a mile north

of District Intown's property is either landmarked or within a

historic district). Businesses that operate in an industry with

a history of regulation have no reasonable expectation that

regulation will not be strengthened to achieve established

legislative ends. See Concrete Pipe & Prods. v. Construction

Laborers Pension Trust, 508 U.S. 602, 645 (1993). In this

case, District Intown was in the real estate business, with a

history of restriction of development for the purpose of

preserving historic sites. Similarly, the Supreme Court rejected a company's claim of reasonable expectations that the

Environmental Protection Agency would maintain trade secret confidentiality where the industry had long "been the

focus of great public concern and significant government

regulation" and the "possibility was substantial that the Federal Government ... would find disclosure [of trade secrets]

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to be in the public interest." Monsanto Co., 467 U.S. at

1008-09. Prior to and after subdivision, this particular property was the subject of increasing public activity devoted to

restricting development through landmark designation. See

Good v. United States, 189 F.3d 1355, 1361-63 (Fed. Cir.

1999) (finding the claimant had no reasonable expectations

where he purchased the land subject to environmental regulation and watched as public concern for the environment

increased and the applicable regulations became more stringent before seeking approval for development).

District Intown also argues that the District Court's finding

that the regulation did not have a significant economic impact

was erroneous. District Intown bases this argument on the

assertion that they presented undisputed evidence that the

lawns, absent development, add nothing to the value of the

apartment building. See Brief for Appellants at 24-25. This

argument misunderstands the substantial burden District Intown faced in District Court. District Intown had to produce

evidence showing that its entire property, including Lot 106,

no longer provided a reasonable rate of return given the D.C.

regulation. Whether the lawns add value to the apartment

building is irrelevant to whether the property as a whole can

be operated at a sufficient profit even with the regulation. In

short, none of the Penn Central factors support District

Intown's claim of a compensable deprivation of property.

III. Conclusion

For the reasons stated above, we affirm the District

Court's grant of summary judgment in favor of the District of

Columbia.

So ordered.

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Williams, Circuit Judge, concurring in the judgment: The

District of Columbia's Historic Preservation Board imposed

historic landmark status not only on an apartment building

named Cathedral Mansions South but also on a substantial

stretch of adjacent lawn bordering the sidewalks of Connecticut Avenue. District Intown, the owner of both, claims that

as applied to the lawn the landmarking effects a taking of its

property in violation of the Takings Clause of the Fifth

Amendment. The majority's disposition is--with one important exception--in general accord with the current opinions of

the Supreme Court. Those decisions are of course binding.

At the same time, however, it is not inappropriate to identify

ways in which the prevailing analysis elevates formal concepts

over economic reality and tends to strip the Clause of its

potential for fulfilling the framers' likely purposes.

The economist's justification for the Takings Clause is that

it provides a check on government's likely tendency to waste

resources by treating private property as a free good. See

Richard A. Posner, Economic Analysis of Law 58 (4th ed.

1992) ("The simplest economic explanation for the requirement of just compensation is that it prevents the government

from overusing the taking power."). This is just an application of the general principle that if a firm can externalize

costs (e.g., the health costs of polluting the air), it will use

more of the unpriced resource (in this example, air as a waste

sink) than it would if required to pay. And it will tend to

overproduce the goods or services whose production uses the

superficially "free" good--i.e., it will produce them at a level

where the true value of the extra inputs exceeds the true

value of the extra output. See generally Robert Cooter &

Thomas Ulen, Law and Economics 45-46 (1988). As applied

to government regulation, similar oversupply can be expected--here, production of regulations that impose more costs

than they afford benefits, that do more harm than good.

The framers, though not articulating the purpose of the

Clause in economic terms, evidently did view it as aimed at

correcting the incentives of the political branches. There is

evidence, for example, that James Madison saw electoral

power slipping into the hands of a non-landholding majority,

which in a "leveling" mode could be expected to invade

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landowners' rights. See William Michael Treanor, The Original Understanding of the Takings Clause and the Political

Process, 95 Colum. L. Rev. 782, 849 (1995). Late twentieth

century America, of course, displays a far greater range of

purposes than "leveling" for reallocation of rights. While the

resulting proposals are naturally advanced in the name of the

public good, many are surely driven by interest-group purposes, commonly known as "rent-seeking." Among these

proposals, at least some inflict aggregate costs considerably

outweighing their aggregate benefits, paralleling the wasteful

production associated with private firms' externalization of

costs. The Takings Clause serves to curb such inefficiencies.

See, e.g., Richard A. Epstein, Takings: Private Property and

the Power of Eminent Domain 281 (1985) ("[T]he Takings

Clause is designed to control rent seeking and political faction. It is those practices, and only those practices, that it

reaches.").

A Takings Clause construction that was dedicated without

qualification to preventing such government externalization

would require compensation whenever regulation reduced the

value of anyone's property, however slightly. Balanced

against that goal is an array of considerations. Most obvious

is the cost of calculating and administering compensation,

which would tend to sink many a beneficent statute. "Government 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." Lucas v. South Carolina

Coastal Council, 505 U.S. 1003, 1018 (1992) (quoting Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 413 (1922)). (The

compensation cost itself would be only a weak countervailing

factor, for most beneficent regulation would presumably generate gains large enough to pay the losers if identification and

calculation were costless.) My goal here is not to pinpoint

the appropriate balance between these competing considerations, much less to suggest that the correct reading is one

under which all regulation materially adversely affecting a

property's value would be compensable. Rather, it is simply

to note the ways in which modern interpretation of the

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Takings Clause, as exemplified in today's decision, impairs its

role as a disincentive to wasteful government activities.

* * *

The majority applies an apparent presumption that contiguous parcels under common ownership should be treated as

one parcel for purposes of the takings analysis. This presumption tends to reduce the likelihood that courts will order

compensation. The larger the parcel, the greater the chance

that the regulated land will retain an economically viable use.

Where no such use remains, there is a "total taking" and the

government can "resist compensation only if the logically

antecedent inquiry into the nature of the owner's estate

shows that the proscribed use interests were not part of his

title to begin with," Lucas, 505 U.S. at 1027; where an

economically viable use survives regulation, the best the

owner can hope for is "partial" takings analysis. Under the

latter courts will determine whether to award compensation

by looking to "the economic impact of the regulation, its

interference with reasonable investment backed expectations,

and the character of the governmental action," Kaiser Aetna

v. United States, 444 U.S. 164, 175 (1979); see also Eastern

Enters. v. Apfel, 118 S. Ct. 2131, 2146 (1998); Lucas, 505 U.S.

at 1019 n.8, and will generally deny compensation so long as

the restriction "substantially advance[s] legitimate state interests," Agins v. City of Tiburon, 447 U.S. 255, 260 (1980); see

also Dolan v. City of Tigard, 512 U.S. 374, 385 (1994). Few

regulations will flunk this nearly vacuous test. In fact, the

Supreme Court has only once found a partial taking to be

compensable, and even then only a plurality applied the

partial takings analysis. See Eastern Enters., 118 S. Ct. at

2149; see also id. at 2154-60 (Kennedy, J.) (rejecting the

plurality's takings analysis and finding invalidity on other

grounds).

The Supreme Court has offered several justifications for

this distinction between partial and total takings. See, e.g.,

Lucas, 505 U.S. at 1017-18 (suggesting that "from the landowner's

perspective," a total taking is tantamount to a physical taking,

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and that from the government's perspective the concern that

an obligation to compensate for any incidental value diminution would impede effective functioning cannot apply in the

"relatively rare situations" of total takings). From the perspective of ensuring that the government not engage in

wasteful behavior, however, the focus on the uses of the land

that remain is misplaced: "[W]hat is decisive is that which is

taken, not that which is retained." Epstein, Takings, supra,

at 58. Whether the landowner is left with a limited use of the

land or none at all is hardly relevant to that issue. And as

the regulating government delineates the scope of regulation,

the opportunity for strategic behavior is obvious.

The majority's cursory application of the Penn Central

factors further broadens the gap between the two modes of

analysis, reinforcing the seemingly predetermined conclusion:

in partial takings cases, the government wins. The majority

states that District Intown has not shown the land "unprofitable to maintain," Maj. Op. at 14; it is unimaginable, however, absent an extraordinary tax liability, that a parcel could

retain an economically viable use yet have a net negative

value. The majority goes on to say that District Intown has

failed to show that the land does not "bring in a sufficient

return," id., but does not answer the all-important question:

a return on what? on out-of-pocket costs? on initial purchase price? on fair market value? Moreover, the majority

provides no guidance as to how "sufficient" the return must

be, except to cite Penn Central, in which the Court found that

a 75% diminution in value did not constitute a compensable

taking. See id.

Similarly, in its consideration of District Intown's "reasonable investment-backed expectations," the majority's analysis

begs the question whether any landowner, in a world where

zoning regulations are prevalent, could ever argue that a

particular regulation was "unexpected." The presumption is

insurmountable: "Businesses that operate in an industry with

a history of regulation have no reasonable expectation that

regulation will not be strengthened to achieve established

legislative needs." Maj. Op. at 15. Although the 1931

Shipstead-Luce Act might have put District Intown on notice

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that some regulation of architectural design might be expected, it is farfetched to conclude that District Intown, merely

because of its proximity to the zoo, should reasonably have

anticipated an absolute ban on construction; the city's counsel, under questioning at oral argument, failed to identify any

uses, or even attempted uses, of the Shipstead-Luce Act to

support a complete construction veto. Although the Takings

Clause is meant to curb inefficient takings, such a notion of

"reasonable investment-backed expectations" strips it of any

constraining sense: except for a regulation of almost unimaginable abruptness, all regulation will build on prior regulation

and hence be said to defeat any expectations. Thus regulation begets regulation.

Although the presumption in favor of looking at the parcel

as a whole, and in turn the increased reliance on the partial

takings mode of analysis, is at odds with the underlying

principle of the Takings Clause, it is perhaps the best construction of the Supreme Court's limited guidance. The

Court has never squarely addressed the question of how

courts should define the relevant geographic parcel of land,

also known as "horizontal severance." Marc R. Lisker, Regulatory Takings and the Denominator Problem, 27 Rutgers

L.J. 663, 705 (1996). In Nectow v. City of Cambridge, 277

U.S. 183 (1928), the Court considered whether the city council

had effectuated a taking of plaintiff's land by zoning as

"residential" a 100-foot strip on plaintiff's 140,000 square foot

parcel. Although the Court appeared to treat the relevant

parcel as encompassing only the fractional strip, this was in

no respect relevant to the Court's decision. In Penn Central

Transportation Co. v. New York City, 438 U.S. 104 (1978), the

Court applied a very weak form of horizontal severance,

focusing exclusively on the landmarked building itself without

treating the owner's neighboring--but not adjacent--property as part of the greater parcel, as had the New York Court

of Appeals. See Penn Central Transportation Co. v. New

York City, 366 N.E.2d 1271, 1276-77 (N.Y. 1977). But Penn

Central tells little, as the properties were not all contiguous,

had been put to different uses, and had never been treated as

a unified whole by the owners or the City.

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Penn Central's handling of "vertical severance," however, is

informative, if only by analogy. Using language seemingly

broad enough to encompass horizontal severance, the Court

made clear that it would not consider the air rights above

Grand Central separately from the land rights: " 'Taking'

jurisprudence does not divide a single parcel into discrete

segments and attempt to determine whether rights in a

particular segment have been entirely abrogated." Penn

Central, 438 U.S. at 130; see also Keystone Bituminous Coal

Ass'n v. DeBenedictis, 480 U.S. 470, 496-502 (1987) (refusing

to regard either coal that statute required miners to leave in

place (about 2% of total coal), or the "support estate," as

distinct property for ascertaining whether statute denied

owners all economically viable uses).

The Court has expressed similar reluctance to engage in

"conceptual severance" more generally (i.e., the treatment of

any specific property right as a single unit). In Andrus v.

Allard, 444 U.S. 51 (1979), the Court refused to treat extinction of the right to sell any part of a lawfully killed bald eagle

as a total taking. See id. at 65-66 ("At least where an owner

possesses a full 'bundle' of property rights, the destruction of

one 'strand' of the bundle is not a taking, because the

aggregate must be viewed in its entirety."). The Court

arguably evidenced a retreat from this strong position in

Hodel v. Irving, 481 U.S. 704, 717-18 (1987), in which it found

a taking in legislation that "completely abolished" certain

landowners' rights to dispose of their property by descent or

devise, even though they retained complete rights to possess

and to make inter vivos transfers. The Court has not,

however, reached agreement on the scope of this retreat.

Compare id. at 719 (Scalia, J., concurring) (saying the decision "effectively limits Allard to its facts"), with id. at 718

(Brennan, J., concurring) (saying that the case was "unusual"

and thus had no impact on Allard). Overall, I think the

majority is correct in its implicit understanding that the

Supreme Court is reluctant to carve a landowner's parcel into

smaller units for which compensation might be more likely.

But the factors that the majority applies in making the

decision, drawn from decisions of the Federal Circuit and

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Claims Court and characterized by the majority as "eminently sound," Maj. Op. at 9, strike me as uninformative and

largely irrelevant. The factors considered are: (1) whether

the neighboring parcels are contiguous, (2) whether they were

acquired simultaneously, (3) whether they have been treated

as a single unit, and (4) the extent to which the restricted lot

benefits the neighboring lot. Maj. Op. at 8-9.

The first factor, contiguity, is clearly necessary but in no

way sufficient. The next two factors--simultaneity of acquisition and unity of use--are more troublesome. Both elevate

history--either the historical purchase or the historical use--

over the real-world present relationship between the tracts.

Compare Laura M. Schleich, Takings: The Fifth Amendment, Government Regulation, and the Problem of the Relevant Parcel, 8 J. Land Use & Envtl. L. 381 (1993) (proposing

that courts look to the "moment of regulation" when defining

the relevant parcel). The majority's focus on the property's

use prior to regulation tells us nothing about the valueproducing opportunities foreclosed at the time of regulation.

"It is, of course, irrelevant that [the government] interfered

with or destroyed property rights that [plaintiff] had not yet

physically used. The Fifth Amendment must be applied with

'reference to the uses for which the property is suitable,

having regard to the existing business or wants of the community, or such as may be reasonably expected in the immediate future.' " Penn Central, 438 U.S. at 143 n.6 (Rehnquist, J., dissenting, quoting Boom v. Patterson, 98 U.S. 403,

408 (1879)).

The majority mentions but brushes aside a fourth factor--

the extent to which the regulated parcel benefits the neighboring lot. Maj. Op. at 9. Yet this appears the most

relevant. The more a burdened tract in its regulated use

benefits contiguous property, the less likely that the regulation has a net negative impact. In the extreme case a

property interest may be worthless except in conjunction with

another. Thus in Keystone Bituminous Coal Ass'n, the

Court pointed out that the "support estate" had "value only

insofar as it protects or enhances the value of the estate with

which it is associated [i.e, the mineral estate]," 480 U.S. at

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501, and therefore refused to treat the "support estate" as a

separate interest at all. Similarly, small parcels of land,

either in the interior or around the edges of greater parcels,

commonly are valuable only when they combine with the

greater parcel to create a more valuable whole; for regulation

of the exterior (such as setback requirements), then, it makes

sense to measure the impact in conjunction with the "primary" parcel. Looking to the property owner's benefit from

these internal synergies parallels use of "average reciprocity

of advantage," Pennsylvania Coal Co. v. Mahon, 260 U.S.

393, 415 (1922), which considers the benefit that each burdened owner--as in ordinary zoning or historic districting--

receives from the similar restriction of his neighbors.

Of course there will be some synergy between almost any

two neighboring parcels under common ownership, since unified ownership creates options for the sole owner that multiple landowners could achieve only by contracting. But synergy is a matter of degree, and mere contiguity should not be

enough. One commentator proposes a rather demanding

synergy test, arguing that the regulated tract should be

considered as its own parcel so long as not all of its value

derives from synergies with neighboring land; in such cases,

the parcel would have an independent economically viable

use, which if destroyed by regulation would be compensable

under Lucas. See John E. Fee, Comment, Unearthing the

Denominator in Regulatory Taking Claims, 61 U. Chi. L.

Rev. 1535, 1557-58 (1994). One need not go so far to see the

skimpiness of the synergy here.

To be sure, Cathedral Mansions is more than several

contiguous parcels. According to the decision of the Historic

Preservation Review Board, "The buildings are sited imaginatively to provide the greatest possible integration of living

space with well-landscaped open space." Joint Appendix

("J.A.") 320. (Passersby who observe the rather bare lawn

will have to reach their own judgments on the adjective "welllandscaped.") Integration there doubtless is--almost any

lawn around a building will manifest a degree of integration.

But there is no explicit showing that these synergies depend

on the entire lawn remaining undeveloped. The proposed

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townhouses would cover only the portion of the lawn abutting

Connecticut Avenue, still leaving the interior portion, approximately half the lawn, undeveloped. Common sense would

suggest that at some distance from the building marginal

synergies created by extra lawn space become slight, and

thus that the part of the lawn beyond that line should be

treated as its own parcel for takings purposes. Further,

although District rent-control law evidently allows the owner

to earn a return on the tax-assessed value of land in a single

tract with a rent-controlled building (here the owner could

apparently recover that status by undoing the formalities of

subdivision), that value is likely to be only a tiny fraction of

the value absent the historic landmarking.

In fact, it may well be completely different synergies--ones

between the lawn and adjacent Connecticut Avenue--that

have driven the landmarking decision. The Board observed

that the lawn "contributes significantly to the unique open

space character of Connecticut Avenue." J.A. 320. A cynic

might suspect that the alleged relationship between the lawn

and the Cathedral Mansions apartments is little more than a

cloak by which the citizens of Upper Northwest Washington

have secured some parkland on the cheap. Parks are good,

but the Fifth Amendment says that taking them is not.

Of course, there is another synergy between the two parcels and adjacent Connecticut Avenue, namely the historical

value that inheres in the preservation of a building as it was

initially constructed (i.e., with an expansive lawn beside it).

Uncompensated landmark preservation seems to rest on this

synergy. The Court in Penn Central embraced the view that

"the preservation of landmarks benefits all New York citizens

and all structures, both economically and by improving the

quality of life in the city as a whole." 438 U.S. at 134. This

broad language seems to redefine "reciprocity of advantage"

in such a way that no government act could ever require

compensation, as the afflicted owner would be a member of

the taking polity and thus in receipt of offsetting advantages,

artificially presumed to be adequate.

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Apart from obliterating takings law, such a view has peculiarly perverse effects in the realm of historic preservation.

Although such laws try to preserve for society the positive

externalities created by buildings like Cathedral Mansions,

inflicting the entire cost on the creator of the landmark (or

his successor in interest) is bound to discourage investment in

first-class design. Moreover, while insurance markets can

achieve the risk-spreading (or anti-"demoralization") goals

that some attribute to the Takings Clause, compare Posner,

Economic Analysis of Law, supra, at 58, they cannot offset

non-compensation's disincentive to good design. Historic

landmark preservation, after all, is imposed selectively on

those who went out of their way to secure architectural

distinction. The higher the quality, the higher the premium

for takings insurance; the disincentive is inescapable.

Having found that the lawn and apartment parcels should

be treated as a unit, the majority nevertheless considers

whether compensation would be due even if the lawn were

analyzed separately; in doing so, it gratuitously takes an even

harsher stance against compensation than does present law.

The majority finds that District Intown has failed to offer

evidence that the regulation denies it "economically viable use

of [the] land," Lucas, 505 U.S. at 1016, even though the

Mayor's own agent found that "any construction that destroyed the lawn would be incompatible with the lawn's status

as an historic landmark." Maj. Op. at 13. Thus, so long as

the lawn is untouched, "economically viable" uses are permissible. It is hard to imagine what "economically viable" use

that constraint leaves, unless the majority means that the

very barest thread of value, yielded by some thoroughly

bucolic use, is enough to defeat a total takings claim. By this

standard, no regulation can ever effect a total taking, and at

best will be tested only under the far weaker partial takings

rubric.

* * *

The prevailing Federal Circuit-Claims Court method of

defining the relevant parcel, followed by the panel here,

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focuses on marginal issues and largely overlooks the more

critical concern of synergies; the focus on the landowner's

historical, rather than proposed, use further skews the analysis. But the Supreme Court's general approach seems to

militate in favor of looking to the parcel as a whole. Similarly, although resting uncompensated landmark preservation on

the idea of reciprocal advantage stretches the concept into

meaninglessness, and the denial of compensation discourages

ex ante what it hopes to foster ex post, the current cases give

these arguments little purchase. Accordingly, I concur in the

majority's decision to affirm.

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