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The K&K Company Story

In 1986, K & K Construction Company purchased a 55-acre parcel of land in Michigan. In 1988, the company decided to construct a restaurant and sports complex on 42 acres of the site. But the Michigan Department of Natural Resources (DNR) refused the company's building application because it claimed that wetlands took up 27 acres of the property. The company then filed a lawsuit challenging the DNR's classification of the site as wetlands.

During litigation, K & K Construction resubmitted a new building application that attempted to accommodate the DNR's concerns with a scaled-back development plan. The plan would have left all but 3.2 acres of the wetlands intact. The company proposed making up for the lost wetlands by converting 5.4 acres of the non-wetlands portion of the property into wetlands. In addition, K & K Construction proposed setting aside another 28 acres of existing and man-made wetlands on adjoining property parcels owned by the company.

By the time the case came to trial, the issue to be decided by the court was whether the state's wetlands classification constituted a regulatory taking. In November 1992, a trial court ruled that the DNR had deprived K & K Construction of "any reasonable return" on its economic investment by effectively condemning the property through its wetlands classification. The DNR agreed to the company's alternative development plan. Litigation continued, however, after another trial court ruled that the state owed K & K Construction more than $5.3 million for the 27 acres that was permanently taken as well as the 28 acres temporarily taken as a result of the DNR's decision.

In June 1996, the Court of Appeals for Michigan ruled for K & K Construction. The state then appealed to the Michigan Supreme Court which ruled against the company. In the March 1998 decision, the court argued that even though the property value of its 55-acre parcel had been lowered by the DNR, the company did not deserve compensation because it owned other parcels near that site which "might" negate the impact.

Source: Pacific Legal Foundation