Glass Half Full for Takings Plaintiffs

In two recent cases dealing with federal environmental permits, landowners could not convince a court that the agencies violated the Fifth Amendment takings clause. In one matter, the plaintiffs had not ripened their claims, and in the other, the appellate court believed that the lower court used the wrong takings analysis. However, in neither case did the court specifically find that the agencies did not violate the Fifth Amendment. 

Pursuant to the Endangered Species Act, a landowner may obtain an incidental take permit ("ITP") that allows the permit-holder to harm or kill an endangered species while conducting an otherwise lawful activity. To obtain such a permit, the applicant must develop a Habitat Conservation Plan ("HCP") that explains in detail how the applicant will minimize harm to the species. The ITP/HCP process can be very costly. 

In Morris v. United States, 58 Fed. Cl. 95 (2003), plaintiff-landowners faced what looked like an easy decision: apply for an incidental take permit ("ITP") to obtain National Marine Fisheries Service ("NMFS") authorization to cut timber on their 1/2-acre lot or just continue to hold the property and let it sit idle. There was a problem, however. The cost of applying for an ITP was more than the timber was worth. Thus, the landowners chose a third option; sue NMFS for taking their property without paying just compensation. 

In Morris, the main issue was whether NMFS had taken a final action as required by Williamson County Reg'l Planning Comm'n v. Hamilton Bank, 473 U.S. 172 (1985). The plaintiffs agreed that generally there is no final action until landowners exhaust all available administrative processes.  However, relying on Palazzolo v. Rhode Island, 533 U.S. 606 (2001) the plaintiffs asserted that forcing them to apply for an ITP in this instance would be unreasonable.

The Court of Federal Claims recognized the landowners' dilemma, but disclaimed jurisdiction because NMFS had not taken a final action. The Court noted that the landowners may not have been required to develop an absolutely comprehensive ITP application and therefore their estimate of the cost to apply for an ITP was speculative. 

As a result, the Court explained that because the plaintiffs did not accept the assistance offered by NMFS and complete an ITP application to the best of their ability, no final agency action existed and the case was not ripe. On a positive note, the Court did aver that if the plaintiffs had filed an application that NMFS rejected as insufficient, then it might have been able to determine whether it would have been reasonable for the plaintiffs to file further applications. 

Similar to the ITP process, under the Clean Water Act a developer must obtain a federal section 404 permit before discharging dredged or fill material into a jurisdictional wetland.  An individual permit under the section 404 program is also time consuming and costly.

In Cooley v. United States, the plaintiffs wanted to develop a mixed-use commercial project on a site that was mostly wetlands. Cooley v. United States, 46 Fed. Cl. 538 (2000). Unlike the plaintiffs in Morris, the Cooley plaintiffs did apply for a section 404 permit. The Corps, however, denied their permit. In 2000, the Court of Federal Claims found that when the Corps refused to issue the plaintiffs a section 404 permit, it diminished the value of their property by at least 98.8%. Cooley v. United States, 46 Fed. Cl. 538 (2000). This, according to the Court of Federal Claims was a categorical "taking" under Lucas v. South Carolina Coastal Commission, 505 U.S. 1003 (1992). Therefore, the Court awarded approximately $2 million in compensation to the plaintiff-landowners. The Corps could not accept this decision and accordingly appealed.  

On appeal, the first issue that the Court of Appeals for the Federal Circuit addressed was whether the case was ripe. After its 1993 denial, and after litigation had commenced, the Corps sent the plaintiffs a letter suggesting that it might be willing to issue a permit for a smaller project. The plaintiffs replied that they would consider settlement if the Corps was willing to grant the previously denied permit. The Corps did not respond. Three years later, in April 1996, sua sponte, the Corps issued a reduced scope permit. Subsequently, 10 days before trial, at the insistence of the Department of Justice, the Corps granted the plaintiffs a provision permit for the full project. The plaintiffs rejected that permit and continued the litigation. 

Based on the post 1993 activities, the Corps argued that its denial of a permit in 1993 was not a final decision. The Court did not accept the Corps' arguments that the landowners could have submitted more information to obtain a permit. The Court focused on the Corps internal correspondence explaining that it had all the information needed to deny the permit, and the permit denial letter that the Corps sent to the landowners, which provided "I must deny the request." Thus, the Court upheld the lower Courts ruling that the Corps 1993 denial was a final action and therefore the plaintiffs' taking claim was ripe.

Furthermore, pursuant to Corp regulations, it could not issue a permit after a denial. Accordingly, the Court of Appeals noted that even if the 1993 denial was not a final action, it would have been futile for the plaintiffs to further pursue a permit and the plaintiffs' claim would be ripe.

Unfortunately, the Cooley Court also addressed whether the lower court correctly used the Lucas test. First, the Court of Appeals noted that the lower court found that the Corps had destroyed less than all of the plaintiffs' property's value. This, according to the Court of Appeals, required the lower Court to use the Penn Central balancing analysis, as opposed to the Lucas categorical taking analysis. Furthermore, the Court of Appeals explained that because the Corps had issued a provisional permit in 1996 (as part of its litigation strategy) there was a question of whether the landowners may only claim a temporary taking. Once again, if the landowners could only claim a temporary taking, then the lower Court incorrectly used the Lucas analysis. Consequently, the Court of Appeals remanded the matter to the trial court.

Thus, neither the Morris nor the Cooley plaintiffs won their takings claim. Yet, there are positive aspects of both cases. In Morris, the Court hinted that plaintiffs who find themselves in the Morris's situation need to file some type of permit application, but maybe not the most detailed. After that, a court may be able to find the case ripe because it would be unreasonable to require an applicant to submit any further applications. An encouraging deduction from Cooley is that after the agency denies a permit, it cannot unripen the case by engaging in post hoc litigation tactics. [ return to top ]