8th Circuit Affirms Summary Judgment on Regulatory Taking Finding No Taking Without Deprivation of All Economic Value of Property
| On January 7, 2025, the 8th Circuit issued its opinion in Baker v. City of Hillsboro, Missouri, 125 F.4th 844 (8th Cir. 2025). There, owners of 156 acres of land annexed to city brought action in state court against city for inverse condemnation under federal and state constitutions and violations of their constitutional rights under § 1983, based on allegations that they had been deprived of any and all economical and productive use of the property as result of city ordinances requiring them to connect to city water services at their own cost. In Becker, Plaintiff presented evidence suggesting the effect of city ordinances reduced the property’s value from $1,550,000 to $477,000. The district court, therefore, concluded that Plaintiff was not deprived of all economically beneficial use of the property. The United States Court of Appeals for the Eighth Circuit reviewed the case de novo and affirmed the district court’s decision.
The 8th Circuit compared the alleged Becker taking with the alleged taking in Palazzolo v. Rhode Island, 533 U.S. 606, 617-18 (2001), where the United States Supreme Court rejected recovery under a Lucas-type takings claim. The Becker court compared Palazzolo to its own facts, stating, “the [Becker] trustees asserted that the effect of the ordinances “reduced the Property’s value from $1,550,000 to $477,000, or about 70%.” This is both a greater residual value than in Palazzolo—$477,000 here compared to $200,000 in Palazzolo—and a smaller percentage decrease than in Palazzolo—roughly 70% here compared to nearly 94% in Palazzolo.” The 8th Circuit therefore concluded, “Thus, even accepting the numbers the trustees relied on without citation in their brief, the trustees’ property here has not been deprived of all economic value and does not constitute a regulatory taking under Lucas and Palazzolo.”
The 8th Circuit reached its ruling despite arguments from the trustees that Palazzolo was distinguishable from the Becker facts because the landowner in Palazzolo could still develop a portion of their property. The 8th Circuit, however, found the argument to be “unavailing,” because the Becker trustees could “develop all of their property so long as they compl[ied] with the regulation.” The court therefore held “It is only when those regulations eliminate all economically valuable use that Lucas requires compensation, and the trustees have failed to establish that Hillsboro’s regulations render their property valueless.”
Overall, the appellate court held that the regulations did not mandate a permanent physical invasion of the property, as the trustees were not compelled to build structures or dedicate land to the City. The court also found that the property retained substantial value, thus not constituting a taking under Lucas v. South Carolina Coastal Council. Critically, under the Penn Central test the court concluded that the economic impact on the trustees was not significant enough to constitute a taking, and the regulations did not interfere with reasonable investment-backed expectations.
Read the entire case at: https://law.justia.com/cases/federal/appellate-courts/ca8/23-3367/23-3367-2025-01-07.html |