Update 3/2008: The parties have settled.
Check out the Findings of Fact and Conclusions of Law issued by the US District Court for the Northern District of California in Yamagiwa v. City of Half Moon Bay, No. 05-4149 VRW (Nov. 28, 2007). No need to digest all 167-pages: the bottom line is that the court awarded a judgment of $36.8 million because the city caused the plaintiff's property to become wetlands, and rendered it undevelopable.
The court held that the city was liable for inverse condemnation under both California and federal law, and that the compensation to be awarded to the landowner was difference in the value of the property before the taking, compared to after. The court also held the city liable for common law nuisance and the tort of trespass.
The San Francisco Chronicle provides details of what led up to the massive judgment in its story "$36.8 million award for undevelopable land 'devastating to city'." That's an understatement: the judgment is three times the city's annual budget, and represents a cost of nearly $3,000 to each resident of the small town on the San Mateo County coast, more famous for its pumpkins and the nearby Mavericks big wave surf spot than its whopping inverse condemnation judgments. Read the city's press release on the decision here.
For an interesting procedural twist, check out pages 155 - 161 of the slip opinion, detailing the city's attempt to use federal jurisdiction as both a sword and a shield. The property owner originally brought her lawsuit in state court, alleging violations of both state and federal law. The city promptly removed the case to federal court on the basis that the case could have been brought there. See, e.g., City of Chicago v. Int'l College of Surgeons, 522 U.S. 156 (1997). After trial however, the city claimed that the case should be remanded to state court for lack of federal subject matter jurisdiction.
But wait, you say, wasn't it the city that removed the case to federal court in the first place, and wasn't the basis for the removal by the city the presence of original federal jurisdiction over the case? Yes, but niceties such as consistency have never prevented local governments from making such claims, often successfully. The city relied upon the ripeness rule of Williamson County Regional Planning Comm'n v. Hamilton Bank, 473 U.S. 172 (1985), the case in which the Supreme Court held that a federal takings claim is not ripe until a landowner has first pursued compensation through state procedures.
But wait again, you say, isn't that what the plaintiff did here, since she first brought her state law inverse condemnation claims in California Superior Court, and the only reason those claims were in federal court is that the city removed the case? Correct again -- the city conceded the point, but argued that since the federal court found for the plaintiff on her state law inverse condemnation claims, she was never actually denied a state remedy, and therefore her federal claims were not ripe because there had been no taking "without just compensation." In other words, the fact that the federal judge found for the plaintiff on her state law claims and awarded compensation meant that the federal judge had no jurisdiction to hear the case. A perfect Möbius strip of an argument, but one the court rightly rejected, stating it "smacks of bad faith." Slip op. at 161.
The rest of the order is worth a read on the issues of calculation of damages and just compensation, and the court's analysis of what constitutes causation and economically beneficial use. Abbott & Kinderman Land Use Law Blog has a concise summary of the facts and holding of the decision, posted here.