by Dennis Crouch
A recently filed petition for writ of certiorari in Lemon Bay Cove, LLC v. United States highlights the longstanding difficulty in defining regulatory taking as well as determining when a regulatory takings claim becomes ripe for judicial review. The brief was filed by the Pacific Legal Foundation, a public interest law firm that focuses largely on protecting private property against government intrusion and regulation.
Background: Lemon Bay Cove, LLC owns about 6 acres of intercoastal property in Charlotte County, Florida, north of Ft. Myers. In 2012, Lemon Bay applied to the U.S. Army Corps of Engineers for a permit to fill about 2 acres around Sandpiper Key to construct a 12-unit townhome development. After a nearly four-year process, the Corps denied the application with prejudice in 2016.
Lemon Bay then filed suit in the Court of Federal Claims, alleging that the Corps’ denial effected a per se regulatory taking under Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992), by depriving the property of all economically viable use. However, after a full trial, the court rejected Lemon Bay’s claim, finding that Lemon Bay’s “persistence in limiting its proposed development to a 12-unit footprint for its own financial reasons prevented the Corps’ consideration of any other economically viable uses of the property.” The Federal Circuit affirmed without opinion under Federal Circuit Rule 36.
After being told ‘no’, Lemon Bay could have revamped its plans, perhaps with a smaller or less intensive development, and asked for reconsideration — something that might have taken another four years to deny. Theoretically though Lemon Bay should be able to eventually get a final decision that either permits use of the property or else denies all economically viable uses. But, this Bleak House solution does not sound tenable, and Lemon Bay asks the Supreme Court: “How long should a property owner have to plead with the government for permission to develop his own land before he may sue for relief?”
But if courts permit the government to avoid that determination merely by holding out a speculative hope that some lesser development might be approved—even against all evidence to the contrary—then Lucas’ protection is illusory. A permitting authority could continue to deny permit applications for ever less substantial development while suggesting that only if the owner filed another application, it might be granted. The Constitution should not—and this Court’s precedents do not—require property owners to play such an expensive, time-consuming game of “Mother, May I.”
Although Dickens is tedious, Bleak House is a great novel for lawyers to read and, at least according to Lemon Bay’s description, offers an apt analogy to the present situation with the potential for regulatory takings claims to become trapped in a cycle of endless reapplications and legal proceedings. In Bleak House, the parties were stuck in a bureaucratic quagmire that eventually consumed the entire estate that was the subject of the famous Jarndyce v. Jarndyce. See Wilkie v. Robbins, 551 U.S. 537
(2007) (“Agency appeals, lawsuits, and criminal defense take money, and endless battling depletes the spirit along with the purse.”).
With this in mind, Lemon Bay asks the following question:
Whether a regulatory takings claim seeking just compensation under Lucas may be defeated by the mere possibility that a permitting authority might have approved a smaller development proposal.
If you recall, in Lucas, the Supreme Court established a categorical rule for regulatory takings. The Court held that when a regulation deprives a property owner of “all economically beneficial or productive use” of their land, it constitutes a per se taking requiring just compensation under the Fifth Amendment, unless the restrictions “inhere in the title itself” through background principles of state property law or nuisance. Lucas decision is significant because it created a bright-line test for certain “extreme” regulatory actions, distinguishing these cases from the more common zoning scenario where regulations merely diminish property values, which are typically analyzed under the multi-factor balancing test established in Penn Central (1978). However, the Court has acknowledged that determining whether “all” economically beneficial use has been destroyed is a difficult fact-specific inquiry, and the burden of proving such a total deprivation falls on the property owner claiming a taking has occurred.
Here, petitioner argues that it should be given an opportunity to argue Lucas and that the lower court’s decision effectively imposes an exhaustion requirement on takings plaintiffs — requiring the land owner to exhaust all potential proposals before claiming they have been denied and leaving them in ‘regulatory purgatory.’
Lemon Bay’s proposed ruling would have a significant limiting power on regulatory bodies who would likely need to begin a practice of offering approvable alternatives whenever denying a proposed development. This change has potential benefit, and continues to be something that lots of successful patent examiners do. A win for Lemon Bay may also require expedited review process so that developers could more quickly ascertain what projects might be approved. This is obviously costly for regulatory agencies, both in the up front analysis and with the heightened risk of further litigation, not to mention the potential impact on public safety and environmental protection. Regulators might feel pressured to approve some level of development in environmentally sensitive areas such as these intercoastal waters to avoid takings claims, potentially compromising conservation and public safety efforts.
= = =
Although the Federal Circuit did not issue a written opinion in the case, the oral arguments in the case included some interesting points. In particular, Andrew Bernie, arguing for the US talked through more aspects of the reasons for denial, including potential impact on manatees and the need for a sovereign land lease from Florida for the dock. But David Smolker, representing Lemon Bay Cove, responded that the Corps’ denial did not provide guidance on what changes would make the application acceptable. He also emphasized the difficulty and cost of the Corps’ permitting process, noting that Lemon Bay spent four years and $400,000 trying to obtain the permit. Smolker contended that requiring Lemon Bay to apply for an undefined, speculative “less impactful development” after already obtaining state permits and zoning approval would result in an endless cycle of applications, effectively asking them to prove a negative.
Musing on potential relation to patents, if the Court acts ultra vires and writes new patent law, is there such a thing as a Judicial Takings?
After all, to this day we still have patent grants being made (creating expectation value at the least), and with the presumption of validity still on the books, AND a judicial rewrite does eviscerate ALL value of the personal property…
Asking for a friend interested in the Rule of Law…
So, is the proposed terminal disclaimer rule a regulatory taking?
>both in the up front analysis and with the heightened risk of further litigation, not to mention the potential impact on public safety and environmental protection
The simplest option for the regulators, of course, would be taking less than 4 years to issue a final opinion.
(I’ll note that the USPTO does appear to take this criticism seriously… ironically, in a subject area where said delay may not necessarily harm the applicant)
Looks like an ideal location for a Big Tech penal colony.
Some times, the most productive use for a piece of land is to allow it to remain as it is.
Perhaps “productive” need be a delta (leaving as is then would be a zero).
Pretty sure “productive” has the context of “productive For the owner.”
Pretty sure that “productive for the owner” doesn’t mean it has to be the owner’s desired productive use.
And how does “remain as is” fit?
Elaborate.
Your first comment above to which I replied…
You reply to my reply with undue snark, especially given your initial post.
Definition of “snark”: critical or mocking comments made in an indirect or sarcastic way.
Please particularly point out and distinctly explain how my reply to your reply was unduly snarky or even just plain old snarky.
If you can’t see it, you won’t see it when I explain it to you.
Re: ” The brief was filed by the Pacific Legal Foundation, a public interest law firm.”
There seem to be a lot of such lawsuits by such firms lately, with a lot of creative “judge shopping”* and their undisclosed funders and real parties in interest are likely to have a lot more private interest than public interest in the subject. But this cases emphasis on allegedly not providing an effective timely way to challenge a regulation-denial might appeal to a cert grant by the new super 6 Sup. Ct. majority.
*They were stuck with the Court of Federal Claims in this case, in order to sue the U.S. Army Corps of Engineers for a permit to fill about 2 acres around Sandpiper Key. Was that area under allegedly navigatable water, or swamp, or what? Where was all the fill coming from?
P.S. If getting the land fill permit takes long enough, this FL sea-level “Lemon Bay” [aptly named?] property will already be under water from increasing ocean levels, and increased storm surges, and building-uninsurable. I would think they should have hitched such a big-secret-money-backed “takings case” legal challenge to a dryer property with more sympathetic “taking” facts?
The area is a lot of trees, you can see it on google maps. They want to cut those trees and put foundation for a housing complex. Which counts as a “fill of a wetland” because the soil is occasionally saturated. It has no effect on navigation.
link to google.com
The fill material is either mulch, dirt or rock, depending on thepurpose (grass, building foundation, etc). It comes from a quarry or from organic waste (mulch). Just like mulch you can buy at home depot.
It seems Lemon Bay should have been thinking ahead. Instead of asking to fill 2 acres, it should have asked to fill 20 so its takings claim could be 10x higher.
These are not the typical stable geniuses we are used to in Florida.