Shands Key, with the City of Marathon in the background
This just in: in Shands v. City of Marathon, No. 3D21-1987 (Fed. 5, 2025), Florida's Third District Court of Appeals sitting en banc held that the city's downzoning of property (Shands Key, shown above in an exhibit from the Key West trial we participated in in June 2021) from General Use (density: one home per acre) to Conservation Offshore Island (one home per 10 acres; Shands Key is just under 8 acres) effected a Lucas taking because it deprived the owners of economically beneficial uses of their land. This, notwithstanding the possibility of the owners selling the property to a third party, who could have donated the property to city in return for a chit to move up in the city's development queue.
We're not going to go into too much detail or offer our opinion because this case is one of ours. Our Pacific Legal Foundation colleague Jeremy Talcott was the lead trial and appellate counsel, backed by Kady Valois. Here's us exiting the courthouse after wrapping up the trial in Key West's Monroe County courtroom a couple of years ago:
Trial (and appeal) team after closing arguments in Key West:
Valois, inversecondemnation.com, Talcott
But we're not going to let you go without noting a few highlights from the en banc opinion:
- Bottom line: The court granted the City's request for rehearing en banc and withdrew the panel opinion, and substituted a new opinion. The en banc opinion did not alter the outcome (property owner wins), and also concluded that the downzoning effected a Lucas taking as a deprivation of economically beneficial uses, notwithstanding that the property could be sold to a third party who could donate it to the city in return for some very watered-down transferable development rights (TDRs).
- The issue: The issue as framed by the majority en banc opinion: "[t]his inverse condemnation appeal presents a novel issue regarding the role that transferred development rights ('TDRs') occupy in adjudicating a categorical, as-applied regulatory takings claim advanced under the landmark case of Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992)." Slip op. at 1.
- The dissent's framing (you can sell your property so what's the beef?): The issue as framed by the one dissenting judge: "[t]he central question the property owners raised in their lawsuit is whether the requirement of ten acres to construct a residence rises to the level of a regulatory taking of their property by denying them all economic use of their property." Slip op. at 50 (Logue, C.J., dissenting).
- Takings: clear as mud (you listening, SCOTUS?): "As observed by Judge Shepherd in his dissent in Ganson v. City of Marathon, 222 So. 3d 17, 20 (Fla. 3d DCA 2016), '[t]he Takings Clause is clear and concise,' but '[r]egrettably, regulatory takings jurisprudence is cryptic and convoluted.'" Slip op. at 11-12.
- Use v. value in the Lucas equation: The focus is use not value. "The Lucas Court repeatedly emphasized that the key to establishing a categorical, as-applied regulatory taking is a 'total deprivation of beneficial use.' Id. at 1017. Stated differently, “the Fifth Amendment is violated when land-use regulation . . . ‘denies an owner economically viable use of his land'' without just compensation. Id. at 1016 (quoting Agins, 447 U.S. at 260) (emphasis in original)." Slip op. at 15.
- The place of TRDs in Fifth Amendment analysis: "The significance of TDRs in the regulatory takings matrix has been sharply debated. Some legal commentators have opined that TDRs are irrelevant to the takings side of the equation because they do not impact the nature and extent of the property interest taken by the government. Others have posited that TDRs necessarily mitigate the economic impact of regulation by infusing the property with value and therefore should be relevant in determining whether the government has effectuated a taking. The Supreme Court has yet to clarify this conundrum." Slip op. at 16-18 (footnotes omitted).
- Token interest: "Against this jurisprudential landscape, we examine the summary judgment record in the instant case. Appellants established that regulation deprived them of any use of the property beyond beekeeping or personal camping. Casting aside the inherent logistical challenges in accessing an island without a dock fringed with high quality hammock and mangroves, these activities are not economically productive. It is axiomatic that 'a State may not evade the duty to compensate on the premise that the landowner is left with a token interest.' See Palazzolo v. Rhode Island, 533 U.S. 606, 631 (2001)." Slip op. at 20-21.
- Future sale as "use?" "It [the Federal Circuit in Lost Tree] then flatly rejected the proposition that “all sales qualify as economic uses.” Id. The court explained that, instead, the relevant inquiry is whether the landowner retains an underlying economic use, and “[w]hen there are no underlying economic uses, it is unreasonable to define land use as including the sale of the land.' Id. (emphasis in original). This is because '[t]ypical economic uses enable a landowner to derive benefits from land ownership rather than requiring a landowner to sell the affected parcel.' Id. (citing Kirby Forest Indus., Inc. v. United States, 467 U.S. 1 (1984) (logging); United States v. 50 Acres of Land, 469 U.S. 24 (1984) (landfilling); and United States v. Fuller, 409 U.S. 488 (1973) (livestock grazing)). Slip op. at 21-22.
- Regulations require land to be left in its natural state? "As the Lucas court observed, regulations “requiring land to be left substantially in its natural state . . . carry with them a heightened risk that private property is being pressed into some form of public service under the guise of mitigating serious public harm.” Id. at 1018. And in this case, the regulation was more onerous than that which went “too far” in Lucas." Slip op. at 27.
- Availability of TDRs may be part of just compensation, but do not relieve government of takings liability: "Of course, under Florida’s existing takings jurisprudence, I suspect a local government cannot force an owner to accept TDRs in lieu of cash as just compensation for a regulatory taking. But, presumably, if a written offer of TDRs in lieu of cash is made by the local government to the owner, the value of offered TDRs can certainly be taken into consideration in determining whether an award of attorney’s fees is appropriate, and, if so, the amount of such award. And certainly, after a jury determines the damages that a regulatory taking has caused a property owner, the parties may negotiate a settlement where the owner accepts TDRs as an alternative to either party’s appeal." Slip op. at 32-33 (footnote omitted) (Scales, J., concurring).
- Separation of powers, part I: "I believe courts should always incline to the most restrained, careful, and painstaking approach before declaring a law unconstitutional. I am particularly concerned that the majority opinion uses its quick and easy “categorical” approach to strike down laws that the other branches of government determined were necessary to protect the lives of the residents of the Florida Keys from hurricanes." Slip op. at 73-73 (Logue, C.J., dissenting).
- Separation of powers, the response: "I concur in the majority opinion. I write separately to address my belief that the dissent’s separation of powers argument is decidedly misplaced. This is not a case in which this Court is invading the province of the legislative branch or expanding its own power improperly. In my view, this is a case in which the Court is exercising its most important role envisioned by our founding fathers—safeguarding individual constitutional rights against government overreach." Slip op. at 35 (Gordo, J., concurring).
- Separation of powers vs. Marbury: "The regulatory scheme as applied, which deprives Shands Key of all economically beneficial use, can only stand if we abrogate our duty to independently preserve and safeguard appellants’ fundamental constitutional right. As I see it, failing to vindicate a right expressly stated in the Constitution is not judicial restraint but judicial abnegation. That we must not do." Slip op. at 42-43 (Gordo, J., concurring).
Here are the briefs of the parties, so you can see the arguments:
- Initial Brief On Merits (property owners)
- Appellee's Answer Brief (City)
- Appellant's Reply Brief (property owners).
A hearty well done to our PLF team for this big win.