In 1986, developer David Lucas paid more than $900,000 for two South Carolina waterfront lots, planning to build a house for his family on one lot, and a house to sell on another. Eighteen months later, the South Carolina General Assembly passed the Beachfront Management Act, prohibiting development past a certain setback line, and effectively making his property worth less than nothing, since he still had to pay taxes and insurance on it.

After exhausting his bureaucratic options, he took the South Carolina Coastal Council to court for compensation. A state trial court ruled in his favor and awarded him $1.2 million, but he lost on appeal in the state Supreme Court. He appealed to the U.S. Supreme Court, and in Lucas v. South Carolina Coastal Council, he prevailed in what is widely regarded as one of the most important Supreme Court decisions of the century, extending Fifth Amendment "Takings" clause protection to property owners whose land has been devalued as a result of government regulations. The Supreme Court remanded the case to the South Carolina Supreme Court for the calculation of damages, and Lucas decided to settle for $1.5 million to cover the cost of the two lots and to pay his bankers and lawyers.

Once in possession of the lots, the Coastal Council's views changed. After nearly five years of legal combat, the council said it really doesn't make sense to maintain the lots as "open space" or "erosion control." The lots are surrounded by other houses, a spokesman for the council explained, and the beach is private. In order to recoup the $1.5 million awarded to Lucas, some of which came from the council's budget, the council plans to sell the lots—for development.

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