Federal Court of Claims Finds Government’s Denial of Permit to Fill Wetlands Constituted a Compensable Taking

Lost Tree Village Corporation, the plaintiff, filed an application to fill wetlands for a plot of land approximately five acres in size. The U.S. Army Corps of Engineers denied the application, and Lost Tree claimed “that the denial of that permit eliminated all economically viable use of the plot and constituted a taking in contravention of the Takings Clause of the Fifth Amendment to the United States Constitution.” The court of appeals remanded the case to determine the loss of economic value in the plot as a result of the denial, and also to establish what standard to apply in order to determine if a compensable taking had occurred. It was undisputed that the plot had a nominal value, which was not reflective of any economic use, but with the permit to fill the wetlands the plot was “worth a substantial amount.”

On appeal, the court discussed the potential economic loss under both the Lucas and Penn Central factors to determine which to apply. Under the Lucas factors, the court stated that “the inquiry [was] whether [the plot] retain[ed] any economically beneficial use without [the permit].” In order to do the analysis, the court took an average of the parties’ estimated value of the plot without the permit and with the permit, which were $27,500 and $4,760,000, respectively. Because of the drastic difference in value, the court found that there was a diminution of value of approximately 99.4%, and that under Lucas “[s]uch a diminution of value constitute[d] a categorical taking . . . .”

The ocurt also found that there was a taking under the Penn Central factors. First, the court found that while the government had a legitimate objective to preserve waterways pursuant to the Clean Water Act, that it singled the plaintiff out for adverse treatment, and that actual wetlands involved were marginal, which weighed in favor of the plaintiff. Second, the court found the reasonable investment-backed expectations factor did not weigh in either party’s favor because of the circumstances surrounding the permit. Third, the court found that there was a clear economic impact because of the 99.4% diminution in value, which weighed heavily in the plaintiff’s favor. Thus, the court found that there was also a compensable taking under the Penn Central factors.

The court then addressed whether the government also owed the plaintiff’s interest on the award, and stated that if disbursement of an award is delayed then the property owner is entitled to interest. The interest should be calculated such that it was approximately what the reasonably prudent person would have received if that person had invested his or her funds to produce a reasonable return. The court found that the “ten-year Treasury STRIPS rate [was] appropriate,” which was based on the amount of time between the taking and the judgment.

The court held that the government’s denial of the permit to fill the wetlands constituted a taking of the plaintiff’s property, and awarded the plaintiff $4,217,887.93 based on its fair market value with the permit, and minus the value without the permit. The court also awarded the plaintiff interest at the ten-year Treasury stripes rate.

Lost Tree Village Corp. v. United States, 2014 WL 1004100 (Fed. Cl. Mar. 14, 2014)

The opinion can be accessed at: http://www.scribd.com/doc/214437120/Lost-Tree-Village-Corp-v-United-States-No-08-117L-Fed-Cl-Mar-14-2014