Opinion ID: 185020
Heading Depth: 2
Heading Rank: 5

Heading: Analysis under Penn Central

Text: There are three main factors to be considered in PennCentral's ad hoc inquiry: the character of the governmentaction, the regulation's economic effect on the claimant, andthe effect on investment-backed expectations. District In- town does not appear to argue that the character of thegovernmental action counsels finding a taking; this is not apermanent invasion, but rather a general regulation with alegitimate public purpose. As to the economic effects, District Intown offered no evidence that this regulation renderedLots 106-114 unprofitable to maintain; there is nothing in therecord to suggest that the apartment building does not bringin a sufficient return for District Intown, and a claimant mustput forth striking evidence of economic effects to prevail evenunder the ad hoc inquiry. See Penn Central Transp. Co., 438U.S. at 131 (reviewing the Court's decisions upholding regulations despite diminution in a property's value of more than75%). Finally, District Intown did not present sufficient evidencethat it had a reasonable investment-backed expectation todevelop the lawns into apartment buildings. Here, as inPenn Central, the regulation does not interfere with DistrictIntown's primary expectation concerning the use of theparcel, because it not only permits but contemplates thatappellants may continue to use the property precisely as ithas been used for the past 28 years. Penn Central Transp.Co., 438 U.S. at 136. District Intown suggested at oral argument that it hassatisfied the requirement of demonstrating reasonable investment-backed expectations because it purchased property that,at the time of purchase, was subdividable. This is notsufficient to establish the existence of reasonable investmentbacked expectations. In this case, where the developmentDistrict Intown proposes departs from the property's traditional use, and the moment of purchase is so attenuated fromthe moment of subdivision, the claimant surely must point tosome 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 ofsubdivision could have reasonably changed. This may be, butwhen appellants subdivided they surely knew that the legalregime had changed since they first bought their property. Moreover, they knew that any subdivided parcel would besubject to that regime. Lucas teaches that a buyer's reasonable expectations must be put in the context of the underlyingregulatory regime. See 505 U.S. at 1030 (stating that theTakings Clause does not require compensation when therestriction is proscribed by background state law rules orunderstandings). District Intown purchased and subdividedits property subject to an existing regulatory regime thatestablishes that District Intown could have had no reasonableexpectations 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 ofdevelopment. For approximately 60 years, the ShipsteadLuce Act has restricted development on properties that, likeCathedral Mansions South, abut or border upon the NationalZoo. See D.C. Code Ann. s 5-410. Were that not sufficient,after 1979, D.C.'s historic landmark laws additionally limitedexpectations 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 potentiallysubject to regulation under the landmark laws. Cf. AmicusCuriae Brief at 15 (pointing out that almost the entire lengthof Connecticut Avenue from M Street to almost a mile northof District Intown's property is either landmarked or within ahistoric district). Businesses that operate in an industry witha history of regulation have no reasonable expectation thatregulation will not be strengthened to achieve establishedlegislative ends. See Concrete Pipe & Prods. v. ConstructionLaborers Pension Trust, 508 U.S. 602, 645 (1993). In thiscase, District Intown was in the real estate business, with ahistory of restriction of development for the purpose ofpreserving historic sites. Similarly, the Supreme Court rejected a company's claim of reasonable expectations that theEnvironmental Protection Agency would maintain trade secret confidentiality where the industry had long been thefocus of great public concern and significant governmentregulation and the possibility was substantial that the Federal Government ... would find disclosure [of trade secrets] to be in the public interest. Monsanto Co., 467 U.S. at1008-09. Prior to and after subdivision, this particular property was the subject of increasing public activity devoted torestricting development through landmark designation. SeeGood v. United States, 189 F.3d 1355, 1361-63 (Fed. Cir.1999) (finding the claimant had no reasonable expectationswhere he purchased the land subject to environmental regulation and watched as public concern for the environmentincreased and the applicable regulations became more stringent before seeking approval for development). District Intown also argues that the District Court's findingthat the regulation did not have a significant economic impactwas erroneous. District Intown bases this argument on theassertion that they presented undisputed evidence that thelawns, absent development, add nothing to the value of theapartment building. See Brief for Appellants at 24-25. Thisargument misunderstands the substantial burden District Intown faced in District Court. District Intown had to produceevidence 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 apartmentbuilding is irrelevant to whether the property as a whole canbe operated at a sufficient profit even with the regulation. Inshort, none of the Penn Central factors support DistrictIntown's claim of a compensable deprivation of property.