Lost Tree Village Corporation v. United States, 787 F.3d 1111

Background

Lost Tree owned a 4.99-acre undeveloped wetland parcel called Plat 57 within a larger developed John’s Island community and applied in 2002 for federal §404 wetlands-fill and local development permits to create a residential lot.
The Town and state permits were obtained, but in August 2004 the Army Corps of Engineers denied the §404 fill permit as unnecessary and because less damaging alternatives existed and development goals had been realized elsewhere.
Lost Tree sued in the Court of Federal Claims claiming a Fifth Amendment regulatory taking; the CFC initially treated a larger combined parcel as the relevant parcel and found ~58.4% diminution (no taking), but the Federal Circuit reversed, holding the relevant parcel is Plat 57 alone and remanding to determine loss to Plat 57.
On remand the CFC averaged the parties’ appraisals, found Plat 57 lost ~99.4% of its value because remaining value derived solely from non-economic environmental attributes, and held the permit denial was a per se taking under Lucas, awarding just compensation.
The government appealed, arguing (1) any residual value (including environmental value) precludes Lucas because Lucas is about value not use, (2) the ability to sell constitutes an economic use, and (3) the CFC overstated loss by comparing post-denial value to hypothetical with-permit highest-and-best-use rather than pre-denial market evidence.
The Federal Circuit affirmed the CFC: Lucas applies because residual value was non‑economic; sale without an underlying economic use does not defeat Lucas; and using the parcel’s highest-and-best-use value (with permit) to measure loss was proper.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Lucas per se rule applies when parcel retains residual value attributable only to non‑economic/environmental attributes	Lucas turns on deprivation of economically beneficial uses; residual non‑economic value does not defeat Lucas	Lucas is about loss of value generally; any residual value (even environmental) precludes a Lucas taking	Lucas applies: per se taking where remaining value is not attributable to any economic use (affirmed)
Whether ability to sell the parcel is an economic use that defeats Lucas	Sale is not an economic use absent an underlying economically productive use	A sale is an economic use and thus any market value allows only Penn Central analysis	Sale alone does not qualify as an economic use when no underlying economic uses exist; Conti and similar cases involve personal property or separate uses
Proper valuation baseline for economic impact (use-with-permit vs. pre-denial price)	Use the parcel’s highest-and-best-use (value with permit) to measure loss	Use demonstrated pre-denial market value (purchase price or pre-denial market evidence) to measure loss	Using the parcel’s highest-and-best-use (with permit) is appropriate; the government cannot rely on the regulation to reduce highest-and-best-use valuation
Whether Penn Central balancing should apply as alternative	If Lucas doesn’t apply, Penn Central factors should govern	If residual value defeats Lucas, Penn Central applies	Court did not reach Penn Central because Lucas applied; CFC’s alternative Penn Central holding not reviewed

Key Cases Cited

Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992) (per se taking when regulation eliminates all economically beneficial uses)
Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978) (adopted multi‑factor balancing test for regulatory takings)
Tahoe‑Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 535 U.S. 302 (2002) (Lucas limited to extraordinary circumstances of total loss of productive use; temporary moratoria analysis)
Loveladies Harbor, Inc. v. United States, 28 F.3d 1171 (Fed. Cir. 1994) (small residual value can be de minimis and support Lucas application)
Palazzolo v. Rhode Island, 533 U.S. 606 (2001) (large percentage loss insufficient for Lucas where economic uses remain)
Conti v. United States, 291 F.3d 1334 (Fed. Cir. 2002) (sale can be relevant for personal property; distinguishable from real‑property context here)
Cienega Gardens v. United States, 331 F.3d 1319 (Fed. Cir. 2003) (discussing Lucas as requiring total loss of value)
Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982) (physical occupation per se taking)
Olson v. United States, 292 U.S. 246 (1934) (highest and best use concept and limits on speculative uses)