Amicus Curiae Brief — Love Terminal Partners, L.P., et al., Petitioners v. United States

No. 18-1062

IN THE

Supreme Court of the United States

LOVE TERMINAL PARTNERS, L.P., and

VIRGINIA AEROSPACE, LLC,

Petitioners,

v.

UNITED STATES,

Respondent.

On Petition for a Writ of Certiorari

to the U.S. Court of Appeals

for the Federal Circuit

BRIEF OF WASHINGTON LEGAL FOUNDATION

AND ALLIED EDUCATIONAL FOUNDATION

AS AMICI CURIAE IN SUPPORT OF PETITIONERS

Richard A. Samp

(Counsel of Record)

Cory L. Andrews

Washington Legal Foundation

2009 Mass. Ave., NW

Washington, DC 20036

(202) 588-0302

rsamp@wlf.org

Date: March 15, 2019

QUESTIONS PRESENTED

1. In assessing whether the government has

effected a compensable taking of private property, may

courts treat real property as worthless simply because

the owner was not generating positive cash flow from

the property at the time of the taking?

2. In determining whether the taking of

property had any economic impact on its owner, may

courts ignore reasonable, investment-backed

expectations that a regulatory environment is likely to

change and, in fact, has been changed by the very law

that effects the taking?

iii

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . v

INTERESTS OF AMICI CURIAE . . . . . . . . . . . . . . 1

STATEMENT OF THE CASE . . . . . . . . . . . . . . . . . 3

SUMMARY OF ARGUMENT . . . . . . . . . . . . . . . . . . 8

REASONS FOR GRANTING THE PETITION . . . 11

I.

THE DECISION BELOW CONFLICTS WITH

SETTLED PRECEDENT THAT REGULATIONS

DEPRIVING REAL PROPERTY OWNERS OF

ALL VALUE CONSTITUTE PER SE TAKINGS,

REGARDLESS WHETHER THE REGULATIONS

CREATE A COMPENSABLE LOSS . . . . . . . . . . . 11

A.

Penn Central’s ReasonableInvestment-Backed-Expectations

Analysis Plays No Role in Per Se

Takings Cases . . . . . . . . . . . . . . . . . . 13

B.

Other Appellate Courts Have

Eschewed the Federal Circuit’s

Constricted Understanding of Per

Se Takings . . . . . . . . . . . . . . . . . . . . . 19

iv

Page

II.

THE FEDERAL CIRCUIT’S NOVEL APPROACH

CAUSED IT TO FORGO ANY ANALYSIS OF

THE PROPERTY’S FAIR MARKET VALUE, AN

ANALYSIS THAT CONFIRMS THE CLAIMS

COURT’S FINDINGS OF SUBSTANTIAL LOSS . . 20

A.

The Court Below Never Considered

the Early-2006 Fair Market Value

of the Property . . . . . . . . . . . . . . . . . 20

B.

The Early-2006 Fair Market Value

Was Substantially Greater than

Zero . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

C.

The Appeals Court’s Decision to

Forgo a Fair-Market-Value

Analysis Undermines Private

Property Rights . . . . . . . . . . . . . . . . . 24

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

v

TABLE OF AUTHORITIES

Cases:

Page(s)

Arkansas Game & Fish Comm’n v. United States,

568 U.S. 23 (2012) . . . . . . . . . . . . . . . . . . . 1, 13, 14

Armstrong v. United States,

364 U.S. 40 (1960) . . . . . . . . . . . . . . . . . . . . . . . . 13

Brown v. Legal Found. of Washington,

538 U.S. 216 (2003) . . . . . . . . . . . . . . . . . . 1, 18, 19

Canel v. Topinka,

212 Ill.2d 311 (2004) . . . . . . . . . . . . . . . . . . . . . . . 19

Cienega Gardens v. United States,

331 F.3d 1319 (Fed. Cir. 2003) . . . . . . . . . . . . . . 15

Goldberg v. Frerichs,

912 F.3d 1009 (7th Cir. 2019) . . . . . . . . . . . . . . . 19

Hall v. State of Minnesota,

9008 N.W.2d 345 (Minn. 2018) . . . . . . . . . . . . . . 19

Horne v. Dep’t of Agriculture,

135 S. Ct. 2419 (2015) . . . . . . . . . . . . . . . . 1, 17, 18

Kimball Laundry Co. v. United States,

338 U.S. 1 (1949) . . . . . . . . . . . . . . . . . . . . . . 21, 23

Lucas v. South Carolina Coastal Council,

505 U.S. 1003 (1992) . . . . . . . . . 6, 8, 14, 16, 17, 19

Murr v. Wisconsin,

137 S. Ct. 1933 (2017) . . . . . . . . . . . . . . . . . . . . . 14

Nollan v. California Coastal Comm’n,

483 U.S. 825 (1987) . . . . . . . . . . . . . . . . . . . . . . . 18

Olson v. United States,

292 U.S. 246 (1934) . . . . . . . . . . . . . . . . . . . . 21, 23

Palazzolo v. Rhode Island,

533 U.S. 606 (2001) . . . . . . . . . . . . . . . . . . . . . . . 14

Penn Central Transp. Co. v. New York City,

438 U.S. 104 (1978) . . . . . . . . . . . . . 2, 6, 13, 14, 15

vi

Page(s)

Phillips v. Washington Legal Found.,

524 U.S. 156 (1998) . . . . . . . . . . . . . . . . . . . . . 1, 18

Ruckelshaus v. Monsanto Co.,

467 U.S. 986 (1984) . . . . . . . . . . . . . . . . . . . . 16, 17

United States v. Miller,

317 U.S. 369 (1943) . . . . . . . . . . . . . . . . . 21, 23, 24

Statutes and Constitutional Provisions:

U.S. Const., amend. v (“Takings Clause”) . . . passim

Tucker Act, 28 U.S.C. § 1491 . . . . . . . . . . . . . . . . . 19

Wright Amendment, Pub. L. No. 96-192, § 29,

94 Stat. 35, 48-49 (1980) . . . . . . . . . . . . . . . . 3, 5, 9

Wright Amendment Reform Act of 2006 (“WARA”),

Pub. L. No. 109-352, 120 Stat. 2011 . . . . . . passim

INTERESTS OF AMICI CURIAE

The Washington Legal Foundation (WLF) is a

public-interest law firm and policy center with

supporters in all 50 States.1 WLF promotes and

defends free enterprise, individual rights, a limited and

accountable government, and the rule of law.

To that end, WLF has frequently appeared in

this and other federal courts in cases involving claims

arising under the Fifth Amendment’s Takings Clause.

See, e.g., Horne v. Dep’t of Agriculture, 135 S. Ct. 2419

(2015); Arkansas Game & Fish Comm’n v. United

States, 568 U.S. 23 (2012); Brown v. Legal Found. of

Washington, 538 U.S. 216 (2003); Phillips v.

Washington Legal Found., 524 U.S. 156 (1998).

The Allied Educational Foundation (AEF) is a

nonprofit charitable and educational foundation based

in Tenafly, New Jersey. Founded in 1964, AEF is

dedicated to promoting education in diverse areas of

study, such as law and public policy, and has appeared

as amicus curiae in this Court on a number of

occasions.

Amici are concerned that the decision below,

unless overturned by this Court, will seriously erode

property rights by undermining the ability of owners to

obtain just compensation when government regulation

1

Pursuant to Supreme Court Rule 37.6, amici state that

no counsel for a party authored this brief in whole or in part; and

that no person or entity, other than amici and their counsel, made

a monetary contribution intended to fund the preparation and

submission of this brief. More than 10 days before filing this brief,

amici notified counsel for Respondent of their intent to file. All

parties have provided written consent to the filing.

2

deprives their property of all economic value. The

Federal Circuit does not dispute that 2006 federal

legislation barred Petitioners from making any

economically viable use of their leasehold interests at

Dallas’s Love Field. Nor is there any dispute that

Petitioners invested millions of dollars in their

property in the years before 2006. The appeals court

nonetheless concluded that the legislation did not effect

a per se taking of Petitioners’ real property.

That conclusion cannot be squared with this

Court’s established case law. The Federal Circuit

reasoned that no taking has occurred because

Petitioners lacked a “reasonable investment backed

expectation” in being able to use their property as an

airline terminal. But a reasonable-investment-backedexpectation analysis is warranted only when a

challenged regulation has deprived real property of

some, but not all of its value.

Penn Central

Transportation Co. v. New York City, 438 U.S. 104

(1978). It is out of place when, as here, the courts

determine that government regulation has rendered

the property worthless. In such circumstances, the

government action is deemed a per se taking, so the

only issue is how much (if any) compensation is due.

The Court of Federal Claims concluded that

Petitioners’ compensable loss amounted to $133.5

million. Amici take no position on whether an award

of that size is justified. But amici are deeply concerned

by the appeals court’s decision to by-pass that analysis

by failing to recognize the existence of a per se

regulatory taking—and thereby overlooking the

substantial losses plainly incurred by Petitioners.

3

STATEMENT OF THE CASE

The facts of this case are set out in detail in the

petition. Amici wish to highlight several facts of

relevance to this brief.

Love Field is a thriving airport located near

downtown Dallas, Texas. Its popularity is due largely

to its central location; it is far closer to downtown than

the rival Dallas-Fort Worth Airport (DFW), which is

located halfway between the cities of Dallas and Fort

Worth. For that very reason, it has earned the enmity

of politicians and others from Fort Worth, who fear

that significant expansion of flights out of Love Field

might harm the financial viability of DFW.

To promote growth at DFW, Congress in 1980

adopted legislation that limited long-haul flights in and

out of Love Field. Pub. L. No. 96-192, § 29, 94 Stat. 35,

48-49 (1980). Known as the Wright Amendment,2 the

law limited use of Love Field to servicing final

destinations within Texas and its four contiguous

neighboring States. Although Congress loosened those

long-haul limitations somewhat in ensuing years, they

remained in place until 2006. But the Wright

Amendment imposed no limitation on the total number

of commercial flights at Love Field.

Love Field thrived despite the Wright Amendment. The airport’s success was keyed by Southwest

Airlines, which operated a hub there. Passengers

2

The law was named in honor of its principal sponsor,

House Majority Leader Jim Wright, the Congressman from Fort

Worth.

4

flying in and out of Dallas often preferred Love Field to

DFW given its proximity to downtown Dallas, and it

was widely acknowledged that demand for Love Field

flights would increase significantly if the Wright

Amendment were repealed.

Southwest Airlines

became a leading and vocal proponent of repeal. A

Master Plan spearheaded by Dallas and other

interested parties envisioned expansion of Love Field

into a 32-gate airport. Pet. App-57.

Love Field’s significant expansion potential led

Petitioners to purchase and develop real property

interests at the airport. The City of Dallas (which

owned Love Field) had leased a portion of Love Field to

Braniff Airways in 1955. Petitioner Love Terminal

Partners, L.P. (LTP) obtained a sublease on a portion

of the Braniff property in 1999, and it invested $17

million to construct (in 2000) a six-gate terminal and

parking facility on the leased property.3 The airline

industry experienced a sharp downturn following the

September 11, 2001 terrorist attacks. But Petitioners

remained optimistic about their Love Field property, as

evidenced by the 2003 acquisition (by Petitioner

Virginia Aerospace, LLC, an entity closely related to

Petitioner LTP) of the entire Braniff lease for $6.5

million. Although Petitioners never realized an annual

net profit on their Love Field investments, they

continued to make regular lease payments to the City

of Dallas.

3

The Claims Court found that Petitioners were

sophisticated investors who conducted a thorough due-diligence

review before investing in Love Field. See, e.g., Pet. App-55 to

App-57.

5

In response to Southwest Airline’s lobbying

effort to repeal the Wright Amendment (and opposition

to repeal by, among others, DFW and the City of Fort

Worth), several Members of Congress called on Dallas

and Fort Worth to arrive at a negotiated solution. Pet.

App-5. Those included at the negotiating table were

Dallas, Fort Worth, DFW, Southwest Airlines, and

American Airlines; Petitioners were excluded. The

resulting “Five-Party Agreement” recommended to

Congress: (1) gradually repealing all long-haul

restrictions at Love Field; (2) permanently limiting

Love Field to 20 gates, to be allocated to the main

terminal (i.e., not to the Lemmon Avenue terminal

owned by Petitioner LTP); and (3) demolishing the

Lemmon Avenue terminal, thereby assuring that it

would never again be used for commercial passenger

service.4

Three months later, Congress adopted the

Wright Amendment Reform Act of 2006 (“WARA”),

Pub. L. No. 109-352, 120 Stat. 2011, which essentially

ratified the terms of the Five Party Agreement.

Petitioners quickly realized the impact of WARA: its

real property at Love Field had been deprived of all

economically viable uses. For purposes of its ruling,

the Federal Circuit accepted that assessment:

“[P]laintiffs’ theory as to the effects of the 2006

legislation is correct and ... the legislation effectively

barred plaintiffs from using the Lemmon Avenue

Terminal for commercial air passenger service.” Pet.

4

The Five Parties recognized that, without congressional

approval, the agreement to limit service would be subject to

challenge under antitrust law.

6

App-12.5 In light of their realization, Petitioners

eventually ceased making payments on their lease. In

response to that default, Dallas took possession of the

leased property and demolished the Lemmon Avenue

terminal.

Petitioners’ optimism about the future of Love

Field proved prescient. Commercial airline traffic in

and out of the airport expanded significantly following

the adoption of WARA in 2006. But Petitioners shared

in none of that prosperity. In the aftermath of WARA,

their Love Field property became worthless—it could

no longer be put to any economically viable use.

Petitioners sued the United States in the Claims

Court in July 2008, asserting that the Government had

taken their property without just compensation, in

violation of their Fifth Amendment rights. Afer trial,

the Claims Court concluded inter alia that: (1)

Congress’s adoption of WARA was a per se regulatory

taking of the property because it deprived Petitioners

of all economically beneficial use of their real-property

leasehold interests, Pet. App-94; and (2) Petitioners

were entitled to just compensation of $133.5 million.

Id. at App-154.

The Federal Circuit reversed. Pet. App-1 to App29. It held that “there was no regulatory taking under

either Penn Central’s three-factor analysis or the

categorical approach described in Lucas [v. South

Carolina Coastal Council, 505 U.S. 1003 (1992)].” Id.

5

Importantly, no one contends that the Lemmon Avenue

Terminal had any other economically viable use.

7

at App-29. As noted above, the appeals court conceded

for purposes of its decision that WARA “effectively

barred plaintiffs from using the Lemmon Avenue

Terminal for commercial air passenger service.” Id. at

App-12. It nonetheless held that WARA was not a per

se regulatory taking because, it determined, the

property could not profitably have been operated as an

air-passenger terminal even before adoption of

WARA—and thus had no pre-existing value. Id. at

App-15 to App-16. The court held:

[T]o establish regulatory takings liability,

a plaintiff must show that a particular

government action significantly

diminished the value of its property.

There cannot be a regulatory taking in

the absence of economic injury. ... This

economic impact inquiry relates not to the

amount of compensation, but to whether a

taking has occurred at all.

Ibid (emphasis added).6 Noting that federal law

imposed long-haul flight restrictions on Love Field

before their repeal by WARA in 2006, the appeals court

held that Petitioners failed to establish a regulatory

taking because they failed to show that the property

could profitably have operated as an air-passenger

terminal before 2006, when those restrictions were still

in effect. Id. at App-17.

6

To support that holding, the appeals court cited to its

own case law only, not to decisions of this Court.

8

SUMMARY OF ARGUMENT

The Claims Court found that Congress’s

adoption of WARA deprived Petitioners of all

economically beneficial use of their real property, and

the Federal Circuit accepted that factual finding. The

appeals court nonetheless held that the deprivation did

not constitute a regulatory taking of the property.

That holding directly conflicts with the decisions of this

Court, which has repeatedly held that regulations that

deprive real property of all value are per se

takings—and that the only issue in such cases is how

much (if any) compensation is due for the taking. See,

e.g., Lucas, 505 U.S. at 1030.

Review is warranted to resolve that conflict.

Review is particularly warranted because federal law

requires all Takings Clause claims against the federal

government to pass through the Federal Circuit.

Unless the decision below, and similarly erroneous

Federal Circuit decisions, are overturned, litigants’

ability to obtain Fifth Amendment just compensation

from the federal government will be severely

compromised. No other federal appeals court has

adopted the Federal Circuit’s constricted approach to

per se regulatory takings of real property.

The Federal Circuit premised its no-regulatorytaking holding on its finding that WARA inflicted no

additional “economic injury” on Petitioners because

they could not have profitably operated the Lemmon

Avenue terminal even before Congress adopted that

statute. Pet. App-15 to App-17. That analysis was

doubly flawed. First, as noted above, the extent of the

loss caused by new government regulations is not

9

relevant to whether a taking has occurred. Second, the

Federal Circuit adopted a flawed method for

determining the extent of the loss. This Court has

repeatedly held that Fifth Amendment “just

compensation” should be based on the fair market

value of the property immediately prior to the taking.

The Federal Circuit never conducted a fair-marketvalue analysis. Had it done so, it inevitably would

have concluded that a buyer would have been willing to

pay a substantial amount for Petitioners’ real property

in early 2006. We note, for example, that in early 2006

(before WARA’s adoption) Petitioners engaged in

serious negotiations with Pinnacle Airlines over “a

possible sale of the [Braniff] Lease” for as much as

$100 million. Pet. App-65. The appeals court scoffed

that Petitioners “never received an actual offer,” id. at

App-19, but the fact that substantial sales prices were

being seriously negotiated undermines any contention

that the property had a fair market value of zero in

early 2006.

Rather than analyzing fair market value, the

Federal Circuit based its no-loss-and-thus-no-taking

holding on its conclusion that the Wright Amendment’s

long-haul restrictions prevented profitable operation

of the property as an air-passenger terminal. Pet. App15 to App-17. But that is akin to holding that a

developer cannot establish a regulatory takings claim

if, at the time that the government declares that

development of property will never be permitted, a

routine zoning variance stands in the way of immediate

commencement of construction at the property site.

That approach is inconsistent with traditional

understandings of property valuation. Even if one

10

accepts the Federal Circuit’s dubious proposition that

Petitioners’ lacked a “reasonable investment-backed

expectation” that Congress would repeal the Wright

Act’s long-haul restrictions, many knowledgeable

observers predicted (correctly) that repeal was

imminent, and those expectations must be factored in

when computing the fair market value of Petitioner’s

property in early 2006. If, as the Claims Court found,

willing buyers would have paid substantial sums for

that property in expectation that Love Field air traffic

would increase substantially, it is irrelevant for fairmarket-value purposes that the property was still a

net-loss proposition in early 2006. The Claims Court

found that Petitioners could have sold their property

for a substantial sum in early 2006; the Federal

Circuit’s assertion that Petitioners had no right to rely

on changes in the regulatory environment does nothing

to undermine the saliency of the Claims Court’s

finding.

WARA changed the regulatory environment

considerably. Before its enactment, Petitioners were

permitted to operate the Lemmon Avenue terminal as

an air-passenger terminal, albeit profitable operations

might remain difficult for so long as Love Field’s longhaul restrictions remained in place.

After its

enactment, operation of the Lemmon Avenue terminal

became impossible; indeed, the terminal had become

slated for demolition.

The Federal Circuit’s holding means that the

federal government can never be required to pay just

compensation for regulatory bombshells of this nature.

Review is warranted to restore the ability of American

property owners to seek redress from their

11

Government.

REASONS FOR GRANTING THE PETITION

The petition raises issues of exceptional

importance.

For at least a century, the Fifth

Amendment has been understood to require the

government to pay “just compensation” to owners of

real property whenever it adopts regulations that

deprive the property of all economically viable use.

The Federal Circuit’s decision breaks sharply from that

consensus; it held that Petitioners did not even suffer

a taking, despite Claims Court findings that federal

government regulation rendered their property

worthless and inflicted more than $133 million in

damages. Review is warranted, particularly because

the decision below cuts off all possibility of

compensation for those facing similar federalgovernment regulation.

I.

THE DECISION BELOW CONFLICTS WITH

SETTLED PRECEDENT THAT REGULATIONS

DEPRIVING REAL PROPERTY OWNERS OF ALL

V ALUE C ONSTITUTE P ER S E T AKINGS ,

REGARDLESS WHETHER THE REGULATIONS

CREATE A COMPENSABLE LOSS

Critical to an understanding of this case is an

understanding of what Congress sought to accomplish

through enactment of WARA. It sought simultaneously

to satisfy the interests of Southwest Airlines and the

City of Dallas (who wanted to expand Love Field from

a regional airport into one that could serve nationwide

travelers) and the interests of DFW and the City of

Fort Worth (who wanted assurances that Love Field

12

would never expand to the point that it would threaten

DFW’s long-term viability).

WARA successfully

balanced those interests, but it did so on the backs of

Petitioners—who were never invited to the bargaining

table. Critical to satisfying DFW’s and Fort Worth’s

interests were absolute assurances that Love Field

would never expand beyond a 30-gate airport. WARA

(and the Five-Party Agreement it ratified) provided

those assurances by not only prohibiting the use of the

Lemmon Avenue terminal for air-passenger service but

also guaranteeing its demolition.

The Claims Court’s two decisions included

detailed factual findings explaining why WARA

deprived Petitioners of all economically viable use of

their real property. See, e.g., Pet. App-76 to App-115.

The Federal Circuit never disputed those findings.7

The appeals court nonetheless held that WARA did not

effect a per se taking of Petitioners’ real property. That

decision conflicts with settled precedent from both this

Court and other appellate courts.

7

The appeals court stated:

We assume, without deciding, that plaintiffs’

theory as to the effect of the 2006 legislation is

correct and that the legislation effectively barred

plaintiffs from using the Lemmon Avenue

Terminal for commercial air passenger service.

Pet. App-12. The appeals court never suggested that the terminal

had any other economically viable uses. Indeed, as the Claims

Court found, the Braniff lease specified that the property could

only be put to aviation-related uses. Id. at App-77.

13

A.

The Penn Central ReasonableInvestment-Backed-Expectations

Analysis Plays No Role Play in Per Se

Takings Cases

The Takings Clause is “designed to bar

Government from forcing some people alone to bear

public burdens which, in all fairness and justice,

should be borne by the public as a whole.” Armstrong

v. United States, 364 U.S. 40, 49 (1960). The Court

recognizes that “no magic formula enables a court, in

every case” to determine whether government

regulation so unfairly burdens individual property

owners so as to constitute a compensable “taking.”

Arkansas Game and Fish Comm’n, 568 U.S. at 32

(stating that “[i]n view of the nearly infinite variety of

ways in which government actions or regulations can

affect property interests, the Court has recognized few

invariable rules in this area.”).

To guide courts in carrying out these “essentially

ad hoc, factual inquiries,” the Court has identified

three factors relevant to Takings Clause

determinations: (1) “the economic impact of the

regulation on the claimant”; (2) “the extent to which

the regulation has interfered with distinct investmentbacked expectations”; and (3) “the character of the

government action.” Penn Central, 438 U.S. at 124.

The Court nonetheless has carved out two

discrete categories of government action deemed

always to constitute a compensable taking, without any

need for courts to engage in a detailed Penn Central

inquiry. Such per se takings occur if the government

either: (1) takes title to or authorizes permanent

14

physical occupation of property; or (2) imposes

regulations that deny all economically beneficial or

productive use of land. Arkansas Game and Fish

Comm’n, 568 U.S. 31-32; Lucas, 505 U.S. at 1015.8

Importantly, the Court has made clear that analysis of

the three Penn Central factors is unwarranted in per se

takings cases; if, for example, government regulation

denies all economically beneficial or productive use of

land, that is the end of the “taking” inquiry—and the

only remaining inquiry is the amount of “just

compensation” (if any). See, e.g. Palazzolo v. Rhode

Island, 533 U.S. 606, 617 (2001) (courts should

undertake a Penn Central analysis only “[w]here a

regulation places limitations on land that fall short of

eliminating all economically beneficial use”); Murr v.

Wisconsin, 137 S. Ct. 1933, 1943 (2017).

In conflict with those decisions, the Federal

Circuit employed a Penn Central analysis in concluding

that WARA did not amount to a “taking” of Petitioners’

property. Pet. App-19 to App-26. The appeals court

held that no taking occurred because (per the second

Penn Central factor) Petitioners’ lacked any reasonable

8

Lucas added one caveat to the per se takings rules: a

regulation that denies all economically viable use of real property

will not require compensation if the challenged land-use restriction

“inhere[s] ... in the restrictions that background principles of

property and nuisance already placed upon land ownership.” 505

U.S. at 1029. No one contends that that caveat is relevant here; no

one contends, for example, that operation of the Lemmon Avenue

terminal for air-passenger service would constitute a public

nuisance. Evidence, as here, that “other landowners, similarly

situated, are permitted to continue the use denied to the claimant”

is strong evidence that the claimant’s proposed use is not barred

by background principles of property law. Id. at 1031.

15

investment-backed expectation of profitability so long

as the long-haul restrictions remained in place at Love

Field, and that such expectations could not, as a matter

of law, be based merely on a hope of future repeal:

The reasonable, investment-backed

expectation analysis is designed to

account for property owners’ expectation

that the regulatory regime in existence at

the time of their acquisition will remain

in place, and that new, more restrictive

legislation or regulations will not be

adopted. As we said in Cienega Gardens

[v. United States, 331 F.3d 1319, 1328

(Fed. Cir. 2003)], “the purpose of

consideration of plaintiffs’ investmentbacked expectations is to limit recoveries

to property owners who can demonstrate

that they bought their property in

reliance on a state of affairs that did not

include the challenged regulatory

regime.”

331 F.3d at 1346.

This

expectations analysis is not designed to

protect private predictions of future

regulatory change. To the contrary, what

is relevant and important in judging

reasonable expectations is the regulatory

environment at the time of the

acquisition of the property.

Pet. App-20 to App-21.

The entire line of Federal Circuit case law relied

on by the court below is unsound and sharply conflicts

with this Court’s per se taking case law. As explained

16

above, once it was determined that WARA deprived

Petitioners of all economically viable use of their land,

Lucas dictates that the statute effected a “taking,” and

the Federal Circuit’s challenges to the reasonableness

of Petitioner’s investment-backed expectations are

irrelevant to the analysis.

Moreover, the appeals court’s reasonableinvestment-backed-expectations analysis makes little

sense. Petitioners are not challenging regulations that

were already in place when they purchased the Love

Field property and constructed a $17 million terminal.

Indeed, they correctly predicted that the in-place

regulations (the long-haul restrictions) would be

repealed. Their Fifth Amendment claims are based on

Congress’s adoption of entirely new (and much more

onerous) regulations that (the Federal Circuit

concedes) deprived the property of all value.

In support of its reasonable-investment-backedexpectations analysis, the Federal Circuit cited

Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984):

In Ruckelshaus, for instance, the

Supreme Court concluded that plaintiffs

only had a reasonable expectation in the

confidentiality of trade secrets disclosed

to the EPA in pesticide registration

applications to the extent that the

relevant statute explicitly guaranteed

confidentiality at the time of submission.

467 U.S. at 1005-06. The Court explained

that plaintiffs could not have had a

reasonable expectation of trade secret

confidentiality prior to 1972, when the

17

statute was silent as to how the EPA

could use and disclose data, or after 1978,

when the statute explicitly allowed

disclosure of all data after ten years.

Pet. App-21 to App-22 (citing 467 U.S. at 1006-10).

Ruckelshaus is wholly inapt. The property at

issue in that Takings Clause case was intangible

personal property (trade secrets), and the per se taking

rule at issue here (the rule governing regulations that

deprive property of all value) applies only to land, not

to personal property.9 So the Court’s rationale for

undertaking a Penn Central reasonable-investmentbacked-expectations analysis in Ruckelshaus is

inapplicable here. Moreover, Horne explained that

Ruckelshaus’s holding is far more limited than the

Federal Circuit suggests. Ruckelshaus holds that

when a business seeks a “government benefit” (in that

case, a license to market a hazardous chemical), part of

its “voluntary exchange” with the government is

surrender of trade secrets necessary to determine the

chemical’s safety. Horne, 135 S. Ct. at 2430. Unlike

the plaintiff in Ruckelshaus, Petitioners have not

sought any government benefit; locating air-passenger

services at the Lemmon Avenue terminal (rather than

9

Explaining the rationale for the differing degrees of

protection afforded to real and personal property, Lucas stated:

“[I]n the case of personal property, by reason of the State’s

traditionally high degree of control over commercial dealings [the

property owner] ought to be aware of the possibility that new

regulation might even render his property economically worthless

(at least if the property’s only economically productive use is sale

or manufacture for sale).” 505 U.S. at 1027-28.

18

at the other Love Field locations specified by WARA)

“cannot remotely be described as a ‘government

benefit.’” 135 S. Ct. at 2430 (quoting Nollan v. Calif.

Coastal Comm’n, 483 U.S. 825, 834 n.2 (1987)).

Importantly, the no-taking holding is erroneous

and warrants review even if the Federal Circuit

correctly determined that Petitioners’ property had no

economic value in early 2006 (and as explained in

detail in Part II, that determination was incorrect as a

matter of law). Brown expressly held that when one of

the two per se taking rules applies, a taking has

occurred, and the issue of whether the taken property

had economic value should only be considered as part

of a court’s subsequent, “just compensation” analysis.

Brown was a challenge to the constitutionality of

a rule adopted by the State of Washington that

required lawyers holding small amounts of client cash

in escrow accounts to pay interest earned on those

accounts to the State. Two clients sued, claiming that

they were the rightful owners of any interest. The

Court agreed and held that Washington’s seizure of the

interest constituted a per se taking of their property.

Brown, 538 U.S. at 235 (citing Phillips, 524 U.S. at

172). Brown went on to conclude that the “just

compensation” to which the plaintiffs were entitled was

zero because they could not have generated any net

interest from their funds if left to their own devices,

id. at 240, but that conclusion did not alter its finding

that a per se taking had occurred.

19

B.

Other Appellate Courts Have

Eschewed the Federal Circuit’s

Constricted Understanding of Per Se

Takings

Federal Circuit case law is an outlier. No other

appellate court decision of which amici are aware has

emulated the Federal Circuit’s approach to per se

takings claims. Instead, other courts uniformly review

claims that a regulation has effected a per se taking by

addressing only the issues as framed by Lucas: does

the challenged regulation take title to the plaintiff’s

property, or does it deprive the plaintiff’s land of all

economically beneficial or productive use? 505 U.S. at

1015. Review is warranted to resolve that conflict.

The decision below included citations to Brown,

but it failed to address Brown’s holding that whether

the regulated property had pre-regulatory value is not

relevant to the per se taking analysis. Those appellate

courts that have addressed Brown’s relevant holding

reached results that directly conflict with the decision

below: they have concluded that the per se taking

analysis is unaffected by the government’s claim that

the “just compensation” is zero because the plaintiff’s

property was economically worthless.

See, e.g.,

Goldberg v. Frerichs, 912 F.3d 1009, 1010-11 (7th Cir.

2019) (Easterbrook, J.); Hall v. State of Minnesota, 908

N.W.2d 345, 355 (Minn. 2018); Canel v. Topinka, 212

Ill.2d 311, 331-33 (2004).

Delaying review to allow additional percolation

of the issue makes little sense in light of the Federal

Circuit’s unique jurisdiction. The Tucker Act, 28

U.S.C. § 1491, requires all Takings Clause claims

20

against the federal government to pass through the

Federal Circuit. Thus, the conflict between the Federal

Circuit and other state and federal appellate courts is

unlikely to become any more pronounced, because no

future conflicting decisions will involve claims against

the federal government. But in the meantime, takings

claimants against the federal government will continue

to be at a unique disadvantage in comparison to

claimants against state and local governments.

II.

THE FEDERAL CIRCUIT’S NOVEL APPROACH

CAUSED IT TO FORGO ANY ANALYSIS OF THE

P ROPERTY ’ S F AIR M ARKET V ALUE , AN

ANALYSIS THAT CONFIRMS THE CLAIMS

COURT’S FINDINGS OF SUBSTANTIAL LOSS

A.

The Court Below Never Considered

the Early-2006 Fair Market Value of

the Property

The United States is likely to respond to the

foregoing argument (that the Federal Circuit erred in

failing to find a per se taking) by arguing, “No harm, no

foul. Review is unwarranted because even if the

Federal Circuit’s legal analysis was faulty, it reached

the correct bottom line: no “just compensation” is due

because (as the Federal Circuit correctly determined)

the pre-WARA value of Petitioner’s property was zero.”

That argument is unavailing, because the

Federal Circuit plainly applied an incorrect method in

determining the value of Petitioners’ property in early

2006, just prior to passage of WARA.

This Court has repeatedly held that “just

21

compensation” for a Takings Clause violation should be

based on the fair market value at the time of the

taking. Olson v. United States, 292 U.S. 246, 255

(1934); Kimball Laundry Co. v. United States, 338 U.S.

1, 5-6 (1949) (stating that the “measure” of just

compensation is the amount of cash or equivalent that

a purchaser would have paid “had a voluntary

exchange taken place”); United States v. Miller, 317

U.S. 369, 374 (1943) (just compensation is “what a

willing buyer would pay in cash to a willing seller” at

the time of the taking). Courts are directed to

determine fair market value based on the price:

that in all probability would have been

arrived at by fair negotiations between an

owner willing to sell and a purchaser

desiring to buy. In making that estimate,

there should be taken into account all

considerations that fairly might be given

substantial weight in such bargaining.

Olson, 292 U.S. at 257.

The Court has explicitly recognized that “future

events or combinations of occurrence” may play a role

in determining fair market value. Ibid. Future events

“shown to be reasonably probable” are relevant factors,

but they should be “excluded from consideration” if

they are based on “mere speculation and conjecture. “

Ibid.

In conflict with that case law, the court below

adopted a far more restricted view of property

valuation. The appeals court concluded that value

could only be based on the property’s current income-

22

producing capability in light of current government

regulations, regardless how likely it was that those

regulations would be altered. Pet. App-18. The court

never examined how much willing buyers would have

been willing to pay for Petitioners’ property in early

2016, a time when (according to the Claims Court’s

findings) informed observers were correctly predicting

that Congress would soon lift the long-haul restrictions

at Love Field—and a time when air-traffic operations

were still permissible at the Lemmon Avenue terminal.

Review is warranted to resolve the conflict between

this Court and the court below regarding propertyvaluation methodologies.

B.

The Early-2006 Fair Market Value

Was Substantially Greater than Zero

Review is particularly warranted because the

conflicting property-valuation methodologies are

plainly outcome-determinative. Had the Federal

Circuit adopted a fair-market-value methodology, it

would have concluded that Petitioners’ property had a

substantially-greater-than-zero value in early 2006, a

value that should have been employed in computing

“just compensation.”

Amici note initially that the Federal Circuit’s

zero-value determination flies in the face of all of the

expert testimony at trial, as well as the district court’s

factual findings. For example, Michael Massey, one of

Petitioners’ expert witnesses (who testimony was

credited by the Claims Court), valued Petitioner’s 9.3acre sublease at $20.5 million. Pet. App-86. The

United States’s experts conceded that the sublease had

a substantial fair market value in early 2006; their

23

principal defense was that the sublease retained

substantial value even after adoption of WARA. In

other words, the Federal Circuit’s no-value finding is

not even supported by the testimony of the

Government’s expert witnesses.

The substantial fair market value of the

property is also supported by the huge financial

investments that Petitioners continued to make in the

property between 1999 and 2006—including building

a $17 million terminal in 2000, purchasing the entire

Braniff lease in 2003, and making lease payments to

the City of Dallas throughout the period. Such

expenditures by sophisticated investors are

inconsistent with a determination that the property

was worthless. As Kimball Laundry recognized,

business assets can have considerable fair market

value, “even in a business losing money”; and “[s]ince

land and buildings are assumed to have some

transferable value, when a claimant for just

compensation for their taking proves that he was their

owner, that proof is ipso facto proof that he is entitled

to some compensation.” Kimball Laundry, 338 U.S. at

19, 20. Moreover, in light of the Claims Court’s

findings that knowledgeable observers were confident

in the years preceding 2006 that Congress was

preparing to repeal Love Field’s long-haul restrictions,

Pet. App-117 to App-126, the likelihood of repeal is

appropriately factored into the fair-market-value

computation. Olson, 292 U.S. at 257.

The Federal Circuit cited Miller in support of its

refusal to ascribe pre-WARA value to the property.

Pet. App-24 to App-25. Its reliance on that decision

was misplaced. Miller held that “just compensation”

24

does not include increases in property value caused by

knowledge of government plans to acquire property

through condemnation. 317 U.S. at 281. But this case

does not involve any government acquisition of

property. Rather, a reason for fair-market-value

increases in this case was knowledge of the increasing

likelihood that the government would relax long-haul

restrictions. Those increases are unrelated to the

government’s later decision to “take” Petitioners’

property by adopting restrictions that deprived the

property of all economically beneficial use.

While appraisal experts may differ on the

precise valuation of Petitioners’ property, the evidence

at trial conclusively demonstrated that the property

had a substantial fair market value before the 2006

enactment of WARA. Review is warranted to address

the Federal Circuit’s refusal to conduct a fair-marketvalue analysis, which would have disclosed that

substantial value.

C.

The Appeals Court’s Decision to

Forgo a Fair-Market-Value Analysis

Undermines Private Property Rights

Review is particularly warranted because the

decision below seriously undermines private property

rights. Petitioners invested millions of dollars at Love

Field to operate an air-passenger terminal. By all

objective criteria, that was a reasonable investment

decision. Petitioners were authorized to operate their

terminal under existing governments regulations, and

they had good reason to believe that those regulations

would be relaxed—thereby increasing profitability.

Then Congress unexpectedly adopted legislation that

25

prohibited Petitioners operations and deprived their

property of all economically beneficial use.

Historically, the Takings Clause has been

invoked to ensure compensation to property owners in

precisely these sorts of circumstances. Yet, the Federal

Circuit has now decreed that the federal government

need not provide compensation. The appeals court has,

in effect, declared irrelevant that the property may

have had substantial fair market value at the time of

the new regulation. Instead of undertaking a fairmarket-value evaluation, it has directed trial courts to

deny all compensation if, at the time of the new

regulation, any other regulations interfered with the

owner’s profitable operations.

This highly restrictive view of Fifth Amendment

rights seriously undermines property owners’ ability to

obtain “just compensation” for draconian restrictions

on their property rights. The decision below is akin to

a holding that a developer cannot establish a

regulatory takings claim if, at the time that the

government declares that development of property will

never be permitted, a routine zoning variance stands in

the way of immediate commencement of construction

at the property site. According to the Federal Circuit,

the property’s appraised value can never take into

account the likelihood that the variance will be

granted, no matter how great that likelihood. This

serious intrusion on property rights warrants review

and reversal.

26

CONCLUSION

The Court should grant the Petition.

Respectfully submitted,

Richard A. Samp

(Counsel of Record)

Cory L. Andrews

Washington Legal

Foundation

2009 Mass. Ave., NW

Washington, DC 20036

(202) 588-0302

rsamp@wlf.org

Dated: March 15, 2019