Petition for Writ of Certiorari — Huntleigh USA USA Corp. v. United States (No. 08-198)
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0 (\) Supreme Court, U.S.
FILED
No.08 98-198 WG-13 2008
Intue OFFICE OF THE CLERK
Supreme Court of the United States
HUNTLEIGH USA CORPORATION,
Petitioner,
v.
THE UNITED STATES,
Respondent.
ON PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE FEDERAL CIRCUIT
PETITION FOR A WRIT OF CERTIORARI
JONATHAN J. LERNER
Counsel of Record
LAUREN E. AGUIAR
SARAH H. YARDENI
SKADDEN, ARPS, SLATE,
MEAGHER & FLom LLP
Four Times Square
New York, New York 10036
(212) 735-3000
Counsel for Petitioner
217492 cr
COUNSEL PRESS
(800) 274-3321 » (800) 359-4859
1
QUESTIONS PRESENTED
Whether the Court of Appeals for the Federal
Circuit erred in holding that Petitioner was not entitled,
as a matter of law, to “just compensation” for a “taking”
of its property pursuant to the Fifth Amendment where
the Aviation and Transportation Security Act, enacted
by Congress in the wake of the terrorist attacks on the
United States on September 11, 2001, (1) nationalized
the entire domestic airport passenger and baggage
screening industry in which Petitioner had operated for
decades; (2) expressly made it illegal for private
screening companies, including Petitioner’s company, to
continue providing these services in the face of a newly
mandated governmental monopoly over provision of such
services; and (3) provided for the take-over by the
government of existing private screening contracts,
including Petitioner’s contracts, pursuant to which
these services were provided.
Whether the Court of Appeals for the Federal
Circuit erred in holding that this Court’s decision in
Kimball Laundry Co. v United States, 338 U.S. 1 (1949),
precludes compensation under the Fifth Amendment for
a “taking” of goodwill and going-concern value, where
those property interests have been permanently, rather
than temporarily, destroyed by governmental action.
ia
STATEMENT PURSUANT TO RULE 29.6
Petitioner Huntleigh USA Corporation is wholly
owned subsidiary of ICTS International N.V.,, a publicly-
held limited liability company whose shares are traded
on the NASDAQ.
a
ili
TABLE OF CONTENTS
QUESTIONS PRESENTED ................
STATEMENT PURSUANT TO RULE 29.6...
BRRMP ESE GP GAPRUREBITEE ccccccccccccsescoves
TABLE OF APPENDICES ..................
TABLE OF CITED AUTHORITIES .........
Sica s Spek ge svouse candies
EY CD
CONSTITUTIONAL AND STATUTORY
PROVISIONS INVOLVED ................
EE Mah odes ccke ned ekcnnssdeusees
EN ee Ee
Be PME oo cc cess ccccceccenwe
Ae ee ee
2. Trial Court Judgment .............
3. Federal Circuit Decision ...........
10
1]
iv
Contents
REASONS FOR GRANTING THE PETITION
A. The Decision Below Conflicts With This
Court’s Takings Jurisprudence ........ 15
1. The Federal Circuit’s Restrictive
Application of Omnia Contravenes
The Reasoning Of That Case and
The Court’s Subsequent Takings
BPE cocci vib eveeteassesesnens 16
2. The Federal Circuit’s Assault on the
Fifth Amendment Mistakenly Limits
This Court’s Decision in Kimball
Sado ob baGu vakde obese vines 19
B. The Decision Below Creates an Intra-
Circuit Conflict in the Federal Circuit
Having Exclusive Jurisdiction Over
Similar Claims, Thus Necessitating This
Court’s Review Without Further
Percolation in the Federal Courts of !
Gin Soe Cie Sa be tae e ed euie es 21
C. The Issue Presented By This Case Is
Important, Recurring, and Has Far-
Reaching Ramifications ............... 26
EE ke 6806660506 ¢i nc eevesaunevess 29
v
TABLE OF APPENDICES
Appendix A — Opinion Of The United States
Court Of Appeals For The Federal Circuit
EB EE. er ba cc uccweceéedneneseens
Appendix B — Opinion Of The United States
Court Of Federal Claims Dated March 15, 2007
Appendix C — Denial Of Motion For Summary
Judgment And Order Dated October 12, 2006
Appendix D — Opinion Of The United States
Court Of Federal Claims Dated April 21, 2005
Appendix E — Opinion Of The United States
Court Of Federal Claims Dated January 7, 2005
Appendix F — Aviation And Transportation
BOGE Gt once vccccess UT CC
vi
Page
TABLE OF CITED AUTHORITIES "
CASES
Air Pegasus of D.C., Inc. v. United States,
424 F:3d 1206 (Fed Cir. 2005) ........... 12, 18, 19
Armstrong v. United States,
ee ccc escccceceesececes 16, 17
Cardinal Chem. Co. v. Morton Int’l Inc.,
oe weceees 15, 22
Cienega Gardens v. United States,
331 F.3d 1319 (Fed. Cir 2003) ............. passim
Cienega Gardens v. United States,
503 F.3d 1266 (Fed. Cir. 2007) .............. 24
Eastern Enters. v. Apfel,
a os tate eo ceccevess 27
Festo Corp. v. Shoketsu Kinzoku
Kogyo Kabushiki Co.,
I oo cc ceccterescesecee 16, 22
First English Evangelical Lutheran Church
of Glendale v. County of Los Angeles, Cal.,
EEE. Sccccccsccbesccsvcccesse 21
vii
Cited Authorities
Goldblatt v. Hempstead,
369 U.S. 590 (1962) ..........cecceeees
Huntleigh USA Corp. v. United States,
63 Fed. Cl. 440 (2005) ............-2.06.
Huntleigh USA Corp. v. United States,
GS Fed. Cl. 178 GQ0G6) .... 2c cccceions.
Huntleigh USA Corp. v. United States,
Be Hs Ss GOED co cccccccocescccs:
Huntleigh USA Corp. v. United States,
525 F.3d 1370 (Fed. Cir. 2008) ..........
KSR Int'l. Co. v. Teleflex Inc.,
Be Gy Gs ROT ED cs esecccccccccess
Kaiser Aetna v. United States,
Ge CE ETED sedi wdsvccevccvcees
Kimball Laundry Co. v United States,
MP BMD ob vcecwevoccessececnes
Lucas v. S.C. Coastal Council,
505 U.S. 1003 (1992) ...............4.-.
Maritrans Inc. v. United States,
342 F3d 1344 (Fed. Cir. 2003) ..........
Omnia Commercial Co. v. United States,
Be We GUND sh ccccceccwacceccece
Page
passim
passim
vili
Cited Authorities
Page
Palazzolo v. Rhode Island,
cee eesee 24
Penn Cent. Tran. Co. v. City of New York,
ee en dec ccecenseeeses passim
Ruckelshous v. Monsanto Co.,
er 27
Tahoe-Sierra Preservation Council, Inc.
v. Tahoe Reg'l Planning Agency,
ee a cnenetoees 24
Warner-Jenkinson Co.
v. Hilton Davis Chem. Co.,
eee 22
STATUTES AND CONSTITUTIONAL PROVISION
Be Ce OED ch dascccndovccwcesccusence 1
SP Me D MUEIUD Seco ccccccseusccencess 13, 21
Se ME ED 56h ce eves destscccnceods 13, 21
I EE DOS pawdedkerscwescsssvecnwes 5
49 U.S.C. § 44901 et seg. (2000) ............... 4
ix
Cited Authorities
Page
Aviation and Transportation Security Act,
Pub. L. No. 107-71, 115 Stat. 597 (2001) ... passim
E,W voces ccctvaveecues' sds passim
REGULATIONS
14 C.FR. pts 107-08 (2000) (superseded) ...... 4
OTHER MATERIALS
Andrew E. Kramer, /n Dispute with BP,
Kremlin’s Hand is Seen, NY Times, July 19,
TET, EES RE Bee PEL epee baer oh SR do 9 SE 28
Simon Romero, Chavez Seizes Greater Economic
Power, NY Times, May 18, 2008 ............ 28
1
Huntleigh USA Corporation (“Petitioner” or
“Huntleigh”) respectfully petitions for a writ of
certiorari to review the judgment of the United States
Court of Appeals for the Federal Circuit in this case.
OPINIONS BELOW
The opinion of the Court of Appeals for the Federal
Circuit (Schall, J., joined by Newman and Mayer, JJ.)
affirming judgment for the government, is published at
525 F.3d 1370 (Fed. Cir. 2008), and reprinted in the
Petitioner’s Appendix (“Pet. App.”) at la-29a.
The opinion of the Court of Federal Claims
(Margolis, J.) granting judgment for the government is
reported at 75 Fed. Cl. 642 (2007), and is reprinted in
the Pet. App. at 30a-46a. The opinion of the Court of
Federal Claims denying the government’s motion for
summary judgment is unreported and is reprinted at
Pet. App. 47a-49a. The opinion of the Court of Federal
Claims denying the government’s motion for
reconsideration is reported at 65 Fed. Cl. 178 (2005),
and is reprinted at Pet. App. 50a-56a. The opinion of
the Court of Federal Claims denying the government’s
motion to dismiss the complaint is reported at 63 Fed.
Cl. 440 (2005), and is reprinted at Pet. App. 57a-85a.
JURISDICTION
The judgment of the Court of Appeals for the
Federal Circuit was entered on May 15, 2908.
The jurisdiction of this Court is invoked under 28 U.S.C.
§ 1254(1).
2
CONSTITUTIONAL AND STATUTORY
PROVISIONS INVOLVED
The Takings Clause of the Fifth Amendment
provides, “nor shall private property be taken for public
use, without just compensation.” U.S Const. amend V.
Pertinent provisions of the Aviation and
Transportation Security Act, Pub. L. No. 107-71, 115
Stat. 597 (2001), are reprinted in relevant part at Pet.
App. 86a-134a.
STATEMENT
This case arises out of the nationalization by the
United States Government of the private domestic
airport passenger and baggage screening industry,
including the business owned by Huntleigh, pursuant
to the Aviation and Transportation Security Act (“ATSA”
or the “Act”), enacted in the wake of the terrorist
attacks on the United States on September 11, 2001.
Pub. L. No. 107-71, 115 Stat. 597 (2001) (Pet. App. 86a-
134a). By its express terms, the Act was specifically
designed to replace, at all domestic airports, private
passenger and baggage screening companies like
Huntleigh, which had provided screening for decades,
with a government monopoly. On its face, the Act
mandates that the government exclusively supply all
such security screening services and expressly prohibits
private companies like Huntleigh from doing so.
See ATSA § 101(g)(1), 115 Stat. at 603 (Pet. App. 105a-
106a); § 110(b)(2), 115 Stat. at 614-615 (Pet. App. 111a-
112a). As provided for in the Act, Huntleigh’s contracts,
pursuant to which it provided screening services, were
3
nullified when the Government stepped in to take over
provision of these services. See ATSA § 101(g)(2)-(3),
115 Stat. at 603-604 (Pet. App. 106a-107a).
The direct and intended impact of the Act on
Huntleigh was to transfer its longstanding security
screening business to a newly created government
agency called the Transportation Security
Administration (“TSA”). Huntleigh’s contracts, goodwill
and going-concern value, which the Federal Circuit
below acknowledged were cognizable property interests,
were completely nullified, and it was precluded from
performing under its existing contracts or entering into
new contracts for the provision of passenger and
baggage screening. Even though the intended purpose
and effect of the Act was to preclude private screening
companies like Huntleigh from continuing to perform
screening services and to replace them with a federal
monopoly, the Federal Circuit, which has exclusive
jurisdiction over Fifth Amendment takings claims
brought against the federal government, misconstrued
this Court’s decision in Omnia Commercial Co. v. United
States, 261 U.S. 502 (1923), to hold that Huntleigh’s loss
was merely “indirect” and did not constitute a
compensable “taking.” This erroneous decision directly
conflicts with the relevant case law of this Court, creates
a conflict within the Federal Circuit, and threatens to
eviscerate the basic constitutional protection of property
rights. Accordingly, this Petition presents an issue of)\
fundamental importance about the government’s power
to seize private property without paying “just
compensation” as constitutionally mandated.
A. Background
Before 2001, airlines were required to establish
specific air transportation security programs to ensure
the safety of airline passengers, which included the
provision of screening passengers and property prior
to their boarding on to an air craft. See 49 U.S.C. § 44901
et seq. (2000), amended by ATSA, Pub. L. No. 107-71
(2001) (Pet. App. 86a-134a); 14 C.F-R. pts. 107, 108 (2000)
(superseded). Virtually without exception, individual air
carriers discharged their passenger and baggage
screening responsibilities by contracting with private
airline security specialists like Huntleigh. Huntleigh
furnished screening services pursuant to long-standing
and continuously renewed contracts, and had an
excellent reputation in the screening industry. These
contracts were rarely, if ever, terminated, and indeed
no major airline had terminated a Huntleigh contract
since 1991.
The tragic events of September 11, 2001 focused
significant national attention on airport security
screening, and the immediate impact on Huntleigh’s
business was dramatic. In keeping with Federal
Aviation Administration recommendations, Huntleigh
determined to improve the quality of screening by
decreasing turnover rates and attracting employees
with the necessary skill level. It also recruited, hired,
and trained thousands of new employees to meet the
increased screening demands. Huntleigh’s actions
reflected the prevailing view in the immediate aftermath
of the terrorist attacks that screening would continue,
as it had for approximately the past thirty years, to be
performed by private companies providing screening on
5
behalf of air carriers but pursuant to heightened
standards and screening requirements.
Within a few months, on November 19, 2001,
Congress enacted ATSA, which created the TSA,
49 U.S.C. § 114, and directed that “{n]Jot later than 3
months” after its enactment, “the Under Secretary of
Transportation for Security shall assume civil aviation
security functions and responsibilities.” ATSA
§ 101(g)(1), 115 Stat. at 603 (Pet. App. 105a). On its face,
the Act made it zllegal for private companies to perform
these services, reqviring instead that “[t]he Under
Secretary of Transportation for Security shall provide
for the screening of all passengers and property .. .”
and that “/a/ll screening of passengers and property
at airports in the United States .. . shall be supervised
by uniformed Federal personnel of the Transportation
Security Administration ...” ATSA § 110(b)(2), 115
Stat. at 614-615 (Pet. App. 11la-112a) (emphasis added).
Recognizing that this mandate was inconsistent with
existing private screening contracts, ATSA referred, in
a section describing the transition from private to public
security screening, specifically to the Act’s impact on
“air carrier or foreign air carrier contract/s] for
provision of passenger screening services at airports
in the United States” and “any contract the air carrier
has entered into with respect to carrying out” a
screening or security function. See ATSA § 101(g)(2)-
(3), 115 Stat. at 603-604 (Pet. App. 106a) (emphasis
added). In light of the understood direct effect on
screening contracts, the Act further provided that in
certain circumstances, “adequate compensation” be
paid to the parties to those contracts. ATSA § 101(g)(2),
6
115 Stat. at 603-604 (Pet. App. 106a). Internal
government memoranda, as well as the government’s
trial witnesses, confirmed that the Act required the take-
over of private screening contracts.
ATSA also required the airlines to continue paying
for screening services, mandating that the money be
paid to the government. Section 118 of ATSA instructs
the TSA to levy fees on both passengers and airlines to
pay the government’s costs for furnishing screening
services. See 115 Stat at 625 (Pet. App. 127a-129a).
Finally, ATSA did not decrease or eliminate the
requirements for screening; it increased them by
imposing more extensive screening requirements,
including screening one hundred percent of
checked baggage, heightened passenger screening
requirements, and enhanced prerequisites, training, and
supervision for screening personnel. See ATSA § 109,
115 Stat. at 613 (Pet. App. 108a-110a); ATSA § 110, 115
Stat. at 614 (Pet. App. 1lla-115a); ATSA § 111, 115 Stat.
at 616-619 (Pet. App. 117a-125a).
Once Congress enacted ATSA, Huntleigh’s private
screening contracts were nullified. Beginning February
17, 2002, to implement ATSA, the TSA entered into
interim contracts with Huntleigh and other private
companies, pursuant to which the companies
temporarily provided screening services on behalf of the
government. Shortly thereafter, during the summer and
fall of 2002, the government unilaterally removed
Huntleigh’s screeners from security checkpoints and
replaced them with TSA employees. By November 2002,
the government had fully implemented its nation-wide
screening monopoly, and every checkpoint for which
7
Huntleigh had a contract to provide screening services
was staffed by federal employees, many of whom had
been formerly employed by Huntleigh.
As a direct result of ATSA, Huntleigh’s valuable
screening business was assumed by the government, its
employees were hired by the government, its long-
standing contracts were nullified, and it was legally
precluded from performing passenger and baggage
screening at all domestic airports in this country. Those
very same passenger and baggage screening functions
are now being operated by the TSA — at the same check
points, at the same airports, for the same air carriers,
and in many instances by Huntleigh’s former employees,
now wearing TSA uniforms.
B. Proceedings Below
1. Pretrial Opinions
On November 14, 2003, Huntleigh initiated this
action against the United States in the Court of Federal
Claims. (See Pet. App. 61a.) Huntleigh alleged that when
the government enacted ATSA, it appropriated
Huntleigh’s valuable business assets, including its
contracts, goodwill and going-concern value, without
compensating Huntleigh. Based on those allegations,
Huntleigh asserted two causes of action, a takings claim
under the Fifth Amendment of the United States
Constitution, and a statutory claim under section 101(g)
of ATSA, which requires the government to pay
“adequate compensation” in the event it assumes “the
rights and responsibilities” of a “contract for provision
of passenger screening services.” ATSA § 101(g)(2), 115
8
Stat. at 603-04 (Pet. App. 106a). Huntleigh is not seeking
review of the dismissal of that statutory claim.
On March 24, 2004, the United States moved to
dismiss Huntleigh’s Complaint pursuant to Rule 12(b)(6)
of the Court of Federal Claims. By opinion and order
dated January 7, 2005, the Court of Federal Claims
rejected all of the government’s legal arguments and
denied the motion to dismiss. (See Pet App. 57a
(Huntleigh USA Corp. v. United States, 63 Fed. Cl. 440
(2005)).) Addressing the existence of property rights,
the Court of Federal Claims held that “business assets,”
including “contracts, goodwill, and going-concern value”
plainly are compensable “property” under controlling
Supreme Court and Federal Circuit precedent.
(Pet. App. 65a.)
The court also decisively rejected the government’s
argument that Huntleigh’s loss of its business assets
was “merely consequential” under Omnia Commercial
Co. v. United States, 261 U.S. 502 (1923), and its progeny.
(See Pet. App. 68a-69a.) The court explained that
“(rjather than merely bringing the contract between
Huntleigh and the airlines to an end, as the government
suggests, the government has appropriated Huntleigh’s
rights under the contract. The government has gone
beyond merely taking over the subject matter of the
contract, as was the case in Omnia.” (Pet. App. 74a.)
Thus, the court determined that the case was controlled
by the Federal Circuit’s opinion in Cienega Gardens v.
United States, 331 F.3d 1319 (Fed. Cir 2003), and held:
The present case is even more egregious.
More than rewriting the contracts between
9
Huntleigh and the nation’s airlines, the
government has taken over Huntleigh’s
position as the contractor, and has created for
itself a sweeping monopoly over the entire
industry.
(Pet. App. 73a-74a.)
Having established that Huntleigh had alleged it
possessed valid property rights compensable under the
Takings Clause, the trial court then determined that
Huntleigh had properly alleged a “taking” under the
three-factor analysis set forth in Penn Central
Transportation Co. v. City of New York, 438 U.S. 104,
124 (1978). (Pet. App. 75a.) The government’s
subsequent motion for reconsideration was denied, on
the grounds that the government had “present[ed] no
new facts [Jor arguments” in its reconsideration motion.
(See Pet. App. 52a, 56a (Huntleigh USA Corp. v. United
States, 65 Fed. Cl. 178 (2005)).)
Following the close of fact and expert discovery, the
government filed a motion for summary judgment. The
Court of Federal Claims denied the government’s motion
from the bench, once again rejecting the legal and factual
arguments advanced by the government:
Many of the legal and factual issues raised
in Defendant’s motion for summary judgment
were considered in this Court’s previous
denial of Defendant’s motion to dismiss|[, 63
Fed. Cl. 440,]... and the motion to reconsider[,
65 Fed. Cl. 178]....
10
Defendant again raises many of the same
issues in the present motion. For the same
reasons previously stated in response to
Defendant’s motions as to those issues, the
motion for summary judgment is denied.
(Pet. App. 47a-48a (Transcript and Order denying
Defendant’s Motion for Summary Judgment, October
12, 2006).)
2. Trial Court Judgment
On November 13, 2006, the case proceeded to a
bench trial which lasted four days. Huntleigh presented
extensive evidence of the direct and devastating impact
of ATSA on its screening contracts, which were nullified
as a result of the Act. (Pet. App. 6a-7a, 33a.) A once
thriving business at the forefront of its industry (id.),
ATSA prohibited Huntleigh from continuing
performance under its screening contracts. (Pet. App.
32a (“The Act required virtually all passenger and
baggage screening to be conducted by federal
employees within one year.”).) There was no evidence
presented to support any contention that ATSA merely
decreased the need for Huntleigh’s services. To the
contrary, the Act legally precluded Huntleigh from
offering competing security screening services
anywhere in the country. (/d.) At the end of December
2006, the parties filed post-trial briefs. The court heard
final arguments on February 28, 2007.
On March 15, 2007, the Court of Federal Claims
issued its final opinion in this case. (See Pet. App. 30a
(Huntleigh USA Corp. v. United States, 75 Fed. Cl. 642
11
(2007)).) In an abrupt and total reversal of its three prior
decisions, the court concluded that “the property
Huntleigh described in its evidence at trial [its contracts,
goodwill or going-concern value] is not subject to
compensation under the Fifth Amendment.” (Pet. App.
35a.) The opinion appeared to contain no analysis of
whether a taking had occurred, and the court did not
address what compensation might be due. Although the
court suggested that the “evidence presented at trial”
contributed to its about-face on the existence of legal
property rights (Pet. App. 35a), the Court of Federal
Claims included only two short paragraphs reciting the
“Facts” (Pet. App. 32a-33a), and instead adopted purely
legal positions that it had itself previously and decisively
rejected on three separate occasions. The trial court
jettisoned its own prior determination that Huntleigh’s
claim was not “merely consequential” under Omnia, and
inexplicably held that the government’s action had
rendered Huntleigh’s private screening contracts
“impossible to perform” which “does not amount to a
taking.” (Pet. App. 37a.) The court concluded: “In
summary, Huntleigh did not possess a compensable
property interest under the Fifth Amendment, and the
Court’s analysis ends there.” (Pet. App. 39a.)
3. Federal Circuit Decision
On July 16, 2007, Huntleigh filed its appeal in the
Federal Circuit, and on May 15, 2008, the Federal Circuit
issued its opinion. (Pet. App. la (Huntleigh USA Corp.
v. United States, 525 F.3d 1370 (Fed. Cir. 2008)).) The
Federal Circuit rejected the lower court’s conclusion that
Huntleigh had no property interest, holding that “it is
undisputed that the property interests Huntleigh alleges
were taken are, for purposes of the Fifth Amendment,
cognizable property interests.” (Pet. App. 13a.)
12
Rather than proceeding to apply the “takings tests”
set forth by this Court in Penn Central, 438 U.S. at 104
and Lucas v. South Carolina Coastal Council, 505 U.S.
1003 (1992), however, the Federal Circuit simply
concluded that Huntleigh had not proven a compensable
Fifth Amendment claim as a matter of law. The court
found that because the government “did not actually
assume [Huntleigh’s] contracts” (7.e., sign its name
where Huntleigh’s name previously had been),
Huntleigh’s takings claim could not be based on an
actual taking of its contracts, but rather must be based
on the argument that ATSA rendered those contracts,
and the associated goodwill and going-concern value,
“worthless.” (Pet. App. 16a.) Without any analysis of
whether those contracts had in fact been rendered
worthless (which they were), the court applied this
Court’s ruling in Omnia Commercial Co. v. United
States, 261 U.S. 502 (1923), and its own decision in
Air Pegasus of D.C., Inc. v. United States, 424 F.3d 1206
(Fed Cir. 2005), to legally foreclose Huntleigh’s takings
claim. (Pet. App. 17a-21a.)
The Federal Circuit determined that the imposition
of ATSA was “indistinguishable” from the regulatory
circumstances in Omnia and Air Pegasus. (Pet. App.
21a.) It concluded that ATSA did not “take action with
respect to any security screening contract to which
Huntleigh was a party,” and instead merely “reduced
the demand for Huntleigh’s services.” (Pet. App. 20a-
21a.) The court did not address ATSA’s explicit language
that it is directed at air carrier contracts for provision
of screening services (which indisputably include
Huntleigh’s former contracts), ATSA § 101(g)(2)-(3), 115
Stat. at 603-604 (Pet. App. 106a), or ATSA’s legislative
13
preclusion of private screening companies (such as
Huntleigh) from providing screening services, ATSA §§
101(g)(1), 115 Stat. at 603 (Pet. App. 105a-106a); §
110(b)(2), 115 Stat. at 614-615 (Pet. App. 111la-112a). The
Federal Circuit determined that Huntleigh’s claim that
the government had arrogated it’s entire screening
business, including its contract rights, which were
rendered “worthless,” did not constitute a compensable
taking.
Finally, the Federal Circuit distinguished this
Court’s analysis in Kimball Laundry Co. v. United
States, 338 U.S. 1 (1949), concluding that goodwill and
going-concern value are only compensable in the context
of a temporary, not permanent, taking. (Pet. App. 24a.)
REASONS FOR GRANTING THE PETITION
Review by this Court of the Federal Circuit decision
is necessary and important to re-align the Federal
Circuit’s jurisprudence with that of this Court, harmonize
conflicting decisions within the Federal Circuit on this
issue, and to ensure that the government is not given a
green light to enact legislation the ultimate effect — and
avowed purpose —- of which is the seizure of private
property without awarding constitutionally mandated
compensation. It is especially important for this Court
to review this incorrect decision because the Federal
Circuit has exclusive jurisdiction over takings claims
against the United States (28 U.S.C. § 1491(a)(1);
28 U.S.C. § 1295(a)(3)), and the erroneous holding of
the Federal Circuit with regard to such claims can only
be rectified by this Court’s intervention.
14
The Federal Circuit’s opinion misconstrues this
Court’s decision in Omnia, 261 U.S. at 502, to deny
Fifth Amendment protection to Petitioner’s claim as
merely indirect or consequential even where Petitioner’s
business and contracts were the avowed targets of the
regulatory taking, not a remotely impacted incident of
the “taking” of someone else’s property. To reach its
result, the Federal Circuit circumvented this Court’s
well-established takings jurisprudence and incorrectly
extended Omnia to a plainly distinguishable factual
situation where it was not intended to apply. At the same
time, the Federal Circuit fundamentally undermined the
Fifth Amendment’s protection of private property by
denying “just compensation” to claimants who can
establish a “taking” by unjustifiably narrowing this
Court’s holding in Kimball Laundry, 338 U.S. at 1.
The decision below also employs discredited legal
analysis previously rejected by, and conflicting with, the
Federal Circuit’s own prior case law. Indeed, in reaching
its conclusion, the Federal Circuit was constrained to
adopt two positions it had previously discarded in
Cienega Gardens v. United States, 331 F.3d 1319
(Fed. Cir. 2003). Because the Federal Circuit provides
the only venue for appellate review on these issues, a
conflict within that circuit creates confusion over
property rights throughout the country and can only
be rectified by this Court’s intervention.
Under the Federal Circuit’s opinion, the federal
government is entirely free to nationalize private
industries under its broad police power without the
constitutional obligation to pay “just compensation.”
The decision prevents a claimant whose property has
15
been rendered “worthless” by regulatory action
specifically intended to prevent the claimant from
pursuing its business or performing under its contracts
from receiving “just compensation” under the
Fifth Amendment as a matter of law. This holding has
ramifications far beyond this case. The significant
adverse effect on private property from this erroneous
precedent is extremely far reaching, both nationally and
internationally. If allowed to stand, the Federal Circuit’s
extraordinary conclusion has the potential to eviscerate
traditional concepts of private property rights by
allowing the federal government to readily seize private
property without complying with the Fifth Amendment’s
mandate to pay “just compensation.” Internationally,
this erroneous precedent would provide foreign
governments with a justification for usurping the
businesses of United States companies with impunity
based on their claimed national interests — and without
compensation.
A. The Decision Below Conflicts With This Court’s
Takings Jurisprudence
This Court has recognized that given the Federal
Circuit’s exclusive jurisdiction over certain matters, its
rulings are of special importance “to the entire Nation.”
Cardinal Chem. Co. v. Morton Int'l, Inc., 508 U.S. 83,
89 (1993). In keeping with this recognition, the Court
grants review of cases emanating from the Federal
Circuit, particularly where, as here, the court has
departed from the course chartered by this Court.
See, e.g., KSR Int'l. Co. v. Teleflex Inc., 127 S.Ct. 1727,
1735, 1743 (2007) (granting certiorari “[b]ecause the
Court of Appeals addressed the question of obviousness
,
_
7
16
in a manner contrary to [the relevant statute} and our
precedents,” and holding that “the fundamental
misunderstandings identified above led the Court of
Appeals in this case to apply a test inconsistent with
our [prior] decisions.”); Festo Corp. v. Shoketsu Kinzoku
Kogyo Kabushiki Co., 5385 U.S. 722, 727-28 (2002)
(granting certiorari in part because the Federal Circuit
departed from the Court’s past precedent). Here, the
Federal Circuit has departed from this Court’s takings
jurisprudence in two distinct ways. First, the court
improperly invoked Omnia, a case barring claimants
from recovery under the Fifth Amendment for remote
or incidental injuries, to deny “just compensation” in a
case that epitomizes a taking contemplated by the Fifth
Amendment. Second, the court limited Kimball
Laundry’s holding in an unsupportable manner that
disregards this Court’s reasoning in that case.
1. The Federal Circuit's Restrictive Application
of Omnia Contravenes The Reasoning Of
That Case and The Court’s Subsequent
Takings Decisions
A bedrock principie enunciated by this Court’s
takings jurisprudence is that the “Fifth Amendment’s
guarantee ... [is] designed to bar Government from
forcing some people alone to bear public burdens which,
in all fairness and justice, should be borne by the public
as a whole.” Armstrong v. United States, 364 U.S. 40,
49 (1960). In furtherance of this fundamental precept,
the Court has developed certain “takings tests” based
on factual inquiry to determine when “‘justice and
fairness’ require that economic injuries caused by public
action be compensated by the government, rather than
17
remain disproportionately concentrated on a few
persons.” Penn Cent. Trans. Co. v. City of New York,
438 U.S. 104, 124 (1978) (citing Armstrong, 364 U.S. at
49; Goldblatt v. Hempstead, 369 U.S. 590, 594 (1962));
Lucas, 505 U.S. at 1015.
Nevertheless, having acknowledged the existence
of Petitioner’s property right, as the Federal Circuit
explicitly did here, the Federal Circuit ignored
completely the standards set forth in Penn Central,
438 U.S. at 104, or Lucas, 505 U.S. at 1003, which should
have been applied to the direct usurpation of
Petitioner’s property by governmental action. The
Federal Circuit’s decision defies the guiding principles
carefully laid down by this Court, and if left standing,
would create an enormous loophole by which the
government could use Omnia to justify direct regulatory
taking of private property rights without the rigorous
inquiry mandated by this Court. It is exactly this type
of rigid detei mination that has generally been eschewed
by the Court in this context. See Penn Central, 438 U.S.
at 123; Lucas, 505 U.S. at 1015.
To be sure, Omnia is applicable to situations in
which injury resulting from governmental action is too
indirect to fall within the Fifth Amendment’s scope.
261 U.S. at 508. But, Omnia does not - and should not —
stand for the proposition that regulatory action to
nationalize an industry, aimed directly at abrogating
private contract rights, is not, as a matter of law, within
the Fifth Amendment’s protection and exempt from a
proper analysis pursuant to this Court’s takings
jurisprudence.
18
In Omnia, the seminal case on consequential losses
in the takings context, which this Court has not
illuminated for eighty-five years, this Court held that a
manufacturer, which had a contract to purchase steel
from the producer of the steel, had no takings claim
where the government, during wartime, appropriated
the steel belonging to the steel producer before it had
been delivered to the manufacturer. 261 U.S. at 511.
Reasoning that the government had appropriated the
subject matter of the contract (steel), and had not
appropriated the contract itself, this Court applied the
general principle that “for consequential loss or injury
resulting from lawful governmental action[,] the law
affords no remedy.” Jd. at 510. The Court acknowledged,
however, that its reasoning did not apply to cases where
the contract at issue is “an integral part of” the property
taken. Omnia, 261 U.S. at 513 (citing Monongahela
Navigation Co. v. United States, 148 U.S. 312 (1893)).
It bears emphasis that in Omnia, the government’s
objective was simply to obtain steel, not to eliminate,
much less supplant, private manufacturers who used
steel. Indeed, the statute did not even target property
belonging to the manufacturer (the steel still resided
with the steel producer), and therefore the injury was
truly “consequential.” 7d. at 510. If ATSA had closed
domestic airports or appropriated all domestic aircraft
for military use, the effect on Petitioner from the
absence of domestic passengers to screen would be
incidental. See, e.g., Air Pegasus of D.C., Inc. v. United
States, 424 F.3d 1206 (Fed Cir. 2005).' But that situation
' The Federal Circuit erroneously likened this case to
Air Pegasus of D.C., Inc. v. United States, 424 F.3d 1206
(Cont'd)
19
is vastly different fror . the one created by the Act which
was specifically designed to nationalize the entire
baggage screening industry, replaced Petitioner’s
business with a government monopoly, and made it illegal
for Petitioner to perform under its existing contracts.
It is hard to imagine a move direct, less “incidental,”
impact on Petitioner.
2. The Federal Circuit’s Assault on the Fifth
Amendment Mistakenly Limits This Court’s
Decision in Kimbali Laundry
While unduly expanding Omnia to constrict the
Fifth Amendment’s protection of private property, the
(Cont'd)
(Fed Cir. 2005), which had applied Ommia to an injury that was
ultimately derivative. In Air Pegasus, the lessee of a heliport
brought a takings claim based on the government’s prohibition
on the use of airspace above the heliport after September 11,
2001. 7d. at 1210. The Federal Circuit held that the plaintiff
could not support such a claim, because as the plaintiff conceded,
it was seeking recompense for a “derivative injury.’” Jd. at 1215.
In assessing whether Air Pegasus suffered a taking, the Federal
Circuit stated that “a claimant seeking compensation from the
government for an alleged taking of private property must, at
a minimum, assert that its property interest was actually taken
by the government action.” Jd. at 1215. The court found Air
Pegasus’s only property interest was in a leasehold, the
Government had taken no action to regulate that interest, and
the claimant thus “failed to assert a cognizable property interest
for purposes of the Fifth Amendment.” /d. at 1217-18. In
contrast, here, Petitioner’s property — made up of its contracts,
goodwill, and going-concern value — were taken by ATSA, a
statute whose direct and intended purpose was to replace
private screening companies with a government monopoly and
to eliminate Petitioner's property.
20
Federal Circuit’s opinion also erroneously narrows this
Court’s decision in Kimball Laundry v. United States,
338 U.S. 1 (1949), to limit the compensation due those
few claimants who could still survive its overly stringent
“takings test.” The Federal Circuit held, “Moreover,
going concern value is a property interest that has been
held to be compensable in the context of a temporary,
but not a permanent, taking.” (Pet. App. 24a (citing
Kimball Laundry, 338 U.S. at 11).) This interpretation
is clearly contrary to the decision in Kimball Laundry
itself, is not supported by any Supreme Court
precedent, and provides yet another reason to grant
this Petition for Certiorari.
As this Court explained in Kimball Laundry, there
are two circumstances in which compensation clearly is
due for goodwill and going-concern value: (1) when the
taking of the physical assets is temporary (as in Kimball
Laundry itself), see 338 U.S. at 15; and (2) when the
government usurps the business and establishes a
monopoly, “as where public-utility property has been
taken over for continued operation by a governmental
authority,” id. at 12. The latter kind of taking, which
occurred here — unquestionably is permanent rather
than temporary —- and gives rise to a right of
compensation for lost goodwill and going-concern value
because the government has precluded the takings
claimant from realizing the value of its business.
See id. at 12-13.
The Federal Circuit’s flawed attempt to limit
Kimball Laundry’s holding is also contrary to this
Court’s determination that temporary takings are “not
different in kind from permanent takings, for which the
a
21
Constitution clearly requires compensation.” See First
English Evangelical Lutheran Church of Glendale v.
County of Los Angeles, Cal., 482 U.S. 304, 318 (1987).
Whether a property interest is compensable turns, not
on the duration of the taking, but on state-law and other
common-law concepts of property. See Maritrans Inc.
v. United States, 342 F.3d 1344, 1352 (Fed. Cir. 2003)
(citing Lucas, 505 U.S. at 1030). The Federal Circuit’s
incorrect conclusion limiting the compensation due to
claimants whose property has been permanently taken
should be addressed so that its erroneous
pronouncement in Kimball Laundry cannot be used to
deny compensation intended by this Court’s
jurisprudence.
B. The Decision Below Creates an Intra-Circuit
Conflict in the Federal Circuit Having Exclusive
Jurisdiction Over Similar Claims, Thus
Necessitating This Court’s Review Without
Further Percolation in the Federal! Courts of
Appeal
Because the Federal Circuit has exclusive
jurisdiction over takings claims brought against the
federal government (28 U.S.C. § 1491(a)(1); 28 U.S.C.
§ 1295(a)(3)), there is no need to await further
percolation of this issue. Here, the Federal Circuit’s
decision, which conflicts with its own prior jurisprudence,
engenders confusion tantamount to a conflict within the
circuits on the vital issue of the scope of the Fifth
Amendment’s protections in the context of regulatory
takings impacting private contract rights. This Court
has granted certiorari under the circumstances,
recognizing that conflict among the circuits may never
22
arise. Festo Corp. v. Shoketsu Kinzoku Kogyo
Kabushiki Co., 585 U.S. 722, 727 (2002) (granting
certiorari in part where the Federal Circuit departed
from its own past precedent); Cardinal Chem. Co. v.
Morton Int'l, 508 U.S. 83, 88 (1993) (granting certiorari
to resolve question within the Federal Circuit relating
to patents); Warner-Jenkinson Co. v. Hilton Davis
Chem. Co., 520 U.S. 17, 21 (1997) (granting certiorari in
light of “(t]he significant disagreement within the Court
of Appeals for the Federal Circuit” and to endeavor to
clarify the scope of the doctrine at issue).
The Federal Circuit has distorted Omnia in varying
and conflicting ways to justify its increasingly crabbed
interpretation of when the Fifth Amendment requires
the payment of “just compensation,” culminating in its
extraordinary holding here. Apart from the obvious legal
error of the Federal Circuit’s reasoning, the decision
that this case is not controlled by its prior decision in
Cienega Gardens v. United States, 331 F.3d 1319
(Fed. Cir 2003) (Pet. App. 21a, 23a), illuminates a conflict
within the Federal Circuit, which has virtually complete
jurisdiction over Fifth Amendment takings cases. The
Federal Circuit’s holding here that Omnia precludes a
finding that the Act constituted a “taking” of
Petitioner’s property requiring the payment of “just
compensation” (Pet App. 16a), is directly at odds with
its conclusion in Cienega Gardens that legislation aimed
at private contract rights amounts to more
than the consequential effect described in Omnia
23
and requires that such compensation be paid,
331 F.3d at 1335.”
In Cienega Gardens, the claim was brought by
owners of real estate who had permitted their premises
to be used as public housing for a period of twenty years,
in return for favorable loan terms. See id. at 1325. Under
the terms of the loans the owners had negotiated with
private banks and in accordance with then existing
regulations, the owners could pre-pay their forty-year
mortgages at the end of the twenty-year term and thus
free up the property for private use. /d. at 1325-26.
Before twenty years had passed, the federal government
enacted legislation prohibiting exercise of the twenty-
year termination clause, precluding the owners from
exiting the public housing program. See id. at 1326. The
owners alleged this legislation constituted a taking of
their contractual and other property rights.
In dismissing the suit, the Court of Federal Claims held
(among other things) that governmental interference
with private contracts, as a matter of law, amounted only
to frustration resulting in “consequential loss[es]”
under Omnia - and not a taking. See Cienega Gardens,
331 F.3d at 1334-35. On appeal, the Federal Circuit
disagreed, explaining that “[t]he proposition in Omnia
about consequential loss or injury refers to legislation
targeted at some public benefit, which incidentally
affects contract rights, not, as in this case, legislation
2 Indeed, the Federal Circuit’s finding in Cienega Gardens
that “Omnia is relevant to this case only because it confirms
that contract rights can be property within the meaning of the
Fifth Amendment and require compensation ‘if taken for public
use,” 331 F.3d at 1335, is equally applicable here.
24
aimed at the contract rights themselves in order to
nullify them.” Id. (emphasis added). Because the
enactment of the offending legislation “directly and
intentionally abrogated the contracts,” Omnia was
inapplicable. Cienega Gardens, 331 F.3d at 1335.
By its express terms, the Act was aimed directly at
screening contracts, including Huntleigh’s contracts, in
order to nullify them and to make way for federalization.
* In Cienega Gardens v. United States , 503 F.3d 1266, 1278
(Fed. Cir. 2007), cert. dismissed, No. 07-1100, 2008 WL 512725
(Aug. 1, 2008), a specially convened panel of the Federal Circuit
discussed the way in which the trial court should have assessed
certain of the Penn Central factors in determining whether a
taking had occurred. The court, however, did not alter its prior
conclusions regarding Omnia. The court reiterated that:
The focus of the regulatory takings analysis is on
fundamental fairness — is it fair for the government
to impose the cost of a regulation on private parties
rather than on the public as a whole through public
spending? To make this determination, there is no
set formula. There simply is no bright line dividing
compensable from noncompensable exercises of the
Government’s power when a regulatory imposition
causes partial loss to the property owner. What is
necessary is a classic example of judicial balancing
of competing values. Thus the regulatory takings
analysis is characterized by an essentially ad hoc,
factual inquiry .. . designed to allow careful
examination and weighing of all the relevant
circumstances.
Id. (citing, inter alia, Palazzolo v. Rhode Island, 533 US. 606
(2001); Penn Central, 438 U.S. at 123; Tahoe-Sierra Pres Council,
Ine. v. Tahoe Reg’l Planning Agency, 535 U.S. 302, 322 (2002)
(internal alterations and quotation marks omitted).)
25
Indeed, the Act goes even further by requiring that the
government be the exclusive provider of screening
services and legally precluding Huntleigh from
continuing to perform under its agreements or entering
into any other contracts for the provision of these
services. In direct conflict with its explicit holding in
Cienega Gardens, that Omnia does not legally foreclose
an action such as the one brought by Huntleigh, the
Federal Circuit here reached the diametrically opposite
conclusion that this type of claim “can not stand.”
(Pet. App. 16a.)
The Federal Circuit also adopted a second holding
in direct conflict with Cienega Gardens. The Federal
Circuit held that, “Huntleigh was not a party to any
agreement or contract with the federal government that
was later unilaterally altered by statute. Rather,
Huntleigh’s contracts with various commercial airlines
were frustrated by a shift in the government’s regulation
of the airlines. Cienega Gardens therefore does not
support Huntleigh’s takings claim.” (Pet. App. 23a.)
In Cienega Gardens, the court stated just the opposite:
“the trial court implied that, under Omnia, if the
government is not a party to the contract, the effect of
the legislation on a private contract can only be
consequential and there can be no taking of a contract
right. .. . Omnia does not support any such rule.”
Cienega Gardens, 331 F:3d at 1335.
The holdings of Cienega Gardens and Huntleigh
cannot be reconciled and represent a clear conflict within
the Federal Circuit necessitating this Court’s immediate
intervention. Given the Federal Circuit’s exclusive
jurisdiction over takings claims against the United
26
States Government, such a conflict amounts to a split
between the circuits and should this conflict go
unresolved, claimants with legitimate Fifth Amendment
claims will be left unsure of their rights under the Fifth
Amendment or worse, will conclude they cannot prevail
under Federal Circuit precedent and will forego bringing
such claims.
C. The Issue Presented By This Case Is Important,
Recurring, and Has Far-Reaching Ramifications
If left standing, the Federal Circuit’s opinion will
trample on the rights guaranteed to property owners
by the very text of the Fifth Amendment. By holding
that a claim based on regulation which, on its face,
directly regulates private contractual rights, rendering
that cognizable property interest “worthless [,] ...
cannot stand” (Pet. App. 16a), the Federal Circuit’s
opinion effectively undermines, if not eliminates, the
crucial protections afforded by the Fifth Amendment,
not only in this case, but in a wide array of potential
contexts. It also will encourage the government to enact
far-reaching regulations without the cost of providing
corresponding and constitutionally mandated
compensation. For example, the government could enact
legislation requiring that the nation’s airline industry
be operated exclusively by a federal agency using
federal employees. Of course, such a regulation would
render private airlines, many of which are publicly
traded companies, worthless and all the equipment
owned by them would have “fire sale” or salvage value
as private airlines would no longer be permitted to
operate their planes domestically. In such a situation,
airline employees would have no real choice but to
27
become federal employees, if given the chance to do so.
Under the Federal Circuit’s opinion, the private airline
would have no recourse. Indeed, no industry would be
safe from federalization, and the government could do
it without paying for what it had taken and destroyed.
This Court has not hesitated to intervene under these
circumstances to prevent further erosion of these
fundamental rights. See Kaiser Aetna v. United States,
444 U.S. 164, 177 (1979) (“There is no denying that the
strict logic of the more recent cases limiting the
Government’s liability to pay damages for riparian
access, if carried to its ultimate conclusion, might
completely swallow up any private claim for ‘just
compensation’ under the Fifth Amendment ... .”)
(emphasis added); see also Ruckelshous v. Monsanto
Co., 467 U.S. 986, 1012 (1984) (“If Congress can ‘pre-
empt’ state property law in the manner advocated by
EPA, then the Taking Clause has lost all vitality. This
Court has stated that a sovereign, ‘by ipse dixit, may
not transform private property into public property
without compensation. . . . This is the very kind of thing
that the Taking Clause of the Fifth Amendment was
meant to prevent.’”) (quoting Webb’s Fabulous
Pharmacies, Inc. v. Beckwith, 449 U.S. 155 (1980));
Eastern Enters. v. Apfel, 524 U.S. 498, 536 (1998) (“{T Jhe
Constitution does not permit a solution to the problem
of funding miner’ benefits that imposes such a
disproportionate and severely retroactive burden upon
Eastern.”).
The potential implications of the Federal Circuit’s
decision are by no means limited to domestic businesses.
The profound potential international implications
reinforce the need for this Court to correct the Federal
28
Circuit’s opinion. A decision upholding the government’s
unfettered right to nationalize an entire private industry
— without requiring compliance with the Fifth
Amendment’s explicit mandate to pay “just
compensation” — can only serve to embolden foreign
governments to nationalize private businesses, including
those belonging to United States’ companies, with
impunity, invoking the Federal Circuit’s jurisprudence
as justification. Indeed, if the Federal Circuit’s decision
is allowec to stand, countries like Russia and Venezuela,
which have increasingly nationalized private property
without proper compensation will need only point to the
rule of law in the United States to justify their actions
in the face of international protest. See, e.g., Andrew E.
Kramer, In Dispute with BP Kremlin’s Hand is Seen,
NY Times, July 19, 2008; Simon Romero, Chavez Seizes
Greater Economic Power, NY Times, May 18, 2008. This
Court’s review of the decision below is warranted in light
of the significant and far-reaching ramifications of this
erroneous precedent which will lead to an erosion of the
basic principles embodied in the Fifth Amendment.
29
CONCLUSION
For the foregoing reasons, we respectfully request
that Huntleigh’s petition for writ of certiorari be
granted.
Respectfully submitted,
JONATHAN J. LERNER
Counsel of Record
LAUREN E. AGUIAR
SARAH H. YARDENI
SKADDEN, ARPS, SLATE,
MEAGHER & FLom LLP
Four Times Square
New York, New York 10036
(212) 735-3000
Counsel for Petitioner
la
APPENDIX A — OPINION OF THE UNITED
STATES COURT OF APPEALS FOR THE FEDERAL
CIRCUIT DATED MAY 15, 2008
UNITED STATES COURT OF APPEALS
FEDERAL CIRCUIT
No. 2007-5118.
HUNTLEIGH USA CORPORATION,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
May 15, 2008.
Before NEWMAN, MAYER, and SCHALL, Circuit
Judges.
SCHALL, Circuit Judge.
Huntleigh USA Corporation (“Huntleigh”) is a
corporation in the business of providing passenger and
baggage screening services at airports throughout the
United States. During the period between 1989 and
early 2002, airlines contracted with Huntleigh in order
to meet their responsibilities for passenger and baggage
screening under the Air Transportation Security Act of
2a
Appendix A
1974, Pub.L. No. 93-366, 88 Stat. 415 (1974) (“Air
Transportation Security Act”) (repealed 1994).
Following the terrorist attacks of September 11,
2001, Congress enacted, and the President signed into
law, the Aviation and Transportation Security Act,
Pub.L. No. 107-171, 115 Stat. 597 (2001) (codified in
scattered sections of 5 U.S.C. and 49 U.S.C.) (“ATSA”).
Two of ATSA’s provisions are pertinent to this appeal.
The first provision, section 101(g)(1), 49 U.S.C. § 44901
(note) (Supp. I 2001), provided that the Under Secretary
of Transportation for Security was to assume all security
and screening functions at United States airports. The
second provision, section 101(g)(2), id., provided that
the Under Secretary of Transportation could perform
those functions by assuming the contracts of private
companies that, at the time, provided security and
screening functions at airports. If the government chose
to accomplish its security and screening obligations via
this route, the statute required that it pay adequate
compensation to the private companies whose contracts
were assumed. /d. ATSA’s transfer of responsibility for
passenger and baggage screening from airlines to the
federal government had the effect of bringing to an end
Huntleigh’s security screening contracts with airlines.
In November of 2003, Huntleigh filed suit in the
United States Court of Federal Claims under the Tucker
Act, 28 U.S.C. § 1491(a)(1) (2000). In its suit, Huntleigh
alleged that ATSA’s transfer of responsibility for
passenger and baggage screening resulted in a taking
of its property without just compensation, in violation
3a
Appendix A
of the Fifth Amendment to the Constitution. Huntleigh
also alleged that it was entitled to compensation under
section 101(g)(2) of ATSA. In November of 2006, the
Court of Federal Claims conducted a four-day trial on
Huntleigh’s claims. Thereafter, on March 15, 2007, the
court rendered a decision in which it rejected both of
Huntleigh’s claims and ordered the dismissal of
Huntleigh’s complaint. Huntleigh USA Corp. v. United
States, 75 Fed.Cl. 642 (2007). The court ruled that
Huntleigh’s takings claim failed because Huntleigh had
failed to establish that its property had been taken by
the government. /d. at 645-46. The court ruled against
Huntleigh on its claim for compensation under section
101(g)(2) of ATSA on the ground that the government
had not assumed any of Huntleigh’s contracts.
Id. at 649.
Huntleigh now appeals the decision of the Court of
Federal Claims. Because we conclude that governmental
action did not effect the taking of Huntleigh’s property
under the Fifth Amendment and that the *1374
government did not assume Huntleigh’s security
screening contracts so as to entitle Huntleigh to
compensation under section 101(g)(2) of ATSA, we affirm
the court’s decision.
4a
Appendix A
BACKGROUND
I.
The facts pertinent to this case are not in dispute.
With the enactment of the Air Transportation Security
Act in 1974, Congress directed the Federal Aviation
Administration to require airlines to implement security
programs to screen all passengers and luggage traveling
in commercial aviation. Air Transportation Security Act,
Pub.L. No. 93-366, § 315(a), 88 Stat. 415, 415 (1974)
(“The Administrator shall prescribe . . . reasonable
regulations requiring that all passengers and all
property intended to be carried in the aircraft cabin in
air transportation . .. be screened by weapon-detecting
procedures or facilities employed or operated by
employees or agents of the air carrier. . . .”). In order to
meet their obligations under the statute, most airlines
hired private security contractors to perform the
required passenger and baggage screening.
Huntleigh began offering passenger screening
services in 1989, and it assumed baggage screening
functions in 1999. As of November 19, 2001, when ATSA
became law, Huntleigh had in place contracts with
approximately 75 airlines. The contracts covered
passenger and baggage screening at some 35 airports
across the United States.
The provisions of Huntleigh’s contracts varied.
Some contracts contained set periods of performance,
whereas others simply continued indefinitely.
Sa
Appendix A
All contracts, however, were terminable upon one party’s
providing a certain number of days notice to the other
party. Huntleigh contends, and the government does
not dispute, that, as of 2001, Huntleigh had acquired an
excellent reputation in the industry and that no major
airline had terminated a contract with Huntleigh since
1991.
IT.
In the wake of the terrorist attacks of September
llth, Congress reassessed the effectiveness of the
screening regime created by the Air Transportation
Security Act, wherein airlines were responsible for
screening functions and generally met that
responsibility by hiring private contractors such as
Huntleigh. Specifically, Congress determined that the
federal government, through a new federal agency, the
Transportation Security Administration (“TSA”), could
more effectively provide screening services at airports
than could private contractors. See H.R.Rep. No. 107-
296, at 53-54 (2001), U.S.Code Cong. & Admin.News
2002, pp. 589, 590 (“The conferees . . . note the terrorist
hijacking and crashes of passenger aircraft on
September 11, 2001 .. . required a fundamental change
in the way [the conferees] approach [ ] the task of
ensuring the safety and security of the civil air
transportation system. The Conferees expect that
security functions at United States airports should
become a Federal government responsibility. .. .”).
Consequently, Congress enacted ATSA, thereby
assigning all airport screening responsibilities to the
TSA, rather than commercial airlines.
6a
Appendix A
ATSA imposed screening responsibilities upon the
federal government and set forth a way in which the
government could meet those responsibilities. Thus,
section 101(a) of ATSA amended 49 U.S.C. § 114(d) to
provide that the Under Secretary of Transportation
“shall be responsible for security in all modes of
transportation,” and ATSA section 101(g)(1) stated that,
not later than three months after the enactment of
ATSA, the Under Secretary of Transportation “shall
assume civil aviation security functions and
responsibilities.” ATSA section 101(g)(2), in turn,
provided that, in order to meet the government’s
responsibilities, the Under Secretary of Transportation
“may assume the rights and responsibilities of an air
carrier or foreign air carrier contract for provision of
passenger screening services at airports in the United
States.” If the Under Secretary of Transportation chose
to meet the government’s obligations under ATSA by
assuming a contract that existed between an airline and
a private screening contractor, section 101(g)(2) required
the “payment of adequate compensation to parties to
the contract.”
Though ATSA nowhere expressly forbade
Huntleigh or other private contractors from continuing
to provide airport screening functions, it effectively
eliminated the market for such services, given that it
concentrated all screening functions in the federal
government. Thus, although no airline other than
American Airlines specifically sent a termination notice
to Huntleigh, Huntleigh and the other airlines with
which it had contracts treated their contracts as
7a
Appendix A
terminated upo* the government’s full assumption of
screening functions at airports, resulting in a
considerable loss of business to Huntleigh.
IT].
As noted above, Huntleigh filed suit in the Court of
Federal Claims under the Tucker Act, alleging that
ATSA’s transfer of responsibility for security screening
from airlines to the federal government resulted in a
taking of its property without just compensation in
violation of the Fifth Amendment. Huntleigh also alleged
that it was entitled to compensation under section
101(g)(2) of ATSA. Following a trial, the Court of Federal
Claims rendered a decision rejecting both of Huntleigh’s
claims and ordering the dismissal of Huntleigh’s
complaint. See generally Huntleigh.
The Court of Federal Claims began by addressing
Huntleigh’s takings claim. Huntleigh alleged the taking
of several property interests. Huntleigh contended first
that the government had appropriated its contracts with
the airlines. Though Huntleigh conceded that the
government had not actually substituted itself as a party
to any of its contracts, it argued that the government
had effectively appropriated the contracts insofar as it
had taken upon itself the responsibility of performing
precisely the functions formerly performed by
Huntleigh. /d. at 645. Huntleigh relied upon Cienega
Gardens v. United States, 331 F.3d 1319 (Fed.Cir.2003),
to establish entitlement to compensation for the taking
of its contractual rights. Huntleigh, 75 Fed.Cl. at 646.
8a
Appendix A
Second, Huntleigh argued that the government had
effected a taking by destroying the going concern value
and goodwill associated with its security screening
business. /d. In advancing this argument, Huntleigh
relied upon Kimball Laundry Co. v. United States, 338
U.S. 1, 69 S.Ct. 1434, 93 L.Ed. 1765 (1949), to establish
the compensability of going concern value and goodwill, '
see id. at 10-11, 69 S.Ct. 1434. Huntleigh, 75 Fed.Cl. at
646.
Turning first to the alleged taking of Huntleigh’s
security screening contracts, the Court of Federal Claims
determined that the contracts were not taken by the
government. /d. at 645-46. The court noted that all the
contracts between Huntleigh and the airlines contained
termination clauses, generally requiring from 30-90 days
advance notice, thus permitting either party to
terminate a contract. ij? «t 646. The court further noted
that, except for American Airlines, none of the airlines
with which Huntleigh had contracts had terminated their
contracts. Jd. Rather, following the enactment of ATSA,
they had allowed the contracts to expire pursuant to
their terms. /d. Under these circumstances, the court
1. Kimball Laundry describes “going-concern value” as
the inertia associated with the clientele of any established
business, as a result of which at least a certain percentage of
the customers of a business can likely be expected to continue
to patronize the business so long as it remains solvent. 338 U.S.
at 10-11, 69 S.Ct. 1434. “Goodwill” consists of “{a] business's
reputation, patronage, and other intangible assets that are
considered when appraising the business.” Black’s Law
Dictionary 715 (8th ed.2004).
9a
Appendix A
reasoned, Huntleigh could not properly contend that
its contracts were taken by the government. /d. The
court further reasoned that, despite the fact that ATSA
was the reason for the expiration of Huntleigh’s
contracts, the government could not be deemed to have
committed a taking of Huntleigh’s property because
ATSA did not regulate Huntleigh. Jd. Rather, by
eliminating any screening obligations the airlines
formerly possessed and transferring those obligations
to the federal government, the statute embodied
regulatory action with respect to the airlines. /d. Citing
Omnia Commercial Co. v. United States, 261 U.S. 502,
43 S.Ct. 437, 67 L.Ed. 773 (1923), and Air Pegasus of
D.C., Inc. v. United States, 424 F.3d 1206 (Fed.Cir.2005)
(“Air Pegasus II”), the court determined that
governmental action directed at third parties had
frustrated Huntleigh’s expectations under its contracts,
but that this circumstance did not provide the basis for
a cognizable takings claim. Huntleigh, 75 Fed.Cl. at 646.
The Court of Federal Claims also rejected
Huntleigh’s claim for compensation based upon the
alleged taking of going concern value and goodwill. The
court reasoned that going concern value and goodwill
could not be deemed to have been taken when, as in the
case before it, there had not been a taking of the
underlying business with which the going concern value
and goodwill were associated. /d. Since the government
did not appropriate Huntleigh’s business, but rather
simply assumed many of the same functions Huntleigh
had formerly performed, Huntleigh was unable to allege
that the government actually took its business and
10a
Appendix A
therefore could not allege a taking of going concern value
and goodwill. /d.
Having disposed of Huntleigh’s takings claim, the
Court of Federal Claims turned to Huntleigh’s second
claim: that it was entitled to compensation under section
101(g)(2) of ATSA. In advancing this claim, Huntleigh
acknowledged that the government had not actually
stepped into its shoes under the various security
screening contracts with the airlines, so as to be deemed
to have assumed “the rights and responsibilities of an
air carrier or foreign air carrier contract for provision
of passenger screening services at airports,” as
contemplated by section 101(g)(2). Jd. at 648. Rather,
Huntleigh argued that the statute did not require a
literal assumption of the contracts. /d. According to
Huntleigh, the statute mandated compensation if, as in
Huntleigh’s case, the government assumed the
responsibilities formerly borne by a private contractor.
Id.
The Court of Federal Claims rejected Huntleigh’s
argument, concluding that section 101(g)(2) of ATSA did
not provide authority for awarding Huntleigh
compensation for its lost business. /d. at 648-49. In
reaching that conclusion, the court relied primarily upon
a textual comparison between sections 101(g)(1) and
101(g)(2) of the statute. As seen, section 101(g)(1)
provided that the government “shall” assume all
screening functions at national airports. /d. at 647
(emphasis added). By contrast, section 101(g)(2)
provided that the government “may” effect this
lla
Appendix A
obligation by substituting itself as a party into contracts
that formerly existed between the airlines and private
screening contractors. Jd. (emphasis added). Were
Huntleigh’s view of ATSA correct, the Court of Federal
Claims reasoned, the statute, in section 101(g)(1), would
have required the government to assume screening
functions and then, in section 102(g)(2), would have
provided that compensation be paid to former private
screeners upon the assumption of such functions. The
statute’s use of the permissive word “may” in section
101(g)(2), however, conveyed to the court that Congress
did not intend for section 101(g)(2) to set forth the sole
means by which the government could assume screening
responsibilities under ATSA. /d. at 648. Thus, the court
determined that the requirements of section 101(g)(2)
only applied when the government actually assumed a
contract between private parties, rather than when the
government undertook to perform functions formerly
performed by one of the parties. Jd. at 648-49. Since
Huntleigh conceded that the government had not
actually assumed any of its security screening contracts,
the court determined that section 101(g)(2) did not
require compensation. /d. at 649. Based upon its rulings,
the Court of Federal Claims entered judgment in favor
of the United States and dismissed Huntleigh’s
complaint. Jd. This appeal followed. We have jurisdiction
pursuant to 28 U.S.C. § 1295(a)(3).
12a
Appendix A
DISCUSSION
On appeal, Huntleigh argues that the Court of
Federal Claims erred in holding that the enactment of
ATSA did not result in the taking of its security
screening contracts, going concern value, and goodwill.
Huntleigh also argues that the court erred in holding
that it was not entitled to compensation under section
101(g)(2) of ATSA on account of what it alleges was the
government’s de facto assumption of its security
screening contracts. We address these contentions in
turn.
I.
The issue of whether a taking has occurred is a
question of law based on factual underpinnings. Stearns ©
Co. v. United States, 396 F.3d 1354, 1357 (Fed.Cir.2005);
Maritrans, Inc. v. United States, 342 F.3d 1344, 1350-
51 (Fed.Cir.2003); Washoe County v. United States, 319
F.3d 1320, 1325 (Fed.Cir.2003). As noted above, in this
case, the pertinent facts are not in dispute.
Consequently, our consideration of Huntleigh’s takings
claim reduces to a question of law. We review de novo a
ruling by the Court of Federal Claims on a question of
law. Columbia Gas Sys., Inc. v. United States, 70 F.3d
1244, 1246 (Fed.Cir.1995).
The Takings Clause of the Fifth Amendment of the
United States Constitution states that “private property
{shall not] be taken for public use, without just
compensation.” U.S. Const. amend. V. The purpose of
13a
Appendix A
the Takings Clause is to prevent “Government from
forcing some people alone to bear public burdens which,
in all fairness and justice, should be borne by the public
as a whole.” Penn Cent. Transp. Co. v. City of N.Y., 438
U.S. 104, 123, 98 S.Ct. 2646, 2659, 57 L.Ed.2d 631 (1978).
We have developed a two-part test for determining
whether “fairness and justice” require compensation for
burdens imposed by a particular governmental action.
First, as a threshold matter, the court must
determine whether the claimant has established a
property interest for purposes of the Fifth Amendment.
Am. Pelagic Fishing Co. v. United States, 379 F.3d 1363,
1372 (Fed.Cir.2004); see also Maritrans, 342 F.3d at 1351.
That is because “only persons with a valid property
interest at the time of the taking are entitled to
compensation.” Wyatt v. United States, 271 F.3d 1090,
1096 (Fed.Cir.2001). The protections of the Takings
Clause apply to real property, see Lucas v. S.C. Coastal
Council, 505 U.S. 1003, 1019, 112 S.Ct. 2886, 2895, 120
L.Ed.2d 798 (1992), personal property, see Andrus v.
Allard, 444 U.S. 51, 65, 100 S.Ct. 318, 327, 62 L.Ed.2d
210 (1979), and intangible property, see Ruckelshaus v.
Monsanto Co., 467 U.S. 986, 1003-04, 104 S.Ct. 2862,
2873, 81 L.Ed.2d 815 (1984). In this case, it is undisputed
that the property interests Huntleigh alleges were
taken are, for purposes of the Fifth Amendment,
cognizable property interests.
Second, “after having identified a valid property
interest, the court must determine whether the
government action at issue amounted to a compensable
14a
Appendix A
taking of that property interest.” Am. Pelagic, 379 F.3d
at 1372; see also Maritrans, 342 F.3d at 1351.
A compensable taking can occur not only through the
government’s physical invasion or appropriation of
private property, see Lucas, 505 U.S. at 1014-15, 112
S.Ct. 2886; Loretto v. Teleprompter Manhattan CATV
Corp., 458 U.S. 419, 427, 102 S.Ct. 3164, 3171, 73 L.Ed.2d
868 (1982), but also by government regulations that
unduly burden private property interests, see Pa. Coal
Co. v. Mahon, 260 U.S. 393, 415, 43 S.Ct. 158, 160, 67
L.Ed. 322 (1922).?
2. Regulatory takings are further subdivided into
categorical and non-categorical takings. A categorical taking
occurs when “all economically viable use, i.e., all economic value,
has been taken by the regulatory imposition.” Rith Energy, Inc.
v. United States, 247 F.3d 1355, 1362 (Fed.Cir.2001) (citation
omitted); see also Am. Pelagic, 379 F.3d at 1372. Conversely, a
non-categorical taking is a taking “that is the consequence of a
regulatory imposition that prohibits or restricts only some of
the uses that would otherwise be available to the property
owner, but leaves the owner with substantial viable economic
use.” Rith Energy, 247 F.3d at 1362 (citation omitted).
Determining whether a non-categorical taking occurred
involves the fact-based inquiry stated in Penn Central, under
which a court considers (1) the character of the governmental
action, (2) the economic impact of the action on the claimant,
and (3) the effects of the governmental action on the reasonable
investment-backed expectations of the claimant. Lingle v.
Chevron U.S.A., Inc., 544 U.S. 528, 538-39, 125 S.Ct. 2074, 2081-
82, 161 L.Ed.2d 876 (2005); Am. Pelagic, 379 F.3d at 1372;
Maritruns, 342 F.3d at 1351; Conti v. United States, 291 F.3d
1334, 1339 (Fed.Cir.2002); Rith Energy, 247 F.3d at 1362.
15a
Appendix A
II.
A.
Huntleigh argues that the Court of Federal Claims
erred in holding that ATSA did not effect a taking of its
security screening contracts and the going concern value
and goodwill associated with its security screening
business. Huntleigh contends that its business
relationships were not merely “frustrated.” It argues
that ATSA, by establishing the federal government as
the only party allowed to perform security screening at
national airports, specifically illegalized the subject
matter of its contracts with the airlines. Huntleigh
distinguishes both Omnia and Air Pegasus J] on the
ground that the statute at issue in this case was far more
direct in terms of its impact on Huntleigh than the
governmental actions in Omnia and Air Pegasus I] were
on the plaintiffs in those cases. Omnia and Air Pegasus
JI, Huntleigh argues, involved governmental regulation
applicable to one party that resulted in a loss to a third
party. Huntleigh asserts that ATSA, by contrast, applied
directly to the contracts between the airlines and
Huntleigh, by illegalizing their subject matter. Huntleigh
urges that Monongahela Navigation Co. v. United
States, 148 U.S. 312, 13 S.Ct. 622, 37 L.Ed. 463 (1903),
NL Industries, Inc. v. United States, 839 F.2d 1578
(Fed.Cir.1988), and Cienega Gardens, compel the
conclusion that ATSA did effect a taking of its property.
Finally, Huntleigh claims that the Court of Federal
Claims erred in its application of Kimball Laundry to
the alleged taking of the going concern value and
goodwill associated with its security screening business.
l6a
Appendix A
The government responds by asserting that Omnia
and Air Pegasus II control the outcome of this case.
The government notes that Congress created the
airlines’ obligation to screen passengers and baggage
with the enactment of the Air Transportation Security
Act and then eliminated that obligation with the
enactment of ATSA, mandating that the government
assume the screening obligations formerly borne by the
airlines. Thus, the government posits, the statutory
mandate focused upon airlines, not upon private
contractors, such as Huntleigh. The government states
that, although ATSA undoubtedly diminished the
demand for Huntleigh’s services and negatively
impacted its business, such effects were indirect
consequences of ATSA’s regulating the airlines and
thereby comprised mere “frustration” of Huntleigh’s
business interests.
B.
The Court of Federal Claims did not err in holding
that Huntleigh had failed to establish a Fifth
Amendment taking of its property. Huntleigh has
conceded that the government did not actually assume
its contracts. Instead, the government engaged in the
functions formerly performed by Huntleigh under the
contracts. Thus, any takings claim cannot be predicated
upon a taking of the contracts. Rather, the argument
must be that ATSA rendered the contracts and the
going concern value and goodwill associated with
Huntleigh’s security screening business worthless. Such
a claim cannot stand, however, in the face of Omnia and
Air Pegasus I].
17a
Appendix A
In Omnia, the plaintiff Omnia Commercial Co.
(“Omnia”) owned a contract entitling it to purchase a
large quantity of steel plate from the Allegheny Steel
Company (“Allegheny”) for an amount below the current
market price. 261 U.S. at 507, 48 S.Ct. 427. Before any
deliveries were made under the contract, however, the
government, pursuant to statute and in order to meet
needs caused by World War I, requisitioned Allegheny’s
entire production of steel plate for 1918 and directed it
not to comply with its contract with Omnia. Jd. In due
course, Omnia filed suit in the Court of Claims, alleging
that the government’s actions with respect to Allegheny
and Allegheny’s contract with Omnia had effected a
taking of Omnia’s right to priority to the steel plate
Allegheny expected to produce. Omnia alleged that the
government had therefore appropriated “for public use
{[Omnia’s] property in the contract,” causing Omnia to
suffer a large monetary loss as a consequence of its losing
a lucrative contract. Jd. at 507-08, 43 S.Ct. 437. After
the Court of Claims dismissed Omnia’s complaint, Omnia
appealed to the Supreme Court. The Supreme Court
affirmed the decision of the Court of Claims. /d. at 514,
43 S.Ct. 437. The Court started from the premise that
Omnia’s contract with Allegheny was “property within
the meaning of the Fifth Amendment” and that if the
contract was “taken for public use the government would
be liable.” Jd. at 508, 43 S.Ct. 437. The Court held,
however, that Omnia’s contract with Allegheny had not
been taken:
In exercising the power to requisition, the
government dealt only with the steel company,
18a
Appendix A
which company thereupon became liable to
deliver its product to the government, by
virtue of the statute and in response to the
[requisition] order. As a result of this lawful
governmental action the performance of the
contract was rendered impossible. It was not
appropriated, but ended.
Td. at 511, 43 S.Ct. 437.
In Air Pegasus I/, the plaintiff, Air Pegasus of D.C.,
Inc. (“Air Pegasus”) operated a heliport at property it
leased in Washington, D.C. 424 F.3d at 1209. Following
the terrorist attacks of September 11th, the Federal
Aviation Administration (“FAA”) banned all commercial
air travel within twenty-five nautical miles of
Washington, D.C., except at a few select locations, such
as Ronald Reagan Washington National Airport. /d. As
a consequence, Air Pegasus was effectively unable to
continue the operation of its business. It thus
abandoned its lease and ceased operations at the
heliport. /d. at 1210. Subsequently, Air Pegasus brought
suit in the Court of Federal claims alleging that the FAA's
flight ban had resulted in the regulatory taking of its
heliport business. /d. Eventually, the court granted
summary judgment in favor of the government and
dismissed Air Pegasus’s complaint. Air Pegasus of D.C.,
Inc. v. United States, 60 Fed.Cl. 448, 459 (2004). The
court did so after concluding that “although the FAA’s
regulatory activity may have had an adverse impact on
[Air Pegasus’s] heliport business,” there was not a
taking of any cognizable property interest of Air
Pegasus. /d.
19a
Appendix A
On appeal, we affirmed the decision of the Court of
Federal Claims. Air Pegasus II, 424 F.3d at 1219. Noting
that Air Pegasus did not own or operate any helicopters
itself, we pointed out that Air Pegasus’s economic injury
was “not the result of the government taking Air
Pegasus’s property, but . . . the more attenuated result
of the government’s purported taking of other people’s
property. This circumstance does not form the basis for
a viable takings claim.” /d. at 1215. After comparing Air
Pegasus’s takings claim to that of the plaintiff in Omnia,
we stated:
Air Pegasus, which did not itself own or
operate any helicopters, does not allege that
the FAA’s restrictions regulated its operations
under the lease. Instead, Air Pegasus
basically alleges that the FAA, by regulating
helicopters owned by third parties, frustrated
its business expectations at the South Capitol
Street heliport. Therefore, like the appellant
in Omnia, Air Pegasus, while no doubt injured
by reason of the government’s actions, has not
alleged a taking of private property under the
Fifth Amendment.
Id. at 1216 (emphasis in original).
As did the plaintiffs in Omnia and Air Pegasus 1],
Huntleigh alleges that it suffered a loss of business as a
result of the government’s regulation of a third party.
The federal government imposed screening obligations
upon commercial airlines in 1974. With the enactment
20a
Appendix A
of ATSA in 2001, however, Congress drastically reduced
the demand for Huntleigh’s services. ATSA did not,
however, regulate Huntleigh directly. Rather, it modified
governmental regulation of the airlines, which resulted
in adverse economic consequences for Huntleigh. Thus,
any losses that Huntleigh suffered were indirect, arising
only as a consequence of ATSA’s elimination of the
airlines’ security screening obligations. In other words,
ATSA had the effect of “frustrating” Huntleigh’s
business expectations, which does not form the basis of
a cognizable takings claim. See id.; Omnia, 261 U.S. at
510, 43 S.Ct. 437.
As noted, Huntleigh argues that Omnia is
distinguishable because, in that case, the government’s
action was directed at a third party, Allegheny, resulting
in only an indirect impact on Omnia. However, urges
Huntleigh, in this case ATSA was directed squarely at
providers of airport security screening functions, such
as Huntleigh, by nationalizing their operations. Similarly,
Huntleigh maintains that Air Pegasus 1] is
distinguishable because any effect that the FAA’s flight
ban had on Air Pegasus, which owned neither the
heliport nor the helicopters, was indirect, as it arose from
governmental regulation of third parties. We are not
persuaded by Huntleigh’s efforts to distinguish Omnia
and Air Pegasus II. As far as Omnia is concerned, the
facts of that case were more favorable to the plaintiff,
Omnia, than the facts of this case are to Huntleigh. As
seen, in Omnia, the government’s actions were directed
squarely at the contractual relationship that existed
between Allegheny and Omnia. The government
a
2la
Appendix A
requisitioned the steel plate that was meant for Omnia
and directed Allegheny not to comply with its contract
with Omnia. Omnia, 261 U.S. at 507, 43 S.Ct. 437. Yet,
the Court held, there was no taking because, “[a]s a
result of this lawful governmental action the
performance of the contract was rendered impossible.
It was not appropriated, but ended.” Jd. at 511, 43 S.Ct.
437. In this case, the purpose of ATSA was not to take
action with respect to any security screening contract
to which Huntleigh was a party. Rather, its purpose was
to transfer security screening responsibilities from the
airlines to the federal government. This action, directed
at the airlines, frustrated Huntleigh’s business
interests. Air Pegasus II, which cited Omnia, is
indistinguishable from this case because in both Air
Pegasus II and this case the party alleging a taking,
rather than having its own property taken, saw its
business interests frustrated by governmental
regulation of third parties (the FAA's flight ban in Air
Pegasus IIT, and ATSA’s transfer of screening
responsibility here).
Finally, Huntleigh’s reliance upon Monongahela,
Cienega Gardens, and NL Industries is misplaced.
None of these cases speaks to the situation presented
here.
In Monongahela, a private company spent
considerable sums of money on the improvement of the
Monongahela River by means of locks and dams.
148 U.S. at 324, 13 S.Ct. 622. The United States
government later condemned and appropriated the
22a
Appendix A
locks and dams. Jd. In the condemnation proceeding,
the government conceded liability for the reasonable
value of the appropriated property but disputed the
amount of compensation due. /d. at 314, 13 S.Ct. 622.
After reaffirming that takings law clearly established
that the United States was liable for the appropriation
of the property, id. at 324, 13 S.Ct. 622, the Court
devoted the bulk of its opinion to determining the proper
measure of damages, id. at 324-45, 13 S.Ct. 622. The
facts of Monongahela clearly differ from the facts of the
present case in that the government has not
appropriated for its own use any property owned by
Huntleigh. Rather, the government has merely relieved
commercial airlines of a duty they formerly possessed,
which action indirectly resulted in the elimination of the
market for Huntleigh’s business.
In Cienega Gardens, various property owners
entered into regulatory agreements with the
Department of Housing and Urban Development
(“HUD”). 331 F.3d at 1325. The agreements provided
that the property owners could prepay their forty-year
mortgages after twenty years. Jd. As the twenty year
prepayment eligibility date approached, however,
Congress determined that permitting prepayment
would undermine efforts to provide low-cost housing.
As aresult, Congress temporarily suspended, and then
later eliminated, the prepayment provisions through the
enactment of statutes that required HUD approval for
prepayment. /d. at 1326. We determined that Congress’s
enactment of such statutes effected a taking that
23a
Appendix A
entitled certain of the property owners to just
compensation. /d. at 1353. The facts of Cienega Gardens,
however, differ significantly from those of this case. Here,
Huntleigh was not a party to any agreement or contract
with the federal government that was later unilaterally
altered by statute. Rather, Huntleigh’s contracts with
various commercial airlines *1382 were frustrated by a
shift in the government’s regulation of the airlines.
Cienega Gardens therefore does not support
Huntleigh’s takings claim.
Neither does NL Industries support Huntleigh. In
that case, NL Industries (“NL’) invested considerable
resources in developing a fleet of vehicles to transport
spent nuclear fuel rods for reprocessing. NL Indus., 839
F.2d at 1579. NUs investment became valueless,
however, when the President determined not to allow
the plant that was to provide the spent fuel rods to
operate. Jd. Holding that.NL had failed to establish a
compensable taking, we stated: “The trial court, ...
rightly, we think, thought that Omnia . . . was, by itself,
authority enough to support its holding that frustration
of a business by loss of a customer was not a taking.”
Id. We believe that the facts of NL Industries are
materially indistinguishable from the facts of the present
case: a governmental action (ATSA) directed at a third
party (airlines) resulting in the loss of business to a
claimant (Huntleigh) who alleges a compensable taking.
We concluded in NL Industries that Omnia foreclosed
24a
Appendix A
the existence of a compensable taking, and we conclude
the same with respect to Huntleigh’s claim.*
ITI.
A.
We turn next to Huntleigh’s claim under section
101(g)(2) of ATSA. As already seen, section 101(g)(2)
provided that, if the Under Secretary of Transportation
for Security chose to meet the government’s obligations
under ATSA by assuming a contract to provide security
screening services, the government was required to pay
adequate compensation to parties to the contract.
In alleging entitlement to compensation under
section 101(g)(2), Huntleigh, as it did in the Court of
Federal Claims, argues first that the clause “assume the
3. Our reasoning applies to all property interests possessed
by Huntleigh, including its contracts and any going concern
value or goodwill associated with its security screening business.
Thus, the authority of Kimball Laundry does not alter our
holding. Though going concern value and goodwill are indeed
compensable property interests, Kimball Laundry, 338 US. at
11, 69 S.Ct. 1434, those property interests, like Huntleigh’s
contracts, were merely “frustrated” by the government’s
enactment of ATSA. They were not taken. Moreover, going
concern value is a property interest that has been held to be
compensable in the context of a temporary, but not a permanent,
taking. See id. at 15,69 S.Ct. 1434; Cooper v. United States, 827
F.2d 762, 763 (Fed.Cir.1987); Fla. Rock Indus. Inc. v. United
States, 791 F.2d 893, 903 (Fed.Cir. 1986).
25a
Appendix A
rights and responsibilities of an air carrier . .. contract,”
describing the conditions under which compensation is
required, suggests that Congress intended that
compensation be provided even when, as in this case,
contracts were not actually assumed. According to
Huntleigh, had Congress intended that compensation
be provided only when contracts were actually assumed,
it would have used the word “contracts” rather than the
phrase “rights and responsibilities of . . . contract[s].”
Noting the canon of statutory interpretation that the
words of a statute are not to be rendered superfluous if
such a construction can be avoided, Walther v. Sec’y of
Health & Human Servs., 485 F.3d 1146, 1150
(Fed.Cir.2007) (“ ‘[A] statute should be interpreted so
as not to render one part inoperative.’ ” (quoting
Colautti v. Franklin, 4389 U.S. 379, 392, 99 S.Ct. 675,
684, 58 L.Ed.2d 596 (1979))), Huntleigh urges that
section 101(g)(2) should be read to require
compensation any time the government assumed the
functions formerly performed by private parties under
security screening contracts. Second, Huntleigh argues
that, in any event, the government, for all intents and
purposes, did effectively assume Huntleigh’s contracts
even if it did not literally insert itself as a party into any
existing contract. In support of this argument,
Huntleigh cites various statements by government
officials speaking of “assuming” air carrier contracts.
The government responds to Huntleigh’s arguments
by reiterating the Court of Federal Claims’ distinction
between sections 101(g)(1) and 101(g)(2) of ATSA. The
government argues that, in contrast to section 101(g)(1),
26a
Appendix A
section 101(g)(2), upon which Huntleigh relies, imparted
discretion to the Under Secretary of Transportation and
created no enforceable rights. The government notes
that section 101(g)(2) provided that, “[aJs of the date
specified in paragraph (1),” i.e., February 19, 2002, “the
Under Secretary may assume the rights and
responsibilities of an air carrier or foreign air carrier
contract for provision of passenger screening services
at airports in the United States described in [49 U.S.C.
§ ] 44903(c), subject to payment of adequate
compensation to the parties to the contract, if any”
(emphases added). The government takes the position
that the purpose of section 101(g)(2) was to authorize,
but not require, TSA to assume existing screening
contracts, in order to meet the three-month deadline
established by section 101(g)(1). In the event that TSA
did assume an existing contract, the obligation to pay
compensation arose. The government argues that
Huntleigh’s reading of the statute creates an illogical
result. According to the government, that is because if,
under the statute, the government was required to
compensate Huntleigh even when it did not actually
assume a contract-which is what Huntleigh urges-it
would mean that section 101(g)(2) was essentially
superfluous. The reason is that section 101(g)(1)
specifically mandated that the government assume all
screening functions at national airports. Section
101(g)(2) then provided that one way the government
could perform that obligation was to assume the “rights
and responsibilities” of contracts between airlines and
screening service providers. If assuming “rights and
responsibilities” is read to mean solely that the
y
27a
Appendix A
government would provide screening services at
national airports, as Huntleigh argues, then section
101(g)(2) served merely to reemphasize the obligation
that section 101(g)(1) had already created. Under these
circumstances, the provision would be redundant, which
would be an illogical result. Accordingly, like the Court
of Federal Claims, the government concludes that the
only reading of the statute that preserves the
distinction in language between the two sub-sections is
that in which the government was required to pay
compensation only when it actually assumed the
contracts of private contractors. The government
emphasizes that Huntleigh concedes that there was no
such assumption of any of Huntleigh’s security
screening contracts.
B.
The Court of Federal Claims did not err in holding
that Huntleigh was not entitled to compensation under
ATSA section 101(g)(2). The language of section
101(g)(2) is clear. The obligation to pay compensation
only arose if TSA “assume|[d] the rights and
responsibilities of an air carrier or foreign air carrier
contract.” The way one assumes the “rights and
responsibilities” of a contract is to step into the shoes
of the parties to the contract. In other words, section
101(g)(2) required compensation only when TSA actually
stepped into the shoes of a party providing security
screening services to an airline under a contract.
Huntleigh concedes that TSA never did that in the case
of any of its contracts. In addition, we agree with the
28a
Appendix A
government that Huntleigh’s reading of the statute-
under which compensation was due when TSA took over
security at airports but did not step into Huntleigh’s
shoes under any of its contracts-renders section
101(g)(2) redundant. The reading of a statute that
produces such a result is disfavored. See Clark v. United
States, 322 F.3d 1358, 1365 (Fed.Cir.2003); see also
United States v. Alaska, 521 U.S. 1, 59, 117 S.Ct. 1888,
1918, 188 L.Ed.2d 231 (1997). In sum, section 101(g)(2)
did not require that the government compensate
Huntleigh for its assumption of screening functions at
national airports.
We also are not persuaded by Huntleigh’s
alternative argument that the government effectively
assumed Huntleigh’s contracts. Huntleigh notes that
internal TSA memoranda speak of “assuming”
screening contracts and that the Under Secretary of
Transportation himself referred to “assuming” contracts
in testimony before Congress. However, such isolated
instances, wherein agency representatives may have
inadvertently used the term “assume” without
contemplating its legal significance, do not give us a
reason to adopt a reading of ATSA that is inconsistent
with its proper construction.
29a
Appendix A
ran CONCLUSION
Because ATSA did not effect the taking of
Huntleigh’s property, but merely frustrated its business
interests, and because Huntleigh is not entitled to
compensation under section 101(g)(2) of ATSA, we affirm
the decision of the Court of Federal Claims.
AFFIRMED
COSTS
Each party shall bear its own costs.
aa
30a
APPENDIX B — OPINION OF THE UNITED
STATES COURT OF FEDERAL CLAIMS
DATED MARCH 15, 2007
UNITED STATES COURT OF FEDERAL CLAIMS
No. 03-2670C.
HUNTLEIGH USA CORPORATION,
Plaintiff,
We
The UNITED STATES,
Defendant.
March 15, 2007.
OPINION
MARGOLIS, Senior Judge.
This case is before the Court following a four-day
trial in November 2006. After post-trial briefing, the
Court heard closing arguments on February 27, 2007.
Plaintiff Huntleigh USA Corporation (“Huntleigh”)
performed passenger and baggage screening at airports
across the country before those functions were
federalized in 2002 pursuant to the Aviation and
Transportation Security Act, Pub.L. No. 107-71, 115
Stat. 597 (2001), (“ATSA” or “the Act”). Huntleigh filed
suit against the defendant, the United States, on two
3la
Appendix B
claims. Count I alleges that when the Transportation
Security Administration (“TSA”) federalized airport
screening, the government violated the Fifth
Amendment’s Takings Clause by taking Huntleigh’s
screening contracts, as well as the goodwill and going-
concern value of its security screening business, without
just compensation.’ Complaint at 1 44. Count II alleges
that defendant violated ATSA § 101(g) by failing to pay
“adequate compensation” for Huntleigh’s security
screening contracts. Complaint at 7 46. Huntleigh claims
damages totaling between $151,117,026 and
$201,252,328. The facts are discussed in detail in the
Court’s previous decisions in this case, Huntleigh
USA Corp. v. United States, 63 Fed.Cl. 440 (2005)
(“Huntleigh I’) and 65 Fed.Cl. 178 (2005) (“Huntleigh
IT”), and they are summarized below.
In Huntleigh I and Huntleigh II, the Court made
preliminary determinations as to both fact and law.
Takings cases, however, are highly fact-intensive, and
the Court stated that it was necessary to develop a full
factual record before making an ultimate decision. With
the benefit of a complete record and a review of the
applicable law, the Court has reached some different
1. Although Huntleigh at times made reference to tangible,
personal property (such as office furniture and uniforms) that
also might have been taken, these items were not mentioned in
Huntleigh’s post-trial brief, Huntleigh offered no evidence at
trial as to their value, and they are the subject of a separate,
administrative action between Huntleigh and the defendant.
Trial Transcript (“Tr.”) 192. As such, the Court will not consider
such property in the instant litigation.
32a
Appendix B
conclusions than in the previous opinions. After careful
consideration of the evidence presented at trial, as well
as the post-trial briefs and oral arguments, the Court
finds for the defendant on both counts.
FACTS
The U.S. Congress passed the Aviation and
Transportation Security Act in response to the terrorist
attacks of September 11, 2001, and the President signed
the Act into law on November 19, 2001. It created the
new Transportation Security Administration to oversee
civil aviation security. The Act required virtually all
passenger and baggage screening to be conducted by
federal employees within one year. In the interim, ATSA
required the new Under Secretary of Transportation
for Security (and head of TSA) to take over responsibility
for security screening within three months. The Act
listed two approaches for transitioning from private to
federal screeners: (1) on or after three months from the
date of enactment, the Under Secretary could assume
the rights and responsibilities of airline contracts for
passenger and baggage screening; and (2) not more than
90 days after enactment, an airline could, at the Under
Secretary’s request, transfer screening contracts to the
Under Secretary. Instead of these methods, the TSA
negotiated new contracts directly with the screening
companies to cover the interim period from February
19, 2002, until federalization was complete on November
19, 2002.
33a
Appendix B
Since 1973, the airlines had been responsible for
passenger and baggage screening, pursuant to
regulations and guidelines established by the Federal
Aviation Administration. Tr. 426. Most airlines met their
security responsibilities by contracting with private
companies to conduct screening. Tr. 427. Huntleigh had
been providing passenger screening services since at
least 1989 and checked baggage screening since 1999.
Tr. 30-31, 34. By November 2001, Huntleigh had
screening contracts with approximately 75 airlines in
about 35 cities. Tr. 85. As a result of ATSA, the airlines
terminated their screening contracts with Huntleigh on
or about February 17, 2002, and Huntleigh signed
interim letter contracts with the TSA to continue
providing passenger and baggage screening at locations
where Huntleigh already operated until federal
employees took over the function. Tr. 84-85, 380, 382-
83. Huntleigh earned $235,112,000 from screening
revenues in 2002, a significant increase from its
$68,983,000 in screening revenues in 2001. Plaintiff’s
Exhibit Admitted at Trial (“PX”) 113-010.
DISCUSSION
I. Takings Claim
The Takings Clause of the Fifth Amendment states,
“nor shall private property be taken for public use,
without just compensation.” U.S. Const. Amend. V. The
Supreme Court has expanded on these 12 words to
declare that the “Fifth Amendment’s guarantee . . . [is]
designed to bar Government from forcing some people
34a
Appendix B
alone to bear public burdens which, in all fairness and
justice, should be borne by the public as a whole,”
Armstrong v. United States, 364 U.S. 40, 49, 80 S.Ct.
1563, 4 L.Ed.2d 1554 (1960). Beyond this simple
principle, however, there is no formula for determining
when a taking has occurred, only “ad hoc, factual
inquiries” for each case. Penn Cent. Transp. Co. v. City
of New York, 438 U.S. 104, 124, 98 S.Ct. 2646, 57 L.Ed.2d
631 (1978). With regard to regulatory takings, the
framework for these inquiries has been defined by the
analysis in Loretto v. Teleprompter Manhattan CATV
Corp., 458 U.S. 419, 102 S.Ct. 3164, 73 L.Ed.2d 868
(1982), Lucas v. South Carolina Coastal Council, 505
U.S. 1003, 112 S.Ct. 2886, 120 L.Ed.2d 798 (1992), and
Penn Central, Lingle v. Chevron U.S.A., Inc., 544 U.S.
528, 538-39, 125 S.Ct. 2074, 161 L.Ed.2d 876 (2005).
Before a court can reach any of these analyses as to
whether a compensable taking of private property
occurred, however, it must first address the threshold
issue of whether the claimant possessed a legally
protected property interest at the time of the alleged
taking. Air Pegasus of D.C., Inc. v. United States, 424
F3d 1206, 1212-13 (Fed.Cir.2005). Although Huntleigh
may have been injured, it has not alleged a taking of
private property under the Fifth Amendment.
In Huntleigh I, this Court held that “mere
engagement in a particular business activity is not
property protected by the Fifth Amendment,” and
Huntleigh cannot recover for damage to “its right to
engage in the business of passenger and baggage
screening.” 63 Fed.Cl. at 444 (emphasis in original).
35a
Appendix B
Huntleigh argues that it is not claiming a taking of its
right to operate its screening business. Instead, it
alternatively describes the relevant property as its
“business assets, including its regularly renewed
screening contracts, goodwill and going concern value”
and its “entire screening business.” £.g., Pl. Brief at
1 104, 109. Regardless of the label, the property
Huntleigh described in its evidence at trial is not subject
to compensation under the Fifth Amendment.
Huntleigh’s claim is similar to that in NL Industries,
Inc. v. United States. In that case, the plaintiff did not
have a compensable property interest in the physical
plant and systems it had developed for transporting
spent nuclear fuel, which were rendered valueless when
a change in U.S. policy resulted in a moratorium on the
license application of the reprocessing plant with which
the plaintiff had contracted. 12 Cl.Ct. 391, 398 (1987),
aff’d 839 F.2d 1578 (Fed.Cir.1988), cert. denied 488 U.S.
820, 109 S.Ct. 63, 102 L.Ed.2d 41 (1988). The Court found
in NL Industries that the regulatory scheme that
allowed the agency to deny the license to the
reprocessing plant was in place before the plaintiff
entered the market. /d. Whether the plaintiff could have
or should have anticipated the particular regulatory
decisions at issue was irrelevant. Jd. Likewise, when
Huntleigh entered the security screening business, it
contracted with the airlines pursuant to security
regulations issued by the government. Plaintiff’s own
aviation security expert admitted at trial] that the federal
government retained the right to change those
regulations. Tr. 492. Before the Fall of 2001, both the
36a
Appendix B
Congress and executive branch entities had publicly
discussed the possibility of changing the aviation
screening paradigm, to include federalizing the
screening functions and workforce. See generally, PX
359 (discussing the history of federal aviation security
studies). It is immaterial] that Huntleigh did not
anticipate the specific policy shifts that occurred after
the terrorist attacks of September 11, 2001, or deem
federalization likely, because the regulatory scheme
allowing those changes was already in place.
In another license case, the Federal Circuit’s recent
decision in Colvin Cattle Co. v. United States also is
instructive. The court declined to find a constitutionally-
protected property interest when the only beneficial use
of the property was destroyed by the government’s
refusal to grant cattle grazing rights to a ranch owner.
468 F.3d 803, 808 (2006). Because the ranch never
possessed grazing rights as a stick in the bundle of
property rights it had, the fact that the denial of grazing
rights rendered its water rights worthless and
diminished the value of its ranch, did not support a
takings claim. /d. Similarly, Huntleigh is attempting to
claim a taking of its contracts and screening business
based on the government’s interference with its right
to engage in the screening business-a right that
Huntleigh never possessed because its contracts with
the airlines were always subject to the security
regulations the government imposed on the airlines.
See Tr. 130-31, 151-52. Huntleigh’s value may have been
diminished after ATSA was enacted, but as these cases
demonstrate, not every loss of value triggers
constitutionally-mandated compensation.
37a
Appendix B
With regard to Huntleigh’s screening contracts, the
government’s actions amount, at most, to frustration of
purpose rather than a taking. Lawful government action
that renders a contract impossible to perform does not
amount to a taking of the contract. Omnia Commercial
Co. v. United States, 261 U.S. 502, 511, 43 S.Ct. 437, 67
L.Ed. 773 (1923) (government requisition of steel,
preventing the steel producer from honoring its
contract, frustrated customer’s contract with the steel
producer, but was not a taking).
Huntleigh’s former and current presidents and
Chief Executive Officers testified at trial that all of
Huntleigh’s screening contracts with the airlines
contained a clause that gave either party the right to
terminate the contract in compliance with its specified
notice provisions. Tr. 54, 199-200, 228. They testified that
the notice requirements were usually 30, 60, or 90 days,
Tr. 196, 228, with the vast majority requiring 30 days
notice. PX 13-59. The airlines terminated these
contracts with Huntleigh as a result of ATSA, Tr. 84,
but Huntleigh did not consider the terminations to be a
breach and did not sue any of the air carriers for breach
of contract. Tr. 186-87. The airlines were within their
rights to terminate the screening contracts at any time,
for any reason or no reason. Tr. 199-200. The
government did not interfere with these contracts.
The airlines terminated the contracts because they
no longer needed Huntleigh’s services when the federal
government took over the screening functions covered
by the contracts. Huntleigh no longer had a customer
38a
Appendix B
for its services. Relying on Omnia, the Federal Circuit
has declared that “frustration of a business by loss of a
customer was not a taking” of private contracts.
NL Industries, Inc. v. United States, 839 F:2d 1578, 1579
(Fed.Cir.1988). Like the airlines in Huntleigh, a
contracting party in NL /ndustries was unable to fulfill
its contract obligations because of a government policy
decision. /d.
The Federal Circuit also found frustration of
purpose rather than a taking when aviation restrictions
in response to the terrorist attacks of September 11,
2001, interfered with the operation of a business.
Specifically, a heliport operator in Washington, D.C., was
forced to close the only business permitted under its
lease when the Federal] Aviation Administration banned
commercial aircraft from the area that included the
heliport. Air Pegasus, 424 F.3d at 1209-10. The
regulations merely frustrated the plaintiff’s business
because they did not apply to the heliport itself, but to
the third parties who sought to fly in and out of the
facility. Jd. at 1216. Likewise, ATSA did not address
Huntleigh or the other screening companies; it merely
moved the responsibility for aviation security from the
airlines to the newly-created TSA. Huntleigh relies
heavily on Cienega Gardens v. United States to rebut
the government’s argument on frustration of purpose.
However, ATSA was “legislation targeted at some public
benefit, which incidentally affect{[ed] contract rights, not,
as in [Cienega Gardens], legislation aimed at the
contract rights themselves in order to nullify them.”
See 331 F.3d 1319, 1335 (Fed Cir.2003) (legislation
39a
Appendix B
preventing property owners from pre-paying mortgages
in accordance with their contract terms to keep the
property within federal, low-cost housing programs
resulted in a taking because it kept the contracts alive
for the government’s benefit).
Finally, Huntleigh seeks compensation under
Kimball Laundry Co. v. United States for damage to
its goodwill and going-concern value. In that case, the
Supreme Court held that the property owners could
recover going-concern value as an element of the just
compensation awarded for the government’s temporary
takeover of their business during World War II. 338 U.S.
1, 8, 16, 69 S.Ct. 1434, 93 L.Ed. 1765 (1949). There was
never a question of whether a taking had occurred, but
only the amount and method for determining just
compensation. /d. at 3, 8, 69 S.Ct. 1434. In contrast, the
government in the instant case has not taken
Huntleigh’s underlying property, the screening
contracts, so there is no basis for awarding damages
for the associated goodwill or going-concern value.
In summary, Huntleigh did not possess a
compensable property interest under the Fifth
Amendment, and the Court’s analysis ends there.
Without a property interest, there can be no taking, and
the Court need not address the Lucas or Penn Central
requirements.
40a
Appendix B
IT. Statutory Claim
Huntleigh also asserts that, aside from its takings
claim, it is entitled to “adequate compensation” under
the Aviation and Transportation Security Act. It argues
that “adequate compensation” in the Act can be
interchangeable with “just compensation” in the Fifth
Amendment context, and Congress therefore intended
the phrase “adequate compensation” to create a
statutory right to takings compensation without the
traditional, common law takings requirements. P]. Brief
at 1147. The Court turns to traditional rules of statutory
interpretation to determine if Huntleigh is entitled to
compensation under § 101(g) of ATSA.”
2. (g) TRANSITION PROVISIONS.
(1) SCHEDULE FOR ASSUMPTION OF CIVIL
AVIATION SECURITY FUNCTIONS.-Not later
than 3 months after the date of enactment of this
Act, the Under Secretary of Transportation for
Security shall assume civil aviation security
functions and responsibilities under chapter 449 of
title 49, United States Code, as amended by this Act,
in accordance with a schedule to be developed by
the Secretary of Transportation, in consultation
with air carriers, foreign air carriers, and
the Administrator of the Federai Aviation
Administration. The Under Secretary shall publish
an appropriate notice of the transfer of such security
functions and responsibilities before assuming the
functions and responsibilities.
(Cont’d)
4la
Appendix B
(Cont'd)
(2) ASSUMPTION OF CONTRACTS.-As of the
date specified in paragraph (1), the Under Secretary
may assume the rights and responsibilities of an air
carrier or foreign air carrier contract for provision
of passenger screening services at airports in the
United States described in section 44903, subject to
payment of adequate compensation to parties to the
contract, if any.
(3) ASSIGNMENT OF CONTRACTS.-
(A) IN GENERAL.-Upon request of the Under
Secretary, an air carrier or foreign air carrier
carrying out a screening or security function under
chapter 449 of title 49, United States Code, may enter
into an agreement with the Under Secretary to
transfer any contract the carrier has entered into
with respect to carrying out the function, before the
Under Secretary assumes responsibility for the
function.
(B) SCHEDULE.-The Under Secretary may enter
into an agreement under subparagraph (A) as soon
as possible, but not later than 90 days after the date
of enactment of this Act. The Under Secretary may
enter into such an agreement for one 180-day period
and may extend such agreement for one 90-day
period if the Under Secretary determines it
necessary.
(4) TRANSFER OF OWNERSHIP-In recognition
of the assumption of the financial costs of security
screening of passengers and property at airports,
and as soon as practica! after the date of enactment
of this Act, air carriers may enter into agreements
(Cont'd)
42a
Appendix B
Section 101(g)(1), “SCHEDULE FOR
ASSUMPTION OF CIVIL AVIATION SECURITY
FUNCTIONS,” states that the new Under Secretary
for Transportation Security “ shall assume civil aviation
security functions and responsibilities” within three
months of the Act’s November 19, 2001, enactment date.
§ 101(g)(1), 115 Stat. 603 (emphasis added). The next
section, “ASSUMPTION OF CONTRACTS,” declares
that “the Under Secretary may assume the rights and
responsibilities of an air carrier or foreign air carrier
contract for provision of passenger screening services
at airports.” Jd. at § 101(g)(2) (emphasis added). This
assumption could occur “as of” the date in § 101(g)(1),
meaning at or on February 19, 2002. See 115 Stat. 603;
Webster’s Third New International Dictionary
(Unabridged) 129 (2002). Finally, “not later than 90 days”
after the November 19, 2001, enactment date,
—— -—- — ——
(Cont’d)
with the Under Secretary to transfer the ownership,
at no cost to the United States Government, of any
personal property, equipment, supplies, or other
material associated with such screening, regardless
of the source of funds used to acquire the property,
that the Secretary determines to be useful for the
performance of security screening of passengers
and property at airports.
(5) PERFORMANCE OF UNDER SECRETARY’S
FUNCTIONS DURING INTERIM PERIOD.-Until
the Under Secretary takes office, the functions of
the Under Secretary that relate to aviation security
may be carried out by the Secretary or the
Secretary's designee.
43a
Appendix B
§ 101(g)(3), “ASSIGNMENT OF CONTRACTS,” states
that an air carrier may, at the request of the Under
Secretary, make an agreement to transfer to the Under
Secretary any contract for passenger and baggage
screening. See 115 Stat. 604.
By using both “shall” and “may,” the clear
implication of these provisions is that the Under
Secretary was required to take over responsibility for
passenger and baggage screening within three months,
but the assumption or assignment of contracts was
discretionary-i.e., it was a possible means for
accomplishing the mandate of the Act. See Huston v.
United States, 956 F.2d 259, 262 (Fed.Cir.1992). Plaintiff
cites the legislative history to argue that the Under
Secretary was required to assume Huntleigh’s
screening contracts. Pl. Brief at 1 62. Yet, on this
particular point, the Act’s language is clear and
unambiguous. As such, examination of legislative history
is unnecessary and inappropriate, and the Court will not
stray from the plain language of the statute. Messick
ex rel. Estate of Kangas v. United States, 70 Fed.Cl. 319,
324 (2006); Fluor Enters., Inc. v. United States, 64
Fed.Cl. 461, 479 (2005) (citing Bob Jones Univ. v. United
States, 461 U.S. 574, 586, 103 S.Ct. 2017, 76 L.Ed.2d
157 (1983)).
In Huntleigh J, this Court assumed as true for the
purposes of determining jurisdiction, plaintiff's
allegations that the contracts had been assumed,
thereby triggering the Act’s “adequate compensation”
requirement. See 63 Fed.Cl. at 450-51; Huntleigh 11,
44a
Appendix B
65 Fed.Cl. at 180. In contrast, the current analysis
centers on whether the government actually assumed
the contracts as a matter of law, as allowed under the
statute. The issue fundamentally turns on the meaning
of “assume” in the Act. Black’s Law Dictionary defines
“assumption” as “[t]he act of taking (esp. someone else’s
debt or other obligation) for or on oneself; the agreement
to so take.” Black’s Law Dictionary (8th ed.2004). The
TSA did not assume Huntleigh’s contracts by taking on
the airlines’ obligations because, among other reasons,
the contracts differed greatly and contained provisions
that were inappropriate for federal government
contracts. PX 292; Tr. 345-47. Instead, the airlines
terminated their contracts with Huntleigh and the other
screening companies on or about February 17, 2002, and
the TSA entered into new contr..ts with the screening
companies for the interim period before complete
federalization occurred. /d.
When making its legal conclusions, the Court will
not be swayed by agency statements, however official
they might be. The TSA’s March 2003 report to the
Congress on compliance with ATSA stated that it had
“assumed the airlines’ passenger screening company
contracts.” PX 298-010. The Under Secretary of
Transportation for Security had made a similar
statement in January 2002, when informing the
Congress about the TSA’s plans for following the Act.
PX 297-003. Huntleigh relies on these official
pronouncements, as well internal TSA memoranda from
jate 2001 and early 2002, to argue that the TSA assumed
the contracts. Pl. Brief at {| 63-66. Whether the TSA
45a
Appendix B
assuined the contracts is a matter of law for the Court
to decide, however, and a statement, even by a party,
that something “is so” does not make it legally true.
Huntleigh argues that the TSA’s eventual takeover
of Huntleigh’s screening responsibilities amounts to an
assumption of its contracts under the Act, even though
the government did not assume Huntleigh’s contracts
with the airlines in the strict, legal sense. The language
of the Act undermines this assertion. Section 101(g)(1)
requires the assumption of “civil aviation security
functions and responsibilities.” 115 Stat. at 603
(emphasis added). In contrast, § 101(g)(2),
“ASSUMPTION OF CONTRACTS,” allows the Under
Secretary to “assume the rights and responsibilities of
an air carrier . . . contract for provision of passenger
screening services . . . subject to payment of adequate
compensation to parties to the contract, if any.”
Id. at 603-04 (emphasis added).
In interpreting a statute, a court must attempt to
give effect to every word and clause. Mudge v. United
States, 308 F.3d 1220, 1228 (Fed.Cir.2002); Perez v. Merit
Sys. Prot. Bd., 85 F.3d 591, 594 (Fed.Cir.1996). The court
also must avoid interpretations that make a word or
clause “inconsistent, meaningless, or superfluous.”
Messick, 70 Fed.Cl. at 324; “RW Inc. v. Andrews, 534
U.S. 19, 31, 122 S.Ct. 441, 151 L.Ed.2d 339 (2001).
Following these tenets, this Court must give significance
to the Congress’ use of the word “contract” in
§ 101(g)(2), and the absence of that word in § 101(g)(1).
In the first section, the Act requires assumption of
46a
Appendix B
“functions and responsibilities,” but not necessarily
contracts. In the second, it specifically permits
assumption of contracts for adequate compensation of
the contract parties. To adopt Huntleigh’s
interpretation would ignore the Congress’ deliberate
insertion of “contract” in § 101(g)(2) and render the word
superfluous. As a result, this Court must conclude that
the Congress intended § 101(g)(2) to apply only if the
government chose to assume screening company
contracts as defined by Black’s Law Dictionary-taking
the airlines’ contract obligations onto itself. That did
not happen, and Huntleigh has not asserted that it did.
Plaintiff’s counsel even admitted at the post-trial
hearing that the government “did not directly assume
those contracts.” Tr. Feb. 27, 2007 at 25. The language
of § 101(g)(3) alss does not apply because the airlines
never entered into any agreements to transfer contracts
to the government. The government did not assume
Huntleigh’s contracts under the Act, and Huntleigh
therefore is not entitled to compensation.
CONCLUSION
For the reasons stated above, it is hereby
ORDERED that the Clerk of the Court shall dismiss
the complaint and enter judgment in favor of the
defendant. Each side to pay its own costs.
47a
APPENDIX C — DENIAL OF MOTION FOR
SUMMARY JUDGMENT AND ORDER
DATED OCTOBER 12, 2006
IN THE UNITED STATES COURT
OF FEDERAL CLAIMS
Docket No.: 03-2670C
HUNTLEIGH USA CORP,
| Plaintiff,
V.
UNITED STATES,
Defendant.
Courtroom 6
National Courts Building
717 Madison Place NW
Washington, D.C.
* * *
THE COURT: Have a seat. Thank you very much
for the helpful oral argument and the voluminous briefs
and appendices. This is my opinion.
Many of the legal and factual issues raised in
Defendant’s motion for summary judgment were
considered in this Court’s previous denial of Defendant’s
48a
Appendix C
motion to dismiss, and they’re reported at 63 Fed. Cl.
440, decided 2005, and the motion to reconsider decided
at 65 Fed. Cl. 178, decided in 2005.
Defendant again raises many of the same issues in
the present motion. For the same reasons previously
stated in response to Defendant’s motions as to those
issues, the motion for summary judgment is denied.
In particular, there are triable issues of material fact
as to whether Lucas or Penn Central provides the
applicable test for determining whether a taking has
occurred. And Defendant’s assertion that Huntleigh
suffered no damages also raises disputed issues of
material fact that must be resolved at trial.
In addition, if the Aviation and Transportation
Security Act was breached, Plaintiff is entitled to a trial
to determine damages. And for all these reasons,
Defendant’s motion for summary judgment is denied.
There are simultaneous memorandum of
contentions of law and fact due on Monday, the 16th.
The pretrial conference is set in Court on October 26 at
2 p.m. And our trial over a period of six days is set for
November 13 through the 20th starting at 9:30 in the
morning. I believe that accurately reflects our future
schedule.
ieee
49a
Appendix C
IN THE UNITED STATES COURT
OF FEDERAL CLAIMS
No. 03-2670C
(Filed: October 12, 2006)
HUNTLEIGH USA CORPORATION,
Plaintiff,
V.
THE UNITED STATES,
Defendant.
ORDER
On October 12, 2006, a hearing was held in open
court on Defendant’s motion for summary judgment,
filed May 30, 2006. For the reasons stated in court,
Defendant’s motion for summary judgment is DENIED.
s/ Lawrence S. Margolis
LAWRENCE S. MARGOLIS
Senior Judge, U.S. Court of Federal Claims
50a
APPENDIX D — OPINION OF THE UNITED
STATES COURT OF FEDERAL CLAIMS
DATED APRIL 21, 2005
UNITED STATES COURT OF FEDERAL CLAIMS
No. 03-2670C.
HUNTLEIGH USA CORPORATION,
Plaintiff,
v.
The UNITED STATES,
Defendant.
April 21, 2005.
OPINION
MARGOLIS, Senior Judge.
Before the Court is defendant’s January 31, 2005
Motion for Reconsideration, filed pursuant to R. Ct. Fed.
Cl. 59(a)(1) (*“RCFC”). The motion arises from the
January 7, 2005 opinion denying defendant’s motion to
dismiss plaintiff’s complaint. See Huntleigh USA
Corporation v. United States, 63 Fed.Cl. 440 (2005).
There, plaintiff asserted that defendant violated the
Takings Clause of the Fifth Amendment to the United
States Constitution when it federalized airport security
Sla
Appendix D
at all domestic commercial airports, thereby displacing
Huntleigh, who had previously provided these services
to various air carriers. Further, plaintiff alleged that
defendant violated § 101(g) of the Aviation and
Transportation Security Act, PL. No. 107-71, 115 Stat.
597 (““ATSA”) when it refused to provide plaintiff with
adequate compensation for the loss of its private
screening contracts. The Court denied defendant’s
motion to dismiss both counts of plaintiff’s claim.
Defendant now seeks reconsideration of the Court’s
ruling. After careful consideration of the entire record,
the Court denies the motion.
DISCUSSION
Motions for Reconsideration are governed by RCFC
59 and are granted at the sole discretion of the Court.
AT & T Corp. & Subsidiaries v. United States, 63
Fed.Cl. 209, 211 (2004). “[A] motion for reconsideration
is improper when based upon ‘the sole ground that one
side or the other is dissatisfied with the conclusions
reached by the court, otherwise the losing party would
generally, if not always, try his case a second time, and
litigation would be unnecessarily prolonged.’ ” /d. at 211-
212 (quoting Roche v. District of Columbia, 18 Ct.Cl.
289, 290, 1800 WL 1263 (1883)). To sustain its burden,
the movant must show: (1) that an intervening change
in the controlling law has occurred; (2) that previously
unavailable evidence is now available; or (3) that the
motion is necessary to prevent manifest injustice.
Fru-Con Const. Corp. v. United States, 44 Fed.Cl. 298,
301 (1999). “The movant may not merely recapitulate
52a
Appendix D
‘cases and arguments considered by th[e] court before
rendering its original decision.’ ” Jd. (quoting Carteret
Savings Bank, F-A. v. Shushan, 721 F.Supp. 705, 706
(D.N.J.1989)).
Defendant alleges three grounds (for
reconsideration: (1) that the Court is mistaken in finding
that plaintiff’s complaint alleges a constitutional taking
of its contracts; (2) that plaintiff enjoyed no reasonable
expectation of continuing in the screening business
because it had no bargained-for rights to the
continuance of its contractual relationships with the
airlines; and (3) that plaintiff has failed to state a claim
for relief because the plaintiff did not allege that the
government assumed any of plaintiff’s contracts with
the airlines.
The defendant presents no new facts nor arguments
in its motion for reconsideration. The government
argues that plaintiff never alleged that the government
took its contracts or tangible assets and that by finding
that plaintiff sufficiently alleged a taking of its contracts
and tangible assets, the Court was in error. The
government asserts that Huntleigh failed to state a
constitutional takings claim, as a matter of law, and that
a taking of contracts is not the same as a mere
impairment of contractual relations. Plaintiff, on the
other hand, asserts that whether a regulation goes too
far in impairing a contract requires a careful analysis of
the Penn Central Transp. Company v. United States
factors at trial. See 438 U.S. 104, 98 S.Ct. 2646, 57
L.Ed.2d 631 (1978).
53a
Appendix D
This issue was addressed in the January 7, 2005
opinion where this Court stated that “[mJore than
rewriting the contracts between Huntleigh and the
nation’s airlines, the government has taken over
Huntleigh’s position as the contractor, and has created
for itself a sweeping monopoly over the entire industry.”
Huntleigh, 63 Fed.Cl. at 447-448. This statement reflects
the Court’s opinion, at that time, that the degree to which
the government took Huntleigh’s business necessitates
a Penn Central factual analysis at trial. The Court notes
that for purposes of the motion to dismiss, the Court
assumed the facts alleged by the plaintiff were true.
Discovery and trial may lead to a later contrary finding.
The government’s assertion that Huntleigh failed
to allege that its contracts were taken was also addressed
in the January 7, 2005 opinion. There, this Court stated:
Count I of Huntleigh’s complaint alleges that
the government took the goodwill and going-
concern value of its business and does not
mention contracts. However, throughout the
complaint Huntleigh asserts that it lost its
screening contracts as a direct result of the
government's actions. Because a court must
construe the allegations in the complaint
broadly and in plaintiff’s favor in considering
a motion to dismiss, this Court finds that
Huntleigh’s complaint sufficiently alleges a
taking of both its screening contracts and its
goodwill and going-concern value. See First
Hartford Corp. Pension Plan & Trust v.
54a
Appendix D
United States, 194 F.3d 1279, 1287
(Fed.Cir.1999) (“Because granting [a motion
to dismiss] summarily terminates the case on
its merits, courts broadly construe the
complaint.”) (quoting Ponder v. United States,
117 F.3d 549, 552-53 (Fed.Cir.1997)).
Huntleigh, 63 Fed.Cl. at 448, FN 1.
In addition, this Court held that Rith Energy v.
United States, 44 Fed.Cl. 108 (1999), was distinguishable
from the present case because Rith Energy involved
claimants who were found to present a danger to the
public, whereas plaintiff, on the other hand, had asserted
that it did not present a danger to the public. Huntleigh,
63 Fed.Cl. at 448. Defendant asserts that by ruling that
the performance of a screening company is a relevant
question of fact, the Court has “extend[ed]... Huntleigh
the backdoor opportunity to use the judicial system to
essentially challenge Congress’ national security
decision to federalize security screening.” Def’s Mtn.
For Reconsideration at 7. This is not so, because, for
the purposes of a motion to dismiss, the Court is
required to accept plaintiff’s assertions as true. Further,
the comparison of Huntleigh to Rith Energy was made
under the first prong of the Penn Central takings
analysis, a purely factual analysis. See Penn Central, 438
U.S. at 124, 98 S.Ct. 2646 (stating that the takings
analysis is an “ad hoc, factual inquir|y]”). This Court, in
its January 7, 2005 opinion, stated: “/Ajt this stage of
the proceeding, this Court does not consider the nature
of the government’s action to have been an appropriate
55a
Appendix D
exercise of police power. Rather, this Court holds that
the nature of the government’s action is the type that
may require compensation, such that plaintiff should
have the opportunity to present evidence.” 63 Fed.Cl.
at 449 (emphasis added). By denying defendant’s motion
to dismiss, the Court has not made a final determination
regarding Huntleigh not being a danger to the
community, and only after discovery and a trial will
plaintiff’s assertion be proved or disproved.
Finally, the government suggests that by failing to
dismiss Count II of plaintiff’s complaint, the Court
prematurely and without adequate support made a
finding regarding Government liability on Count II. The
Court held that the government assumed plaintiff’s
contracts when, at the end of the interim period, it
transferred all of plaintiff’s security responsibilities to
TSA personnel. Huntleigh, 63 Fed.Cl. at 451. Again, the
Court assumed for the purposes of the motion to
dismiss, plaintiff’s allegations were true. Later factual
development and trial could lead to a different
conclusion. The Court stated in its January 7, 2005
opinion that the “issues in Count II clearly necessitate
the development of a factual record.” /d.
The government has failed to meet the standards
required to prevail on a motion for reconsideration.
Plaintiff is correct that: (1) the government has not
suggested an intervening change in the controlling law;
(2) the discovery of previously unavailable evidence is
irrelevant at the dismissal stage; and (3) the government
has failed to argue that its motion for reconsideration is
56a
Appendix D
necessary to prevent manifest injustice. The
government has failed to sustain its burden of proof on
any of the standards. See e.g., CW Gov't Travel, Inc. v.
United States, 63 Fed.Cl. 459, 462 (2005).
CONCLUSION
For the foregoing reasons, the Court DENIES the
defendant’s motion for reconsideration.
57a
APPENDIX E — OPINION OF THE UNITED
STATES COURT OF FEDERAL CLAIMS
DATED JANUARY 7, 2005
UNITED STATES COURT OF FEDERAL CLAIMS
No. 03-2670C.
HUNTLEIGH USA CORPORATION,
Plaintiff,
V.
The UNITED STATES,
Defendant.
Jan. 7, 2005.
OPINION
MARGOLIS, Senior Judge.
This action is before the Court on defendant’s
motion to dismiss Counts I and II of plaintiff’s complaint.
Plaintiff, Huntleigh USA Corporation (“Euntleigh”),
filed a complaint against defendant, the United States,
alleging two counts. First, plaintiff alleges that
defendant violated the Takings Clause of the Fifth
Amendment to the United States Constitution when it
federali7ed airport security at all domestic commercial
airports thereby displacing Huntleigh, who had
S8a
Appendix E
previously provided these services to various air
carriers. Second, plaintiff alleges that defendant
violated § 101(g) of the Aviation and Transportation
Security Act, Pub.L. No. 107-71, 115 Stat. 597 (the “Act”)
(codified primarily in sections of Title 49 of the United
States Code), which according to plaintiff requires the
Transportation Security Administration (“TSA”) to pay
adequate compensation to private security screening
companies for the loss of their contracts. Plaintiff
contends that defendant violated § 101(g) of the Act
when it refused to provide plaintiff with adequate
compensation for the loss of its private screening
contracts. Specifically, defendant contends that Count
I of the complaint should be dismissed because
plaintiff has failed to state a claim upon which relief
may be granted. Additionally, defendant contends that
Count II of the complaint should be dismissed because
the court lacks jurisdiction or, in the alternative, because
plaintiff has failed to state a claim upon which relief may
be granted. After careful consideration of the briefs and
oral argument, the Court denies defendant's motion to
dismiss Counts I and II.
FACTS
On November 19, 2001, in response to the
September 11, 200! hijackings, the United States
Congress enacted the Aviation and Transportation
Security Act, Pub.L. No. 107-71, 115 Stat. 597. The Act
created the Transportation Security Administration and
charged it with carrying out, among other things, civil
aviation security functions, including security screening
59a
Appendix E
operations for passenger air transportation. Pub.L. No.
107-71, § 101(a), 115 Stat. 597, 597-602. The Act shifted
the responsibility for screening passengers and
property boarding aircrafts from private companies to
TSA. 49 U.S.C. § 44901(a). To carry out this shift, the
Act sets forth various deadlines that TSA was required
to meet. Of importance to this action, TSA was required
to: (1) assume civil aviation security functions and
responsibilities not later than three months after the
date of enactment of the Act (February 19, 2002),
§ 101(g)(1), and (2) have a sufficient number of
federalized screeners in place to screen all passengers
and property that would be boarding aircrafts at all 429
domestic commercial airports not later than one year
after the date of enactment of the Act (November 19,
2002), § 110(c)(1). Thus, TSA had a nine-month period
to transition from private screeners to federal screeners.
The Act set out two approaches that TSA could use
in transitioning from private to federalized airport
security screening. First, TSA could assume the rights
and responsibilities of air carriers under existing
screening contracts. § 101(g)(2). Second, TSA could
obtain, through agreements with air carriers, the
assignment of existing screening contracts. § 101(g)(3).
Thus, if TSA chose to utilize either of these two
approaches, it would essentially be taking the place of
the air carriers with respect to their contracts with
private screening companies. If TSA chose to use the
second approach, the Act required that the agreements
be entered into not later than 90 days after the date of
enactment. Further, the Act mandated that the
60a
Appendix E
agreements be for one !80-day period, wh *h could be
extended for one 90-day period if the Under Secretary
determined that such an extension was necessary.
§ 101(g)(3)(B).
TSA ultimately chose a different approach. Under
TSA’s approach, private security companies submitted
bids for interim contracts with the government, which
remained in effect for up to the nine-month transition
period.
Huntleigh is a private security company. Since 1988,
Huntleigh has provided passenger and baggage
screening at airports throughout the United States. At
the time the Act was passed, Huntleigh had contracts
with eight major airlines, and a number of smaller air
carriers, to provide passenger and baggage screening
services at 35 airports across the United States.
Huntleigh’s contract with each airline consisted of a core
agreement, with addendums for each separate airport
location. These contracts generally had a term of three
years, with a provision for automatic renewal, which the
airlines often invoked.
In July 2002, Huntleigh received notices from the
government informing it that TSA would be replacing
Huntleigh’s screening checkpoints one by one. On July
23, 2002, the government terminated the first Huntleigh
security checkpoint. Over the next four months, TSA
terminated all of Huntleigh’s additional checkpoints. By
November 2002, TSA had fully federalized airport
security screening. As a result, Huntleigh alleges it has
6la
Appendix E
been forced out of the airport security industry, but
continues to provide some non-security related services
to air carriers and airports, such as skycap services,
baggage handling, and janitorial services. On
November 14, 2003, Huntleigh filed a complaint with this
Court.
DISCUSSION
I. Standard of Review
Count I of Huntleigh’s complaint alleges that by
federalizing airport security at all domestic commercial
airports, the federal government has taken Huntleigh’s
security business for public use without providing just
compensation, in violation of the Fifth Amendment to
the United States Constitution. Specifically, Huntleigh
contends that the government’s actions constituted a
taking of its (1) contracts' and (2) goodwill and going-
concern value.
1. Count I of Huntleigh’s complaint alleges that the
government took the goodwill! and going-concern value of its
business and does not mention contracts. However, throughout
the complaint Huntleigh asserts that it lost its screening
contracts as a direct result of the government’s actions. Because
a court must construe the allegations in the complaint broadly
and in plaintiff’s favor in considering a motion to dismiss, this
Court finds that Huntleigh’s complaint sufficiently alleges a
taking of both its screening contracts and its goodwill and
going-concern value. See First Hartford Corp. Pension Plan &
Trust v. United States, 194 F.3d 1279, 1287 (Fed.Cir.1999)
(“Because granting [a motion to dismiss] summarily terminates
the case on its merits, courts broadly construe the complaint.”)
(quoting Ponder v. United States, 117 F.3d 549, 552-53
(Fed.Cir.1997)).
62a
Appendix E
Count II of the complaint alleges that by failing to
pay adequate compensation to Huntleigh for the loss of
its contracts with the airlines, the TSA has violated
§ 101(g) of the Act. Specifically, Huntleigh contends that
it is entitled to the fair market value of the contracts
based on their initia] term as well as compensation for
the delay in payment from the time the contracts were
taken over by the government.
When considering a motion to dismiss a claim under
RCFC 12(b)(6), a court must accept as true all well-pled
factual allegations and draw all reasonable inferences
in plaintiff’s favor. DeMarco Durzo Dev. Co. v. United
States, 60 Fed.Cl. 632, 635 (2004) (citing Godwin v.
United States, 338 F.3d 1374, 1377 (Fed.Cir.2003)). Such
a motion should be granted only when “it appears beyond
doubt that the plaintiff can prove no set of facts in
support of his claim which would entitle him to relief.”
Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40
L.Ed.2d 90 (1974) (quoting Conley v. Gibson, 355 U.S.
41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). Therefore,
the Court must determine if, given plaintiff’s allegations,
it is beyond doubt that there are no set of circumstances
that would entitle plaintiff to relief for its claims that
the government took its screening contracts, goodwill
and going-concern value without just compensation.
‘Jurisdiction over any suit against the Government
requires a clear statement from the United States
waiving sovereign immunity, together with a claim
falling within the terms of the waiver.” United States v.
White Mountain Apache Tribe, 537 U.S. 465, 472, 123
63a
Appendix E
S.Ct. 1126, 155 L.Ed.2d 40 (2003) (citations omitted).
The Tucker Act contains *444 such a waiver, and gives
this Court jurisdiction over claims against the United
States that seek money damages and are “founded
either upon the Constitution, or any Act of Congress.”
28 U.S.C. § 1491(a)(1). Thus, plaintiff must point to some
constitutional or statutory provision that “can fairly be
interpreted as mandating compensation by the Federal
Government for the damage sustained.” White
Mountain Apache Tribe, 537 U.S. at 472, 123 S.Ct. 1126
(quoting United States v. Mitchell, 463 U.S. 206, 217,
103 S.Ct. 2961, 77 L.Ed.2d 580 (1983)). In this case,
plaintiff’s claim for monetary damages is based on §
101(g) of the Aviation and Transportation Security Act.
II. Count I-Takings Claim
“Whether or not a taking has occurred is a question
of law based on factual underpinnings.” Cienega
Gardens v. United States, 331 F.3d 1319, 1328
(Fed.Cir.2003) (citing Basz Enters. Prod. Co. v. United
States, 133 F.3d 893, 895 (Fed.Cir.1998)). In analyzing a
takings claim a court must undertake three separate
inquiries. First, a court must determine whether the
subject of the alleged taking is property for purposes
of the Takings Clause. If it is, the court must then
determine whether the government action constituted
a compensable taking, that is, whether the government
interference goes “too far.” Penn Central
Transportation Co. v. New York City, 438 U.S. 104, 124,
98 S.Ct. 2646, 57 L.Ed.2d 631 (1978) (laying out a three-
factor analysis to assess whether a given regulation goes
64a
Appendix E
“too far” for purposes of the Takings Clause). Finally, if
the court finds that a taking has occurred, it must
determine the amount of just compensation.
In this case, defendant contends that Huntleigh’s
takings claim fails to state a claim for two separate
reasons: (1) that Huntleigh fails to assert a valid
property interest compensable under the Fifth
Amendment; and (2) that, even if Huntleigh does have
a valid property interest, the government’s action in this
case did not constitute a compensable taking.
A. Nature of Plaintiff’s Claim
As a threshold matter, the Court must determine
how to characterize plaintiff’s claim. Plaintiff asserts that
it has a protected property interest in its business
assets, including its long-running contracts with
established customers, goodwill, and going-concern
value. Plaintiff further alleges that upon passage of the
Act, its protected property interest was taken without
just compensation. Defendant, on the other hand,
asserts that mere engagement in a business activity is
not protected property under the Fifth Amendment, and
therefore, that a Fifth Amendment taking has not
occurred. Thus, the question is whether Huntleigh has
alleged that its business assets or its right to engage in
the business of passenger and baggage screening has
been taken. Such a distinction is crucial. If the Court
were to agree with the government that Huntleigh has
alleged nothing more than a taking of its right to engage
in a particular business activity, the Court would grant
65a
Appendix E
the government’s motion to dismiss. As the government
correctly points out, mere engagement in a particular
business activity is not property protected by the Fifth
Amendment.
Despite the government’s attempt to characterize
plaintiff’s claim, the Court finds that plaintiff has alleged
that its business assets were taken, including its
contracts, goodwill, and going-concern value. Defendant
is mistaken in its characterization of plaintiff’s claim, as
plaintiff repeatedly states that by federalizing airport
security at all the nation’s airports, the government has
taken its business assets. Accordingly, the Court will
analyze whether Huntleigh’s business assets are
compensable property under the Fifth Amendment.
B. Contracts, Goodwill and Going-Concern Value
Plaintiff alleges that by virtue of the Act, the
government has taken its business assets, including its
long-term screening contracts, goodwill and going-
concern value. The government admits that contracts
are property. Therefore, plaintiff’s allegation that it had
a contractual right to provide screening services to
various airlines sufficiently sets forth a property
interest. See Cienega Gardens, 331 F.3d at 1329-30. The
parties dispute, however, whether goodwill and going-
concern value are property under the Takings Clause.
Plaintiff cites Kimball Laundry Co. v. United States, a
case where the Army temporarily condemned the
plaintiff’s laundry plant during World War II. 338 U.S.
1,69 S.Ct. 1434, 93 L.Ed. 1765 (1949). There, the plaintiff
66a
Appendix E
asserted that it was entitled not only to compensation
for the value of the use of its plant and equipment, but
also for the “diminution in the value of its business due
to the destruction of its ‘trade routes.’ ” Jd. at 8, 69 S.Ct.
1434. The term “trade routes,” explained the court,
served as a “general designation both for the lists of
customers built up by solicitation over the years and
for the continued hold of the Laundry upon their
patronage.” /d. In other words, the Laundry’s going-
concern value. Thus, the court found that the
government was required to compensate the plaintiff
for the going-concern value of its laundry business.
Kimball Laundry, 338 U.S. at 12, 69 S.Ct. 1434.
Defendant argues, however, that going-concern
value is only compensable under the Fifth Amendment
when the government has temporarily taken control of
a claimant’s tangible business assets. The government
also relies on Kimball Laundry because the Court held
that the Army’s temporary, rather than permanent, use
of the plaintiff’s property was a taking. /d. at 12, 69S.Ct.
1434. The government asserts that when the taking of
tangible business asseis is permanent, going-concern
value does not afford recovery.
This Court is not persuaded by the government’s
argument. In Kimball Laundry, the court found the
government’s use of the plaintiff’s property to be a
compensable taking not because the use was temporary,
but because the use precluded the plaintiff from
capitalizing on its trade routes. As the court noted, “[t]he
government's temporary taking of the Laundry’s
67a
Appendix E
premises could no more completely have appropriated
the Laundry’s opportunity to profit from its trade routes
than if it had secured a promise from the Laundry that
it would not for the duration of the Government’s
occupancy of the premises undertake to operate a
laundry business anywhere else in the City of Omaha.”
Id. at 14, 69 S.Ct. 1434. The government asserts that
Huntleigh, unlike Kimball Laundry, remains completely
free to exploit its intangible assets anyway it wants.
However, Huntleigh, like Kimball Laundry, has no
alternatives under the Act. Because the Act makes it
impossible for Huntleigh to conduct its airport security
business at the nation’s airports, it cannot simply
“adjust” by entering into new contracts nor may it
exploit its intangible assets elsewhere. Huntleigh’s
going-concern value allegedly has been severely
diminished by the Act, and the government has been
assured that there is no competition from Huntleigh.
Like the plaintiff in Kimball Laundry, “(t]he owner
retains nothing of the going-concern value that it
formerly possessed; so far as control of that value is
concerned, the taker fully occupies the owner’s shoes.”
Id. at 13, 69 S.Ct. 1434.
Further, plaintiff asserts that its situation is similar
to United States v. 0.88 Acres of Land, 670 F.Supp. 210
(1987). There, the government condemned the
defendant's canoe and boat livery with the intention of
consolidating all of the area’s liveries into one large
business. /d. at 211. The court held that the
government’s taking was compensable under the Fifth
Amendment, stating where “1) the government intends
68a
Appendix E
to construct facilities in substitution for an existing
business; 2) the new business is operated under the
government’s pervasive regulation; 3) the government
creates a monopoly situation and realizes a pecuniary
interest by doing so, the government’s activity is
tantamount to the operation of the ongoing concern
which, in turn, comprises a business taking.” Jd. at 213.
Plaintiff likens the present case to 0.88 Acres of Land,
asserting that the government intentionally assigned
plaintiff’s business to itself, depriving plaintiff of the
transferable intangible value of its business.
Defendant responds by distinguishing both Kimball
Laundry and 0.88 Acres of Land from the present case
by asserting that in those cases the government
physically seized control of a business, whereas here,
the government merely eliminated a market for the
plaintiff’s commercial services. Defendant argues that
the present case is similar to Southern Counties Gas
Co. v. United States, 141 Ct.Cl. 28, 157 FSupp. 934 (1958),
where the government banned human habitation in a
particular area, thereby destroying the demand for the
plaintiff’s utility services in that area. There, the court
held that “the falling off of customers, though caused
by the project, was not a taking.” /d. at 935. The court’s
rationale was that even though the plaintiff’s loss was
due to the government’s project, the loss was merely
consequential, and plaintiff could still serve other
customers throughout Southern California.
Huntleigh’s loss, which was much greater than
merely consequential to the government’s action, was
69a
Appendix E
caused by the government’s intended taking of its entire
business. Here, the specific purpose of the Act was to
replace private airport screeners with TSA airport
screeners, or as plaintiff alleges, to completely exclude
Huntleigh and other private companies from the airport
screening business throughout the United States. This
Court holds that Huntleigh’s loss is more than
consequential, and therefore, Huntleigh is entitled to
develop a factual record in support of its assertion.
C. Airline Screening-A Highly Regulated Industry
Defendant argues that Huntleigh had no underlying
inherent right to engage in airline screening, given the
pervasive government regulatory dominance over
airline security. Defendant relies upon Mitchell Arms,
Inc. v. United States, 7 F.3d 212 (Fed.Cir.1993), where
the plaintiff, a firearms importer who held a federal
license to import and sell firearms, sued the government
when it revoked all import licenses for assault rifles. The
plaintiff claimed that the revocation of its license
constituted a taking. The court found that Mitchell’s
expectation of selling assault rifles in the United States
did not constitute a property right protected under the
Fifth Amendment. /d. at 216. The court held that because
Mitchell voluntarily entered the firearms import
business, a governmentally controlled area, Mitchell did
not have a property interest in its expectation of selling
the assault rifles. 7d. Here, defendant asserts that
Huntleigh had no inherent right to engage in airline
screening due to the pervasive government regulatory
dominance over airline security. Defendant argues that
70a
Appendix E
by entering the airline screening industry, Huntleigh
placed itself in an arena exclusively controlled by
government regulation.
In American Pelagic Fishing Company, L.P. v.
United States, 379 F:3d 1363 (Fed.Cir.2004), the plaintiff
alleged a taking in violation of the Fifth Amendment
when the government revoked its license to fish in any
U.S. fishery within the Exclusive Economic Zone
(“EEZ”) in the Atlantic Ocean. /d. at 1369. The Federal
Circuit held that American Pelagic did not have a
property interest in its fishing permits. /d. at 1374. The
court based its decision on Conti v. United States,
another fishing license case. 291 F.3d 1334 (Fed.Cir.2002).
In Conti, the court viewed Conti’s fishing permit as a
revocable license and stated that “no property rights
are created in permits and licenses.” /d. at 1340 (citing
United States v. Fuller, 409 U.S. 488, 493, 93 S.Ct. 801,
35 L.Ed.2d 16 (1973)).
The government asserts that American Pelagic and
Mitchell Arms apply to the current case because like
the fishing industry, there was pervasive government
regulatory dominance over airline security at the time
Huntleigh entered the airline security business.
Defendant maintains that Huntleigh never possessed
any inherent right to engage in airline screening
independent of the government's regulatory permission,
and that while the government has revoked its
permission to engage in airline screening, it has not
otherwise impaired Huntleigh’s going-concern value.
The government claims that because Huntleigh remains
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Appendix E
free to engage in any other screening or security
activities it wishes, it has hardly legislated Huntleigh
out of existence.
Huntleigh maintains that even though the industry
in which it operated was regulated by the government,
it still possesses a compensable property right. Plaintiff
acknowledges that prior to the passage of the Act, the
government, through the FAA, heavily regulated airport
security procedures. Plaintiff’s position, however, is that
while the government had the right to alter the
regulations governing airport security, it had no right
to “legislate a private company out of existence.”
Pl.’s Opp. at 60. Plaintiff relies on Cienega Gardens v.
United States, 331 F.3d 1319 (Fed.Cir.2003), where the
court held that the plaintiff had vested property rights
even in “an area voluntarily entered into and one which,
from the start, is subject to pervasive Government
control.” Jd. at 1330. In Cienega Gardens, real estate
owners of low-income apartments sued the government
when Congress enacted two statutes that abrogated the
owners’ rights to prepay their forty-year mortgage
loans after twenty years. /d. at 1323. The plaintiffs
argued that by enacting the statutes, the government
had taken their property because the laws prevented
them from exiting the housing programs after twenty
years. The statutes prohibited the plaintiffs from
regaining possession and control of their real estate
because only extinguishment of their mortgages
released the owners from the U.S. Department of
Housing and Urban Development’s low-rent housing
programs. /d.
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Appendix E
The court in Cienega Gardens rejected the
government’s assertion that the plaintiff could not
demonstrate a protected property right “in an area
voluntarily entered into and one which, from the start,
is subject to pervasive Government control.” Jd. at 1330.
The court held that the plaintiffs had vested property
interests in the contractual right to prepay and exit the
housing programs and thereby regain their normal
rights of ownership.
This Court finds a significant difference between
Mitchell Arms and American Pelagic, and the present
case. In Mitchell Arms, the government’s action
revoked Mitchell's authority to import certain firearms
into the United States. Otherwise, the court noted,
“Mitchell retained complete control over the rifles.
Mitchell could have done anything it wished with the
rifles, except import them into the United States... .”
Mitchell Arms, 7 F.3d at 217. The government did not
take Mitchell’s rifles, it merely took Mitchell’s ability to
market the rifles. The same was true of American
Pelagic, where the plaintiff was only limited from fishing
in the EEZ and could continue to fish in other parts of
the Atlantic Ocean.
The present case is distinguishable from Mitchell
Arms and American Pelagic. Although Huntleigh
technically retains control over its business, there is
nothing it can do with its business; Huntleigh cannot
participate in the nation’s airline screening industry.
Defendant asserts that Huntleigh remains free to
engage in airline screening activities that are permitted
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Appendix E
by law. This may appear to be the case, but in reality,
Huntleigh is left with minimal business opportunity.
Huntleigh’s primary business was to provide security
screening at the nation’s airports, and that activity is
now completely in the hands of the federal government.
Further, the interests affected-Huntleigh’s contracts,
goodwill, and going-concern value-were inherent to its
business with the nation’s airlines. The business did not
depend on the exercise of the government’s regulatory
power; the federal regulations merely dictated the
procedures by which Huntleigh conducted its airline
passenger screenings. In Mitchell Arms and American
Pelagic, because the licensees could not assign, sell or
transfer their licenses, they did not have property
interests in their licenses. Huntleigh, on the other hand,
owns its business assets and can assign, sell or transfer
these assets.
Furthermore, the present case is not a licensing
case. Rather, it is very similar to Cienega Gardens where
the mortgage prepayment right at issue was created
by the real estate owners’ private contracts with private
lenders. 331 F.3d at 1325. Here, Huntleigh’s property
rights, its contracts, goodwill, and going-concern value,
were created by private contracts between Huntleigh
and the nation’s airlines. These rights cannot be illusory
just because they concern activities subject to pervasive
government control. Quoting Cienega Gardens, “(that
cannot be, and is not, the law.” /d. at 1331. Further, in
Cienega Gardens where the government essentially
rewrote the contracts between the owners and the
lenders, the court found there w
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