# Appendix — American Pelagic Fishing Co. v. United States, 125 S. Ct. 2963 (2005) (No. 04-1252)

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 2005

## Text

la

APPENDIX A

In the United States Court of Appeals
for the Federal Circuit.

AMERICAN PELAGIC FISHING COMPANY, L.P.,
Plaintiff-Appellee,

v.
UNITED STATES, Defendant-Appellant.
No. 03-5101.
Aug. 16, 2004.

Before CLEVENGER, SCHALL, and BRYSON, Circuit
Judges.

SCHALL, Circuit Judge.

The United States appeals the decision of the United
States Court of Federal Claims that American Pelagic
Fishing Co., L.P. (“American Pelagic”) suffered a taking in
violation of the Fifth Amendment to the U.S. Constitution,
for which the court awarded damages in the amount of
$37,275,952.67. Am. Pelagic Fishing Co. v. United States,
49 Fed.Cl. 36 (2001) (liability) (“Am. Pelagic I’); 55 Fed.Cl.
575 (2003) (damages) (“Am. Pelagic IT’). We conclude,
however, that American Pelagic did not suffer the taking of a
property interest that is legally cognizable under the Fifth
Amendment. We therefore reverse the decision with regard
to liability, vacate the award of damages, and remand the
case to the Court of Federal Claims with the instruction that
it enter judgment in favor of the United States.

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BACKGROUND
I.

This case involves commercial fishing for mackerel and
herring in the Exclusive Economic Zone (“EEZ”) of the
United States in the Atlantic Ocean. The EEZ consists of the
waters two hundred nautical miles from the coastal boundary
of each state. See 16 U.S.C. § 1811 (2000); Proclamation
No. 5030, 48 Fed.Reg. 10,605 (Mar. 14, 1983).

The pertinent facts are not in dispute. Throughout the
1990s, the National Marine Fisheries Service (“NMFS”)
reported that mackerel and herring stocks in the Atlantic
Ocean were at record highs and were substantially
underfished. Am. Pelagic, 49 Fed. Cl. at 39. In 1993, a
study commissioned by the U.S. Senate Finance Committee
and prepared by the U.S. International Trade Commission
concluded that only larger ships could improve the
competitive position of the U.S. Atlantic mackerel industry
with respect to European competitors. Mackerel:
Competitiveness of the U.S. Industry in Domestic and
Foreign Markets, Inv. No. 332-333, Pub. 2649 (Int’l Trade
Comm’n June 1993). In 1994, following a recommendation
by the Mid-Atlantic Fishery Management Council

' The Magnuson-Stevens Fishery Conservation and Management

Act, Pub.L. No. 94-265, 90 Stat. 331 (1976) (codified at 16 U.S.C. §§
1801-1883) (“Magnuson Act”), confers federal management authority
over marine fishery resources upon the Secretary of Commerce
(“Secretary”) and the NMFS, a subunit of the National Oceanic and
Atmospheric Administration, which is an agency within the Department
of Commerce (“Commerce”). See Am. Pelagic I, 49 Fed. Cl. at 38-39.

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(“MAFMC”),” the NMFS rescinded its potential controls’
over access to the Atlantic mackerel fishery, explaining that
stocks were “extremely high” and harvesting low. Atlantic
Mackerel, Squid, and Butterfish Fisheries, 59 Fed.Reg.
49,235 (Dep’t Commerce Sept. 27, 1994) (rescinding the
control date of August 13, 1992, set forth in Atlantic
Mackerel, Squid, and Butterfish Fisheries, 57 Fed.Reg.
36,384 (Dep’t Commerce Aug. 13, 1992)). In 1996, the
MAFMC concluded that

[i]n order to compete in the world bulk market, the U.S.
will have to emulate its foreign competitors which
harvest, process, and ship mackerel in large quantities so
as to take advantage of economies of scale. Currently,
the U.S. east coast industry does not have the large
vessels necessary to participate in this market * * * .

> The MAFMC is one of eight regional fishery councils charged

with developing fishery management plans for fisheries within the EEZ in
accordance with the standards set forth in the Magnuson Act. See 16
U.S.C. § 1851. The MAFMC has management responsibility for Atlantic
mackerel, while the New England Fishery Management Council
(“NEFMC”) has management responsibility for Atlantic herring. Once a
Fishery Management Plan (“FMP”) is approved by the Secretary, it is
promulgated by the NMFS. During the relevant time period in 1997, an
official FMP was in place for the Atlantic mackerel fishery, but only a
preliminary FMP was in place for the Atlantic herring fishery. Am.
Pelagic I, 49 Fed. Cl. at 39.

>A “control date” provides notice to anyone subsequently
entering a fishery that he is not assured of continued participation in the
fishery should a limited entry scheme be implemented. See, e.g., Atlantic
Mackerel, Squid, and Butterfish Fisheries, 57 Fed.Reg. 36,384 (Dep’t
Commerce Aug. 13, 1992).

4a

Annual Quota Specifications for Atlantic Mackerel, Loligo,
Illex, and Butterfish for 1997 12 (MAFMC July 1996).

For 1997, the NMFS established an allowable biological
catch of 1.178 million metric tons of Atlantic mackerel, but
commercial landings totaled only 15,406 metric tons. Am.
Pelagic I, 49 Fed.Cl. at 39.* In its draft FMP for Atlantic
herring in 1997, which was partially approved by the
Secretary in 1999, the NEFMC proposed an allowable
biological catch of 300,000 metric tons; yet, commercial
landings totaled only 95,715 metric tons. /d. at 40.

Il.

Lisa Torgersen is the President and sole shareholder of
American Pelagic. Am. Pelagic II, 55 Fed.Cl. at 577. In
November 1996, Atlantic Star Fishing Company, American
Pelagic’s predecessor, purchased a large, U.S.-flagged hull
with the intent of transforming it into a commercial fishing
vessel. Jd. at 579-80. In January 1997, it contracted with a
Norwegian shipyard to convert the hull into a freezer
trawler—a large, commercial fishing vessel with the capacity
to catch all of its own fish, freeze them on board, and offload
them for shipping to their final destination. Jd. at 579 n.6,
580. The result was the Atlantic Star, a vessel 369 feet long,
displacing 6,900 gross tons, and having a total of 13,400
horsepower (about 7,000 horsepower for running the
generators for the freezers and the remainder for propulsion).
Id. at 580. Outfitted with the most sophisticated technology

4

The government’s interrogatory responses indicate that
commercial landings of Atlantic mackerel in 1997 totaled 15,406 metric
tons, not 15,706 as the Court of Federal Claims stated in Am. Pelagic I,
49 Fed.Cl. at 39.

Sa

for locating, sorting, and freezing fish year-round, the
Atlantic Star could safely hold 400 to 500 metric tons of fish.
Id. at 580-81. American Pelagic’s total investment in the
vessel approached $40 million. Am. Pelagic I, 49 Fed. Cl. at
38.

While the vessel was being outfitted, American Pelagic
set about applying for the necessary permits and gear
authorizations. Pursuant to 50 C.F.R. § 648.4(a)(5) (1996),
the Atlantic Star was required to carry on board a valid
Atlantic mackerel permit to fish for, possess, or land Atlantic
mackerel in or from the EEZ. Because of the potential for
incidental bycatch, the Atlantic Star also was required to
have a Northeast Multispecies (Nonregulated) fish permit.
Id. § 648.4(a)(1). In April 1997, the Northeast Regional
Office of the NMFS reissued both permits to American
Pelagic: Federal Fisheries Permit # 610018 for, inter alia,
Atlantic mackerel, expiring December 31, 1997; and Federal
Fisheries Permit # 610018 for Northeast Multispecies
(Nonregulated), expiring April 30, 1998. In addition,
pursuant to 50 C.F.R. § 648.80(d) (1996), on August 28,
1997, the Northeast Regional Office issued to American
Pelagic a Gulf of Maine/Georges Bank Midwater Trawl Gear
Authorization letter for, inter alia, Atlantic herring, expiring
April 30, 1998.° Am. Pelagic I, 49 Fed. Cl. at 40.

* Initially, the permits were issued to the Atlantic Star Fishing

Company on February 5, 1997. Am. Pelagic I, 49 Fed.Cl. at 40.

6

American Pelagic was required to carry this authorization letter
because it planned to harvest fish with midwater trawl gear of mesh size
less than that normally required by the regulations. 50 C.F.R. §
648.80(d).

6a

Il.

During 1997, as Ms. Torgersen prepared for commercial
operation, opposition to the Atlantic Star began to develop.
Id. Concerns about the size of the vessel and its potential
effect on the Atlantic mackerel and herring fisheries were
voiced at a joint meeting of the Herring Section of the
Atlantic States Marine Fisheries Commission and the
NEFMC Herring Committee in March 1997. These concerns
subsequently were incorporated into legislation introduced in
the U.S. House of Representatives to establish a moratorium
on any fishing vessel, in the Atlantic mackerel and herring
industries, equal to or greater than 165 feet in length, with an
engine of more than 3,000 horsepower. Jd. at 40-41 (citing
H.R. 1855, 105th Cong. (1997)). In September 1997, a
similar bill was introduced in the U.S. Senate. The Senate
bill would have revoked Atlantic mackerel or herring permits
that had been issued to vessels 165 feet or longer with an
engine of more than 3,000 horsepower. Jd. at 41 (citing S.
1192, 105th Cong. (1997)).

Despite the fact that neither bill was enacted, Congress
passed a rider to an appropriations act that effectively
cancelled American Pelagic’s existing permits and
authorization letter, and at the same time prevented any
further permits from being issued to the Atlantic Star. Id. at
41-42 (citing text of Departments of Commerce, Justice, and
State, the Judiciary, and Related Agencies Appropriations
Act, 1998, Pub.L. No. 105-119, § 616, 111 Stat. 2440, 2518-
19 (1997) (“1997 Appropriations Act”)). The following year,
Congress enacted the identical provision in another

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appropriations act,’ and in 1999, it made the size limitation
and permit revocation permanent.® /d. at 42. The NMFS has
since promulgated regulations reflecting this prohibition.” Jd.
As a result of the legislation, the Atlantic Star was unable to
receive a permit to fish in any U.S. fishery within the EEZ; at
the time, no other vessel was affected by the legislation. Jd.
at 42, 43.

After the Atlantic Star’s permits were cancelled,
American Pelagic took the vessel to the Baltic Sea to
participate in a research project. During this time, the vessel
operated as a “mother ship”: it did not catch fish itself but
merely processed the fish caught by other vessels. Because
the venture was not profitable, the Atlantic Star spent only a
few months in the Baltic. Subsequently, American Pelagic
took the Atlantic Star to Mauritania, off the coast of west
Africa, and purchased fishing rights for those waters while
maintaining its status as a U.S.-flagged vessel. The vessel

: Departments of Commerce, Justice, and State, the Judiciary, and

Related Agencies Appropriations Act, 1999, Pub.L. No. 105-277, tit. II, §
202, 112 Stat. 2681, 2681-618 (1998) (“1998 Appropriations Act”).

* 1999 Emergency Supplemental Appropriations Act, Pub.L. No.
106-31, § 3025, 113 Stat. 57, 100-101 (1999) (“1999 Appropriations
Act”) (amending section 617 of the 1998 Appropriations Act).

° See Fisheries of the Northeastern United States, 64 Fed.Reg.
57,587 (Dep’t Commerce Oct. 26, 1999) (revising 50 C.F.R. pt. 648 and
imposing size and power limitations on vessels in the Atlantic mackerel
fishery); Magnuson-Stevens Fishery Conservation and Management Act
Provisions, 65 Fed.Reg. 77,450 (Dep’t Commerce Dec. 11, 2000)
(revising 50 C.F.R. pt. 648 and imposing size and power limitations on
vessels in the Atlantic herring fishery).

8a

and its equipment performed to expectations; however, the
lack of fish and warm water temperatures prevented the
Atlantic Star from being profitable. American Pelagic chose
not to reflag the Atlantic Star and obtain authorization to fish
in a foreign fishery. By April 1999, American Pelagic was
operating at a loss. After unsuccessful attempts to secure
additional financing, and after rejecting Chapter 11
bankruptcy, American Pelagic sold the Atlantic Star to two
of its partners on July 6, 1999. Am. Pelagic II, 55 Fed. Cl. at
582-83.

IV.

American Pelagic brought suit in the Court of Federal
Claims in March 1999, alleging that the 1997 and 1998
Appropriations Acts revoking its permits and barring it from
receiving future permits effected a temporary taking of the
Atlantic Star. Am. Pelagic I, 49 Fed.Cl. at 44. In its
complaint, American Pelagic asserted that it had a property
right in its fishery permits and authorizations that was taken
by the legislation. Compl. {J 58, 64. American Pelagic
further asserted that the United States had “taken, destroyed,
and deprived [American Pelagic] of its compensable,
investment backed expectations in the use and operation of
the [Atlantic Star |” and had “taken all economically viable
use” of the vessel. Jd. 9¥ 59-60, 65-66. Thus, American
Pelagic alleged a taking of its property without just
compensation in violation of the Fifth Amendment. /d. ¥J
61, 67. American Pelagic sought relief in the form of “the
fair market value” of its property that had been taken,
measured as “the expected net revenues or profit from
operation of the [Atlantic Star] in the fisheries of the United
States” during the fiscal years 1998 and 1999. /d. It
estimated its just compensation to be in or around $10
million for each fiscal year, not including pre-or
postjudgment interest, damages, costs, and attorneys’ fees.
Id. “Prayer for Relief” J 1-3. In due course, the parties filed

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cross-motions for summary judgment. On April 4, 2001, the
Court of Federal Claims granted summary judgment in favor
of American Pelagic on the issue of liability. Am. Pelagic /,
49 Fed. Cl. 36.

The court started from the premise that because licenses
and permits are traditionally not protected by the Takings
Clause, the res potentially taken by the legislation consisted
of the Atlantic Star itself, which the government conceded to
be property for Fifth Amendment purposes. /d. at 46. The
court then explained, “To determine whether a property right
exists independent of the regulatory scheme, it is necessary to
decide ‘whether an independent or preexisting right of use
under common law applies.’ “ Jd. at 47 (quoting Maritrans
Inc. v. United States, 40 Fed. Cl. 790, 796 (1998)). In that
context, the court determined that

[t]he relevant stick in the bundle in this context is the
right to use the Atlantic Star to fish, subject to regulation.
* ** We are not confronted here with a property or a use
which is inherently dangerous or a nuisance. There is
nothing in the nature of a fishing vessel that suggests that
any use is totally a matter of governmental grace. * * *
Absent such a built-in limitation, personal property, like
land, comes with an inherent right of use. We note that
the right to use is one of the group of rights inhering in
the citizen’s relation to [a] physical thing.

Id. (citations and internal quotation marks omitted). The
court thus determined that American Pelagic possessed a
property interest “in using [the Atlantic Star] to fish.” Jd. at
48.

The court then embarked upon a regulatory takings
analysis. In its analysis, the court decided that all three
factors of the Penn Central test weighed in favor of finding
that a regulatory taking had occurred: (i) American Pelagic’s
investment-backed expectation of participating in the

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Atlantic mackerel fishery was reasonable; (ii) the degree of
economic impact was severe enough to leave the Atlantic
Star with no commercially viable uses; and (iii) the character
of the government action, in purpose and effect, was both
retroactive and targeted at American Pelagic. Jd. at 48-51
(citing Penn Cent. Transp. Co. v. City of New York, 438 U.S.
104 (1978)).

The parties proceeded to a trial on damages in December
2002. Am. Pelagic II, 55 Fed.Cl. 575. The court awarded
American Pelagic damages in the amount of the fair rental
value of the Atlantic Star. In the absence of any market for
leasing such a vessel for fishing off the east coast of the
United States, the court derived a model for fixing the fair
rental value based upon a “reasonably established net
revenue stream” as presented by American Pelagic, with
minor modifications. Jd. at 584-90, 592-95. Ultimately, the
Court of Federal Claims awarded American Pelagic damages
in the amount of $37,275,952.67 for what it described as “a
temporary regulatory taking of all value of its vessel for a
twenty month period.”’° Jd. at 595.

The government has timely appealed the Court of Federal
Claims’ decisions on both liability and damages. We have
jurisdiction pursuant to 28 U.S.C. § 1295(a)(3).

10 In Am. Pelagic II, the court also affirmed its previous analysis of
the three Penn Central factors in light of Tahoe-Sierra Preservation
Council v. Tahoe Regional Planning Agency, 535 U.S. 302 (2002), which
issued after Am. Pelagic I and which reaffirmed that the Penn Central
analysis is the proper way to address whether a temporary regulatory
taking has occurred. 55 Fed. Cl. at 590-91 (quoting Tahoe-Sierra, 535
U.S. at 335).

POR EL EE ee eS ee ee ee

lla

ANALYSIS
I.

Summary judgment is appropriate only if there is no
genuine issue of material fact and the moving party is entitled
to a judgment as a matter of law. Fed. Cl. R. 56(c);
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48
(1986). We review a grant of summary judgment by the
Court of Federal Claims de novo to determine whether it
correctly applied this standard. See Cienega Gardens v.
United States, 265 F.3d 1237, 1244 (Fed. Cir. 2001). We
affirm if, when the facts are viewed in the light most
favorable to the nonmoving party and doubts are resolved
against the movant, there are no genuine issues of material
fact and the moving party is entitled to judgment as a matter
of law. Helifix, Ltd. v. Blok-Lok, Ltd., 208 F.3d 1339, 1345-
46 (Fed. Cir. 2000). Whether a compensable taking has
occurred is a question of law based on factual underpinnings.
Maritrans Inc. v. United States, 342 F.3d 1344, 1350-51
(Fed. Cir. 2003) (citing Wyatt v. United States, 271 F.3d
1090, 1096 (Fed. Cir. 2001)). As noted above, in this case,
the pertinent facts are not in dispute.

In reviewing a final decision of the Court of Federal
Claims after a trial, we review legal conclusions de novo, and
we review factual findings under the clearly erroneous
standard. Jd. (citing Glendale Fed. Bank, FSB v. United
States, 239 F.3d 1374, 1379 (Fed. Cir. 2001)). “A finding is
‘clearly erroneous’ when although there is evidence to
support it, the reviewing court on the entire evidence is left
with the definite and firm conviction that a mistake has been
committed.” /d. (citing United States v. United States
Gypsum Co., 333 U.S. 364, 395 (1948)).

12a

The government challenges both the grant of summary
judgment on liability and the award of damages to American
Pelagic. Because our ruling on the issue of liability disposes
of the case, we do not reach the government’s challenge to
the award of damages.

Il.

The law generally applicable to takings claims is well
settled. The Fifth Amendment to the United States
Constitution provides that private property shall not “be
taken for public use without just compensation.” U.S. Const.
amend. V, cl. 4. The purpose of this prohibition 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 Central, 438 U.S. at 123
(quoting Armstrong v. United States, 364 U.S. 40, 49
(1960)). Real property, see Lucas v. S.C. Coastal Council,
505 U.S. 1003, 1019 (1992); personal property, see Andrus v.
Allard, 444 U.S. 51, 65 (1979); and intangible property, see
Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1003-04 (1984),
each may constitute the res of a takings claim. The Supreme
Court has recognized that the government may “take”
private property either by physical invasion or by regulation.
Lucas, 505 U.S. at 1014-15. This case involves an alleged
regulatory taking. “A ‘regulatory taking may occur when
government action, although not encroaching upon or
occupying private property, still affects and limits its use to
such an extent tliat a taking occurs.’” Cienega Gardens, 265

l3a

F.3d at 1244 (citing Palazzolo v. Rhode Island, 533 U.S. 606,
617 (2001)).""

We have developed a two-part test to determine whether
a taking has in fact occurred. See Maritrans, 342 F.3d at
1351 (citing M & J Coal Co. v. United States, 47 F.3d 1148,
1153-54 (Fed.Cir.1995)); see also Conti v. United States, 291
F.3d 1334, 1339 (Fed.Cir.2002), cert. denied, 537 U.S. 1112
(2003). First, as a threshold matter, the court must determine
whether the claimant has established a property interest for
purposes of the Fifth Amendment. Maritrans, 342 F.3d at
1351. “It is axiomatic that only persons with a valid property
interest at the time of the taking are entitled to
compensation.” Wyatt, 271 F.3d at 1096 (citing, inter alia,
Almota Farmers Elevator Warehouse Co. v. United States,
409 U.S. 470, 473-74 (1973); Cavin v. United States, 956
F.2d 1131, 1134 (Fed: Cir. 1992)). If the claimant fails to
demonstrate the existence of a legally cognizable property
interest, the courts task is at an end. Maritrans, 342 F.3d at
1352 (citing M & J Coal, 47 F.3d at 1154).

'' American Pelagic alleged a temporary, as opposed to a

permanent, taking of its property interest. Temporary takings are not
different in kind from permanent takings—a temporary taking simply
occurs when what would otherwise be a permanent taking is temporally
cut short. Wyatt, 271 F.3d at 1097. “The essential element of a temporary
taking is a finite start and end to the taking.” Jd. In this case, the time
period of the alleged taking ran from November 26, 1997, the date upon
which American Pelagic’s permits and authorization letter were revoked
in the 1997 Appropriations Act, to July 6, 1999, the date on which the
Atlantic Star was sold. See Am. Pelagic II, 55 Fed. Cl. at 576; Compl. §
57.

14a

Second, after having identified a valid property interest,
the court must determine whether the governmental action at
issue amounted to a compensable taking of that property
interest. Chancellor Manor v. United States, 331 F.3d 891,
902 (Fed.Cir.2003) (citing M & J Coal, 47 F.3d at 1153-54).
With regard to this second inquiry, we have stated that it is
important to decide at the outset whether the alleged taking
was “categorical” or not. /d. (citing Rith Energy, Inc. v.
United States, 247 F.3d 1355, 1362 (Fed.Cir.2001) (on
rehearing)). In Rith Energy, we explained the difference
between a categorical and a noncategorical taking: A
categorical taking has been defined as one in which “all
economically viable use, i.e., all economic value, has been
taken by the regulatory imposition.” Palm Beach Isles
Assocs. v. United States, 231 F.3d 1354, 1357 (Fed. Cir.),
modifying 208 F.3d 1374 (Fed. Cir. 2000). A categorical
taking is distinct from 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.” Id. 247 F.3d at 1362. When a taking is noncategorical,
the court will undertake the fact-based inquiry enumerated in
Penn Central to evaluate whether the governmental action
constituted a compensable taking of the property interest.
Maritrans, 342 F.3d at 1351. The three Penn Central factors
are (i) the character of the governmental action, (ii) the
economic impact of the action on the claimant, and (iii) the
extent to which the action interfered with the claimant’s
reasonable investment-backed expectations. 438 U.S. at 124.
On the other hand, when the taking 1s categorical, we have
explained that “analyzing whether compensation is due does
not require an inquiry into whether the plaintiff had
reasonable investment-backed expectations that were
defeated by the regulatory measure that gave rise to the
takings claim.” Rith Energy, 247 F.3d at 1362 (citing Palm
Beach Isles Assocs., 231 F.3d at 1357).

Ill.

Preliminarily, American Pelagic alleged that it had a
property right in its “lawfully duly issued fishery permits and
authorizations” that was “appurtenant to the use and
operation of [American Pelagic’s] fishing vessel, the
[Atlantic Star].” Compl. ¥J 58, 64; Br. Pl.-Appellee at 27-29.
According to American Pelagic, this property right was taken
by the United States because the fishery permits and
authorization letter had already been issued when the 1997
Appropriations Act was passed, and at the time, the NMFS
lacked the discretion not to renew them. Br. Pl.-Appellee at
27-29. The Court of Federal Claims concluded, however,
that no such property right existed: “Licenses or permits are
traditionally treated as not protected by the Takings Clause
because they are created by the government and can be
cancelled by the government and normally are not
transferable.” Am. Pelagic I, 49 Fed. Cl. at 46.

On appeal, American Pelagic reasserts its contention that
it had a legally cognizable property interest in its lawfully
issued fishing permits and authorization letter. First, it
argues that the permits and authorization letter were
mandatory, rather than discretionary. See Foss v. Nat'l
Marine Fisheries Serv., 161 F.3d 584, 588 (9th Cir.1998)
(finding, for purposes of a procedural due process claim, a
constitutionally protectible property interest in a fishing
quota permit from the NMFS because the NMFS had no
discretion to deny a permit application if regulatory
requirements were met). According to American Pelagic, the
only grounds for denying their issuance or renewal were
incomplete, late, or altered applications, or the failure to meet
eligibility requirements, none of which applied in the case of
the Atlantic Star. 50 C.F.R. § 648.4(e), (i). American Pelagic
also argues that the permits could only have been revoked or

|

l6a

suspended for a specified “offense” or for failure to pay a
penalty, neither of which occurred in this case. Id. §
648.4(m); 15 C.F.R. § 904.301(a) (1997).

The government responds that American Pelagic did not
have a property interest in its fishery permits. In support of
its position, it cites Conti, 291 F.3d at 1341, which concluded
that a swordfishing permit did not confer a property interest
for purposes of the Takings Clause. The government
explains that American Pelagic’s permits were not
transferable or assignable, 50 C.F.R. § 648.4(k);'* that they
did not confer exclusive fishing privileges; and that they
could be revoked, suspended, or modified by the
government, id. § 648.4(h), (m).'° In addition, the
government distinguishes a constitutionally protected right to
a permit under a due process analysis from a compensable
property right under a Takings Clause analysis; according to
the government, the two are not coterminous. The
government points out that in Foss, upon which American
Pelagic relies, the court actually engaged in a procedural due

12

Section 648.4(k} provides: “A permit issued under this part is
not transferable or assignable. A permit will be valid only for the fishing
vessel, owner and/or person for which it is issued.” 50 C.F.R. § 648.4(k).

' Section 684.4(h) provides: “A permit will continue in effect
unless it is revoked, suspended, or modified under 15 CFR part 904, or
otherwise expires, or ownership changes, or the applicant has failed to
report any change in the information on the permit application to the
Regional Administrator as specified in paragraph (f) of this section.” Jd. §
648.4(h). Section 684.4(m) provides: “The Assistant Administrator may
suspend, revoke, or modify, any permit issued or sought under this
section. Procedures governing enforcement-related permit sanctions or
denials are found at subpart D of 15 CFR part 904.” Id. § 648.4(m).

dered

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process analysis, not a Fifth Amendment takings analysis.
The government also points out that 15 C.F.R. § 904.301(a),
upon which American Pelagic relies for the mandatory nature
of its permits, specifically states that “Nothing in this subpart
precludes sanction or denial of a permit for reasons not
relating to enforcement.”

We conclude that American Pelagic did not and could not
possess a property interest in its fishery permits and
authorization letter. In Conti, we explained that because he
could not assign, sell, or transfer his swordfishing permit,
because it did not confer exclusive fishing privileges, and
because the government at all times retained the right to
revoke, suspend, or modify it, Paul Conti did not possess a
property interest in his permit. 291 F.3d at 1341-42. This
“absence of crucial indicia of a property right, coupled with:
the government’s irrefutable retention of the right to suspend,
revoke, or modify” the swordfishing permit “compels the
conclusion that the permit bestowed a revocable license,
instead of a property right.” Jd. at 1342. The same reasoning
extends to American Pelagic’s permits and authorization
letter. There is simply no contention that American Pelagic
had the authority to assign, sell, or transfer its permits and
authorization letter,'* nor that it was granted exclusive

14

Although American Pelagic contends that its permits were
potentially transferable to future owners of the Atlantic Star, it does not
contend that those permits were transferable to a different vessel.
Moreover, American Pelagic does not argue that it had the authority to
effect a transfer of its permits to future owners of the Atlantic Star. It
asserts only that future owners of the same vessel could apply for the
same permits held by American Pelagic, and if they qualified, the permit
numbers would stay the same and remain with the vessel.

18a

privileges to fish for Atlantic mackerel and herring in the
EEZ. American Pelagic distinguishes its permits from Mr.
Conti’s only by alleging that the government could not refuse
to issue or reissue, revoke, modify, or suspend them in the
absence of specified conditions. As the government notes,
however, the regulation upon which American Pelagic relies
specifically provides that “Nothing in this subpart precludes
sanction or denial of a permit for reasons not relating to
enforcement.” 15 C.F.R. § 904.301(a). This language
preserved the government’s right to deny or sanction the
permits and authorization letter issued to the Atlantic Star.
The conditions we set forth in Conti are therefore met. We
agree with the Court of Federal Claims that American
Pelagic did not possess a property interest in its fishing
permits and authorization letter.

IV.

American Pelagic’s main contention in the Court of
Federal Claims was that the 1997, 1998, and 1999
Appropriations Acts, as implemented in 50 C.F.R. pt. 648,
effected a taking of the use of the Atlantic Star for fishing in
the Atlantic mackerel and herring fisheries in the EEZ."°
Compl. Fj 57-58, 60-61. Specifically, American Pelagic

'S It is undisputed that American Pelagic had a property interest in
the Atlantic Star. See Am. Pelagic I, 49 Fed. Cl. at 46. However,
American Pelagic does not contend that the Atlantic Star itself was taken
by the revocation of its permits and authorizations. In fact, as the trial
court explained, “the owner was left with the ship; it was not physically
taken. Instead, restrictions merely were placed on its use.” Jd. Thus,
American Pelagics main contention, as stated in its complaint, was that
the revocation of its permits and authorizations took from it the right to
use the Atlantic Star to fish for Atlantic mackerel and herring in the EEZ.

ee, ee

19a

argued that, in fiscal years 1998 and 1999, the revocation of
its permits “prohibited [American Pelagic’s] use of the
[Atlantic Star] for its intended operation in the Atlantic
mackerel and herring fisheries of the United States, and any
other fishery of the United States * * * and has taken the
expected net revenues or profits [American Pelagic] would
have earned and received from use and operation of the
[Atlantic Star] * * *.” Id. 9§ 57, 63; see also id. FJ 60, 66
(“United States has taken, destroyed, and deprived [American
Pelagic] of its compensable investment backed expectations
in the use and operation of the ATLANTIC STAR * * * and
has taken all economically viable use of the [Atlantic
Star] * * *.”); Br. Pl.-Appellee at 20-27.

American Pelagic asserted that there was either a
- categorical or a noncategorical regulatory taking. According
to American Pelagic, a temporary categorical taking occurred
because the revocation of American Pelagic’s permits and
authorizations deprived the Atlantic Star of all economically
beneficial use during the takings period. In the alternative,
American Pelagic contended that analysis of each of the Penn
Central factors established that a temporary noncategorical
regulatory taking occurred.

The Court of Federal Claims concluded that American
Pelagic did in fact possess a property interest in the use of the
Atlantic Star to fish in the Atlantic mackerel and herring
fisheries in the EEZ, and that this right was taken by the
revocation of its permits and authorization letter. Am.
Pelagic I, 49 Fed.Cl. at 44-52. The court first determined
that the Takings Clause applies to both tangible and
intangible personalty. Jd. at 45-46. It then turned to the
matter of identifying the property interest allegedly taken:
“In this case, from the standpoint of traditional property
concepts, the res potentially taken by the government was the
ship itself.” Jd. at 46. However, the court recognized that the
Atlantic Star itself was not taken nor destroyed; rather,

20a

restrictions were placed upon its use. /d. Relying on Lucas
for the proposition that compensation is owed when
government “so completely destroys the beneficial uses of
property that it is, in effect idled,” the court distilled the
existence of a property interest to a single question: “[A]re
the uses prohibited within the bundle of rights otherwise
inherent in the vessel?” Jd.

The court answered: “To determine whether a property
right exists independent of the regulatory scheme, it is
necessary to decide ‘whether an independent or preexisting
right of use under common law applies.’ ” Jd. at 47 (quoting
Maritrans, 40 Fed. Cl. at 796, and citing Mitchell Arms, Inc.
v. United States, 7 F.3d 212, 217 (Fed.Cir.1993)). While
acknowledging that the use of the Atlantic Star to fish in the
EEZ was entirely dependent upon a regulatory scheme, the
court emphasized that the use (fishing) was not inherently
dangerous, a nuisance, or “totally a matter of governmental
grace.” Jd. Thus, the court concluded that “the right to use is
one of the group of rights inhering in the citizen’s relation to
[a] physical thing. Inherent in the ownership of vessels is the
right to use them.” /d. (internal quotation marks and citations
omitted). The court thus distinguished the nondangerous use
of the Atlantic Star for fishing in the EEZ from the use of
spent plutonium for nuclear fission, Allied-Gen. Nuclear
Servs. v. United States, 839 F.2d 1572 (Fed.Cir.1988), and
the importation of semiautomatic assault rifles into the
United States for sale, Mitchell Arms, 7 F.3d 212. Am.
Pelagic I, 49 Fed. Cl. at 47. Finally, the court distinguished
Conti on the ground that the restriction there was limited to a
particular use of the claimant’s boat (fishing for swordfish
using drift gillnets) and did not, as the court found in this
case, restrict all economically beneficial uses. Nor was there
any allegation, as there is here, that Mr. Conti was being
targeted by the legislation that banned the use of drift gillnets
for swordfishing. Jd. at 48. Accordingly, the court

2la

-

concluded that because “[flishing as a livelihood is not a
creation of the government *** [American Pelagic]
possessed a property interest in using its vessel to fish, albeit
subject to the regulatory regime.” Jd.

Having found a cognizable property interest, the court
went on to determine that each of the Penn Central factors
was Satisfied. Jd. at 48-51. The court concluded that from
the time the 1997 Appropriations Act was passed until the
time that American Pelagic sold the Atlantic Star, the
government “took [American Pelagic’s] property interest in
the use of its vessel to fish for Atlantic mackerel in the EEZ
O29 ao

V.
A.

On appeal, the government challenges the grant of
summary judgment on liability in favor of American Pelagic.
The government starts from the premise that in order for a
taking claim to succeed, what must be taken is one of the
sticks in the bundle of rights that defines the owner’s
relationship to the res. From there, it argues that the Court of
Federal Claims erred in holding that American Pelagic
possessed a property interest in the use of the Atlantic Star to
fish for Atlantic mackerel and herring in the EEZ, even
subject to government regulation. The government urges that
no property interest exists in an individual’s investment in
uses of personalty that are dependent upon discretionary
permit issuances by the government. Br. Def.-Appellant at
22.

American Pelagic recognizes that one of the sticks in the
bundle of property rights that the owner of property acquires
with his title must be proscribed in order for a taking to
occur. Br. Pl.-Appellee at 21-27; Supp. Br. Pl.- Appellee at
2. However, because the use of the Atlantic Star to fish was
lawful not only under traditional property and nuisance

22a

principles, Lucas, 505 U.S. at 1030, but also under the
regulatory regime by which its permits were issued,
American Pelagic argues that use of the vessel to fish for
Atlantic mackerel and herring constituted a _ legally
cognizable property interest. In contrast to Mitchell Arms, in
which we explained that the ability to sell a firearm does not
inhere in ownership of the firearm itself upon the owner’s
acquisition, American Pelagic asserts that the right to fish for
Atlantic mackerel and herring in the EEZ did inhere in its
ownership of the Atlantic Star.

Thus, the question we must answer is this: Was the right
to fish for Atlantic mackerel and herring in the EEZ a legally
cognizable property interest such that it was a stick in the
bundle of property rights that American Pelagic acquired as
the owner of the Atlantic Star? For the reasons that follow,
we conclude that it was not. Consequently, American
Pelaic’s takings claim fails.

B.

We determine whether an asserted right is one of the
rights in the bundle of sticks of property rights that inheres in
a res by looking to “existing rules or understandings” and
“background principles” derived from an independent source
such as state, federal, or common law. Lucas, 505 U.S. at
1030 (quoting Bd. of Regents of State Colls. v. Roth, 408 U.S.
564 (1972)).'© These rights define the dimensions of the

'© The Court explained:

[O)jur “takings” jurisprudence * * * has traditionally
been guided by the understandings of our citizens
regarding the content of, and the States power over, the
“bundle of rights” that they acquire when they obtain title

(cont'd)

23a

requisite property interest for purposes of establishing a
takings claim. Significantly, the Supreme Court has
distinguished personal property from real property:
And in the case of personal property, by reason of the
State’s traditionally high degree of control over
commercial dealings, [the owner] ought to be aware of
the possibility that new regulation might even render his
property economically worthless (at least if the property’s
only economically productive use is sale or manufacture
for sale). See Andrus v. Allard, 444 U.S. 51, 66-67
(1979).

Lucas, 505 U.S. at 1027. Thus, it is conceivable that the
owner of personal property, as opposed to land, may have a
lower expectation that he has a property interest in using his
personal property for commercial dealings. Moreover, there
is a distinction between simply not being disturbed in the
particular use of one’s property and having the right to that
use of the property. Clearly, in order for there to be a
cognizable property interest sufficient to support a takings
claim, the latter must be true. Thus, simply because many
commercial fishermen were not affected by the 1997, 1998,
and 1999 Appropriations Acts and continued to fish for
Atlantic mackerel and herring in the EEZ, it does not follow

to property. It seems to us that the property owner
necessarily expects the uses of his property to be restricted,
from time to time, by various measures newly enacted by
the State in legitimate exercise of its police powers; “as
long recognized, some values are enjoyed under an implied
limitation and must yield to the police power.” Pa. Coal
Co. v. Mahon, 260 U.S. [393,] 413 [(1922)].

Lucas, 505 U.S. at 1027.

24a

that those fishermen had a property interest in the use of their
vessels to fish in the EEZ. They simply were enjoying a use
of their property that the government chose not to disturb. In
other words, use itself does not equate to a cognizable
property interest for purposes of a takings analysis.

C.

Up until the 1960s, most nations with coastlines,
including the United States, had declared jurisdiction over
territorial seas of three miles and conservation zones of
twelve miles. See, e.g., Bartlett Act, Pub. L. No. 88-308, 78
Stat. 194 (1964) (previously codified at 16 U.S.C. §§ 1081-
86) (three-mile territorial sea jurisdiction); Pub. L. No. 89-
658, 80 Stat. 908 (1966) (previously codified at 16 U.S.C. §§
1091-94) (three-to twelve-mile conservation zone
jurisdiction) (both repealed by the Magnuson Act, title IV, §
402(a), (b), 90 Stat. at 360). Similarly, prior to the enactment
of the Magnuson Act, a state could regulate its state-
registered vessels and its citizens while fishing in what is
now the EEZ pursuant to a line of Supreme Court cases
culminating in Skiriotes v. Florida, 313 U.S. 69 (1941).
Countries generally attempted to achieve conservation of fish
by entering into international fishing agreements (to
approximately twenty of which the United States was a
party). See S. Rep. No. 94-416, n.3, app. 1. In 1976,
however, in response to the third session of the United
Nations Convention on the Law of the Sea (““UNCLOS”),
which provided for coastal nation management of resources
within a two-hundred-mile zone, Congress enacted the
Magnuson Act:

Fishery conservation zone

There is established a zone contiguous to the
territorial sea of the United States to be known as the
fishery conservation zone. The inner boundary of the
fishery conservation zone is a line coterminous with the

25a

seaward boundary of each of the coastal States, and the
outer boundary of such zone is a line drawn in such a
manner that each point on it is 200 nautical miles from
the baseline from which the territorial sea is measured.

16 U.S.C. § 1811 (1976).

Subsequently, in a presidential proclamation, President
Reagan established the EEZ and assumed sovereign rights for
the United States over this two-hundred-mile zone. Quoting
from UNCLOS, Dec. 10, 1982, art. 56, p 1, 21 LL.M. 1245,
1280,'’ he announced:

Within the Exclusive Economic Zone, the United
States has, to the extent permitted by international law,
(a) sovereign rights for the purpose of exploring, .
exploiting, conserving and managing natural resources,
both living and non-living, of the seabed and subsoil and
the superjacent waters and with regard to other activities
for the economic exploitation and exploration of the
zone, such as the production of energy from the water,
currents and winds * * *.

Proclamation No. 5030, 48 Fed.Reg. 10,605. It is clear from
this language that, at least as of 1983, the United States had
asserted sovereignty with respect to the exploration,
exploitation, conservation, and management of the natural
resources of the EEZ. This assertion of sovereignty was
subsequently codified in the 1986 amendments to the
Magnuson Act:

'7 To date, the United States has not ratified UNCLOS.

aii

26a

United States sovereign rights to fish and fishery
management authority

(a) In the exclusive economic zone. Except as
provided in section 102 [16 USCS 1812], the United
States claims, and will exercise in the manner provided
for in this Act, sovereign rights and exclusive fishery
management authority over all fish, and all Continental
Shelf fishery resources, within the exclusive economic
zone.

(b) Beyond the exclusive economic zone. The
United States claims, and will exercise in the manner
provided for in this Act, exclusive fishery management
authority over the following:

(1) All anadromous species throughout the migratory
range of each such species beyond the exclusive
economic zone; except that that management authority
does not extend to any such species during the time they
are found within any waters of a foreign nation.

(2) All Continental Shelf fishery resources beyond
the exclusive economic zone.

Act of Nov. 14, 1986, Pub. L. No. 99-659, tit. I, § 101(b),
100 Stat. 3706, 3706-97 (codified as amended at 16 U.S.C.
§ 1811 (2000)). Thus, Congress explicitly assumed
“sovereign rights and exclusive fishery management
authority over all fish” in the EEZ. This assumption of |
sovereignty indisputably encompasses all rights to fish in the

EEZ.

The various provisions of the Magnuson Act are
consistent with this exercise of U.S. sovereignty over the
EEZ and the fish and resources within it. Enacted to “take
immediate action to conserve and manage the fishery
resources found off the coast of the United States,” 16 U.S.C.
§ 1801(b)(1), the Magnuson Act established national

ee Ee ae Pome E ne eee

ee

27a

standards by which fishery “conservation and management”
plans would be developed, id. § 1851(a). Congress further
established under the auspices of the Secretary Regional
Fishery Management Councils, including the NEFMC and
the MAFMC, with direct authority over the fisheries within
their respective geographic regions. Jd. § 1852. As noted
above, each council is charged with the obligation, among
others, of preparing and submitting FMPs for the fisheries
within its authority. Jd. § 1852(h). Congress required the
FMPs to contain

conservation and management measures * * * necessary
and appropriate for the conservation and management of
the fishery, to prevent overfishing and rebuild overfished
stocks, and to protect, restore, and promote the long-term
health and stability of the fishery * * *.

Id. § 1853(a)(1)(A). Significantly, the Magnuson Act bars
foreign fishing in the EEZ entirely, except as the United
States permits, id. § 1821, and authorizes the regional
councils to require federal permits for U.S. fishermen to fish
in any fishery within the EEZ, id. § 1853(b)(1). Thus, in
addition to asserting U.S. sovereignty over the EEZ and the
fish and resources therein, Congress also erected an elaborate
framework by which the fisheries in the EEZ would be
managed under the oversight of the Secretary.

Pursuant to the Magnuson Act, the “conservation and
managem Pelagic fish are those fish whose habitat is above the floor of the
ocean. Here, plaintiff was going to fish for two pelagic species, Atlantic
herring, and Atlantic mackerel.

76a

reasoned that due to a lack of economies of scale, the smaller
American vessels fishing in the western Atlantic could not
compete with the European vessels in terms of quality,
transportation and marketing. The study concluded that
larger fishing vessels would offer economies of scale and
allow the United States Atlantic mackerel industry to
compete internationally.

Capt. Michael Genovese testified for defendant. He
captains a fishing vessel, the White Dove Too, in the western
Atlantic. He took the view that the ITC studies were overly
optimistic, based on his own difficulty locating mackerel.
Capt. Genovese reasoned that mackerel were not present,
because he often could not find fish. Additionally, he
intimated that the government statistics were based on data
which was inaccurately gathered. Neither he nor any other
government witness furnished any details or explanation of
these purported inaccuracies. The court gives little weight to
his suspicions. He displayed a firm conviction that it would
be impossible to fish in any manner better than the traditional
one already employed off of the East Coast. Yet, Capt.
Genovese showed a complete lack of knowledge about
vessels of the same size and capacity as the Atlantic Star. He
made no attempt to conceal his personal opposition to new
vessels coming into East Coast waters. We accept the
accuracy of the NMFS and ITC data.

Harold Torgersen acknowledged that some of those
fishing on the East Coast may not have been able to find
herring and mackerel readily. He attributed these difficulties
to problems other than the lack of fish, however. He
explained that herring are usually widely distributed and can
be difficult to find. Advanced methods of targeting and
capturing the fish would eliminate most difficulties. Mr.
Torgersen also explained that mackerel swim much faster
than the cod or haddock normally caught along the East
Coast. The Atlantic Star was to be outfitted with the best

i Sa tl tek A i ee Dates

T7a

sonar and finding equipment available.“ Such a vessel, with
substantially more horsepower than those vessels already
operating off the East Coast, would be necessary to catch
enough Atlantic herring and mackerel to compete with the
European industry.

Mr. Torgersen also explained that in order to be
profitable in the herring and mackerel industry, a vessel
would need to be capable of staying out at sea for long
periods of time. This would enable the vessel to stay with
the fish as they moved, eliminating the need to continually
relocate the schools of fish. He noted, however, that it was
common practice for the smaller East Coast vessels to return
to shore as soon as their relatively small storage tanks
became full. This disruption made the fish more difficult to
relocate. The court finds the explanations given by plaintiff's
witnesses to be more plausible than Capt. Genovese’s
unsupported assertions. We conclude that there were ample
stocks of mackerel and herring in the western Atlantic. “As
explained more fully below, the Atlantic Star was uniquely
well suited to find and catch them.

b. Financing and Marketing

After examining the ITC studies, Mrs. Torgersen
investigated whether there would be a market into which she
could sell East Coast mackerel and herring. While employed
at BFI, she had established a thriving niche market for atka
mackerel in Japan. Capitalizing on her strong ties to the
Japanese buyers, Mrs. Torgersen sent samples of mackerel to

4

The Atlantic Star was equipped with sonar that could find
herring within 4,000 meters and mackerel within 2,000 meters.

78a

three Japanese companies with whom she had done business
previously. Each sent back an enthusiastic letter expressing
their desire to purchase large quantities of Atlantic herring
and mackerel. Mrs. Torgersen was also confident, based on
her previous experience selling pollack with roe that she
could cultivate a market for herring with roe among Japanese
buyers. The court is persuaded that Mrs. Torgersen could
have developed a market for herring, herring with roe and
mackerel from the western Atlantic in Japan, as well as other
markets.

Mrs. Torgersen then sought financing for a vessel to fish
in the western Atlantic. Bryggens, an investment brokerage
company, aided Mrs. Torgersen in her search. Initially, a
plan was drawn up for the Atlantic Star to be a mother ship.
However, plaintiff was unable to obtain financing for the
vessel on that basis Investors did not think that the project
would offer sufficient economies of scale to make the
venture profitable. APFC changed its plans and began to
seek financing for a vessel which would both catch and
freeze its own fish in the western Atlantic.° APFC attempted
to find financing for the vessel as a freezer trawler without
updating the “mother ship” business plan provided by
Bryggens.

* A mother ship is a processing ship which does not catch its own
fish. Instead, smaller vessels actually catch fish, which are then pumped
onto the processing vessel. Once the mother ship processes the fish they
are shipped to the final destination.

* This type of vessel is known as a freezer trawler. A freezer
trawler has the capacity to catch all its own fish. The fish are then frozen,
or processed, on board the vessel. After the fish are processed, they are
offloaded to be shipped to their final destination.

79a

Mrs. Torgersen was president and sole shareholder of
Atlantic Star Fishing Company (“ASFC”). ASFC was
formed in November of 1996 for ease of financing the
purchase of a vessel designed solely for the Atlantic fishery.
Mrs. Torgersen was also the president, secretary and majority
shareholder of Pelagic Management Inc. (“PMI”), which was
formed to manage the vessel ASFC purchased. Initially,
ASFC and PMI joined as partners in APFC, with PMI as the
general partner and ASFC as a limited partner. ASFC and
PMI were then joined in APFC by Dutch partners, American
Pelagic Combination, V.O.F., as APFC sought additional
financing for its venture. American Pelagic Combination,
V.O.F., owned by Parlevliet and Van der Plas, gained a 49%
interest in APFC.’ APFC eventually obtained financing from
ING Bank in The Netherlands to purchase an existing vessel
and convert it into a high volume mackerel and herring
trawler. APFC was the corporate entity which purchased the
Atlantic Star.

7 American Pelagic Combination, V.O.F. would later withdraw
from APFC when the Atlantic Star was sold to Parlevliet and Van der
Plas.

* As a condition to gain financing, plaintiff obtained a $23 million
political risk insurance policy from Lloyd’s of London. The premium for
the insurance policy was $290,000. Mrs. Torgersen testified that plaintiff
did not receive any proceeds from this policy. The policy provided
coverage, in part, “in the event that ‘any of the permissions are revoked,
cancelled or not renewed * * *” Directly as a result of: (i) a Change in
Law (as defined herein) and/or (ii) any change to the Open Access Policy
relating to the Herring and/or Mackerel Fisheries in the North East
Region * * *.” Instead, lenders with mortgages on the Atlantic Star
received a payment from Lloyd’s of London in a settlement.

80a

2. Facilities of the Atlantic Star

Upon securing financing for the venture, plaintiff sought
a United States hull for purchase. Procuring an existing
United States hull was necessary in order to receive the
appropriate U.S. flag, as well as any U.S. fishing licenses.
Plaintiff purchased a vessel, which was then named Apollo II,
for $1.7 million. At the time of purchase, the Apollo IT was
outfitted as an incinerator ship. APFC determined that the
vessel] was large enough to convert to a freezer trawler.
Plaintiff concluded that the cheapest and fastest way to outfit
the vessel for pelagic fishing in the western Atlantic was to
have it towed to Norway and overhauled.

a. Outfitting the Atlantic Star

Mrs. Torgersen ensured that there was enough capacity to
achieve profitable economies of scale when choosing fishing
and freezing equipment. Additionally, APFC took great care
to outfit the Atlantic Star with the best, most appropriate
equipment for the East Coast herring and mackerel fisheries.
The vessel was designed and outfitted as a high volume
herring and mackerel trawler.

Capt. Robert Hempstead testified for plaintiff. Capt.
Hempstead was the former captain of the Atlantic Star during
the time that it fished in Mauritanian waters. Capt.
Hempstead has been employed in the maritime industry since
1973, serving as captain, first mate and first officer on a
variety of vessels. Capt. Hempstead showed comprehensive
knowledge of vessels of the same size and capacity as the
Atlantic Star, as well as the fishing industry in general. In
particular he had a detailed understanding of the outfitting of
the Atlantic Star. The court found Capt. Hempstead to be a
highly reliable witness. He explained that the vessel was
“purpose-built” for the East Coast fishery.

The Atlantic Star was outfitted with a single, large net,
approximately 369 feet in length. It was attached to the boat

8la

by lines about 1000 meters long. The net was held open by
two large steel doors attached to the back of the Atlantic Star,
known as trawl doors. It could safely hold 400 to 500 metric
tons of fish in what is known as the “codend.” Capt.
Hempstead testified that the boat could, in one five hour tow,
catch at least 300 tons of fish. If it had been allowed to fish
in United States waters, APFC would have outfitted the
Atlantic Star’s net with a sorting grid. The grid would have
allowed smaller fish to escape, enabling the Atlantic Star to
consistently catch a larger size of herring and mackerel.

The Atlantic Star had two engines with a total of more
than 13,000 horsepower, far in excess of other pelagic
trawlers on the East Coast. Almost 7,000 of this horsepower
ran the generators for the freezing plant. The remaining
horsepower was used to propel the ship. Plaintiff's witnesses
testified that horsepower is extremely important when
considering how much fish a particular vessel could catch, in
part because the net of a vessel is designed around its
horsepower. Capt. Hempstead explained that a vessel with
more horsepower could tow a bigger net with bigger trawl
doors at a higher rate of speed. High speed is important
when catching mackerel, because the vessel must be able to
keep up with the fish. A larger net and greater speed would,
therefore, lead to more fish caught.

Mr. Arne Uhlen, plaintiff's expert on processing plants,
testified that the Atlantic Star was outfitted with the best
freezing equipment available, possibly better than any other
ship at that time. He oversaw the operation of the Atlantic
Star’s processing plant during the time it fished in
Mauritania. Mr. Uhlen has worked in the fish processing
industry since the late 1970s, and displayed extensive
knowledge about the industry. The court finds his testimony
highly credible. He took pains to make his testimony
accurate. Mr. Uhlen knowledge on the subject of processing

82a

was obviously based on extensive technical understanding, as
well as personal experience.

Mr. Uhlen described the processing plan of the Atlantic
Star as follows. Once caught, the fish were pumped on
board, as opposed to hoisted onto the deck still in the net.’
The Atlantic Star could pump 300 tons of fish into the hull in
a matter of minutes. As the fish were pumped aboard they
were sent through a dewatering tank. The fish were then
pumped into the refrigerated seawater tanks (“RSW tanks”).
The vessel was outfitted with six RSW tanks. Each tank
could hold up to 150 metric tons of fish. As with the fishing
equipment, plaintiff incurred extra expense to purchase the
maximum freezing capacity for the Atlantic Star. Once in the
RSW tanks, chilled sea water was used to cool the fish. After
they were cooled, the fish were pumped through a sorting
machine.

The sorting machine, consisting of a system of rollers,
would separate the fish into different sizes and send them
into bins filled with chilled water.'° After the fish were
sorted according to size, they were pumped through a tube
and into plate freezers. Once inside the freezers, the fish
were frozen into solid blocks. The frozen blocks then

® Pumping on board was safer, as the stability of the vessel was
not jeopardized by a large net of fish coming on board. Additionally, the
fish would remain alive longer while in the codend, instead of being
crushed by other fish if brought on deck in the net.

'0 Although the vessel ultimately never fished for herring, the court
found the testimony of Ms. Torgersen, Mr. Torgersen and Mr. Uhlen
highly credible that the sorting machines were sophisticated enough to
sort herring with roe from herring without roe.

83a

traveled along a conveyor belt to machines which placed the
blocks in cartons and strapped the cartons shut. Workers
would then stack the cartons on wooden pallets.

The plan put forward by plaintiff is not a mere
speculation. As explained infra, although the vessel was
barred from United States waters, efforts were made to fish
elsewhere. The Atlantic Star fished in Mauritania, the only
fishery available without causing the loss of its status as an
American-flagged vessel. Mrs. Torgersen put the mechanics
of this plan for the ship fully into operation when it was in
Mauritania."

b. Plans to Offload at Sea

APFC intended to offload 90% of its frozen fish at sea.
This approach was more profitable than going to- shore to
offload because the vessel would be able to stay at sea,
eliminating transit and searching time. The ship was
outfitted with everything necessary to remain at sea for
months at a time. The Atlantic Star had two custom-made
cranes. They were designed to lift eight tons and intended to
aid the vessel in offloading in whatever weather conditions
the vessel might face. The ship carried sufficient fuel, food
and parts for an extended trip, and could have been re-
equipped by other ships. Further, Capt. Hempstead testified
that weather would not play a significant role in the ability of
the Atlantic Star to fish or remain at sea.'* The Atlantic Star

'! Plaintiff provided the court with a DVD containing a tour of the
vessel as it operated in Mauritania.

'2 In fact, Hempstead testified that in the Baltic Sea, a trip
discussed infra, where the weather conditions are notoriously bad, the
Atlantic Star was only kept from fishing approximately half a dozen days.

84a

demonstrated its capacity to off-load at sea during its tour in
Mauritanian waters.

We give little credence to the contrary testimony of
Michael Love. Mr. Love was a former employee of APFC.
He was hired to aid in the effort to lobby Congress to allow
the Atlantic Star to retain its fishing permits. He later served
on the crew of the Atlantic Star in Mauritania. Mr. Love
returned home to the East Coast after the first fishing trip and
was not recalled to the Atlantic Star. Mr. Love’s courtroom
demeanor made his unfavorable views of plaintiff clear.'°
Furthermore, it was apparent to the court that Mr. Love had
no knowledge of plaintiff's initial business plans, prior to
meetings with Congress. Mr. Love testified that he was not
present for the initial discussions regarding financing or
choice of equipment. Thus, any knowledge about whether
plaintiff intended to off load at sea came only after plaintiff
was making concessions in an effort to appease members of
Congress. The court finds his testimony unreliable. We
therefore find that plaintiff intended to offload 90% of its
cargo to tramper vessels at sea.'*

'3 Defendant attempted to show that Mr. Love was a part owner in
the Atlantic Star, in order to show that he was qualified to testify
regarding the value of the business. However, Mr. Love held, at most, a
de minimus interest, for which he never paid. The court, therefore, does
not rely on Mr. Love’s testimony with respect to APFC’s value.

7 - tramper vessel is a commercial fishing vessel which transports

cargo whenever it is hired to do so.

85a

3. Atlantic Star Precluded from Fishing in United States
Waters

While the Atlantic Star was being overhauled in Norway,
at a cost of approximately $34 million, plaintiff applied for
and obtained all necessary fishing permits.'* The permits
were reissued to the vessel on April 8, 1997 and April 12,
1997. In November 1997, as the Atlantic Star was poised to
begin fishing, its permits were retroactively voided. At the
same time, APFC was prospectively barred from obtaining
new permits.'° The details of the permitting process and

'S In order to fish for, possess, or land Atlantic mackerel in the

Exclusive Economic Zone of the United States, plaintiff was required to
apply for a permit under 50 C.F.R. § 648.4(a)(5). Because incidental by-
catch of nonregulated species was possible, plaintiff applied for a
Northeast Multispecies (Nonregulated) permit under 50 C.F.R. §
648.4(e)(1). Plaintiff requested an authorization letter from the Regional
Administrator in the Gulf of Maine/Georges Bank Regulated Area for
plaintiff's net, because the mesh size necessary for herring and mackerel
was smaller than normally required by 50 C.F.R. § 648.80(d). The
Northeast Regional Office of NMFS issued the following permits on
February 5, 1997:

1. Federal Fisheries Permit # 610018, for Atlantic mackerel and
Illex squid and for incidental Loligo squid and butterfish, with an
expiration date of December 31, 1997.

2. Federal Fisheries Permit # 610018, for Northeast Multispecies
(Nonregulated), with an expiration date of April 30, 1998.

'© Congress adopted section 616 of the Departments of Commerce,
Justice, and State, the Judiciary and Related Agencies Appropriations
Act, 1998, Pub.L. 105-119, 111 Stat 2440 (1997) (“1997 Appropriations
Act”), which had the initial effect of revoking plaintiff's permits and
barring their reissuance for one year. An identical provision was enacted
on October 21, 1998 as section 617 of the Department of Commerce,

(cont'd)

86a

subsequent loss of the permits are discussed in greater depth
in American Pelagic I, 49 Fed.Cl. at 40.

4. Trips Made by the Atlantic Star
a. Baltic Sea trip

Mrs. Torgersen testified that she tried to put the vessel to
some use during what she hoped would be a temporary
moratorium after passage of the 1997 Appropriations Act.
She took the Atlantic Star to the Baltic Sea to participate in a
research project. The Atlantic Star did none of its own
fishing, but operated as a mother ship, processing fish from
catching vessels. The vessel only remained in the Baltic Sea
for a few months, because the venture was not profitable.

b. Mauritania trip.

Plaintiff was able to utilize the Atlantic Star as a fishing
and processing vessel for the first time off the coast of
Mauritania, in west Africa. Mauritania does not have a
fishing fleet of its own and it imposes no restrictions on
foreign flagged vessels. Instead, vessels must simply
purchase fishing permits. The Atlantic Star thus was able to
purchase fishing rights while maintaining its status as a
United States flagged vessel.

Justice, and State, the Judiciary and Related Agencies Appropriations
Act, 1999, Pub.L. 105-277, 112 Stat. 2681 (1998) (“1998 Appropriations
Act”). Plaintiff was permanently barred from obtaining herring and
mackerel permits by § 3025 of the 1999 Emergency Supplemental
Appropriations Act, Pub.L. 106-31, 113 Stat. 57 (“1999 Appropriations
Act”).

87a

The equipment aboard the Atlantic Star performed
exactly as expected in Mauritania.'? The best day of
processing for the Atlantic Star was 14,872 blocks or
approximately 342 metric tons in one day.'® Within one
month, the ship was performing better than any other ship in
Mauritania. However, the lack of consistent quantities of fish
precluded the vessel from processing at its full capacity.
Thus, the Atlantic Star was unable to produce to its highest
level of 340 metric tons per day, nor at the rate of 250 metric
tons plaintiff proposes here, on a regular basis.

Not only was the Atlantic Star plagued by a lack of fish,
Mauritanian waters posed unique problems for processing.
The temperature both of the sea water and the fish in
Mauritania was significantly warmer than it would have been
in the western Atlantic. It took longer to chill the fish in the
RSW tanks, and longer to freeze them in plate freezers.
Mr. Uhlen testified that, in contrast, the water temperature on
the East Coast of the United States would have been perfect

'7 Arnie Uhlen did discuss some minor problems with a strapping

machine, which was used to close the cartons containing frozen blocks of
fish. He acknowledged that for a time only two machines worked.
However, the machines were promptly fixed.

'8 The figure 342 metric tons represents 14,872 blocks, multiplied
by 23 kilograms. Plaintiff explained that while in Mauritania it packaged
up to 23 or 24 kilograms of fish into each carton. These cartons would
normally hold 20 kilograms. Plaintiff explained that the fish from
Mauritania are often bound to west African markets where weight scales
are not available. Therefore, the cartons are packed full so that the buyer
knows that it has not been cheated. Plaintiff explained that full packing
was possible because there was no reporting regime in Mauritania, which
would have required accounting for the extra kilograms of fish.

88a

for the processing system of the Aflantic Star, especially in
wintertime. Although the conditions were not ideal in
Mauritania, Capt. Hempstead testified that the experience in
Mauritania showed that the Atlantic Star could have operated
extremely well in the western Atlantic.

Plaintiff lost money during its time in Mauritania despite
the fact that it outfished every other vessel. Mauritanian
waters simply did not offer enough fish for a long enough
period of time to allow the Atlantic Star to be profitable.
Other boats were able to supplement their catch by fishing
during prime season in Mauritania, but then spending the rest
of the year in European waters. The Atlantic Star was

, prohibited from doing the same because it could not fish in
European waters. By April 1999, APFC was operating at a
loss, and behind on payments. Suppliers were considering
arresting the vessel due to the nonpayment of invoices.
Attempts to secure additional financing by APFC were
unsuccessful. After considering and rejecting Chapter 11
bankruptcy, the partners of APFC, Parlevliet and Van der
Plas, agreed to take over both the payment of bills and the
revenue of the Atlantic Star. Parlevliet and Van der Plas
eventually purchased the Atlantic Star from APFC on July 6,
1999.'° From April until July, APFC continued to pay
corporate expenses, but Parlevliet and Van der Plas assumed
the revenues and expenses for the vessel.

'9 Plaintiff recorded a gain on the sale of the vessel. Ms. Wendy
Visconty, plaintiff's accounting expert, explained that this gain resulted
from the difference between removing the vessel from the books and the
liabilities associated with the vessel from the books. The gain was not,
according to Ms. Visconty, a cash gain to plaintiff.

89a

5. Other Profitable Options not Open to Plaintiff
a. Alternative Fishing Options

Defendant intimates that plaintiff could have fished for
herring alone, since permits were not required for herring in
the western Atlantic. Mrs. Torgersen testified that mackerel
is an inevitable by-catch when fishing for herring.”
Defendant concedes that a permit is required just to possess
mackerel. The 1997 Appropriations Act and 1998
Appropriations Act precluded the Atlantic Star from holding
the necessary permit. Therefore, we conclude that the
Atlantic Star could not fish for herring alone, because of the
inevitable by-catch of mackerel.

In addition, plaintiff could not take the vessel to any other
United States fisheries. The other fisheries within the United
States Exclusive Economic Zone (“EEZ”) have their own
permitting regime, none of which would have been open to
the Atlantic Star. Under the 1997 Appropriations Act and the
1998 Appropriations Act, no permits of any kind could be
issued to plaintiff.’ The 1999 Appropriations Act only

2 Capt. Genovese also testified for defendant that herring and
mackerel swim together, and are inevitably by-catch of one another.

*! The 1997 Appropriations Act § 616(a)(2) stated that none of the
funds appropriated in the bill may be made available to issue or renew a
fishing permit or authorization “that would allow such a vessel to engage
in the catching, taking, or harvesting of fish in any other fishery within
the exclusive economic zone of the United States.” A vessel could have a
permit if it had documentation or endorsements prior to September 1997
and were not surrendered at any time afterwards. However, § 616(c)
declared all of APFC’s permits to be null and void. Therefore, after the
passage of the 1997 Appropriations Act, plaintiff was barred from fishing

(cont’d)

90a

restricted the availability of APFC to obtain herring’ and
mackerel permits. Even so, Mrs. Torgersen testified that
there was no other fishery large enough in the United States
EEZ in which plaintiff could obtain a permit which could
have allowed the Atlantic Star to make a profit. For instance,
the Alaskan fishery was already regulated under a limited
access plan. This meant ‘hat the fishery was already fully
capitalized and open only to those vessels with a prior catch
history.”°

Mrs. Torgersen testified at the only fishery outside of
the United States in which the Atlantic Star could obtain
fishing rights was Mauritania. In order to fish in the EEZ of
any other country, re-flagging the vessel would have been
necessary. As discussed above, the Atlantic Star lost money
fishing in Mauritania.

b. Mother Ship Option

Another suggested use of the Atlantic Star was as a
mother ship. There were several factors which precluded
utilizing the vessel in this manner, however. First, APFC
could not obtain financing for a venture in which the Atlantic
Star was simply a mother ship. Because of the Atlantic
Star’s design and equipment, it probably would have lost

anywhere a permit was required within the United States EEZ. The
language of the 1998 Appropriations Act was identical.

22 Although not specifically required for the western Atlantic
fishery.

3 A prior catch history, according to Mrs. Torgersen’s testimony,

is the catch which a particular vessel was able to land in previous years.

9la

money as a mother ship.7* Second, the vessel could not
possess any mackerel without a permit, even as a mother
ship.

In sum, Mrs. Torgersen conducted an exhaustive,
although ultimately unsuccessful, search for a fishery in
which the Atlantic Star could be operated profitably and in
which it was eligible to obtain all the necessary permits.
Defendant offered no evidence to the contrary.

6. Plaintiff's Theory of Recovery

APFC’s compensation model is based on the fair rental
value of the Atlantic Star. Unfortunately, there was no
existing market for leasing a vessel like the Atlantic Star
fishing off the East Coast. The Atlantic Star was unique.
Contrary to defendant’s suggestion, however, this does not
preclude a request for compensation. We agree with Dr.
James Miller, plaintiff's expert, that an appropriate model for
fixing fair rental value can be derived from the reasonably
established net revenue stream.

24 Capt. Hempstead explained that the Atlantic Star had been
outfitted to fish and process. This investment was useless when the
Atlantic Star was used as a mother ship. Plaintiff could not have operated
profitably unless it utilized the whole of its capacity. Mr. Uhlen’s
testimony to the contrary is not persuasive. He acknowledged that he was
not sure that such an option was actually profitable. His expertise related
to the processing capabilities of the vessel, not its financial management.
Mr. Love offered an opinion about the ability of the Atlantic Star to
operate as a mother ship based on the assumption that the Apollo II hull
had been outfitted from the outset as a mother ship—a completely

separate question.

92a

Dr. Miller is the chairman of an international economic,
financial and regulatory consulting firm. He is the former
Director of the Office of Management and Budget, former
Chairman of the Federal Trade Commission, and has served
in several other government capacities. Dr. Miller received a
Ph.D. in economics from the University of Virginia. He has
taught economics at University of Virginia, George
Washington University and George Mason University. His
testimony was clear, thorough and showed an understanding
of the realities facing the Atlantic Star. The court found him
to be a highly competent, reliable witness.

Dr. Miller utilized the net revenue stream which would
have been available to the Atlantic Star in order to determine
what the rental value of the vessel would have been in a fair
market. He explained that, as with any lease, the total
income stream available to the isssee and lessor is a fixed
amount. Therefore, whether the |\:ssee were to take on all
costs and revenues and pay a fixea amount to lessor, or lessor
were to assume some costs for a portion of the revenues, the
net effect would be the same. In a competitive market, the
difference between the amount that the lessor could have
made operating the vessel itself or renting to the lessee will
be razor thin. The net revenue stream is an appropriate
measure, therefore, for rental value. It represents what the
lessee would be willing to pay and what the lessor willing to
accept as reasonable rental value. Furthermore, Dr. Miller
testified that the conservative nature of the projections he
used for plaintiff's revenues, combined with a generous
allowance for costs, would leave ample room for a potential
lessee to make a significant profit. The business opportunity
would have been very attractive to a potential lessee.

After determining the appropriate monthly rental fee,
based on the Atlantic Star’s revenue stream, Dr. Miller
adjusted the monthly fees back to the beginning of the
damages period. In order to bring each month’s rent back to

93a.

the first month of the taking, Dr. Miller applied the weighted
average cost of capital (“WACC”). He explained that each
corporation’s WACC is based on its cost of debt and equity
and the corporation’s mix of each. The cost of debt is
determined by the cost of third-party loans held by that
entity. The cost of equity is determined by the return on
equity earned by other fishing firms during the same period.
Taken in their relative proportion in APFC’s financing
structure establishes APFC’s WACC of 18.5%. When he
brought the operating margin back to December 1997, the
first month of the taking, the rental value for the Atlantic Star
was $44,742,926. Dr. Miller based his calculations on a
75,000 metric ton per year model. The net revenue from the
sale of herring and mackerel would have been $72,577,500.
The total costs, based on a 75,000 metric ton model were
estimated at $27,834,574.

Once plaintiff's revenue stream for the rental of the
Atlantic Star was brought back to the date of the taking, Dr.
Miller applied a rate for a safe investment, the five year
treasury rate, to bring plaintiff's damages to current dollars.
The current value of the rental value of the Atlantic Star at
the time of trial was $55,913,929. The reasonableness of
plaintiff's damages model will be discussed infra. However,

the court first addresses disputes with respect to the figures
for revenues and costs imbedded within the calculation.

a. Price of Herring and Mackerel

Plaintiff's expert, Mr. David Ellenton, provided the court
with an analysis for the appropriate sales price for herring
and mackerel. He has a wealth of knowledge about the world
export market for herring and mackerel based on experience
marketing large volumes of fish. Mr. Ellenton was a very
convincing witness.

Mr. Ellenton determined that American export prices
were not the appropriate measure, because they were too

94a

high. The overall American market for Atlantic herring and
mackerel is very small. The majority of Atlantic herring and
mackerel caught in America goes into the domestic bait
market, a small niche market which artificially inflates the
average price of Atlantic herring and mackerel. American
producers do not sell in volume into the larger international
markets, and their prices thus do not provide a good
benchmark for the volume of fish APFC would produce.
Therefore, he examined the Dutch and Norwegian export
prices for herring and mackerel.” Norway and Holland are
the world’s largest producers. According to Mr. Ellenton, due
to the volume of fish the Atlantic Star would have marketed,
Dutch and Norwegian prices are the appropriate starting

point.

Mr. Ellenton established an average Dutch and
Norwegian price for each month during the damages period
based on information provided by the Norwegian Seafood
Export Council and the Netherlands Central Bureau of
Statistics. The raw data provided by these agencies listed the
price for herring or mackerel sold into a particular country by
month. Mr. Ellenton established an average monthly price
based on the prices for those markets into which he
anticipated APFC would sell. He made no decisions about
how much of plaintiff's anticipated 75,000 metric tons of fish
would be sold into each particular country. Instead, he
included in his average price all of those markets into which

25 During trial defendant objected to Mr. Ellenton’s testimony as it
related to world export prices. During discovery the parties had agreed to
rely upon United States export prices for Atlantic herring and mackerel.
However, the government’s own witness based his opinion on the same
world export prices. This made irrelevant the attorneys’ prior agreement.

95a

he anticipated APFC would sell. He then adjusted that price
based on the average exchange rate from Dutch and
Norwegian currency.

Mr. Ellenton explained that the Atlantic Star may not
have been able to sell fish at the Dutch and Norwegian
prices. As a new vessel in the market, the Atlantic Star
would have a market entrance barrier to overcome.
Additionally, the fat content in the fish supplied in the United
States might be lower than that supplied by Dutch and
Norwegian vessels. This could have affected price, because
some purchasers prefer fish with higher fat content. These
differences led Mr. Ellenton to make a reduction of 10% to
both the Dutch and Norwegian export prices. He then
averaged the two, concluding that APFC would have
received $ 0.41 per kilogram for Atlantic herring and $ 0.73
per kilogram for Atlantic mackerel. The prices which Mr.
Ellenton provided were free on board (“F.0.B.”).”°

The government’s expert on this issue, Mr. Jeffery
Reichle, did not dispute the basic premise of Mr. Ellenton’s
analysis-that American export prices were not an accurate
model for prices the Atlantic Star would have received.
Beyond that point, however, he and Mr. Ellenton parted
ways. Mr. Reichle did not pretend to be a disinterested
witness. He was heavily involved in the lobbying effort to
keep the Atlantic Star from fishing off the East Coast.
Furthermore, Parlevliet and Van der Plas, the partners of
ASFC in APFC, had offered to buy Mr. Reichle’s business,
Lund’s Fisheries. In his view, the offered purchase was an

76 A F.O.B. price assumes that the fish are sold direct from the
vessel. The price does not incorporate a cost for shipping.

96a

effort to remove him as an opponent to the Aflantic Star.
Furthermore, his testimony reflected inattention to detail and
a lack of knowledge about Mr. Ellenton’s method. Nor was
he experienced in the volumes of fish APFC would have
sold. For these reasons, the court gives little weight to his
testimony.

Mr. Reichle opined that only Dutch prices for herring and
mackerel were appropriate measures. He thus excluded
Norwegian export prices. Mr. Reichle reasoned that almost
all Norwegian product went to Japan because Norwegian fish
were caught by purse seine nets and frozen by blast freezers,
making them more desirable. However, Mr. Reichle testified
that he did not know whether Mr. Ellenton had made any
adjustments based on where APFC would market its fish and
he was unaware which markets Mr. Ellenton included in his
average Norwegian price. Additionally, Mr. Ellenton’s
report provides sufficient evidence that the Norwegian
product was not, in fact, sold primarily to the Japanese
market. The court rejects Mr. Reichle’s reliance on Dutch
prices alone.

Mr. Reichle made certain price reductions to Mr.
Ellenton’s model. Mr. Reichle opined that the fat content of
Atlantic herring and mackerel in the western Atlantic tends to
be lower than that in Dutch waters. Additionally, he testified
that those fish caught in the western Atlantic tended to be
smaller than those in the Dutch waters. He reasoned that a
10% quality adjustment from the Dutch price for mackerel
and 15% for herring was appropriate. Mr. Reichle stated that
a differentiation between APFC prices and the Dutch prices
was necessary because the Dutch fleet was made up of
primarily purse seines. According to him, purse seines would
produce a higher quality of fish because they would not
damage the fish in the same way that a trawl vessel would.
Finally, Mr. Reichle explained that the vertical plate freezers
which APFC intended to use would produce a lower quality

97a

of frozen fish than usually provided by Dutch vessels, which
used blast freezers.

Mr. Reichle provided no information as to why a greater
adjustment was necessary for herring as opposed to
mackerel. Further, he did not explain why the quality
adjustments Mr. Ellenton made were not sufficient. Mr.
Ellenton testified that his 10% price reduction took into
account the difference in fat content between the American
and European producers. Mr. Torgersen testified that during
the damages period the Dutch fleet did not, in fact, contain
any purse seines. In addition, both Mr. Torgersen and
Mr. Ellenton explained that the majority of Atlantic herring
and mackerel are frozen in the same manner as the Atlantic
Star. In fact, Mr. Ellenton testified that there was almost no
gap in the quality between American and European product.
It would be even less significant for the Atlantic Star, which
would be able to catch larger fish and process them without
damage. The court rejects Mr. Reichle’s quality adjustments.

Mr. Reichle also made a reduction in price for the
increased distance between the vessel and its final market for
APFC, in comparison to Dutch producers. Mr. Reichle
reasoned that a $0.035 per kilogram reduction from
plaintiff's prices would be appropriate for the difference in
freight costs. He opined that because the Atlantic Star would
be off the East Coast of the United States it would have to
pay more for transport to final markets.

There are several problems with Mr. Reichle’s
adjustment. First, he relied on Mr. Ellenton’s prices for his
analysis, which were F.O.B. Therefore, as pointed out in the
supplemental report of plaintiff's accounting witness,
Ms. Visconty, freight is most appropriately an additional
cost, not an adjustment to price. Nor did Mr. Reichle provide
a basis for the amount of his adjustment. He exhibited a lack
of knowledge regarding shipping cost for the volume of fish

98a

which APFC proposed. This lack of knowledge was
compounded by the fact that he calculated an adjustment for
freight not knowing into which countries Mr. Ellenton’s price
reflected sales. For these reasons, the court makes no
adjustment to plaintiff's price for transportation costs.

Finally, the court rejects Mr. Reichle’s adjustment based
on his understanding that Dutch producers routinely package
23 kilograms into 20 kilogram cartons. As explained by
Mr. Torgersen, the Dutch regulatory system requires that
every kilogram of fish which is caught, as well as every
kilogram of fish produced, be reported. The Dutch prices
reflected in Mr. Ellenton’s reports are reported by the
kilogram, and not by the carton. Therefore, whether a carton
could hold 20 or 23 kilograms would be immaterial for
purposes of determining price, since the prices are reported
per kilogram. Furthermore, plaintiff's witnesses, whom the
court finds to be more reliable, all testified that the there is no
over-packing done by Dutch producers. Instead, if a market,
as in Mauritania, requires that a carton is packed full, both
the buyer and seller understand that the price negotiated is
per kilo, no matter how full any particular carton may be.
Therefore, the court will not adjust plaintiffs prices for a
difference in Dutch packaging methods.

b. Price of Herring with Roe

Mr. Ellenton determined that the most appropriate price
for herring with roe was $1.38 per kilogram. Unlike prices
for Atlantic herring and mackerel, Mr. Ellenton determined
that the United States export price was, in fact, the most
accurate measure. He reasoned that the price of herring with
roe sold to Japan and China today from the United States is
the most analogous to the product that APFC would have
sold. Currently, the United States exports herring with roe
caught off the West Coast. Mr. Ellenton confirmed Mrs.
Torgersen’s view that the Atlantic Star would have caught

99a

enough herring with roe to create a market at $1.38 per
kilogram. He acknowledged that there are routine closures,
disallowing fishing during specific time periods along the
Gulf of Maine during the herring spawning season.
However, Mr. Ellenton explained that there are no closures
on George’s Bank, in northern Maine. He testified that the
Atlantic Star could have harvested enough herring with roe
there to provide a sufficient supply to maintain the $1.38 per
kilogram price.

In contrast, Mr. Reichle concluded in his expert report
that APFC had not intended to market herring with roe. In
addition, Mr. Reichle testified that he had no experience
marketing that product. Nor was he aware of Mrs.
Torgersen’s ties to the Japanese market. He based this on the
deposition of Mrs. Torgersen, in which, when asked if there
were any mention of Atlantic herring with roe in the 1998
budget, she responded that there was not. She went on,
however, to explain that the 1998 budget was a “preliminary,
probably working document and it was just to get an idea of
the overall, just the big picture.” Furthermore, this
preliminary budget was prepared during negotiations with
Congress. Mr. Reichle conceded that the budget to which
Mrs. Torgersen referred in her deposition had little bearing
on her plans to market herring with roe. It was also apparent
from Mrs. Torgersen’s testimony, as well as her business
plans that APFC did, in fact, intend to market herring with
roe. The court finds that there is no basis to reject
Mr. Ellenton’s price for herring with roe.

c. Costs

The second element of plaintiff's damage calculation is
the offsetting cost of operation. Ms. Wendy Visconty, a
managing director of RSM McGladrey, Inc., testified for the
plaintiff. She was qualified as an expert in auditing as well
as accounting, particularly for businesses of the size and type

100a

of APFC. She had experience with auditing Alaskan fishing
vessels. Ms. Visconty provided the court with an extensive
and detailed analysis of the Atlantic Star’s costs. Her report
was well documented and thoroughly researched. Unlike
defendant’s accounting expert, Mr. Paul Berdy, Ms. Visconty
did not have any personal connection to the case.

She included three categories of costs: materials, labor,
and manufacturing overhead. Within materials she included
costs necessary to package the Atlantic Star’s catch, as well
as those expenses related to offloading and storage. The cost
of packaging material, including the cartons and their plastic
liners, was independently verified by a quote obtained from a
supplier at $3,752,000. Ms. Visconty included docking, cold
storage, and pallet replacement within her calculations for
off-loading at $636,000. These costs were approximated
from available prices from actual suppliers.

Labor costs of $12,584,135 included crew salaries and
share, payroll taxes, technician fees, crew travel, and galley
supplies. For crew salary and share,”’ technician fees, as
well as the computation payroll taxes, Ms. Visconty assumed
that for highly skilled workers, the Atlantic Star would be
competing with similarly outfitted vessels in the Alaskan
fisheries. She explained that in this industry it is common for
highly skilled crew to be flown long distances in order to
outfit vessels. Ms. Visconty therefore based her opinion on
salaries, technician fees, and crew share information for the
Atlantic Star’s crew in Mauritania, but also for similar

27 Ms. Visconty testified that the cost for crew share would vary
according to the amount of the Atlantic Star’s production, because crew
share is calculated on a percentage of production sold.

10la

vessels in Alaska. This resulted in higher overall costs. She
then included a modest increase to these costs in order to
make the estimates very conservative, i.e., higher. She based
her estimates for crew travel and galley supplies on the
Atlantic Star’s actual experience in Mauritania, once again
including an adjustment to ensure the estimates were
conservative.

Finally, Ms. Visconty estimated costs for manufacturing
overhead. She included $10,862,439 in costs for spare parts,
repairs and maintenance, fuel, insurance, brokerage fees,
administration*® and other miscellaneous expenses. Once
again, Ms. Visconty relied on both independent research and
the Atlantic Star’s experience in Mauritania. As with the
earlier expenses, she included an adjustment in order to
ensure her numbers were not only accurate, but conservative.
Therefore, although the Atlantic Star only incurred, on
average, $52,000 per month in Spare parts costs,
Ms. Visconty’s report includes costs of $100,000 per month
in costs. The increase allowed for the replacement of a net,
as well as the wear which could occur because of aggressive
fishing on the East Coast. The same type of analysis was
done for repairs and maintenance. Fuel costs were estimated
based on the fuel usage of similar sized engines. Insurance,
brokerage and other miscellaneous fees were calculated by
comparison to vessels of similar size.

Mr. Berdy testified for defendant. He did not dispute
Ms. Visconty’s basic analysis. He contended that there were

Brokerage fees and administration Costs, according to Ms.
Visconty would have a direct relationship with production by the Atlantic
Star. -

102a

costs missing from her report. He explained in his report that
an ad valorem customs fee, political risk insurance, and
drydocking costs should all be included within Aflantic
Star’s expenses. Mr. Berdy also opined that the costs
provided by Ms. Visconty should be altered based on what he
termed inconsistencies in the record. He asserted that
previous testimony by Mr. Love and Mrs. Torgersen conflict
with Ms. Visconty’s cost assumptions. Furthermore, Mr.
Berdy testified that the crew compensation level proposed by
Ms. Visconty was too low.

Without calling into question Mr. Berdy’s general
competence as an accountant, we have serious misgivings
about his qualifications to testify in this case. Mr. Berdy had
very limited experience in providing accounting services for
fishing operations. Nor was he a disinterested witness. His
limited experience was largely based on his work for Lund’s
Fisheries, which is owned by Mr. Reichle. Mr. Berdy
traveled to the Netherlands with Mr. Reichle for meetings
with Parlevliet and Van der Plas to discuss the purchase
Lund’s Fisheries. Mr. Berdy worked with an accountant from
the Dutch partners and came up with a projected sales price
for Lund’s Fisheries. Mr. Berdy acknowledged that he did
not directly rely on Generally Accepted Accounting
Principles in his analysis. He exhibited a general lack of
knowledge about the facts of this case.

Mr. Berdy testified that plaintiff should have included in
its calculations an ad valorem customs duty which may have
been assessed on the Atlantic Star, as well as the premiums
for political risk insurance and additional drydocking costs.
With respect to the ad valorem duty, Mr. Berdy relied on
Mrs. Torgersen’s deposition in which she referenced a $2
million estimate for this customs duty. When pressed by
plaintiff's counsel Mr. Berdy conceded that he had made no
further inquiries into the nature of the assessment, and
“without doing proper research, [he] wouidn’t know”

a eee

103a

whether the ad valorem duty should be included as an
operating cost.

Ms. Visconty explained that because the ad valorem tax
is assessed on the vessel itself, as opposed to its operation,
the tax is a capital cost. It is generally considered to be part
of the cost of constructing a vessel. In addition, the nature of
an ad valorem tax is that it is subject to negotiation between
vessel owners and the government over a period of one to
two years. She therefore concluded that the ad valorem tax
should not be considered an operating cost.

Mr. Berdy also displayed a lack of understanding with
respect to how the Atlantic Star had been financed. He was
unaware of the reasons for obtaining political risk insurance
and the terms of that insurance. Mr. Berdy stated that he
would have to do further research before he could be sure
that the cost of political risk insurance should be included
within expenses. Because Mr. Berdy himself is not sure
whether these costs should be included, the court will rely on
Ms. Visconty’s more authoritative analysis leaving them out.

Mr. Berdy’s inclusion of drydocking costs was based on
Mrs. Torgersen’s offer to Congress to spend $1,000,000 on a
repair facility in New England. There is no question that this
was not a necessary cost. The offer was made in response to
political pressure in an unsuccessful effort to preserve her
fishing rights. For the same reasons, we decline to make any
adjustments to Ms. Visconty’s analysis as it relates to
offloading costs. Mr. Berdy also based this adjustment on
statements made by Mrs. Torgersen to members of Congress
with respect to her willingness to build a cold storage facility
and offload the majority of its catch on shore. We decline to
make Mr. Berdy’s proposed adjustments.

Finally, the court will not adopt Mr. Berdy’s analysis of
crew costs, which was based on Mr. Love’s testimony.
Without meeting Mr. Love, understanding his relationship to

104a

plaintiff, or independently verifying his testimony, Mr. Berdy
opined that the court should rely on Mr. Love’s testimony
regarding crew compensation. As explained earlier, the court
did not find Mr. Love’s testimony credible in its own right.
It is no more credible when filtered through Mr. Berdy’s
report. Furthermore, Ms. Visconty provided the court with
an extensive analysis of the Aflantic Star’s actual
compensation of its crew, as well as salaries for similar
vessels in Alaskan waters. The court finds this to be more
reliable. We therefore make no adjustment to plaintiff's crew
compensation costs.

d. Adjustment to Catch Volume

One adjustment to the basic assumptions of plaintiff's
model must be made, however. In his calculations, Dr.
Miller assumed that the Atlantic Star would produce 75,000
metric tons of fish (37,500 metric tons of herring, 37,500
metric tons of mackerel) each year. Plaintiff put forward
testimony and exhibits showing the availability of fish well
in excess of this 75,000 metric tons per year. Plaintiff met its
burden to show that the Atlantic Star was physically capable
of catching and processing this amount of fish each year.
Defendant nevertheless urges the court to adjust plaintiff's
model to reflect 50,000 metric tons per year, based on two
theories.

First, defendant looks to plaintiff's comments made to
Congress. Plaintiff had some notice that Congress, in
response to pressure from owners of small local vessels, was
considering voiding its permits. The government makes
much of plaintiffs efforts to forestall congressional action.
Mrs. Torgersen, along with Michael Love, met with members
of Congress, including Senator Olympia Snow. At those
meetings, plaintiff attempted to come to some agreement
with those members whose constituents had expressed
concern about the Atlantic Star. Mrs. Torgersen put together

105a

several proposals. One of these proposals would place a self-
imposed limit of 50,000 metric tons per year on the vessel.
The efforts were to no avail. Nevertheless, defendant offers
plaintiff's statements as proof that its original plans were
actually smaller than 75,000 metric tons, on a scale with the
reduced plans for harvesting offered under the duress of the
negotiating process with Congress.

We are surprised and disappointed that the government
would make use of statements, prompted under what
amounts to political duress, to draw into question
Mrs. Torgersen’s credibility. The discussions between
Mrs. Torgersen and members of Congress were about
political compromise, not plaintiffs initial expectations.
Plaintiff was at risk of losing its entire investment in the
Atlantic Star, and, not surprisingly, was willing to make large
concessions in order to preserve some value in that
investment. We therefore assign no meaning to statements
made during the negotiations about fishing Capacity, on shore
facilities or off-loading on shore.

The court is thus persuaded that the Atlantic Star was
capable of producing in excess of 50,000 metric tons of fish.
Indeed we are persuaded it was capable of producing in
excess of 75,000 metric tons. The capacity and fish were
there. In terms of the rental value of the boat, however, it is
also relevant to know what would have been represented to
prospective, albeit, tentative, renters. In this respect,
plaintiffs business plan is important, and it is the evidence as
to that plan which introduces uncertainty about the 75,000
‘metric ton figure, for an annual catch.

Uncertainty as to this figure was introduced by Mr. and
Mrs. Torgersen themselves in their affidavits in support of
plaintiff's motion for summary judgment. Mrs. Torgersen
provided a declaration in support of Plaintiff's Response to
Defendant’s Motion for Summary Judgment in July of 1999.

106a

In it, Mrs. Torgersen stated that APFC had planned to harvest
Atlantic mackerel from December to May and Atlantic
herring year round “for a total approximate amount of 50,000
[metric tons] per year.” Mr. Torgersen agreed with those
statements. Neither Mr. Torgersen nor Mrs. Torgersen were
under compulsion to provide the court with that number.
Plaintiff is bound by such statements. There is no reason the
court should not rely upon them. We therefore find that
plaintiff's original plans called for producing approximately
50,000 metric tons of herring and mackerel per year. This
figure represents an unquestionable quantity that it both
planned to produce and could in fact produce, and thus an
appropriate figure for calculate what a willing renter would
have paid.

DISCUSSION
A. Impact of Tahoe Regulatory Takings Analysis

After our decision in American Pelagic I, the Supreme
Court decided Tahoe-Sierra Pres. Council v. Tahoe Reg.
Planning Agency, 535 U.S. 302 (2002), addressing the
elements of a temporary regulatory taking. The Court
rejected a per se rule modeled solely on Lucas, because of its
concern that the rule would make routine moratoria
actionable. The routine delays inherent in a legitimate
regulatory process should not prompt an automatic temporary
taking. Instead, if regulatory action has the effect of denying
all economically viable use of property, a Penn Central
analysis is then conducted in order to determine whether,
under “all the relevant circumstances” a taking is established.
Tahoe-Sierra, 535 U.S. at 335 (referring to Palazzolo v.
Rhode Island, 533 U.S. 606, 636 (2001)).

In the present case, the “relevant circumstances” include
the fact that the character of the government action here
strongly tends toward a taking. Congress retroactively
revoked plaintiff's permits in a targeted fashion. The

107a

Atlantic Star was the only vessel which fell within the ambit
of the 1997, 1998, and 1999 Appropriation Acts. It is clear
from the record that Congress’ decision was not the result of
a typical regulatory process. Instead, it was motivated by
political considerations directly aimed at the Atlantic Star.
Congress’ action was far from being a routine delay in
agency decision-making. There was no permit application
pending. All permits had been granted. No decision was
held in abeyance pending fact finding. Congress simply
decided not to allow the Atlantic Star to fish using its
previously issued permits. The character of the government
action thus points to a taking. None of the Court’s concerns
in Tahoe about promoting deliberative regulatory
consideration apply.

We thus confirm our previous holding that the three-part
Penn Central test for a taking is met. The plaintiff had a
reasonable investment backed expectation that it could
profitably, legally, use its vessel. As further explained
below, the economic impact was a 100 percent loss of
economically viable use. And, finally, the character of the
government’s action points to a deliberate decision to take
the use of the vessel for public purposes.

B. “All Economically Viable Use”

In American Pelagic I, we found that no other
economically viable uses were available to the plaintiff.
Nevertheless, because we left open the question of whether
plaintiff had established any economic impact of the
legislation, we allowed defendant at trial to offer evidence of
alternative uses. As we found supra, however, there were
indeed no other profitable uses available to the Atlantic Star.
Defendant nevertheless offers three other arguments as to
why plaintiff's evidence still does not satisfy its burden of
proof.

108a

Where a taking has occurred, compensation is required
for a taking in “the extraordinary circumstance when no
productive or economically beneficial use of [the property] is
permitted.” Lucas v. South Carolina Coastal Council, 505
U.S. 1003, 1017 (1992); Tahoe-Sierra, 535 U.S. .302
(distinguishing the normal regulatory action from the
regulatory taking based on the removal of all economically
viable use). The plaintiff bears the burden of showing that no
economically viable use remains. See Andrus v. Allard, 444
U.S. 51, 60 (1979); Goldblatt v. Town of Hempstead, 369
U.S. 590, 594 (1962). -

Defendant contends first that, because plaintiff's books
and records reflect a tax gain when the vessel was sold,
plaintiff was not economically harmed by the taking. The
fact that there may have been a paper tax gain does not mean
the plaintiff did not suffer a temporary taking prior to the
vessel’s sale, however. In any event, as Ms. Visconty
explained, any nominal tax gain was a result of removing the
Atlantic Star from plaintiffs books. There was no real
economic gain to plaintiff.

Defendant next contends that the proceeds from an
insurance policy preclude recovery. The Lloyd’s of London
policy on which defendant relies provided insurance against
loss of fishing permits. Defendant has argued throughout
this case that plaintiff did not have a property interest in its
permits. American Pelagic I, 49 Fed.Cl. at 46 (citing
Bradshaw v. United States, 47 Fed.Cl. 549 (2000); Hage v.
United States, 35 Fed.Cl. 147 (1996)). It is ironic that it now
contends that insurance against loss of those permits
prohibits plaintiff's recovery. In any event, the court held
that the taking here was the use of plaintiff's boat. American
Pelagic I, 49 Fed.Cl. at 51.

Defendant’s argument misconstrues the purpose of the
compensation aspect of the Takings Clause. The Fifth

109a

Amendment “does not prohibit the taking of private property,
but instead places a condition on the exercise of that power.”
First English Evangelical Lutheran Church v. Los Angeles,
482 U.S. 304, 314 (1987). That condition is just
compensation for that which is taken. The proceeds of an
owner’s insurance policy covering loss do not constitute just
compensation from the government, nor does it mean that the
government did not cause a complete diminution in value.
The government cannot be the beneficiary of an insurance
policy for which it did not pay. ”

Defendant also argues that any loss suffered by plaintiff
is a result of its own business decisions. Defendant would
have the court find that because plaintiff did not sell its boat
as soon as the 1997 Appropriations Act was passed, any
subsequent loss was a result of plaintiff's choices. The facts
are otherwise. This argument fails to take into account that
the 1997 Appropriation Act and the 1998 Appropriations Act
were potentially temporary. It was not until the passage of
the 1999 Appropriations Act that the revocation of the
plaintiff's permits was permanent. Plaintiff's decision to
hold the vessel in the interim, while it attempted to avoid any
extension of the permit cancellation, and while it sought to
make some profitable use, was not unreasonable. Nor has
defendant offered evidence that plaintiff turned down any

29 In Shelden v. United States, 34 Fed.Cl. 355 (1995), the court
commented on the collateral source rule as it applied to the taking of
plaintiff's mortgage. The court declined to diminish plaintiffs’ recovery
by the amount of the earthquake insurance which they had purchased on
their home. The government could not benefit from the plaintiffs’
foresight.

110a

offers to purchase the Atlantic Star after passage of the 1997
Appropriations Act.

Finally, defendant argues that if plaintiff had built a
different boat, or outfitted the Atlantic Star for a different
fishery, plaintiff would not have had such a large loss. This
is tantamount to criticizing plaintiff for owning something
the government wanted to take. We assume defendant does
not seriously advance this argument. In sum, the Lucas test
is met: plaintiff has established the “extraordinary
circumstance[] when no productive or economically
beneficial use” remains. Lucas, 505 U.S. at 1017 (emphasis
in original). .

C. Fair Rental Value

Unlike a permanent taking, a temporary taking deprives
the owner not of its property, but the use of its property for a
fixed period of time. The owner is entitled to the “reasonable
value of the property’s use” during the temporary taking.
United States v. Pewee Coal Co., 341 U.S. 114, 117 (1951).

When a taking of property occurs, its owner must be
compensated in the amount that was lost as a result of the
taking. Yuba Natural Resources, Inc. v. United States, 904
F.2d 1577, 1581 (1990) (citing First English, 482 U.S. at
319). It is the duty of the court to determine compensation
which places the owner of property “in as good a position
pecuniarily as if his property had not been taken.” Yancey,
915 F.2d at 1543 (quoting Olson v. United States, 292 U.S.
246, 255 (1934)). Compensation, however, is limited to what
was actually taken by the government and excludes indirect
or remote injuries. See United States v. General Motors
Corp., 323 U.S. 373, 379 (1945).

Unlike a permanent taking in which the court examines
the market value of the fee interest prior to and subsequent to
the takings period when determining damages, for a
temporary taking it is well settled that the appropriate

llla

measure of compensation is the fair rental value of property.
See Kimball Laundry Co. v. United States, 338 U.S. 1, 6
(1949). See also, First English, 482 U.S. at 314. Were the
difference between the market value of the fee before and
after the taking the basis for compensation, “there might
frequenily be situations in which the owner would receive no
compensation whatever because the market value of the
property had not decreased during the period of the taker’s
occupancy.” /d. The actual value of the property, the
Owner’s initial investment in that property, and any other
factors which go solely to the value of the fee interest are
therefore irrelevant for purposes of determining fair rental
value.

In general, the fair rental value of a property should be
- determined by market forces. United States v. General
Motors Corp., 323 U.S. 373 (1945). A hypothetical analysis
is undertaken. The court attempts to determine what two
parties making a voluntary exchange would have agreed
upon, recognizing that the actual exchange was done under
compulsion. Kimball Laundry Co., 338 U.S. at 5-6.
However, just compensation may not be reduced to a simple
formula, tied solely to available market values. See United
States v. Cors, 337 U.S. 325, 332 (1949). There may be
instances in which the “market value furnishes an
inappropriate measure of actual value.” General Motors
Corp., 323 U.S. at 379. In fact, “when the property is of a
kind seldom exchanged, [and] it has no ‘market price,’ * * *
recourse must be had to other means of ascertaining value.”
Kimball Laundry Co., 338 U.S. at 5-6. In that situation, the
court attempts to determine the loss to plaintiff. See United
States v. Commodities Trading Corp., 339 U.S. 121, 123
(1950).

Defendant proposes that, because in this case there is no
readily ascertainable rental market, plaintiff is left without a
remedy under the Takings Clause. Fortunately, the law is not

112a

so unreasonable. As explained in Bigelow v. RKO Radio
Pictures, 327 U.S. 251, 256 (1946), “the wrongdoer may not
object to the plaintiff's reasonable estimate of the cause of
injury and of its amount, supported by the evidence, because
not based on more accurate data which the wrongdoer’s
misconduct has rendered unavailable.” See also Locke v.
United States, 151 Ct.Cl. 262, 267, 283 F.2d 521 (1960).
“The ascertainment of value is not controlled by rigid rules or
artificial formulae; what is required is a ‘reasonable judgment
having its basis in a proper consideration of all relevant
facts.” ” American-Hawaiian Steamship v. United States, 129
Ct.Cl. 365, 124 F.Supp. 378 (1954) (citing The Minnesota
Rate Cases, 230 U.S. 352, 434 (1913)).

Plaintiff bears the burden of proving its loss to a
reasonable certainty. See Foster v. United States, 2 Cl.Ct.
426, 445 (1983) (citing United States v. 145.30 Acres of
Land, 385 F.Supp. 699, 702 (W. D. La.1974), aff'd, 524 F.2d
1231 (Sth Cir. 1975)). It is entitled, however, to all
reasonable inferences which may be drawn from the
evidence. See Locke, 151 Ct.Cl. at 267-68, 283 F.2d 521
(1960). Moreover, that the inquiry is based on some
conjecture is not fatal. Yaist v. United States, 17 Cl.Ct. 246,
257 (1989) (citing United States v. Silver Queen Mining Co.,
285 F.2d 506 (10th Cir. 1960)). Where there is no market for
a piece of property, or one may not be readily discerned, it is
the responsibility of the trial court to determine a fair rental
value based on other data available. United States v. Miller,
317 U.S. 369, 374 (1943) (“Where, for any reason, property
has no market, resort must be had to other data to ascertain
its value.”).

Plaintiff must show that there is a demand for the use
which it proposes. See Fordyce v. United States, 7 Cl.Ct.
591, 600 (1985). The undeveloped nature of a market for
large fishing vessels in the western Atlantic required the
court to examine the market for similar vessels elsewhere in

113a

the world. Plaintiff provided ample fact and expert testimony
that permits a comparison of the Atlantic Star with
production and sale by vessels operating in other areas.

Additionally, plaintiff must show that its use of the
property was not a speculative or conjectured use. See
United States v. 320.0 Acres of Land, 605 F.2d 762, 814 (Sth
Cir. 1979). Here, as discussed supra, it requires no
speculation to conclude that plaintiff would have successfully
used the Aflantic Star as a fishing vessel for Atlantic herring
and mackerel off the East Coast of the United States.

As explained in Kimball Laundry, every takings case
involves a counter-factual inquiry—-what would willing
parties have agreed upon if the government had not intruded,
requiring an involuntary exchange. Kimball Laundry, 338
U.S. at 6. The absence of a competitive market, while
important, does not destroy the court’s ability to find
damages in this case. Instead, it requires the court to
examine additional evidence, provided in this case by
Dr. Miller, about what would have transpired if a market had
existed. As discussed above, Dr. Miller’s model is based on
extensive evidence and sound reasoning. The absence of a
real-world market for the rental of the Atlantic Star does not
render Dr. Miller’s model speculative.

Because there was no actual rental market for fishing
vessels like the Atlantic Star, a working model for a
competitive market was necessary. This is what Dr. Miller
attempted to construct. As explained above, his model
provided the court with a probable revenue stream which
would closely approximate the fair rental value of the
Atlantic Star during the takings period. In a competitive
market, the revenue stream that the Atlantic Star probably
could have achieved is equivalent to the amount that a
potential lessee would have been willing pay in order to rent
the vessel. Basic economic principles dictate that potential

1l4a

lessees would compete, bidding up to the revenue stream for
the Atlantic Star. As lessor, then, plaintiff would have been
able to realize this rental value but for the taking.

As discussed above, plaintiff put forward a number of
highly qualified, competent and reliable witnesses. These
witnesses demonstrated that plaintiff could have made a
profit from the fishing and subsequent sales of herring and
mackerel off the East Coast. The extensive and detailed
report from Ms. Visconty more than satisfied plaintiff's
burden to show offsetting costs which would have been
incurred by the vessel when it was in operation.

Defendant would also have the court find that the
component parts of plaintiffs damages model are too
theoretical to provide the basis for damages. Specifically,
defendant’s witness, Mr. Reichle, opined that plaintiff's
method of determining prices at which Atlantic herring and
mackerel would have been sold during the damages period
was speculative. For reasons set out above, however, we do
not rely on Mr. Reichle’s testimony. Furthermore, plaintiff's
expert, Mr. Ellenton, gave a detailed explanation of his
pricing method. Far from being speculative, it was based
upon years of experience and information published by the
Norwegian Seafood Export Council and the Netherlands
Central Bureau of Statistics.

Defendant challenges the reasonableness of plaintiff's
damages model. Based on Mr. Berdy’s testimony, defendant
argues that plaintiff's damage claim equates to a 368% return
on equity when one begins with what plaintiff invested in the
vessel. For the purposes of a temporary taking, however, we
are not concerned with plaintiff's initial investment. Neither
the purchase price nor the sale price of the Atlantic Star have
any bearing on the amount to which plaintiff is entitled. This
court does not look at the before and after values of a
resource in a temporary takings analysis. Yuba Natural

115a

Resources, 904 F.2d at 1577. Mr. Berdy’s return on equity
critique therefore fails as a matter of law. In any event the
analysis suffers from another problem. Mr. Berdy based this
return on equity only on the amount invested by Mrs.
Torgersen. He did not include any equity added by Parlevliet
and Van der Plas. Thus, his analysis is incomplete.

Defendant does not propose an alternative method of
determining damages. In fact, when asked how he would
calculate damages, Mr. Berdy outlined the very method
which Dr. Miller used.

Finally, defendant contends that plaintiff has simply
provided the court with a request for compensation for lost
profits. We disagree. Unfortunately, there is no market from
which to determine fair rental value. The net income which
the Atlantic Star would have generated during the takings
period simply provides the basis for calculating a fair market
rent. See Pettro v. United States, 47 Fed.Cl. 136, 153 (2000)
(damages for temporary taking of mineral rights based on
probable rental value); Bass Enterprises Production Co. v.
United States, 48 Fed.Cl. 621 (2001) (plaintiff entitled to
interest it would have earned if its right to utilize an oil and
gas lease had not been taken). Plaintiff's damage model is
therefore permissible.

One adjustment is required, however. Plaintiff's damage
model is based solely on an assumed production of 75,000
metric tons per year. We held, however, that plaintiff's
damages should be limited to an assumed catch of 50,000
metric tons per year. Although we recog

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386007_0647%3A2. Public record. Not legal advice.