                                                                    [PUBLISH]


              IN THE UNITED STATES COURT OF APPEALS

                       FOR THE ELEVENTH CIRCUIT
                                                                FILED
                         ________________________       U.S. COURT OF APPEALS
                                                          ELEVENTH CIRCUIT
                                                              JUNE 5, 2001
                               No. 99-14762                THOMAS K. KAHN
                         ________________________               CLERK



                      D. C. Docket No. 81-06424-CV-NCR

A.A. PROFILES, INC.,

                                                      Plaintiff-Appellant,

                                   versus

THE CITY OF FORT LAUDERDALE,

                                                      Defendant-Appellee.

                         ________________________

                 Appeal from the United States District Court
                     for the Southern District of Florida
                       _________________________
                               (June 5, 2001)


Before WILSON, KRAVITCH and COX, Circuit Judges.

COX, Circuit Judge:
       We have for review A.A. Profiles, Inc.’s (“Profiles”) appeal of the district

court’s judgment finding that the City of Fort Lauderdale (the “City”) “took”

Profiles’s property in violation of the Fifth and Fourteenth Amendments but declining

to award any damages.

                                         Background1

       In 1979, Profiles contracted to purchase a parcel in northwest Fort Lauderdale,

Florida.    The parcel’s zoning was the City’s least restrictive industrial and

manufacturing classification. Despite its zoning classification, the tract was bordered

to the west and south by residential development. Profiles’s plan was to establish a

wood-chipping business on the site. Because of economic factors at the time, it had

become prohibitively expensive to truck organic waste such as tree limbs to more

remote landfills. Profiles sought to take advantage of this opportunity by offering a

local site for organic waste to be processed. The company also planned to profit from

the sale of mulch and wood chips for landscaping and other uses. The City

Commission unanimously approved the development. In exchange for the City’s

permission to operate the business, Profiles promised to construct a ten-foot high

concrete wall around the property before beginning chipping operations.


       1
               The following facts are drawn from our previous opinion, A.A. Profiles, Inc. v.
City of Fort Lauderdale, 850 F.2d 1483 (11th Cir. 1988), the district court’s order granting final
judgment, and undisputed facts in the record.

                                                 2
      After receiving the City’s approval of its plan, Profiles completed the purchase

of the property. The purchase price of the property was $3,290,955.62 of which

Profiles paid a $25,000 downpayment. The remainder of the purchase price was

financed. Profiles executed two mortgages on the property, one held by the seller and

one held by Landmark First National Bank. Profiles then acquired building permits

and began to improve the property by clearing it and starting construction of the wall

that was to surround the property. Before the wall was complete or the chipping

machinery in place, Profiles contacted the City’s Chief Building Inspector and asked

to be allowed to begin accepting and storing organic matter on the property in order

to bring in some needed revenue. The Building Inspector approved the idea with the

caveat that the storage of materials would have to stop if there were any complaints.

      Profiles then began to accept organic matter, doing business under the

ultimately unfortunate name of “Le Dump.” Profiles distributed flyers which touted

the location of the facility and invited customers to “dump anything that grows” at “Le

Dump” for $1.50 a cubic yard. Predictably, area residents became concerned that

Profiles was actually operating a dump on the premises and began complaining to the

City. Profiles soon found itself at the center of a political maelstrom with significant

numbers of the surrounding residents actively campaigning to kill the project. On

May 6, 1980, the City Commission held a public meeting on the issue and heard the


                                           3
testimony of numerous area residents who were opposed to the project. The

Commission voted to temporarily suspend the project at the meeting. By this point,

Profiles’s expenditures exceeded its available cash by $267,283.87. On July 30, 1980,

the Commission held another public hearing to consider a resolution that would allow

the project to go forward with other restrictions.2 Again, the Commission heard the

testimony of neighbors adamantly opposed to the project. The Commission did not

act on the resolution and the May 6 suspension was never lifted. On March 10, 1981,

the Commission voted to re-zone the property to a light industrial use category that

would not allow a wood-chipping operation. Profiles soon lost the property in

foreclosure proceedings.3

       Profiles filed suit in the Southern District of Florida in August 1981 against the

City, the mayor, and members of the Commission asserting claims under 42 U.S.C.

§ 1983. Profiles alleged, inter alia, that the City’s actions in indefinitely suspending

the project’s permits and later re-zoning the property constituted a taking without just

compensation and also violated unspecified rights under the Fourteenth Amendment.

       2
                These restrictions were that a 150-foot buffer zone be created on the parcel, the
concrete wall be built along the interior border of the buffer zone as opposed to at the property
line, and that wood chipping machinery be in place at the site before operations could begin.
       3
               The first mortgage on the property was already in foreclosure at the time the City
re-zoned the property but the foreclosure proceedings were not final until after the re-zoning
decision had been made. Therefore, we previously concluded that Profiles was still the
landowner at the time of the final zoning decision. See A.A. Profiles, Inc. v. City of Ft.
Lauderdale, 850 F.2d 1483, 1487 n.5 (11th Cir. 1988) (Profiles I).

                                                 4
Following the presentation of Profiles’s evidence on liability, the City moved to

dismiss pursuant to Rule 41(b) of the Federal Rules of Civil Procedure.4 The district

court granted the motion on December 30, 1986, finding that: (1) Profiles had not

presented sufficient evidence to establish that a taking took place; (2) the City’s

actions in suspending Profiles’s permits was a valid exercise of its police powers; (3)

Profiles had sufficient state law remedies that it had failed to pursue; and (4) there was

no causal connection between the City’s actions and Profiles’s damages. Profiles

appealed.

       On appeal, Profiles contended that it had presented sufficient evidence to

demonstrate that the temporary suspension was a regulatory taking. See A.A. Profiles

v. City of Fort Lauderdale, 850 F.2d 1483, 1486 (11th Cir. 1988) (Profiles I). The

City argued that it never reached a final decision on the project and therefore no taking

took place. See id. at 1486-87. We concluded that the facts of the instant case were

“indistinguishable” from those that supported a finding of a regulatory taking in

Wheeler v. City of Pleasant Grove, 664 F.2d 99 (5th Cir. Unit B 1981) (Wheeler I).




       4
               Rule 41(b) was amended in 1991 to remove language that authorized the use of
the rule as a means of terminating an action when a plaintiff has not met its burden of proof.
That provision of the former rule is now part of Rule 52(c).

                                               5
      In Wheeler I, the plaintiffs were granted a permit to build an apartment building

on their property. See 664 F.2d at 100. Soon after the approval was granted, there

was a massive wave of neighborhood resistance to the planned project, which

eventually led Pleasant Grove’s City Council to pass an ordinance forbidding the

construction of new apartments. See id. The passage of the new ordinance voided the

permit previously issued to the plaintiffs. See id. We held that the passage of the

ordinance was confiscatory in nature and therefore a taking. See id. Because the facts

of the instant case were analogous to those of Wheeler I, we concluded that the City’s

actions effected a taking and remanded for further proceedings in the case. See

Profiles I, 850 F.2d at 1488.

      Following the remand, Profiles settled with the individual defendants, leaving

the City as the sole defendant. Proceedings in the district court resumed in February

1996. Since the City had not previously had the opportunity to offer evidence, the

district court first held a new trial on liability. The district court found that the City

had failed to present evidence which was substantially different from that already in

the record on appeal. Therefore, the court concluded that the issue of liability was

foreclosed by our opinion in Profiles I and proceeded to conduct a trial on damages.

Profiles produced three appraisals of the value of the project. The City produced an

expert who presented his analysis of the financial data provided by Profiles.


                                            6
      In determining Profiles’s damages, the district court took its cue from the

portion of the Profiles I opinion in which we found that the instant case was

indistinguishable from the Wheeler case. Using the formula established in our third

Wheeler opinion, Wheeler v. City of Pleasant Grove, 833 F.2d 267 (11th Cir. 1987)

(Wheeler III), the court concluded that Profiles’s losses were due to the project being

“underfinanced and undercapitalized,” and were not the result of the City’s actions.

The court therefore found that Profiles had failed to establish any compensable loss

from the City’s regulatory taking. Profiles has again appealed.

                                   Issues on Appeal

      Profiles raises three issues on appeal. First, it contends that our mandate in

Profiles I compelled the conclusion that both a taking occurred and that Profiles was

damaged by the taking. Therefore, Profiles maintains the district court erred in finding

Profiles suffered no losses due to the City’s conduct. Second, Profiles argues that the

district court attempted to indirectly avoid this court’s mandate by finding that Profiles

incurred no damages. Third, Profiles maintains that the district court erred by

admitting the testimony of the City’s expert witness.

                                  Standard of Review

      We review the district court’s determination of the proper legal standard to

compute damages de novo. See Sandoval v. Hagan, 197 F.3d 484, 491 (11th Cir.


                                            7
1999). The court’s factual findings, however, will only be reversed if clearly

erroneous. See Taylor Rental Corp. v. J.I. Case Co., 749 F.2d 1526, 1530 (11th Cir.

1985). Rulings on the admissibility of expert testimony are subject to review for

abuse of discretion. See Allison v. McGhan Med. Corp., 184 F.3d 1300, 1306 (11th

Cir. 1999).

                              Contentions of the Parties

      Profiles contends that the district court was obligated to award compensation

because this court concluded that a taking had occurred. Profiles argues that the just

compensation clause of the Fifth Amendment is “self-executing” and the district court

therefore had no discretion to find that Profiles had not been damaged due to the

City’s conduct. Further, Profiles contends that the district court erred by applying the

formula for compensation of “temporary” takings instead of using the formula for

permanent takings. Profiles also suggests that the court piled error upon error by

misapplying the formula for temporary takings. Finally, Profiles contends that the

district court erred in admitting the testimony of the City’s expert witness. The

witness, an accountant, testified as to the financial condition of Profiles’s wood

chipping operation and opined that Profiles business would likely have failed even

absent the City’s actions. Profiles argues that the extent of the capitalization of its

operation is irrelevant to the determination of just compensation and the expert’s


                                           8
testimony should therefore have been excluded as not “helpful” under Rule 702 of the

Federal Rules of Evidence.

      The City contends that the district court properly applied the Wheeler III

formula in computing the proper compensation in this case. Further, it argues that the

application of the formula demonstrated that Profiles was owed no compensation for

the City’s actions and to award Profiles damages would unjustly enrich a business that

was doomed to failure absent the City’s actions. Finally, the City contends that the

testimony offered by its expert met the requirements established by the Supreme Court

in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S. Ct. 2786

(1993).

                                     Discussion

      We agree with Profiles that the court erred in finding that Profiles suffered no

compensable loss due to the City’s actions. As we noted in Profiles I, the City’s re-

zoning decision was a “confiscatory measure” and a “taking.” Profiles I, 850 F.2d at

1488, 1489. We remanded the case for further proceedings. See id. at 1489. The

necessary implication of our holding was that Profiles suffered harm due to the City’s

actions. Generally, the law of the case doctrine requires a court to follow what has

been explicitly or by necessary implication decided by a prior appellate decision. See

In re Justice Oaks II, Ltd., 898 F.2d 1544, 1549 n.3 (11th Cir. 1990). An appellate


                                          9
court’s holding will be law of the case unless: “(1) a subsequent trial produces

substantially different evidence, (2) controlling authority has since made a contrary

decision of law applicable to that issue, or (3) the prior decision was clearly erroneous

and would work manifest injustice.” United States v. Robinson, 690 F.2d 869, 872

(11th Cir. 1982).

       After conducting a de novo trial, the district court determined that the City

failed to “present evidence . . . which was substantially different from that . . . part of

the record on appeal.” (R.6-282 at 1.) The court also did not find that our holding had

been abrogated by a contrary decision or was clearly erroneous. Accordingly, our

holding that a taking had occurred was law of the case and the district court was

obligated to determine the extent of the harm caused by the taking and compensate

Profiles accordingly. What the district court was not free to do, however, was to

revisit, in the guise of determining the proper damages, the issue of whether a taking




                                            10
occurred.5 Therefore, the district court erred in concluding that Profiles’s losses were

due solely to the underfinancing of the project.

       We now turn to the question of how to measure just compensation in this case.

Profiles argues that the district court erred by applying the Wheeler III damages

formula, contending that the Wheeler formula is appropriate only in temporary takings

cases. Profiles maintains that the City’s actions in this case caused a permanent

taking. We agree with Profiles that the Wheeler III formula would not provide just

compensation in this case.6




       5
                 We faced an analogous situation in the lengthy Wheeler litigation. See Wheeler v.
City of Pleasant Grove, 746 F.2d 1437 (11th Cir. 1984) (Wheeler II). In Wheeler I, we found
that the application of the city ordinance was a “confiscatory measure” and remanded for the
district court to determine damages. See Wheeler v. City of Pleasant Grove, 664 F.2d 99, 100
(5th Cir. Unit B 1981) (Wheeler I). On remand, the district court found that the offending
ordinance did not “proximately cause any compensable injury.” Wheeler II, 746 F.2d at 1439.
The plaintiffs again appealed. See id. at 1440. We vacated the judgment, holding that the
district court improperly conducted a de novo determination of whether the plaintiffs were
damaged. See id. at 1441. We concluded that it was at least necessarily implied from our
previous opinion that the city’s unconstitutional conduct had damaged the plaintiffs. See id. at
1441. Therefore, we again remanded for the district court to determine the proper damages. See
id.
       6
                 We also agree with Profiles that the district court erred in interpreting our
conclusion in Profiles I that the instant case was “indistinguishable” from Wheeler I as a signal
that the proper formula for compensation was the one we established in Wheeler III. Profiles I,
850 F.2d at 1488. It is clear that our reference to Wheeler I in Profiles I was limited to the issue
of whether a taking had occurred, and did not address the proper formula for compensation. See
id. It is also notable that the Profiles I opinion makes no reference to 1987's Wheeler III opinion,
which established the measure of compensation for temporary takings, instead referring only to
Wheeler I, which dealt solely with the issue of liability.

                                                11
       The starting point for any inquiry into damages in a takings cases is to query

“[w]hat has the owner lost?” Boston Chamber of Commerce v. Boston, 217 U.S. 189,

195, 30 S. Ct. 459, 460 (1910). The goal of the Fifth Amendment’s just compensation

requirement is to return the affected property owner to “as good position pecuniarily

as he would have occupied if his property had not been taken.”7 United States v.

Miller, 317 U.S. 369, 373, 63 S. Ct. 276, 279-80 (1943). Any inquiry into just

compensation must be controlled by principles of equity and fairness to both the

property owner and the government. See Bauman v. Ross, 167 U.S. 548, 570, 17 S.

Ct. 966, 975 (1897).

       Although there are no absolute standards outside of the requirement that the

compensation paid for a taking be “just,” courts have established some working rules

to guide the inquiry. In cases where government regulation has permanently rendered

property worthless, courts have generally adopted the “market value” test, which

       7
                Two independent bases underlie the requirement that property owners be
compensated for losses due to takings. First, the Fifth Amendment requires that owners whose
property is taken for “public use” must receive just compensation. U.S. Const. amend. V. If a
local government’s “police power regulation is not enacted in furtherance of the public health,
safety, morals, or general welfare” there can be no “public use” of a landowner’s property and,
correspondingly, no Fifth Amendment taking. San Diego Gas & Elec. v. City of San Diego, 450
U.S. 621, 656 n. 23, 101 S. Ct. 1287, 1306 n. 23 (1981) (BRENNAN, J., dissenting).
Compensation for losses due to invalid uses of the police power could still be available,
however, under the Fourteenth Amendment’s due process clause. See id.; Wheeler v. City of
Pleasant Grove, 833 F.2d 267, 270 n.3 (11th Cir. 1987) (Wheeler III). The analysis used to
calculate the proper compensation is the same whether a property owner has suffered a Fifth
Amendment taking or a Fourteenth Amendment due process violation. See Wheeler III at 270
n.3.

                                              12
provides that the measure of just compensation is the market value of the property at

the time of the taking.8 See Almota Farmers Elevator & Warehouse Co. v. United

States, 409 U.S. 470, 474, 93 S. Ct. 791, 794 (1973). Market value is generally

determined from “what a willing buyer would pay in cash to a willing seller.” Id.

(internal quotation omitted). And since a hypothetical buyer would look at both

existing and potential uses for property, “fair market value takes into consideration

‘[t]he highest and most profitable use for which the property is adaptable and needed

or likely to be needed in the reasonably near future . . . to the full extent that the

prospect of demand for such use affects the market value . . . .’” United States v.

320.0 Acres of Land, 605 F.2d 762, 781 (5th Cir. 1979) (quoting Olson v. United

States, 292 U.S. 246, 255, 54 S. Ct. 704, 708 (1934)).

       Courts have established another test to determine just compensation when a

regulation diminishes but does not destroy the market value of property. In the case

of such a “partial taking,” courts have applied a modified market value test which

accounts for the diminution in value. Generally, the proper method is to subtract the

market value of the property as encumbered by the regulation from the market value



       8
                Deviating from the market value test is appropriate when the property’s market
value is too difficult to determine or when applying the test would “result in manifest injustice to
[the] owner or public. . . .” United States v. Commodities Trading Corp., 339 U.S. 121, 123, 70
S.Ct. 547, 549 (1950).

                                                13
of the property without the offending regulation in place. See United States v. 101.88

Acres of Land, 616 F.2d 762, 769 (5th Cir. 1980).

       The Supreme Court has also recognized that compensation may be due when

a government regulation temporarily infringes upon an individual’s property rights.

In First English Evangelical Lutheran Church v. Los Angeles County the Court held

that the rescission of an ordinance which had completely denied the plaintiff the

ability to use its property for multiple years was a “constitutionally insufficient”

remedy. 482 U.S. 304, 322, 107 S. Ct. 2378, 2389 (1987). In such a case, the

government would also be obligated to compensate the property owner for its losses

during the period that the offending regulation was in place.9 See id. In Wheeler III

we concluded that a property owner’s losses for a temporary taking are in the “form

of an injury to the property’s potential for producing income or an expected profit.”

Wheeler III, 833 F.2d at 271 (citation omitted). We therefore held that the proper

measure of compensation was “the market rate return computed over the period of the

temporary taking on the difference between the property’s fair market value without

the regulatory restriction and its fair market value with the restriction.” Id.



       9
                As the First English Court noted, it has been long established that governments
are constitutionally obligated to compensate property owners for the temporary physical
appropriation of property. See First English Evangelical Lutheran Church v. Los Angeles
County, 482 U.S. 304, 318, 107 S. Ct. 2378, 2387 (1987).

                                               14
       Lost income was a proper measure of compensation in Wheeler because the

affected property owners retained their parcel and were capable of proceeding with

their development plans at the point we declared a taking had occurred and enjoined

the enforcement of the offending ordinance. See Wheeler v. City of Pleasant Grove,

896 F.2d 1347, 1349-50 (11th Cir. 1990) (Wheeler IV). All that the Wheeler plaintiffs

had lost due to the taking was the income they would have otherwise gained during

the time the ordinance was in effect.10 See Wheeler III, 833 F.2d at 271. Turning to

the facts of the instant case, it is apparent that applying the Wheeler III test would not

lead to just compensation. The Wheeler III framework is appropriate only when the

property owner’s losses are limited to the temporary use of its property and the

concomitant income. Here, Profiles neither possessed nor retained the ability to

derive economic value from the property at the point we declared that a taking had

occurred. Because the injury in this case was permanent rather than temporary, the

proper measure of compensation is not the Wheeler III standard but instead the

diminution in market value test.11




       10
               In fact, the market value of the Wheeler’s parcel had appreciated during the
period the taking was in effect. See Wheeler v. City of Pleasant Grove, 896 F.2d 1347, 1351
(11th Cir. 1990) (Wheeler IV).
       11
               Profiles has never alleged, nor does the record support a conclusion, that the
City’s actions completely destroyed the property’s market value.

                                                15
       Although the district court noted that there were three appraisals of the property

submitted by Profiles, these appraisals have not been made part of the record on

appeal. The record also does not include the substance of the expert testimony

proffered by Profiles as evidence of the property’s value. Accordingly, we are unable

to determine on this record the extent of the diminution, if any, in the property’s

market value that was due to the City’s actions. We therefore remand to the district

court for additional fact-finding on the issue. In determining the reduction in the

market value of the parcel, the court must consider any aspect of the property that

could have affected the amount a reasonable buyer would be willing to pay. See

Almota Farmers Elevator & Warehouse Co. v. United States, 409 U.S. at 474, 93 S.

Ct. at 794. The district court must limit its inquiry, however, to the value of the

property as of the day of the taking. That is, Profiles’s precarious financial state and

the later foreclosure are relevant only to the extent that they could have affected the

property’s market value.12

       Finally, we agree with Profiles that the district court abused its discretion in

admitting the testimony of the City’s expert witness. The substance of the witness’s

testimony was his opinion that Profiles did not have a positive equity position in the

       12
                The district court may have been correct in concluding that the project was
doomed even absent the City’s actions. However, the correct focus in determining compensation
here is the effect of the regulation upon the market value of the property, not on whether
Profiles’s operation would have ever become a going concern or turned a profit.

                                             16
project by May 1980. (R.13 at 66.) The district court later relied on this testimony

to find that Profiles’s operation would have failed absent the City’s actions and

therefore Profiles was owed no compensation. As we note above, the relevant inquiry

is not whether Profiles would have been successful in proceeding with its business,

but to what extent the City’s actions diminished the property’s market value. Because

the expert’s testimony was addressed solely to the issue of whether Profiles’s

operation would have succeeded, it was irrelevant to the determination of just

compensation and therefore should have been excluded.13

                                        Conclusion

       For the foregoing reasons, we reverse the judgment of the district court and

remand for the court to determine the compensation owed Profiles using the

diminution in market value test. On remand, the court should limit its inquiry to any

factors which would have affected the property’s market value as of the date of the

taking.

       REVERSED AND REMANDED WITH INSTRUCTIONS.




       13
               We do not address, however, whether testimony that a property owner could not
have successfully made a profit even absent a confiscatory government action would be relevant
in a true temporary takings case, such as Wheeler, where the property owner’s loss is measured
by the property’s potential for producing income during the time the taking is effective.

                                              17
