Takings and Wetlands in the Claims Court: Florida Rock and Loveladies Harbor

Lee R. Epstein

Lee R. Epstein is a partner at Linowes and Blocher in Silver Spring, Maryland, where he specializes in environmental and natural resources law. He is a former Maryland Assistant Attorney General.

[20 ELR 10517]

On July 23, 1990, the U.S. Claims Court found in two separate decisions that the federal government had unconstitutionally taken private property without just compensation.¹ In both, the U.S. Army Corps of Engineers (Corps) had denied Clean Water Act § 404² permits to fill wetlands. The permit denial in New Jersey, affecting a 12.5-acre portion of residential property, resulted in the court ordering $ 2.6 million in damages.³ The other, in Florida, resulted in a $ 1 million award for the denial of a limestone mining operation on 98 acres.⁴ Although the Claims Court is only the trial court for monetary damage claims against the federal government under the Tucker Act,⁵ and appeals to the Federal Circuit and the U.S. Supreme Court are still possible, the current visibility and prominence of wetlands policy and jurisprudence suggest that these cases have the potential to shape judicial decisions for years to come.

Case Backgrounds

Florida Rock III

Florida Rock came to the Claims Court in 1984 after the Corps had denied the company's request for a permit to quarry limestone on 98 acres. The permit request covered only a portion of the company's holdings (approximately 1,560 acres) of South Florida wetlands but, if granted, would have allowed for three years of mining activity.

Florida Rock had purchased the property in 1972, solely for limestone mining, for about $ 1,900/acre.⁶ It had begun to mine in 1978, but was stopped by the Corps for lack of a valid § 404 Clean Water Act permit for fill in "waters of the United States."⁷ A subsequent permit request was ultimately denied by the Corps two years later.⁸

When the company first appeared before the U.S. Court of Claims in 1984, the court held that it was entitled to compensation of $ 10,500 per acre for denial of all reasonable or economic use. ⁹ Chief Judge Kozinski also held, contrary to the Corps' findings, that the company's proposed mining activities would not have polluted the water.¹⁰

On appeal in 1986, the Federal Circuit Court of Appeals noted that the latter finding was illogical and improper. The court further decided that a fair market value analysis should take into account the potential investment and speculative marketplaces for the property, rather than merely presuming the displacement of all economic use, as the trial court had done.¹¹

On remand in 1990, Judge Smith circumvented the Federal Circuit's reasoning and revived the Claims Court's original conclusions. To address and dismiss the so-called nuisance exception to the general rule requiring compensation for regulatory takings, Judge Smith found that the company's proposed mining operation would not have polluted the Biscayne Aquifer.¹² In so doing, the court implies that because other mining operations already existed in the area, the addition of Florida Rock's activities could not approach the level of or create a nuisance such that harm to wetland ecology or groundwater resources would result.

In addition, the Claims Court held that the mere possibility of some future value in the property and the government expert's conclusion that knowledgeable investors might still purchase it at $ 4,000 per acre were too speculative to pass muster.¹³ This determination bypassed the appellate court's earlier concern that a mistake was made in ignoring defendants' expert and evidence that knowledgeable buyers would have paid a substantial figure.¹⁴

Finally, Judge Smith found that the plaintiff's valuation and appraisal techniques, while "admittedly novel," were acceptable for determining value before and after the government's action. While the plaintiff's survey of recent land purchasers may not have completely and accurately uncovered knowledge of the government's regulations at the time of the purchase, Judge Smith found the company's attempt a reasonable one.¹⁵ The court thus accepted plaintiff's pre- and postregulation valuations, rejecting previous governmental evidence about postregulation inquiries by [20 ELR 10518] knowledgeable people, at or above the $ 4,000 per acre figure.¹⁶

Loveladies Harbor IV

Loveladies Harbor is the companion wetlands taking case issued on the same day as Florida Rock III. The outcome is similar: denial of a permit to fill wetlands resulted in a taking, requiring just compensation under the Fifth and Fourteenth Amendments of the U.S. Constitution — here, $ 2.6 million.¹⁷ Loveladies Harbor had requested the Corps' permission to fill 12.5 acres for a residential subdivision. Plaintiffs had purchased 250 acres for this purpose in 1956, for $ 300,000, and 199 acres had been sold and/or developed by the late 1970s, when plaintiffs sought permission to fill the remainder. After litigation with the State of New Jersey over the remaining 51 acres and the state's later issuance of a permit for 11.5 acres, the developer sought a permit from the Corps. That permit was denied in 1982. The Corps' permit denial was affirmed by the federal district court and, on appeal, by the U.S. Court of Appeals for the Third Circuit.¹⁸

In the Claims Court in 1988, Judge Smith heard and dismissed cross motions for summary judgment.¹⁹ Reserving for later trial the issue of whether any economically viable use for plaintiffs' property remained, he rejected the government's two key arguments: (1) that plaintiffs' entire 250 acres should be considered, rather than a separate and distinct 12.5-acre parcel,²⁰ and (2) that the proposed use would constitute a nuisance and thus not require just compensation.²¹

With regard to the latter, the Claim Court's examination of the governmental interest to be served is instructive. In Loveladies Harbor III, the court balanced governmental interests in preserving wetlands against the private burden borne by these plaintiffs and concluded that the private burden was too great.²² Judge Smith wrote that the precedent in Deltona Corp. v. United States²³ was no longer binding, since the Federal Circuit had issued a contrary decision in Florida Rock II, which held that the preservation of wetlands was not for the prevention of a public harm but rather for the maintenance of a public benefit.²⁴ Accordingly, the government's nuisance theory stood little chance of surviving — and it did not.

With respect to the "parcel as a whole" argument, the court in 1988 agreed to examine only the 12.5 acres subject to the permit denial. The government urged that the 250-acre purchase should be considered as a whole, and its diminution in value taken in light of the original 250-acre parcel's economic use and return. Distinguishing prior precedent,²⁵ the court limited its focus on the property plaintiffs held when the taking was said to have occurred — 57.4 acres out of the original 250-acre parcel. The court then further winnowed the "parcel" down to the 12.5 acres at issue.

Finally, Judge Smith's 1988 opinion in Loveladies Harbor III expressed his belief that plaintiffs' reasonable, investment-backed expectations had been frustrated: their interest had always been resale for development and that potential no longer existed. Because he believed the ultimate valuation of the regulated 12.5 acres was not resolvable on a motion for summary judgment, however, the court reserved for trial that centrally important issue.²⁶

The result of that trial is Judge Smith's 1990 opinion in Loveladies Harbor IV. Having addressed the issues of investment-backed expectations, parcel-as-a-whole, and lack of substantial state interests in Loveladies Harbor III, the Claims Court in Loveladies Harbor IV primarily analyzed the issues of valuation before and after the governmental action.

Judge Smith first accepted plaintiffs' proposition that the "highest and best use" of the property was as a 40-lot subdivision, and that its "fair market value" (FMV) was $ 2,658,000. He rejected outright any notion that the prepermit denial valuation should be affected by the mere existence of a strong wetlands regulatory regime, recalling the Federal Circuit's dismissal of such an argument in Florida Rock II as "a little humor [in] an otherwise serious and scholarly brief. . . ."²⁷

Next rejecting the defendant's proffered potential uses of the property (e.g., as a small marina, for nature study, etc.) and the potential $ 40,000 value of the one land-locked upland acre, the court found that the value after the permit denial was $ 12,500 — effectively nominal given the resulting diminution in value of more than 99 percent. ²⁸ This drastic economic impact, combined with the lack of a substantial legitimate state interest and the complete frustration of investment-backed expectations, led the court to its ultimate holding that an unconstitutional taking had occurred.

Analysis

Overview

Florida Rock and Loveladies Harbor are significant from two perspectives. First, they are constitutional takings cases in which a federal court has determined that regulatory takings resulted from lawful permit denials and require just compensation. Second, they are wetlands cases, where permit issuance would have resulted in permanent alteration of more than 100 wetland acres in the aggregate (98 acres in South Florida, and 12.5 acres in New Jersey). As post- [20 ELR 10519] First English,²⁹ Nollan,³⁰ and Keystone Bituminous³¹ federal takings decisions, each helps to sculpt the future takings landscape. The cases also fuel the existing controversy over federal and state governmental policy on wetlands regulation.

The courts' traditional ad hoc approach in takings cases provides a general framework for analysis. For example, the Supreme Court's three-factor approach in Connolly v. Pension Benefit Guaranty Corp.³² considers the overall character of the governmental action; the economic impact of the regulation on the applicant; and the extent to which the regulation interferes with reasonable and distinct investment-backed expectations. The first factor scrutinizes the governmental action in terms of the legitimacy of its ends and the rationality of its means, and whether any overreaching in fact occurred. The second requires courts to examine the value of the property before and after the governmental action, and the third involves an analysis of the landowner's timing, initial expenditures, and whether the investment decision was informed. Each of these factors is examined in the next section of this Dialogue.

Takings Analysis

Governmental Action. One percent of land-use jurisprudence is that substantial state interests must be served by governmental regulatory actions that adversely affect private property rights.³³ Under the Fifth and Fourteenth Amendments' due process equation, the governmental regulatory action must be rationally based and reasonably constructed.³⁴ Equally important, however, is the balancing that weighs the degree of private burden against the prevention of public harm. This balancing is usually done within the context of the police power and the protection of the public health, safety, and welfare.

In Florida Rock II and Loveladies Harbor IV, the private burden was deemed too great, the public harm was deemed too small, and the regulatory effect was deemed to constitute the actual provision of a public benefit. Thus, there was not sufficient support for the legitimacy of the governmental action involved. Such a result should concern governmental and environmental interests, for if unchallenged or sustained on appeal, the court's decisions and mode of analysis will undermine the continued effectiveness of wetlands protection programs.

In Florida Rock III and in Loveladies Harbor IV, the Claims Court did not fully consider wetlands protection within the broad context of Clean Water Act goals and policies. This broad approach has been repeatedly reaffirmed in the federal courts, beginning in 1975, when NRDC v. Calloway³⁵ declared the full breadth of federal jurisdictional interest in wetland resources. Similarly, Avoyelles Sportsmen's League v. Alexander³⁶ expressed the view that the protection of wetlands and their vital functions is a basic policy of the Clean Water Act, and Deltona³⁷ described the important natural biological functions served by wetlands and the Clean Water Act's mandate for their conservation. Again, in Smithwick v. Alexander,³⁸ the Fourth Circuit found the balance tilting decisively in favor of wetlands protection. Finally, in United States v. Riverside Bayview Homes,³⁹ the Supreme Court recognized the breadth of congressional concern for protection of water quality and aquatic ecosystems, especially wetlands, and noted their central value in the hydrologic cycle.⁴⁰ Notwithstanding Congress' recognized objective of restoring and maintaining the chemical, physical, and biological integrity of the waters of the United States, including wetlands, Judge Smith in Loveladies Harbor IV apparently found the plaintiffs' development rights to be of higher importance than the public's interest in protecting wetlands—repairing to the property's economic valuation before and after the regulatory action.⁴¹

Similarly, the court also reviewed matters within the technical expertise of the regulatory agencies, as established by the overall Clean Water Act framework. Detailed Corps/EPA regulations have unmistakably made the water quality-groundwater-wetlands connection for some 15 years,⁴² and general proscriptions against the discharge of fill material make no facial distinction between residential development, road building, or some other development activity.⁴³ Nevertheless, the court stated in Florida Rock III a personal view that no increase in harm to the Biscayne Aquifer would result from the new mining proposal — given the many existing mines in the area.⁴⁴ Under this interpretation, future cumulative impact analyses by the Corps and EPA would be foreclosed.⁴⁵ Additionally, the Claims Court held the nuisance exception to the takings rule inapplicable in Florida Rock III, essentially because limestone mines are common in the area,⁴⁶ and in Loveladies Harbor III, because the harm or injury to the public from development of these wetlands was not substantial — the Clean Water Act and its regulations notwithstanding.⁴⁷

[20 ELR 10520]

Economic Impact. In Loveladies Harbor IV, the Claims Court accepted the FMV and "highest and best use" of the 12.5 acres, before regulatory action, as a 40-lot residential subdivision, valued at $ 2,658,000: "This proposed use would have been physically possible and financially feasible; furthermore, it was a use to which the property could have been readily converted."⁴⁸ In the companion case, Florida Rock III, the Claims Court validated its earlier valuation of $ 10,500 per acre, for a total pretaking value of $ 1,029,000.

The Claims Court in both cases agreed with plaintiffs that the posttaking value was nominal, since knowledgeable persons would now pay little for the regulated property. In Florida Rock III, the court declined to adopt the analysis of comparable, arm's-length transactions undertaken at trial by the government's expert, as well as evidence discussed by the Federal Circuit concerning expressions of interest by knowledgeable people.⁴⁹ The court instead relied on "an admittedly novel"⁵⁰ survey undertaken by plaintiff's appraiser to determine how well informed the potential market was.⁵¹ And in Loveladies Harbor IV, the Claims Court rejected the argument that plaintiff's preregulatory valuation should have taken into account the existence and operation of the Clean Water Act's § 404 regulatory program.⁵²

An important factor in the Claim Court's economic impact analysis in Loveladies Harbor IV was its decision to limit geographically the takings scope to the 12.5 acres at issue in the permit, rather than to evaluate the economic impact of restricting this portion of the parcel as compared with the development permitted or already accomplished on the bulk (almost 200 acres) of the parcel. On this issue, the Claims Court distinguished the U.S. Supreme Court's pronouncement in Penn Central Transportation Co. v. City of New York:

"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. In deciding whether a particular governmental action has effected a taking, this Court focuses rather both on the character of the action and on the nature and extent of the interference with rights in the parcel as a whole . . . .⁵³

The Claims Court had previously issued a decision that examined the degree of intrusion on property rights as a whole for determining whether governmental action had effected a taking. In Deltona,⁵⁴ a landowner had developed a substantial portion of its property and claimed a taking on the remainder, which had since been regulated. The Claims Court in Deltona directly compared the reduced value of the landowner's property still owned after the claimed taking to the total acreage of Deltona's original purchase.⁵⁵ Because the court in Deltona had also examined other " statistics" on property held only at the time of the governmental action, Judge Smith stated in Loveladies Harbor III that Deltona did not offer a "rigid rule."⁵⁶ He also relied on Keystone Bituminous for guidance on how to define the extent of plaintiffs' property rights, noting that in Keystone the Supreme Court did not include all the property held at the time of the original purchase.⁵⁷

The Claims Court may be making distinctions without a difference. In Keystone, the Supreme Court addressed total coal resources in the ground vis-a-vis those that must remain in the ground according to established law on sub-surface rights. The issue of the entire mineral estate's original purchase value was neither raised nor argued, and the Court was merely responding to plaintiff's chief assertion that the evaluation of property rights should focus on the tons of coal that must remain in the ground. Therefore, a "point-in-time" issue, such as that developed by the Claims Court in Loveladies Harbor IV was inoperative in Keystone. Keystone's central tenet was that the denominator of the equation should be chosen to broadly represent the full potential of the parcel of property rights as a whole. That full potential in Loveladies Harbor IV arguably should have included the aggregate returns from the parcel in which the original investment-backed expectations resided: the full 200 acres of development occurring over a 25-year period, as compared, on a percentage basis, with the recently restricted 12.5-acre portion.

Unlike Loveladies Harbor IV, the Claims Court in Deltona determined the extent of plaintiff's property rights by evaluating the income stream from the entire property parcel purchased for development some 15 years earlier. 1[20 ELR 10521] The Claims Court concluded that the government's permit denial for an area comprising just 20 percent of the total acreage of the original purchase and 33 percent of its developable land represented a sure diminution in value, but not a compensable taking of entire value. In arriving at its conclusion, the Claims Court in Deltona weighed the company's reasonable expectations in the face of the government's permit program, and the government's substantial and legitimate regulatory interest. Whether the Claims Court in Loveladies Harbor IV and Florida Rock III should have adhered to its earlier approach in Deltona will likely be an issue for appellate review.⁵⁸

Investment-Backed Expectations. In Florida Rock III and Loveladies Harbor IV, the Claims Court found that investment-backed expectations would unreasonably be frustrated by the government's regulatory actions. Both landowners initially purchased their property with expectations of either developing or mining, yet the reasonableness of such expectations, as well as the investments made in reliance on those expectations, must be determined. Loveladies Harbor plaintiffs initially paid $ 300,000 for 250 acres in 1959 — or approximately $ 1,200 per acre. Thus, the 1959 total purchase price of the plaintiffs' 12.5 acres — if one can legitimately limit the takings analysis to that segment of the property — was approximately $ 15,000. Florida Rock purchased its 1,560 acres in 1972 for about $ 2.9 million, or about $ 1,900 per acre. The 1972 purchase price of the 98-acre parcel thus approximates $ 186,000.

The reasonableness of plaintiffs' distinct investment-backed expectations was only indirectly addressed by the Claims Court. It did not address whether it was reasonable (i.e., whether it was justifiable through the application of a rational and logical analysis of all available and existing facts) for plaintiffs in Loveladies Harbor to develop all 250 acres, or even the precise 12.5 acres at issue in the permit. Nor did the Claims Court address whether it was reasonable to expect to be able to mine all 1,560 acres, or the 98 acres that were the subject of the Corps' permit request.

Presumably, in 1959, it may have been eminently reasonable to expect that someday those 250 acres of upland and marsh on Long Beach Island, New Jersey, could be fully developed into dwellings. Similarly, in 1972, it may have been reasonable to purchase and expect to mine the 1,560 square acres of South Florida swampland that Florida Rock originally purchased. But, as the Clean Water Act § 404 regulatory program matured, and jurisdiction over both tidal and nontidal wetlands became firmly settled in both regulations and case law, the "reasonableness" of such earlier, necessarily uninformed expectations should likewise have become attenuated. The reasonableness of investment decisions must be demonstrated and not merely presupposed.⁵⁹ Thus, it is incumbent on the courts to assess investment data and their reasonableness as of the date of the complained regulatory action.

Conclusion

Florida Rock III and Loveladies Harbor IV are landmark decisions in takings jurisprudence that explore matters crucial to governmental regulatory programs in general and the wetlands permit program in particular. Of course, practitioners and others scrutinize every new federal takings decision for its manner and methodology, as well as for its outcome. These two decisions, together with their case histories, attempt to tackle such taking conundrums as the benefit/harm test and the nuisance exception; the reaches and limits of future, speculative, and market value; the parcel-as-a-whole issue; pre- and postregulation valuations; and the scope and legitimacy of governmental interests. Their analyses and outcomes pose significant difficulties for congressional, state, and local lawmakers, enacting regulating programs that impact on a broad variety of property interests. Similarly, federal and state wetland regulators will face difficulty when making immediate permit decisions that may eventually result in takings claims.

First, the result of the governmental interests tests in these cases found the public purpose side of the equation wanting when compared with the private burden, despite strong federal legislation and case law to the contrary. In ruling out the use of the so-called nuisance exception, the court first had to disregard the fundamental water quality/wetlands interrelationship that characterizes wetlands regulation, and then refuse to view a single, proposed regulated activity from a cumulative perspective.

Second, the Claims Court did not examine the reasonable, distinct investment-backed expectations of the plaintiff-landowners in great depth, leading readily to the conclusion that such expectations had been sufficiently frustrated. Whether a reasonableness analysis should include consideration of widely known governmental regulatory programs and climates, and whether the "investment-backing" should be assessed as it relates directly to the original purchase or to other costs incurred, are questions answerable only on appeal.

Finally, the Claims Court's application of precise pre- and postregulation valuation methodologies will likely undergo further scrutiny. Future examinations of this issue will focus on the plaintiff's knowledge of the regulatory impact on the fair market value of its property; the amount and quality of evidence necessary to provide or at least lay a foundation for asserting that a market exists for the regulated property; and most important, defining the denominator in the "parcel as a whole" fraction. In Florida Rock III and Loveladies Harbor IV, the Claims Court was not persuaded by precedent or argument to make the denominator the entire, originally purchased and mostly developed parcel. Having set the fraction at 1/1, and having undertaken the other analyses discussed in this Dialogue, the Claims Court virtually assured — indeed mandated — the outcomes of the two cases. Whether appeals will alter those outcomes, or whether other courts will use similar lines of reasoning, remains to be seen.

1. Florida Rock Indus., Inc. v. United States, 21 Cl. Ct. 161, 20 ELR 21201 (1990) [hereafter Florida Rock III]; Loveladies Harbor, Inc. v. United States, 21 Cl. Ct. 153, 20 ELR 21207 (1990) [hereafter Loveladies Harbor IV].

2. 33 U.S.C. § 1344, ELR STAT. FWPCA 057.

3. Loveladies Harbor IV, 21 Cl. Ct. at 161, 20 ELR at 21210.

4. Florida Rock III, 21 Cl. Ct. at 176, 20 ELR at 21206.

5. 28 U.S.C. § 1491 et seq.

6. While the Claims Court figured the earlier value using "simple division" at $ 1,250 per acre, $ 2,964,000 divided by 1,560 acres actually yields $ 1,900 per acre.

7. FWPCA § 502(7), 33 U.S.C. § 1362(7), ELR STAT. FWPCA 061.

8. See Florida Rock III, 21 Cl. Ct. at 164, 20 ELR at 21201.

9. Florida Rock Indus., Inc. v. United States, 8 Cl. Ct. 160, 15 ELR 20626 (1985) (Florida Rock I).

10. Id. at 175, 15 ELr at 20633.

11. Florida Rock Indus., Inc. v. United States, 791 F.2d 893, 895, 899, 16 ELR 20671, 20673, 20676 (Fed. Cir. 1986), cert. denied, 479 U.S. 1053 (1987) [hereafter Florida Rock II].

12. Florida Rock III, 21 Cl. Ct. at 166-67, 20 ELR at 21202. The nuisance exception generally holds that the government has unquestioned authority to prevent a property owner from using his property to harm others. Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470, 17 ELR 20440 (1987); Miller v. Schoene, 276 U.S. 272 (1928).

13. Florida Rock III, 21 Cl. Ct. at 172, 20 ELR at 21204-05.

14. Florida Rock II, 791 F.2d at 903, 16 ELR at 20675.

15. Florida Rock III, 21 Cl. Ct. at 172, 20 ELR at 21204.

In brief, plaintiffs' expert, with the assistance of a well-qualified statistician and an experienced real estate market researcher, employed a statistical analysis of a census of property holders in the region to determine knowledge and motivation of purchasers of "comparable" property. Defendant's expert identified transactions of property it determined were objectively comparable, largely assumed knowledgeable purchasers if the transactions had been at arm's-length, and determined an average per-acre price paid.

Essentially, the adopted result rewards ignorance.

16. Id. at 172-74, 20 ELR at 21205-06.

17. Loveladies Harbor IV, 21 Cl. Ct. at 160, 20 ELR at 20210.

18. Loveladies Harbor, Inc. v. Baldwin, No. 82-1948 (D.N.J. Mar. 12, 1984) (unpublished) (Loveladies Harbor I), aff'd without opinion, 751 F.2d 376, 15 ELR 20088 (3d Cir. 1984) (Loveladies Harbor II) (Corps' denial of permit not arbitrary or capricious).

19. Loveladies Harbor, Inc. v. United States, 15 Cl. Ct. 381, 19 ELR 20092 (1988) [hereafter Loveladies Harbor III].

20. Id. at 391-93, 19 ELR at 20097-98.

21. See id. at 389, 19 ELR at 20096.

22. Id.

23. 228 Ct. Cl. 476, 657 F.2d 1184, 11 ELR 20905 (1981).

24. Loveladies Harbor III, 15 Cl. Ct. at 388, 19 ELR at 20096.

25. Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470, 17 ELR 20440 (1987); Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 8 ELR 20528 (1978); Deltona, 228 Cl. Ct. at 476, 657 F.2d at 1184, 11 ELR at 20905.

26. Loveladies Harbor III, 15 Cl. Ct. at 399, 19 ELR at 20101.

27. Loveladies Harbor IV, 21 Cl. Ct. at 156 n.5, 20 ELR 21208 n.5.

28. Id. at 158-59, 20 ELR at 21209.

29. FirstEnglish Evangelical Lutheran Church v. County of Los Angeles, 482 U.S. 304, 17 ELR 20787 (1987).

30. Nollan v. California Coastal Comm'n, 483 U.S. 825, 17 ELR 20918 (1987).

31. 480 U.S. at 470, 17 ELR at 20440.

32. 475 U.S. 211 (1986).

33. Agins v. City of Tiburon, 447 U.S. 255, 10 ELR 20361 (1980).

34. Nectow v. City of Cambridge, 277 U.S. 183 (1928). On the pure takings side of the same equation is an analysis of whether the property owner is left with reasonable use.

35. 392 F. Supp. 685, 5 ELR 20285 (D.D.C. 1975).

36. 473 F. Supp. 525, 11 ELR 20315 (W.D. La. 1979).

37. 228 Ct. Cl. at 476, 657 F.2d at 1184, 11 ELR at 20905

38. 12 ELR 20432 (4th Cir. 1981).

39. 474 U.S. 121, 16 ELR 20086 (1985).

40. The public welfare value of wetlands has been recognized as extraordinarily high. See,e.g., COUNCIL ON ENVIRONMENTAL QUALITY, OUR NATION'S WETLANDS (1978); OFFICE OF TECHNOLOGY ASSESSMENT, WETLANDS: THEIR USE AND REGULATION (1984); THE CONSERVATION FOUNDATION, NATIONAL WETLANDS POLICY FORUM, PROTECTING AMERICA'S WETLANDS: AN ACTION AGENDA (1988).

41. Loveladies Harbor IV, 21 Cl. Ct. at 159, 20 ELR at 21209.

42. See Minnehaha Creek Watershed Dist. v. Hoffman, 596 F.2d 617, 9 ELR 20334 (8th Cir. 1979) (emplacement of riprap materials and dam construction in lake deemed a discharge of a pollutant without regard to effects on water quality); 40 C.F.R. pt. 230; 33 C.F.R. pts. 320-330 (1986).

43. 33 C.F.R. § 323.2(f)(1986).

44. See supra note 12 and accompanying text.

45. Interestingly, the court recognized the concept of cumulative impact on the Aquifer, but stated that it was not the court's function to decide the acceptable level of pressure on or danger to it. Florida Rock III, 21 Cl. Ct. at 167, 20 ELR at 21202. Yet, that may well have been the court's role in Florida Rock III and Loveladies Harbor IV, particularly because avoiding cumulative effects is a hallmark of the wetlands regulatory framework.

46. Id., 20 ELR at 21202.

47. Loveladies Harbor IV, 21 Cl. Ct. at 160, 20 ELR at 21210.

48. Id. at 157, 20 ELR at 21208. This approach ignores the existing regulatory framework and climate. The court accepted without question that "highest and best use" for the 12.5 acres is as a residentially developed parcel with 40 houses on it. But the definition of " highest and best use" is "[t]he reasonably probable and legal use of vacant land . . . which is physically possible, appropriately supported, financially feasible, and that results in the highest values." (quoting AMERICAN INSTITUTE OF REAL ESTATE APPRAISER, APPRAISAL OF REAL ESTATE 19 (9th ed. 1987) (emphasis added)). Perhaps the centrally important question is begged in both cases, by not taking into account whether these uses are indeed appropriately supported, legal uses, given the mandates of the Clean Water Act. While the proposed uses are not rendered flatly "illegal" by the regulatory regime, it would seem logical that such should help inform the valuation question.

49. Florida Rock III, 21 Cl. Ct. at 172, 20 ELR at 21204. Footnote 7 in the Florida Rock III opinion simply discounts evidence of three actual offers made on the property after the permit denial by stating that no evidence was presented by the government as to these potential purchasers' "knowledge" or financial capabilities. The court then dismissed these offers as evidence of an adequate market, although the coming together of several willing buyers (and one assumes, sellers) for the purpose of purchase and sale is indeed that term's customary definition. If courts will need in the future to delve deeply into the prospective or potential financial capabilities of such a market, a new task of unimagined complexity will have been carved out for judges or juries.

50. Id. at 173, 20 ELR at 21205.

51. However, the results of such an analysis might logically add credence to the government's postaction valuation case. On the one hand, the court seems to have said that since people in the South Florida region, where the market has a history for some fairly substantial speculation, did not have knowledge of the government's regulatory program, it was reasonable for plaintiffs' investment-backed expectations to have been high — and reasonable thus to permit a high pregovernmental action valuation. On the other hand, the court disallowed or disbelieved evidence that a fair market existed for the regulated land, stating that the interest expressed in the property was likely wholly uninformed and thus too speculative. There is an inherent logical inconsistency between these two findings: because of a lack of knowledge, there was no such thing as a "fair market value," nor indeed, a "real" market at all; but that same lack of knowledge could lead plaintiffs to believe that their speculation had been sound and their market decision reasonable.

52. This harkens back to the question of whether such expectations were "reasonable," in light of recent precedent, extensive regulations, and burgeoning case law on wetlands protection. They might well not have been.

53. 438 U.S. at 130-31, 8 ELR at 20534.

54. 228 Ct. Cl. at 476, 657 F.2d at 1184, 11 ELR at 20905.

55. Id. at 490, 657 F.2d at 1188-89, 11 ELR at 20906-07.

56. Loveladies Harbor III, 15 Cl. Ct. at 392, 19 ELR at 20097.

57. Id., 19 ELR at 20098.

58. The alternative to the Deltona approach would permit piecemeal analyses of discrete, individual "takings" on but a single large parcel of land, even if bought and financed with the sole intent of overall development or resource-based use. Thus, each segment's individual development would be analyzed without relation to the whole, or to any immediate past segment's development and financial returns, or to returns accruing from development of the whole.

59. Case law on what constitutes "reasonable investment-backed expectations" is in transition, and further guidance from the courts is needed. Generally, ignorance of the existence of the wetlands regulatory regime does not exempt a potentially regulated entity from the duty to make a reasoned judgment about investment decisions.