Petition — Georgia Power Co. v. 138.30 Acres of Land
Supreme Court brief1980
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FILED
AUG2 0 1980
ferent, LLERK
In the Supreme Court of the United States
October Term, 1980
GEORGIA POWER COMPANY,
Petitioner,
VS.
138.30 ACRES OF LAND and MILDRED
B. SANDERS, ET AL..,
Respondents.
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
WALLACE MILLER, JR.
Counsel of Record
W. WARREN PLOWDEN, JR.
500 First National Bank Building
Macon, Georgia 31298
(912) 745-2821
Attorneys for Petitioner
E. L. MENDENHALL, Inv., 926 Cherry Street, Kansas City, Mo. 64106, (816) 421-8080
QUESTION PRESENTED
Whether the just compensation clause of the fifth
amendment, rather than the law of the forum state, governs
the measure of compensation in condemnation proceedings
brought in a federal district court under the right of
eminent domain delegated to federal licensees by Section
21 of the Federal Power Act.
PARTIES
The parties to this proceeding in the court of appeals
were as follows:
Georgia Power Company;
138.30 Acres of Land in Land Lot 327 of the Third
Land District, 389th GM District, Putnam County, Georgia;
Mildred B. Sanders, a/k/a Mrs. Carl D. Sanders, Jr.;
Brannen McCarthy Sanders;
Carl Walton Sanders;
377.61 Acres of Land in Land Lots 367, 368, 369, 377,
378, 379, 380, 381, 382 and 383 of the Third Land District,
389th GM District, Putnam County, Georgia;
Nellie W. Larman;
532.82 Acres of Land in the 145th GM District, Green
County, Georgia;
Clifford H. Dyer, Jr.;
J.P. Dyer III; and
George M. Dyer.
III
TABLE OF CONTENTS
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an SESE ya RRO ca 1
EE Se RE RYOTE ORL Se 2
Constitutional Provision and Statute Involved .............. 2
I I sscdsncntesidbondenssationsntiodesncesave 3
Reasons for Granting the Wit ......0..2.0......ccccseecceeeseeeeeees 5
i ecient bepicobalabeloalbonasiiens 12
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TABLE OF AUTHORITIES
CASES
Arnett v. Kennedy, 416 U.S. 134 (1974) 00 eee eee 8
Bauman v. Ross, 167 U.S. 548 (1897) 2.0... eeeeeceeeeeeeeeee 6
Boswell v. Georgia Power Company, 440 U.S. 907
(1979) ....... diese ticstaiilialoc\atdRctit dn onntaiinintescslblianuns 3,9
Clearfield Trust Co. v. United States, 318 U.S. 363
(1943) SC MRSA its hlitsiiapesicinipeaghtigei 4
Dohany v. Rogers, 281 U.S. 362 (1930) 220.022... eeeeeees 11
Georgia Power Company v. 54.20 Acres of Land, et al.,
UE BO AD Gat. LOTT) cncesccscccccensccccsccsnsnassontonsotetiose 3
Georgia Power Company v. 138.30 Acres of Land, et al.,
SE ME. 0D GLE, BITD) ccccccccececccnsercecnsnseeesoscosssecsiocs 3-4
Georgia Power Company v. Sanders, 617 F.2d 1112 (5
ISR ee 4
Kohl v. United States, 91 U.S. 367 (1876) .....00.020020000..-.. 5
Marbury v. Madison, 5 U.S. (1 Cranch) 137 (1803) ...... 7
_ PREVIOUS PAGE WAS BLANK
y%
IV
Monongahela Navigation Company v. United States,
A ee I ita kincaid rapapdiintdacncavecssenecdiccunenas 7,10
Olsen v. United States, 292 U.S. 246 (1934) ~....40000002..... 6
Richmond Elks Hall Association v. Richmond Rede-
velopment Agency, 561 F.2d 1327 (9 Cir. 1977) ........ 11
United States v. 9.17 Acres of Land, etc., C.A. No. 79-
I MN MD Cassis cat Sidee ae ssccdesopaceeetienaumpeee 10
United States v. 146.60 Acres of Land, etc., C.A. No. 78-
SOU We NG icc ce tls ac cncinbn catsnshcenntetidedacelaveiadeabees 10
United States v. Fuller, 409 U.S. 488 (1973) -....0002000... 6
United States v. Gerlach Live Stock Co., 339 U.S. 725
fhe EE RE RNa Mpc ORS RIE NII RE PIED, ROU IE 7
United States v. Kimbell Foods, Inc., 440 U.S. 715
Py ERE EC EN HE Eas ACS EN RA aes eT Oa aL oR NO 4
United States v. Miller, 317 U.S. 369 (1943) 0000... 6, 11
CONSTITUTION, STATUTES AND RULES
Rs A IIS I dickies sdecnchinnmpertiethtlntndcannssninunnonns 2,5, 10, 11
Federal Power Act, Ch. 285, Section 1, 41 Stat. 1063,
16 U.S.C. §792, et seq.—
I BG Tite BOT) cocscsiccsceciccecscscciecccdscosseaee 10
Bactides 31,26 WEG, GONG occ sccesckccnseseaccnrssveccenves 2,4, 5,6
Uniform Relocation Assistance and Real Property A¢-
quisition Policies Act of 1970, 42 U.S.C. §4601,
DE I seesnssteccncssapicsevesearssenescsnmetcbssstinstebeiesssbiossnnssoteosinasoseoses 7
FE I Meet eit Mi cicisthevssitcpieaiossiceguninilopistebage ecnisnes 4)
EE thins vectra tacicnabbiiistanctsinciasabcntsaiteusinserbeetncs. 5)
Be EY MEINE TES scureceussvaucrasiapinbbiertoehscuighudseebensbisadeonmoscatesie 2
Se NE NE i hecistcaracesa astienco nascent susisiiadoeneamibesaicsnnstndianeveasicieens 5
Se IN erick eayisiteiiederdsshabincaicatenmiaslcutieaathsninieaiobtieghtaisaee 5
V
MISCELLANEOUS
Brief for United States as Amicus Curiae, Boswell v.
United States, 440 U.S. 907 (1979) .......-.--ceccececceceeeeeees 3,9
Monaghan, Forward: Constitutional Common Law,
Se Ss tec, UI BRIM cesicsiinccdesdnincicanitensrotnnrindttrnsinesiion 7
Hearings on S. 1419 Before the Water Power Com-
mittee of the House, 65th Cong., 2d Sess. 366 (1918) 6
H. R. Rep. No. 715, 65 Cong., 2d Sess. 20 (1918) ............ 6
a Ie CE ctastintihntienicenainnbe igen celioniohinptesicesniasiiions 2
In the Supreme Court of the United States
October Term, 1980
GEORGIA POWER COMPANY,
Petitioner,
Vs.
138.30 ACRES OF LAND and MILDRED
B. SANDERS, ET AL..,
Respondents.
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
Georgia Power Company respectfully petitions for a
Writ of Certiorari to review the judgment of the Court of
Appeals for the Fifth Circuit in the above-entitled case.
OPINIONS BELOW
The en banc opinion of the Court of Appeals (App. Al)
is reported at 617 F.2d 1112 (5 Cir. 1980). The panel
opinion of the Court of Appeals (App. A36), is reported
at 596 F.2d 644 (5 Cir. 1979). The prior opinion of the
Court of Appeals (App. A53) which was overruled by the
en banc decision is reported at 563 F.2d 1178 (5 Cir. 1977).
Copies of the judgments sought to be reviewed are repro-
duced in the Appendix at A99, A101 and A103. The judg-
ments sought to be reviewed involve identical questions,
and Georgia Power Company is, therefore, filing a single
petition pursuant to Rule 19.4.
JURISDICTION
The judgments of the court of appeals were entered
on May 27, 1980. The jurisdiction of this Court is invoked
under 28 U.S.C. §1254(1).
CONSTITUTIONAL PROVISION AND
STATUTE INVOLVED
U.S. Const. amend. V:
No person shall . . . be deprived of life; liberty, or
property, without due process of law; nor shall private
property be taken for public use, without just compensa-
tion.
Section 21 of the Federal Power Act, ch. 285, 41 Stat.
1074, 16 U.S.C. §814, provides:
That when any licensee cannot acquire by contract
or pledges an unimproved dam site or the right to use or
damage the lands or property of others necessary to the
construction, maintenance, or operation of any dam, reser-
voir, diversion structure, or the works appurtenant or
accessory thereto, in conjunction with an improvement
which, in the judgment of the Commission, is desirable
and justified in the public interest for the purpose of im-
proving or developing a waterway or waterways for the
use or benefit of interestate or foreign commerce, it may
acquire the same by the exercise of the right of eminent
domain in the District Court of the United States for the
district in which such land or other property may be
located, or in the state courts. The practice and pro-
cedure in any action or proceedings for that purpose in
the District Court of the United States shall conform as
nearly as may be with the practice and procedure in similar
3
action or proceeding in the courts of the state where the
property is situated: Provided, that the United States
District Courts shall only have jurisdiction of cases when
the amount claimed by the owner of the property to be
condemned exceeds $3,000.00.
STATEMENT OF THE CASE
These are land condemnation cases brought by Georgia
Power Company in connection with its Lake Wallace
Project, 42 F.P.C. 356 (1969). The jurisdiction of the Dis-
trict Court was invoked under 16 U.S.C. §814.
In a prior decision also involving petitioner’s Lake
Wallace project, Georgia Power Company v. 54.20 Acres
cf Land, et al., 563 F.2d 1178 (5 Cir. 1977), the court of
appeais held that just compensation in a condemnation
case instituted by a Federal Power Commission licensee
under §21 of the Federal Power Act is to be determined
in accordance with rules developed in federal condemna-
tion decisions. It rejected contentions of the landowners
that state law controlled or supplied the rules of decision
to determine just compensation. The landowners filed
a petition for writ of certiorari to this Court. The Court
invited the Solicitor General to file a brief setting forth
the views of the United States, 439 U.S. 814 (1978), and
thereafter denied certiorari, Boswell v. Georgia Power
Company, 440 U.S. 907 (1979).
In the meantime, the instant cases were proceeding
through the district court and were thereafter appealed to
the court of appeals. A panel of the Fifth Circuit held
that it was bound by the earlier decision approving the
use of federal rules to determine just compensation.
Georgia Power Company v. 138.30 Acres of Land, et al.,
596 F.2d 644 (5 Cir. 1979). A motion for rehearing en
banc was granted, and the panel opinion was reversed.
Georgia Power Company v. Sanders, 617 F.2d 1112 (5 Cir.
1980).
The Court of Appeals held that the source of the
eminent domain power in question is federal, but that
“Tslince the statute does not specify the appropriate rule
of decision, the task of interstitial federal lawmaking
falls upon the federal judiciary in this case ‘to declare the
governing law in an area comprising issues substantially
related to an established program of government opera-
tion.’” Id. at 1115. It reviewed a series of decisions
from this Court beginning with Clearfield Trust Co. v.
United States, 318 U.S. 363 (1964) through United States
v. Kimbell Foods, Inc., 440 U.S. 715 (1979) and determined
that “state law should be adopted unless it is shown that
the legislative intent or other sufficient reasons exist to
displace state law with federal common law... .” Id.
It concluded that the “interests of the United States
in the determination of the amount of compensation a
private licensee must pay a landowner in a condemnation
proceeding under §21 are not sufficient to warrant displace-
ment of state law on that issue.” Id. at 1118, and that
“the law of the state where the condemned property is
located is to be adopted as the appropriate federal rule
for determining the measure of compensation when a li-
censee exercises the power of eminent domain pursuant
to §21 of the Federal Power Act.” Id. at 1124.
Four judges dissented on the ground that federal rules
should apply of their own force to such condemnation
proceedings for the reasons set forth in the first opinion
of the Fifth Circuit.
REASONS FOR GRANTING THE WRIT
I,
The Court of Appeals Incorrectly Decided an Im-
portant Question Concerning the Interpretation
of the Fifth Amendment Which Should Be Settled
by This Court.
The court of apppeals committed fundamental error
when it treated the issue before it as one of interstitial
lawmaking. Rather, the issue involves the interpretation
of the just compensation clause of the fifth amendment
which is solely and exclusively a question of federal con-
stitutional law. There is no occasion to undertake any
balancing of interests between the federal government
and the states or to search for the intention of Congress
as to how to calculate the amount of money which must
be paid to a landowner to comply with the constitutional
mandate.
Section 21 of the Federal Power Act delegates to li-
censees the use of the federal power of eminent domain.
This is the exact same power which is available to the
federal government, its agencies and officials, and is the
only power which Congress can delegate. Kohl v. United
States, 91 U.S. 367 (1876). When Congress delegated
this “right of eminent domain” to FPC licensees it did
not leave any gap in the statute which needs filling any
more than it did when it delegated the use of the power
to, for example, the Secretary of the Army,’ the Sec-
retary of the Interior,’ the Tennessee Valley Authority,’
or a natural gas pipeline company.‘ It was not setting
33 U.S.C. §591.
43 U.S.C. §421.
16 U.S.C. §831x.
15 U.S.C. §717.
- of =
6
up a new scheme or program with new rights and duties
and the almost invariable gaps or interstices which ac-
company such legislation. Rather, it was delegating a
pre-existing power whose constitutional limitations were
well-known to Congress by 1920.°
Prior decisions of this Court have undertaken to
formulate “working rules” to control the admissibility of
evidence in the determination of just compensation. See,
e.g., Bauman v. Ross, 167 U.S. 548 (1897) (off-setting ben-
efits); Olsen v. United States, 292 U.S. 246 (1934) (highest
and best use in combination with other lands); United
States v, Miller, 317 U.S. 369 (1943) (elimination of en-
hancement); United States v. Fuller, 409 U.S. 488 (1973)
(elimination of value based on use in combination with
government permit lands). However, rather than viewing
its task as one of interstitial lawmaking in the sense of
choosing between “federal common law” and state law
on the basis of the supposed congressional intent, the Court
has viewed its function as one of interpreting and enforc-
ing the provisions of the federal constitution. At the risk
of stating the obvious, we would point out that this is,
after all, “the province and duty of the judicial department
5. The public use limitation was briefly considered by the
Committee on Water Power of the House. During hearings on
S. 1419 Augustus S. Houghton representing the Conservation
Commission of the State of New York testified that Section 21
would conflict with the New York Constitution because it would
allow taking private property for private use which would be
an abuse of the right of eminent domain. Hearings on S. 1419
Before the Water Power Committee of the House, 65th Cong., 2d
Sess. 366 (1918) (statement of Augustus S. Houghton). There-
after the Committee reported the bill to the House on June 28,
1918. The only comment on Section 21 was that “[s]ome mem-
bers of the committee express a doubt as to the constitutionality
of section 21 but a majority of your committee believe the same
is constitutional and a proper provision to be included in the
law.” H. R. Rep. No. 715, 65th Cong., 2d Sess. 20 (1918).
7
.... Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177
(1803).°
The court of appeals, on the other hand, seems to have
assumed that Congress has the power to define just com-
pensation, either by setting its own rules or by reference to
state law. Although Congress can and has on occasion con-
ditioned the exercise of the power upon the payment cf
amounts over and above just compensation,’ it has no
right, authority or prerogative to determine what shall
be the measure of compensation under the fifth amendment
when private property is taken for public purposes. In
Monongahela Navigation Company v. United States, 148
U.S. 312 (1893), this Court held unconstitutional an act
of Congress which authorized the condemnation of a lock
and dam owned by the navigation company, but which
forbade any consideration of the value of its franchise to
collect tolls in placing a value on the property being taken.
The Court held:
By this legislation congress seems to have assumed
the right to determine what shall be the measure of
compensation. But this is a judicial, and not a legis-
lative, question. The legislature may determine what
private property is needed for public purposes; that is
a question of 2 political and legislative character. But
when the taking has been ordered, then the question of
compensation is judicial. It does not rest with the
6. “The Court undoubtedly has both the power and the
duty to fashion ‘interpretative’ implementing rules to fill out
the meaning of generally framed constitutional provisions. This
is simply an ancient aspect of the judicial function in constru-
ing the meaning of any text—constitutional, statutory, con-
tractual, etc.” Monaghan, Forward: Constitutional Common
Law, 89 Harv. L. REv. 1, 22 (1975).
7. See Uniform Relocation Assistance and Real Property
Acquisition Policies Act of 1970, 42 U.S.C. §4601, et seq.; United
States v. Gerlach Live Stock Co., 339 U.S. 725 (1950).
y%
public, taking the property, through congress or the
legislature, its representative, to say what compensa-
tion shall be paid, or even what shall be the rule of
compensation. The constitution has declared that just
compensation shall be paid, and the ascertainment of
that is a judicial inquiry.
Id. at 327.
In a slightly different context, the Court has taken the
same approach with regard to the deprivation of property
under the due process clause of the fifth amendment in
Arnett v. Kennedy, 416 U.S. 134 (1974):
While the state may define what is and what is not
property, once having defined those rights the Con-
stitution defines due process, and as I understand it
six members of the Court are in agreement on this
fundamental proposition.
Id. at 185. (White, J. concurring in part and dissenting in
part.)
As our cases have consistently recognized, the ade-
quacy of statutory procedures for deprivation of a
statutorily created property interest [public employ-
ment] must be analyzed in constitutional terms.
Id. at 167. (Powell, J. concurring in part and concurring
in the result in part.)
Quite apart from the interests of the instant parties,
the decision of the Court of Appeals will have an adverse
impact on the development of federally licensed water
power projects and the costs to consumers of power pro-
duced by those projects. This issue was ably discussed by
the Solicitor General in his amicus brief:
A project’s total costs, including its land acquisition
costs, bear directly on its economic feasibility and hence
9
on whether the project will be undertaken. And once
a project is undertaken and completed, costs that were
incurred for land acquisition are passed on to con-
sumers in the price of the electric power generated.
Investment in land acquisition is included in the rate-
base determinations by the Commission when it reg-
ulates interstate wholesale rates for electric power,
and by state utility commissions when they set rates
for the intrastate sale of power. For these reasons,
in light of the significant differences in land acquisition
costs that may result from the choice between federal
and state rules for measuring compensation, the choice
of the legal standard is a matter of concern to the com-
mission in carrying out its licensing functions.
Brief for United States as Amicus Curiae at 11-12, Boswell
v. Georgia Power Company, 440 U.S. 907 (1979).
Finally, we would respectfully suggest that this issue
is likely to recur. There are something in excess of 30
federal statutes (A105) which delegate the authority to
exercise the federal eminent domain power to various gov-
ernment departments, agencies, cabinet secretaries, govern-
ment corporations, public utilities and others. Under the
opinion of the court of appeals it will be necessary to decide
whether Congress intended federal law to control the
determination of just compensation under each of these
statutes or whether application of state law »vould frustrate
or hinder an ongoing federal program.*®
8. The Court of Appeals attempted to distinguish cases
which apply fede~al rules of valuation in condemnation actions
on the theory that when the United States condemns and pays
for the land “the federal interests involved differ markedly”
617 F.2d at 1119 from the situation in this case. The federal
interests which it identified were 1) maximization of hydro-
electric development, 2) reduced energy costs, and 3) minimi-
zation of cost to the government. Id. at 1120. However, these
are the same federal interests which are at stake in government
(Continued on following page)
10
II.
The Decision of the Court of Appeals Conflicts
With Prior Decisions of the Supreme Court and
the Ninth Circuit.
The issue in this case has always been framed in
terms of whether federal or state law supplies the rules to
determine just compensation. In its most basic sense,
however, what we are really dealing with in this case are
the rules of evidence which guide the fact finder in arriving
at a sum of money representing just compensation.
This Court held in Monongahela Navigation Company
that just compensation within the meaning of the fifth
amendment is the full monetary equivalent of the prop-
erty taken. In order to determine this full monetary
equivalent, the trier of fact of necessity has to take into
account evidence of the value of the property on the date
of taking. Facts regarding this value such as whether
or not the announcement of the project has favorably in-
fluenced prices of comparable property in the neighbor-
hood or whether the remainder will increase in value be-
Footnote continued—
hydro projects, and the interests of the states in preserving their
property laws are also the same. There are several govern-
ment condemnation cases pending in the same district court from
which these cases arose, and which are assigned to the same
commissioners for trial. These cases, United States v. 9.17 Acres
of Land, etc., C.A. No. 79-55-ATH (M.D. Ga.); United States v.
146.60 Acres of Land, etc., C.A. No. 78-57-ATH (M.D. Ga.),
were brought to acquire projerty for the Richard B. Russell Dam
and Lake Project which is being constructed by the Corps of
Engineers. The federal government has just as much interest in
developing hydroelectric power, reducing energy costs and min-
imizing construction expense at Lake Wallace as it does with
the Russell Dam Project. The irony in all this is that under
the theory of the court of appeals, Georgia Power Company will
have to incur excessive and unrealistic land costs, but the gov-
ernment has reserved the right in Section 14 of the Act, 16 U.S.C.
§807(a) to condemn the project at any time upon payment of
just compensation which presumably would be calculated under
federal rules.
11
cause of the project are the types of evidentiary questions
which must be considered to determine the full monetary
equivalent.
In United States v. Miller, 317 U.S. 369 (1943), this
Court held that state law rules concerning what evidence
may be considered by the fact finder “could not affect
questions of substantive right,—such as the measure of
compensation,—grounded upon the Constitution of the
United States.” Id. at 380. The opinion of the court of
appeals in this case not only holds that state evidentiary
rules regarding determination of just compensation can
be relied upon, but that a district court in this circuit has
no choice and must follow state law.
Richmond Elks Hall Association v. Richmond Re-
development Agency, 561 F.2d 1327 (9 Cir. 1977), was
an inverse condemnation action brought under the fifth
amendment by a landowner against a federally assisted
city redevlopment agency. The landowner contended that
just compensation means not only the full monetary value
of the property taken, but that it also includes litigation
expenses and attorneys’ fees. Relying on this Court’s
opinion in Dohany v. Rogers, 281 U.S. 362 (1930) the Ninth
Circuit held that expenses of litigation and attorneys’ fees
are not includable in just compensation under the fifth
amendment. It then rejected a contention by the land-
owner that state law (which provided for an award of
costs and expenses to owners in inverse condemnation
cases against public entities) should be adopted to de-
termine the proper measure of compensation.
The Fifth Circuit, on the other hand, has required the
adoption of state law as the appropriate federal rule, and
if the law of the state in question required the payment
of attorneys’ fees and expenses, these amounts would be
includable in a federal condemnation case.
12
Federally guaranteed rights set forth in the Bill of
Rights should not have materially different dimensions in
each of the states. Both the source of the right and its
ultimate interpretation are unitary, and the conflicts
identified above therefore justify the grant of the writ to
review the judgment below.
CONCLUSION
We respectfully urge the Court, for all the reasons set
forth above, to grant the writ and reverse the decision
below.
Respectfully submitted,
WALLACE MILLER, JR.
Counsel of Record
W. WARREN PLOWDEN, JR.
Attorneys for Petitioner
Al
APPENDIX
GEORGIA POWER COMPANY,
Plaintiff-Appellee,
v.
138.30 Acres of Land, situate, lying and being in Land
Lot 327 of the 3rd Land District 389th G. M. District,
Putnam County, Georgia, Defendant,
Mildred B. SANDERS, a/k/a Mrs.
Karl D. Sanders, Jr., et al.,
Defendants-Appellants,
GEORGIA POWER COMPANY,
Plaintii f-Appellee,
v.
377.61 Acres of Land, situate, lying and being in Land
Lots 367, 368, 369, 377, 378, 379, 380, 381, 382 and 383
of the Third Land District, 389th G. M. District,
Putnam County, Georgia, Defendant,
Mrs. Nellie W. LARMAN, et al.,
Defendants-Appellants.
GEORGIA POWER COMPANY,
Plaintiff-Appellee,
Vv.
532.82 Acres of Land, situate, lying and being in the 145th
G. M. District, Greene County, Georgia, Defendant,
Clifford H. DYAR, Jr., et al.,
Defendants-Appellants,
Nos. 77-1775, 77-1776 and 77-1777.
United States Court of Appeals,
Fifth Circuit.
May 27, 1980.
A2
Appeals from the United States District Court for the
Middle District of Georgia.
Before COLEMAN, Chief Judge, BROWN, AINS-
WORTH, RONEY, GEE, TJOFLAT, HILL, FAY RUBIN,
VANCE, KRAVITCH, FRANK M, JOHNSON, Jr., GARZA,
HENDERSON, REAVLEY, POLITZ, HATCHETT, RAND-
ALL, TATE, SAM D. JOHNSON, and THOMAS A. CLARK,
Circuit Judges.*
RANDALL, Circuit Judge:
These condemnation cases present the issue whether
compensation should be determined under federal law or
under the law of the state where the condemned property
is located when a licensee of the Federal Energy Regulatory
Commission (the Commission)! exercises the power of
eminent domain in federal court as authorized by Section
21 of the Federal Power Act, 16 U.S.C. § 814 (1976). If
federal law is chosen, then the next issue for determination
is whether the court should apply uniform national law
or should apply, as federal law, the law of the state where
the property is located. The panel held that federal law
governed and the measure of compensation was to be
determined under uniform national law. Georgia Power
*Judge Goldberg was a member of the en banc court under
28 U.S.C.A. § 46(c) and participated in the oral argument of the
case en banc. Since that time he has taken senior status and
therefore does not participate in this decision. Judges Godbold
and Anderson were recused and took no part in the consideration
or decision of these cases. Judge Charles Clark took no part in
the consideration or decision of these cases.
1. On October 1, 1977, the Federal Power Commission ceased
to exist and its functions and regulatory responsibilities were trans-
ferred to the Secretary of Energy and the Federal Energy Reg-
ulatory Commission pursuant to the Department of Energy Or-
ganization Act, Pub.L. No. 95-91, 91 Stat. 565 (August 4, 1977).
See 42 U.S.C.A. §§ 7101, et seq. (1978) at §§ 7151(b) (transfer of
functions to Secretary of Energy) and 7172(a) (transfer of func-
tions to Federal Energy Regulatory Commission).
A3
Co. v. 138.30 Acres of Land, 596 F.2d 644, 649 (5th Cir.
1979) (hereinafter referred to as Larman, the name of
one of the landowners in the proceeding). In so doing,
the panel was bound by our prior decision in Georgia
Power Co. v. 54.20 Acres of Land, 563 F.2d 1178 (5th
Cir. 1977), cert. denied, 440 U.S. 907, 99 S.Ct. 1213, 59
L.Ed.2d 454 (1979) (hereinafter referred to as Dodson,
the name of one of the landowners in that proceeding).
Because of the importance of the question at issue, we
decided to have Larman reheard en banc (thereby vacating
the panel opinion, 5th Cir. R. 17), to reconsider our holding
in Dodson. Georgia Power Co. v. 138.30 Acres of Land,
602 F.2d 1243 (5th Cir. 1979). It is the opinion of a
majority of the en banc court that Dodson was, in part,
wrongly decided and, in that respect, should be overruled.
We agree with Dodson that the source of law is federal
but we now hold, contrary to Dodson, that the law of
the state where the condemned property is located is to
be adopted as the appropriate federal rule for determining
the measure of compensation when a licensee of the Com-
mission exercises the power of eminent domain pursuant
to Section 21 of the Federal Power Act.
Parts I and II of the panel opinion in Larman, denom-
inated “Right to a Jury Trial” and “Discretion to Appoint
a Commission,” (up to Part III, “Applicability of Federal
Law,” 596 F.2d at 648), are unaffected by our present
decision on the choice of law issue and are, accordingly,
approved and adopted by the court en banc. In Part IV
of Larman, under the heading “Alleged Errors in the Com-
mission’s Final Report,” the panel first set forth general
principles relevant to commissions’ reports, then discussed
the commission’s findings with respect to each of the
properties involved and, finally, remanded for further fact
findings and reevaluation of the compensation awarded
each of the landowners. The portion of that section out-
A4
lining general principles relevant to commissions’ reports,
(up to the subheading “Sanders Taking,” 596 F.2d at 649),
is unaffected by our present decision and is, therefore,
approved and adopted by the court en banc. The balance
of the discussion in that section, however, insofar as it
is dependent upon the commission’s application of federal
common law to the determination of the amount of com-
pensation, is rendered inapplicable by our holding that
Georgia law supplies the appropriate federal standard and
is superceded to that extent. Part III of the panel opinion,
denominated “Applicability of Federal Law,” is superceded
in its entirety by this opinion.
In both Dodson and Larman, Georgia Power Company,
a privately owned Georgia utility, instituted condemnation
proceedings against Georgia landowners in federal court
to acquire land for the Lake Wallace hydroelectric power
generating project in Georgia. These proceedings were
instituted pursuant to Section 21 of the Federal Power Act,
authorizing persons or entities licensed by the Commission
under Section 4(e) of the Federal Power Act, 16 U.S.C.
§ 797(e),? to exercise the right of eminent domain under
specified circumstances. Section 21 provides as follows:
2. Under 16 U.S.C. § 797(e) (1976), the Commission is au-
thorized and empowered as follows:
To issue licenses to citizens of the United States, or to any
association of such citizens or to any corporation organized
under the laws of the United States or any State thereof,
or to any State or municipality for the purpose of construc-
ting, operating, and maintaining dams, water conduits, reser-
voirs, power houses, transmission lines, or other project works
necessary or convenient for the development and improve-
ment of navigation and for the development, transmission,
and utilization of power across, along, from, or in any of the
streams or other bodies of water over which Congress has
jurisdiction under its authority to regulate commerce with
foreign nations and among the several States, or upon any
part of the public lands and reservations of the United States
(including the Territories), or for the purpose of utilizing the
(Continued on following page)
A5
When any licensee cannot acquire by contract or
pledges an unimproved dam site or the right to use
or damage the lands or property of others necessary
to the construction, maintenance, or operation of any
dam, reservoir, diversion structure, or the works appur-
tenant or accessory thereto, in conjunction with an
improvement which in the judgment of the commission
is desirable and justified in the public interest for the
purpose of improving or developing a waterway or
waterways for the use or benefit of interstate or foreign
commerce, it may acquire the same by the exercise
of the right of eminent domain in the district court
of the United States for the district in which such
land or other property may be located, or in the State
courts. The practice and procedure in any action or
proceeding for that purpose in the district court of
the United States shall conform as nearly as may be
with the practice and procedure in similar action or
proceeding in the courts of the State where the prop-
erty is situated: Provided, That United States district
courts shall only have jurisdiction of cases when the
amount claimed by the owner of the property to be
condemned exceeds $3,000.
The district judge appointed a three-member commis-
sion to determine the amount of compensation due the
landowners. See Fed.R.Civ.P. 71A(h). The judge’s in-
structions to the commission embodied federal rules for
Footnote continued—
surplus water or water power from any Government dam,
except as herein provided: ... Provided further, That in
case the Commission shall find that any Government dam
may be advantageously used by the United States for public
purposes in addition to navigation, no license therefor shall
be issued until two years after it shall have reported to Con-
gress the facts and conditions relating thereto... .
Georgia Power was issued a license by the FPC for the Lake
Wallace Project (then called the Laurens Shoals Project), on
August 6, 1969. 42 F.P.C. 356 (1969).
A6
determining just compensation. The landowners’ requests
to substitute for those instructions ones in accord with
Georgia rules were denied. If Georgia law were applied,
the amount awarded the landowners would be greater
than it would be under federal law.* Under Georgia law,
the value of any benefits accruing by virtue of the project
to any part of the landowner’s land which is not taken
may be offset only against the recovery for damages to
that remainder, if any, and not against the recovery for
the value of the land actually taken. See Ga.CodeAnn.
§ 36-504 (1970). Under federal law, the value of any
benefits accruing by virtue of the project to the portion
of the tract not taken may be offset against the recovery
for the value of the land actually taken. Bauman v. Ross,
167 U.S. 548, 17 S.Ct. 966, 42 L.Ed. 270 (1897); United
States v. Trout, 386 F.2d 216 (5th Cir. 1967). Furthermore,
under Georgia law, just compensation might include any
increase in the value of the property caused by general
knowledge of the project. See Hard v. Housing Authority
of Atlanta, 219 Ga. 74, 132 S.E.2d 25 (1963). Under federal
law, just compensation does not include any such increase
in the value of the property. United States v. Miller, 317
U.S. 369, 63 S.Ct. 276, 87 L.Ed. 336 (1943).‘
3. In fact, in case No. 75-4448, the commission awarded no
monetary compensation, a result which could not be reached
under Georgia law. Dodson, 563 F.2d at 1180.
4. At the time Dodson was decided, under Georgia law, rea-
sonable attorneys’ fees would have been included.in the award.
See White v. Georgia Power Co., 237 Ga. 341, 227 S.E.2d 385
(1976), overruled, DeKalb County v. Trustees, Decatur Lodge No.
1602, 242 Ga. 707, 251 S.E.2d 243 (1978). Since then, however,
the Georgia Supreme Court has held that attorneys’ fees need
not be included in the measure of just compensation under the
Georgia Constitution. DeKalb County, 251 S.E.2d 243 (overruling
White v. Georgia Power Co. and its progeny).
It appears that the two differences in the method of determin-
ing just compensation under Georgia and federal law discussed
in the text above are the key differences. In any event, they
are the only ones mentioned specifically on appeal. Any questions
concerning the exact parameters of Georgia law on this issue
will have to be resolved on remand.
AT
[1] We think it clear that the source of the eminent
domain power at issue here is federal. Since Section 21
licensees derive their authority to exercise the power of
eminent domain from the Federal Power Act, which was
passed in the exercise of a “ ‘constitutional function or
power,’” see United States v. Kimbell Foods, Inc., 440
U.S. 715, 726, 99 S.Ct. 1448, 1457, 59 L.Ed.2d 711 (1979)
(quoting Clearfield Trust Co. v. United States, 318 U.S. 363,
366, 63 S.Ct. 573, 574, 87 L.Ed. 838 (1943)), their rights,
as well, should derive from a federal source. 440 U.S. at
726, 99 S.Ct. at 1457. We think that, in this context,
federal interests are “sufficiently implicated to warrant
the protection of federal law.” Kimbell Foods, 440 U.S.
at 727, 99 S.Ct. at 1457-1458. Since the statute does not
specify the appropriate rule of decision, the task of inter-
stitial federal lawmaking falls upon the federal judiciary
in this case “‘to declare the governing law in an area
comprising issues substantially related to an established
program of government operation.’” United States v.
Little Lake Misere Land Co., 412 U.S. 580, 593, 93 S.Ct.
2389, 2397, 37 L.Ed.2d 187 (1973) (quoting Mishkin, The
Variousness of “Federal Law”: Competence and Discre-
tion in the Choice of National and State Rules for Decision,
105 U.Pa.L.Rev. 797, 800 (1957)). Thus, the question
which remains is whether the court should choose federal
common law or state law as the appliceble federal rule.
See, e. g., Kimbell Foods, 440 U.S. 715, 99 S.Ct. 1448, 59
L.Ed.2d 711; Clearfield Trust, 318 U.S. 363, 63 S.Ct. 573,
87 L.Ed. 838.
The answer to this question is largely dependent upon
whether one begins with the position that state law should
be adopted unless it is shown that legislative intent or
other sufficient reasons exist to displace state law with
federal common law or with the position that federal com-
mon law should be utilized unless it is shown that legis-
A8
lative intent or other sufficient reasons exist to warrant
adoption of state law. Basic considerations of federalism,
as embodied in the Rules of Decision Act,’ prompt us to
begin with the premise that state law should supply the
federal rule unless there is an expression of legislative
intent to the contrary, or, failing that, a showing that
state law conflicts significantly with any federal interests
or policies present in this case. Wallis v. Pan American
Petroleum Corp., 384 U.S. 63, 68, 86 S.Ct. 1301, 1304, 16
L.Ed.2d 369 (1966).
Our reading of Supreme Court decisions convinces us
of the correctness of our approach.* In Clearfield Trust,
5. The laws of the several states, except where the Con-
stitution or treaties of the United States or Acts of Congress other-
wise require or provide, shall be regarded as rules of decision
in civil actions in the courts of the United States, in cases where
they apply.
28 U.S.C. § 1652 (1976).
6. Ample support for this presumption favoring adoption
of state law as the federal rule is found in the law review com-
mentaries. As Professor Wechsler has said regarding the role
of federalism, “National action has always been regarded as ex-
ceptional in our policy, an intrusion to be justified by some
necessity, the special rather than the ordinary case. .. The
political logic of federalism thus supports placing the burden of
persuasion on those urging national action.” Wechsler, The Po-
litical Safeguards of Federalism: The Role of the States in the
Composition and Selection of the National Government, 54 Colum.
L.Rev. 543, 544-45 (1954). See also Mishkin, The Variousness of
“Federal Law”: Competence and Discretion in the Choice of
National and State Rules for Decision, 105 U.Pa.L.Rev. 797, 814
n.64 (1957) (“Our federalism, which the [Rules of Decision] act
expresses, seems to posit generally that in case of doubt, the
courts should use state law, leaving new extensions of federal
power to the legislative body.”); Comment, Federal Courts—
Choice of Controlling Law in Cases Involving Federally Insured
Mortgages, 49 N.C.L.Rev. 358, 365 (1971) (“If the philosophy of
the Rules of Decision Act is applied in answering the second
question of whether to adopt the local law as the federal rule,
a presumption will arise that the state law is adopted. This pre-
sumption could be rebutted by a showing of sufficient federal
int_rest for rejection of the local law as the federal rule.”); Com-
ment, Rules of Decision in Nondiversity Suits, 69 Yale L.J. 1428,
(Continued on following page)
A9
federal law was chosen as the applicable federal rule to
govern an action against the United States on a federal
check. 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed. 838. The
Court stated:
In our choice of the applicable federal rule we
have occasionally selected state law.... But reasons
which may make state law at times the appropriate
federal rule are singularly inappropriate here. The
issuance of commercial paper by the United States
is on a vast scale and transactions in that paper from
issuance to payment will commonly occur in several
states. The application of state law, even without the
conflict of laws rules of the forum, would subject the
rights and duties of the United States to exceptional
uncertainty. It would lead to great diversity in results
by making identical transactions subject to the vagaries
of the laws of the several states. The desirability of
a uniform rule is plain.
Id. at 367, 63 S.Ct. at 575 (citation omitted).
Footnote continued—
1446 (1960) (“In the absence of evidence of congressional intent
to the contrary, state law would seem applicable under the Rules
of Decision Act in all three cases [where a federal statute is in-
volved and 1) a term of the act requires further definition; 2)
no provision is made for certain matters; or 3) the statute regu-
lates certain areas without indicating whether existing state law
in that area is preempted or continues in force where the federal
law does not specifically govern], for the statute does not ‘other-
wise require or provide.’ Of course, courts examining the major
purposes of the act may find that the application of state law will
cause results contrary to the objectives sought by Congress. In
some cases, the lack of uniformity itself may obstruct the opera-
tion of a statute even though none of the various results are by
themselves objectionable. But this is, in effect, simply a finding
of congressional intent not to be bound by state law. Without
that finding, state law should be followed.”). Cf. Comment
Adopting State Law as the Federal Rule of Decision: A Pro
Test, 43 U.Chi.L.Rev. 823, 826 (1976) (“when the source of law is
federal, Congress or the Constitution ‘“require[s]"”’ otherwise
than that state law [should] govern of its own force”) (quoting
United States v. Little Lake Misere Land Co., 412 U.S. 580, 592-93,
93 S.Ct. 2389, 2396-97, 37 L.Ed.2d 187 (1973) ).
Al0
The choice of state law as the federal rule was thought
to be similarly inappropriate in determining whether the
United States could recover for damages suffered when
a serviceman is injured by a third party tortfeasor. United
States v. Standard Oil Co., 332 U.S. 301, 67 S.Ct. 1604,
91 L.Ed. 2067 (1947). Uniform national treatment, rather
than diversified local disposition, was called for because
of the distinctively federal nature of the government-
soldier relation and because the question was primarily
one of federal fiscal policy, of no particular concern to the
states or their citizens. Id. at 310-11, 67 S.Ct. at 1609-10."
In Bank of America National Trust & Savings Ass’n v.
Parnell, 352 U.S. 29, 77 S.Ct. 119, 1 L.Ed.2d 93 (1956), the
Supreme Court held state law applicable, refusing to ex-
tend the Clearfield Trust rationale to litigation between
private parties even though the suit involved federal com-
mercial paper. The Court reasoned as follows:
The present litigation is purely between private parties
and does not touch the rights and duties of the United
States. The only possible interest of the United States
in a situation like the one here, exclusively involving
the transfer of Government paper between private
persons, is that the floating of securities of the United
States might somehow or other be adversely affected
by the local rule of a particular State regarding the
liability of a converter. This is far too speculative far
too remote a possibility to justify the application of
federal law to transactions essentially of local concern.
352 U.S. at 33-34, 77 S.Ct. at 121.
In Wallis v. Pan American Petroleum Corp., the Court
held that state law governed the dealings of private par-
7. Judge Wisdom viewed these early cases, Clearfield Trust
and Standard Oil, as representative of a presumption favori
a law, from which later cases departed. Dodson, 563 F.
at 1188.
All
ties in an oil and gas lease issued under the Mineral Leas-
ing Act of 1920. 384 U.S. 63, 86 S.Ct. 1301, 16 L.Ed.2d 369.
The Court there enunciated the following test:
In deciding whether rules of federal common law
should be fashioned, normally the guiding principle
is that a significant conflict between some federal
policy or interest and the use of state law in the
premises must first be specifically shown.
Id., at 68, 86 S.Ct. at 1304.*
In Miree v. DeKalb County, Georgia, 433 U.S. 25, 97
S.Ct. 2490, 53 L.Ed.2d 557 (1977), the Court held state law
applicable in an action against the county by survivors of
deceased airline passengers who attempted to recover as
third party beneficiaries of a contract between the county
and the Federal Aviation Administration. The Clearfield
Trust approach was inapplicable because the rights of pri-
vate litigants alone were at issue. 433 U.S. at 30, 97 S.Ct.
at 2494. Although the United States has a substantial
interest in regulation of air travel and promotion of air
travel safety, id. at 31, 97 S.Ct. at 2494, as was the case in
Parnell and Wallis, any federal interest in the outcome of
the specific question before the Court was “ ‘far too specu-
lative, far too remote a possibility to justify the applica-
tion of federal law to transactions essentially of local con-
cern.’” Id. at 32-33, 97 S.Ct. at 2495-2496 (quoting Parnell,
352 US. at 33-34, 77 S.Ct. at 121-122).
Finally, in Kimbell Foods, decided after Dodson, the
Court held that state law should be adopted as the ap-
propriate federal rule for establishing priorities of com-
peting federal (SBA and FHA) and private liens since a
8. Judge Simpson viewed this language as “nearly, if not
quite,” establishing a ‘presumption favoring state law in choice
of law cases.”” Dodson, 563 F.2d at 1194 (dissent).
Al2
national rule was unnecessary to protect the federal in-
terests involved. 440 U.S. 718, 99 S.Ct. at 1453. The Court
rejected what it considered “generalized pleas for uni-
formity as substitutes for concrete evidence that adopting
state law would adversely affect administration of the fed-
eral programs.” Id. at 730, 99 S.Ct. at 1459. The govern-
ment’s argument that the special priority accorded federal
tax liens was requ‘red here as well, since application of
state law would undermine its ability to recover funds dis-
bursed under the lending programs and thus would conflict
with program objectives, was also rejected. Id. at 733-38,
99 S.Ct. at 1461-1464. The special priority the government
commands in its tax collecting capacity was not warranted
in this context where it was in substantially the same posi-
tion as private lenders. Id.
The foregoing review of Supreme Court decisions leads
us to the conclusion that they do indeed evidence “a grow-
ing desire to minimize displacement of state law,” Dodson,
563 F.2d at 1189, and that conclusion strongly supports our
position that state law should be adopted as the federal
rule of compensation unless it is shown that legislative in-
tent or other sufficient reasons exist to displace state law
with federal common law.
[2] Our review of the relevant legislative history re-
veals no express congressional intent that federal common
law and not state law should supply the federal rule in
determining the measure of compensation in condemnation
cases brought under Section 21. Therefore, we turn to an
examination of the considerations relevant to the “nature
of the specific governmental interests and to the effects
upon them of applying state law.” Standard Oil, 332 U.S.
at 310, 67 S.Ct. at 1609. If the effect of applying state law
is virtually to nullify the federal objectives, then there is
a conflict that precludes application of state law. See, e. g.,
Al3
Little Lake, 412 U.S. 580, 93 S.Ct. 2389, 37 L.Ed.2d 187. If
application of state law would arguably interfere with an
identifiable federal policy or interest, but not amount to
a conflict which would preclude application of state law,
we must proceed to an examination of the relative strength
of the state’s interests in having its rules applied. See
United States v. Yazell, 382 U.S. 341, 351-53, 86 S.Ct. 500,
506-07, 15 L.Ed.2d 404 (1966); cf. Little Lake, 412 U.S. at
599, 93 S.Ct. at 2400 (although adoption of state law was
precluded because it conflicted with the federal program
regarding federal land acquisitions under the Migratory
Bird Act, the Court stated that its conclusion might con-
ceivably be influenced if the retroactive state statute
sought to be applied served “legitimate and important state
interests the fulfillment of which Congress might have
contemplated through application of state law’); Wallis,
384 U.S. at 68, 86 S.Ct. at 1304 (not reaching the issue since
no significant threat was found). See generally Comment,
Adopting State Law as the Federal Rule of Decision: A
Proposed Test, 43 U.Chi.L.Rev. 799 (1976).
[3] While we do not deny the existence of important
federal interests in issues arising under the Federal Power
Act (indeed, that is the basis for our decision that federal
law governs in the first place), we are of the opinion that
the interests of the United States in the determination of
the amount of compensation a private licensee must pay
a landowner in a condemnation proceeding under Section
21 are not sufficient to warrant displacement of state law
on that issue. Before a license may be issued under the
Federal Power Act, there must be a determination by the
Commission that the project does not affect the “develop-
ment of any water resources for public purposes [that]
should be undertaken by the United States itself.” 16
U.S.C. § 800(b). Thus, by definition, a licensed project
does not implicate the interests of the United States to the
Al4
degree that it is thought desirable that the project be under-
taken by the United States itself. We find persuasive and
relevant to determining the nature of federal and state in-
terests in this case the distinction observed by the Ninth
Circuit in Public Utility District No. 1 v. City of Seattle,
382 F.2d 666, 669-70 (9th Cir.), cert. dismissed, 396 U.S.
803, 90 S.Ct. 22, 24 L.Ed.2d 59 (1969) (even though it was
made in support of its finding, which we deem erroneous,
that Section 21 does not delegate full eminent domain
power):
We first observe that the position of a licensee is
disuinguishable from that of the United States with
respect to furthering of the national interest. By is-
suance of a license the United States is not acting in
the national interest through the licensee to the same
extent as it would if it undertook the project itself.
The United States acts in the public interest on a na-
tional scale; the licensee often on a local scale, on
projects thought to be of insufficient dimensions to
warrant the assertion of national power. In many
cases the requirements of federal permission and regu-
lation are all that the national interest requires. Fre-
quently the licensee is a privately owned utility or
even manufacturer, seeking the license for purposes
of profit.
Although federal rules have been applied to the de-
termination of just compensation in federal condemnation
cases where the United States is the party condemning
and paying for the land,® we do not deem those decisions
9. See, e. United States v. Miller, 317 U.S. 369, 380, 63
S.Ct. 276, 283, 7 L.Ed. 336 (1943); United States v. Certain
Property "Located in Borough of Manhattan, 344 F.2d 142, 146
(2d Cir. 1965); United States v. City of New York, 165 F.2d 526,
528 (2d Cir. 1948) (L. Hand, J.); United States v. Certain Parcels
of Land, 144 F.2d 626, 628 (3d Cir. 1944); United States v.
3,595.98 Acres of Land, 212 F.Supp. 617 ( N.D.Cal.1962).
Ald
controlling’’ since our case arises in the context of a Sec-
tion 21 proceeding by a licensee where the nature of the
10. The majority in Dodson denied being bound by those
cases but was of the opinion that those decisions were helpful
starting points even though they did not involve federal con-
demnations by Section 21 licensees. Judge Wisdom wrote:
Other courts in federal compensation cases have balanced
the state and federal interests and have concluded that federal,
rather than state, law should sipply the rules of compensa-
tion. Unless we find the weights on our scale to be sub-
stantively different, we see no reason to diverge from the
yn of the Supreme Court and some of our Courts of
ppeals.
Dodson, 563 F.2d at 1186, n. 21. While a decision to apply federal
rules of compensation might implicitly involve a determination
that federal interests outweigh state interests, we do not find
the cases cited persuasive since they contain no express interest
analysis, which may be indicative of the importance attached to
the presence of the United States as the condemnor in those cases.
In support of its contention that there is no need to balance
any interests in this case, Georgia Power Company places great
reliance on Richmond Elks Hall Ass’n v. Richmond Redevelopment
Agency, 561 F.2d 1327 (9th Cir. 1977), where the court refused to
apply the law of the state (which, unlike federal law, awards
costs and expenses, including attorneys’ fees, to landowners who
obtain judgment in inverse condemnation actions against public
entities) in a successful inverse condemnation action brought
under the Fifth Amendment against a federally assisted city
redevelopment agency. The Ninth Circuit viewed the Supreme
Court’s reasoning in a Miller Act case, F. D. Rich Co. v. Industrial
Lumber Co., 417 U.S. 116, 94 S.Ct. 2157, 40 L.Ed.2d 703 (1974),
controlling. The Miller Act provides a remedy for suppliers and
subcontractors who perform services or provide material for a
contractor in connection with construction on federal property
who must bring suit to recover money owed them by the con-
tractor. 40 U.S.C. § 270a et seg. (1976). In F. D. Rich Co., the
Supreme Court stressed the importance of a uniform national rule
and reversed the Ninth Circuit’s holding that the Miller Act re-
quires an award of attorneys’ fees where the “public policy” of
the state in which suit is brought allows an award of fees in
similar contexts. One reason for reversal was expressed as fol-
lows:
Although the court below premised its decision on the theory
that a Miller Act remedy is afforded “ ‘in lieu of the lien
upon land and buildings customary where property is owned
by private persons,’ ” it gave respondent more protection than
California law affords litigants involved in disputes arising
from private construction projects who are not entitled to an
(Continued on following page)
Al6
federal interests involved differs markedly from the na-
ture of the federal interests involved where the United
States is the condemnor. Furthermore, while also not
controlling, there is authority for the application of state
law to questions concerning compensation, such as ad-
missibility of evidence of consequential damages and the
propriety of interest on a compensation award in con-
demnation actions brought in federal court under Section
21. See, e. g. Feltz v. Central Nebraska Public Power &
Irrigation Dist., 124 F.2d 578 (8th Cir. 1942) .™
Footnote continued—
award of attorneys’ fees. We think it better to extricate the
federal courts from the morass of trying to divine a “state
policy” as to the award of attorneys’ fees in suits on construc-
tion bonds.
417 U.S. at 128, 94 S.Ct. at 2164. The Court also pointed out
that “[m]Jany federal contracts involve construction in more than
one State, and often, as here, the parties to Miller Act litigation
have little or no contact, other than the contract itself, with the
State in which the federal project is located.” Id. at 127, 94 S.Ct.
at 2164. In view of the foregoing analysis, discussing federal
and state interests, we do not think Richmond Elks Hall lends
much support to Georgia Power’s theory that there is no need
to balance interests and we do not deem controlling on the issue
before us the following language from F. D. Rich Co. quoted by
the court in Richmond Elks Hall:
The Miller Act provides a federal cause of action, and the
scope of the remedy as well as the substance of the rights
created thereby is a matter of federal not state law. Neither
respondent nor the court below offers any evidence of con-
gressional intent to incorporate state law to govern such an
important element of Miller Act litigation as liability for
attorneys’ fees. [F. D. Rich Co., 417 U.S.] at 127, 94 S.Ct. at
2164.
561 F.2d at 1334. Furthermore, we note that unlike Section 21
licensees, the redevelopment agency in Richmond Elks Hall was
federally funded.
11. See also Central Nebraska Pub. Power & Irrigation Dist.
v. Harrison, 127 F.2d 588 (8th Cir. 1942); Central Nebraska Pub.
Power & Irrigation Dist. v. Fairchild, 126 F.2d 302 (8th Cir. 1942);
Samuelson v. Central Nebraska Pub. Power & Irrigation Dist., 125
F.2d 838 (8th Cir. 1942); Burnett v. Central Nebraska Pub. Power
& Irrigation Dist., 125 F.2d 836 (8th Cir. 1942); McGinley v. Cen-
tral Nebraska Pub. Power & Irrigation Dist., 124 F.2d 692 (8th Cir.
1942); Central Nebraska Pub. Power & Irrigation Dist. v. Berry,
124 F.2d 586 (8th Cir. 1942).
Al7
The overriding federal interest at stake in a case
such as this one is in implementing or effectuating the fed-
eral program. Thus, if state law is so hostile that its
application would actually frustrate this objective, a con-
flict exists which precludes adoption of state law as the
federal rule. See Little Lake, 412 U.S. 580, 93 S.Ct. 2389,
37 L.Ed.2d 187. The specific federal interests or policies
which may be identified under the Federal Power Act
are 1) maximization of hydroelectric development, 2) re-
duced energy costs and 3) minimization of cost to the
government should it decide to exercise its option to ac-
quire a project at the expiration of the license term, upon
payment of ‘‘net investment,” not exceeding the “fair
value” of the property taken, under Section 14(a) of the
Federal Power Act, 16 U.S.C. § 807(a) (1976).'* See First
12. Section 14(a) of the Federal Power Act provides as
follows:
Upon not less than two years’ notice in writing from the
Commission the United States shall have the right upon or
after the expiration of any license to take over and there-
after to maintain and operate any project or projects as
defined in section 796 of this title, and covered in whole
or in part by the license, or the right to take over upon mutual
agreement with the licensee all property owned and held by
the licensee then valuable and serviceable in the development,
transmission, or distribution of power and which is then de-
pendent for its usefulness upon the continuance of the
license, together with any lock or locks or other aids to navi-
gation constructed at the expense of the licensee, upon the
condition that before taking possession it shall pay the net
investment of the licensee in the project for projects taken,
not to exceed the fair value of the property taken, plus such
reasonable damages, if any, to property of the licensee val-
uable, serviceable, and dependent as above set forth but not
taken, as may be caused by the severance therefrom of
property taken, and shall assume all contracts entered into
by the licensee with the approval of the Commission. The
net investment of the licensee in the project or projects so
taken and the amount of such severance damages, if any,
shall be determined by the Commission after notice and op-
portunity for hearing. Such net investment shall not include
or be affected by the value of any lands, rights-of-way, or
other property of the United States licensed by the Commission
(Continued on following page)
Al8
Iowa Hydro-Electric Cooperative v. FPC, 328 U.S. 152,
171-74, 180, 66 S.Ct. 906, 915-16, 919, 90 L.Ed. 1143 (1946).
See generally J. Kerwin, Federal Water-Power Legislation
(1926).
It is clear to us that application of state law to the
narrow question of the determination of the amount of
compensation a licensee must pay a landowner does not
nullify federal objectives and does not result in a conflict
which would preclude application of state law. In Little
Lake, application of a state statute retroactively making
mineral rights imprescriptible would have deprived the
federal government of its previously bargained for con-
tractual interests in mineral rights and would have cre-
Footnote continued—
under this chapter, by the license or by good will, going
value, or prospective revenues; nor shall the values allowed
for water rights, rights-of-way, lands, or interest in lands be
in excess of the actual reasonable cost thereof at the time
of acquisition by the licensee: Provided, That the right of
the United States or any State or municipality to take over,
maintain, and operate any project licensed under this chapter
at any time by condemnation proceedings upon payment of
just compensation is expressly reserved.
16 U.S.C. § 807(a) (1976). The option provision has been cited
as illustrative of the “closensss of the relationship of the Federal
Government to these projects and its obvious concern in main-
taining control over their engineering, economic and financial
soundness.” First Iowa Hydro-Electric Coop. v. FPC, 328 U.S.
152, 172-73, 66 S.Ct. at 906, 90 L.Ed. 1143 (1946). See also id.
at 181 n. 25, 66 S.Ct. at 920, n. 25. The government, however,
in its amicus brief to the Supreme Court on petition for certiorari
in Dodson, brief for United States at 12, Boswell v. Georgia Power
Company, 440 U.S. 907, 99 S.Ct. 1213, 59 L.Ed.2d 454 (1979),
described the governmental interest arising from this option as
a “less important federal interest” since it cannot be predicted
with confidence that many lensed projects will be recommended
for federal take-over as their ‘erms expire. Since under Section
7(b) of the Act, 16 U.S.C. § 809(b), approval may not be given
for any application for a project when the Commission finds that
“the development of any water resources for public purposes
should be undertaken by the United States itself,” the landowners
argue that exercise of the option is unlikely because it will have
already been determined that it was unnecessary for the United
States to undertake the project initially.
Alg
ated uncertain’y in the land acquisition program embodied
in the Migratory Bird Conservation Act, 16 U.S.C. § 715
et seq. The Court held that “borrowing” state law in this
case would be inappropriate since ‘‘specific aberrant or hos-
tile state rules do not provide appropriate standards for
federal law.” Little Lake, 412 U.S. at 595-96, 93 S.Ct. at
2398. Georgia Power Company argues that it would like-
wise be inappropriate to apply Georgia law to the com-
putation of just compensation in condemnation actions in
federal court under Section 21 since, especially in its al-
lowance of enhanced value resulting from knowledge of
the project, as to which it is admittedly in the minority,”
the Georgia law is sufficiently aberrant and hostile to the
energy program embodied in the Federal Power Act. We
do not agree that application of a state law which results
in higher awards to the landowners, even when aspects
of that law represent the minority position, amounts to
the kind of conflict which precluded adoption of state law
in Little Lake. Compare Yazell, 382 U.S. 341, 86 S.Ct.
500, 15 L.Ed.2d 404, where the Court held that state law
governed in a suit by the United States to collect a debt
owed the SBA even though application of that particular
state law precluded the government’s recovery. The Court
recognized that the state’s law of coverture, successfully
13. The Supreme Court of Georgia answered contentions
that only Georgia has a rule allowing enhancement in value re-
sulting from the improvement as follows:
To such contentions we would reply further by paraphrasing
a statement of a great president who once said, “Everybody is
against me—everybody except the people,’ by saying that
all the decisions are against what we hold—all except the
controlling decisions of the courts of Georgia. On this point
in Green v. Coast Line Railroad Co., 97 Ga. 15, at pages 36
and 37, 24 S.E. 814, at page 822, 33 L.R.A. 806, this court
said: “Every direct authority known to us is against us.
Nevertheless, we are right, and these authorities are all
es as time and further judicial study of the subject will
manifest.”
Hard v. Housing Authority of Atlanta, 219 Ga. 74, 132 S.E.2d 25,
30 (1963).
A20
invoked by the debtor, was “peculiar and obsolete” and
had even been repealed in Texas subsequent to the events
in the case. 382 U.S. at 351, 86 S.Ct. at 506. Nevertheless,
the Court declined to override the state law because
state interests, particularly in the field of family and
family-property arrangements . . . should be over-
ridden by the federal courts only where clear and
substantial interests of the National Government,
which cannot be served consistently with respect for
such state interests, will suffer major damage if the
state law is applied.
Id. at 352, 86 S.Ct. at 507.
Although application of state law resulting in higher
condemnation costs to the licensee is not precluded, never-
theless, since application of the state law arguably burdens
or interferes with the three federal interests or policies
enumerated above, we must weigh the federal interest in
avoiding this interference against the state interest in hav-
ing its law applied.
In any case involving the issue of choice of federal
or state law, the desirability of uniformity achieved by
application of federal common law may be advanced.
Where, however, as here, uniformity bears little relation
to the federal program at issue,'* it does not weigh heavily
14. We take the opportunity to note at this juncture that
the Federal Power Act does not represent an attempt by Congress
to provide for application of uniform national law to all aspects
of hydroelectric development under the Act. Examining the legis-
lative history which primarily indicates congressional desire to
insure the passage and constitutionality of the Act in order to
promote the long needed development of water power, the Su-
preme Court cited as illustrative of the integration of state and
federal jurisdiction, which carefully preserves the separate in-
terests of the states, the following provisions:
[Section] 4(a) and (c), cooperation of the Commission with
the executive departments and other agencies of the State
and National Governments is required in the investigation of
(Continued on following page)
A21
in favor of application of uniform federal law. Further-
more, since a licensee often has the option of utilizing
Footnote continued—
such subjects as the utilization of water resources, water-power
industry, location, capacity, development costs and the re-
lation to markets of power sites, and the fair value of power.
§ 4(f), notice of application for a preliminary permit is to
go to any State or municipality likely to be interested. § 7(a),
in issuing permits and licenses preference is to be given to
States and municipalities. § 10(e) licenses to States and
municipalities under certain circumstances shall be issued
and enjoyed without charge. § 14, a right is reserved not
only to the United States but to any State or municipality
to take over any licensed project at any time by condemna-
tion and payment of just compensation. §§ 19 and 20,
regulation of service and rates is preserved to the states.
First Iowa Hydro-Electric Coop., 328 U.S. at 174-75 n. 19, 66
S.Ct. at 916, 917 n. 19. This integration refutes any argument
that failure to promote ease in federal administration through
adoption of uniform national standards of compensation signifi-
cantly undermines operation of the energy program. We think
that Sections 19 and 20, 16 U.S.C. §§ 812 and 813, expressly limit-
ing the Coinmission’s authority to regulate rates and other charges,
which are directly related to energy costs, to situations where a
state does not have its own regulations, is telling of the absence
of intent to apply uniform federal law to the compensation ques-
tion.
Although cost of land acquisition is included in rate-base de-
termination by the Commission in regulating interstate wholesale
rates for electric power and by state utility commissions setting
rates for the intrastate sale of power, the government conceded
in its amicus brief to the Supreme Court on petition for certiorari
in Dodson, brief for United States at 12 n. 11, Boswell v. Georgia
Power Company, 440 U.S. 907, 99 S.Ct. 1213, 59 L.Ed.2d 454
(1979), that “the Commission has not either in its rules and
decisions determining what costs for hydroelectric projects are
allowable under 16 U.S.C. 797(b) [determination of “actual legiti-
mate original cost of and the net investment in a licensed project’ ]
or in its rules and decisions governing rate-making by interstate
wholesalers of electricity and natural gas, developed a standard
favoring the use of either federal or state criteria in the valua-
tion for land acquisition purposes.” See also Grand River Dam
Auth. v. Grand Hydro, 335 U.S. 359, 374-75, 69 S.Ct. 114, 121-122,
93 L.Ed. 64 (1948) (discussing materiality of fact that valuations
are used in determination of rates and net investment; holding
that Federal Power Act does not displace state rules of com-
pensation where a licensee relies only on the powers of eminent
domain granted by the state; leaving open the questions of the
proper measure of value in a condemnation proceeding instituted
by the United States [since settled in favor of application of
(Continued on following page)
A22
either state or federal eminent domain power (as Georgia
Power Company has with respect to most, if not all, of
the land taken for the Lake Wallace project), application
of uniform federal law when a licensee proceeds under
the federal power authorized by Section 21 could result in
a corresponding loss of uniformity even in a single proj-
ect." Of course, distinguishing cases where the United
States is the condemning party from cases where a li-
censee is the condemnor, applying federal law to deter-
mine the measure of compensation in the former but not
in the latter, might be thought to be equally lacking in
uniformity and undesirable.’* Since national uniformity
is not specifically related to the operation of the Federal
Power Act and since application of either federal or state
law may result in a corresponding loss of uniformity,
Footnote continued—
federal law, United States v. Twin City Power Co., 350 U.S. 222,
76 S.Ct. 259, 100 L.Ed. 240 (1956)] or by one of its licensees
under Section 21).
15. We express no opinion as to whether Congress had the
power to compel “application of a uniform, federal standard in
any exercise of eminent domain power, state or federal, to ac-
quire land on which to build these federally regulated facilities”
as contended by Judge Simpson, Dodson, 563 F.2d at 1200 (dissent)
and disputed by the majority, id. at 1183 n. 16.
We agree with the majority in Dodson that the landowners’
arguments that impermissible forum shopping and denial of equal
protection may result from application of different standards of
compensation when a licensee has the option of proceeding under
state or federal powers of eminent domain are without merit. Id.
at 1191-93.
16. Indeed, the same lack of uniformity in a single project
could result if state law is applied to determine compensation when
a licensee condemns the property and if federal law is applied
to determine the “fair value” to which “net investment” is limited
when the United States exercises its take-over option under Sec-
tion 14. We note that, as pointed out by Judge Simpson, problems
of interpretation of “net investment” emphasize that “whether
the price paid by a state party in a Section 21 condemnation will
affect the price later paid by the federal government in exer-
cising its option under Section 14 is by no means certain.” Dodson,
563 F.2d at 1198 n. 11. See also Grand River Dam. Auth. v.
Grand Hydro, 335 U.S. at 374-75, 69 S.Ct. at 121-22.
A23
arguably cancelling out the advantage otherwise gained,
we do not count this argument in either side’s favor."
In analyzing the state’s interests in having its laws of
compensation apply when a licensee exercises the power of
eminent domain under Section 21 of the Federal Power
Act, we begin with the state’s interest in avoiding displace-
ment of its laws in the area of property rights, traditionally
an area of local concern. Since property has been viewed
as a bundle of valuable rights and since the question of
what constitutes property is usually determined with refer-
ence to state law,!® we think it consistent that the value of
those rights also be determined with reference to state law.
Since states, as well as the federal government, have an in-
terest in providing economical energy to their citizens, their
laws of compensation, accommodating that interest with
that of insuring that their condemnee-landowner citizens
are compensated in accord with their (states’) views of
what is just, are entitled to weight. As pointed out by the
landowners, a Section 21 licensee-condemnor is typically
either the state itself, a state-owned entity, a municipality
or a private utility, organized and operating under the laws
of the state and heavily regulated by a state utility com-
mission. A licensee usually condemns property for a proj-
ect and sells electricity produced therefrom only in the
state where it operates. This case, for example, involves a
17. Another argument traditionally advanced in cases in-
volving the issue of choice of state or federal law is that greater
certainty may be achieved by application of well established state
law on an issue as to which there is no established body of
federal common law. As pointed out by the majority in Dodson,
that argument carries no weight in this case since there is an
established body of federal law on the issue of just compensation.
Dodson, 563 F.2d at 1189-90. While that fact does not further
the argument that state law should be adopted in this case, we do
not view it as significantly detracting from it.
18. See, e. g., United States v. Certain Property Located in
Borough of Manhanttan, 344 F.2d 142, 144-45 (2d Cir. 1965)
(Friendly, J.); United States v. 145.30 Acres of Land, 385 F.Supp.
699 (W.D.La.1974), aff'd, 524 F.2d 1231 (5th Cir. 1975).
A24
private corporation using private funds to take private prop-
erty from a private landowner.
Georgia Power Company asserts that the application
of Georgia law as the federal rule of compensation in these
cases will result in higher land acquisition costs than those
which would have obtained if the law applicable to cases in
which the federal government is the condemnor were ap-
plied.” Georgia Power goes on to assert that because those
costs will ultimately be recovered from consumers of hydro-
electric power in the form of higher charges for power,
the selection of Georgia law will impermissibly burden the
achievement of one of the principal objectives of the Fed-
eral Power Act, inexpensive hydroelectric power. As-
suming that the effect of the application of Georgia law
will be higher cost to the consumer, nevertheless, we dis-
agree with the conclusion that the result is an impermissible
burden on the achievement of the objectives of the Federal
Power Act. To apply federal law because of the de-
creased cost to the consumer as compared to the cost to the
19. We do not view as highly probative the conflicting as-
sertions of the parties in their supplemental briefs on rehearing
en banc concerning the inferences which should be made regard-
ing the effects of the energy program of increased costs of con-
demnation based largely on certain statistics gleaned from the
report of the United States Department of Energy, Energy In-
formation Administration, Hydroelectric Plant Construction Cost
and Annual Production Expenses 1976, Twentieth Annual Sup-
plement (May 1978). The landowners argue basically that since
a substantial number of projects were developed through the use
of state laws of condemnation, we may conclude that use of
state law does not retard hydroelectric development. While
this appears to us to be largely conjectural, the argument that
use of state law does retard hydroelectric development does not
appear significantly less so.
The landowners also assert in their en banc briefs that the
Wallace Dam project was budgeted in anticipation that state law
would control the setting of just compensation. The Power Com-
pany vigorously denies that this was the case. We decline to
give weight to this disputed assertion. Cf. Kimbell Foods, 440
U.S. at 729-32, 99 S.Ct. at 1459-61; Yazell, 382 U.S. 341, 86 S.Ct.
500, 15 L.Ed.2d 404.
A25
consumer which would result if Georgia law were applied
is to require certain Georgia landowners partially to sub-
sidize a private Georgia utility and consumers of electric
power in a way which would not be required of them if
Georgia law were applied. In the absence of an indi-
cation of specific legislative intent to impose such a burden
on Georgia landowners, we will not presume that Congress
would have balanced the interests of private licensees and
consumers of hydroelectric power, on one hand, and the
property owners, on the other hand, in a fashion different
from the way in which the laws of the State of Georgia
balance such interests.
As is demonstrated by the persuasiveness of the well-
reasoned positions advanced by both the majority and the
dissent in Dodson, the choice of law question in this case
is a close one. A majority of this court, however, is of the
opinion that absent a showing of legislative intent to the
contrary considerations of federalism warrant a preference
for adoption of state law as the federal rule. We do not
find the showing of federal interest and the effect thereon
of applying state law sufficient to overcome that preference
in this case. Thus, we are led to the conclusion that the law
of the state where the condemned property is located
is to be adopted as the appropriate federal rule for deter-
mining the measure of compensation when a licensee ex-
ercises the power of eminent domain pursuant to Section 21
of the Federal Power Act.
The judgments of the district court are VACATED and
the cases are REMANDED for further proceedings con-
sistent with this opinion.
VACATED and REMANDED.
A26
FAY, Circuit Judge, concurring:
In this era of ever-groping federal tentacles, perhaps
it is quixotic to brandish one small sword in a crusade
against further invasion of the powers of states. With the
hope that this battle cry will not be a last gasp, I will
charge forward with the apparently anachronistic views
that states are sovereigns, that states do control property
and property rights. A significant conflict between federal
and state interests must exist tc preempt state control.
Trimmed to the bone, the facts of this case are that a
private, Georgia utility company desires privately-owned
Georgia land from Georgia citizens for a private hydro-
electric power and recreation project in Georgia to sup-
ply power to Georgia citizens and to provide profit to
private investors. In looking to define “just compensa-
tion” when such a private, state-controlled utility company
exerts the eminent domain power to acquire private land,
federal law should not control the inquiry. I therefore
concur in the majority result, although I would have
reached that holding by a different route.
Despite the danger of appearing to have surrendered
this battle, I will also suggest an additional basis for prefer-
ring state laws as federal rules of decision.
A. States Control Property
A helpful, if overly simplified, starting point may be
to sketch out several types of state-federal relationships.
In some instances, the Constitution forbids states to act, or
grants the federal government exclusive power to act. In
these subject areas, state action is precluded. At the op-
posite end of the spectrum are the powers the Constitution
reserves to the states.’ In those areas, congressional au-
1. It is probably the height of naivety to recall that some
of us were taught that the federal government received its powers
through delegation and that powers and authority not specifically
prohibited to the states nor delegated to the United States were
retained by those same sovereign states, U.S.Const. amend. X.
“ A27
thority to regulate states is limited. See, e. g., National
League of Cities v. Usery, 426 U.S. 833, 96 S.Ct. 2465, 49
L.Ed.2d 245 (1976). Between these poles are areas that
Congress has the power to regulate, and Congress either
does or does not act. If Congress has not acted, state
law is usually effective. If Congress has acted, and state
law conflicts, the supremacy clause requires preemption
of the state law, although Congress can designate state
law to be applicable. At times Congress partially exercises
its powers, leaving open some questions of applicable law.
In those instances, the courts decide whether federal or
state law applies, under the rubric of determining the
choice of law or the rule of decision.
Essentially four situations exist, therefore, in which
state law may apply: when Congress expressly adopts
state law, when Congress has not exercised its powers,
when Congress has acted leaving some areas open, and
when the tenth amendment? requires state law to apply
of its own force. In cases involving the latter three
situations, the courts must determine whether state law
applies, of its own force or otherwise, and, except in some
tenth amendment situations, whether it conflicts with fed-
eral programs or policies. The determination requires an
inquiry into the traditional, constitutional allocation of
power over subject matters between state and federal
governments.
My objection to the current framework for determin-
ing choice of law is that it stands on its head the proper
order of questions, losing sight of the inquiry into con-
stitutional allocations of power. The path to choice be-
tween a federal or state rule has acquired many steps.
First, the court decides whether the source of the right is
2. Reference to the tenth amendment is not meant to be
exclusive but rather primary. See also U.S.Const. amend. XXI.
A28
state or federal. If the source is federal, the court inquires
whether Congress has provided that either federal or
state law should govern. In the absence of congressional
statement, the court considers whether the federal rule
should be to adopt state law, or to apply or fashion a uni-
form federal rule. In answering this question, the court
initially determines whether use of state law will truly con-
flict with effectuation of federal policies or programs. If
the answer is “no,” the court balances federal interests in
uniformity against the state’s interests in spheres tradition-
ally left to local control.
In my view the initial inquiry should be into what the
competing subject areas are. The first step should be a
determination of whether the subject area is one tradition-
ally left to state control, not whether the source of right
is state or federal. Especially when dealing with those
powers left to the states, the courts should tread gingerly to
the conclusion that Congress has preempted the field. See
Hisquierdo v. Hisquierdo, 439 U.S. 572, 581, 99 S.Ct. 802,
808, 59 L.Ed.2d 1 (1979); Santa Fe Industries, Inc. v. Green,
430 U.S. 462, 477-80, 97 S.Ct. 1292, 1302-05, 51 L.Ed.2d 480
(1977); United States v. Yazell, 382 U.S. 341, 86 S.Ct. 500,
15 L.Ed.2d 404 (1966). Indeed, a premise to the interstitial
choice of law rulemaking is that Congress has not spoken,
and therefore it should be rare to uncover an intent to
preempt state law. Perhaps this explains why state law is
adopted as the federal rule in so many choice of law cases.
Instead of focusing on the allocation of state-federal
control over the subject areas, the current choice of law
analysis requires looking to the source of the right in
question. Very little space is spent discussing this threshold
inquiry. If the source of right is determined to be federal,
the requirements of Erie R.R. Co. v. Tompkins, 304 U.S. 64,
58 S.Ct. 817, 82 L.Ed. 1188 (1938) and the Rules of De-
A29
cision Act® do not apply to cause state law to operate of
its own force. The source of right is held to be federal
whenever the case involves the Constitution, Clearfield
Trust Co. v. United States, 318 U.S. 363, 366-67, 63 S.Ct.
573, 574, 75, 87 L.Ed. 838 (1943); see Butner v. United
States, 440 U.S. 48, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979); a
federal statute, UAW v. Hoosier Cardinal Corp., 383 U.S.
696, 86 S.Ct. 1107, 16 L.Ed.2d 192 (1966); a federal rela-
tionship, United States v. Standard Oil Co., 332 U.S. 301,
305-06, 67 S.Ct. 1604, 1606-07, 91 L.Ed. 2067 (1947); a fed-
eral program, United States v. Kimbell Foods, Inc., 440 U.S.
715, 726-27, 99 S.Ct. 1448, 1457-58, 59 L.Ed.2d 711 (1979);
United States v. Little Lake Misere Land Co., 412 U.S. 580,
592, 93 S.Ct. 2389, 2396, 37 L.Ed.2d 187 (1973); an implied
federal cause of action, Burks v. Lasker, 441 U.S. 471, 476-
77, 99 S.Ct. 1831, 1836, 60 L.Ed.2d 404 (1979); a federal
agency, United States v. Security Trust & Savings Bank,
340 U.S. 47, 71 S.Ct. 111, 95 L.Ed. 53 (1950); or a federal
contract, United States v. Allegheny, 332 U.S. 174, 64 S.Ct.
908, 88 L.Ed. 1209 (1944).
In a world in which the ever-burgeoning federal gov-
ernment colors most aspects of life, this federal nexus is
rarely lacking, and, accordingly, state law rarely applies of
its own force.* Indeed, these choice of law cases normally
arise in federal court, and, absent diversity, presumably
need some federal connection to enter the federal halls of
justice. Therefore the question posed in the first step of
3. See note 7 infra.
4. In a review of the choice of law cases, one is impressed
with how infrequently the source of right is not federal. In
United States v. Yazell, 382 U.S. at 357, 86 S.Ct. at 509, the Court
left unanswered whether state law applied of its own force or
as a federal rule. Perhaps if the source of right is state law, the
courts immediately move into standard preemption analysis. See
reel % Ackerman, ........ WP Gecsines , 100 S.Ct. 402, 62 L.Ed.2d 355
(1979).
A30
the prevailing choice of law analysis is often answered the
instant the action is commenced.
Perhaps it is splitting hairs to argue over the means for
selecting state law as the rule of decision so long as that
result is reached in the majority of cases. I, for one, how-
ever, find an inherent harm in this usurpation of state
power contrary to the precepts of federalism even if the
displacement is in name only. But the characterization of
the source of the question as federal goes beyond the ap-
pellation. First, the courts still may reject state law that
conflicts with or is hostile to federal policies, or is aberrant.
Although prevailing preemption analysis might also weed
out conflicting state rules, to call the source federal casts
uncertainty over whether, in any particular case, that
state’s law will apply, or will be found lacking in federal
court. Second, characterizing the source as federal binds
state courts to follow the federal rule. Third, by entitling
the source federal, state conflicts of law rules will not apply,
even if the state law is adopted as the federal rule. Klaxon
Co. v. Stentor Elec. Mfg. Co., Inc., 313 U.S. 487, 61 S.Ct.
1020, 85 L.Ed. 1477 (1941). Fourth, the characterization
and subsequent steps of the analysis relegate state interests
to a simple balancing against federal policies rather than
requiring a focus on constitutional allocations and uncon-
stitutional infringements of power.
In this case, the open question is one of property law,
one of the few areas traditionally left to the states. See
United States v. Little Laxe Misere Land Co., 412 U.S.
580, 605-08, 93 S.Ct. 2389, 2403-05, 37 L.Ed.2d 187 (1973)
(Stewart & Rehnquist, J.J., concurring); United States v.
Yazell, 382 U.S. 341, 352-58, 86 S.Ct. 500, 506-10, 15 L.Ed.2d
404 (1966); United States v. Burnison, 339 U.S. 87, 89,
70 S.Ct. 503, 504, 94 L.Ed. 675 (1950); Davies Warehouse
Co. v. Bowles, 321 U.S. 144, 155-56, 64 S.Ct. 474, 480-81, 88
L.Ed. 635 (1944); see also Sunderland v. United States, 266
A31
U.S. 226, 232-34, 45 S.Ct. 64, 65, 69 L.Ed. 259 (1923). The
Supreme Court sometimes mentions this tradition of state
property control when choosing the federal rule. E. g.
Butner v. United States, 440 U.S. 48, 55, 99 S.Ct. 914, 918,
59 L.Ed.2d 136 (1979); United States v. Brosnan, 363 U.S.
237, 241-42, 80 S.Ct. 1108, 1111-12, 4 L.Ed.2d 1192 (1960);
RFC v. Beaver County, 328 U.S. 204, 210, 66 S.Ct. 992,
995, 90 L.Ed. 1172 (1946). The property question arises be-
tween a Georgia landowner and a privately-owned, Georgia
utility company over land in Georgia condemned for a
Georgia power project. Grant of a federal license is con-
ditioned on the project’s being one that the United States
should not undertake. 16 U.S.C. § 800(b) (1976). The
major purpose of the Federal Power Act was to remove im-
pediments to development of local power plants by grant-
ing licensees permission to infringe upon the federal navi-
gational servitude.’ Under these circumstances state law
should govern the definition of just compensation!
It is true that section 21 appears to grant licensees
some eminent domain power, though it may be limited.
See Public Utility District No. 1 v. Seattle, 382 F.2d 666,
669-73 (9th Cir. 1967). But see Dodson, 563 F.2d 1178, 1187-
88 (5th Cir. 1977). To call the source federal and to apply
the choice of law analysis, however, skips the questions of
whether Congress can constitutionally act in the property
area, and whether Congress can constitutionally delegate
the federal eminent domain power to private individuals or
other legal entities and immunize such recipients from the
5. See Public Utility District No. 1 v. Seattle, 382 F.2d 666,
671 (9th Cir. 1967). Before the Federal Water Power Act of 1920
was enacted, the Rivers and Harbors Act of 1890 restricted con-
struction of bridges, piers, and abutments on navigable streams.
Additional legislation in 1899, 1906, and 1910 allowed construc-
tion of dams upon passing of a special bill in Congress but pro-
vided no protection for investors and permitted forfeiture or gov-
ernment take-over at any time. See H.R.Rep.No.61, 66th Cong.,
1st Sess. ........ (1919).
A32
requirements of state law.® I would not be so quick to
displace state supremacy over property within its borders,
especially when the federal interests are so slight.
B. State Law Preference
While I depart from the majority on the route it took,
I agree that state law governs. Although “considerations of
federalism’’ provide one ground for preferring state law,
another fundamental constitutional principle supports elect-
ing state law as the tie breaker. As vital to our system as
the notion of federal and state sovereignty is the concept
of the separation of powers of the three federal govern-
mental branches. If state law is not utilized, the federal
6. In Dodson, the majority concluded that the delegation was
constitutional by analogy to the Natural Gas Act, upheld in
Thatcher v. Tennessee Gas Transmission Co., 180 F.2d 644 (5th
Cir.), cert. denied, 340 U.S. 829, 71 S.Ct. 66, 95 L.Ed. 609 (1960).
563 F.2d 1178, 1181. Cf. Public Utility District No. 1 v. Seattle,
382 F.2d 666 (9th Cir. 1967) (Congress has not bestowed the full
measure of its eminent domain power on licensees, especially since
licensees are often private companies operating for profit, not for
a national interest).
7. The majority finds the roots of federalism in the Rules of
Decision Act. As suggested by note 6 of the majority opinion,
however, commentators debate whether the Rules of Decision Act
applies when the source of law is federal. If the source is federal,
“the Constitution or Treaties of the United States or Acts of Con-
gress” may “otherwise require” than that state laws be rules of
decision. United States v. Little Lake Misere Land Co., 412 U.S.
580, 592-93, 93 S.Ct. 2389, 2396, 37 L.Ed.2d 187 (1973). See Note.
Adopting State Law as the Federal Rule of Decision: A Proposed
Test, 43 U.Chi.L.Rev. 823, 826 n.23 (1976). Other commentators
believe that the Rules of Decision Act incorporates international
conflicts of law principles to restrict the “cases where they [state
rules] apply” to ones involving intra-territorial situations. R.
Bridwell & R. Whitten, The Constitution and the Common Law
78-87, 99, 129-30 (1977). Although a question of federal source
might involve a totally intrastate transaction, such as this one
involving Georgia parties and Georgia property, it also might
cover a setting in which choice of state law might force its ap-
plication to cases with extraterritorial circumstances. Neverthe-
less, federalism principles do support a preference for choosing
state law, regardless of whether those principles are embodied
in the Rules of Decision Act or extracted from the Constitution’s
structing of the federal system.
A33
courts must decide whether to fashion a federal rule, a
process that may encroach on the legislative powers re-
served to Congress.’ See Wallis v. Pan American Petroleum
Corp., 384 U.S. 63, 68, 86 S.Ct. 1304, 16 L.Ed.2d 369 (1966);
United Auto Workers v. Hoosier Cardinal Corp., 383 U.S.
696, 701, 86 S.Ct. 1107, 1110, 16 L.Ed.2d 192 (1966); United
States v. Standard Oil Co., 332 U.S. 301, 313-16, 67 S.Ct.
1604, 1610-12, 91 L.Ed. 2067 (1947).°
This is not to suggest that federal courts have no power
to shape federal common-law rules; the Supreme Court
has reaffirmed for almost forty years the judiciary’s author-
8. As the majority suggests, a third ground for preferring
state law in this case is that the suit is between private parties.
The Supreme Court has indicated that, especially when the United
States is not a party, a strong conflict is needed to displace state
law. Miree v. DeKalb County, Georgia, 433 U.S. 25, 31, 97 S.Ct.
2490, 2494, 53 L.Ed.2d 557 (1977); Bank of America v. Parnell,
352 U.S. 29, 34, 77 S.Ct. 119, 121, 1 L.Ed.2d 93 (1956). For cases
in which federal law was applied when the United States was not
a party, however, see Illinois v. Milwaukee, 406 U.S. 91, 92 S.Ct.
1385, 31 L.Ed.2d 712 (1972) (federal rule applied in dispute be-
tween states over interstate pollution); Holmberg v. Armbrecht,
327 U.S. 392, 66 S.Ct. 582, 90 L.Ed. 743 (1946) (federal rule of
equity applied in federal action between private parties). See also
Hisquierdo v. Hisquierdo, 439 U.S. 572, 99 S.Ct. 802, 59 L.Ed.2d 1
(1979); J. I. Case v. Borak, 377 U.S. 426, 84 S.Ct. 1555, 12 L.Ed.2d
423 (1964); Tunstall v. Brotherhood of Locomotive Firemen & En-
ginemen, 323 U.S. 210, 65 S.Ct. 235, 89 L.Ed. 187 (1944); Sola
Electric v. Jefferson Electric, 317 U.S. 173, 63 S.Ct. 172, 87 L.Ed.
165 (1942). The United States’ status as a party, however, cer-
tainly does not trigger the automatic generation of a federal rule.
E. g., United States v. Kimbell, 440 U.S. 715, 99 S.Ct. 1448, 59 L.
Ed.2d 711 (1978); United States v. Yazell, 382 U.S. 341, 86 S.Ct.
500, 15 L.Ed.2d 404 (1966); United States v. Brosnan, 363 U.S. 237,
80 S.Ct. 1108, 4 L.Ed.2d 1192 (1960).
9. In Standard Oil, the Court turned down the opportunity to
create a federal rule, but it also rejected use of a state rule. That
case is therefore not solid support for a general state law pref-
erence, but it does reflect the Court’s concern that its rulemaking
not infringe on powers best exercised by Congress. See also R.
Bridwell & R. Whitten, supra note 7, at 133-34. These authors also
express the concern that judicial rulemaking rarely takes into
account the parties’ expectations, which causes unfairly retroactive
rulemaking, and uncertainty in the law and in private relations.
Id. at 133. See majority opinion, note 17.
A34
ity to fill many of the gaps left by Congress.’ Nor is it
suggested that separation of powers principles would re-
quire adoption of state law in the face of a significant .con-
flict between that law and federal directives; under the cur-
rent framework, the balancing of state and federal ir.’ »rests
does not occur until after a determination that state law is
not inconsistent with federal goals. Furthermore, I recog-
nize that separation of powers considerations may not carry
as much weight for questions such as this one, in which
the federal common-law rules have been long evolving
without indication of congressional displeasure. It does
seem to me, however, that separation of powers pririciples
fortify a general preference for applying a state law rather
than creating a federal rule when the weight of federal and
state interests is close on balance." If the current frame-
10. Cf. Cannon v. University of Chicago, 441 U.S. 677, 730,
745-47, 99 S.Ct. 1946, 1974, 1982-84, 60 L.Ed.2d 560 (Powell, J.,
dissenting) (1979) (distinguishing separation of powers problems
from choice of law questions). For the view that Congress would
be unable to bear the burden of interstitial lawmaking, see Hart,
The Relations Between State and Federal Law, 54 Colum.L.Rev.
489, 534 (1954). See also United States v. Little Lake Misere Land
Co., 412 U.S. at 593, 93 S.Ct. at 2397.
11. The majority states that “the choice of law question in
this case is a close one,” although federal interests are not “suf-
ficient to overcome [a state law] preference.” The question
does not appear so close to me. No significant conflict exists
that will defeat the purposes of the Federal Power Act. The three
articulated federal interests or policies are not unduly hampered
by application of state law. Congress itself built into the Act a
significant amount of disuniformity. As in Kimbell, the federal
operations already specifically adapt to state law and involve in-
dividual negotiation with landowners, which minimizes the force
of Georgia Power’s “generalized pleas for uniformity.” 440 U.S.
at 729-30, 99 S.Ct. at 1459. The Court’s statements in Butner con-
cerning use of state rules in bankruptcy proceedings have even
greater relevance to the Federal Power Act, under which the fed-
eral interests are less compelling:
Property interests are created and defined by state law.
Unless some federal interest requires a different result, there
is no reason why such interests should be analyzed differently
simply because an interested party is involved in a bank-
ruptcy proceeding. Uniform treatment of property interests
(Continued on following page)
A35
work for analyzing choice of law must remain, principles of
federalism and separation of powers support favoring state
law as the rule of decision.
ALVIN B. RUBIN, Circuit Judge, with whom AINS-
WORTH, TJOFLAT and FRANK M. JOHNSON, Jr., Cir-
cuit Judges, join, dissenting.
Because I fail to perceive any sound reason to dis-
tinguish between condemnation proceedings brought by the
United States and those in which it authorizes its power
to be used by its statutory licensee for a federal public pur-
pose, I respectfully dissent. Federal rules ex proprio
vigore should apply to such condemnation proceedings for
the reasons set forth in the majority opinion in Georgia
Power v. 54.20 Acres of Land, 563 F.2d 1178 (5th Cir.
1977), cert. denied, 440 U.S. 907, 99 S.Ct. 1213, 59 L.Ed.2d
454 (1979), and followed in the panel opinion, 596 F.2d
644.
Footnote continued—
by both State and federal courts within a State serves to
reduce uncertainty, to discourage forum shopping, and to pre-
vent a party from receiving “a windfall merely by reason
of the happenstance of bankruptcy.” Lewis v. Manufacturers
— Bank, 364 U.S. 603, 609, 81 S.Ct. 347, 350, 5 L.Ed.2d
440 U.S. at 55, 99 S.Ct. at 918. Under these circumstances, the
state interests outweigh the federal, regardless of whether a gen-
eral presumption favoring state law is utilized.
A36
GEORGIA POWER COMPANY,
Plaintiff-Appellee,
Ve
138.30 ACRES OF LAND, situate, lying and being in
Land Lot 327 of the 3rd Land District 389th G. M. District,
Putnam County, Georgia, Defendants,
Mildred B. SANDERS, a/k/a Mrs.
Karl D. Sanders, Jr., et al.,
Defendants-Appellants.
GEORGIA POWER COMPANY,
Plaintiff-Appellee,
V.
377.61 ACRES OF LAND, situate, lying and being in Land
Lots 367, 368, 369, 377, 378, 379, 380, 381, 382 and 383 of
the Third Land District, 389th G. M. District, Putnam
County, Georgia, Defendants,
Mrs, Nellie W. Larman et al.,
Defendants-Appellants.
GEORGIA POWER COMPANY,
Plaintiff-Appellee,
Vv.
532.82 ACRES OF LAND, situate, lying and being in the
145th G. M. District, Greene County, Georgia, Defendants,
Clifford H. Dyar, Jr., et al.,
Defendants-Appellants.
Nos. 77-1775 to 77-1777.
United States Court of Appeals,
Fifth Circuit.
June 6, 1979.
A37
Appeals from the United States District Court for the
Middle District of Georgia.
Before MORGAN, FAY and RUBIN, Circuit Judges.
ALVIN B. RUBIN, Circuit Judge:
The owners of three properties were required to ren-
der unto the sovereign portions of their land for the Lake
Wallace hydroelectric project in Georgia; they protest that
they did not receive in return their constitutional due,
and appeal from commission determinations of just com-
pensation for the property taken. The owners, we con-
clude, were not constitutionally guaranteed a jury trial;
the district court acted within the range of its discretion
in appointing a commission; and the commission properly
applied federal rather than state law in determining the
amount of compensation. However, the commission made
clear errors in, or failed adequately to explain the basis
for, its conclusions determining the amount of compensa-
tion due each of the owners. Therefore, the judgments of
the district court approving the reports are vacated, and
the cases remanded for further proceedings consistent
with this opinion.
I. Right toa Jury Trial
[1] The !andowners assert that their right to just
compensation includes the right to have the amount of
compensation fixed by a jury, and urge that the Supreme
Court has never squarely denied the right to a jury trial
on the issue of just compensation in an eminent domain
action brought by the United States. The premises of the
appellants’ argument are mistaken.
In ruling on a challenge to a jury determination of the
scope of a condemnation project, the Supreme Court re-
cently said, “it has long been settled that there is no con-
A38
stitutional right to a jury in eminent domain proceedings.”
United States v. Reynolds, 1970, 397 U.S. 14, 18, 90 S.Ct.
803, 806, 25 L.Ed.2d 12, 17 (denial of jury trial on issue
of project’s scope). That case did not directly present
the issue of the right to have the amount of compensation
determined by a jury, but the Court’s determination that
no constitutional issue was presented is consistent with
prior decisions in which it has implicitly held or stated
in dicta that there is no right to a jury trial in condemna-
tion proceedings. See, e. g., Bawman v. Ross, 1897, 167
U.S. 548, 591, 17 S.Ct. 966, 983, 42 L.Ed. 270, 289; Long
Island Water-Supply Co. v. Brooklyn, 1897, 166 U.S. 685,
694, 17 S.Ct. 718, 722, 41 L.Ed. 1165, 1168; United States
v. Jones, 1883, 109 U.S. 513, 519, 3 S.Ct. 346, 350, 27 L.Ed.
1015, 1017; Curtiss v. Georgetown and Alexandria Turn-
pike Co., 1810, 10 U.S. (6 Cranch) 233, 3 L.Ed. 209. See
also 12 C. Wright & A. Miller, Federal Practice and Pro-
cedure: Civil § 3051 at 120 (1973); 5 Moore’s Federal
Practice {]38.32[1] at 240-49 (2d ed. 1978). In promulgat-
ing subdivision (h) of Rule 71A of the Federal Rules of
Civil Procedure, the Supreme Court also expressly ap-
proved use of a commission to determine just compensation
in certain cases.
[2] The Fourth Circuit has, apparently, reconsidered
Beatty v. United States, 4 Cir. 1913, 203 F. 620, dismissed
for want of jurisdiction and cert. denied, 1914, 232 U.S.
463, 34 S.Ct. 392, 58 L.Ed. 686, which recognized the right
to a jury trial. See United States v. 21.54 Acres of Land,
4 Cir. 1973, 491 F.2d 301, 304; Atlantic Seaboard Corpora-
tion v. Van Sterkenburg, 4 Cir. 1963, 318 F.2d 455, 459;
United States v. Cunningham, 4 Cir., 246 F.2d 330, 332.
For example, in 21.54 Acres of Land, supra, 491 F.2d at
304, the court noted that a landowner is not entitled to a
jury trial if the trial judge determines that valuation
should be by a commission or if Congress establishes a tri-
A39
bunal to determine the amount of compensation due. See
40 U.S.C. § 258a; Fed.R.Civ.P. 71A(h). If there were a
constitutional right to a jury trial on just compensation,
the judiciary and Congress would have no power to deny
landowners a jury trial.
II. Discretion to Appoint a Commission.
[3] The landowners contend that it was an abuse of
discretion for the court to appoint a commission in their
cases because only a small amount of property possessing
unique characteristics was involved, a jury trial would
not have occasioned thera hardship, and a jury would have
been more sympathetic than a commission to small land-
owners. Yet it was precisely because the Supreme Court
considered use of a commissivii to be more equitable to
small property owners that it authorized commission ap-
pointment.
Subdivision (h) of Rule 71A of the Federal Rules of
Civil Procedure gives the court discretion, ‘because of
the character, location, or quantity of property to be con-
demned, or for other reasons in the interest of justice,”
to order the use of a commission to determine the com-
pensation due. The advisory committee that formulated
the present rule had previously proposed a rule requiring
a jury trial on the issue of just compensation in all cases
except when existing statutes provided to the contrary.’
The Supreme Court directed the committee to reconsider
in view of assertions that: (1) a provision for jury trial
would be unfair in the case of many small landowners who
lived at distances remote from the place where court
would be held; (2) such a trial would be expensive and
1. There were statutory exceptions for TVA cases and cases
arising in the District of Columbia, See 12 C. Wright & A. Miller,
Federal Practice & Procedure: Civil § 3051 at 119-20; 5 Moore’s
Federal Practice 1 38.22[2] at 250.1-52.
A40
burdensome to them; and (3) commissions are less likely
than juries to make disproportionate awards when the
government is condemning great acreages. See generally
12 C. Wright & A. Miller, Federal Practice and Procedure:
Civil § 3051; 5 Moore’s Federal Practice {| 38.32[2].
In presenting its revised proposal, now subdivision (h),
the Advisory Committee noted that the reason justifying
use of a commission for TVA cases “applied not only to
the TVA but to other large governmental projects, such as
. .. hydroelectric power . . . national forests, and others.”
Supplementary Report to the Court of the Advisory Com-
mittee, March 1951, reprinted in 7 Moore’s Federal Prac-
tice | 71A.06[2] at 71A-172. The Committee further noted
that the rule as drafted met the Court’s concerns: “[i]n
large projects like the TVA the court may decide to use a
commission.” Id. at 71A-173.
The Lake Wallace project embraces 21,215 acres, com-
posed of 225 tracts held by 197 different owners. The
property taken is located in five counties, all of which are
some distances from where the district court sits. At the
time these cases were commenced, it was estimated by
Georgia Power Company’s land department manager that
it would be necessary to file about 40 condemnation cases
to acquire the property; coincidentally, 40 cases had been
brought by the time this appeal was briefed. The dis-
trict court noted each of these factors in denying a jury
trial.
Our prior cases applying Rule 71A support the district
court’s decision. Although we have previously stressed
that a commission is to be used only for exceptional rea-
sons, see United States v. Leavell & Ponder, Inc., 5 Cir.
1961, 286 F.2d 398, 407-08, cert. denied, 366 U.S. 944, 81 S.Ct.
1674, 6 L.Ed.2d 855 and United States v. Buhler, 5 Cir. 1958,
254 F.2d 876, 880, we have recognized that Rule 71A(h)
A4l
permits denial of a jury trial and appointment of a com-
mission in cases involving “large areas held by many small
landowners, or property too distant for a jury to view the
premises ....” Id. We have also upheld the use of a
commission in a project involving only sixteen parcels of
land. United States v. 2,477.79 Acres of Land, 5 Cir. 1958,
259 F.2d 23.
[4, 5] The fact that the property of the particular
landowners involved in these cases was small and possessed
unique characteristics, or that the landowners desired a
jury trial, is not controlling; the rule focuses on the
character, location or quantity of the entire property being
condemned, hence on the overall scope of the project. See
Buhler, supra, 254 F.2d at 880. A tremendous undertaking
may embrace particular tracts of small size whose appraisal
is relatively easy. The commission is appointed for the
entire project, not simply for specific parcels whose value
is difficult to determine. If, indeed, these properties are so
singular as to require complex analysis, that factor would
weigh in favor of, rather than against, the appointment of
a commission. See Leavell & Ponder, supra, 286 F.2d at
408-09; United States v. Cunningham, 4 Cir. 1957, 246 F.2d
330, 333.
III. Applicability of Federal Law.
[6-8] Although the constitution requires the payment
of just compensation when private property is taken for
a public purpose, whether the taking is by federal or state
authority, different standards for determining just com-
pensation may be established by state and federal laws.
See Grand River Dam Authority v. Grand-Hydro, 1948,
335 U.S. 359, 69 S.Ct. 114, 93 L.Ed. 64. Under federal com-
mon law, which was applied by the commission, just com-
pensation is calculated by subtracting the project’s benefit
A42
to the land retained from the value of the land taken. Un-
der Georgia law, consequential benefits to the land retained
by the condemnee are not offset against the value of the
land taken in determining just compensation. Because
each of the owners retained land that was benefitted by
the project, if compensation had been determined under
state law rather than federal law, each would have been
entitled to more compensation.
[9] However we have now resolved the issue by
holding that federal law should be applied when a licensee
of the Federal Power Commission exercises the power of
eminent domain in federal court as authorized by Section
21 of the Federal Power Act, 16 U.S.C. § 814 (1970).
Georgia Powe: Company v. 54.20 Acres of Land, 5 Cir.
1977, 563 F.2d 1178, cert. denied, 1979, ........ © Rates , 99
S.Ct. 1213, 59 L.Ed.2d 454.
IV. Alleged Errors in the Commission’s Final Report.
We turn, then, to the commission’s report with respect
to each of the properties. This necessarily involves a dis-
cussion of the characteristics of each property in some
detail. However, we set forth, at the outset, the principles
that apply to the reports of such commissions.
[10-12] Commissions are not juries, whose general
verdicts are favored by a presumption of regularity if sub-
stantial evidence supports their result. See Mortensen v.
United States, 1944, 322 U.S. 369, 374, 64 S.Ct. 1037, 1040,
88 L.Ed. 1331; Sulmeyer v. Coca Cola Company, 5 Cir. 1975,
515 F.2d 835, 845, cert. denied, 424 US. 934, 96 S.Ct. 1148,
47 L.Ed.2d 341; Boeing Company v. Shipman, 5 Cir. en banc
1969, 411 F.2d 365, 374, 9 C. Wright & A. Miller, Federal
Practice and Procedure: Civil § 2524. When a commission
is used in place of a jury to determine the compensation
for a taking “[c]onclusory findings are alone not sufficient,”
A43
because findings by a commission are to “be accepted by
the court ‘unless clearly erroneous’; and conclusory find-
ings as made in these cases are normally not reviewable
by that standard.” United States v. Merz, 1964, 376 U.S.
192, 198, 84 S.Ct. 639, 643, 11 L.Ed.2d 629, 634. “[A] hear-
ing before a commission must result in findings much more
detailed than a general verdict.” United States v. 2,872.88
Acres of Land, 5 Cir. 1962, 310 F.2d 775, 777, modified in
Merz, supra. See Cunningham, supra, 246 F.2d at 333. The
path followed by the commission in reaching the amount of
the award shall be distinctly marked, United States v. Merz,
supra, 376 U.S. at 199, 84 S.Ct. at 643, 11 L.Ed.2d at 634, if
not blazed with an array of findings of subsidiary facts that
demonstrate that the ultimate finding is soundly and legally
based. 2,872.88 Acres of Land, supra, 310 F.2d at 779.
We recently reversed the decision of a district court
accepting a commission’s report that failed to explain why
the commission had rejected certain sales as comparables;
the case was remanded for findings that would give us
“a basis for enlightened appellate review.” United States
v. Trout, 5 Cir. 1967, 386 F.2d 216, 224. While the com-
mission’s path in these cases may have been better marked
than the trail in Trout, certain of its findings were, never-
theless, either clearly erroneous or insufficient to provide a
basis for “enlightened” review. Therefore we remand the
cases for further proceedings related to some of the points
discussed below.
Sanders Taking
[13] After the taking of 138.30 acres by Georgia Power
Co., the landowners are left with three separate parcels
consisting of 4.79, 21.20 and 41.03 acres. The smallest parcel
has direct highway access, but the other two do not. The
21.20 acre parcel has been cut off from the state highway
A44
by the reservoir; after the taking, the only remaining
access to this parcel is over a small, unpaved road that
grazes the eastern corner of the property. In order partially
to remedy this problem, Georgia Power Co., prior to the
commission’s hearing, gratuitously granted to the landown-
ers an unimproved 80-foot easement that allows direct
access to a county road. By its terms, however, the ease-
ment expires “upon nonuse for 24 consecutive months, or
no maintenance for 12 months... .”
The 41.03 acre parcel was deprived of access to a state
highway by the taking of 10 acres in the western corner of
the original tract. The district court’s final order reserves
to the landowners, “a 50-foot, non-exclusive road right-of-
way” along the southwestern boundary of the 10 acres
taken, which will give this parcel access to the highway.
However the topography of the area makes it difficult to
construct a road, and drainage from an adjoining tract may
create maintenance problems. International Paper Com-
pany owns the fee simple interest over which the ease-
ment runs;? if a road is constructed, the users must main-
tain it or they must bear the expense of constructing a
paved surface. Even in that event, the county may refuse
to accept dedication because the road is on property owned
in fee by International Paper Company.
In its amended report, the commission found that the
provision made for road purposes with respect to the 21.20
acre tract was “so nearly adequate” as not to affect ad-
versely the fair market value of the tract. It found that
giving the 41.03 acre tract a value of $1100 per acre “in-
cludes the cost of any road.” The commission allowed no
additional compensation for the construction of a road to
this tract because “[n]Jone of the comparables cited by the
2. Georgia Power Co. obtained from International Paper Co.
the easement that was granted to Sanders.
A45
witnesses for the landowner or the Power Company in-
cluded an item for road construction.” In reaching these
conclusions, the commission did not adequately compensate
the owners for the access problems created for these two
parcels, and, therefore its findings as to their values are
clearly erroneous.
[14, 15] A simple easement over unimproved fields
that will expire “upon no use for 24 consecutive months, or
no maintenance for 12 months,” is clearly less valuable to
the property owned than either a public road or a perma-
nent easement. If the owner is unable for any reason to
build a road over the easement within 24 months, or if,
thereafter, the owner is unable to maintain it, it will be
lost.* Moreover, even if the easement is utilized, the land-
owner must bear both the cost of construction and the con-
tinuing expense of maintenance. Each of the expert wit-
nesses who testified concerning the value of the remaining
21.20 acre tract believed that the limited easement added
to the value of the property and based his estimate of value
on what the property would be worth if a road were con-
structed. Two of them calculated the current value of the
parcel by estimating the value of the tract with road access,
then deducting the cost of constructing a road and an
additional amount to account for the risk of losing the ease-
ment. One estimated that the value of the tract should be
reduced by 25 percent simply to account for the limited
nature of the easement; another, a witness for Georgia
Power, made a 20 percent reduction for the same reason.
A third expert, who did not specifically make a deduction
to account for the limited nature of the easement, never-
theless admitted that such an easement is less valuable
3. International Paper Co. has explained, in a letter to
Georgia Power Co., that the intent of the parties to the easement
was that the 24 month and 12 month limitation periods shall com-
mence when filling of the Wallace Dam Reservoir begins, or, at
the latest, on the scheduled filling date of January 1, 1979.
A46
than a permanent one. The commission relied on these
experts’ other opinions in connection with this parcel, but
ignored their testimony concerning the effect of the limited
easement. Because all of the experts agreed that the re-
stricted nature of the easement had a detrimental effect on
value, and two of the three expressly stated that some
allowance should be made for it, the failure of the commis-
sion to do so was clearly erroneous.
The commission assumed that the cost of building a
road over the right-of-way affected the value of the 41.03
acre parcel, but in allowing only $1100 an acre for the
property with some vague allowance for this expense, it
included far less than the estimated $10,000 cost of a paved
road. If the commission assumed that a less expensive
road would be built that could not be dedicated to the
county, it made no specific allowance for maintenance ex-
pense, and the language of its report suggests that none
was tacitly included. Its failure to take adequately into
account the effect of these costs on the parcel’s value was
clearly erroneous.
Larman Taking
The Larman taking was on October 29, 1974. Sales of
other properties prior to that date were used by the com-
mission as comparables for the purpose of estimating the
value of the Larman property; some of these comparables
were used to estimate its pre-taking value, while the others
were used to estimate its post-taking value. The use of
different comparables apparently was based on the assump-
tion that the character of the property was changed by the
taking and, therefore, other comparables then became ap-
propriate. The prices of these comparable properties were
adjusted to account for the amount of time that had
elapsed between the time of sale and the time of the Larman
taking, and the market conditions prevailing during this
A47
period. Mrs. Larman alleges that the commission was
inconsistent in its adjustments and that, had it followed its
own standards, it would have awarded her more compen-
sation. In particular, she asserts that the commission im-
properly failed to adjust for inflation one of the comparable
sales used to establish the value of the Larman property
before the taking while it made such adjustments in as-
sessing other comparable sales that had occurred about the
same time and that were used to establish pre- and post-
taking values.
One expert witness testified that property in the area
of the Larman property appreciated about 25 percent dur-
ing 1973, but that, beginning in 1974, the market leveled off.
This expert thought that the appreciation rate was a little
higher, approximately 35 percent, during 1973 for property
that would remain after the project was completed or
that was purchased because of speculation prompted by
the project. This testimony clearly supports the commis-
sion’s adjustment of several of the comparable sales that
occurred more than two months prior to the end of 1973.
The following table shows the increases that the com-
mission made in the sale price per acre of the comparable
sales to account for the inflation after they occurred:
Sale used as
comparable for
determining
value Sale Commission’s
Date before price adjustment
of or after (per (price/ Percentage
sale taking acre) acre) adjustment
1/73 Before $550 0 0
2/73 After $825 +$288 34.9%
3/73 After $974 +$87 8.9%
6/73 Before $365 +$86 23.6%
“11/73 Used for both Varied 0 0
or post purposes
1973
*Remaining sales
A48
[16] We have great difficulty in comprehending what
the commission did and why. For example, in establishing
the value of the property before the taking, an adjustment
was made in the June 1973 sale, but none in the January
1973 sale. The reason for this apparent inconsistency is
not explained, In effect, the commission apparently as-
sumed, without adequate explanation of its rationale, that
without the project the value of the property sold in Jan-
uary would have been unchanged from that time through
October 1974. Yet an expert who testified regarding the
inflation rate during 1973 stated that he would add 25 per-
cent to the sale price of that property to adjust for inflation
since the time it was sold. The failure either to make such
an adjustment or to account adequately for the failure to do
so makes the report unacceptable.
When we examine the comparables used to value the
residual property after the taking, we find other unex-
plained adjustments or failures to adjust. The March
sale was adjusted upward less than 10 percent for timing.
The sale price of the comparable property sold a month
before was adjusted upward by almost 35 percent, which
is more in line with what the expert testimony indicated
is appropriate. At least on the surface, the handling of
the March 1973 comparable appears to be an error in
Mrs. Larman’s favor, for it appears that a greater upward
adjustment in the sale price of this property should have
been made.
Dyar Taking
A. Shallow water
[17] Once the reservoir is filled, the property re-
tained by the landowners will have an extensive shoreline.
The water in this part of the lake will be extremely
shallow. Moreover, the level of the water in the lake will
A49
rise and fall daily because Lake Wallace will be a pump-
storage facility. This variation in the water’s depth,
coupled with the shallowness of the reservoir in the area
of Dyar’s property, will cause a substantial daily move-
ment of its shoreline. In the southern portion, it will
move in and out up to 200 feet horizontally each day;
consequently, vast mudflats will often be exposed.
Expert witnesses for both parties testified that the
portion of the Dyar property with shallow water will be
less valuable than the portion with deeper water. One
witness estimated that the value of this property will be
one-third less than if it had deeper water. The commis-
sion, however, made no specific allowance for this factor.
It explained its failure to do so on the basis that it relied
exclusively ‘‘on adjusted comparable sales.”
In valuing the property retained after the taking, the
commission cited the conclusions of the experts who tes-
tified, but did not itself adjust the sales these experts
cited as being comparable. All of these experts clearly
took the shallow water into account in their testimony.
For purposes of comparison with the retained Dyar prop-
erty, two of them adjusted downward the sales prices of
those properties they considered comparable having water
depth superior to that of the Dyar property. In addition,
they included a comparable property that has even shal-
lower water than the Dyar property will have, and ad-
justed its sale price upward to account for this factor.
Based on his analysis of the adjusted comparables he had
selected, one of these two experts concluded that the re-
maining Dyar property was worth $900 per acre. The
other concluded that it was worth $850 per acre. The
third expert, who testified for the landowners, neither con-
sidered any sales involving property with water shallower
than that on the Dyar property, nor adjusted each com-
parable separately for this factor; in order to take it into
A50
account, however, he reduced bv one-third the estimated
value he obtained based on the comparables he considered.
He also included a discount factor for “holding time” until
the lake is ready for use. The commission considered this
to be improper, and, therefore revised his figure of $668
per acre to $813 per acre.
The commission concluded that the remaining Dyar
property is worth $850 per acre, which is less than or
equal to the value given by two of the experts even after
taking the shallow water into account. The commission
would have arrived at a higher value for the property than
it did if it had not accepted the adjustments these experts
made to take into account the shallow water. Its reliance
on the testimony of the experts regarding the influence of
this factor, rather than attempting to make its own specific
adjustments to each comparable sale to take it into ac-
count, was not clearly erroneous.
B. Sales the commission rejected as comparable
The commission rejected three sales that the land-
owners’ expert testified involved property comparable to
the Dyar property. The owners assert that the commission
did not adequately explain its basis for rejecting these
sales.
[18] The Dyar tract was a functioning farm unit.
This gave it a higher value than unused fields. Only one
of the sales accepted as comparable by the commission
involved property employed as a functioning farm unit;
yet, each of the properties involved in the three sales that
the commission rejected as comparables was so utilized.
The commission rejected one of them because it was an
“industrial sale”; the property had been sold to a com-
pany for development of a fertilizer processing plant. The
other two sales the commission refused to consider were
ASdl
dismissed with the conclusory statement that they “were
not of sufficient comparability to use.”
[19] The commission’s refusal to consider the “in-
dustrial sale” was reasonable. However, no basis for its re-
fusal to treat the other two sales as comparable is shown
in the record. In fact, when the landowners’ expert tes-
tified regarding these two sales, the commission indicated
that it would view them as comparables.
These two sales were at prices of $750 per acre and
$733 per acre, considerably higher than the prices of the
other properties considered by the commission. Had these
sales been considered, Dyar’s compensation would have
been greater. The commission’s failure to adequately ex-
plain its refusal to consider these sales as comparables
makes its report unacceptable.
C. Adjustment for pasture
Before the taking, the Dyar property consisted, in part,
of open land or pasture land and, in part, of timber land.
The commission considered sales of different properties in
order to value each of these components of the Dyar prop-
erty. In order to value the open land or pasture land, the
commission considered sales of three properties that it
considered comparable. The prices of each of these prop-
erties was adjusted to take into account differences be-
tween it and the Dyar property. With the adjustments
made by the commission, the prices of these comparables
were $459, $468 and $500; based on this evidence, the
commission valued the Dyar pasture land at $485 per acre.
[20] The owners assert that a 10 percent downward
adjustment made by the commission to account for ‘“‘pas-
ture” in the price of one of the comparables, a sale by
Barksdale to Beauchamp, is clearly erroneous. The com-
mission gave no justification for this adjustment. The
r*%
**
A52
reason for it is not self-evident, although the record sug-
gests at least one possible explanation.‘ We are unable,
however, to determine from the record what the com-
mission’s rationale actually was. The landowner was en-
titled to an explanation that would permit us intelligently
to review it. See United States v. Trout, supra. Further
findings should have been made by the commission.
Conclusion
_ For the reasons set forth above, further fact-findings
and, in light thereof, reevaluation of the compensation
awarded each of these landowners are required. Accord-
ingly, the judgments of the district court in these cases
are VACATED, and the cases are REMANDED for fur-
ther proceedings consistent with this opinion.
VACATED and REMANDED.
4. One of the experts who testified regarding the Barksdale
sale testified that he believed this was a speculative sale. The
commission may well have believed that the sale price was some-
what more than a buyer would pay simply for land to use for
pasture. The 10 percent reduction in this sale price, therefore,
may be attributable to the commission’s taking this factor into
account.
A53
GEORGIA POWER COMPANY,
Plaintiff-Appellee,
Vv.
54.20 ACRES OF LAND, situated lying and being LAND
LOTS 315 AND 326 OF the 3RD LAND
DISTRICT, etc., et al.,
Defendants,
Jim Dodson and Patricia W. Womack,
Defendants-Appellants.
J.C. HILSMAN, et al.,
Plaintiffs-Appellants,
V.
GEORGIA POWER COMPANY,
Defendant-Appellee.
Nos. 75-4448 and 77-1327.
United States Court of Appeals,
Fifth Circuit.
Nov. 28, 1977.
Appeals from the United States District Court for the
Middle District of Georgia.
Before WISDOM, SIMPSON, and TJOFLAT, Circuit
Judges.
WISDOM, Circuit Judge:
These condemnation cases present the issue whether
compensation should be determined under federal law or
under the law of the state where the condemned property
is located when a licensee of the Federal Power Commis-
sion exercises the power of eminent domain in federal
court as authorized by Section 21 of the Federal Power
A54
Act, 16 U.S.C. § 814 (1970). We reserved this question in
Louisiana v. Lindsey, 5 Cir. 1975, 524 F.2d 934, as did the
Supreme Court in Grand River Dam Authority v. Grand-
Hydro, Inc., 1948, 335 U.S. 359, 69 S.Ct. 114, 93 L.Ed. 64.
We now hold that federal law controls.
I.
The plaintiff-appellee, Georgia Power Company, is a
privately owned Georgia utility. It intends to operate a
hydroelectric power generating facility with a dam across
the Oconee River in Hancock and Putnam Counties,
Georgia, at a point known as Laurens Shoals. The dam
will produce a lake to be known as Lake Wallace. The
appellants are Georgia landowners with property which
will be inundated by Lake Wallace.’
Under the Federal Power Act, 16 U.S.C. §§ 791a, et
seq. (1970), the Federal Power Commission may issue
licenses to certain persons or entities to construct, operate,
or maintain various hydroelectric generating facilities. 16
U.S.C. § 797(e). The F.P.C. issued a license to Georgia
Power on August 6, 1969, for the Lake Wallace Project.’
As a licensee, Georgia Power may exercise the right of
eminent domain under Section 21 of the Federal Power
Act, 16 U.S.C. § 814 (1970), which provides:
When any licensee cannot acquire by contract or
pledges an unimproved dam site or the right to use or
1. The numerous appellants in this consolidated appeal fell
into three groups for briefing purposes. In addition, Mrs. Nellie
W. Larman, another landowner involved in a Lake Wallace con-
demnation proceeding, filed an amicus brief. Because each ap-
pellant’s argument, if successful, would benefit the appellants as
a group, we generally have not identified the particular party
advancing an argument discussed in this opinion.
(2; #42 F.P.C. 356 (1969). At that time, the project was known
as the Laurens Shoals Project and the license is issued in that
name.
A55
damage the lands or property of others necessary to
the construction, maintenance, or operation of any dam,
reservoir, diversion structure, or the works appurte-
nant or accessory thereto... it may acquire the same
by the exercise of the right of eminent domain in the
district court of the United States for the district in
which such land or other property may be located, or
in the State courts. The practice and procedure in
any action or proceeding for that purpose in the dis-
trict court of the United States shall conform as nearly
as may be with the practice and procedure in similar
action or proceeding in the courts of the State where
the property is situated: Provided, That United States
district courts shall only have jurisdiction of cases
when the amount claimed by the owner of the property
to be condemned exceeds $3,000.
Exercising this right, Georgia Power brought actions
in the District Court for the Middle District of Georgia.
Senior Judge W. A. Bootle appointed a three-member
Commission, see Fed.R.Civ.Proc. 71A, to determine the
amount of compensation due the condemnees. In his in-
structions to the Commissioners, Judge Bootle set out the
federal law of compensation. These rules differ from
Georgia law. Instruction No. 20 directs the Commissioners
to ignore an increase in value which the Georgia Power
project has created in the condemned property; a Georgia
court might recognize such value. See Hard v. Housing
Authority, Ga. 1963, 219 Ga. 74, 132 S.E.2d 25. Instruction
No. 21 allows the Commissioners to offset any recovery for
land actually taken with benefits to any remaining property
caused by the project; Georgia law prohibits such a set-off.
See Ga.Code Ann. § 36-504 (1970). The district court de-
clined to instruct the Commissioners to include a reason-
able attorney’s fee in their award; in a Georgia proceeding
a reasonable attorneys’ fee would be allowed. See White
A56
v. Georgia Power Company, Ga.1976, 237 Ga. 341, 227 S.E.
2d 385.
After these instructions were first made in 1975 sev-
eral condemnees in cases other than No. 75-4448 filed mo-
tions and objections opposing the use of federal law. The
district court held a pre-trial hearing on the objections.
Judge Bootle made several changes in the phrasing of his
instructions, but he regarded federal laws as controlling.’
The Commission then heard evidence in No. 75-4448. Its
report concluded that the benefits accruing to the land re-
maining with the landowners exceeded the value of the
property taken. As a result, the Commission awarded no
monetary compensation. The landowners opposed Georgia
Power’s motion to confirm the report on the ground that
the offset of benefits was improper. The court overruled
these objections and the condemnees appealed.*
No. 77-1327 began after Judge Bootle’s decision in No.
75-4448 to apply federal law. The condemnees in No. 77-
1327 nevertheless moved that the court incorporate Georgia
law into its instructions.’ The judge conducted a pre-trial
conference and heard argument on the question. He then
denied the motion and adhered to his previous order that
3. After the hearing, Judge Bootle provided a Memorandum
to Counsel citing cases supporting his conclusion that federal law
of compensation applies. Those cases are Clearfield Trust Co. v.
United States, 1943, 318 U.S. 363, 63 S.Ct. 573, 87 L.Ed 838;
United States v. County of Allegheny, 1944, 322 U.S. 174, 64 S.Ct.
908, 88 L.Ed. 1209; United States v. Standard Oil Co., 1947, 332
U.S. 301, 67 S.Ct. 1604, 91 L.Ed. 2067; United States v. Yazell,
1966, 382 U.S. 341, 86 S.Ct. 500, 15 L.Ed.2d 404; Duvall-Wheeler
Livestock v. United States, 5 Cir. 1969, 415 F.2d 226; United States
v. McCleskey Mills, Inc., 5 Cir. 1969, 409 F.2d 1216.
4. During the condemnation proceedings of 75-4448 the ap-
pellant Jim Dodson conveyed his interest in the condemned prop-
erty to Patricia Womack. On March 21, 1975 Judge Bootle
| Georgia Power’s motion to add Patricia Womack as a
fendant.
5. The composition of the Commission and the Instructions
given to the Commissioners are the same in both cases before us.
A57
federal law applies. Judge Bootle certified the question for
immediate review under 28 U.S.C. § 1292(b) (1970). This
Court allowed the appeal, and consolidated it with No. 75-
4448.
Il.
Before a federal court may reach the question of ap-
plying state or federal common law to an issue before it,
the court must determine that the source of the right or
authority in question is federal. If the source is not fed-
eral, Erie Railroad Co. v. Tompkins, 1938, 304 U.S. 64, 58
S.Ct. 817, 82 L.Ed. 1188, and the Rules of Decision Act®
direct that state law apply of its own force. Even if the
source is federal, the court must follow any congressional
directions about the proper law to apply. See Comment,
Adopting State Law as the Federal Rule of Decision: A
Proposed Test, 43 U.Chi.L.Rev. 823, 826 (1976).
We find that the source of the power to condemn prop-
erty contained in Section 21 is federal. Eminent domain
inheres in sovereignty. See Kohl v. United States, 1876, 91
U.S. 367, 23 L.Ed. 449. Within our federal system the
states and the federal government exercise independent
powers of eminent domain, and neither can delegate the
use of the other’s authority. 91 U.S. at 372-73, 23 L.Ed.
449; Latinette v. City of St. Louis, 7 Cir. 1912, 201 F. 676,
678. Thus, when Congress provided that licensees could
exercise “the” power of eminent domain, it was referring
to the federal power. Both courts and commentators have
described the eminent domain power delegated in Section
6. The laws of the several states, except where the Consti-
tution or treaties of the United States or Acts of Congress other-
wise require or provide, shall be regarded as the rules of decision
in civil actions in the courts of the United States, in cases where
they apply.
28 U.S.C. § 1652 (1970).
A58
21 as the federal power. Federal Power Commission v.
Tuscarora Indian Nation, 1960, 362 U.S. 99, 120, 80 S.Ct.
543, 4 L.Ed.2d 584; City of Tacoma v. Taxpayers of Tacoma,
1958, 357 U.S. 320, 340, 78 S.Ct. 1209, 2 L.Ed.2d 1345; Chap-
man v. Public Utility District No. 1, 9 Cir. 1966, 367 F.2d
163, 167; 7 Moore’s Federal Practice J 71A.10[2]. When it
condemns land under Section 21, a licensee acts as the
agent of the United States government. Tuscarora Nation
of Indians v. Power Authority, 2 Cir. 1958, 257 F.2d 885,
894, vacated as moot sub nom., McMorran v. Tuscarora Na-
tion of Indians, 362 U.S. 608, 80 S.Ct. 960, 4 L.Ed.2d 1009.
This delegation of federal power is constitutional. Missouri
v. Union Electric Light & Power Co., C.D.Mo.1930, 42 F.2d
692; see Thatcher v. Tennessee Gas Transmission Co., 5 Cir.
1950, 180 F.2d 644, cert. denied, 340 U.S. 829, 71 S.Ct. 66, 95
L.Ed. 609 (upholding identical delegation in the Natural
Gas Act, 15 U.S.C. § 717(b) (1970)).
Appellants argue that Section 21 does not delegate
federal authority, but merely provides a federal forum for
exercise of a state created eminent domain power. Such
an interpretation does not accord with decisions upholding
the right of a licensee to condemn property that it could
not obtain under the applicable state statute. E. g., City
of Tacoma v. Taxpayers of Tacoma, 1958, 357 U.S. 320, 78
S.Ct. 1209, 2 L.Ed.2d 1345; First Iowa Hydro-Electric Co-
operative v. Federal Power Commission, 1946, 328 U.S.
152, 66 S.Ct. 906, 90 L.Ed. 1143. There is no suggestion in
the statute that Congress intended to create an interstitial
power of eminent domain that would function only when
state powers were inadequate. In contrast, Section 19, 16
U.S.C. § 812 (1970) expressly limits the FPC’s authority
to regulate rates to situations where a state does not have
its own regulations Section 20, 16 U.S.C. § 813 (1970)
places similar limits on other powers of regulation.
A59
We are not persuaded by the argument that the $3,000
in controversy requirement shows that Section 21 is a
jurisdictional provision. It is true that this requirement
parallels the amount in controversy requirement for di-
versity cases at the time the Federal Power Act was en-
acted. Congress, however, added the $3,000 requirement
late in the consideration of the Federal Power Act. Com-
pare H.R.Rep.No.715, 65th Cong., 2d Sess. 27, H.R.Rep.
No.1147, 65th Cong., 3d Sess. 13, and H.R.Rep.No.61, 66th
Cong., Ist Sess. 10 (original versions without the $3,000
amount in controversy requirement) with S.Rep.No.180,
66th Cong., Ist Sess. 9 and 16 U.S.C. § 814 (1970) (versions
containing $3,000 amount in controversy requirement as
added on the House floor). As a result, the requirement
cannot be read as an indication of the original purpose of
Section 21. Members of Congress do not seem to have
believed the amount in controversy amendment signif-
icantly changed Section 21; the Senate and Conference
Committee Reports, written after the House adoption of the
amendment, do not mention it. Further, the House debates
establish that the amount in controversy minimum was de-
signed to prevent inconvenience to a landowner who might
otherwise need to travel several hundred miles to press a
small compensation claim. 58 Cong.Rec. 2240 (1919) (re-
marks of Mr. Stevenson).
We have not found any congressional directive to apply
state law in either the language of Section 21 or its legis-
lative history. Therefore, the second prerequisite to our
consideration of the choice of law issue is met. The lan-
guage in the statute referring to state “practice and pro-
cedure” does not govern the choice between substantive
rules of compensation. The Supreme Court has held that
such language “[does] not, and could not, affect questions
of substantive right—such as the measure of compensation
—grounded upon the Constitution of the United States”.
United States v. Miller, 1943, 317 U.S. 369, 380, 63 S.Ct. 276,
A60
283, 87 L.Ed. 336. Accord United States v. 93.970 Acres of
Land, 1959, 360 U.S. 328, 79 S.Ct. 1193, 3 L.Ed.2d 1275. The
appellants attempt to distinguish Miller on the ground that
the plaintiff was the United States rather than a private
licensee. We cannot see why in this context the identity of
the plaintiff would change the meaning of virtually identical
language.” And insofar as Section 21 did require con-
7. The Miller opinion specifically interpreted the following
statutes:
In every case in which the Secretary of the Treasury or any
other officer of the Government has been, or hereafter shall
be authorized to procure real estate for the erection of a
public building or for other public uses, he may acquire the
same for the United States by condemnation, under judicial
process, whenever in his opinion it is necessary or advan-
tageous to the Government to do so, and the Attorney Gen-
eral of the United States, upon every application of the
Secretary of the Treasury, under this section and section 258
of this title, or such other officer, shall cause proceedings to
be commenced for condemnation within thirty days from
receipt of the application at the Department of Justice.
40 U.S.C.A. § 257.
The practice, pleadings, forms and modes of proceeding
in causes arising under the provisions of this act shall con-
form, as near as may be, to the practice, pleadings, forms and
proceedings existing at the time ‘n like causes in the courts
of record of the State within w.iich such [district court is]
held, any rule of the court to the contrary notwithstanding.
Act of Aug. 1, 1888, c. 728 § 2, 25 Stat. 357. This section was
codified, as amended, at 40 U.S.C. § 258 until it was superceded
by Rule 71A of the Federal Rules of Civil Procedure.
The Secretary of the Army may cause proceedings to be
instituted, in the name of the United States in any court hav-
ing j iction of such proceedings, for the acquirement by
condemnation of any land, right of way or material needed
to enable him to maintain, operate or prosecute works for
the improvement of rivers and harbors for which provision
has been made by law; such proceedings to be prosecuted in
accordance with the laws relating to suits for the condemna-
tion of property of the States wherein the proceedings may
be instituted: Provided, however, That when the owner of
such land, right of way, or material shall fix a price for the
same, which in the opinion of the Secretary of the Army,
shall be reasonable, he may purchase the same at such price
without further delay: And provided further, That the Sec-
retary of the Army is authorized to accept donations of land
or materials required for the maintenance or prosecution of
such works.
33 U.S.C.A. § 591.
A61
formity with state practice, it has been superseded by Rule
71A of the Federal Rules of Civil Procedure. United States
v. 93.970 Acres of Land, 1959, 360 U.S. 328, 79 S.Ct. 1193, 3
L.Ed.2d 1275; 7 Moore’s Federal Practice {| 71A.10[2] at
71A-252 (2d ed. 1975).
There is little discussion of Section 21 in the Committee
Reports or the congressional debates, and none of it illu-
minates the choice of law issue. Appellants argue, how-
ever, that other sections of the statute, such as Sections 19
and 20, evidence a congressional respect for state law which
includes state rules of compensation in an eminent domain
proceeding. We are not ready to make this inference from
unrelated provisions in the Federal Power Act without more
support in the legislative materials. The legislative history
reveals that Congress took care to preserve state rights in
the regulation of power and property to forestall a con-
stitutional attack on the Federal Power Act. See, e. g.,
First Iowa Hydro-Electric Cooperative v. Federal Power
Commission, 328 U.S. at 174, 66 S.Ct. 906. As a result, the
Federal Power Act contains many explicit acknowledge-
ments of state authority. See, e. g., Id. at 174 n. 19, 66
S.Ct. 906; Sections 4(a) and (c)* (requires cooperation be-
tween the FPC and the executive departments and other
agencies of the state and federal governments on specified
subject); 4(f)® (requires notice of application for a pre-
liminary permit to be given to any state or municipality
likely to be interested); 7(a)’® (gives preference in issuing
permits and licenses to states and municipalities); 10(e)™
(provides that certain licenses to states and municipalities
be issued and enjoyed without charge); 14"? (gives states
8. 16U.S.C. § 797(a) and (c) (1970).
9. 16 U.S.C. § 797(f) (1970).
10. 16 U.S.C. § 800(a) (1970).
11. 16 U.S.C. § 803(e) (1970).
12. 16 U.S.C. § 807 (1970).
A62
or municipalities as well as federal government an option to
acquire a licensed project); 19;'* 20;'4 and 27° (a “saving”
clause concerning state laws relating to the control, ap-
propriation, use or distribution of water used in irrigation
or for municipal or other uses, or any vested right acquired
therein). The failure to mention specifically state laws of
eminent domain contrasts with these provisions, and sug-
gests, if anything, that Congress did not believe it neces-
sary to follow state eminent domain rules or desire courts
to do so.’®
The Committee Reports reveal thet some members
had concerns over the constitutionality of Section 21, al-
though it is not clear whether they thought it an im-
proper invasion of state prerogatives or an improper dele-
gation of federal authority to private parties. H.R.Rep.
No.61, 66th Cong., Ist Sess. 10. At any rate, a majority
13. 16 U.S.C. § 812 (1970).
14. 16 U.S.C. § 813 (1970).
15. 16 U.S.C. § 821 (1970).
16. The dissent makes much of the fact that Congress did
not assure “application of a uniform, federal standard in any
exercise of eminent domain power, state or federal, to acquire
land on which to build these federally regulated facilities’. (Em-
phasis changed.) This omission becomes much less telling when
one realizes that it is not certain that Congress had the power to
compel such uniformity.
Congress could not have simply passed a statute instructing
the states to apply federal rules of compensation whenever a
licensee chose to exercise a state-granted power of eminent domain
to take property for a licensed project. As Justice Brandeis
stated in Erie: “Congress has no power to declare substantive
rules of common law applicable in a state whether they be local
in their nature or ‘general,’ be they commercial law or a part of
the law of torts’. 304 U.S. at 78, 58 S.Ct. at 822.
Nor could Congress have passed a law forbidding a state from
delegating sta.e eminent domain power to a federal licensee. A
state has exclusive control over its power of eminent domain.
Kohl v. United States, 91 U.S. at 372-73, 23 L.Ed. 449. Just as the
federal government could not force the states to grant licensees
the use of state eminent domain power, it could not force them
not to make the grant.
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expressed belief that the provision was constitutional and
appropriate, without any indication that such a conclusion
would be possible only if federal courts applied state
law in Section 21 cases. Id,"'
The appellants also argue that Congress endorsed
the use of state compensation law when it enacted a pro-
vision substantially identical to Section 21 in the Natural
Gas Act, 15 U.S.C. § 717f(h) (1970), without commenting
adversely on certain cases appellants read to mandate
adoption of state law for all substantive issues arising in a
Section 21 lawsuit. In a similar vein, the appellants urge
us to follow these decisions as a matter of stare decisis.
In particular, they draw our attention to a line of Eighth
Circuit cases beginning with Feltz v. Central Nebraska
Public Power and Irrigation District, 8 Cir, 1942, 124 F.2d
578'* and to Oakland Club v. South Carolina Public Ser-
vice Authority, 1940, E.D.S.C., 30 F.Supp. 334, aff’d, 4 Cir.
1940, 110 F.2d 84.
We do not read these cases as determinative of the
issue before us. In Feltz, a FPC licensee condemned land
for relocation of a highway. The landowner claimed con-
sequential losses because the property was divided and
because of increased distance to the railhead. The jury
gave a smaller award than the appraisers, and the court
17. We note that Congress passed the Federal Power Act in
1920, during the era of Swift v. Tyson, 1842, 41 U.S. 1, 10 L.Ed,
865. Thus, Congress would have expected federal courts to apply
general common law absent a specific congressional direction to
the contrary.
18. The other Eighth Circuit cases are Central Nebraska
Public Power & Irrigation Dist. v. Harrison, 8 Cir, 1942, 127 F.2d
588, Central Nebraska Public Power & Irrigation Dist, v, Fair-
child, 8 Cir. 1942, 126 F.2d 302; Samuelson v. Central Nebraska
Public Power & Irrigation Dist., 8 Cir, 1942, 125 F.2d 838; Burnett
v. Central Nebraska Public Power & Irrigation Dist., 8 Cir, 1942,
125 F.2d 836; McGinley v. Central Nebraska Public Power &
Irrigation Dist., 8 Cir, 1942, 124 F.2d 692; and Central Nebraska
Public Power & Irrigation Dist. v. Berry, 8 Cir, 1942, 124 F.2d 586,
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added interest from the date of the taking. Both sides
appealed. Among other questions, the court of appeals
ruled on the exclusion of evidence of consequential dam-
ages, 124 F.2d at 578, and the propriety of interest on a
compensation award, 124 F.2d at 584. Without articulating
its reasoning, the court indicated that Nebraska law con-
trolled both issues. There is no indication that the parties
contested this issue or that the court gave it any serious
consideration. Indeed, because of the mixture of issues
each party may have thought it to his advantage to rely
upon state law. The condemnees had read that state
law to allow consequential damages and the condemnor
could cite favorable state law on interest. The specific
issue of just compensation raised before this Court was
not considered. The other Eighth Circuit cases also lack
any discussion of a general choice of law problem or of
the specific issue before us. In the absence of any rea-
soned discussion of the difficult choice of law issue, we
cannot accept these cases as persuasive authority or inter-
pret congressional inattention to them as an endorsement
of the view that state law should fill all substantive gaps
in Section 21.
Oakland Club is not on point. In that case the federal
licensee enjoyed state as well as federal power of eminent
domain. It filed a condemnation in federal court which the
property owner contested on the grounds that the South
Carolina procedure was constitutionally defective and that
Section 21 authorized the licensee to take only an easement
rather than a fee.
The district court upheld the state procedure and in-
terpreted Section 21 to authorize the taking of a fee in-
terest. It went on to make several observations that the
appellants have emphasized in this case. First, the court
stated that Section 21 is not a ‘comprehensive, self-con-
A65
tained and exclusive law of eminent domain’’. Second, the
court construed Section 21 “not as an exclusive law of
eminent domain, . . . but as complementary to the State
law, and as enabling the holder of a Federal Power license
to exercise in the Federal courts .. . the substantive rights
of eminent domain granted to it under the State law.” 30
F.Supp. at 341. The Court of Appeals approved of these
statements and added its own suggestion that Section 21
was meant to give a condemnor “the privileges of eminent
domain under the State law...” 110 F.2d 84, 86.
Insofar as the Oakland Club litigation stands for the
point that Section 21 does not preempt any applicable
state powers of eminent domain, it is irrelevant to the
issue before us.’* Insofar as the case supports the argu-
ment that Section 21 is solely a jurisdictional provision,
we reject it for the reasons already expressed. And in-
sofar as’ it interprets Section 21 to grant a state rather
than a fedsral” power of” eminent domain, we find it in
conflict with holdings by the Supreme Court. See Federal
Power Commission v. Tuscarora Indian Nation, 1960, 362
U.S. 99, 120, 80 S.Ct. 543, 4 L.Ed.2d 584; City of Tacoma v.
Taxpayers of Tacoma, 1958, 357 U.S. 320, 340, 78 S.Ct.
1209, 2 L.Ed.2d 1345; see also Kohl v. United States, 1876,
91 U.S. 367, 372-73, 23 L.Ed. 449, 451 (federal government
lacks the power to grant the use of a state power of emi-
nent domain). Neither the district court nor the Court
of Appeals in Oakland Club considered the specific issue
whether state or federal law governs the methodology of
determining compensation under Section 21. In sum, ‘the
Oakland Club opinions are far too questionable and unclear
19. This Circuit has held that § 7(h) of the Natural Gas Act,
15 U.S.C.A. § 717f(h), which is almost identical to § 21 of the
Federal Power Act, oes not P oon 9 state laws of eminent do-
main. Robinson v. Transcontinental Gas Pipe Line Corp., 5 Cir.
My on .2d 1397, cert. denied, 398 U.S. 905, 90 Sct 1695, 26
i
A66
to justify adherence by this Court or to warrant an in-
terpretation of congressional failure to comment upon
them as an expression of legislative intent on the choice
of law issue before us.””
IL.
We now proceed to the principal issue. Because the
source of the power delegated by the Federal Power Act
is federal, the governing law must be federal. See, e. g.,
Friendly, In Praise of Erie—And of the New Federal Com-
mon Law, 39 N.Y.U.L.Rev. 383, 407 (1964); Mishkin, The
Variousness of “Federal Law”: Competence and Discretion
in the Choice of National and State Rules for Decision, 105
U.Pa.L.Rev. 797, 798-801 (1957); Comment, Adopting State
Law as the Federal Rule of Decision: A Proposed Test,
43 U.Chi.L.Rev. 823, 826-27 (1976). Of course, federal
law may be fashioned by adopting parallel state rules.
E. g., Clearfield Trust Co. v. United States, 1943, 318 U.S.
363, 367, 63 S.Ct. 573, 87 L.Ed. 838. For instance, the courts
usually determine what constitutes “property” by looking
20. The other cases cited in various landowner briefs as ex-
pressing a direct or indirect conclusion that state law of com-
pensation applies in a Section 21 condemnation are also off the
mark. King v. Grand River Dam Auth., 10 Cir.
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