In the United States v. 50 Acres of Land et al., 1984, the U.S. Supreme Court ruled that when federal government takes over municipal property for public use, it must pay just compensation based on fair market value without considering any possible substitute facilities costs. The case arose after the City of Duncanville in Texas was compensated $225,000 by the Federal Government for a landfill site taken under eminent domain laws to construct a flood control project. However, city officials argued that they should receive an additional $468,500 as cost incurred to provide equivalent disposal services elsewhere due to loss of their landfill site. The court disagreed and held that Fifth Amendment's Just Compensation Clause does not require federal government to pay more than fair market value even if replacement cost is higher.

In the dissenting opinion for United States v. 50 Acres of Land et al., Justice O'Connor, joined by Chief Justice Burger and Justices Powell and Rehnquist, argued that the majority's decision to award just compensation based on reproduction cost rather than fair market value was incorrect. The dissenting justices believed this approach deviated from established precedent without sufficient justification. They contended that fair market value has been traditionally used as a measure of just compensation because it reflects what a willing buyer would pay in cash to a willing seller at the time of taking. By contrast, they saw replacement cost as an artificial construct which does not necessarily reflect actual loss suffered by property owners when their land is taken for public use. Moreover, they expressed concern that using replacement cost could lead to overcompensation in some cases where old buildings with little market value are replaced with new ones at government expense.