Opinion ID: 2804701
Heading Depth: 2
Heading Rank: 1

Heading: Lucas

Text: The question presented in this appeal is whether residual value arising from noneconomic uses precludes application of Lucas and requires application of Penn Central’s balancing test. Confined to its facts, Lucas does not answer the question. In Lucas, the South Carolina legislature enacted a statute that prohibited a landowner from erecting any permanent habitable structures on his land. 505 U.S. at 1009. The state trial court found that the prohibition left the property valueless. Id. The Supreme Court emphasized that the prohibition denied the landowner all “economically beneficial uses” of his land. Id. at 1019 (emphasis added). Yet the Court used the term “use” synonymously with the term “value.” See id. at 1019 n.8. The question of whether residual value attributable to noneconomic uses precludes Lucas’s per se treatment was not squarely answered, however, because the affected parcel in Lucas retained no value of any kind. Id. at 1009. Subsequent Supreme Court cases emphasize that a Lucas taking requires a total loss in economic value, see Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg’l Planning Agency, 535 U.S. 302, 330 (2002), but Supreme Court precedent does not address the precise facts before us, in particular, the existence of residual land value derived solely from noneconomic uses.
The trial court held that because the government’s permit denial deprived Lost Tree of 99.4% of Plat 57’s value, a Lucas taking had occurred. Lost Tree CFC II, 115 Fed. Cl. at 231. Recognizing that Lucas requires a total loss in economic value, id. at 228 (citing Tahoe-Sierra, 535 U.S. at 330), the trial court explained that Plat 57’s residual value “does not reflect any economic use.” Id. at 231 (emphasis added). Plat 57’s residual value stems from environmental value as wetland. Id. at 231 n.9. 8 LOST TREE VILLAGE CORPORATION v. US Thus, Plat 57’s residual value is not economic value, and hence Lucas applies. The government argues that Lucas is about value, no matter its source. According to the government, if a regulated parcel retains any value, including environmental value, the landowner cannot maintain a Lucas claim. Lost Tree and Amicus Curiae respond that Lucas is about use. If a regulation deprives a landowner of all land use, Lucas’s per se treatment is appropriate. We agree with the trial court that a Lucas claim falls somewhere between the parties’ interpretations. While Lucas itself does not squarely address the issue, this court’s precedent does. In Loveladies Harbor, Inc. v. United States, the government denied plaintiffs a § 404 fill permit. 28 F.3d 1171, 1173 (Fed. Cir. 1994). The fair market value of the affected parcel prior to the permit denial was over $2 million. Id. at 1174. After the permit denial, the parcel was worth $12,500, less than one percent of its original value. Id. at 1175. Because the remaining value was “de minimis,” the relevant parcel was “deprived of all economically feasible use,” and Lucas’s per se treatment was appropriate. Id. at 1181–82. The government argues that subsequent doctrinal developments at the Supreme Court conflict with Loveladies Harbor. We agree that subsequent decisions have explained that a Lucas taking is rare. In Palazzolo v. Rhode Island, the plaintiff argued that wetlands regulations reduced his land value by more than 93%. 533 U.S. 606, 616 (2001). That decrease in value was not sufficient to trigger Lucas’s per se treatment. Id. at 631. The Supreme Court more recently clarified in Tahoe-Sierra that Lucas “was limited to ‘the extraordinary circumstance when no productive or economically beneficial use of land is permitted.’” 535 U.S. 302, 330 (2002) (emphasis in original) (quoting Lucas, 505 U.S. at 1017). LOST TREE VILLAGE CORPORATION v. US 9 We disagree that post-Lucas Supreme Court developments conflict with our holding in Loveladies Harbor. In Palazzolo, the 93% loss in value was insufficient to trigger Lucas because the landowner was left with value attributable to economic uses. As the Court explained, “[a] regulation permitting a landowner to build a substantial residence on an 18-acre parcel does not leave the property ‘economically idle.’” Palazzolo, 533 U.S. at 631. The Court also indicated that the “State may not evade the duty to compensate on the premise that the landowner is left with a token interest[,]” implying that residual value does not defeat a categorical takings claim at least when residual value is not attributable to economic uses. See id. at 629. In Tahoe-Sierra, the Court addressed a “temporary” takings claim. The Court explained that 32month moratoria on development do not deprive a landowner of all economically beneficial use because economic use can resume at the end of the moratoria. See TahoeSierra, 535 U.S. 302, 332 (“Logically, a fee simple estate cannot be rendered valueless by a temporary prohibition on economic use, because the property will recover value as soon as the prohibition is lifted.”). The government argues that this court’s precedent characterizes Lucas as applying only in the narrow circumstance in which all value, regardless of its source, has been lost. We disagree. After Tahoe-Sierra, our cases have characterized the Lucas inquiry in terms of “value.” See, e.g., Cienega Gardens v. United States, 331 F.3d 1319, 1344 (Fed. Cir. 2003) (Lucas requires loss of “100% of a property interest’s value”). Aside from Loveladies Harbor, however, our takings jurisprudence addresses circumstances such as those in Tahoe-Sierra and Palazzolo in which economic use (and hence economic value) was merely suspended, permitted on an unaffected portion of the parcel, or not entirely destroyed. See, e.g., Seiber v. United States, 364 F.3d 1356 (Fed. Cir. 2004); Bass En10 LOST TREE VILLAGE CORPORATION v. US ters. Prod. Co. v. United States, 381 F.3d 1360 (Fed. Cir. 2004).
The government argues that a landowner’s ability to sell an affected parcel is an economic use that precludes Lucas’s per se treatment. According to the government, Lucas classifies a sale as an economic use. The government cites this court’s decision in Conti v. United States for the same proposition. See 291 F.3d 1334 (Fed. Cir. 2002). Because Plat 57 has residual value, the government argues Lost Tree’s ability to sell Plat 57 precludes Lucas’s application. We disagree. The government’s argument incorrectly assumes that negligible noneconomic appraisal value enables a landowner to sell a regulated parcel. As the trial court found, Plat 57’s residual environmental value has been reduced by mosquito abatement measures, which left isolated hummocks and stagnant eutrophic pools. Lost Tree CFC II, 115 Fed. Cl. at 231 n.9. The government did not produce evidence indicating that Lost Tree could sell Plat 57 in such a condition. Speculative land uses are not considered as part of a takings inquiry. See Olson v. United States, 292 U.S. 246, 257 (1934). Even if we assume that Plat 57’s value necessarily enables Lost Tree to sell the parcel, we disagree that all sales qualify as economic uses. When there are no underlying economic uses, it is unreasonable to define land use as including the sale of the land. Typical economic uses enable a landowner to derive benefits from land ownership rather than requiring a landowner to sell the affected parcel. See, e.g., Kirby Forest Indus., Inc. v. United States, 467 U.S. 1 (1984) (logging); United States v. 50 Acres of Land, 469 U.S. 24 (1984) (landfilling); United States v. Fuller, 409 U.S. 488 (1973) (livestock grazing). LOST TREE VILLAGE CORPORATION v. US 11 Contrary to the government’s assertion, Lucas does not suggest that a land sale qualifies as an economic use. The Court in Lucas referred to a “sale” as an economic use in the context of personal property whose “only economically productive use is sale or manufacture for sale.” 505 U.S. at 1028 (citing Andrus v. Allard, 444 U.S. 51, 66–67 (1979) (a case dealing with a prohibition on the sale of eagle feathers)). The Court explained that a personal property owner should be aware of the possibility that a regulation could render personal property worthless because of the State’s “traditionally high degree of control over commercial dealings.” Id. By contrast, in the context of real property, focusing Lucas “solely on market value” allows “external economic forces,” such as inflation, to artificially skew the takings inquiry. Del Monte Dunes at Monterey v. City of Monterey, 95 F.3d 1422, 1433 (9th Cir. 1996). The government cites this court’s decision in Conti v. United States for the proposition that a sale qualifies as an economic use. See 291 F.3d 1334 (Fed. Cir. 2002). In Conti, a regulation banned drift gillnet fishing in the Atlantic Swordfish Fishery. Id. at 1344. The plaintiff alleged a taking because the regulation prevented him from using his gillnet fishing gear. The Court did not apply Lucas in part because the claimant could offer for sale or sell his gillnet fishing gear. Id. Conti, however, deals with personal property. Aside from that distinction, the claimant’s ability to sell the commercial gillnet fishing gear stemmed from a potential buyer’s ability to use that gear to fish somewhere other than in the Atlantic Swordfish Fishery. See id. The economic use, i.e., the owner’s ability to sell, stemmed from a separate economically productive use. The same cannot be said of Lost Tree’s alleged ability to sell Plat 57. The government argues that the trial court’s holding will allow speculators to purchase regulated property cheaply, apply for a development permit, and, if the 12 LOST TREE VILLAGE CORPORATION v. US permit is denied, succeed on a Lucas claim. We disagree. Lost Tree persuasively argues that “[i]n the real world, real estate investors do not commit capital either to undevelopable property or to long, drawn-out, expensive and uncertain takings lawsuits.” Appellee Br. 21, n.7. Even if the government’s hypothetical was plausible, this court considered and rejected a similar argument in Loveladies Harbor. 28 F.3d 1171, 1181 (Fed. Cir. 1994). The court explained that if such strategic behavior presented itself, “[o]ur precedent displays a flexible approach, designed to account for factual nuances.” Id. Framed differently—in the context of existing land ownership—the government’s hypothetical lends support to the trial court’s holding. To establish a per se claim under the government’s reading of Lucas, a landowner would have to demonstrate that a regulation destroyed all land value, regardless of its source. Yet the fact that the landowner could make such a showing, according to the government’s hypothetical, would prompt speculation giving rise to post-regulation land value. In other words, speculators would value otherwise valueless land based solely on the possibility that a Lucas taking could be maintained and that a takings judgment could be won. Land value resulting from such speculation would defeat the very Lucas claim on which the speculation was based.