Federal Circuit revives Lake Michigan takings case

January 28, 2014 | By BRIAN HODGES

Earlier today, we received an excellent opinion from the Federal Circuit in the physical takings case, Banks v. United States. At issue was the so-called “stabilization doctrine”—a legal doctrine that will suspend the 6-year statute of limitations in cases where a taking is occurring as a result of a gradual physical process like erosion or inundation. Under that doctrine the statute of limitations will not begin running until the landowner should be deemed to be aware that some government act is causing the erosion or flooding.

Between 1836 and 1903, the U.S. Army Corps of Engineers constructed jetties in Lake Michigan to stabilize the entrance of the St. John River into a harbor on Lake Michigan for commercial shipping. The Corps increased the size of the jetties in 1952 and, between 1950 and 1989, encased them in impermeable steel sheeting. Over the years, however, the Corps became aware that its jetties were causing accelerated erosion and damage to lakefront properties to the south of the harbor. The Corps attempted to mitigate for this harm by adopting a series of largely unsuccessful beach renourishment programs between 1970 and 1999.  In 1999, 37 shoreline property owners sued for inverse condemnation alleging that the jetty project effected a permanent physical taking of their shoreline properties.

The fact that a physical taking had occurred was not seriously disputed during the liability phase of the trial. Instead, the case focused on whether the landowners had filed their complaint within the 6-year statute of limitations. This question turned on two takings doctrines. First, in United States v. Dickinson (1947), the U.S. Supreme Court held that in cases involving a gradual physical process, like seepage or erosion, the statute of limitation will not begin to accrue until the conditions had sufficiently stabilized. Conditions are considered “stabilized” when it becomes clear that the gradual process set into motion by the government has effected a permanent taking. Second, in Applegate v. United States (1994), the Federal Circuit held that, under the Dickinson stabilization doctrine, a takings claim will not accrue when the government is making efforts to mitigate for actions that would otherwise constitute a taking.

Applying these rules, however, can be difficult.  In fact, the Banks court ruled on the claims accrual question in this case three times, coming to three very different conclusions.  During the liability phase of this case, the lower court concluded that the claims accrued in 1989 when all of the work on the jetties was completed. The Federal Circuit reversed that decision because the trial court failed to take into consideration the Army Corps’ mitigation efforts which continued into 2000. On remand, the trial court determined that Banks’ claims had accrued in January 27, 2000, when the Army Corps issued its determination that its mitigation efforts were unsuccessful and the harm from the jetties was irreversible. Then after the damages phase of the trial, the court changed its mind and concluded that, because someone should have noticed accelerated erosion at some point between 1903 and 1952, Banks’ claims had accrued well before the Corps discovered that its jetties were damaging private property. The trial court, therefore dismissed all of the claims as time barred.

PLF filed an amicus brief in support of the landowners’ appeal because it is essential, both for the parties and future takings litigants, that the courts correctly apply the stabilization doctrine. Our brief explained that the stabilization doctrine does not allow courts to dismiss claims based on generalities or presumptions. The date on which a taking claim accrues will vary from lot to lot based on a variety of site specific conditions that can alter or render uncertain the progression of the physical damage, such as the occurrence of natural erosion alongside government-induced erosion. This requirement that a trial court to engage in a sufficiently individualized analysis before dismissing a gradual taking claim as time-barred is not a technicality—it is a necessity.

The Federal Circuit agreed, holding that the property owners’ awareness of that some erosion was occurring before 1952 was not sufficient for their takings claims to accrue. Indeed, the Court held that it was “unreasonable” for the trial court to “assume that a property owner should have been able to discern the difference between the naturally occurring erosion and that caused by the jetties.” The Court sent the Banks case back for a determination on its merits.