UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


DIST INTOWN PROP LTD

v.

DC


98-7209b

D.C. Cir. 1999


*	*	*


Edwards, Chief Judge: In 1961, District Intown Limited  Properties
Partnership ("District Intown") purchased Cathe- dral Mansions South,
an apartment building and landscaped  lawn on Connecticut Avenue
across from the National Zoo.  District Intown subdivided this
property into nine contiguous  lots in 1988. In March 1989, all nine
lots were declared  historic landmarks. In July 1992, the Mayor of the
District  of Columbia denied District Intown's request for
construction  permits to build eight townhouses on eight of the nine
lots,  finding that the construction was incompatible with the prop-
erty's landmark status. Alleging that the District of Colum- bia's
denial constituted a taking, District Intown and its  general partners
sued under 42 U.S.C. s 1983 (1994) for just  compensation under the
Takings Clause of the Fifth Amend- ment.


Upon cross motions for summary judgment, the District  Court granted
summary judgment for the District of Colum- bia. See District Intown
Properties Ltd. Partnership v.  District of Columbia, 23 F. Supp. 2d
30 (D.D.C. 1998). The  District Court held that the relevant parcel
for the purposes  of determining whether a taking had occurred
consisted of  the entire property, including the apartment building,
not the  eight individual lots that District Intown sought to develop.
 See id. at 35-36. The court then analyzed the alleged taking  under
the Supreme Court's holdings in Lucas v. South Car- olina Coastal
Council, 505 U.S. 1003 (1992), and Penn Cen- tral Transportation Co.
v. City of New York, 438 U.S. 104  (1978). The District Court found
that there was no categori-


cal taking under Lucas, because District Intown had not been  deprived
of all economic value in the relevant parcel. The  trial court further
held that District Intown could not make  out a claim under Penn
Central, because its reasonable  investment-backed expectations had
not been disappointed  and it continued to receive economic benefits
from the prop- erty.


We hold that the District Court correctly found that the  relevant
parcel for the takings analysis consisted of the entire  property held
by District Intown, i.e., the property as it was  originally purchased
in 1961 and as it was held for 27 years  prior to the 1988
subdivision. All relevant objective and  subjective factors support
this conclusion. When the proper- ty is viewed as a single parcel,
there is no doubt that it has  not been rendered valueless. Indeed,
even if each subdivided  parcel is considered separately, District
Intown has not  shown a "total taking" under Lucas. In addition, the
record  here does not show that District Intown's investment-backed 
expectations were disappointed. This is not surprising, be- cause
District Intown could not have had any reasonable  investment-backed
expectations of development given the  background regulatory structure
at the time of subdivision.  Accordingly, we hold that District Intown
did not present any  genuine issue of material fact in support of a
takings claim  under Penn Central or Lucas. We therefore affirm the 


I. Background 


In 1961, District Intown purchased in fee simple Lot 1 of  Subdivision
Square 2106 on Connecticut Avenue, across from  the National Zoo. The
property was known as Cathedral  Mansions South and consisted of an
apartment building and  adjacent landscaped lawns. District Intown
made no signifi- cant changes to the property until 1988, when it
subdivided  Cathedral Mansions South into nine lots, designated as
Lots  106 through 114. The subdivisions were recorded on June 30, 
1988. Lot 106 contains the apartment building, and Lots 107  through
114 are each portions of the landscaped lawn. The 


record indicates that District Intown spent $2,819 to survey  the
parcel and to record the subdivision. The record does not  reflect any
other expenses.


On December 30, 1988, District Intown applied for permits  to build one
townhouse on each of the eight landscaped lots.  The zoning and
structural engineering divisions of the De- partment of Consumer and
Regulatory Affairs approved the  permits on March 7, 1989. However,
because the property is  located across from the National Zoo, the
permits were  referred to the Commission on Fine Arts. See D.C. Code 
Ann. s 5-410 (1994) ("Shipstead-Luce Act"). The Shipstead- Luce Act,
in effect since the 1930s, empowers the Commission  on Fine Arts to
communicate to the Mayor "recommenda- tions, including such changes,
if any, as in its judgment are  necessary to prevent reasonably
avoidable impairment of the  public values belonging" to various
buildings and parks. Id.  On March 31, 1989, the Commission on Fine
Arts recom- mended against construction.


Beginning in 1987, before the property was subdivided, a  movement
developed in the Woodley Park community in  support of designating the
property a historic landmark.  This culminated on March 2, 1989, when
the group filed a  landmark designation petition. This was five days
before  District Intown received zoning approval for the construction.
 The Historic Preservation Review Board ("Review Board")  approved the
landmark designation on May 17, 1989. Be- cause the landmark
designation petition was pending when  District Intown's permits were
approved for zoning, the per- mits were referred to the Review Board
pursuant to the  District of Columbia's landmark laws, see D.C. Code
Ann.  s 5-1001 et seq. (1994 & Supp. 1999), effective since 1979. On 
July 19, 1989, the Review Board recommended that the  construction
permits be denied. The permit applications  were dismissed without
prejudice on December 20, 1991.


On January 31, 1992, District Intown filed new permit  applications
identical in all respects to those previously dis- missed. The permits
were again referred to the Review  Board, which recommended denial
because construction on  the lawn would be incompatible with its
historic landmark 


status. Pursuant to D.C. Code Ann. s 5-1007(e), District  Intown
requested a hearing before an agent designated by  the Mayor. The
hearing was held on July 22 and 24, 1992.  The Mayor's agent agreed
with the Review Board, stating  that "any construction destroying the
lawn" would be incom- patible with its landmark status. Decision and
Order of  Mayor's Agent p 61 n.1, reprinted in Joint Appendix ("J.A.")
 368. In addition, the agent purported to hold that the denial  of the
construction permits did not work an economic hard- ship or constitute
a taking, but the District of Columbia Court  of Appeals has since
declared that the agent's holding was  outside his jurisdiction. See
District Intown Properties, Ltd.  v. Department of Consumer and
Regulatory Affairs, 680 A.2d  1373, 1379 (D.C. 1996) (decision of the
Mayor's agent regard- ing alleged economic hardship would have no
preclusive effect  in any future proceeding in which District Intown
might claim  an uncompensated taking).


Thereafter, on March 22, 1996, District Intown filed this  s 1983
action. On cross motions for summary judgment, the  District Court
entered summary judgment for the District of  Columbia on September
25, 1998. See District Intown Prop- erties Ltd. Partnership, 23 F.
Supp. 2d at 39. The court  found that the property (i.e., the
"relevant parcel") for the  purposes of assessing whether a taking had
occurred consist- ed of the original Lot 1 prior to its subdivision
into nine lots.  See id. at 35-36. Because District Intown continued
to  receive significant economic benefits from use of the relevant 
parcel, the court found that appellants failed to demonstrate  that
their property had been rendered "valueless," and their  claim to a
taking under Lucas failed. See id. at 36-37. The  court then turned to
the ad hoc analysis elucidated by Penn  Central and found that none of
the ad hoc factors support  District Intown's takings claim. See id.
at 37-39. This  appeal followed.


II. Analysis


A. Standard of Review


This court reviews a grant of summary judgment de novo.  See Aka v.
Washington Hosp. Ctr., 156 F.3d 1284, 1288 (D.C. 


Cir. 1998) (en banc). A party is entitled to summary judg- ment if the
record reveals that there is no genuine issue as to  any material fact
and that the moving party is entitled to  judgment as a matter of law.
See Fed R. Civ. P. 56(c). In  deciding whether there is a genuine
issue of material fact, the  court must assume the truth of all
statements proffered by  the non-movant except for conclusory
allegations lacking any  factual basis in the record. See Greene v.
Dalton, 164 F.3d  671, 675 (D.C. Cir. 1999). Summary judgment may be
grant- ed even if the movant has proffered no evidence, so long as 
the non-movant "fails to make a showing sufficient to estab- lish the
existence of an element essential to that party's case,  and on which
that party will bear the burden of proof at  trial." Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986). As  the "party challenging
governmental action as an unconstitu- tional taking," District Intown
bears a "substantial burden."  Eastern Enterprises v. Apfel, 524 U.S.


B. The Takings Analysis


The Takings Clause of the Fifth Amendment prohibits the  government
from taking "private property ... for public use,  without just
compensation." U.S. Const. amend. V. In a  regulatory takings case,
the principal focus of inquiry is  whether a regulation "reaches a
certain magnitude" in depriv- ing an owner of the use of property.
Pennsylvania Coal Co.  v. Mahon, 260 U.S. 393, 413 (1922); see also
id. at 415 (asking  whether the regulation "goes too far"). The
Supreme Court  has indicated that most regulatory takings cases should
be  considered on an ad hoc basis, with three primary factors 
weighing in the balance: the regulation's economic impact on  the
claimant, the regulation's interference with the claimant's 
reasonable investment-backed expectations, and the character  of the
government action. See Penn Central Transp. Co., 438  U.S. at 124.


The meaning of the three factors identified in Penn Central  has been
amplified by the Court, both in Penn Central and in  later cases. The
regulation's economic effect upon the claim- ant may be measured in
several different ways. See Hodel v.  Irving, 481 U.S. 704, 714 (1987)
(looking to the market value 


of a property); Keystone Bituminous Coal Ass'n v. DeBened- ictis, 480
U.S. 470, 495-96 (1987) (looking to whether the  regulation makes
property owner's coal operation "commer- cially impracticable");
Andrus v. Allard, 444 U.S. 51, 66  (1979) (looking to the possibility
of other economic use be- sides sale, which was prohibited by the
challenged regula- tion); Penn Central Transp. Co., 438 U.S. at 136
(focusing on  the ability to earn a reasonable rate of return). A
reasonable  investment-backed expectation "must be more than a
'unilat- eral expectation or an abstract need.' " Ruckelshaus v. Mon-
santo Co., 467 U.S. 986, 1005-06 (1984) (quoting Webb's  Fabulous
Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 161  (1980)). Claimants
cannot establish a takings claim "simply  by showing that they have
been denied the ability to exploit a  property interest that they
heretofore had believed was avail- able for development." Penn Central
Transp. Co., 438 U.S.  at 130. And the character of the governmental
action de- pends both on whether the government has legitimized a 
physical occupation of the property, see Loretto v. Tele- prompter
Manhattan CATV Corp., 458 U.S. 419, 434-35  (1982), and whether the
regulation has a legitimate public  purpose, see Keystone Bituminous
Coal Ass'n, 480 U.S. at  485. Finally, under all three of these
factors, the effect of the  regulation must be measured on the "parcel
as a whole." See  Penn Central Transp. Co., 438 U.S. at 130-31.


The Supreme Court has indicated that it will find a "cate- gorical" or
per se taking in two circumstances. The first  circumstance includes
regulations that result in "permanent  physical occupation of
property." Loretto, 458 U.S. at 434-35.  This circumstance is not at
issue in this case. The second  circumstance includes regulations
pursuant to which the gov- ernment denies all economically beneficial
or productive use  of property. See Lucas, 505 U.S. at 1015. This
so-called  "total taking" claim is at the heart of District Intown's 
complaint here. Unfortunately, the facial simplicity of the  "total
taking" standard belies the difficulty in its application.  As the
Court acknowledged in Lucas, its "rhetorical force ...  is greater
than its precision, since the rule does not make 


clear the 'property interest' against which the loss of value is  to be
measured." 505 U.S. at 1016 n.7.


Under both Lucas and Penn Central, then, we must first  define what
constitutes the relevant parcel before we can  evaluate the
regulation's effect on that parcel. In the instant  case the question
is: Does the relevant parcel consist of the  property as a whole or do
the eight lots for which construc- tion permits were denied constitute
the relevant parcels?  This has been referred to as the "denominator
problem."  E.g., Loveladies Harbor, Inc. v. United States, 28 F.3d
1171,  1179 (Fed. Cir. 1994). State law may offer some guidance on 
how to define the relevant parcel, but, as the Court has noted,  state
law is not always determinative. Compare Lucas, 505  U.S. at 1017 n.7
(suggesting that one may look to the influ- ence of the State's
property law--whether and to what extent  the State has recognized and
extended legal recognition to  the particular interest alleged to have
been deprived of all  economic value--on the claimant's reasonable
expectations),  with Keystone Bituminous Coal Ass'n, 480 U.S. at 500
(refus- ing to treat the support estate as a separate parcel of 
property simply because Pennsylvania law recognizes it as  such and
noting that "our takings jurisprudence forecloses  reliance on such
legalistic distinctions within a bundle of  property rights").


C. The Relevant Parcel


The definition of the relevant parcel profoundly influences  the
outcome of a takings analysis. Above all, the parcel  should be
functionally coherent. In other words, more should  unite the property
than common ownership by the claimant.  Thus, a court must also
consider how both the property- owner and the government treat (and
have treated) the  property.


The District Court used several factors to determine the  relevant
parcel: the degree of contiguity, the dates of acquisi- tion, the
extent to which the parcel has been treated as a  single unit, and the
extent to which the restricted lots benefit  the unregulated lot. See
District Intown, 23 F. Supp. 2d at  35 (citing Ciampitti v. United
States, 22 Cl. Ct. 310, 318 


(1991)). An analysis focused on these factors is eminently  sound and
it mirrors the approach taken by other courts in  regulatory takings
cases. See Forest Properties, Inc. v.  United States, 177 F.3d 1360,
1365 (Fed. Cir.) (stressing the  owner's treatment of property as a
unit from the time of  purchase), cert. denied sub nom. RCK Properties
v. United  States, 120 S. Ct. 373 (1999); K & K Constr. Co. v. Depart-
ment of Natural Resources, 575 N.W.2d 531, 537 (Mich.)  (stressing
contiguity, unity of ownership, and a common  development plan), cert.
denied, 119 S. Ct. 60 (1998).


Applying these factors, the District Court correctly deter- mined that
all nine lots should be treated as one parcel for  the purpose of the
court's takings analysis. The lots are  spatially and functionally
contiguous. District Intown pur- chased the property as a whole in
1961 and treated it as a  single indivisible property for more than 25
years. District  Intown presented no evidence that, even after
subdivision, it  treated the lawn lots separately from Lot 106, the
lot that  contains the apartment building, for the purposes of
account- ing or management. The intentional act of subdivision is the 
only evidence produced by District Intown that it has treated  the
lots as distinct units. In fact, before the Mayor's agent,  District
Intown did not come forward with evidence showing  that it had, for
accounting purposes, treated the lawn mainte- nance fees separately
from expenses associated with main- taining the apartment building.
See Decision & Order of  Mayor's Agent p 40, reprinted in J.A. 364.
While there is a  dispute as to whether the adjacent landscaped lawn
increases  the apartment building's value, this is immaterial. Even if
 Lot 106 were deemed to have the same value with or without  Lots 107
through 114, the application of the other three  factors strongly
suggests that Lots 106 through 114 are  functionally part of the same


Appellants argue that the District Court was wrong to  treat all the
lots as a single parcel because it contradicts  Lucas and two Federal
Circuit cases. This argument falls  flat. District Intown first argues
that the Lucas Court  termed "extreme" and "unsupportable" a similar
decision by  the state court in Penn Central to treat multiple
holdings as a 


single parcel for takings analysis. See Brief for Appellants at  15-16.
This dictum, see Lucas, 505 U.S. at 1017 n.7, referred,  however, only
to the state court's decision to treat all of Penn  Central's holdings
in the vicinity of Grand Central Station as  part of the denominator
for the purposes of deciding whether  plaintiffs could receive a
reasonable return on their invest- ment in Grand Central. See Penn
Central Transp. Co. v.  New York, 366 N.E.2d 1271, 1278 (N.Y. 1977).
The Penn  Central Court had no need to address this holding. The 
Lucas dictum casts aspersions on the state court's elevation  of one
factor, unity of ownership, over other factors in  determining the
relevant parcel. The District Court engaged  in no such "extreme"
conduct here; it did not look to all of  District Intown's holdings in
the vicinity of Cathedral Man- sions South to evaluate the economic
effect of the regulation  at issue here; it looked to contiguous
property that was  purchased and treated as a single unit by


Similarly, the two Federal Circuit cases cited by District  Intown do
not undermine the District Court's definition of the  relevant parcel.
See Brief for Appellants at 16 (citing Lovela- dies Harbor, 28 F.3d at
1171 and Florida Rock Indus., Inc. v.  United States, 791 F.2d 893
(Fed. Cir. 1986)). Neither of  these cases support appellants'
position and, in fact, Lovela- dies Harbor supports the District
Court's decision. In Flori- da Rock Industries, the court reviewed the
Army Corps of  Engineers' uncompensated rejection of the plaintiff's
applica- tion to mine limestone on 98 acres of the plaintiff's wetland
 property. See Florida Rock Indus., 791 F.2d at 896. The  Federal
Circuit affirmed the trial court's decision to consider  the 98 acres
as the relevant parcel separate from the adjacent  1,462 acres of
wetland. See id. at 904. The Federal Circuit's  justification for this
decision, however, was that all the evi- dence and the findings
indicated that the Army Corps of  Engineers would have rejected mining
on all of the property,  so there was no point to including all 1,560
acres in the  relevant parcel. See id. at 904-05. Thus, Florida Rock 
Industries is not analogous to the instant case; there is no 
indication that the District of Columbia will prevent District 


Intown from continuing to use its property to obtain income  from its
apartment building.


Loveladies Harbor lends support to the District Court's  decision to
treat Lots 106-114 as one parcel. The plaintiff in  Loveladies Harbor
sought to develop a total of 12.5 acres of  land, consisting of 11.5
acres of wetlands and one acre of filled  upland. See Loveladies
Harbor, 28 F.3d at 1180. The Army  Corps of Engineers refused to grant
the permit required to  fill the wetlands acreage. See id. at 1174. In
reviewing  whether this denial constituted a taking the Federal
Circuit  found that the trial court correctly concluded that the rele-
vant parcel was the entire 12.5 acres, not just the 11.5 acres  to
which the permit denial applied. See id. at 1181. Thus,  Loveladies
Harbor argues against treating the property bur- dened by the
regulation separately from contiguous property.


Moreover, the Loveladies Harbor Court emphasized that a  "flexible
approach, designed to account for factual nuances,"  guides its
analysis of the denominator problem. Id. These  factual nuances
include "whether there remained substantial  economically viable uses
for plaintiff's property after the  regulatory imposition," id.
(citing Deltona Corp. v. United  States, 657 F.2d 1184 (Ct. Cl.
1981)), and "the timing of  transfers in light of the developing
regulatory environment."  Id. Both of these factors support our
conclusion in the  instant case that Cathedral Mansions South as a


Finally, Penn Central is instructive where, as here, appel- lants own a
single piece of property that is divisible into  several legally
recognized entities. Indeed, the Court was  rather blunt in saying


"[t]aking" jurisprudence does not divide a single parcel  into discrete
segments and attempt to determine whether  rights in a particular
segment have been entirely abro- gated.


Penn Central Transp. Co., 438 U.S. at 130. The Court also  made it
clear that a party may not "establish a 'taking' simply  by showing
that they have been denied the ability to exploit a 


property interest they heretofore had believed was available  for
development." Id. The Court found this suggestion to be  "simply
untenable." Id.


On the basis of the foregoing authority, it seems clear here  that we
must analyze District Intown's property not as sepa- rate, potentially
divisible and transferable parcels, but as one  contiguous parcel.
Appellants note that the District of Co- lumbia has taxed Lots 107
through 114 at a higher rate since  subdivision, reflecting the
District of Columbia's assessment  that these lots are vacant
developable land. They contend  that it is inconsistent for the
District of Columbia to speak  from both sides of its mouth in this
regard, claiming for tax  purposes that the lots are developable, but
refusing to permit  development on the lots. We simply note that
appellants  retain the right to recombine the parcels and treat them
as  one property for the purposes of taxation, so no further 
disadvantage will befall them on this score.


We are perplexed by our concurring colleague's criticism of  our
approach to evaluating a takings claim. As the concur- ring opinion
correctly notes, at bottom, the approach that we  follow and the
result that we reach are in accord with  Supreme Court case law.
Unless and until the Court in- structs otherwise, we are obliged to
judge within the bounds  of established precedent.


D. Analysis Under Lucas


Given that Lots 106 through 114 should be treated as a  single parcel,
the District Court's denial of summary judg- ment on District Intown's
Lucas claim is unremarkable. To  come within Lucas, a claimant must
show that its property is  rendered "valueless" by a regulation.
Lucas, 505 U.S. at  1009. District Intown presented no evidence to
show that the  regulation deprived the property as a whole of all
economical- ly beneficial use.


Even were we to view Lot 106 as distinct from Lots 107  through 114, it
seems plain that the District Court should  have granted appellees'
motion for summary judgment.  Drawing all inferences in favor of
District Intown, the record 


does not support the conclusion that Lots 107 through 114 are  rendered
"valueless" by the regulation at issue. The record  contains a finding
by the Mayor's agent that any construction  that destroyed the lawn
would be incompatible with the  lawn's status as a historic landmark.
See Decision & Order  of Mayor's Agent p 61 n.1, reprinted in J.A.
368. District  Intown argues from this that its case fell on all fours
within  Lucas. District Intown seeks to extend Lucas beyond its 
reach. The Lucas Court consciously recognized that it was  drawing an
arbitrary line between total destruction of eco- nomic value and
something marginally less than total destruc- tion. See 505 U.S. at
1019 n.8 (pointing out that while the  line establishing a categorical
deprivation as requiring a  complete diminution in value is arbitrary
as it relates to  someone who only suffers a 95% deprivation in value,
the  person whose deprivation is "one step short of complete" may 
still seek compensation under the Penn Central balancing  test).
District Intown propounded no evidence that the  lawns' economic value
was totally destroyed as is required by  Lucas, nor did District
Intown offer evidence of the plots' fair  market value after its
construction permits were denied. Cf.  Florida Rock Indus., 791 F.2d
at 905 (reversing the trial  court's finding that denial of permit
constituted an uncompen- sated taking because the court failed to
consider the proper- ty's fair market value after regulation).


The concurring opinion misconstrues the opinion for the  court when it
suggests that, pursuant to our analysis, no  compensable taking could
ever be found. As noted in the  foregoing discussion, we simply intend
to highlight the limited  nature of the Lucas inquiry, and note that
there would be no  "categorical" taking even were we to view the
parcels as  separate under Lucas. We do not pass on how the parcels 
would fare separately under Penn Central's ad hoc analysis.


E. Analysis under Penn Central


There are three main factors to be considered in Penn  Central's ad hoc
inquiry: the character of the government  action, the regulation's
economic effect on the claimant, and  the effect on investment-backed
expectations. District In-


town does not appear to argue that the character of the  governmental
action counsels finding a taking; this is not a  permanent invasion,
but rather a general regulation with a  legitimate public purpose. As
to the economic effects, Dis- trict Intown offered no evidence that
this regulation rendered  Lots 106-114 unprofitable to maintain; there
is nothing in the  record to suggest that the apartment building does
not bring  in a sufficient return for District Intown, and a claimant
must  put forth striking evidence of economic effects to prevail even 
under the ad hoc inquiry. See Penn Central Transp. Co., 438  U.S. at
131 (reviewing the Court's decisions upholding regula- tions despite
diminution in a property's value of more than  75%).


Finally, District Intown did not present sufficient evidence  that it
had a reasonable investment-backed expectation to  develop the lawns
into apartment buildings. Here, as in  Penn Central, the regulation
does not interfere with District  Intown's "primary expectation"
concerning the use of the  parcel, because it "not only permits but
contemplates that  appellants may continue to use the property
precisely as it  has been used" for the past 28 years. Penn Central
Transp.  Co., 438 U.S. at 136.


District Intown suggested at oral argument that it has  satisfied the
requirement of demonstrating reasonable invest- ment-backed
expectations because it purchased property that,  at the time of
purchase, was subdividable. This is not  sufficient to establish the
existence of reasonable investment- backed expectations. In this case,
where the development  District Intown proposes departs from the
property's tradi- tional use, and the moment of purchase is so
attenuated from  the moment of subdivision, the claimant surely must
point to  some action beyond mere purchase to establish the reason-


Appellants also argue that their expectations of the proper- ty's use
between the moment of purchase and the moment of  subdivision could
have reasonably changed. This may be, but  when appellants subdivided
they surely knew that the legal  regime had changed since they first
bought their property. 


Moreover, they knew that any subdivided parcel would be  subject to
that regime. Lucas teaches that a buyer's reason- able expectations
must be put in the context of the underlying  regulatory regime. See
505 U.S. at 1030 (stating that the  Takings Clause does not require
compensation when the  restriction is proscribed by background state
law rules or  understandings). District Intown purchased and
subdivided  its property subject to an existing regulatory regime that
 establishes that District Intown could have had no reasonable 
expectations of development at the time it made its invest- ments.


At the time of purchase, District Intown could have reason- ably
expected the Shipstead-Luce Act to affect its rights of  development.
For approximately 60 years, the Shipstead- Luce Act has restricted
development on properties that, like  Cathedral Mansions South, abut
or border upon the National  Zoo. See D.C. Code Ann. s 5-410. Were
that not sufficient,  after 1979, D.C.'s historic landmark laws
additionally limited  expectations of development. See id. s 5-1001 et
seq. Thus,  at the time District Intown subdivided the property, it
knew,  or should have known, that the property was potentially 
subject to regulation under the landmark laws. Cf. Amicus  Curiae
Brief at 15 (pointing out that almost the entire length  of
Connecticut Avenue from M Street to almost a mile north  of District
Intown's property is either landmarked or within a  historic
district). Businesses that operate in an industry with  a history of
regulation have no reasonable expectation that  regulation will not be
strengthened to achieve established  legislative ends. See Concrete
Pipe & Prods. v. Construction  Laborers Pension Trust, 508 U.S. 602,
645 (1993). In this  case, District Intown was in the real estate
business, with a  history of restriction of development for the
purpose of  preserving historic sites. Similarly, the Supreme Court
re- jected a company's claim of reasonable expectations that the 
Environmental Protection Agency would maintain trade se- cret
confidentiality where the industry had long "been the  focus of great
public concern and significant government  regulation" and the
"possibility was substantial that the Fed- eral Government ... would


to be in the public interest." Monsanto Co., 467 U.S. at  1008-09.
Prior to and after subdivision, this particular prop- erty was the
subject of increasing public activity devoted to  restricting
development through landmark designation. See  Good v. United States,
189 F.3d 1355, 1361-63 (Fed. Cir.  1999) (finding the claimant had no
reasonable expectations  where he purchased the land subject to
environmental regula- tion and watched as public concern for the
environment  increased and the applicable regulations became more
strin- gent before seeking approval for development).


District Intown also argues that the District Court's finding  that the
regulation did not have a significant economic impact  was erroneous.
District Intown bases this argument on the  assertion that they
presented undisputed evidence that the  lawns, absent development, add
nothing to the value of the  apartment building. See Brief for
Appellants at 24-25. This  argument misunderstands the substantial
burden District In- town faced in District Court. District Intown had
to produce  evidence showing that its entire property, including Lot
106,  no longer provided a reasonable rate of return given the D.C. 
regulation. Whether the lawns add value to the apartment  building is
irrelevant to whether the property as a whole can  be operated at a
sufficient profit even with the regulation. In  short, none of the
Penn Central factors support District  Intown's claim of a compensable
deprivation of property.


III. Conclusion


For the reasons stated above, we affirm the District  Court's grant of
summary judgment in favor of the District of  Columbia.


So ordered.


Williams, Circuit Judge, concurring in the judgment: The  District of
Columbia's Historic Preservation Board imposed  historic landmark
status not only on an apartment building  named Cathedral Mansions
South but also on a substantial  stretch of adjacent lawn bordering
the sidewalks of Connecti- cut Avenue. District Intown, the owner of
both, claims that  as applied to the lawn the landmarking effects a
taking of its  property in violation of the Takings Clause of the
Fifth  Amendment. The majority's disposition is--with one impor- tant
exception--in general accord with the current opinions of  the Supreme
Court. Those decisions are of course binding.  At the same time,
however, it is not inappropriate to identify  ways in which the
prevailing analysis elevates formal concepts  over economic reality
and tends to strip the Clause of its  potential for fulfilling the


The economist's justification for the Takings Clause is that  it
provides a check on government's likely tendency to waste  resources
by treating private property as a free good. See  Richard A. Posner,
Economic Analysis of Law 58 (4th ed.  1992) ("The simplest economic
explanation for the require- ment of just compensation is that it
prevents the government  from overusing the taking power."). This is
just an applica- tion of the general principle that if a firm can
externalize  costs (e.g., the health costs of polluting the air), it
will use  more of the unpriced resource (in this example, air as a
waste  sink) than it would if required to pay. And it will tend to 
overproduce the goods or services whose production uses the 
superficially "free" good--i.e., it will produce them at a level 
where the true value of the extra inputs exceeds the true  value of
the extra output. See generally Robert Cooter &  Thomas Ulen, Law and
Economics 45-46 (1988). As applied  to government regulation, similar
oversupply can be expect- ed--here, production of regulations that
impose more costs  than they afford benefits, that do more harm than


The framers, though not articulating the purpose of the  Clause in
economic terms, evidently did view it as aimed at  correcting the
incentives of the political branches. There is  evidence, for example,
that James Madison saw electoral  power slipping into the hands of a
non-landholding majority,  which in a "leveling" mode could be
expected to invade 


landowners' rights. See William Michael Treanor, The Origi- nal
Understanding of the Takings Clause and the Political  Process, 95
Colum. L. Rev. 782, 849 (1995). Late twentieth  century America, of
course, displays a far greater range of  purposes than "leveling" for
reallocation of rights. While the  resulting proposals are naturally
advanced in the name of the  public good, many are surely driven by
interest-group pur- poses, commonly known as "rent-seeking." Among
these  proposals, at least some inflict aggregate costs considerably 
outweighing their aggregate benefits, paralleling the wasteful 
production associated with private firms' externalization of  costs.
The Takings Clause serves to curb such inefficiencies.  See, e.g.,
Richard A. Epstein, Takings: Private Property and  the Power of
Eminent Domain 281 (1985) ("[T]he Takings  Clause is designed to
control rent seeking and political fac- tion. It is those practices,
and only those practices, that it  reaches.").


A Takings Clause construction that was dedicated without  qualification
to preventing such government externalization  would require
compensation whenever regulation reduced the  value of anyone's
property, however slightly. Balanced  against that goal is an array of
considerations. Most obvious  is the cost of calculating and
administering compensation,  which would tend to sink many a
beneficent statute. "Gov- ernment hardly could go on if to some extent
values incident  to property could not be diminished without paying
for every  such change in the general law." Lucas v. South Carolina 
Coastal Council, 505 U.S. 1003, 1018 (1992) (quoting Pennsyl- vania
Coal Co. v. Mahon, 260 U.S. 393, 413 (1922)). (The  compensation cost
itself would be only a weak countervailing  factor, for most
beneficent regulation would presumably gen- erate gains large enough
to pay the losers if identification and  calculation were costless.)
My goal here is not to pinpoint  the appropriate balance between these
competing consider- ations, much less to suggest that the correct
reading is one  under which all regulation materially adversely
affecting a  property's value would be compensable. Rather, it is
simply  to note the ways in which modern interpretation of the 


Takings Clause, as exemplified in today's decision, impairs its  role
as a disincentive to wasteful government activities.


* * *


The majority applies an apparent presumption that contig- uous parcels
under common ownership should be treated as  one parcel for purposes
of the takings analysis. This pre- sumption tends to reduce the
likelihood that courts will order  compensation. The larger the
parcel, the greater the chance  that the regulated land will retain an
economically viable use.  Where no such use remains, there is a "total
taking" and the  government can "resist compensation only if the
logically  antecedent inquiry into the nature of the owner's estate 
shows that the proscribed use interests were not part of his  title to
begin with," Lucas, 505 U.S. at 1027; where an  economically viable
use survives regulation, the best the  owner can hope for is "partial"
takings analysis. Under the  latter courts will determine whether to
award compensation  by looking to "the economic impact of the
regulation, its  interference with reasonable investment backed
expectations,  and the character of the governmental action," Kaiser
Aetna  v. United States, 444 U.S. 164, 175 (1979); see also Eastern 
Enters. v. Apfel, 118 S. Ct. 2131, 2146 (1998); Lucas, 505 U.S.  at
1019 n.8, and will generally deny compensation so long as  the
restriction "substantially advance[s] legitimate state inter- ests,"
Agins v. City of Tiburon, 447 U.S. 255, 260 (1980); see  also Dolan v.
City of Tigard, 512 U.S. 374, 385 (1994). Few  regulations will flunk
this nearly vacuous test. In fact, the  Supreme Court has only once
found a partial taking to be  compensable, and even then only a
plurality applied the  partial takings analysis. See Eastern Enters.,
118 S. Ct. at  2149; see also id. at 2154-60 (Kennedy, J.) (rejecting
the  plurality's takings analysis and finding invalidity on other 


The Supreme Court has offered several justifications for  this
distinction between partial and total takings. See, e.g.,  Lucas, 505
U.S. at 1017-18 (suggesting that "from the landowner's  perspective,"
a total taking is tantamount to a physical taking, 


and that from the government's perspective the concern that  an
obligation to compensate for any incidental value diminu- tion would
impede effective functioning cannot apply in the  "relatively rare
situations" of total takings). From the per- spective of ensuring that
the government not engage in  wasteful behavior, however, the focus on
the uses of the land  that remain is misplaced: "[W]hat is decisive is
that which is  taken, not that which is retained." Epstein, Takings,
supra,  at 58. Whether the landowner is left with a limited use of the
 land or none at all is hardly relevant to that issue. And as  the
regulating government delineates the scope of regulation,  the
opportunity for strategic behavior is obvious.


The majority's cursory application of the Penn Central  factors further
broadens the gap between the two modes of  analysis, reinforcing the
seemingly predetermined conclusion:  in partial takings cases, the
government wins. The majority  states that District Intown has not
shown the land "unprofit- able to maintain," Maj. Op. at 14; it is
unimaginable, howev- er, absent an extraordinary tax liability, that a
parcel could  retain an economically viable use yet have a net
negative  value. The majority goes on to say that District Intown has 
failed to show that the land does not "bring in a sufficient  return,"
id., but does not answer the all-important question:  a return on
what? on out-of-pocket costs? on initial pur- chase price? on fair
market value? Moreover, the majority  provides no guidance as to how
"sufficient" the return must  be, except to cite Penn Central, in
which the Court found that  a 75% diminution in value did not
constitute a compensable  taking. See id.


Similarly, in its consideration of District Intown's "reason- able
investment-backed expectations," the majority's analysis  begs the
question whether any landowner, in a world where  zoning regulations
are prevalent, could ever argue that a  particular regulation was
"unexpected." The presumption is  insurmountable: "Businesses that
operate in an industry with  a history of regulation have no
reasonable expectation that  regulation will not be strengthened to
achieve established  legislative needs." Maj. Op. at 15. Although the
1931  Shipstead-Luce Act might have put District Intown on notice 


that some regulation of architectural design might be expect- ed, it is
farfetched to conclude that District Intown, merely  because of its
proximity to the zoo, should reasonably have  anticipated an absolute
ban on construction; the city's coun- sel, under questioning at oral
argument, failed to identify any  uses, or even attempted uses, of the
Shipstead-Luce Act to  support a complete construction veto. Although
the Takings  Clause is meant to curb inefficient takings, such a
notion of  "reasonable investment-backed expectations" strips it of
any  constraining sense: except for a regulation of almost unimag-
inable abruptness, all regulation will build on prior regulation  and
hence be said to defeat any expectations. Thus regula- tion begets


Although the presumption in favor of looking at the parcel  as a whole,
and in turn the increased reliance on the partial  takings mode of
analysis, is at odds with the underlying  principle of the Takings
Clause, it is perhaps the best con- struction of the Supreme Court's
limited guidance. The  Court has never squarely addressed the question
of how  courts should define the relevant geographic parcel of land, 
also known as "horizontal severance." Marc R. Lisker, Regu- latory
Takings and the Denominator Problem, 27 Rutgers  L.J. 663, 705 (1996).
In Nectow v. City of Cambridge, 277  U.S. 183 (1928), the Court
considered whether the city council  had effectuated a taking of
plaintiff's land by zoning as  "residential" a 100-foot strip on
plaintiff's 140,000 square foot  parcel. Although the Court appeared
to treat the relevant  parcel as encompassing only the fractional
strip, this was in  no respect relevant to the Court's decision. In
Penn Central  Transportation Co. v. New York City, 438 U.S. 104
(1978), the  Court applied a very weak form of horizontal severance, 
focusing exclusively on the landmarked building itself without 
treating the owner's neighboring--but not adjacent--proper- ty as part
of the greater parcel, as had the New York Court  of Appeals. See Penn
Central Transportation Co. v. New  York City, 366 N.E.2d 1271, 1276-77
(N.Y. 1977). But Penn  Central tells little, as the properties were
not all contiguous,  had been put to different uses, and had never
been treated as  a unified whole by the owners or the City.


Penn Central's handling of "vertical severance," however, is 
informative, if only by analogy. Using language seemingly  broad
enough to encompass horizontal severance, the Court  made clear that
it would not consider the air rights above  Grand Central separately
from the land rights: " 'Taking'  jurisprudence does not divide a
single parcel into discrete  segments and attempt to determine whether
rights in a  particular segment have been entirely abrogated." Penn 
Central, 438 U.S. at 130; see also Keystone Bituminous Coal  Ass'n v.
DeBenedictis, 480 U.S. 470, 496-502 (1987) (refusing  to regard either
coal that statute required miners to leave in  place (about 2% of
total coal), or the "support estate," as  distinct property for
ascertaining whether statute denied  owners all economically viable


The Court has expressed similar reluctance to engage in  "conceptual
severance" more generally (i.e., the treatment of  any specific
property right as a single unit). In Andrus v.  Allard, 444 U.S. 51
(1979), the Court refused to treat extinc- tion of the right to sell
any part of a lawfully killed bald eagle  as a total taking. See id.
at 65-66 ("At least where an owner  possesses a full 'bundle' of
property rights, the destruction of  one 'strand' of the bundle is not
a taking, because the  aggregate must be viewed in its entirety.").
The Court  arguably evidenced a retreat from this strong position in 
Hodel v. Irving, 481 U.S. 704, 717-18 (1987), in which it found  a
taking in legislation that "completely abolished" certain  landowners'
rights to dispose of their property by descent or  devise, even though
they retained complete rights to possess  and to make inter vivos
transfers. The Court has not,  however, reached agreement on the scope
of this retreat.  Compare id. at 719 (Scalia, J., concurring) (saying
the deci- sion "effectively limits Allard to its facts"), with id. at
718  (Brennan, J., concurring) (saying that the case was "unusual" 
and thus had no impact on Allard). Overall, I think the  majority is
correct in its implicit understanding that the  Supreme Court is
reluctant to carve a landowner's parcel into  smaller units for which
compensation might be more likely.


But the factors that the majority applies in making the  decision,
drawn from decisions of the Federal Circuit and 


Claims Court and characterized by the majority as "eminent- ly sound,"
Maj. Op. at 9, strike me as uninformative and  largely irrelevant. The
factors considered are: (1) whether  the neighboring parcels are
contiguous, (2) whether they were  acquired simultaneously, (3)
whether they have been treated  as a single unit, and (4) the extent
to which the restricted lot  benefits the neighboring lot. Maj. Op. at


The first factor, contiguity, is clearly necessary but in no  way
sufficient. The next two factors--simultaneity of acquisi- tion and
unity of use--are more troublesome. Both elevate  history--either the
historical purchase or the historical use-- over the real-world
present relationship between the tracts.  Compare Laura M. Schleich,
Takings: The Fifth Amend- ment, Government Regulation, and the Problem
of the Rele- vant Parcel, 8 J. Land Use & Envtl. L. 381 (1993)
(proposing  that courts look to the "moment of regulation" when
defining  the relevant parcel). The majority's focus on the property's
 use prior to regulation tells us nothing about the value- producing
opportunities foreclosed at the time of regulation.  "It is, of
course, irrelevant that [the government] interfered  with or destroyed
property rights that [plaintiff] had not yet  physically used. The
Fifth Amendment must be applied with  'reference to the uses for which
the property is suitable,  having regard to the existing business or
wants of the com- munity, or such as may be reasonably expected in the
imme- diate future.' " Penn Central, 438 U.S. at 143 n.6 (Rehn- quist,
J., dissenting, quoting Boom v. Patterson, 98 U.S. 403,  408


The majority mentions but brushes aside a fourth factor-- the extent to
which the regulated parcel benefits the neigh- boring lot. Maj. Op. at
9. Yet this appears the most  relevant. The more a burdened tract in
its regulated use  benefits contiguous property, the less likely that
the regula- tion has a net negative impact. In the extreme case a 
property interest may be worthless except in conjunction with 
another. Thus in Keystone Bituminous Coal Ass'n, the  Court pointed
out that the "support estate" had "value only  insofar as it protects
or enhances the value of the estate with  which it is associated [i.e,
the mineral estate]," 480 U.S. at 


501, and therefore refused to treat the "support estate" as a  separate
interest at all. Similarly, small parcels of land,  either in the
interior or around the edges of greater parcels,  commonly are
valuable only when they combine with the  greater parcel to create a
more valuable whole; for regulation  of the exterior (such as setback
requirements), then, it makes  sense to measure the impact in
conjunction with the "pri- mary" parcel. Looking to the property
owner's benefit from  these internal synergies parallels use of
"average reciprocity  of advantage," Pennsylvania Coal Co. v. Mahon,
260 U.S.  393, 415 (1922), which considers the benefit that each bur-
dened owner--as in ordinary zoning or historic districting-- receives
from the similar restriction of his neighbors.


Of course there will be some synergy between almost any  two
neighboring parcels under common ownership, since uni- fied ownership
creates options for the sole owner that multi- ple landowners could
achieve only by contracting. But syner- gy is a matter of degree, and
mere contiguity should not be  enough. One commentator proposes a
rather demanding  synergy test, arguing that the regulated tract
should be  considered as its own parcel so long as not all of its
value  derives from synergies with neighboring land; in such cases, 
the parcel would have an independent economically viable  use, which
if destroyed by regulation would be compensable  under Lucas. See John
E. Fee, Comment, Unearthing the  Denominator in Regulatory Taking
Claims, 61 U. Chi. L.  Rev. 1535, 1557-58 (1994). One need not go so
far to see the  skimpiness of the synergy here.


To be sure, Cathedral Mansions is more than several  contiguous
parcels. According to the decision of the Historic  Preservation
Review Board, "The buildings are sited imagina- tively to provide the
greatest possible integration of living  space with well-landscaped
open space." Joint Appendix  ("J.A.") 320. (Passersby who observe the
rather bare lawn  will have to reach their own judgments on the
adjective "well- landscaped.") Integration there doubtless is--almost
any  lawn around a building will manifest a degree of integration. 
But there is no explicit showing that these synergies depend  on the
entire lawn remaining undeveloped. The proposed 


townhouses would cover only the portion of the lawn abutting 
Connecticut Avenue, still leaving the interior portion, approxi-
mately half the lawn, undeveloped. Common sense would  suggest that at
some distance from the building marginal  synergies created by extra
lawn space become slight, and  thus that the part of the lawn beyond
that line should be  treated as its own parcel for takings purposes.
Further,  although District rent-control law evidently allows the
owner  to earn a return on the tax-assessed value of land in a single 
tract with a rent-controlled building (here the owner could 
apparently recover that status by undoing the formalities of 
subdivision), that value is likely to be only a tiny fraction of  the
value absent the historic landmarking.


In fact, it may well be completely different synergies--ones  between
the lawn and adjacent Connecticut Avenue--that  have driven the
landmarking decision. The Board observed  that the lawn "contributes
significantly to the unique open  space character of Connecticut
Avenue." J.A. 320. A cynic  might suspect that the alleged
relationship between the lawn  and the Cathedral Mansions apartments
is little more than a  cloak by which the citizens of Upper Northwest
Washington  have secured some parkland on the cheap. Parks are good, 
but the Fifth Amendment says that taking them is not.


Of course, there is another synergy between the two par- cels and
adjacent Connecticut Avenue, namely the historical  value that inheres
in the preservation of a building as it was  initially constructed
(i.e., with an expansive lawn beside it).  Uncompensated landmark
preservation seems to rest on this  synergy. The Court in Penn Central
embraced the view that  "the preservation of landmarks benefits all
New York citizens  and all structures, both economically and by
improving the  quality of life in the city as a whole." 438 U.S. at
134. This  broad language seems to redefine "reciprocity of advantage"
 in such a way that no government act could ever require 
compensation, as the afflicted owner would be a member of  the taking
polity and thus in receipt of offsetting advantages,  artificially


Apart from obliterating takings law, such a view has pecu- liarly
perverse effects in the realm of historic preservation.  Although such
laws try to preserve for society the positive  externalities created
by buildings like Cathedral Mansions,  inflicting the entire cost on
the creator of the landmark (or  his successor in interest) is bound
to discourage investment in  first-class design. Moreover, while
insurance markets can  achieve the risk-spreading (or
anti-"demoralization") goals  that some attribute to the Takings
Clause, compare Posner,  Economic Analysis of Law, supra, at 58, they
cannot offset  non-compensation's disincentive to good design.
Historic  landmark preservation, after all, is imposed selectively on 
those who went out of their way to secure architectural  distinction.
The higher the quality, the higher the premium  for takings insurance;


Having found that the lawn and apartment parcels should  be treated as
a unit, the majority nevertheless considers  whether compensation
would be due even if the lawn were  analyzed separately; in doing so,
it gratuitously takes an even  harsher stance against compensation
than does present law.  The majority finds that District Intown has
failed to offer  evidence that the regulation denies it "economically
viable use  of [the] land," Lucas, 505 U.S. at 1016, even though the 
Mayor's own agent found that "any construction that de- stroyed the
lawn would be incompatible with the lawn's status  as an historic
landmark." Maj. Op. at 13. Thus, so long as  the lawn is untouched,
"economically viable" uses are permis- sible. It is hard to imagine
what "economically viable" use  that constraint leaves, unless the
majority means that the  very barest thread of value, yielded by some
thoroughly  bucolic use, is enough to defeat a total takings claim. By
this  standard, no regulation can ever effect a total taking, and at 
best will be tested only under the far weaker partial takings 


* * *


The prevailing Federal Circuit-Claims Court method of  defining the
relevant parcel, followed by the panel here, 


focuses on marginal issues and largely overlooks the more  critical
concern of synergies; the focus on the landowner's  historical, rather
than proposed, use further skews the analy- sis. But the Supreme
Court's general approach seems to  militate in favor of looking to the
parcel as a whole. Similar- ly, although resting uncompensated
landmark preservation on  the idea of reciprocal advantage stretches
the concept into  meaninglessness, and the denial of compensation
discourages  ex ante what it hopes to foster ex post, the current
cases give  these arguments little purchase. Accordingly, I concur in
the  majority's decision to affirm.