Amicus Curiae Brief — Bailey v. United States, 124 S. Ct. 2412 (2004) (No. 03-1073)

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Suprome Court, U.S

_ FILED |

~ APR 30 2004 |

No. 03-1073 OFFICE OF THE CLERK |

IN THE

Supreme Court of the Anited States

H.C. BAILEY, JR., ET AL.,

Petitioners,

UNITED STATES, ET AL.,

Respondents.

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Federal Circuit

BRIEF FOR AMBASE CORPORATION

AS AMICUS CURIAE

SUPPORTING PETITIONERS

MARK A. PERRY

Counsel of Record

AMANDA M. ROSE

GIBSON, DUNN & CRUTCHER LLP

1050 Connecticut Avenue, N.W.

Washington, D.C. 20036-5306

(202) 955-8500

Counsel for Amicus Curiae

QUESTION ADDRESSED BY AMICUS

Under this Court’s precedents, the physical seizure of a

viable business by the government constitutes a per se taking

requiring just compensation under the Fifth Amendment. The

government physically seized viable businesses owned by

petitioners and amicus. Has the Federal Circuit erred in cate-

gorically refusing to apply the per se takings analysis where

the business seized is a savings and loan institution?

RULE 29.6 STATEMENT

Pursuant to this Court’s Rule 29.6, AmBase Corporation

states that it has no parent corporation and that no publicly

held company owns 10% or more of its stock.

Ng RI a a Ke a i 2

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TABLE OF CONTENTS

Page

QUESTION ADDRESSED BY AMICUS .......... cece eeeeeees i

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BE SB sisncovcnnspasesnssincdnvisdesssansniccessceses 1V

INTRODUCTION AND INTEREST OF AMICUB.............. l

REASONS FOR GRANTING THE WRIT .................ccceeeee 3

ial nsth. cana tdciciesaiidonsaasneninchievenbeenapiansensenanis 16

TABLE OF AUTHORITIES

Page(s)

AmBase Corp. v. United States,

2 RR eRe iterner WnarTOnerer eran ) i ee

American Continental Corp. v. United States,

Be eek ee ee icethitrathccccndcccatacamentoneenetncinntnanrntinoens 6

Armstrong v. United States,

i I ei assiciciscninnatinsciheniacansinneceeabnaaeaananetes 5

Bailey v. United States,

341 F.3d 1342 (Fed. Cir. 2003)................... S, 7, 11, 13, 34

Branch v. United States,

Fe TOE Ce Gls Fein sn cs ciivntainesithctnirnvoens 7,43

California Housing Securities, Inc. v. United States,

Fae Fe Fae CR, Cs TI iieniivissitivesisscscnnicssincasvnnons passim

Castle v. United States,

301 F.3d 1328 (Fed. Cir. 2002)........:0..c00esseeseee 7, 14, 13, 4

De Laval Steam Turbine Co. v. United States,

i Ee.) OE A MC AO AIT TE 14

Dolan v. City of Tigard,

FE i ee bikini lascnidclenshencsiabindicntala 9,12

First English Evangelical Lutheran Church v. Los

Aagenes, AEE IB. FOR FB) evvasiicsercessevisnssccrsnesnsovseaiives 5,9

Golden Pacific Bancorp v. United States,

ES F.O0 FOGG CR. Ce. FD aasssccicsencssctccscsesscesishans passim

Kaiser Aetna v. United States,

I Te. FE iertersttitdicamrasithdenninlagitioaninninan 12, 15

Keystone Bituminous Coal Ass’n v. DeBenedictis,

UA ee eicctedeitintiniicicaienniaanda 9

Kimball Laundry Co. v. United States,

Se hs. 6 CE ientttesdiniecetindmammiaaiaaine 5

Loretto v. Teleprompter Manhattan CATV Corp.,

A VE re Ca essiitiiinnennaiinesnienaniiamedaiins passim

Lucas v. South Carolina Coastal Council,

SOS VF. Te eerictiesnstvinentaaccsacsiinnsnncibars 9,10, 15

Lynch v. United States,

Fee Fk BT CE rennin 14

Marion & Rye Valley Ry. Co. v. United States,

FIG UE. BO i ikniianndioniomniinmane 5

Monongahela Navigation Co. v. United States,

BE UF re CE citrsinectninsh cul ecnaneneeaeaeeian 3,9

New York v. Burger, ,

SE Ee. Fe A iseieimimcblatanaamaee 11

Nollan v. California Coastal Comm’n,

WS FE. Be 6 a te isicticinnciiienseienae 12

Palazzolo v. Rhode Island,

SF Ur CE tiiericnienincenncimmataanaaoae 10

Penn Central Transportation Co. v. City of New York,

Se UE, FE i sitieaniccsncrtenneacnnasienemn 14

Pennsylvania Coal Co. v. Mahon,

ee Le. Be tistical 4

Preseault v. ICC,

Ge Ue: 8 CI itnieniscrnesneenseonaen 11,12

Preseault v. United States,

100 F.3d 1525 (Fed. Cir. 1996) (en banc).................. 10, 11

Pumpelly v. Green Bay Co.,

Be Ue: BT ED winitincikienccncsnainsamenandeniaienmananiin 4

Regional Rail Reorganization Act Cases,

SEP ULSD. FS Ce ietainimeindannuams 15

Ruckelshaus v. Monsanto Co.,

EEE Gas HONEA FE xrvitinrsincsnnncceilenndiahinsaieerintiinasenies 12, 15

Sinking-Fund Cases,

Fe FO COME scitcinastinstercucticaaminianaaemiaiaiaesaaiadanti 12

Tahoe-Sierra Preservation Council, Inc. v. Tahoe

Regional Planning Agency, 535 U.S. 302 (2002).............. 5

Transportation Co. v. Chicago, |

Fe Geis IO COTE ei sctasinncissstntidstainicdaiabdniiiataaidldmatenteieis 4

United States v. North American Transp. & Trading

Ch, Hee ee Se os cae 8

United States v. Pewee Coal Co.,

Pe Saale. 6 CED rinstnsinineseacaaotetaeamauieenbaaas 5

United States v. Winstar Corp.,

FED Se Ce ioiiecsinniaaideeaieeae anes 12,4

Webb’s Fabulous Pharmacies, Inc. v. Beckwith,

EF EAs. EAS CR rissnnicrcianaiehipnabaiaiieniaakueoee 10

Williamson County Regional Planning Comm'n v.

Hamilton Bank, 473 U.S. 172 (1985).......ccccccccsssessseseceees 15

Youngstown Sheet & Tube Co. v. Sawyer,

RAs FF Ca ED sitissvasisiseacomaeannieteiledaatedennaaies 8

BRIEF FOR AMBASE CORPORATION

AS AMICUS CURIAE

SUPPORTING PETITIONERS

AmBase Corporation, as amicus curiae, respectfully

submits that the petition for a writ of certiorari should be

granted.’

INTRODUCTION AND INTEREST OF AMICUS

The second question presented by petitioners in this case

is whether the Federal Circuit erred in rejecting as a matter of

law their claim that the government’s seizure of a private

business—a savings and loan institution—constituted a tak-

ing requiring just compensation under the Fifth Amendment.

The government also seized a thrift owned by amicus, and

the Court of Federal Claims denied its taking claim for rea-

sons similar to those adopted in the decision below. See Am-

Base Corp. v. United States, 58 Fed. Cl. 32 (2003).

In 1988, AmBase Corporation purchased all of the out-

standing stock of Carteret Bancorp, Inc., the holding com-

pany of Carteret Savings Bank, a federally chartered savings

and loan association. Before the AmBase acquisition, Car-

teret had acquired four failing thrifts pursuant to Winstar- ~

type contracts with the Federal Savings & Loan Insurance

Corporation (FSLIC). See 58 Fed. Cl. at 34-37; United States

v. Winstar Corp., 518 U.S. 839 (1996).

Pursuant to this Court’s Rule 37.6, amicus states that this

brief was not authored in whole or in part by counsel for any party,

and that no person or entity other than amicus or its counsel made

a monetary contribution to the preparation or submission of this

brief. Letters consenting to the filing of this brief have been sub-

mitted to the Clerk.

“Throughout the mid-1980’s, Carteret was a healthy and

profitable business.” 58 Fed. Cl. at 37. It recorded positive

net income every year, increased its assets from less than $2

billion to almost $6 billion, and increased its regulatory net

worth from $71 million to $321 million. Jbid. A significant

portion of that net worth was $182 million in supervisory

goodwill remaining from Carteret’s acquisition of failing

thrifts earlier in the decade. Jbid. In 1988, AmBase agreed to

purchase Carteret for $266 million. Jbid. -

The Financial Institutions Reform, Recovery, and En-

forcement Act of 1989 (FIRREA) revised many of the rules

applicable to thrift institutions, including the calculation of

regulatory capital. See Winstar, 518 U.S. at 857 (plurality

opinion). FIRREA required, among other things, that super-

visory goodwill be phased out in no more than five years

notwithstanding any preexisting contractual amortization pe-

riods. “Given the amount of supervisory goodwill on Car-

teret’s books, Carteret was particularly concerned about

FIRREA’s provisions that phased out the amount of supervi-

sory goodwill that could be used towards meeting capital re-

quirements.” AmBase, 58 Fed. Cl. at 38.

In late 1989, AmBase infused $20 million into Carteret;

on February 13, 1991, AmBase infused another $30 million

into Carteret. 58 Fed. Cl. at 38. “[B]y June of 1991, Carteret

had not secured [additional] new capital, and despite the in-

clusion of supervisory goodwill in regulatory capital, re-

ported to the OTS that it had failed to meet all three mini-

mum capital requirements [under FIRREA].” Jd. at 39. But

“{djespite Carteret’s difficulty in securing new capital, by the

end of November of 1992, Carteret had returned to profitabil-

ity, recording positive net income of $11 million.” Jbid. Be-~

cause of the “death spiral” induced by FIRREA, however, the

thrift failed to meet the new capital requirements, “and on

December 4, 1992, the OTS placed Carteret into conservator-

ship with the Resolution Trust Corporation [(RTC)].” Jbid.

AmBase sued the government for, among other things,

taking its property (Carteret) without paying just compensa-

tion. The government responded “that the imposition of a

conservatorship on a failed thrift is not, and cannot, be a tak-

ing.” 58 Fed. Cl. at 50. The Court of Federal Claims agreed,

stating that “it is well established that the government’s sei-

zure and closure of an insolvent bank and the appointment of

a receiver to control the bank’s assets pursuant to valid fed-

eral statutes is not a taking under the Fifth Amendment.”

Ibid. The court further observed that the thrift retained a

cause of action for breach of contract, and concluded that, at

least in cases involving contractual rights, “the takings claim

can only exist if there is no remedy other than a takings claim

for the government’s breach of contract.” Jd. at 51.

REASONS FOR GRANTING THE WRIT

The Federal Circuit’s decision in this case is the culmi-

nation of a series of cases in which that court (and, following

its lead, the Court of Federal Claims) has effectively declared

the constitutional guarantee of just compensation in the event

of a governmental taking inapplicable to an entire sector of

the American economy—the regulated financial services in-

dustry. The Constitution, however, contains no exception for

banks and thrifts, and the Federal Circuit’s creation and en-

forcement of just such an exception cannot be reconciled

with this Court’s Takings Clause jurisprudence. Review is

warranted to ensure that owners of financial institutions are

afforded the same Fifth Amendment protection as owners of

other types of businesses.

1. The government’s physical occupation of private

property constitutes a per se taking. Loretto v. Teleprompter

Manhattan CATV Corp., 458 U.S. 419, 441 (1982). Govern-

ment-chartered businesses are treated the same as other pri-

vate property for Takings Clause purposes. Monongahela

Navigation Co. v. United States, 148 U.S. 312, 341 (1893)

(the government “can no more take the franchise which the

state has given than it can any private property belonging to

an individual”). Thrifts are government-chartered businesses.

Winstar, 518 U.S. at 844. It should necessarily follow that

the government’s physical occupation of a thrift business

constitutes a per se taking. But in the Federal Circuit it does

not. That conclusion warrants review by this Court.

a. At least since Pennsylvania Coal Co. v. Mahon, 260

U.S. 293 (1922), this Court has drawn a distinction between

“regulatcry” and “per se” takings, reserving the latter cate-

gory for vases in which the government physically occupies

private property. In Loretto, for example, the Court held that

a law mandating the installation of cable television equip-

ment on private buildings constituted a permanent physical

invasion of private property, and thus constituted a per se

taking requiring just compensation without need to resort to

the ad hoc factors articulated in Mahon and subsequent regu-

latory taking cases. See 458 U.S. at 434-35.

The Loretto Court explained that the per se rule is war-

ranted for four principal reasons. First, it is dictated by

precedent: This Court has always considered physical occu-

pations to be takings. 458 U.S. at 427-35 (citing, inter alia,

Pumpelly v. Green Bay Co., 80 U.S. 166, 181 (1871); Trans-

poriation Co. v. Chicago, 99 U.S. 635, 642 (1879)). Second,

this “traditional rule . . . avoids otherwise difficult line-

drawing problems,” because “whether a permanent physical

occupation has occurred presents relatively few problems of

proof.” Jd. at 436-37. Third, “the character of the invasion is

qualitatively more intrusive than perhaps any other category

of property regulation.” Jd. at 441. And fourth, property own-

ers entertain “a historically rooted expectation of compensa-

tion” when the government physically occupies their prop-

erty. [bid.

This Court has consistently treated the government’s sei-

zure of a business as a per se taking. United States v. Pewee

Coal Co., 341 U.S. 114 (1951); Kimball Laundry Co. v.

United States, 338 U.S. 1 (1949); Marion & Rye Valley Ry.

Co. v. United States, 270 U.S. 280 (1926). In fact, the Court

has often cited business seizure cases to distinguish such per

se takings from mere regulatory takings: In Loretto, for ex-

ample, the Court cited Pewee Coal as an example of the tra-

ditional rule. 458 U.S. at 431-32; see also Tahoe-Sierra Pres.

Council, Inc. v. Tahoe Reg’! Planning Agency, 535 US. 302,

322-23 & n.18 (2002); First English Evangelical Lutheran

Church v. Los Angeles, 482 U.S. 304, 331-32 (1987) (Ste-

vens, J., dissenting).

The government physically seized the thrifts formerly

owned by petitioners and amicus. See Golden Pacific Ban-

corp v. United States, 15 F.3d 1066, 1073 (Fed. Cir. 1994)

(“when the Comptroller placed the Bank in FDIC receiver-

ship there was, in a very real sense, a physical invasion and

permanent occupation”). When they were seized, the thrifts

were worth millions of dollars.” This Court’s precedents in-

dicate tha: these seizures—like the seizure of any business—

should be analyzed under the per se takings doctrine.

b. The Federal Circuit, however, has concluded that the

government’s seizure of a particular type of business—

federally regulated banks and thrifts—can never constitute a

per se taking. Bailey v. United States, 341 F.3d 1342, 1347

(Fed. Cir. 2003). The rule applied in the decision below is the

result of a series of cases involving compounding errors.

2 Today, the thrifts are worth nothing—“not because [the]

property vanished into thin air” (Armstrong v. United States, 364

U.S. 40, 48 (1960)), but because of losses attributable to the gov-

ernment liquidation. See Pewee Coal, 341 U.S. at 117-19 (gov-

ernment responsible for post-seizure losses). For this reason, the

notion of a “receivership deficit” is irrelevant to a claim for just

compensation under the Fifth Amendment. The government is re-

sponsible for the value of the property to its owners on the date it

was seized, regardless of any subsequent decline in value.

The genesis of the Federal Circuit’s flawed approach lies

in American Continental Corp. v. United States, 22 Cl. Ct.

692 (1991), which involved a thrift that was placed into con-

servatorship after a regulatory finding that it was in an “un-

safe and unsound” condition. The thrift challenged the ap-

pointment of a conservator, but a district court sustained the

regulatory finding. The thnft then brought a separate action

under the Takings Clause, which was rejected by the Claims

Court. That court held that Loretto’s per se rule did not apply

to thrifts because thrift owners’ “expectations as to the opera-

tion of [their property] reasonably must have been rooted in

the scope of the government’s regulatory authority rather

than in historical notions of the rights of owners of physical

things.” Jd. at 700.

The Federal Circuit adopted the American Continental

approach in California Housing Securities, Inc. v. United

States, 959 F.2d 955 (Fed. Cir. 1992), which also involved a

thrift placed into conservatorship following a regulatory find-

ing that it was unsafe and unsound. The court said that “Lo-

retto simply does not fit cases such as this where the histori-

cally rooted expectations of ownership that underlie Loretto

do not exist.” Jd. at 959-60. Those expectations do not exist

in the thrift industry, according to the Federal Circuit, be-

cause thrift owners “lack[{] the fundamental right to exclude

the government from [their] property at those times when the

government could legally impose a conservatorship or re-

ceivership on [the thrift].” Jd. at 958.

Both American Continental and California Housing in-

volved thrifts that failed to meet preexisting regulatory re-

quirements.’ The Federal Circuit has subsequently extended

It is therefore possible that the holdings of these early

cases were correct: If the government adequately established that

the thrifts were seized for failure to comply with rules inherent in

their charters, then no just compensation would have been due. But

the reasoning employed by the Federal Circuit in California Hous-

its no-takings rule to cases in which the government seizure

was based on a change in regulation. See Golden Pacific, 15

F.3d at 1072-74 (no per se taking despite claim that regula-

tors “reneged” on a prior commitment regarding solvency

determinations). In Branch v. United States, 69 F.3d 1571

(Fed. Cir. 1996), which was the first case in which a takings

claim was expressly premised on the changes wrought by

FIRREA, the court said only that “[i]t is well established that

it is not a taking for the government to close an insolvent

bank and appoint a receiver to take control of the bank’s as-

sets.” Id. at 1575; see also Castle v. United States, 301 F.3d

1328, 1341 (Fed. Cir. 2002) (“seizure of a bank for failure to

meet regulatory capital requirements does not constitute a

taking”), cert. denied, 123 S. Ct. 2572 (2003).

The decision below, in which the Federal Circuit said

only that “[w]e have already rejected the theory that regula-

tory assessments of liability fall into the category of per se

takings” (Bailey, 341 F.3d at 1347), thus follows a line of

precedent to the same effect. The validity of that line war-

rants examination by this Court.

2. The Federal Circuit’s conclusion that the Loretto rule

is inapplicable to the banking industry, although variously

articulated in the decisions summarized above, ultimately

rests on four interrelated grounds: (a) the owners of thrifts

and banks do “not possess the most valued property right in

the bundle of property rights, the right to exclusive posses-

sion, or stated conversely the right to exclude others” (Ca/i-

fornia Housing, 959 F.2d at 958); (b) thrift owners have no

“historically rooted expectation of compensation” (ibid.); (c)

banking is a highly regulated industry (id. at 959); and (d)

thrift owners give up their right to just compensation in ex-

ing was manifestly incorrect, and has been subsequently adopted

as a legal rule supporting the judgments in cases arising under very

different circumstances, including the decision below.

change for governmental benefits (ibid.). Each is squarely

contrary to this Court’s precedents.

a. With respect to the first point, the Federal Circuit has

asserted that bank and thrift owners “lack[] the fundamental

right to exclude the government from [their] property at :

those times when the government could legally impose a con-

servatorship or receivership.” California Housing, 959 F.2d

at 958 (emphasis added); see also Golden Pacific, 15 F.3d at

1074.

The Federal Circuit’s reformulation of the per se analy-

sis begs the constitutional question. To say that the taking is

authorized by law says nothing about whether just compen-

sation is due. The cable operators in Loretto, after all, were :

authorized to place their equipment on building rooftops; the

question was whether the property owners were constitution-

ally entitled to just compensation based on the exercise of

that authority. See Loretto, 458 U.S. at 426 (“a permanent

physical occupation authorized by government is a taking

without regard to the public interests that it may serve”) (em-

phasis added). The Court’s affirmative answer to that ques-

tion points up the fallacy in the Federal Circuit’s reasoning.

Under the Federal Circuit’s approach, the government could

always avoid the obligation to pay just compensation simply

by securing advance authorization for its seizures. But that is

not, nor has it ever been, the law. See Youngstown Sheet &

Tube Co. v. Sawyer, 343 U.S. 579, 632 (1952) (Douglas, J.,

concurring).*

ae a eae max

It is a truism that the government, without paying just

compensation, “may condemn unsafe structures, may close

a governmental seizure is not authorized by law, the property

owner has a claim in tort against the government official, not a

constitutional claim against the sovereign. United States v. North

American Transp. & Trading Co., 253 U.S. 330, 333-34 (1920). |

Indeed, authorization is a prerequisite to a takings claim: If

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unlawful business operations, may destroy infected trees, and

surely may restrict access to hazardous areas.” First English,

482 U.S. at 325-26 n.4 (Stevens, J., dissenting); see, e.g.,

Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S.

470, 491-92 (1987). The Federal Circuit has adopted this

premise, with which no one disagrees, as its conclusion:

Every bank and thrift seizure, the Federal Circuit has de-

cided, falls within the government’s authority to regulate

business. But “like the other powers granted to Congress by

the Constitution, the power to regulate commerce is subject

to all the limitations imposed by such instrument, and among

them is that of the Fifth Amendment.” Monongahela Naviga-

tion, 148 US. at 336.

The very basis of cases such as these is that the thrifts

were not “unlawful business operations” at the time of sei-

zure. A central premise of the lawsuits brought by petitioners

and amicus is that their thrifts would have complied with ap-

plicable law were it not for changes wrought by FIRREA—

changes from which the thrifts had attempted to insulate

themselves by contracts that the government breached. While

banking is obviously a regulated industry, and participants in

the industry accept regulation as part of the background prin-

ciples pursuant to which thrifts must operate, the government

“does not have unlimited power to redefine” those back-

ground principles. Loretto, 458 U.S. at 439; see also Lucas v.

South Carolina Coastal Council, 505 U.S. 1003, 1028-29

(1992). Otherwise, the thrifts’ “right to exclude would not be

regulated, it would be eviscerated.” Dolan v. City of Tigard,

512 U.S. 374, 394 (1994).°

° Like the seizure of a thrift, the condemnation of a private

residence is a per se taking of the owner’s physical property. In

certain circumstances (e.g., where the government proves that the

residence was purchased with the proceeds of illegal activity), the

government may not be required to pay just compensation to the

owner. But unless the government is able to carry its burden of

This Court has made it abundantly clear that if the gov-

ernment attempts to avoid paying just compensation on the

ground that a taking is justified by some background princi-

ple that inheres in the title to the property, it bears the burden

of proving the validity of such a defense. Lucas, 505 U.S. at

1031-32. That is because a “State, by ipse dixit, may not

transform private property into public property without com-

pensation.” Webb’s Fabulous Pharmacies, Inc. v. Beckwith,

449 U.S. 155, 164 (1980). But the Federal Circuit has al-

lowed the federal government to get away with just such an

ipse dixit by converting a defense—the purported insolvency

of the thnift—into a categorical bar on the availability of the

takings remedy. This Court has repeatedly emphasized that

this approach is inconsistent with the Takings Clause. Palaz-

zolo v. Rhode Island, 533 U.S. 606, 627 (2001).

b. The Federal Circuit, reasoning that “Loretto simply

does not fit cases . . . where the historically rooted expecta-

tions of ownership that underlie Loretto do not exist,” has

held as a matter of law that thrift owners lack a constitution-

ally protectable expectation of just compensation for the sei-

zure of their property. California Housing, 959 F.2d at 959-

60; see also Golden Pacific, 15 F.3d at 1074. This special

rule for the thrift industry conflicts with settled takings law.

In Preseault v. United States, 100 F.3d 1525, 1539-40

(Fed. Cir. 1996), the en banc Federal Circuit expressly re-

jected, in a case involving a taking of land, the notion that a

per se taking under Loretto may be found only after it is de-

termined that the property owner had a “historically rooted

expectation of compensation.” Such a reading of Loretto, the

proving that the owner has forfeited his ownership nghts by violat-

ing some established rule that inheres in the title to the property,

the Constitution requires the government to pay for the fair value

of the property taken. There is no basis in this Court’s takings ju-

risprudence for applying any different rule to thrift seizures.

Se ee Se

Federal Circuit explained, “stand[s] the law on its head.” Jd.

at 1540. Nevertheless, the Federal Circuit has continued,

even after Preseault, to mechanically apply the holding of

California Housing and its progeny to cases involving bank

and thrift seizures. See, e.g., Bailey, 341 F.3d at 1347; Castle,

301 F.3d at 1341. It has thus refused to rely on Loretto solely

in the context of the financial services industry, for a reason

that the en banc court has expressly rejected for all other

property owners. Review by this Court is warranted to both

reaffirm the holding of Loretto and to ensure that the Federal

Circuit affords owners of financial institutions the same con-

stitutional protections it affords to owners of other types of

property. ©

c. The Federal Circuit has also accepted the bare exis-

tence of federal regulation as justification for wholesale sei-

zures of financial institutions. See California Housing, 959

F.2d at 959 (“Given [the] long history of government regula-

tion of savings and loan associations, [plaintiffs] were cer-

tainly on notice that [the thnft] might be subjected to differ-

ent regulatory burdens over time”). But in our modern soci-

ety, some entity of state or federal government regulates vir-

tually all businesses—not only banks, but law firms, auto-

body shops, accountants, hairdressers, and so forth. The Fed-

eral Circuit’s rule improperly “conflates the scope of [the

government’s regulatory] power with the existence of a com-

pensable taking and threatens to read the Just Compensation

Clause out of the Constitution.” Preseault v. ICC, 494 U.S. 1,

23 (1990) (O’Connor, J., concurring). Whether applied

across the board or only to banks, the Federal Circuit’s rule

conflicts with this Court’s precedents.°

° This Court has held, for example, that even “pervasively

regulated businesses” are entitled to the protections of the Fourth

Amendment. New York v. Burger, 482 U.S. 691 (1987). There is

“no reason why the Takings Clause of the Fifth Amendment, as

much a part of the Bill of Rights as the ... Fourth Amendment,

It is well-established that “[t]he scope of the [govern-

ment’s] authority to regulate ... is an issue quite distinct

from whether [its] exercise of [that authority] effected a tak-

ing.” Preseault, 494 U.S. at 22 (O’Connor, J., concurring);

see, e.g., Sinking-Fund Cases, 99 U.S. 700, 719-20 (1878)

(recognizing that a railroad’s property could be taken within

the meaning of the Fifth Amendment although the railroad

was “a creature of the United States,” “created for public

purposes,” “to a large extent devoted to public uses” and

“subject to legislative control”); Kaiser Aetna v. United

States, 444 U.S. 164, 172-73 (1979) (explaining that “while

Kuapa Pond may be subject to regulation by the Corps of

Engineers, acting under the authority delegated it by Con-

gress in the Rivers and Harbors Appropriation Act,” it does

not follow that no taking has occurred). The Federal Circuit, .

by confusing the two issues, has erroneously deprived thrift

owners of a remedy guaranteed to them by the Constitution.

d. The Federal Circuit’s final ground for rejecting Lo-

retto was that “[iJn exchange for the benefit of federal de-

posit insurance, [the thrift] gave the government the right,

among other nights, to place [it] in conservatorship or receiv-

ership when warranted.” California Housing, 959 F.2d at

959.

Under some circumstances, the government may ex-

pressly condition the grant of benefits on a surrender of prop-

erty rights. Ruckelshaus v. Monsanto Co., 467 U.S. 986,

1007 (1984). But merely by acquiring regulated property,

thrift owners do not consent to its seizure. See, e.g., Nollan v.

California Coastal Comm’n, 483 U.S. 825, 833 (1987) (“the

announcement that the application for (or granting of) [a

building] permit will entail the yielding of a property interest

cannot be regarded as establishing the type of voluntary ‘ex-

should be relegated to the status of a poor relation in these compa-

rable circumstances.” Dolan, 512 U.S. at 392.

ee ye ee ee

change’” that would allow an uncompensated taking); Lo-

retto, 458 U.S. at 439 (“a landlord’s ability to rent his prop-

erty may not be conditioned on his forfeiting the nght to

compensation for a physical occupation”). Even if the bene-

fits of regulation were relevant, the government would have

to carry its burden of proving in each particular case that no

just compensation is due because the value of the benefit

conferred outweighs the cost of seizure.’

3. The reasoning of the California Housing line of cases

has led to its own per se rule in the Federal Circuit: The sei-

zure of thrifts can never be a taking and is not even to be ana-

lyzed under the Loretto framework. See, e.g., Bailey, 341

F.3d at 1346-47; Castle, 301 F.3d at 1341; Branch, 69 F.3d

at 1575; Golden Pacific, 15 F.3d at 1073-74; AmBase, 58

Fed. Cl. at 50. That conclusion warrants review by this

Court.

A thrift seizure is a prototypical physical occupation. On

the appointed day, federal agents typically storm the building

just before opening or just after closing, and order all em-

ployees to leave. They then secure the files, vault, and com-

puter systems, and lock the doors to prevent anyone from en-

tering. The physical property and its operations are then

turned cver to a government entity (as conservator or re-

” In this regard, the court also would have to weigh the

benefits conferred by private owners on the government. In the

1980s, thrift acquirers saved the government billions of dollars by

averting thrift closures. With respect to Carteret, for example,

FSLIC saved $180 million when Carteret acquired four failing

thrifts, thus averting their closure. The government’s only “pay-

ment” for that benefit was the promises that it subsequently repu-

diated. Through these lawsuits, petitioners, amicus, and others are

seeking nothing other than compensation for benefits previously

conferred, and advantages previously promised, by the govern-

ment. The government, by contrast, seeks to avoid any financial

responsibility notwithstanding its breach of trust.

ceiver) for liquidation, or sale. In a single day, the owners’

property interests—worth millions of dollars before the gov-

ernment’s arrival—are eradicated. If the government’s occu-

pation of a laundry or coal mine constitutes a physical taking

(and this Court has held that they do), it is difficult to con-

ceive of a thrift seizure as anything other than a per se taking.

4. Even if the Federal Circuit were correct that the Lo-

retto rule does not apply in the context of thrift seizures, that

would not end the inquiry. Thrift owners, like petitioners and

amicus, whose property was seized solely on the basis of a

change in the regulatory regime, should be afforded the op-

portunity to prove a regulatory taking under the three-part

approach articulated in Penn Central Transportation Co. v.

City of New York, 438 U.S. 104 (1978). But as explained in

the petition (at 20-30), the Federal Circuit has also erred in its

analysis of thrift seizures under the regulatory taking doc-

trine, effectively adopting yet another per se rule that FIR-

REA effected no regulatory takings regardless of the circum-

stances of particular cases. See Bailey, 341 F.3d at 1347 (“the

seizure of thrifts ‘for failure to comply with the regulatory

requirements imposed by FIRREA’ does not constitute a

regulatory taking”’) (quoting Castle, 301 F.3d at 1341).

The Federal Circuit’s approach to regulatory taking

cases simply ignores the fact that FIRREA worked a whole-

sale evisceration of contracts expressly designed to protect

thrifts and their owners from precisely the type of regulatory

change that Congress wrought in 1989. As a result, the line

of Federal Circuit cases is irreconcilable with this Court’s

explicit recognition that “[r]ights against the United States

arising out of a contract with it are protected by the Fifth

Amendment.” Lynch v. United States, 292 U.S. 571, 579

(1934); see also De Laval Steam Turbine Co. v. United

States, 284 U.S. 61, 71 (1931) (cancellation of a government

contract “is an exercise of the power of eminent domain, and

the liability of the government is for just compensation”).®

The Federal Circuit’s approach also cannot be reconciled

with this Court’s recognition that governmental promises can

result in reasonable, investment-backed expectations, the

frustration of which gives rise to a takings claim. Monsanto,

467 U.S. at 1011; Kaiser Aetna, 444 U.S. at 179-80. And the

Federal Circuit, by refusing to hold the government liable for

just compensation notwithstanding the total elimination of

thrift owners’ property rights, has failed to heed the “cate-

gorical rule that total regulatory takings must be compen-

sated.” Lucas, 505 U.S. at 1026. Its regulatory taking analy-

sis in thrift cases is thus as unmoored from this Court’s

precedents as is its refusal to apply Loretto in this context.

The Federal Circuit, in short, has left petitioners, amicus,

and owners of other seized thrifts with no recourse under the

Fifth Amendment. This conclusion, as éxemplified by the

decision below, violates numerous core precepts of this

Court’s takings jurisprudence. The Federal Circuit has so far

departed from the accepted course of constitutional adjudica-

tion that this Court’s review is warranted. Otherwise, prop-

* The Court of Federal Claims suggested that the Takings

Clause has no application where there also exists a contract be-

tween the claimant (or a related entity) and the government. 58

Fed. Cl. at 51. To the extent the government reiterates that argu-

ment here, it is wrong for the reasons stated in the Brief for John

K. Castle et al. as Amici Curiae Supporting Petitioners, Franconia

Assocs. v. United States, No. 01-455 (Feb. 2002), at 6-23. Even

where a contractual remedy exists, the Takings Clause remedy re-

mains available to “cove[r] any shortfall between [the alternative]

remedy and just compensation.” Monsanto, 467 U.S. at 1018; see

also Regional Rail Reorganization Act Cases, 419 U.S. 102, 156

(1974); Williamson County Regional Planning Comm’n v. Hamil-

ton Bank, 473 U.S. 172, 194-95 (1985). Where a contractual rem-

edy is unavailable—for whatever reason—the government’s con-

stitutional obligation to pay just compensation is undiminished.

erty owners will continue to be denied the remedy that the

Constitution expressly confers upon them. :

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted.