## Facts

- Anthony Palazzolo owned coastal property in Westerly, Rhode Island, much of which consisted of salt marsh requiring substantial fill for development; some upland area remained.
- In 1971, Rhode Island created the Coastal Resources Management Council (CRMC) and adopted a coastal program that treated salt marshes as protected coastal wetlands with strict limits on development.
- In 1983, Palazzolo sought permits to fill most of the marsh and build a bulkhead; CRMC denied the application based on wetland impacts and inconsistency with the coastal program.
- In 1985, he submitted a reduced proposal to fill a smaller portion for a private beach club and parking; CRMC denied it for failure to satisfy the “special exception” criteria and for ecological harm.
- Palazzolo brought an inverse-condemnation claim alleging the regulatory denials effected a taking under the Fifth and Fourteenth Amendments.
- A key premise on remand was that the parcel retained permitted economic use, including the potential to build at least one single-family residence on upland portions with substantial market value.
- After the U.S. Supreme Court held the claim ripe and not barred by post-enactment acquisition, the case returned to state court for a merits determination of whether a taking occurred.

## Issues

1. Whether application of coastal-wetlands restrictions and permit denials deprived the owner of all economically beneficial use, constituting a categorical taking under *Lucas*.
2. If not, whether the restrictions nonetheless constituted a compensable regulatory taking under *Penn Central* based on economic impact, interference with reasonable investment-backed expectations, and the character of the government action.

## Decision

- The Superior Court entered judgment for the State and denied compensation.
- The court found no categorical taking under *Lucas* because the property retained economically valuable, permissible uses, including residential development on upland portions.
- The court treated the relevant parcel as the property as a whole, not the marsh portion in isolation, and concluded the parcel retained significant value.
- The court found no taking under *Penn Central* because the remaining permitted use and value reduced the severity of economic impact, expectations of intensive fill-based development were not reasonable, and the regulation was a general environmental program protecting coastal wetlands.
- The court also relied on the idea that restricting large-scale filling of salt marshes aligned with background limits in property and nuisance law and did not require compensation where substantial value remained.

## Legal Principles

- A *Lucas* categorical taking requires denial of all economically beneficial or productive use of the relevant parcel; residual valuable use defeats a per se claim.
- The relevant parcel is generally evaluated as the parcel as a whole rather than segregating regulated portions to manufacture total deprivation.
- Under *Penn Central*, courts assess (1) economic impact, (2) interference with reasonable investment-backed expectations, and (3) the character of the government action; significant remaining value and broadly applicable environmental regulation weigh against a taking.
- Post-enactment acquisition of title does not, by itself, bar a takings claim; ripeness is satisfied when the regulatory agency has effectively reached a final position such that further applications would be futile.
- Restrictions consistent with background principles of property and nuisance law may limit asserted uses without compensation, particularly where regulation prevents serious harm and does not eliminate all value.

## Conclusion

On remand, the court held that denial of permits to fill protected coastal wetlands did not effect a compensable taking because the owner retained viable, valuable residential use of the parcel and the wetlands restrictions reflected a broadly applicable environmental program rather than a confiscatory imposition under either *Lucas* or *Penn Central*.


Palazzolo v. Rhode Island, No. 89-5969, 2005 WL 1645974 (R.I. Super. Ct. July 5, 2005) (unpublished)