WHAT DO YOU MEAN I CAN'T USE MY WETLANDS ?? THAT
ISN'T A MERE SETBACK, IT'S AN OUT AND OUT TAKING !!!
Roger D. Schwenke
Carlton, Fields, Ward. Emmanuel, Smith & Cutler
In a decision earlier this year, the U.S. Supreme Court announced its
ruling in a case that many had hoped would finally and decisively define the
point at which a regulation that reduces property values could be deemed a
taking which would require compensation under the U.S. Constitution's Fifth
Amendment. On June 29, 1992, the Court in Lucas v. South Carolina Coastal
Council, 112 S. Ct. 2886, 120 L. Ed. 798, 60 U.S.L.W. 4842, held that the denial of
all economically beneficial or productive use of private property, even by a
law intended to prevent a public harm or otherwise to benefit the public,
violates the Fifth Amerdment's guarantee that government will not take private
property for public use without just compensation. Although the Lucas case
involved a land use set-back restriction, the decision may impact the question
of when and how dredge and fill or other wetlands restrictions might also
constitute a compensable taking.
Unfortunately, the decision seems to have provided very few clear, final or
decisive answers to regulatory taking questions. It struck a midpoint in the
regulatory takings arena. To those who hoped that the Court, finally, would
provide clear guidelines in this otherwise muddy and murky territory, to show
when and how any regulatory action should be tested on constitutional
grounds, the best the court did was eliminate a governmental capability-to
validate a restriction (and thereby avoid any obligation for compensation) by
merely claiming that the law or regulation was intended to prevent a public
harm) oAby merely claiming that the landowner's use of the property would be
deemed to be "inconsistent with the public interest".
Instead, governmental regulators, in any situation where a rule or statute
will cause the landowner to lose all economic or beneficial value now must
instead look to and specifically identify established principles of state nuisance
and property law to justify such a prohibition and to avoid an obligation for
compensation. Where the regulation will not cause the landowner to lose all
"economically beneficial use" of his land, the decision in Lucas does not clarify
when, how, and to what extent compensation must be paid. Instead, in a
footnote, it tells us that its rule "does not make clear" the "property interest"
against which the loss of value is to be measured. 60 U.S.L.W. 4842,4848, n. 7.
Very few cases of government regulation, especially cases of wetlands
regulation, will fall clearly beyond the boundary described by the Court.
FACTS AND PROCEDURAL BACKGROUND OF LUCAS:
In 1986, David Lucas, a South Carolina real estate developer, paid $975,000
for two residential lots on a coastal barrier island near Charleston, South
Carolina. He intended to build single-family homes such as those on
neighboring parcels. The lots were located approximately 300 feet from the
beach, and that time, were zoned for single-family residential construction. At
that time, no state, county or municipal regulations prohibited development of
In 1988, after Hurricane Hugo hit the area, South Carolina enacted the
Beachfront Management Act that barred any permanent structures close to the
high water mark. The Act delineated a set-back line from the beach for
construction of permanent structures. Lucas' lots were within the restricted
area. Lucas filed suit in state court against the South Carolina Coastal Council,
claiming that even though the Act may have been a lawful exercise of the state's
police power and may have advanced a legitimate public interest, the
construction ban as applied to him deprived him of all "economically viable
use" of his property and therefore effected an unconstitutional "taking" under
the Fifth and Fourteenth Amendments which required the payment of just
The state trial court agreed and concluded that the Act deprived Lucas of
any reasonable economic use of the land and agreed that this amounted to a
taking that required compensation. It entered an award in excess of $1.2
The South Carolina Supreme Court reversed. 404 S. E. 2d 895 (S.C. 1991). It
held itself bound, in light of Lucas' failure to attack the Act's validity, to accept
the Legislature's "uncontested ... findings" that new construction in the coastal
zone threatened a valuable public resource, and ruled that the takings doctrine
does not require compensation, regardless of the regulation's effect on the
property value, if the regulation is designed to prevent "harmful or noxious
uses" of property equivalent to public nuisances. The Court characterized the
Act as a law that "merely" regulated use to abate a public nuisance, despite an
admonition by dissenting Justice Harwell that the majority's interpretation of a
broad nuisance exception "would totally eviscerate the takings clause". 404 S.E.
THE SUPREME COURT HOLDINGS -- as delivered by Justice Scalia:
A. Ripeness After Lucas was briefed and argued in the South Carolina
Supreme Court, but before the Court issued its opinion, South Carolina
amended the Act to allow homes to be built under certain circumstances, by-a
special permit. The U.S. Supreme Court rejected the State's ripeness argument,
despite prior case law which might have precluded review if the South
Carolina Supreme Court has based its judgment on ripeness grounds (as the
Coastal Council had urged it to do). Instead, because the State court had
"shrugged off the possibility of further administrative and trial proceedings...
. preferring to dispose of Lucas's takings claim on the merits, Justice Scalia
concluded that it would be unfair to insist that Lucas pursue the late-created
special permit procedure before considering his taking claims ripe.
B. Regulatory Actions which are compensable without inquiry into the Public
The Court, through Justice Scalia, in what is in part a new version of a
black-letter regulatory taking rule, declared that there are two types of
regulation that are compensable without inquiry into the public interest
advanced by the regulations.
1. "The first encompasses regulations that compel the property owner to
suffer a physical 'invasion' of his property, .... no matter how minute the
intrusion, and no matter how weighty the public purpose behind it...." (For
instance, a law requiring landlords to allow television cable companies to
install cable facilities in their apartment buildings constituted a taking even
though the facilities occupied less than 1 1/2 cubic feet of space.)
2. "The second situation in which we have found categorical treatment
appropriate is where regulation denies all economically beneficial or
productive use of land." The Court affirmed that the "Fifth Amendment is
violated when land use regulation does not substantially advance legitimate
state interests or denies an owner economically viable use of his land. "
(emphasis in text of opinion).
C. Regulatory actions which are not compensable:
Justice Scalia acknowledged that no compensable taking would occur if
the restricted use would have been prohibited under state law of property, or
state nuisance law.already placed upon land ownership or use:
1. "Where the State seeks to sustain regulation that deprives land of all
economically beneficial use, we think it may 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."
2. Regulations which prohibit all economic use of land amount to
compensable takings unless the regulatory limitations "inhere in the title itself,
in the restrictions that background principles of the State's law of property and
nuisance already place upon land ownership."
3. If the regulation does "no more than duplicate the result that could have
been achieved in the courts by adjacent landowners (or other uniquely
affected persons) under the State's law of private nuisance, or by the State
under its complementary power to abate nuisances that affect the public
generally or otherwise," then its effect is not compensable.
4. The Court offers several illustrations of persons who would not be
entitled to compensation under this analysis: (a) an owner of a lake bed when he
is denied the requisite permit to engage in a landfilling operation that would
have the effect of flooding others' land; and (b) the owner of a nuclear generating plant
when it is directed to remove all improvements from its land upon discovery that the
plant sits astride an earthquake fault. Justice Scalia explains that the use of such
properties for what are now expressly prohibited purposes was always unlawful and the
State was free at any point to make the "implication of those background principles of
nuisance and property law explicit."
5. However, as noted earlier, Justice Scalia made clear that to win its case South
Carolina must do more than proffer the legislature's declaration that the uses Lucas
desires are inconsistent with the public interest, or the conclusory assertion that they
violate a common-law maxim. Instead, South Carolina must identify "background
principles of nuisance and property law that prohibit the uses he now intends in the
circumstances in which the property is presently found."
PECULIARITIES OF LUCAS WHAT THE CASE DID NOT ADDRESS:
Several factual and precedential factors complicate an assessment of the impact of
the Lucas decision. First, as already noted, there was a significant ripeness issue which
the Supreme Court chose to sidestep. Despite the 1990 passage of legislation allowing a
waiver of the setback requirements for owners who, before the Beach Front Management
Act was enacted, had acquired property with an intention to build, Lucas never applied
for a waiver; during oral arguments, his counsel stated that he never did so because the
South Carolina Supreme Court was considering his case when the waiver became
available. During these same oral arguments, Justice Sandra Day O'Connor pointed out
that in previous taking cases where administrative remedies had not been exhausted, the
Court had found the cases "not ripe" for consideration. Despite this reservation, Justice
O'Connor concurred in the majority opinion written by Justice Scalia.
Second, a further complicating factor arose from questions concerning Mr. Lucas'
intentions for use of the property. Although he had owned it for two years before the
Act was passed, and alleged that he had commissioned architectural plans during that time
period he had never applied for a building permit. Under established law in many
jurisdictions (including Florida), permission to build would not vest until some permitting
action had been taken. On this basis, many advocates of the Coastal Council position
argued that Lucas had no vested or protected right to construction buildings, and
therefore had no claim to a value that could have derived from such construction.
To some extent, the significance of this argument is perhaps mooted by the fact
that Lucas, as a taking case rather than a case predicated on alternative constitutional
principles, had to use a different measure of damages. The damages in Lucas did not
include consequential damages. Instead, they included only an assessment of the fair
market value of the property when it was taken, which would not include the property's
appreciation or value which would have been derived from construction.
By contrast, damages in a due process case would include consequential damages.
For instance, in an earlier South Carolina case, Scott v. Greenville County, a property
owner sued alleging that he had been deprived of the value of his property through the
use of unconstitutional processes. 716 F. 2d 1049 (4th Cir. 1983). In Scott, a real estate
developer brought suit against Greenville County, South Carolina, and its County
Council, based on what was alleged to be a wrongful withholding of a building permit.
After purchasing an option to acquire property, intending to build low income housing,
local opposition forced Scott to obtain a court order requiring issuance of a building
permit. Because of the delay and uncertainties created by the associated litigation, plans
for the project never materialized. Scott eventually sold his remaining interest in the site
and the project for an amount which he claimed only partially offset the amount he had
In his suit, based on 42 U.S.C. 1983, Scott claimed three constitutional theories:
1. The denial of a permit was motivated by racial discrimination;
2. Aside from the racial discrimination, the withholding of the permit was a
deprivation of property without due process; and
3. There was a "taking" of property, the permit, without just compensation.
716 F. 2d at 1413.
The Fourth Circuit held that although the permit was property warranting
constitutional protection, there was no taking involved in that case. The Court
distinguished between the land itself, and the permit. Because Scott did not have the
"permit actually in hand", his property interest was not one subject to a taking claim. In
its analysis of whether there had been a taking, Judge Winter, speaking for the three
Judge panel, stated "non-issuance of the permit did not effectively destroy the value of
the building site, the rights to which Scott eventually sold. Therefore, we conclude the
Scott has no taking claim." Id. at 1421-22.
.This phraseology clearly delineates a difference between Luca and Scott. In
Lucas, the U. S. Supreme Court determined that the value of beach front lots was
effectively destroyed, whereas in Scott the Circuit Court determined that it was not.
Lucas was not awarded damages for profits he might have projected he would make on
the house he intended to build for resale. By contrast, in a due process case like Scot,
"a developer's economic interest in profits flowing from successful completion of a
housing development is not too highly speculative to merit judicial protection." 716 F.
2d at 1424.
Finally, a third complication and peculiar fact pattern, arising out of Lucas, was
the lack of factual finding activity by the lower courts. If the U. S. Supreme Court had
wanted finally to rule in favor of Lucas, rather than remanding the case to the State Court
with directions to consider state common law regarding the loss of economic value in
property regulation and regarding South Carolina public interests in preventing a public
harm or nuisance, the Court would have had little guidance from the South Carolina State
Supreme Court as to the extent of the taking or value of the property. Rather than
making such specific findings, the South Carolina Supreme Court had instead relied upon
earlier U. S. Supreme Court interpretations, especially Mugler vs. Kansas, 123 U. S. 623
(1887), and those decisions' determination that a regulation to prevent a serious public
harm could not constitute a taking. Therefore, the lower South Carolina courts had not
needed to consider other factors in making a determination of a taking, such as whether
In a wetland context, this seems to be the closest circumstance akin to the facts in
Lucas. Consequently, under the holding in Lucas this scenario would seem to present a
very strong argument that a compensable taking has resulted. To reach this point,
however, several thresholds must first be crossed:
1. The property owner first must show that they have exhausted any
administrative remedy that is available. Where there are procedures to seek a variance
from regulations, or to appeal a permit denial, arguably the property owner must pursue
those remedies before a takings claim would be considered to be ripe. There are
variations in the case law evolving with respect to this question, as is indicated by the
recent Florida Vatalaro case discussed below. However, the ripeness/administrative
remedy exhaustion/permit appeal issue is a threshold question which must be addressed in
many evaluations, perhaps most evaluations, of whether even a total wetlands prohibition
of development results in a taking. In Lucas, the requirement was not a factor because
the South Carolina Act did not, at the time of initial trial, include any such remedy.
2. The property must be inherently capable of development. The Court in
Lucas indicated that a right to develop had to be part of the owner's "title". Under the
Lucas decision, the analysis of the title issue turns on the law of each individual state.
As noted earlier, the decision did give certain examples of what Justice Scalia considered
to be actions that a state could proscribe under common law principles of property law
and nuisance, thereby being action which would not require compensation. The flooding
illustration provided in Lucas obviously has some clear parallels to wetlands regulation.
The Lucas decision used as an illustration the circumstance where the
owner of a lakebed wanted to engage in land filling that would have the effect of flooding
other's land. Presumably, this recognition of what would otherwise be a traditional
property and nuisance proscription recognizes that such an activity would be an
unreasonable interference with the use and enjoyment of other's property, and thus would
constitute a nuisance under traditional tort law.
In the wetlands context often, at least with respect to sophisticated
stormwater or wetlands regulation, the flood storage capacity of a wetlands area is
recognized as a wetland value and is thereby protected, or at least addressed in the
context of the permit process. Presumably, under Lucas, the filling of wetlands might
thereby properly be prohibited, without compensation, if such a filling would result in
either an unreasonable flooding of other properties in the same water shed, or would
result in some other consequence which unreasonably interfered with downstream rights
in the use and enjoyment of the property. Obviously, most wetlands filling requests
would not result in the type of extreme nuisance consequences, under present common
law of nuisance. It is certainly possible, however, that after Lucas, courts seeking to
allow a regulation could expand the scope of nuisance law.
Furthermore, the tort law of nuisance on which Lucas basis so much has, in
the past, generally been developed to handle after-the-fact remedies. Now, courts will be
required to evaluate a regulation which prospectively seeks to avoid unreasonable
consequences, decide whether there is a proper relationship between a regulation and the
nuisance which the regulator now must identify and specify as one sought to be avoided.
For instance, in a wetlands context, a court might have to decide whether a prohibition on
filling is proper if there is a possibility, albeit only a remote one, that the filling would
result in a nuisance.
3. For the Lucas holding to apply, even in this total prohibition context, the
regulation must result in the loss of "all economically beneficial use" of the property.
This is a very difficult standard to meet, and as previously noted, even where
construction is not possible, property may have a remaining economic value for
recreational or similar uses.
A corollary to this rule, which is often overlooked in the analysis of Lucas,
is that proving a deprivation of all economic development value is required only if a
property owner wants to take advantage of the "black letter" rule set down in Lucas.
Based on prior precedent, property owners can still prove takings where there has been a
less comprehensive deprivation of value. Those cases have found takings, where there
has been interference with the property owner's distinct "investment-backed
expectations". Those line of cases remain unchanged, even after Lucas.
4. Particularly in Florida, the "title" issue emphasized in the Lucas decision
probably will be a major element of analyzing whether there is a proper relationship
between regulations and classical state common law principles of property. Concepts
such as the public trust doctrine, although more recognized in certain states other than
Florida, will have some significance in attempting to reconcile the landowner's
investment-backed expectations, the restrictions imposed by Lucas, and the tradition of
property limitations in that state.
For instance, in Florida, the Florida Supreme Court in Graham v. Estuary
Properties. Inc., 399 So. 2d 1374, over ten years ago identified factors which must be
considered in deciding whether a taking has occurred:
(a) Whether there has been a physical invasion of the property. [As
noted earlier, this same factor was also identified in Lucas].
(b) The degree to which there has been a diminution in value of the
property. Stated another way, "whether the regulation precludes all economically
reasonable use of the property." [Again, this language is amazingly similar to that used
in Lucas, eleven years later].
(c) Whether the regulation confers a public benefit or prevents a public
(d) Whether the regulation promotes the health, safety, welfare, or
morals of the public.
(e) Whether the regulation is arbitrarily and capriciously applied.
(f) The extent to which the regulation curtails investment-backed
the Act had denied all economically viable use, the specific nature of a possible protected
property interest for Lucas, or whether Lucas has pursued all possible administrative
This aspect of the Lucas holding is one of the reasons why the decision can be
characterized as a very narrow ruling. For instance, even where habitable structures
could not be built, other cases have often acknowledged that property may have economic
value for recreational uses. Moreover, under a more traditional analysis the burden
would be on the property owner to prove that no economically beneficial value remained.
As in most cases where one is required to prove a negative, such a showing could have
been rebutted by a single contrary example. Unfortunately, the approach taken by the
South Carolina lower courts, especially the South Carolina Supreme Court, avoided the
necessity of addressing these "complicating" factors.
In fact, when the Lucas case reached the U. S. Supreme Court, the Court refused
to consider an argument that the South Carolina trial court was in error when it had made
a finding that the Act had rendered Lucas' property valueless. The Court did so because
South Carolina had failed to raise the argument in its brief opposing the property owner's
request for the U. S. Supreme Court to hear the case. Consequently, the entire direct
issue of value was substantially removed from the U. S. Supreme Court deliberations.
Obviously, this is a subject which would normally be a matter of extensive debate,
testimony and evidence, in any proceeding where a taking is alleged.
WHAT DOES LUCAS MEAN TO WETLANDS REGULATION?
Trying to apply the Luca decision, with all of its unanswered questions and
ambiguities, to the situation confronting wetlands regulation is difficult, at best, and
perhaps impossible. However, perhaps the best way to approach this question is to look
at two separate scenarios.
Case 1: Wetlands regulations which totally prohibit all development on an entire tract:
112 S. Ct. 2886, 2894, n. 7.
The Court perhaps because this was not the situation presented in Lucas, or
perhaps because the issue is being raised in a footnote, chose not to expand upon this
question. It does, however, emphasize that the answer probably will require and inquiry
into the law of each state:
"The answer to this difficult question may lie in how the owner's
reasonable expectations have been shaped by the state's law of property --
i.e., whether and to what degree the state's law has accorded legal
recognition and protection to the particular interest in land with respect to
which the takings claimant alleges a diminution in (or elimination of) value." Id.
Given the interplay between state and local zoning and land use restrictions on
property development, coupled with federal (Corps of Engineer and EPA) regulation
through 404, carried to an extreme this suggestion of inquiry into state property law
could lead to what one commentator has termed "seemingly bizarre results". If wetlands
are regulated under a Corps issued 404 permit, even one issued jointly between DER
and the Corps, and are subject to EPA review and veto, is the determination of whether
that regulation amounts to a taking going to be impacted by whether a local municipality
has approved a subdivision ordinance or rezoning of the tract?
FLORIDA CASES BEFORE AND AFTER LUCAS:
Just before the U. S. Supreme Court rendered its decision in Lucas, a Florida
District Court of Appeals entered a decision, involving wetlands questions, which in
many ways paralleled the holding in Lucas. In Vatalaro v. Florida Department of
Environmental Regulation, 17 FLW 1350, 601 So. 2d 1223 (Fla. 5th DCA, May 29,
1992), the Court ruled that a taking had occurred where DER denied a dredge and fill
permit for the construction of two house pads, driveways and septic tank drain fields in
property which was already zoned residential. The Court concluded that this denial of
the dredge and fill permit constituted a regulatory taking of the property.
The land owner had bought the land after DER had clear statutory authority to
regulate dredge and fill activity, and without investigating whether the property would
require wetlands permits. The plaintiffs son, who also was Orange County's Chief
Building Inspector, had conducted a due diligence and concluded that the property could
be built upon. After the County issued the necessary building permits and construction
began, DER initiated an enforcement action which was suspended while Vatalaro sought
an after-the-fact permit, a permit which was denied based on the quality of the wetland
and on the water quality impacts from the septic tanks. DER concluded that mitigation
would not work and that the only construction which would be authorized would be a
boardwalk. This decision was upheld by a hearing officer after a formal administrative
hearing. Rather than appealing that administrative determination, the Vatalaros brought a
The trial court granted Summary Judgment in favor of DER, basing its decision on
the Third District Court of Appeal case of Namon v. DER, 558 So. 2d 504 (Fla. 3rd
DCA 1990). Namon had held that a person who purchased land subject to an existing
law which precluded building without a permit could not subsequently claim a taking
based on the proper denial of such authorization. The District Court there concluded that
someone in that position had no "reasonable and distinct expectation" of building, and
therefore could not require the public to assume the risk of what would otherwise be a
speculative business decision.
The Fifth District disagreed, saying that it considered irrelevant the fact that the
Vatalaro's purchase of property occurred subsequent to the enactment of the Warren S.
Henderson Wetlands Protection Act of 1984 (Sections 403.91-.938, Florida Statutes).
The Fifth District felt that since the Henderson Act did not flatly prohibit wetlands
alteration, the mere possibility that a permit might issue gave Vatalaro a legitimate
expectation. Not only did the Court overturn the Summary Judgment, but it also ruled
that a taking had occurred. As expressed by the Court:
"In the case law, all economically viable use of the property has been
taken. A home cannot be constructed on it, or anything else for that
matter. The language used in denying the permit makes it clear that use of
the subject land is limited to just looking at it. Apparently even walking
across the land is destructive to its delicate balance, as the construction of a
boardwalk was suggested. This result falls within the contemplation of the
cases finding a taking where all economically viable uses of the property
has been prevented. 601 So. 2d 1223, 1229.
As of the time these materials are prepared, DER has petitioned the Florida
Supreme Court to review the Vatalaro decision, citing a clear conflict with Namon. In its
arguments, and in subsequent comment on the case, DER has distinguished the Vatalaro
situation from Lucas, since the Department appears to recognize that Mr. Lucas did not
need a coastal permit when he bought his property and, less than two years later, was not
even able to apply for a permit to build. By contrast, they argue that Vatalaro bought its
property with full awareness of the types of restrictions which could be imposed under
the Warren S. Henderson Wetlands Protection Act.
In light of the property rights analysis which was so critical to the Lucas holding,
it is perhaps significant that the Vatalaro court appears to have been significantly
influenced by the fact that the property was already zoned residential and that such zoning
would have allowed the land owner to build two homes on it. The opinion points out that
"the bundle of rights the owner had has been diminished," and that the permit denial does
not allow the property to continue to exist "in the state in which it was acquired." 601
So. 2d, 1223, 1228.
A few months before Lucas was decided, a trial court in Seminole County,
applying the analysis of the Florida Supreme Court's Graham v. Estuary Properties
decision, and the dissent from the South Carolina Supreme Court decision in Lucas,
determined that a "taking" would occur when the County denied a land owner's
application for a waiver of wetland's zoning ordinance. Chira v. Seminole County, Case
No. 88-4946-CA-13-9 (Circuit Court for the Eighteenth Judicial Circuit, Seminole
County, Florida). The ordinance required prior approval from the County before
wetlands were developed, and restricted development use to only ten (10%) percent of the
total area of the property. The land owner attempted to sell the remaining five acres of a
seventeen-acre tract, and the contract for sale was subject to site plan approval. The land
owner sought site plan approval but the county refused to waive the ordinance.
In response, the land owner sued for inverse condemnation as well as other relief.
He acknowledged, like the plaintiff in Lucas, that the regulation was a legitimate exercise
of the state's police power. Nonetheless, he argued, and the trial court found, that the
ordinance restricted the use of the remaining five acres by ninety (90%) percent, thereby
significantly reducing the property value and the land owner's investment-backed
expectations. The court considered the purpose and effect of the ordinance, and
characterized it as one which would create a public benefit rather than prevent a public
harm. Because the trial court determined that the ordinance conferred a "public benefit",
but at the same time substantially devalued the land owner's property, it determined that a
compensable taking had occurred.
In another Florida case, involving a growth management restriction rather than a
wetlands regulation, the Eleventh Circuit Court of Appeals, a few weeks after the Lucas
decision, reversed a federal magistrate trial court order which had found that Lee
County's density restriction of one residential unit per forty (40) acres, in a wetlands
area, had constituted a taking of private property. Reahard v. Lee County, 968 F. 2nd
1131 (1lth Cir. 1992), reversing Reahard vs. Lee County, Case No. 89-227-Civ.-FTM-
10 D (M.D. Fla. 1991).
The land owner had sought to develop a 126 unit development, but instead the
County was limiting him to a density of 1 unit per 40 acres. The land owner alleged that
several hundred other acres had been developed since 1940 in the Coastal mangrove area.
The trial court viewed the 40 acres at issue separately, and determined that the County
had "substantially deprived" the plaintiff of a sufficiently economically viable use of the
property, such that he was entitled to compensation. A jury later awarded the Reahards
$700,000 as compensation for that taking.
On appeal to the Eleventh Circuit, the Court rejected the argument that a
"substantial reduction in value" required a public compensation. Instead, it held that in
cases where a regulation substantially advances a legitimate state interest, like wetlands
protection, compensation is required only if a land owner has been denied all or virtually
all economic use of the regulated property.
The Court further ruled that, despite having substantial and relevant evidence
before him, the Magistrate had failed to make adequate factual findings concerning the
character, ownership, use and development history of the property. The Court instructed
the Magistrate to inquire into the actual extent to which the plaintiff had been granted
land use approvals and, to determine how much the plaintiff had spent money or built
infrastructure in reliance on those approvals.
Although the Eleventh Circuit had awaited the release of Lucas, as noted by
footnote 5 of the Reahard decision the Eleventh Circuit seems to have placed far greater
reliance on earlier U.S. Supreme Court standards for taking determinations, citing Penn
Central Transp. Co. v. New York City, 438 U.S. 104 (1978), Nollan vs. California
Coastal Commission, 483 U.S. 825 (1987), and Agins v. City of Tiburon, 447 U.S. 255
The Court held that in circumstances like this where a land owner conceded that a
regulation was a valid exercise of the police power and either the court or the land owner
acknowledged that it substantially advances a legitimate governmental interest, a taking
and the obligation for just compensation will occur only if "an owner has been denied
all or substantially all economically viable use of his property." 968 F. 2nd 1131,
1136 (emphasis added) (citing an earlier Eleventh Circuit decision, Eide v. Sarasota
County, 908 F. 2d 716 (Eleventh Cir., 1990).
Since the Magistrate had not determined whether the Lee County regulation would
leave the Reahards with an economically viable use for their property, the standard set by
the Eleventh Circuit is as follows:
"In order to resolve the question of whether the land owner has been denied
all or substantially all economically viable use of his property, the fact
finder must analyze, at the very least: (1) the economic impact of the
regulation on the claimant; and (2) the extent to which the regulation has
interfered with investment-backed expectations." Id.
The Court went on to identify specific factual findings which the Magistrate must
pursue, upon remand. This listing, although obviously focused directly on the facts
confronting Mr. Reahard and his property, also serve as a good listing of the types of
issues which now must be addressed in any evaluation of taking questions, at least in the
1. When and how much land was purchased, where was the land located, what
was the nature of the title to the land, what was the composition of the land and how was
it initially used?
2. What was the history of development on the property, what had been built
and by whom? Had the property been subdivided, sold, what plats had been filed, and
what roads had been dedicated?
3. What was the history of zoning and regulation on the land -- "how and
when was the land classified?" How had these classifications changed and what uses had
4. How did development change when title passed?
5. What is the present nature and extent of the property?
6. What were the reasonable expectations of the land owner under common
7. What were the reasonable expectations of the land owner's neighbors under
8. And "perhaps most importantly" (emphasis by the court), what was the
diminution in the investment-backed expectations of the land owner, if any, after passage
of the regulation?
As the first post-Luca Florida case, Reahard re-emphasizes that a land owner
must prove the existence of an investment-backed expectation, and further must
demonstrate that those expectations are the product of a common, statutory and local law
in existence at the time of the purchase. Coupled with that, the land owner must take
into account the actual approvals granted by the government and the funds that have been
expended in reliance on that.
If the Florida Supreme Court chooses to review Vatalaro, perhaps we will gain a
further refinement of how and when these economic impact, investment-backed
expectation, property rights and public interest issues all will come together, and how
they will impact wetlands regulation in Florida.
In addition to awaiting the outcome, if any, of Florida Supreme Court
consideration of Vatalaro, note should also be taken of the pending Federal Circuit Court
of Appeals cases reviewing earlier lower court takings cases relating to wetlands
regulation. In two recent Claims Court cases, the Court found regulatory takings due to
Corps permit denials and awarded compensation. In each instance, the Claims Court
addressed the nuisance exception, valuation issues, and questions of how much of the
original purchase were relevant.
In Florida Rock Industries. Inc. v. United States. 20 ELR 21201 (CI.Ct. 1990),
the court ruled that the Corps' denial of a 404 permit was an unconstitutional taking
and warranted just compensation under the Fifth Amendment.
The court described the facts of this case as follows: In 1972 Florida Rock, a
large-scale miner of limestone, bought 1,560 acres in order to mine limestone. Because
of a slump in the construction industry, it did not attempt to mine the property until 1978.
Between the acquisition and the beginning of mining operations, Congress amended the
CWA establishing the 404 permitting program for wetlands. The Corps required
Florida Rock to apply for a permit to cover three years' mining activity (98) acres),
which Florida Rock did. The Corps denied the permit, and Florida Rock filed in the
Claims Court seeking just compensation for a regulatory taking.
The court found that the nuisance exception to the general rule that just
compensation is required when the government regulates the value out of private property
was not applicable here because mining limestone in this area could not be considered a
nuisance; there were many other limestone quarries in the area and many desirable
neighborhoods had been built around lakes made from abandoned quarries.
The court stated that the determination whether a regulation or its application
denied an owner economically viable use of its land and resulted in a taking must be
decided case by case, applying factors announced by the Supreme Court in Connolly v.
Pension Benefit Guar. Corp., 475 U.S. 211, 224-225 (1986); (1) the economic impact of
the regulation on the claimant, (2) the extent to which the regulation has interfered with
distinct investment-backed expectations, and (3) the character of the government action.
In determining the character of the government action, the court noted that if the mining
operation had been begun before the CWA amendments it probably would have been
"grandfathered in" and that the determination that there has been a taking is essentially "a
determination that the public at large, rather than a single owner, must bear the burden of
an exercise of the state power in the public interest." The court found that in this case,
the character of the government action weighed in the plaintiffs favor. In determining
the economic impact, the court compared the value taken to the value remaining,
following Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470 (1987), and
found a diminution of 95 percent. With respect to investment-backed expectations the
court found that the plaintiff purchased the land solely to mine and there is not other
business by which it could recoup its investment, subject to the regulation. Based on
appraisals, the court awarded Florida Rock over $1 million plus interest for the 98 acre
Loveladies Harbor. Inc. v. United States, 21 CI.Ct. 153 (Cl. Ct. 1990). In this
companion case to Florida Rock decided on the same day, the court again found that the
Corps' denial of a permit resulted in a taking requiring just compensation under the Fifth
The court recited the facts as follow: Loveladies bought 250 acres of vacant land
in New Jersey for $300,000 in 1956. By May, 1982, 199 acres had been filled and
homes constructed. Development of the remaining 51 acres was prevented by state and
federal wetlands regulations requiring permits. The state granted a permit allowing
development of 12.5 acres; the Corps denied a permit for any acreage. Loveladies
sought compensation for taking of the 12.5 acres.
Previous phases of the case had decided all but the valuation issues. The court
defined "fair market value" and "Highest and best business use", determined the value
had been reduced by 99 percent, and awarded compensation of $2.6 million.
In light of the Lcas decision, the United States Court of Appeals for the Federal
Circuit is now being asked to consider whether it agrees with these earlier two
determinations. Again, that decision should be closely watched to determine how the
issues of this investment-backed expectations, reliance, and loss of economic viability
come together with respect to wetlands regulation in Florida.