The Volokh Conspiracy - Federal District Court Awards $36 Million in Compensation for a Regulatory Taking Claim:

Legal scholar and eminent domain expert Gideon Kanner has two interesting posts (here and here) on a recent case in which a federal district judge awarded a property owner over $36 million in compensation for an inverse condemnation claim. For nonexperts, an inverse condemnation action is a claim by a property owner that the government has taken his property, and that he is therefore entitled to "just compensation" under the Takings Clause of the Fifth Amendment.

As Kanner explains, the City of Half Moon Bay, California flooded the owner's 24 acre tract and then forbade all development on it, citing its newly created "wetland" status as justification. As a matter of constitutional law, this is a relatively easy case. The Supreme Court made clear in Lucas v. South Carolina Coastal Council that a regulatory action that wipes out 100% of a property's economic value automatically constitutes a taking under the Fifth Amendment except under rare circumstances that probably don't apply to this case. In addition, the Court has also held that any permanent physical invasion of property by the government (see Loretto v. Teleprompter) counts as a taking, and you don't have a to be a takings law maven to figure out that deliberate flooding counts as a "physical invasion."

What is unusual about the case is the extremely large compensation award. Supreme Court precedent holds that government must pay "fair market value" compensation for a taking. Without studying the evidence closely, I can't tell whether this particular award is excessive or not, given the market value of the land in question. It will be interesting to see if the award is upheld on appeal to the Ninth Circuit Court of Appeals, which is not exactly known for its solicitude towards property rights. For now, I will only point out that the difficulty (often the impossiblity) of determining appropriate compensation levels is one of several reasons for limiting the use of eminent domain as much as possible, an argument I developed in greater detail in Part II of this article.

If the award does stand up on appeal, Half Moon Bay may find it hard to pay. As Kanner notes in his first post, the city's annual budget is only $10 million. Perhaps the city fathers should have weighed their potential legal liability more carefully before deciding to cause the flooding of the property in question in the first place.

UPDATE: The court's opinion is available here.

UPDATE #2: My use of the term "deliberate flooding" may have been somewhat misleading. In reality, as the court explains in its opinion (pp. 35-37), city officials were aware that the area in question would flood if they failed to perform proper maintenance on their own nearby facilities; yet they chose not to do so. It is therefore fair to say that they deliberately caused the area to be flooded as a consequence of their alteration of nearby property. However, it is not clear whether that was their preferred outcome, or merely a byproduct of their pursuit of other objectives. The difference between these two scenarios is legally immaterial.

	[Ilya Somin, December 9, 2007 at 10:32pm] Trackbacks Federal District Court Awards $36 Million in Compensation for a Regulatory Taking Claim: Legal scholar and eminent domain expert Gideon Kanner has two interesting posts (here and here) on a recent case in which a federal district judge awarded a property owner over $36 million in compensation for an inverse condemnation claim. For nonexperts, an inverse condemnation action is a claim by a property owner that the government has taken his property, and that he is therefore entitled to "just compensation" under the Takings Clause of the Fifth Amendment. As Kanner explains, the City of Half Moon Bay, California flooded the owner's 24 acre tract and then forbade all development on it, citing its newly created "wetland" status as justification. As a matter of constitutional law, this is a relatively easy case. The Supreme Court made clear in Lucas v. South Carolina Coastal Council that a regulatory action that wipes out 100% of a property's economic value automatically constitutes a taking under the Fifth Amendment except under rare circumstances that probably don't apply to this case. In addition, the Court has also held that any permanent physical invasion of property by the government (see Loretto v. Teleprompter) counts as a taking, and you don't have a to be a takings law maven to figure out that deliberate flooding counts as a "physical invasion." What is unusual about the case is the extremely large compensation award. Supreme Court precedent holds that government must pay "fair market value" compensation for a taking. Without studying the evidence closely, I can't tell whether this particular award is excessive or not, given the market value of the land in question. It will be interesting to see if the award is upheld on appeal to the Ninth Circuit Court of Appeals, which is not exactly known for its solicitude towards property rights. For now, I will only point out that the difficulty (often the impossiblity) of determining appropriate compensation levels is one of several reasons for limiting the use of eminent domain as much as possible, an argument I developed in greater detail in Part II of this article. If the award does stand up on appeal, Half Moon Bay may find it hard to pay. As Kanner notes in his first post, the city's annual budget is only $10 million. Perhaps the city fathers should have weighed their potential legal liability more carefully before deciding to cause the flooding of the property in question in the first place. UPDATE: The court's opinion is available here. UPDATE #2: My use of the term "deliberate flooding" may have been somewhat misleading. In reality, as the court explains in its opinion (pp. 35-37), city officials were aware that the area in question would flood if they failed to perform proper maintenance on their own nearby facilities; yet they chose not to do so. It is therefore fair to say that they deliberately caused the area to be flooded as a consequence of their alteration of nearby property. However, it is not clear whether that was their preferred outcome, or merely a byproduct of their pursuit of other objectives. The difference between these two scenarios is legally immaterial.