Argument Recap

Earlier this month, the Federal Circuit heard oral argument in Lemon Bay Cove LLC v. United States, a takings case that attracted an amicus brief. In this case, the Federal Circuit is reviewing a judgment of the Court of Federal Claims, which held that the denial of a wetland permit by the United States Army Corps of Engineers was not a categorical taking or regulatory taking of Lemon Bay’s land. Judges Reyna, Mayer, and Cunningham heard the argument. This is our argument recap.

David Smolker argued for Lemon Bay Cove LLC. He began by asserting that the facts are not in dispute. Instead, he maintained, the question is whether the lower court properly applied the law to those facts. Smolker asserted 99.2% of the property at hand was wetland, which had no economic benefit without a permit from the Army Corps of Engineers.

A judge interjected, pointing out that, when Lemon Bay Cove bought the property, it was aware that this fact might create a challenge. Additionally, the judge noted, Lemon Bay Cove filed only one set of plans with the Army Corps of Engineers, and when that plan was rejected, it had the ability to file another plan and never did. The judge asked how in these circumstances would the denial of the permit deprive the appellant “categorically” of its land. Smolker responded by arguing the denial is “a categorical taking in this particular instance because, once the Corps concluded that they would not grant this permit for this particular development proposal, then the burden shifted to the Corps to tell [Lemon Bay Cove] specifically what they would approve.” The judge, however, reiterated that Lemon Bay Cove never tried to refile a permit, even when the Corps provided suggestions along with its denial. In response, Smolker asserted that, “it was the client’s conclusion that any further reductions in or minimization [of it use of the property] would not achieve the economic objective that they had,” which was to recover on its investment.

At this point another judge asked if it was correct that the Corps doesn’t have a duty to make whole a buyer who loses its return on its investment. Smolker responded by arguing “one of the elements that is relevant to a regulatory taking claim is the ability to recover the investment into the property.” The judge, in response, asked if someone “has a property right to have a return on his investment.” Smolker responded “no,” but he argued it is a consideration and, because the previous owner recieved a preliminary approval for a similar plan, Lemon Bay Cove believed it would be able to receive a permit.

One judge proposed that Lemon Bay Cove’s main argument is that applicants “shouldn’t be made to have successive filings in order to prove that” the government “is never going to give [what you are seeking] to you precisely.” Smolker agreed. He maintained that, “once the Corps denies the application that’s in front of it, the burden shifts to them to say, specifically, here’s what we would approve.” One judge responded by pointing out that the applicant must demonstrate that “additional applications would have been futile” and suggested Lemon Bay Cove has not provided “any such evidence.”

Andrew M. Bernie represented the United States. He argued the lower court “correctly held, following a 10-day trial, that the Corps’s denial of a single permit did not qualify as a category of taking” under the relevant precedent. He asserted there is no evidence the “Corps would have necessarily denied a different proposal, such as for a water-dependent use, a non-water-dependent use with a smaller footprint, or perhaps something else entirely, like houses built with pilings or something like that.” Bernie explained that the permitting process is designed in such a way that a party may apply for a permit, and the Corps will provide the party feedback on its application, and what was different in this case is that “Lemon Bay insisted that it had to build this specific project to recover its investment.”

Bernie contended that approvals from other counties “are not relevant.” Additionally, he explained, the prior Florida state approval was for a plan without a dock, and after amending its plan, Lemon Bay Cove “never come back to the state of Florida to obtain approval for any sort of proposal with a dock.” One judge asked if it was true that “the dock would actually extend beyond what is arguably their property . . . and into a portion of the state property.” Bernie responded affirmatively, adding “there’s clearly no reasonable investment backed expectations here and all the other factors are in favor of the government.”

In his rebuttal, Smolker argued it is difficult to “square the fact that the trial court found no reasonable investment expectation in being able to [use] this property because of the Army Corps regulations with the finding . . . that [Lemon Bay Cove] should have applied for lesser impactful development.” He concluded by highlighting that the Corps’ process is “extremely burdensome.”

We will continue monitoring this case and report on developments.