ELR Citation: ELR 21036
No(s). 91-5156 (Fed. Cir. Mar 10, 1994)

The court vacates a judgment by the U.S. Court of Federal Claims that the U.S. Army Corps of Engineers' (Corps') denial of a dredge and fill permit under §404 of the Federal Water Pollution Control Act (FWPCA) resulted in a taking requiring just compensation under the Fifth Amendment to the U.S. Constitution. The court remands for a determination of what, if any, economic use—as measured by fair market value—remains after the permit denial, and for consideration of whether, in light of the properly assessed value of the land, the company has a valid takings claim. The company had applied for a §404 permit to dredge and fill 98 acres of a 1,560-acre tract of land in Dade County, Florida, which it had purchased in 1972 for the sole purpose of mining limestone. The Corps denied the application. The company filed suit in Claims Court alleging that the permit denial was an uncompensatedregulatory taking of its property. In its first decision, the Claims Court held that the permit denial was a regulatory taking, for which the company was entitled to compensation in the amount of $1,029,000 plus interest. The Claims Court found that the value of the parcel before the taking was $10,500 per acre and that the property's value after the taking was negligible because rock mining—which, in the court's opinion, was the only viable economic use of the land—had been foreclosed. The U.S. Court of Appeals for the Federal Circuit vacated the judgment, and remanded to the Claims Court for reconsideration of whether a taking had occurred and for a determination of the fair market value of the property after the permit denial. On remand, the Claims Court again held that a compensable taking had occurred, finding that the permit denial deprived the company of all economically beneficial use of its land. The Claims Court again found the property's fair market value to be a nominal $500 per acre, because no market for the property exists among knowledgeable investors.

The court rejects the Claims Court's analysis that all economically beneficial use of the land was taken by the government. The court holds that the Claims Court erred in accepting the testimony of an assessor who rejected all comparable sales values on the basis that none of the purchasers were sufficiently sophisticated and knowledgeable. The Federal Circuit's instruction on remand the second time explicitly required the Claims Court to consider a relevant market made up of investors who are real but are speculating in whole or major part. It is not disputed that there was an active—though speculative—market for the company's land at the time of and following the permit denial in 1982. Thus, although the fair market value of the property remains to be determined, the court finds it was much higher than $500 per acre. The court notes that a speculative market may exist in regulated as well as unregulated land, and that the precise content of regulations at any given time may not be important to those active in the market. When the market, as here, provides a well-substantiated value for a property, a court may not substitute its own judgment as to what is a wise investment.

The court holds that it is unable to determine, based on the record, whether the permit denial at issue constitutes a taking. The court directs the Claims Court on remand to reconsider the parties' proffered assessments and other evidence in the record to once again determine the property's fair market value. If there is at least some reduction in value, the Claims Court must then determine whether the reduction constitutes a taking. The court holds that a partial deprivation resulting from a regulatory imposition—some diminution in value—constitutes a "partial" taking, and is compensable in an amount proportional to the value of the interest taken as compared to the total value of the property. The court further directs the Claims Court to undertake an ad hoc takings analysis and consider the extent of the property owner's loss of economic use as a result of the regulation, whether the government acted for a public purpose, and whether the government has equitably allocated the benefits and burdens of the regulation.

A dissenting judge would hold that U.S. Supreme Court precedent forecloses compensation to a property owner for a "partial" taking. Also, the Fifth Amendment does not provide a valid claim for compensation based on loss of property value alone; the taking of the fee is required.

[Previous decisions in this litigation are published at 15 ELR 20626, 16 ELR 20671, 20 ELR 21201, and 22 ELR 20591. Briefs in this litigation are digested at ELR PEND. LIT. 65815, 65885, 65891, 66184, and 66330.]

Counsel for Plaintiff
John A. DeVault III
Bedell, Dittmar, DeVault & Pillans
The Bedell Bldg., 101 E. Adams St., Jacksonville FL 32202
(904) 353-0211

Counsel for Defendant
Robert L. Klarquist
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

Before NIES, Chief Judge, NEWMAN and PLAGER, Circuit Judges.