Opposition Brief — Coastal Petroleum Co. v. Chiles

| Supreme Court, U.S.

FILED

MAY 27 1998

OFFICE OF THE CLARK

IN THE SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1997

No. 97-1760

COASTAL PETROLEUM COMPANY,

Petitiorer,

VS.

Hon. LAWTON CHILES, et al., as and constituting the

Board of Trustees of the Internal Improvement Trust Fund,

and as constituting the Executive Board of the Department of

Natural Resources of the State of Florida,

Respondents.

On Petition for a Writ of Certiorari to the District

Court of Appeal, First District of Florida

RESPONDENTS' BRIEF IN OPPOSITION TO PETITION

FOR CERTIORARI

ROBERT A. BUTTERWORTH

Attorney General of Florida

JONATHAN A. GLOGAU*

CHARLES R. MCCOY

Assistant Attorneys General

*Counsel of Record for Respondents

OFFICE OF THE ATTORNEY GENERAL

The Capitol, PL-01

Tallahassee, FL 32399-1050

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QUESTIONS PRESENTED

[as framed by Petitioner]

1. Does the Takings Clause of the Fifth Amendment to the

Unites States Constitution protect petitioner's long-term oil and gas

royalty on sovereignty submerged lands from outright confiscation

by Florida?

2. Whether Florida impairs its own contractual obligations in

violation of Art. 1, §10 of the United States Constitution by

refusing to enter into leases on sovereignty lands thereby rendering

petitioner's royalty worthless?

3. Does Dolan v. City of Tigard, 512 U.S. 374 (1994), require

Florida to establish "rough proportionality" between its absolute

restriction on drilling for oil and gas, and the environmental perils

it seeks to avert?

4. Has Florida denied petitioner its royalty without the due

process of law required under the Fourteenth Amendment to the

Constitution when it declared petitioner's royalty "speculative" and

therefore worthless, without allowing petitioner a fair opportunity

to introduce evidence of value?

Respondents will argue that none of the questions are fairly

presented, as all assume Petitioner's royalty is indeed property

under state law--a matter the decisions below resolved against

Petitioner. Also, Petitioner's third question was not raised or ruled

upon below, and is not preserved for review.

TABLE OF CONTENTS

QUESTIONS PREG 6s 5 ess ne cect acs i

FABLE OP CORTES os 58 RL ii

TABLE OF AUTHOREVURS «oo 50060 ke csessciaww iii

CP Be oo 56k eG ee

RIRTTIIC TION sn Sik A Hn Ba 2

STATEMENT OF THE CAGE... 5 iscsis in Soeids isan 2

REASONS FOR DENYING THE WRIT ...............4. 6

A. The Decision Below Is Highly Factual; And

Turns On A Question of State Law Only, That

Coastal's Royalty Interest Is Not "Property" .. 6

B. Prudential Concerns Weigh Strongly

Against Certiorari Review ........... 1]

C. The Remaining Questions Suggested

By Coastal Are Not Fairly Presented .. 15

1. Impairment of Contract ........... 15

2. Conflict with Dolan's "Rough

Propostiomehty” FOE ...cc essences 16

3. Opportunity to Present Evidence of

bc pega re Se ye 17

COIN AARIIUON os ss tv 6dnuss peusun peer eee 18

Cases Page(s)

Federal

ernst ¥, Fomenons, 503. 07.5; 593 (1992). cccciiscviicvcene 7

Brady v. Maryland, 83 S. Ct. 1194 (1963) ............... 11

Coastal Petroleum Co., v. International Minerals Corp.,

Pee PE TP TO, BD os os eee san ee see's 2

Coastal Petroleum Co. v. Sec. of the Army, case nos. 68-951-Civ-CA

& 69-699-Civ-CA [unpublished] (S.D. Fla. Feb. 5, 1971) ..... 9

Dolan vy. City of Tigard, 512 U.S. 374 (1994) ......... 1,16

illinois Central Railroad v. Illinois, 146 U.S. 387 (1892) ... 8

ee ET AOE dias ca basses 2a Vey oeeeeeeas 9,10

Marine One, Inc. v. Manatee County, 898 F.2d 1490

I a ee ke ge ede MA's s w'ccee seca s 17

Cts SULA PO CIPI E). cag vce ee evearses's 14

Ruckelshaus v. Monsanto, 467 U.S. 986 (1984) ....... 7,15

United States v. Johnson, 268 U.S. 220 (1925) ......... 11

State

Broward v. Mabry, 58 Fla. 298, 50 So. 826 (1909) ....... 8

EE Oy BE ak CEE 8 ee CREP EG ae eR ba ae 8

Conway Land, Inc. v. Terry, 542 So. 2d 362 (Fla. 1989) 10,11

Graham v. Estuary Properties, Inc., 399 So. 2d 1374

(Fla. 1981), cert. denied, 454 U.S. 1083 (1981) ........ 14

Neel v. Rudman, 33 So. 2d 234 (Fla. 1948) ............. 7

State v, Black River Phosphate Co,, 32 Fla. 82,

ES Ts Ue CARs whch pie) cae ake HE owe eke viens 8

State v. Gerbing, 56 Fla. 603, 47 So. 353 (1908) ......... 8

Welles v. Berry, 434 So. 2d 962 (Fla. 2d DCA 1983) .. 8,15

Other Authority

PNR E aoe sy 2 GER regrieeteateae ap arg Nr payee aE Ey ise n Mi 2,11

PEE. oe a Fe xo eRe ee bw ONE ERR SES 8

Bo ties Pe les ge he heh ba bo Roe en bee es 15

ah a a NE ee a aS oe a 3,5

Stern & Gressman, Supreme Court Practice (7th ed. 1993) 11

TLL LONE NN EE eRe

IN THE SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1997

No. 97-1760

COASTAL PETROLEUM COMPANY,

Petitioner,

VS.

Hon. LAWTON CHILES, et al., as and constituting the Board

of Trustees of the Internal Improvement Trust Fund, and as

constituting the Executive Board of the Department of Natural

Resources of the State of Florida,

Respondents.

On Petition for a Writ of Certiorari to the District

Court of Appeal, First District of Florida

RESPONDENTS' BRIEF IN OPPOSITION TO

PETITION FOR CERTIORARI

PINI BELOW

The opinion by the First District Court of Appeal (Pet. App. 1I-

12) is reported at 701 So.2d 619. The opinion of the trial court

(Pet. App. 13-33) is not reported.

JURISDICTION

The decision below was a final decision by the First District |

Court of Appeal of Florida on November 5, 1997. The Florida

Supreme Court declined discretionary review on January 28, 1998. |

The petition for writ of certiorari was docketed on April 28, 1998.

Petitioner has invoked this Court's jurisdiction under 28 U.S.C.

§1257(a).

Respondents will urge the decision below was tantamount to a

determination that Coastal's royalty interest was not "property"

under Florida law. By petitioning for certiorari, Coastal seeks

reversal on the underlying issue of state law only. This Court does

not have jurisdiction to do so.

STATEMENT OF THE CASE

This case addresses a matter of state law; that is, whether a

residual royalty interest in sovereign land--given the unusual facts

of this case--is a property interest under Florida law. Essentially,

Coastal seeks certiorari to reverse a decision of state law that no

property interest arose, in order to press its federal claim that a

1990 statute effected a taking of its royalty interest.

In 1941, Coastal's corporate predecessor leased a tremendous

swathe of land under Florida's Gulf waters. In 1976, Coastal

entered an agreement settling litigation with Respondents

("Florida" or the "State"), and relinquishing all but a royalty

interest in the nearshore portion of that land.’ Coastal Petroleum

'The map on page 55 of Coastal's appendix is helpful. It shows that

after the 1976 settlement Coastal's lease was reduced to two parallel

bands of land under the Gulf of Mexico. Each band is about 3 nautical

miles wide, roughly following the coastline, from Naples to

Apalachicola. The more landward band (aqua on the map) is subject

to Coastal's residual interest. For clarity, this band will be referred as

the "royalty area." It is the only area at issue in this litigation.

2

a icillleiiilaiieieiaiiaidiiiliialiall

Co., v. International Minerals Corp., 709 F.Supp. 1092, 1098 n.3

(N.D. Fla. 1988) By statute, the 1990 Legislature banned future

oil and gas drilling throughout Florida's Gulf waters, not just

near the shore. Ch. 90-72, Laws of Florida (1990), codified as

§253.61(1)(d) & §377.24(9), Florida Statutes (prohibiting oil and

gas leases and permits for most of Florida's territorial waters in

the Gulf and Atlantic).

Coastal's statement omits highly factual conclusions reached

by the state courts. The trial court found that from 1947 to 1968

twenty-two offshore wells were drilled, only one of which--not

in the royalty or offshore areas--discovered any oil or gas. There

were no third-party requests for leases in the royalty area during

the 15 years between the settlement and the instant litigation.

(Pet. App., p. 3, 14-16) These facts compelled the conclusion the

royalty area was not "prospective" for oil and gas in 1976, when

Coastal relinquished all but its royalty interest back to the

Trustees pursuant to the settlement agreement. (Pet. App. p. 5,

16)

The trial court found the 1976 agreement was silent as to

whether the State was to cooperate with potential future lessees,

and contained no provision requiring the royalty area to be leased

at all. (Pet. App., p. 16) The court also found, based on Florida

law, that the settlement agreement did not imply a condition that

the State would lease land within the royalty area. It concluded

that the settlement agreement did not give Coastal any right to

require the royalty area be leased to others. Therefore, Coastal's

royalty interest was "only a conditional right to profits that might

be derived form oil production in the future." (Pet. App., p. 18)

The most seaward band (dark blue on map) is subject to Coastal's

right to actively explore for oil and extract any commercial quantities

found. The two bands are separated by a third band (white on map),

in which Coastal relinquished all its interests.

3

Section 3, part 1.(D) of the settlement provided:

Coastal shall have no right to intervene in any

land use decisions within the areas leased

other than as to the outermost three miles

retained by Coastal. Coastal's only rights ...

shall be the specified residual royalty on oil,

gas, and other minerals. [e.s.]

See "Memorandum of Settlement" at §3, par. 1.(D) [Pet. App., p.

50].

ee REN ERE a

This language covers any land use decisions, not just those

made by the titleholder of the royalty area; that is, the Board of

Trustees of the Internal Improvement Trust Fund. The trial court

held that under §3, part 1.(D), Coastal "surrendered its rights to

the Trustees," including any right as to granting new leases--a

land use decision. (Pet. App., p. 20-21) Therefore, the court

concluded the royalty interest was "not a 'right’ that was taken by

the laws prohibiting exploration and production of oil in the

nearshore [royalty] area." (Pet. App., p. 21) Later, the court

added:

Under these circumstances, Coastal's reservation

of the royalty interest not only failed to create a

duty on the part of the State to lease, but fa-led to |

contain any reasonable expectation that the State |

would lease in the future.

* + &

Recovery of any profits form the reserved royalty

interest would be purely speculative. In fact,

there were many obstacles to a potential recovery

of profits even before the 1990 legislation. ....

Coastal's opportunity to recover a profit from oil

produced in the nearshore area depends [on] a

ae

series of possibilities, one stacked on another.

* * +

A more practical interpretation leads the court to

conclude that no property right was taken and

that no compensation can be due.

(Pet. App., p. 25-33)

The First District Court of Appeal agreed:

We concur in the sound reasoning of the trial

court in determining that [B]ecause of Coastal's

lack of a reasonable expectation that the State

would lease and its lack of ability to force the

State to lease, the State's action in protecting its'

[sic] sovereign submerged land by preventing

exploration and drilling does not constitute a

compensable taking of Coastal's reserved

property interest.

(Pet. App., p. 2) In reaching this conclusion, the First DCA

repeated several of the trial court's conclusions as to the royalty

area's prospects for containing commercial quantities of oil. It

then held Coastal's royalty interest did not rise to a "protectable

property interest under the law of inverse condemnation." (Pet.

App., p. 11)

This is the context in which Coastal contends ch. 90-72, Laws

of Florida (Pet. App., p.56-9) effected a taking. That law, a land

use decision by the Florida Legislature, prohibited oil and gas

leasing in Florida's Gulf waters. It did, however, except leases

entered before its effective date; thereby not. .ecting Coastal's

active exploration and production rights in the outermost portion

of the original leasehold. Coastal seeks compensation for the

alleged taking through the statutory prohibition against leasing

the royalty area to others for oil and gas drilling.

REASONS FOR DENYING THE WRIT

A. THE DECISION BELOW IS HIGHLY

FACTUAL AND TURNS ON A QUESTION

OF STATE LAW ONLY, THAT

COASTAL'S ROYALTY INTEREST IS NOT

PROPERTY

Coastal's petition fails to show why granting certiorari would

be appropriate under Rule 10(c). Under that rule, this Court may

grant review when a state court decides an important question of

federal law which has not been settled by this Court, but should

be; or has decided a federal question in a way conflicting with

relevant decisions of this Court.

The petition is deficient under either alternative in 10(c). The

opinions of the state trial and appellate courts rest on extensive

and unusual facts, and upon a decision of state law only; that the

particular interest allegedly taken was not "property" under

Florida law. Alternatively, the «pinions rest on the highly

factual conclusion that the royalty area was not "prospective" for

oil and gas, so that Coastal's expectation of a return on the

royalty was not reasonable; and thus did not rise to a property

interest which was protected.

Coastal concedes the state law nature of this crucial issue,

advancing the generality that "a royalty is a protected interest in

real property under Florida law." [e.s.] (pet., p. 7-8) This

unremarkable observation has nothing to do with the

determination here, that the particular royalty? at issue was not

"property"; or, if legally property, is factually so speculative that

it is not a reasonable investment backed expectation protected by

the Takings Clause.

Property interests arise under state law, not the U.S.

Constitution. Ruckelshaus v. Monsanto, 467 U.S. 986, 1001

(1984) ("[p]roperty interests ... are not created by the

Constitution. Rather, they are created and their dimensions are

defined by existing rules or understandings that stem from an

independent source such as state law." [internal quotation

omitted]). See also Barnhill v. Johnson, 503 U.S. 393, 398, 112

S.Ct. 1386, 1389, 118 L.Ed.2d 39 (1992) ("In the absence of any

controlling federal law, ‘property’ and ‘interests in property’ are

creatures of state law"). Under the unusual facts of this case, the

decisions of the state courts must be read as a determination that

Coastal's particular interest was not property under Florida law;

or, if property, not an interest protected by the U.S. Constitution.

The royalty area is sovereignty submerged land of the Gulf of

Mexico. As a matter of Florida law, it has long been subject to

the public trust doctrine:

The title to swamp and overflowed lands which

Florida received in the 1850s and thereafter was

vested in the Board of Trustees for the Internal

Improvement Fund of Florida by the legislature.

The title to sovereignty lands at this point

remained in the legislature as a public trust.

Florida has long recognized that a royalty interest in minerals is

different from the mineral interest itself. See Neel v. Rudman, 33

So.2d 234, 237 (Fla. 1948) (en banc) ("a conveyance of a royalty

interest and the conveyance of minerals in place are two entirely

different documents and convey entirely different interests").

7

Illinois Central Railroad v. Illinois, 146 U.S. 387,

13 S.Ct. 110, 36 L.Ed. 1018 (1892); Broward v.

Mabry, 58 Fla. 298, 50 So. 826 (1909); State v.

Black River Phosphate Co., 32 Fla. 82, 13 So.

640 (1893). These lands differ from other state

lands. Sovereignty lands are for public use, "not

for the purpose of sale-or conversion into other

values, or reduction into several or individual

ownership." State v. Gerbing, 56 Fla. 603, 608,

47 So. 353, 355 (1908).

Coastal Petroleum Co. v. American Cyanamid Co. 492 So.2d

339, 342 (Fla. 1986). See also, Art. X, §11, Fla. Const. (1970

amendment which declares sovereign lands held in trust for all

the people).

As the case law discussed in American Cyanamid observes,

the public trust doctrine long preceded the 1941 lease to

Coastal's predecessor; the leasehold as acquired by Coastal in

1947; and the 1976 settlement agreement. The 1990 law

prohibiting offshore drilling was but a legislative exercise of the

duty imposed by that doctrine. It was an exercise of proprietary,

not regulatory, power. Both courts recognized this. Therefore,

Welles v. Berry, 434 So.2d 982 (Fla. 2d DCA 1983), did not

create an implied duty in the State to lease the royalty area to

others. Subject to the public trust doctrine, the State was not

obligated to seek the maximum economic return from sovereign

land. This, too, is a matter of state law only. (See Pet. App., p.

8-10, 18-26.)

The 1990 law simply made explicit what the public trust

doctrine had long implied--that the use of sovereign, submerged

land was restricted in ways not applicable to private land, and

private use of sovereign land must yield to the best interest of the

public as a whole. Consequently, the public trust doctrine, as

manifested in the 1990 law, was an existing rule or

understanding--it was an implied condition or reservation in the

leases from their inception in 1941.> With respect to Coastal's

leases, the Uctrine was, an implied reservation Application or

exercise of the doctrine does not require just compensation under

the Takings Clause. See Lucas v. South Carolina Coastal

Council, 112 S.Ct. 2886, 2901 (1992):

In light of our traditional resort to "existing rules

or understandings that stem from an independent

source such as state law" to define the range of

interests that qualify for protection as "property"

under the Fifth and Fourteenth Amendments ...

this recognition that the Takings Clause does not

require compensation when an owner is barred

from putting land to a use that is proscribed by

those "existing rules or understandings" is surely

unexceptional. When, however, a regulation that

declares "off-limits" all economically productive

or beneficial uses of land goes beyond what the

relevant background principles would dictate,

compensation must be paid to sustain it.

[citations omitted]

The public trust doctrine is an existing rule or understanding

which was found, in litigation involving Coastal and the State,

*See Coastal Petroleum Co. v. Sec. of the Army, case nos. 68-95 1-

Civ-CA & 69-699-Civ-CA [unpublished] (S.D. Fla. Feb. 5,-1971)

("The relationship of the Trustees to Coastal is not as tenants in

common or joint tenants but rather as grantor and grantee with the

grantor holding a reservation clause. The reservation clause, of

course, is the trust doctrine mentioned in footnote | above."). [Note:

these consolidated cases are in the record below at Plaintiff's Ex. 1, R

4616-24.].

to be a specific reservation in favor of the State in the leases.

Exercise of the duty, imposed by the public trust doctrine, to

protect sovereignty submerged land cannot be the basis of

Coastal's taking claim.‘

The courts below found Coastal had no contractual right,

founded upon the 1976 settlement, to require Florida to pursue

other leases in the royalty area. Those courts also found, as a

matter of fact, the royalty area had no prospect of containing oil

in commercial quantities. They found, as a matter of fact and

state law, Coastal had no right to require or even expect that the

royalty area be leased to anyone in the future. They held

Coastal's interest was not "property" under Florida law; or, if

property, was not a protected interest since Coastal had no

reasonable expectation of a return on the royalty. Thus, the

factual and state-law character of the decisions is paramount.

Coastal correctly cites to Conway Land, Inc. v. Terry, 542

So.2d 362 (Fla. 1989) for the general proposition that a

perpetual, non-participatory royalty interest in oil and gas is an

interest in real property. Of course, Coastal fails to mention that

its interest arises through a lease of sovereign land always

subject to the public trust doctrine; its lease was voluntarily

amended through the 1976 settlement agreement to relinquish,

in the nearshore area, all but the passive royalty interest; the

royalty interest was not perpetual, but limited to 40 years; and

that evidence adduced at trial showed the nearshore area was not

prospective for commercial quantities of oil, thereby raising no

reasonable expectation of future leasing. None of this was

‘Coastal's reliance on Lucas is also unavailing because the 1990 law

did not restrict all economically productive or beneficial uses of the

royalty. To the extent there was value there, Coastal retains that value

through the possibility of recovery of oil by slant drilling into the

royalty area. (Pet. App., p. 28-9)

10

present in Conway.

Consequently, the petition for certiorari unavoidably seeks

review of fact and state-law* questions already resolved

adversely to Coastal. This Court lacks jurisdiction. See 28

U.S.C. §1257 (establishing certiorari jurisdiction to review

decisions by the highest state court in which a decision could be

had, when a state statute is questioned as being repugnant to the

Constitution, etc.; but not establishing jurisdiction to entertain

questions of state law only).

B. PRUDENTIAL CONCERNS WEIGH

STRONGLY AGAINST CERTIORARI

REVIEW

Two courts have concurred in this highly fact-specific case,

that Coastal had no. protected property interest in the royalty

area. Such concurrence turns upon the proven lack of oil and gas

in the royalty area, and upon interpretation of the 1976

settlement agreement--a separate contract from the original lease.

In the 1976 agreement, Coastal voluntarily relinquished all

rights but the passive royalty in the nearshore area. Coastal also

agreed not to intervene in state land use decisions, such as the

1990 Florida law which Coastal now contends effected the

taking. Certiorari is highly inappropriate. See United States v.

Johnson, 268 U.S. 220, 227 (1925) ("We do not grant a certiorari

[petition] to review evidence and discuss specific facts."). See

also Stern & Gressman, Supreme Court Practice (7th ed. 1993)

“This Court is bound by the Florida courts’ interpretation of state

law. Brady v. Maryland, 83 S.Ct. 1194, 1198 (1963) ("We usually

walk on treacherous ground when we explore state law, for state

courts, state agencies, and state legislatures are its final expositors

under our federal regime." [footnote omitted]).

11

§4.14 ("The Supreme Court will usually deny certiorari when

review is sought of a lower court decision which turns solely

upon an analysis of the particular facts involved, or upon the

construction of particular contracts or written instruments.”).

These highly unusual facts would make this case readily

distinguishable as a precedent. Again, certiorari review is not

justified.

In addition to sharing the flaw of Part A, Part B of Coastal's

petition (p. 8-9) exhibits flaws of its own. Part B again assumes

the royalty interest is "property." It also assumes a compensable

taking must be found, when the factual record shows the royalty

interest--if assumed to be property under Florida law--has such

speculative value that Coastal's expectation of a monetary return

is not reasonable.*®

This is where Coastal tries to bootstrap itself into a federal

question. It assumes that evidence of the dollar value of the

royalty goes only to valuation of taken property. It fails to

comprehend that the inability to show any reasonably measurable

value also goes to whether the expectation of receiving a royalty

payment is "property"; and, if so, whether such property is

protected by the Takings Clause. Nothing in this Court's

jurisprudence makes the Takings Clause an insurance policy to

‘In its second footnote, Coastal faults the State for urging there is no

oil to be found in the royalty area, while simultaneously requiring a

bond of up to $4.25 billion for clean up costs of a hypothetical million

barrel [oil] spill. Coastal fails to inform this Court that the subject

bond was for a proposed exploratory well nine miles into the Gulf

(Pet. App., p. 73 at par. 8); that is, far outside the royalty area, which

extends only 4.36 miles into the Gulf. (Pet. App., p. 4, 15) There is

no evidence that any commercial oil deposits 9 miles offshore would

also lie within the royalty area.

12

ee

preserve the speculator's dreams of riches against proper

governmental action.

Coastal would evade its erroneous assumptions by baldly

asserting the 1990 law deprived it of the only "viable" economic

use of its property. Viability is not the issue; reasonableness is.

Coastal never asks whether its royalty interest is an investment

backed-expectation that is reasonable. Recall the lucid

observations by the trial court:

Recovery of any profits from the reserved royalty

interest would be purely speculative. In fact,

there were many obstacles to a potential recovery

of profits even before the 1990 legislation. First,

there would have to be an operator willing to

advance the coasts of exploring for oil in the

nearshore area. Second, the operator would have

to reach a reasonable agreement to lease the land

from the state. Third, it would have to be

economically feasable [sic] for the operator to

produce the oil without violating land regulations

in existence at the time of the lease. Fourth the

operator would have to actually strike oil. ...

Furthermore, the fact that there has been no oil

produced in the nearshore area at any time during

the history of Coastal's relationship with the

Trustees is another good indicator that Coastal

had no reasonable expectation of obtaining a

profit from the royalty interest.

(Pet. App., p. 31)

As a matter of fact, the royalty interest had no economic

value which Coastal could reasonably expect to realize. None of

the cases cited by it stand for the proposition that the government

must pay just compensation anytime it takes property

constituting an unreasonable economic expectation. See Olson

v. US., 292 U.S. 246, 257 (1934):

Elements affecting value that depend upon events

or combinations of occurrences which, while

within the realm of possibility, are not fairly

shown to be reasonably probable should be

excluded from consideration for that would be to

allow mere speculation and conjecture to become

a guide for the ascertainment of value ....

The logic of this observation is not limited to the valuation of

taken property. It is equally applicable to the determination of

whether an economic expectation rises to a protected property

interest.

Coastal is no different from the landowner who

unsuccessfully challenged development restrictions in Graham

v. Estuary Properties, Inc., 399 So.2d 1374, 1383 (Fla. 1981),

cert. denied, 454 U.S. 1083 (1981) ("Estuary, on the other hand,

had only its own subjective expectation that the land could be

developed in the manner it now proposes."). Coastal maintained

only a subjective expectation that it might, some day, receive a

royalty if someone discovered and produced commercial

quantities of oil in the royalty area. However, based on the trial

court's factual findings--most prominently that the royalty area

was not prospective for oil and gas when the 1976 settlement

was reached--Coastal's subjective expectation was not

reasonable. The Takings Clause simply does not protect

Coastal's unreasonable expectation against later exercise of the

government's proprietary right to control the use of sovereign

land.

14

i NE a

The instant petition wrongly assumes Coastal's royalty

interest is property under Florida law. It then raises an abstract,

almost rhetorical question: If the government takes property

shown to create only an unreasonable expectation of monetary

return, has the government taken property for which the U.S.

Constitution requires just compensation? The question answers

itself, and the answer is "no."

C. THE REMAINING QUESTIONS

SUGGESTED BY COASTAL ARE NOT

FAIRLY PRESENTED

1. Impairment of Contract {Coastal's second question]

Both state courts found there was no contractual or statutory

obligation upon Florida to lease the royalty area for oil and gas

drilling. (Pet. App., p. 7-10, 19-21) The discussion by both

courts focused on the meaning of §253.52, Florida Statutes; the

meaning of §3, part 1.(D) of the 1976 settlement agreement; and

the applicability of Welles v. Berry, 434 So.2d 962 (Fla. 2d DCA

1983). All three items are matters of fact and state law only. In

its impairment of contract argument, Coastal simply asks this

Court to re-weigh the evidence, and to ‘e-interpret state law.

(See pet. at p. 10-12, arguing that the state courts erred as a

matter of Florida law.)

For the purpose of a taking under the U.S. Constitution,

"property" must be created by an independent source.

Ruckelshaus v. Monsanto. Coastal's unavoidable problem is that

under the 1976 settlement, it had no right to compel Florida to

lease the royalty area at all. As interpreted by the state courts,

§253.52, Florida Statutes, did not require the State to lease the

royalty area and did not imply a contractual right between

Coastal and the State. Therefore, Coastal had no express or

implied contractual right which could be impaired by the 1990

15

law. Its impairment of contract claim has no factual or legal

basis justifying review.

2. Conflict with Dolan's "Rough Proportionality" Test

[Coastal's third question]

Parsing Dolan v. City of Tigard, 512 U.S. 374 (1994),

Coastal urges that certiorari should be granted to ascertain

whether there is "rough proportionality" between the "ends it

[Florida] seeks and the restrictions it imposes" (pet., p. 14). This

question is not properly before the Court.

First, Coastal did not raise it the state courts, thereby

depriving them of the onportunity to pass upon it. Second, it

ignores the profound differences between this case and Dolan.

In Dolan, a landowner was required by the city of Tigard

(Oregon) to dedicate part of her land for flood control and traffic

improvements in return for approval of a building permit. At no

time was the existence of a property interest questioned; at no

time was the existence of property value questioned. The city

exercised its police power only, and applied that power to control

the use of privately owned land.

Here, Coastal voluntarily relinquished all rights in the royalty

area beyond the passive royalty itself, as part of a lawsuit

settlement. Absolutely nothing required it to do so. It was free

to pursue the litigation. Coastal had no property interest, only a

distant hope--refuted by experience--that someone, someday

might find oil in commercial quantities which could be produced

profitably in light of unchallenged environmental regulations.

Because Coastal has no right to require or even expect Florida

would lease the royalty area in the future, Coastal's hope of a

return on the royalty is so speculative that it is not a reasonable

expectation.

16

a

Pe CP ae

Unlike Dolan, there was no exaction here. The 1990 law was

not just an exercise of the police power. It was an exercise of the

right of ownership by the Florida Legislature as trustee of

sovereign land. See i , 898

F.2d 1490, 1491 (11th Cir. 1990) (holding, under Florida law,

revocation of permits for private upland owners to build docks

on sovereign, submerged land was not a taking; and rejecting

analogy to cases in which a city's application of its zoning laws

to owners of private property was determined to constitute a

taking). There is no factual support for the analogy to the "rough

proportionality" test in Dolan. To the contrary, the analogy is so

rough and disproportionate that it is meaningless, and not a basis

for certiorari review.

3. Opportunity to Present Evidence of Value [Coastal's

fourth question]

Coastal begins its final point by urging the decision below

“cannot be supported on the audacious ground that the royalty

has been shown to be worthless." (pet., p. 16-17) This point

ignores the procedural history of this case.

Originally, the trial court entered summary judgment for the

State. (Pet. App., p. 38-45) That judgment was reversed, as

material facts were still disputed. Among those facts were the

“expectation of the parties at the time [of] the settlement." (Pet.

App., p. 37)

Upon remand to the trial court, Coastal had ample

Opportunity to adduce competent evidence’ of the value of the

"Coastal urges it is useful to mention some of the evidence of value

it "could" introduce. (pet. , p. 18-19) Such evidence appears either

inadmissible or incompetent. Some of it is self-serving reliance on

reports by the "Oil & Gas Journal" about Coastal's beliefs. The rest

17

residual interest in the royalty area--not to show "value" for the

sake of proving damages, but to show the royalty interest created

a_ reasonable expectation of return; and thus was a protected

property interest. Coastal failed to do so. Instead it adduced

expert testimony--which the trial court chose not to believe--that

the royalty area was indeed prospective for oil and gas at the

time of the settlement. In contrast, the State proved, through

evidence of the absence of third-party lease requests and the

historic failure of all drilling on the leases, that the royalty area

was not prospective. Therefore, Coastal's residual royalty did

not create a reasonable expectation of return, and was not

protected by the U.S. Constitution.

Coastal simply failed to adduce persuasive evidence of value,

as part of its effort to show the royalty, under the 1976 settlement

agreement, created a reasonable expectation of return; thereby

becoming a protected property interest. Coastal's fourth question

is no more than an attempt to undo its earlier failure.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted,

ROBERT A. BUTTERWORTH

Attorney General

JONATHAN A. GLOGAU*

CHARLES R. MCCOY

Assistant Attorneys General

has to do with purchase of leases by the U.S. government, for land far

removed from the royalty area.

18

May 27, 1998

*Counsel of Record for Respondents

Office of the Attorney General

The Capitol, Suite PL-01

Tallahassee, FL 32399-1050

(850) 414-3300