# Petition for Writ of Certiorari — Eastern Minerals International, Inc. v. United States

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2002
- **Citation:** 535 U.S. 1077

## Text

No.

EASTERN MINERALS INTERNATIONAL, INC., MARTIN P.
DUFFY, Administrator of the Estates of Wilson W. Wyatt, Sr.,
and Anne D. Wyatt, WILSON W. WYATT, JR., MARY ANNE
WYATT, NANCY WYATT ZORN, VAN BUREN MINERALS
CORP., AND MILTON J. BERNOS, JR.,

THE UNITED STATES,

On Petition For A Writ Of Certiorari To The
United States Court Of Appeals For The Federal Circuit

PETITION FOR A WRIT OF CERTIORARI

WALTER H. FLEISCHER
1320 Old Chain Bridge Rd.
Suite 440

McLean, Virginia 22101
(703) 821-0613

MICHAEL BOOS -
4101 Chain Bridge Rd.
Suite 313

Fairfax, Virginia 22030
(703) 691-7717

IN THE
Supreme Court of the United States

“rene Coun, ue
‘ en

011100 Jaw 25 2009

OFFICE OF THE CLERK

Petitioners,

Respondent.

RAYMOND D. BATTOCCHI
Counsel of Record

JOHN R. POWELL

VICKI A. PAISLEY

Gabeler, Battocchi & Griggs,
PLLC

1320 Old Chain Bridge Rd.

Suite 260

McLean, Virginia 22101

(703) 847-8888

Counsel for Petitioners

(1)
QUESTIONS PRESENTED FOR REVIEW

In a case seeking just compensation for categorical
regulatory takings of real property interests:

1. When the holder of a renewable lease proves that
seeking a permit became futile before the right to renew the lease
expired, can the holder recover for a taking of the remaining lease
term and the right to renew?

2. Can the holders ofa royalty interest in minerals, which
is of unlimited duration, recover for a taking of that interest when
it is'shown that seeking a permit became futile, and also that a
final decision denying a permit later was issued?

3. When a federal agency uses unfair and protracted
procedures to prevent the use of property, including failing to
issue in writing a decision it has reached to deny a permit, can
affected property owners recover for a taking?

4. What standards should a federal appellate court follow
when reviewing a trial court’s factual findings on extraordinary
delay and other issues in a regulatory takings case?

ee ee

(11)
PARTIES TO THE PROCEEDINGS

All parties to this proceeding in the United States Court
of Appeals for the Federal Circuit are listed in the caption. |

CORPORATE DISCLOSURE STATEMENT

Eastern Minerals International, Inc., and Van Buren
Minerals Corp. have no parent corporations, and no publicly held
corporation owns 10% or more of either’s stock.

(i11)
TABLE OF CONTENTS

Page
QUESTIONS PRESENTED FOR REVIEW ............ (1)
PARTIES TO THE PROCEEDINGS ..........--2esee: (i1)
CORPORATE DISCLOSURE STATEMENT ...... ree
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cy Fhe Swe oP yy) 8 oe 5. (v)
EY PEIN cv rcvcwerccvccovesessees (vi)
ee li vwe cd een see ceeaweacees |
CO EE er ee re ee ee |
CONSTITUTIONAL AND STATUTORY :
CE EW ED vce vee essveccsvenny |
RIT UT BOONE GRUIES oc cece cece rt eewencneees 2
A. Introduction and Summary. ..............-.. 2
a adie os Wea 0d +e ka eee oes 2
et es re 8
Dy, Ampeliate DOCIIOM. ... .. cece cece ec eeees 9
REASONS FOR GRANTING THE WRIT ............. 10

I. THE DECISION THAT THE OWNERS OF
NEITHER A LEASE NOR OF A ROYALTY
INTEREST CAN RECOVER FOR A TAKING,
DESPITE PROVING FUTILITY, WARRANTS
es ccc anes e eke s seas e vee theses 12

Il. THE COURT OF APPEALS’ FAILURE TO
FOLLOW OR APPLY THIS COURT'S
DECISIONS PROHIBITING UNFAIR OR
REPETITIVE LAND-USE PROCEDURES
ALSO WARRANTS REVIEW. ...........-.--- 15

:

(iv)

IIT. THE COURT OF APPEALS’ FAILURE TO
FOLLOW THIS COURT’S DECISIONS

REQUIRING APPELLATE COURTS TO GIVE
DEFERENCE TO FACTUAL FINDINGS IN
TAKINGS CASES ALSO WARRANTS
RIG Bary ite T he Ande Ls Ac ae 17

lV. IF ALLOWED TO STAND, THE DECISION
BELOW WILL HAVE FAR REACHING
CAIN OG ES sven tenn ca teesesysBieves: 20

Re PPP CPP CP Err Terre ry Titer ree.

(v"
TABLE OF CITED AUTHORITIES

Cases: Page
Bernos Coal Co. v. Lujan, 739 F.Supp. 1133

(E.D. Tenn. 1990)... cc cecccccccnreurececvescecesss 4
Howe Realty Co. v. City of Nashville,

176 Tenn. 405, 141 S.W.2d 904 (1940) ...........45. 21
Lucas vy. South Carolina Coastal Council,

GOS US, 10S CFG) ccs ccc euccresceioncs 17, 20, 21
MacDonald, Sommer & Frates v. County of Yolo,

ATT US, SOBCIE) n doc ccccercssceserevesesierss 15
Monterey v. Del Monte Dunes at Monterey, Ltd.,

S96 US, GBT CIGSO) coc ccctnccnvsevetawensess Passim
Moore v. Memphis Stone & Gravel Co.,

47 Tenn. App. 461, 339 S.W.2d 29 (1959) ..........-- 21
Palazzolo v. Rhode Island, 533 U.S. 606 (2001) .... Passim
Palm Beach Isles Ass’s. v. United States,

231 F.3d 1365 (CA Fed. 2000) .........-- eee ee ener 21
Penn Central Transportation Co. v. New York City,

BOR US. TOR CIGI onc oc ctu cek gers eneeiasioness 17
Psidium v. Tahoe Regional Planning Agency,

PEO Bee bh, 7) rn ie rer ye 12

Tahoe-Sierra Preservation Council, Inc. v. Tahoe
Regional Planning Agency, 216 F.3d 764 (CA9 2000),

cert. granted, —- U.S.__, 121 S.Ct. 2589 (2001) ...... 10
United States v. General Motors Corp.,
peegle eye ll, | rrr er rere rer. 12
United States v. Petty Motor Co.,
cee ys fi. || eer rrr rrr rr. Passim

Williamson County Reg’'l. Planning Comm. v.
Hamilton Bank, 473 U.S. 172 (1985) ........-4-5- 10, 19

(vi)

Statutes: P
te ey ON os os n'a s Galas ok oainate sane a wareeres |
es CIEE 5.6.4 va Vos be a Ree eTEa ea eee 12
LS eee BEE nen ae ate eae re emigre 8,12
ee GET LEDs 66.544 va Nn dws hue eeetaeeuee 3
ies Sa OED 4 6500.5 + kod. eae hed ek Cee 3
ae is EE 4 5 60056 b¥es Fe ande eerie cea 3
as © REN EEMOIE, 6 v6 05.045 4e5adolaene eneuees 3
Oe Wes © LSP EPCUDMOD ccckescccnesweccesss 16, 17
es Or COD 6b bios pec eek bias ceescerss 5
Pe © LEFT COMED 5 65 wenn bindeancevess 3,17
Surface Mining Control and Reclamation Act,

30 U.S.C. §§ 1201 et seq. (1988) (“SMCRA”) ..... Passim
Regulation:
el 8 et ey Perr ree er rr rr 19

(vil)
TABLE OF APPENDICES
Page

Appendix A — — Notice of Entry of Judgment and
Opinion of the United States Court of Appeals
for the Federal Circuit Dated and Entered
November 19, 2001] ..... ccc cccccvcesecsveveveees la

Appendix B - ~ Opinion and Order of the United States
Court of Federal Claims Dated and Filed October 2,
i oo aes ee ee her mere l6a

Appendix C - - Opinion and Order of the United States
Court of Federal Claims Dated and Filed November
ye. ep ernrrrerer yr Tre rrr ti rr ae 32a

Appendix D — — Judgment of the United States Court of
Federal Claims Dated and Filed December 22, 1998 ... 5la

Appendix E - — Surface Mining Control and Reclamation
Act of 1977, 91 Stat. 445:

tRE AAO... 0s. 0s das eedaess 52a
30 U.S.C. 1256(d) (1988) ......ce eee eee eee 52a
30 U.S.C. 12SHe) (IGE)... eee ess ccc rece ees 54a
30 U.S.C. 1272(e)(3) (1988) 2.2... eee ee eee 54a

Appendix F - — Docket Entries, United States Court
of Appeals for the Federal Circuit .........+.-+++++- 55a

Appendix G - - Order, United States Court of Appeals |
for the Federal Circuit, Dated July 2,2001.............. 56a

PETITION FOR A WRIT OF CERTIORARI

Eastern Minerals International, Inc. (“Eastern”); Martin
P. Duffy, Administrator of the Estates of Wilson W. Wyatt, Sr.,
and Anne D. Wyatt; Wilson W. Wyatt, Jr.; Mary Anne Wyatt;
Nancy Wyatt Zorn; “’an Buren Minerals Corp. (“Van Buren’) ;
and Milton J. Bernos, Jr., respectfully petition for a writ of
certiorari to the United States Court of Appeals for the Federal
Circuit.

OPINIONS BELOW

The opinion of the United States Court of Appeals for the
Federal Circuit (App. la-15a)' is reported at 271 F.3d 1090 (CA
Fed. 2001). The two opinions of the United States Court of
Federal Claims (App. 16a-50a) which were appealed are reported
at 36 Fed.Cl. 541 (1996), and 39 Fed.Cl. 621 (1997).

JURISDICTION

The judgment of the United States Court of Appeals for
the Federal Circuit was entered on November 19, 2001 (App. 1a).
The jurisdiction of this Court is invoked pursuant to 28 U.S.C. §
1254(1).

CONSTITUTIONAL AND STATUTORY
PROVISIONS INVOLVED

The Fifth Amendment provides: “nor shall private
property be taken for public use, without just compensation.”
The provisions of the Surface Mining Control and Reclamation
Act of 1977, 30 U.S.C. § 1201, et seq., relevant to this petition
are reprinted in the Appendix at 52a-54a.

' "App." references are to Appendices A to G, infra, pp. la-56a.
"JA" references are to the Joint Appendix filed in the Court of
Appeals. “Tr.” references, when used, are to trial transcript
references on certain pages of the Joint Appendix. Petitioners have
requested that the Clerk of the Court of Appeals send one copy of the
Joint Appendix to this Court for lodging.

2

STATEMENT OF THE CASE

A. Introduction and Summary. Eastern had a twelve-
year renewable coal mining lease, and the Wyatts had a 3.5% coal
royalty interest. Eastern received two permits, under which it
spent large sums to prepare the property for mining, and applied
for a renewal permit in 1982. Although there were no changes in
applicable law, there was a change in governmental policy, and
no renewal permit ever was granted (JA 1475). As a result of
respondent's failure to issue a permit, both Eastern’s lease and the
Wyatts’ royalty interest were rendered worthless.

The trial court found that Eastern’s permit application
became futile because the Interior Department never would have
granted a permit, and also that there was intentional and
extraordinary delay. It found that there was a taking by August
1990, before Eastern’s right to renew its lease expired, and eight
years after Eastern first applied for a renewal permit. The Trial
Court awarded both Eastern and the Wyatts compensation for
categorical takings. The Federal Circuit reversed both judgments.
It sua sponte held that Eastern could not recover for the
renewable portion of its lease even if it showed that seeking a
permit was futile before the right to renew expired. That Court
failed to follow or apply the rule that an agency cannot use unfair
or repetitive procedures to avoid a final decision. The Court of
Appeals did not follow or cite several applicable decisions of this
Court; engaged in an unrestricted review of the facts instead of
deferring to the Trial Court’s findings; and summarily reversed
the judgment for the Wyatts without discussing it.

B. Facts. In 1953 Anne D. Wyatt and Wilson W. Wyatt,
Sr. (“Wyatts”) bought about 10,000 acres of land in Tennessee for
investment purposes. Some of it adjoins Falls Creek Falls State
Park (“Park”). In 1975 Milton J. Bernos, Jr., contracted to buy
the property from the Wyatts on an installment basis (App. 16a,
4a; JA 1018, 1479). In 1979, after Bernos confirmed that the
property contained valuable coal reserves, a three-way sale-
leaseback transaction was completed. Cane Tennessee, Inc.
("Cane") purchased the property from the Wyatts for about $5.1

3

million, subject to the retention by the Wyatts of a 3.5% royalty
interest in any future mined coal. Cane simultaneously leased
the property to Eastern, a corporation which Bernos formed.
The lease was for a 12-year term, and Eastern had the option to
renew the lease for additional 10 year terms (App. 33a, JA 76-
77 (Tr. 452-53)). To renew the lease, Eastern had to exercise its
option by about August 31, 1990, '80 days before lease
termination, and incur a several million dollar obligation (App.
Sa: JA 84 (Tr. 495-96); JA 959-60, 954, 953). A consulting
firm retained by Cane estimated that Bernos would make
between $55 and $69 million mining the property (JA 1030-31,
151 (Tr. 888)).’

In 1977 Congress enacted the Surface Mining Control and
Reclamation Act, 30 U.S.C. §§ 1201 et seq. (1988) ("SMCRA"),
which requires a permit to mine coal. Jd. § 1256(a). SMCRA
could be enforced by either the Interior Department’s Office of
Surface Mining (“OSM”) or a State agency. /d. §§ 1253-54,
1211. SMCRA provides that if the enforcing agency finds that a
mine would “adversely affect” a state Park, a State agency could
veto a permit by objecting. /d. § 1272(e)(3).

In 1979 Eastern applied to an agency of the State of
Tennessee, which then was administering SMCRA, for a permit
to disturb 33 surface acres to deep mine coal. The State issued
a one-year permit in 1980, and another one-year permit in 1981.
Both times the State determined that the proposed mine would
comply with all SMCRA requirements, including the “adversely
affect” a park provision (App. 5a, JA 21-22 (Tr. 125-30)).
Under these permits, Eastern spent large sums to dig a box cut

2 In 1979 there was another sale-leaseback transaction in which
petitioner Van Buren acquired a separate coal lease (App. 17a). The
Trial Court dismissed Van Buren’s claims as unripe, and the Federal
Circuit declined to review that ruling, holding that the issue was
moot in light of its other rulings (App. 23a, 2a-3a). Van Buren
petitions for certiorari to keep its claims alive in the event certiorari
is granted and the judgment below is reversed. The Van Buren lease
is not further addressed in this petition.

4

(a large excavation enabling vehicular access to the deep coal
seam), and develop other infrastructure for mining (App. 17a,
JA 85-86 (Tr. 504-08)).

In 1982 Eastern was ready to begin mining coal, and
applied for a renewal permit (JA 1425, 1431). There were no
changes in the “adversely affect” provisions of SMCRA or
implementing regulations (JA 254 (Tr. 1489)). The State
denied the application, and ordered Eastern to reclaim the
property, which would require filling in the box cut, at its
expense (JA 1183-84). Thereafter the State, acting as OSM’s
agent, agreed that Eastern could submit another application to
OSM, which was about to take over the enforcement of
SMCRA, and that reclamation would be stayed until the final
outcome of the permit application (JA 1186-87).

In October 1984 Eastern submitted its application to
OSM, which then began a technical review of it (JA 1432; App.
6a). The sole issue OSM considered from 1984 on was whether
Eastern’s mine would “adversely affect” the Park (JA 605-06,
609, 626-27, 718, 747-48). In June 1985 Eastern submitted
added information in response to a Technical Deficiency Letter
(“TDL”) issued by OSM (JA 577-80, 589-99). After reviewing
this submission, an OSM official acknowledged that he had no
"strong defense" to Eastern's response, and that OSM officials
might have to "hang our hats" elsewhere (App. 35a and n.3; JA
602).

In August 1985, OSM completed its technical review, and
tentatively decided to grant a permit (JA 1194, 28 (Tr. 166), 25
(Tr.145)).* Before Eastern could be informed of that decision,

> See Bernos Coal Co. v. Lujan, 739 F.Supp. 1133, 1135-37
(E.D.Tenn. 1990).

* An August 9, 1985 OSM memorandum stated that Eastern's
application was anticipated to "be in order for permit issuance by
November 1, 1985," and requested section 510(c) findings (JA 1194).
Section 510(c) findings, which address (fn. continued next page)

nian

5

a high ranking State official wrote a letter opposing a permit
(JA 1195-98). Then, instead of granting a permit, OSM wrote
Eastern that its application would involve "great expense," (JA
605). In December 1985 OSM issued a second TDL, which
requested voluminous hydrologic information (JA 609-15). At
all relevant times State agencies opposed allowing Eastern to
mine anywhere on its property (App. 34a-35a and n. 2; JA 19-20
(Tr. 108-10, 114-17); JA 58-59 (Tr. 347-353); JA 1195-98).°
This meant that, if OSM made an “adversely affect” finding, it
would deny a permit.

Eastern learned that it would cost about $250,000.00 to
obtain the information OSM requested (JA 138 (Tr. 808)), and
Bernos was running out of money. In January, 1986, Eastern
applied to OSM’s Small Operator Assistance Program
(“SOAP”) so it would pay for the studies necessary to answer
the TDL (JA 616, 46-48 (Tr. 277, 281, 287)). OSM’s SOAP
office granted the application (JA 54 (Tr. 323)) and was
required to collect the information at government expense (30
U.S.C. §1257(c); JA 273 (Tr. 1600); JA 51 (Tr. 309)).
However, after the SOAP application was approved, OSM’s
SOAP office paid for no studies because OSM’s permitting
office decided to deny a permit without receiving further
information (JA 48 (Tr. 288)). In July 1986, OSM’s permitting
office denied the application based on "noise" (JA 626), a
ground OSM never mentioned as a deficiency in its TDL, and
not addressed in OSM’s permitting regulations (JA 609-15,
268, 161 (Tr. 1571, 938-39)). The denial letter also noted the

(fn. continued) legal matters such as bonds, are made after the
technical review is completed, and OSM concludes that a permit
should issue (JA 25, 28, 35 (Tr. 144-45, 166, 206-07); see App. 6a).
Section 510(c) findings are not sought when the technical review
leads to a decision to deny a permit, since there is nothing to bond.

> The Tennessee Wildlife Resources Agency wanted to insure that
all of Eastern’s property would be available for wild turkey hunting
by the public (JA 58, 59 (Tr. 349, 357)).

6

“strong potential” for adverse hydrologic consequences, but did
not make a definite finding on this point (JA 626).

In June 1987, on Eastern’s appeal to an Administrative
Law Judge (“ALJ”), OSM agreed to render a complete decision
on adverse impact, and the ALJ told OSM to inform Eastern
"immediately" of any additional information it needed to supply
so OSM could make the decision (JA 661-662). The ALJ also
stated that OSM would be acting in “bad faith” if it sought
reclamation while the permit application was pending (JA 676).
In February 1988 OSM reissued to Eastern essentially the same
TDL it had sent out in December 1985 ( JA 1291, 42 (Tr. 251-
52)). Eastern reapplied to OSM’s SOAP office, and its SOAP
application was again approved (JA 48 (Tr. 289-90)).

In 1988 and 1989 OSM put the SOAP effort on "hold"
three times. An internal OSM memorandum stated that the
agency wanted to "tak[e] the pressure off" of it caused by
Eastern's "aggressive pursuit of SOAP monies" (JA 725). First,
in May 1988, OSM put SOAP on hold for failure to reclaim the
box-cut (JA 725, 49 (Tr. 293)). This was inconsistent with the
1984 agreed order staying reclamation, and after the ALJ stated
that seeking reclamation would constitute “bad faith” (JA 1187,
676). In September 1988 OSM put SOAP on hold again
because OSM’s permitting office, which earlier had issued
TDLs alleging there were “numerous deficiencies” in Eastern’s
hydrologic data, now was "unsure" whether a SOAP study
would be "worth the expense" (JA 49 (Tr. 293)). OSM put the
SOAP effort on hold a third time in May 1989, based again, in
part, on Eastern's failure to reclaim (JA 1333-35, 49-50 (Tr.
294-298)). In July 1989, after Eastern overcame that objection
(JA 1337), OSM’s SOAP office commissioned a report by
Challenge consultants to provide the information to satisfy the
TDL (JA 50 (Tr. 298-300)). Challenge did everything OSM
requested (JA 50 (Tr. 301)), and its report found no problems
with the projected mine (JA 83 (Tr. 492-93)). However, OSM
did not grant a permit (JA 298 (Tr. 1736-37); App. 7a-8a).

7

Instead, in the summer of 1990, an OSM official
prepared a "confidential" plan proposing numerous information
gathering steps, which would take an extended time to complete
(JA 1391-96; JA 50 (Tr. 301-02)). On August 3, 1990 OSM
abandoned the existing SOAP plan and created a new plan
involving several phases (JA 1398-1400; JA 50-51 (Tr. 300-
04)). At each stage of these plans, if the result was favorable to
Eastern OSM would not grant a permit. Instead, it would go on
to the next step of the plan (JA 1392-95, 1399, 50 (Tr. 302-03)).

Before August, 1990, Bernos informed OSM several
times of the looming lease expiration and the need for action
(JA 46 (Tr. 278)), but OSM issued no decision. Eastern did not
exercise its renewal option at the end of August 1990, and the
lease thus technically expired at the end of February 1991.
Thereafter, Eastern remained in possession as a holdover tenant,
with Cane’s acquiescence, until about May 1993, when Eastern
and Cane executed an agreement formally terminating the lease
(JA 84 (Tr. 496-98)). Eastern continued to pursue a permit after
the lease expired because it believed that it could persuade Cane
to re-lease the property if a permit was obtained (id; see App.
18a).

In January 1992, OSM decided that it did not need any

more SOAP studies after all, and to deny a permit on the merits

(JA 42-43, 51 (Tr. 255-56, 307)). After Bernos complained to the

ALJ about that prospective decision (JA 1415-16), OSM reversed

course again and did not deny the permit. Instead it waited 18

| more months and then sent out essentially the same TDL it had

| issued twice earlier (JA 747-61, 42 (Tr. 251-52)). OSM’s

permitting office sent the TDL to Eastern, instead of to OSM’s

SOAP office which was responsible for obtaining the data, so the

permitting office could deny Eastern's application for failing to

respond to the TDL, instead of on its merits (JA 304 (Tr. 1777)).

In 1994, with SOAP not having conducted any additional studies,

OSM denied a permit. The denial was not based on an “adversely

affect” finding, but because Eastern failed to respond to the TDL
which was SOAP’s responsibility (JA 764).

-

8

In 1991 the Wyatts conveyed their 3.5% royalty interest
to their children, who retain it today (App. 22a; JA 767). From
start to finish, Bernos and Eastern lost $3.8 million on this
venture (JA 1475, 85-86 (Tr. 504, 509)).

C. Trial Court Decision. In December 1994, petitioners
brought a regulatory takings suit against respondent in the United
States Court of Federal Claims (“Trial Court”) (JA 765). That
Court had jurisdiction under 28 U.S.C. § 1491(a)(1).

After a 12 day trial (JA 924-25), the Trial Court (per
Judge Hodges) made findings that by early August 1990 Eastern’s
attempt to obtain a permit became futile, and that OSM’s delay
was intentional and extraordinary. The Trial Court made these
findings relevant to futility: that OSM “had no intention of ever
granting the permit,” (App. 28a) and “never would have granted
the permit” (App. 34a); that “it was clear that OSM ... had no
intention of allowing mining next to the park” (App. 37a); and
that “OSM’s policy was to stop Eastern’s development without
taking a final action that plaintiff could appeal” (App. 36a). The
Trial Court also found that proposals to mine on other portions of
Eastern’s property “would have been denied by OSM,” and that
“Eastern’s claim is ripe for adjudication” (App. 22a-23a).

On the question of delay, the Trial Court found that OSM
“waged a war of attrition against Eastern” (App. 36a); that OSM
delayed consideration of the application for “an extraordinary
length of time” (App. 28a); that “the delay became unreasonable”
by early August 1990 (App. 37a, 36a; JA 1397-1400); and that
the government “destroyed the fruits of [plaintiffs’] investments
by purposely delaying action on plaintiffs’ [permit] application
until after their lease expired” (App. 32a).

The Trial Court also found that Eastern did not extend its
lease at the end of August 1990 because it correctly believed
“OSM never would have granted the permit” (App. 34a); that
Eastern “could not afford to retain an expensive leasehold when
it knew that state and federal authorities would never renew its
permit” (App. 36a); and that OSM “prevented Eastern both from

9

obtaining the benefit of its leasehold interest and from renewing
its lease” (App. 38a).

The Trial Court further found that OSM’s extraordinary
delay made both Eastern’s lease and the Wyatts’ royalty interest
“valueless” (App. 31a), and determined that the takings were
permanent (App. 37a-38a). Relying upon United States v. Petty
Motor Co., 327 U.S. 372 (1946), the Trial Court determined that
Eastern was entitled to recover for the value of both its remaining
lease term (which extended to February 1991) and its right to
renew for additional ten-year terms (App. 38a-39a). It ultimately
entered a judgment for Eastern for $9,961 ,393.00, and the Wyatts
for $3,743,766.00, both with compound interest (App. 51a).

D. Appellate Decision. Ina decision issued more that
20 months after oral argument (App. 1a, 55a), the Federal Circuit
reversed. Judge Gajarsa wrote for himself and Judges Newman
and Bryson. The Federal Circuit sua sponte ruled that Eastern
could not recover for a permanent taking because it did not have
a property interest. It found as a “fact” that Eastern “voluntarily”
relinquished its leasehold interest by not renewing its lease by the
end of August, 1990 (App. 10a). It rejected the Trial Court’s
findings that OSM made Eastern’s permit application futile by
August 1990 as “speculatory (sic) reasoning” (id.), and ruled that
the “futility exception can never excuse the prerequisite that there
exist a valid property interest for all takings cases” (id.).° The
Federal Circuit did not cite or acknowledge the holdings in Petty
Motor and several other decisions by this Court upon which
petitioners relied. Nor did it address or apply the rule expressed
in Palazzolo v. Rhode Island, 533 U.S. 606 (2001), and other
decisions of this Court, that an agency cannot use unfair

® In the Court of Appeals the government argued, inter alia, that
extraordinary delay could cause only a temporary but never a permanent
taking. However, even the government did not dispute that Eastern could
recover for a taking if its permit application was futile by early August
1990 because OSM reached a final decision by then. See U.S. Opening
Br., pp. 25-33; Rep. Br. pp. 7-11.

10

procedures to prevent the use of property.

The Court of Appeals analyzed Eastern’s property interest
in the remaining term of its lease, which extended from August
1990 to February 1991, from the perspective that Eastern could
only assert a “temporary” taking of that interest for that time
(App. 10a-11la, 15a). In that respect, on the question whether
extraordinary delay made the government liable for a temporary
taking of Eastern’s remaining lease term, the Federal Circuit ruled
that there was no extraordinary delay sufficient to cause a taking
(App. Ila-15a). Citing Williamson County Reg’l. Planning
Comm. v. Hamilton Bank, 473 U.S. 172 (1985), it stated that this
Court has condoned delays of up to approximately eight years
(App. 12a). Without addressing any of the evidence supporting
the Trial Court’s findings, the Federal Circuit ruled that the
findings of extraordinary or bad faith delay were clearly
erroneous, arid that Eastern could not recover for a temporary
taking of its leasehold interest (App. 15a).

In addition, the Federal Circuit summarily reversed the
judgment for the Wyatts, without discussing it (App. 3a, 15a).
That Court did not address in any respect the nature of the
Wyatts’ property interest, which is of timeless duration and never
has expired, or explain why the Wyatts could not recover for a
permanent or temporary taking.

REASONS FOR GRANTING THE WRIT

The Federal Circuit’s decision is at odds with United
States v. Petty Motor Co., 327 U.S. 372 (1946), Palazzolo v.
Rhode Island, 533 U.S. 606 (2001), Monterey v. Del Monte
Dunes at Monterey, Ltd., 526 U.S. 687 (1999), and other
decisions of the Court. The ruling below violates several
fundamental precepts of this Court’s takings jurisprudence and,
if allowed to stand, would have far reaching effects. The Court
of Appeals did not even cite Petty Motor, Palazzolo, or
Monterey. On the other hand, it cited (App. 12a, 1 1a, n.6) with
approval Tahoe-Sierra Preservation Council, Inc. v. Tahoe
Regional Planning Agency, 216 F.3d 764 (CA9 2000), cert.

1]

granted, _ U'S. __,, 121 S.Ct. 2589 (2001), a decision
obviously under review which in any event does not justify the
Federal Circuit’s rulings.

First, Petty Motor holds that when the government takes
a renewable lease, it is liable for the value of both the remaining
lease term, and any right to renew which exists at the time of
the taking. Palazzolo confirmed that, once the uses of property
permitted by an agency are known, a takings claim is ripe. The
Federal Circuit disregarded Petty Motor and Palazzolo, and
held that, even after proving that a permit application is futile,
a leaseholder cannot recover for a permanent taking of the
leasehold rights which exist when the application became futile.
The effect of this unprecedented holding is to severely diminish
the value of leasehold interests which are, by their nature,
property interests of temporal duration. The Federal Circuit’s
decision is even more far reaching when applied to the Wyatts,
who had a royalty interest of endless duration which never
expired.

Second, the Trial Court made various specific findings
that OSM had used unfair procedures, including effectively
reaching a decision adverse to petitioners which it did not
disclose. The Court of Appeals did not even apply the
“repetitive or unfair” procedures standard reaffirmed in
Palazzolo, 533 U.S. at 609. Indeed, it did not even address the
Trial Court’s crucial findings on the point, instead treating the
issue as one involving solely the extent of delay. By so doing
the Federal Circuit allowed OSM, contrary to Palazzolo and
other decisions, to use unfair procedures to bar the use of
property.

Third, in Monterey the Court held that several takings
issues are. in substantial part fact based, and therefore
presumptively entitled to deference by a reviewing court. The
Federal Circuit’s treatment of those findings of the Trial Court
which it did address -- those going to the issue of extraordinary
delay -- conflicts with Monterey. The Federal Circuit followed
erroneous standards in freely reversing the Trial Court’s

12

findings, without giving them any deference. The Court of
Appeals’ conclusion that eight years clearly was not enough
time for the agency to decide whether Eastern’s mine would
“adversely affect” the Park will place even more unreasonable
burdens on property owners. This Court should review the
decision below to explicate and enforce the proper standards for
appellate review of trial court findings in takings cases.

This extreme decision is from the Circuit in which all
takings claims for more than $10,000 against the United States
must be brought. 28 U.S.C. §§ 1346(a)(2); 1491(a)(1). If
allowed to stand, it will make it unreasonably difficult for even
the most deserving takings plaintiffs to recover from the United
States.

I. THE DECISION THAT THE OWNERS OF
NEITHER A LEASE NOR OF A ROYALTY
INTEREST CAN RECOVER FOR A TAKING,
DESPITE PROVING FUTILITY, WARRANTS
REVIEW,

A. As of early August 1990, Eastern’s property consisted
of its remaining lease term, and the right to renew. In Petty
Motor, the United States formally condemned a renewable lease
before the option to extend expired. The Court held that the
tenant was entitled to compensation for the option period, and
was not required to exercise the option. 327 U.S. at 380-81.
Accord, United States v. General Motors Corp., 323 U.S. 373,
376 n. 3 (1945). It follows that if there was a taking of Eastern’s
Leasehold interest by August 31, 1990, Eastern was entitled to
compensation for its remaining lease term and the right to renew.

B. A regulatory takings claim is ripe for review once a
court knows an agency’s position on the scope of permitted
development. E.g., Suitum v. Tahoe Regional Planning Agency,
520 U.S. 725, 733, 738-44 (1997) (claim ripe because permission
to build denied, although extent of compensation uncertain). In
Palazzolo the Court held that a takings claim was ripe because
the extent of allowable development on the property was known.
The Court explained that once “the permissible uses of the

13

property are known to a reasonable degree of certainty, a takings
claim is likely to have ripened,” 533 U.S. at 609, and that a
permit need be pursued “only if there is uncertainty as to the
land’s permitted use.” /d. at 610.

The Trial Court made explicit findings that Eastern’s
permit application became futile (e.g., OSM “never would have
granted the permit”(App. 34a)) before the right to renew expired
(App. 34a-38a: JA 1397-1400). Under these findings, there was
a taking of Eastern’s leasehold interests in early August 1990
because that is when the permit application became futile and the
takings claim ripened.

Although the Trial Court relied on Petty Motor in
awarding Eastern compensation for the taking of its right to
renew (App. 38a), and although the Federal Circuit ordered
supplemental briefing on the import of Palazzolo (App. 56a), the
Federal Circuit’s opinion disregards both decisions. The Federal
Circuit did not disturb the Trial Court’s futility findings. Instead,
it held, in essence, that (1) because Eastern “voluntarily” did not
renew its lease at the end of August 1990, it no longer had a
property interest in renewal terms, and (2) even if Eastern proved
that seeking a permit was futile before August 31, 1990, it does
not matter because “‘the futility exception can never excuse the
prerequisite that there exist a valid property interest for all
takings cases” (App. 10a).

This sua sponte conclusion, which is unsupported by the
citation of any authority, is circular and places the cart before the
horse. If Eastern’s permit application became futile before
August 31, 1990, that makes all the difference, because Eastern’s
takings claim became ripe while it owned a right to renew, and it
was entitled to compensation for that property interest. Once a
permit application has become futile, the final decision
requirement is met, and compensation is due.

The Federal Circuit’s contrary conclusion is both
inconsistent with this Court’s decisions, and otherwise
unsupportable. If in August 1990 OSM had issued a short letter

14

denying Eastern a permit on the ground that its mine would
“adversely affect” the Park, there unquestionably would have
been a final decision and Eastern’s claim for a permanent taking
of its lease, including the night to renew, would have been npe.
No different result should follow when the government makes a
final decision but declines to put it in writing. The purpose of the
ripeness doctrine is to enable agencies to arrive at considered
decisions, not to allow them to place unreasonable hurdles in the
path of owners which effectively destroy their property rights.

This ruling gives agencies an incentive not only to delay,
but to avoid formalizing their decisions, especially when temporal
property interests, such as renewable leases, are at stake. In this
way, the decision below allows agencies to avoid paying just
compensation by outlasting the owners of property interests of
finite duration. Tlie owner often cannot renew the (non-
performing) lease without incurring a large financial obligation;
and once the lease expires, the owner will no longer have a
property interest to assert.

C. Unlike Eastern’s lease, the Wyatts’ royalty interest is
of timeless duration. It never has expired. In 1991, the Wyatts
transferred their royalty interest to their children, who own it
today (App. 22a; JA 767). The Wyatt children joined the suit as
plaintiffs precisely so that they, instead of their parents, could
recover if the Trial Court found a taking after 1991, and they
cross-appealed from the Trial Court’s judgment (App. la). The
Court of Appeals stated that “OSM denied the permit in a final
action” in 1994 (App. 10a).’ Under this reasoning, the Wyatt
children had a ripe categorical takings claim as of 1994.

The Federal Circuit’s summary reversal of the judgment
for the Wyatts seems inexplicable, and certainly was not
explained. Also unexplained is the Federal Circuit’s failure to
remand the claims by the Wyatt children so the Trial Court could

” In fact, OSM denied the permit because Eastern allegedly failed
to submit necessary information in response to OSM’s third TDL
(App. 18a; JA 764).

15

determine whether they could recover for a taking in 1994, under
the terms of the Federal Circuit’s own decision. The Court of
Appeals’ ultimate holding is that neither the Wyatts nor their
children, who held property interests of timeless duration, could
recover for a taking, despite proving futility, and despite the
existence ofa final decision. That ruling is quite far reaching and
difficult to defend, and it warrants review.

II. THE COURT OF APPEALS’ FAILURE TO
FOLLOW OR APPLY THIS COURT’S
DECISIONS PROHIBITING UNFAIR OR
REPETITIVE LAND-USE PROCEDURES ALSO
WARRANTS REVIEW.

In MacDonald, Sommer & Frates v. County of Yolo, 477
U.S. 340, 350, n. 7 (1986), the Court explained that “[a] property
owner is of course not required to resort to piecemeal litigation or
otherwise unfair procedures in order to obtain” a decision on
what uses can be made of its property. In Palazzolo, the Court,
citing Monterey, reaffirmed that:

“Government authorities, of course, may not
burden property by imposition of repetitive or
unfair land-use procedures in order to avoid a
final decision.” [533 U.S. at 609].

The Trial Court made several findings that OSM used
repetitive and unfair procedures to avoid issuing a final decision
in writing. It specifically found, inter alia, that “OSM’s policy
was to stop Eastern’s development without taking a final action
that plaintiff could appeal” (App. 36a); that OSM “waged a war
of attrition against Eastern” (App. 36a); and that OSM “purposely
delay[ed] action on plaintiffs’ [permit] application until after their
lease expired” (App. 32a). The Trial Court also found that
Eastern’s leasehold had lost all value by early August 1990 for
straightforward reasons. It was in early August 1990, after the
outside consultants had done all the studies OSM requested, that
OSM, with knowledge that Eastern’s lease was about to expire,
concocted an ad hoc, “confidential” and unpublished new plan,

16

not called for by statute, regulation or prior practice, under which
the application would go through numerous further steps, none of
which could result in the granting of a permit. See App. 34a-38a;
JA 1397-1400.

Although the Federal Circuit addressed and reversed the
Trial Court’s findings on extraordinary delay, see App. | la-15a,
it completely ignored the issue of unfair agency procedures. The
Court of Appeals neither applied the “repetitive and unfair land
use procedure” standard, nor dealt with the Trial’s Court findings
on repetitive and unfair procedures. By so doing, the Court of
Appeals circumvented Palazzolo, Monterey, and other decisions
of the Court which make clear that takings claims are ripe when
agencies resort to unfair procedures.

In Palazzolo, the Court stated that agencies could not
use unfair procedures “to avoid a final decision.” 526 U.S. at
609. In this case the Trial Court made findings that OSM had, in
effect, made a decision to deny a permit but declined to put that
decision in writing,® and the Court of Appeals did not reverse
those findings. If an agency cannot unfairly avoid reaching a
final decision, a fortiori it cannot act to outlast the owner of a
lease until after it expires by withholding the issuance of a final
decision it has in fact reached.

The unfairness of OSM’s actions is further shown by the
fact that under SMCRA Eastern should have been granted a
permit shortly after it applied for one in 1982. 30 U.S.C. §
1256(d)(1) provides that, subject to certain exceptions, “[a]ny
valid permit issued pursuant to this Act shall carry with it the
right of successive renewal upon expiration.” In 1982 Eastern
applied for a renewal permit, not a new one, as both the State

®* Such is the import of the findings thatOSM “had no intention
of ever granting the permit” (App. 28a) and “never would have
granted the permit,” (App. 34a); and that “OSM’s policy was to stop
Eastern’s development without taking a final action that plaintiff
could appeal” (App. 36a).

17

and OSM have acknowledged.’ Section 1256(d)(1) does not
allow an agency to deny a renewal permit on that ground that a
mine would “adversely affect” a Park within the meaning of §
1272(e)(3). Under § 1256(d)(1), Eastern was entitled to a
renewal permit, and OSM should not have been inquiring into the
“adversely affect” issue at all. This makes the unfairness of
OSM’s actions even more stark, and the Court of Appeals’
willingness to tolerate them even more far reaching.

Ill. THE COURT OF APPEALS’ FAILURE TO
FOLLOW THIS COURT’S DECISIONS
REQUIRING APPELLATE COURTS TO GIVE
DEFERENCE TO FACTUAL FINDINGS IN
TAKINGS CASES ALSO WARRANTS REVIEW.

A. In Monterey, a jury returned a verdict finding the City
liable for a taking. The Court noted that “we have described
determinations of liability in regulatory takings cases as
‘essentially ad hoc, factual inquires,’” 526 U.S. at 720, citing
Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1015
(1992), quoting Penn Central Transportation Co. v. New York
City, 438 U.S. 104, 124 (1978). The Court held in Monterey that
the “issue whether a landowner has been deprived of all
economically viable use of his property is a predominately factual
question,” and the question whether the regulation substantially
advances legitimate state interests is “a mixed question of fact
and law,” and affirmed the verdict. 526 U.S. at 720-21.

Separate from its findings of futility and extraordinary
delay, the Trial Court made several other findings which are
relevant to whether there was a taking. For example, the Trial
Court found that plaintiffs “reasonably relied on the two permits
they received . .. when they invested in the property” (App. 29a);
that OSM “prevented Eastern . . . from renewing its lease” (App.

*» The State stipulated in a 1984 Order that Eastern’s 1982
application was for a renewal permit (or a re-permit), and the United
States so acknowledged in its interrogatory responses in the Trial
Court (JA 1183, 1425, 1434; see JA 1475).

18

38a); that the government “destroyed the fruits of [plaintiffs’]
investments” by purposeful delay (App. 32a); and that “Eastern’s
claim is ripe for adjudication” (App. 23a). The Trial Court’s
ultimate conclusion that there was a taking is in substantial part
fact based. The Court of Appeals did not reverse any of these
findings, but failed to give them any effect. By so doing the
Court of Appeals failed to follow Monterey.

Although the Court of Appeals stated that it reviews
findings of fact for clear error, it also stated that “whether a taking
has occurred is a question of law based on factual underpinnings”
(App. 9a). To the extent the Court of Appeals believed that it was
free under this standard to disregard any of the Trial Court’s
relevant findings in arriving at the legal conclusion that there was
no taking, the Court of Appeals applied an erroneous standard of
review and failed to follow Monterey.

B. The Court of Appeals did address and reverse as
clearly erroneous the Trial Court’s findings of extraordinary
delay. It ruled that Eastern could not recover for a taking of its
remaining lease term, which extended from August 1990 to
February 1991, because there was no extraordinary delay as a
matter of law (App. 1la-15a). However, the Court of Appeals
did not address any of the evidence which supported the Trial
Court’s delay findings or give any explanation as to why they
were erroneous. By so doing, the Court of Appeals further
circumvented Monterey.

The Federal Circuit not only overlooked the evidence
supporting the Trial Court’s delay findings. It also made several
statements which directly conflict with the evidence. To take just
some examples: the Court of Appeals asserted that “much of the
delay through 1991 was caused by” Eastern’s failure to submit
information (App. 15a). But Terry Small, who headed OSM’s
SOAP office, testified that no delay which may have occurred
after January 1986 was attributable to Eastern (JA 52 (Tr. 310)).
The Court of Appeals stated that OSM determined in 1990 that it
needed additional information to assess hydrologic impact (App.
14a-15a). But OSM’s Richard Mann, who was in charge of the

19

hydrology issues, testified that OSM had adequate information to
make an “adversely affect” finding on the hydrology issues at all
times since 1986 (JA 41 (Tr. 246-48)).

Although the Federal Circuit stated that “OSM did not
cause any extraordinary delay” (App. 13a), it failed to mention
the testimony of an OSM official that, except for Eastern’s case
(and abandoned applications) OSM has decided even the most
complex cases in about 2 years, and others in less time (JA 319
(Tr. 1866-67)). It also overlooked the fact that OSM had
completed its technical review in 1985, when it decided to grant
a permit, but then demanded voluminous additional information
after the State objected. It also overlooked the fact that it was the
Interior Department’s own ALJ, not the Trial Court, who stated
that OSM attempts io seek reclamation while the permit
application was pending would constitute “bad faith.” See supra, —
p. 6. The Federal Circuit stated that Eastern “never informed
OSM that it had relinquished its” lease (App. 11a). But the head
of OSM’s SOAP office testified that Bernos informed him
“several times” of the looming lease expiration and the need for
action (JA 46 (Tr. 277-78)). The Federal Circuit stated that in
February 1991 Eastern’s lease was terminated and it lost its “right
of access to mine the property”(App. 1 1a). It overlooked the fact
that Eastern remained in possession as a holdover tenant, with
Cane’s consent, until 1993 (JA 84 (Tr. 496-98)).

Williamson County, upon which the Court of Appeals
relied (App. 12a), did not condone delays of approximately eight
years. Instead, the Court held that a takings claim was not ripe
because the owner failed to follow available procedures for
obtaining a variance from zoning decisions. 473 U.S. at 190-95.
No such procedures were available here.!°

'° OSM had available a procedure under which Eastern could seek an
exemption from SMCRA’s permitting requirement by establishing that it
had Valid Existing Rights (“VER”) before SMCRA was passed. See 30
C.F.R. § 761.5 (1988). Eastern exhausted this potential remedy by filing
a VER application, which OSM denied (JA 1404-12; App.7a).

20

C. Eight years elapsed between 1982 and 1990, when
Eastern’s right to extend its lease expired. Four years elapsed
between 1986, when OSM issued an “unripe” denial, and 1990.
OSM had from 1984 on simply to determine whether Eastern’s
mine would “adversely affect” the Park, and it had no need to
continue a technical review which it completed in 1985. By
reversing the Trial Court’s findings of extraordinary delay as
clearly erroneous, and impliedly concluding that OSM clearly did
not have enough time to consider the renewal permit application,
the Federal Circuit has legitimized dilatory tactics. It has reached
an extreme result which undermines property nghts, and is
fundamentally inconsistent with several decisions of the Court.

IV. IF ALLOWED TO STAND, THE DECISION
BELOW WILL HAVE FAR REACHING
CONSEQUENCES.

This is an unusually strong regulatory takings case. The
Wyatts initially bought their property in 1953. All persons who
owned interests in the property when SMCRA was passed in
1977, i.e., the Wyatts and Bernos, joined this suit as plaintiffs.
And the takings claimed here were categorical. The Trial Court
entered judgments for categorical takings after it found that
Eastern’s and the Wyatts’ property interests were rendered
“valueless” (App. 31a). That finding is correct —-— neither a coal
lease nor a royalty has any value if the property cannot be mined
—— and the Federal Circuit did not disturb it.

Generally speaking, the right to compensation is strongest
where, as here, the regulatory taking is categorical.'’ That right

'' The government’s defenses in a categorical case are limited,
and eight Justices have confirmed that investment backed
expectations is not a factor in a categorical case. Citing Lucas, 505
U.S. at 1015 (1992), Justice Kennedy’s majority opinion in
Palazzolo states:

“First, we have observed, with certain qualifications, see
infra at 614-15, that a regulation which ‘denies all
economically beneficial or (fn. continued next page)

naaeisecanncirwiiaiinieiiiatiiaiaaiiaiiiaaiaa sai

21

is even stronger if the categorical case is one in which a plaintiff
detrimentally relied upon validly issued permits before suffering
a total prohibition on use.'* The right is stronger still if the
categorical case is one in which a trial court is presented with
extensive evidence, including internal documents, of unfair and
bad faith agency action, and in which the trial court makes
explicit and detailed findings of futility and intentional delay.
If these petitioners cannot recover from the United States for a
regulatory taking, it is difficult to understand who could.

This decision is from the Circuit in which all takings
cases for more than $10,000.00 against the United States must be
brought. It reflects an egregious failure to follow legal principles
clearly set forth in this Court’s decisions. If allowed to stand, this
decision will make it extremely difficult for even the most
deserving property owners to recover from the United States. It

(fn. continued) productive use of land’ will require
compensation under the Takings Clause.” [533 U.S. at
607].

Justice Ginsburg’s dissenting opinion in Palazzolo (joined by
Justices Souter and Breyer) states that, subject to the nuisance
defense, “denial of ‘all economically beneficial or productive use of
land’ constitutes a taking.” [Ginsburg, J., dissenting on other
grounds, 533 U.S. at 627, quoting Lucas, 505 U.S. at 1013].

Compare Palm Beach Isles Ass’s. v. United States, 231 F.3d
1365, 1367-70 (CAFed. 2000) (Gajarsa, J., dissenting from the denial of
rehearing en banc).

'2 Tennessee, like most states, recognizes the doctrine of “vested
rights,” under which a plaintiff who obtains a valid permit and spends
funds in reliance thereon obtains a kind of property interest in renewal
permits. See Howe Realty Co. v. City of Nashville, 176 Tenn. 405, 141
S.W.2d 904, 906 (1940); and Moore v. Memphis Stone & Gravel Co.,
47 Tenn. App. 461, 470-72, 339 S.W.2d 29 (1959). By the time Eastern
applied for a renewal permit in 1982, it already had received two valid
permits under which it spent large sums preparing the property for
mining. Under Tennessee law, Eastern had not only a property interest in
its leasehold, but a separate property interest in a renewal permit.

22

will give the government a blueprint showing how to deliberately
delay action on permit applications, and exhaust the applicant’s
resources. It will deter potential plaintiffs from bringing viable
takings claims. And it will deter judges in the Court of Federal
Claims from awarding compensation for takings even in
compelling cases.

CONCLUSION
Certiorari should be granted.

Respectfully Submitted,

WALTER H. FLEISCHER RAYMOND D. BATTOCCHI

1320 Old Chain Bridge Rd. Counsel of Record

Suite 440 . JOHN R. POWELL

McLean, Virginia 22101 VICKI A. PAISLEY

(703) 821-0613 Gabeler, Battocchi & Griggs,
PLLC

MICHAEL Boos 1320 Old Chain Bridge Rd.

4101 Chain Bridge Rd. Suite 260

Suite 31300 McLean, Virginia 22101

Fairfax, Virginia 22030 (703) 847-8888

(703) 691-7717
January 25, 2002

Counsel for Petitioners

APPENDIX

la

Appendix A — — Notice of Entry of Judgment and Opinion
of the United States Court of Appeals for the Federal
Circuit Dated and Entered November 19, 2001

UNITED STATES COURT OF APPEALS
FOR THE FEDERAL CIRCUIT

NOTICE OF ENTRY OF
JUDGMENT ACCOMPANIED BY OPINION

OPINION FILED AND JUDGMENT ENTERED: 11/19/01

The attached opinion announcing the judgment of the court
in your case was filed and judgment was entered on the date
indicated above. The mandate will be issued in due course.
ia x *

JAN HORBALY
Clerk

cc: JEFFREY C. DOBBINS
RAYMOND D. BATTOCCHI
CHARLES F. LETTOW

EATERN MINERALS V. US, 99-5054, -5059 CFC-94-CV-
1098

* * * * *

ANNE D. WYATT, EASTERN MINERALS
INTERNATIONAL, INC., VAN BUREN MINERALS
CORPORATION, MILTON J. BERNOS, JR., NANCY
WYATT ZORN, WILSON W. WYATT, JR. and MARTIN P.
DUFFY, Executor of the Estates of Wilson W. Wyatt, Sr.,and
Anne D. Wyatt, Plaintiffs-Cross Appellants, v. UNITED
STATES, Defendant-Appellant. 99-5054, 99-5059

UNITED STATES COURT OF APPEALS FOR THE
FEDERAL CIRCUIT, November 19, 2001, Decided

PRIOR HISTORY: Appealed from: United States Court of
Federal Claims. Judge Robert H. Hodges, Jr.

2a

Eastern Minerals Int'l v. United States, 36 Fed. Cl. 541, 1996
U.S. Claims LEXTS 173 (1996)

Eastern Minerals Int'l v. United States, 39 Fed. Cl. 621, 1997
U.S. Claims LEXTS 271 (1997)

DISPOSITION: REVERSED.

COUNSEL: Raymond D. Battocchi, Gabeler, Battocchi &
Griggs LLC, of McLean, Virginia, argued for plaintiffs-cross
appellants. With him on the brief were John R. Powell, and
Vicky Ann Paisley. Of counsel on the brief was Walter H.
Fleischer, of Washington, DC.

Jeffrey C. Dobbins, Attorney, Environment and Natural
Resources Division, Department of Justice, of Washington, DC,
argued for defendant-appellant. With him on the brief were Lois
J. Schiffer, Assistant Attorney General; Marc A. Smith, and
Andrew C. Mergen, Attorneys. Of counsel on the brief was
Daniel W. Kilduff, Attorney, Office of the Solicitor,
Department of the Interior, of Washington, DC.

Charles F. Lettow, Cleary, Gottlieb, Steen & Hamilton, of
Washington, DC, for amicus curiae Cane Tennessee, Inc. Of
counsel on the brief were Michael A. Mazzuchi, and Timothy
A. Vogel. |

JUDGES: Before NEWMAN, BRYSON, and GAJARSA,
Circuit Judges.

OPINION: GAJARSA, Circuit Judge.

In this regulatory takings case, the United States appeals the
October 6, 1996 and November 25, 1997 judgments of the
United States Court of Federal Claims on the issue of liability.
Plaintiff Van Buren Mineral Corporation ("Van Buren") cross-
appeals the trial court's judgment that its claims are unripe.
Plaintiffs Eastern Mineral International, Inc. ("EMI"), Wilson
Wyatt, Sr., and Anne D. Wyatt ("the Wyatts") further cross-

3a

appeal the trial court's award of damages. |

After dismissing a variety of the plaintiffs’ claims as unripe,
the trial court held that the federal government had effected a
permanent regulatory taking of the property interests of EMI
and the Wyatts. E. Minerals Int'l, Inc. v. United States, 36 Fed.
Cl. 541, 552 (1996). The court further held the government
liable for the takings, and awarded EMI $15,866,311 and the
Wyatts $3,743,766, plus compound interest. E. Minerals Int'l,
Inc. v. United States, 39 Fed. Cl. 621, 631 (1997). For the
reasons discussed below, we reverse the judgment of the trial
court on the issue of liability, and dismiss the cross-appeals as
moot.

I. BACKGROUND

This case concerns the administration of the Surface Mining
Control and Reclamation Act of 1977 ("SMCRA" or the "Act"),
30 U.S.C. § 120] et seq.. Concerned that "many surface mining
operations result in disturbances of surface areas and adversely
affect commerce and the public welfare," 30 U.S.C. § 1201(b),
Congress passed the Act to "establish a nationwide program to
protect society and the environment from the adverse effects of
surface coal mining operations." 30 U.S.C. § 1202(a) (1994).
The Act created the Office of Surface Mining Regulation and
Enforcement ("OSM") within the Department of the Interior
and authorized the Secretary of the Interior ("Secretary") to
administer the Act by promulgating regulations and enforcing
its provisions. 30 U.S.C. §§ 1211(a), 1211(c) (1994); see also

Hodel v. Virginia Surface Mining & Reclamation Ass'n, 452
U.S. 264, 268-69, 69 L. Ed. 2d 1, 101 S. Ct. 2352 (1981).

The Act regulates surface coal mining through a two-phase
program designed to balance both federal and state interests.
See Hodel, 452 U.S. at 289 (describing the Act as establishing
"a program of cooperative federalism"). During the initial
regulatory phase the federal government promulgates and

' A brief urging affirmance as to liability and partial reversal and
remand as to damages was filed by Cane Tennessee, Inc. as amicus
Curiae.

4a

enforces basic environmental protection standards. These
standards include requirements for restoration of land,
preservation of topsoil, and protection of the hydrological
balance. 30 U.S.C. §§ 1252(c), 1265(b) (1994). The federal
standards are complemented by continuing state regulations.
States can issue permits for surface mining, but only if the
applicant complied with federal interim standards concerning
the environmental impact of the proposed mine. Id. § 1252(b).

The initial phase is followed by a permanent phase, during
which each state adopts its own regulatory program to provide
for compliance with the various federal performance standards.
Id. § 1253(a). The goal of the program is to allow states to tailor
their permitting schemes to meet their own needs, within a
general framework of federal oversight. If a state's program
does not meet basic federal standards, the Secretary is required
to step in with his own program for assuring compliance. Id. §
1254(b). Under no circumstances may a person engage in
surface coal mining without a permit from an appropriate
regulatory agency. Id. § 1256(a).

The property at issue in this case is located in Bledsoe and
Van Buren Counties in southeastern Tennessee, adjacent to the
Fall Creek Falls State Park. On December 12, 1975, Wilson
Wyatt, Sr. and Anne D. Wyatt sold the property to-Milton J.
Bernos, Jr. Under the conditions of the sale, as amended, the
Wyatts were to receive $4.3 million in installments and retain
a 3.5% royalty interest in all coal extracted from the property.

In December 1978, Bernos canceled his contract with the
Wyatts. By this time, Bernos had acquired a portion of the
property, but the majority remained in the Wyatts' hands. In
1979, the Wyatts sold their remaining interest in the property to
Cane Co., Ltd. (later Cane Tennessee, Inc.) ("Cane"). Once
again, the Wyatts retained a 3.5% royalty interest in the
minerals. Meanwhile, Bernos sold his interest in the property to
Colten, Inc. ("Colten"). Colten then immediately entered into a
lease with Van Buren, a company wholly owned by Bernos.

Thereafter, Cane granted an exclusive lease to mine the
property to EMI, another company wholly owned by Bernos.

Sa

Although the term of this lease was set to expire on February
28, 1991, EMI had the right to extend the lease term for four
ten-year terms upon 180 days notice to Cane. EMI could not,
however, exercise the right to extend the lease term after
August 1990.

After signing the lease, EMI set out to secure the necessary
permits to begin mining the property. On February 4, 1980, the
Division of Surface Mining and Reclamation of the Tennessee
Department of Conservation ("DSM") issued EMI a one-year
permit under DSM's interim regulatory program. As required
under the Act, DSM found that the proposed mine would not
“adversely affect" the adjacent park. See id. § 1272(e)(3). The
permit granted EMI permission to disturb thirty-three acres on
the property. With the permits in hand, EMI executed a box cut
on the property to extract coal from the Sewannee coal seam,
and also constructed various "improvements" to the land,
including a sediment pond, a backfill area, and various roads.
Adhering to the requirements of 30 U.S.C. § 1272(e)(5), EMI
located the box cut just over 300 feet from the property's
boundary with the Fall Creek Falls State Park.

Four months after the permit expired, on June 18, 1981 , EMI
again applied for a permit from the DSM. On September 14,
1981, DSM granted EMI another one-year permit. After this
permit expired, EMI filed another application with DSM for
still another permit.’ The DSM rejected this permit application
on May 8 1984. It found that EMI had not adequately addressed
the issues of noise, water quality and subsidence.’ On August 15,
1984, the Tennessee Surface Mining Board of Reclamation
affirmed the rejection.

? By this time, DSM was reassigned to the Tennessee Department
of Health and Environment.

> DSM also noted that Mr. Bernos, the sole shareholder of Cane,
had violated various coal mining regulations in the past. See 30
U.S.C. § 1260(c) (1994) (barring any applicant with outstanding
environmental violations from receiving permit until agency receives
assurances that violations have been resolved).

6a

Later that year, OSM determined that Tennessee had not
effectively implemented its SMCRA program. Pursuant to its
authority under the Act, OSM revoked the state's authority, and
assumed control of the Tennessee surface mining regulatory
program. At the same time, under the regulations promulgated by
the agency, the state retained joint reviewing authority.

OSM reviews permit applications in three stages. First, the
agency reviews an application to determine if it is
administratively complete. After the agency is satisfied that it has
all the necessary information, it conducts a technical review to
determine if the proposed mining operation meets all substantive
legal requirements. Finally, OSM closes out the application,
whereupon it addresses any final legal matters, such as the
securing of any bonds.

In October of 1984, EMI applied for a new permit from OSM.
In its application, EMI sought to disturb 26.3 acres of the Cane
property and mine approximately 4,600 acres of coal. On
December 31, 1984, OSM notified EMI that its application was
administratively incomplete. After EMI acknowledged and
corrected the deficiencies, OSM informed EMI that it would need
the approval of the Tennessee DOC if OSM determined that the
proposed mine would adversely affect the Fall Creek Falls Park,
pursuant to 30 U.S.C. § 1272(e)(3).

OSM then commenced its review of EMI's application. On May
30, 1985, OSM issued EMI a technical deficiency letter ("TDL")
outlining various concerns about the proposed mine. Among
these concerns were the effect of the mine on Cane Creek and the
impact of the mine on the "scenic and solitude values of Falls
Creek Falls State Park." On June 25, 1985, EMI responded to the
TDL with a letter that included little of the information requested
by OSM.

In August of 1985, the State of Tennessee exercised its joint-
review authority, and objected to the permit application. The state
believed that the mine would have adverse environmental impacts
on the surrounding area. On December 12, 1985, OSM issued
another TDL requiring specific information to satisfy the
hydrologic and environmental impact requirements of the Act

7a

pursuant to 30 U.S.C. § 1257. This TDL contained five pages of
specific information necessary for OSM to approve the
application. On January 15, 1986, in response to the deficiency
letters, EMI sought financial assistance in complying with the
request for additional information from OSM's Small Operator
Assistance Program ("SOAP").4 On July 2, 1986, OSM denied
the permit application before it acted on the SOAP application.
The agency had concluded that the proposed mine would
adversely impact the park by Causing excessive noise and
possibly adverse hydrological consequences.’ On July 30, 1986,
EMI appealed the denial to an administrative law judge ("ALJ").

This began a lengthy period of further review. Because OSM
had not conclusively established a hydrological impact from the
proposed mine, the ALJ asked the parties to work with one
another to provide OSM the information it needed for its
hydrological assessment. OSM also agreed to review EMI's claim
that it enjoyed valid existing rights ("VER") in the property that
relieved it from any ban on mining near the park. At EMI's
request, OSM was ordered to decide the VER claim before EMI
spent any additional funds on complying with OSM's request for
more information. On January 20, 1988, OSM denied the claim
for VER. On February 1, 1988, OSM submitted a revised TDL to
EMI outlining the information it still required.

EMI did not respond to the February 1, 1988 TDL. Instead, it
elected to apply again for SOAP funds. The August 1990
deadline for extending the Cane lease came and went without

* SOAP's purpose "is to provide for eligible operators a
determination of probable hydrologic consequences and a
statement of results of test borings or core samplings which are
required components of the permit application." 30 C.F.R. §
795.1; 30 C.F.R. § 795.6 (listing eligibility requirements for
SOAP).

* Having denied EMI's permit application, OSM then denied
EMI's SOAP application based on 30 CF.R. § 795.6(a)(3) (2001)
(limiting SOAP eligibility to applicants not restricted from obtaining

permit).

| a a

8a

EMI exercising its option. As provided under its terms, the lease
expired on February 28, 1991. Meanwhile, OSM had determined
that any mining on the Cane and Colten lands would "adversely
affect" the park. OSM was concerned about both surface water
and groundwater discharges, and had decided that EMI could not
assuage these concerns.

On August 25, 1993, OSM issued another TDL. Once again,
OSM requested specific information from EMI necessary to
complete its assessment. Although SOAP had funded drilling, a
lineament study, and a fracture analysis, OSM found a number of
deficiencies in the information supplied to the agency. On
February 18, 1994, OSM again informed EMI that a response to
the TDL was essential to the permit review. Finally, on April 13,
1994, OSM denied EMI's permit request.

The plaintiffs then filed suit in the United States Court of
Federal Claims. The plaintiffs contended that the government's
"extraordinary delay" in reviewing the permit application resulted
in Bernos losing both long-term leases. After a trial, the court
issued an opinicn and order dated October 2, 1996 dismissing the
claims of various piaintiffs for jurisdictional reasons. E.
Minerals, 36 Fed. Cl. at 547-48. However, the court rejected the
government's argument that EMI's claim was ripe only as to the
Cane property, the only property for which it sought a permit. Jd.
at 547. The court agreed with the plaintiffs that any effort at
securing a permit for the Colten property would have been futile.
Id.

Addressing the merits of EMI and the Wyatts' claim, the court
held that "extraordinary government delay may result in a
constructive permit denial," and thus a permanent taking. Jd. at
548. The court further held that the delay suffered by EMI and the
Wyatts established a compensable economic impact and that EMI
and the Wyatts had sufficient investment-backed expectations
based on the two permits EMI had received earlier from DSM.
Id. at 550-5].

In an order dated April 21, 1997, the court expounded on its
earlier holding on the issue of liability. The government then
moved for reconsideration. On November 25, 1997, the court

es

9a

granted the motion, but increased the compensation awarded to
EMI and the Wyatts. Ultimately, on December 22, 1998, the court
entered a final judgment awarding damages to both EMI and the
Wyatts. The United States now appeals the judgment of the trial
court, and the plaintiffs cross-appeal.

I]. STANDARD OF REVIEW

In reviewing the judgments of the Court of Federal Claims, this
court examines findings of fact for clear error and reviews legal
conclusions completely and independently. Bass Enterprises
Prod. Co. v. United States, 133 F 3d 893, 895 (Fed. Cir. 1998);
Columbia Gas Sys., Inc. v. United States, 70 F.3d | 244, 1246
(Fed. Cir. 1995). Whether or not a taking has occurred is a
question of law based on factual underpinnings. Alves v. United
States, 133 F.3d 1454, 1456 (Fed. Cir. 1998); Bass Enters.
Prod. Co. v. United States, 133 F.3d 893, 895 (Fed. Cir. 1998);
Whitney Benefits, Inc. v. United States, 926 F.2d 11] 69, 1172-73
(Fed. Cir. 1991). We have jurisdiction over the appeal pursuant
to 28 U.S.C. § 1295¢a)(3).

III. DISCUSSION
A. Scope of the Asserted Taking

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. The Supreme
Court has recognized that the government may "take" private
property by either physical invasion or regulation. Lucas v. S. C.
Coastal Council, 505 U.S. 1003, 1014-15, 120 L. Ed. 2d 798,
112 S. Ct. 2886 (1992); Good v. United States, 189 F.3d ] 355,
1360 (Fed. Cir. 1999).

As discussed above, the plaintiffs in this case allege regulatory
takings by the federal government. It is axiomatic that only
persons with a valid property interest at the time of the taking are
entitled to compensation. Almota Farmers Elevator &
Warehouse Co. v. United States, 409 U.S. 470, 473-74, 35 L.
Ed. 2d 1, 93 S. Ct. 791 (1973); Pro-Eco, Inc. v. Bd. of Comm'rs
of Jay County, Indiana, 57 F.3d 505, 509 (7th Cir. 1995);
Cavin v. United States, 956 F.2d 1 131, 1134 (Fed. Cir. 1992).

10a

In this case, OSM denied the permit in a final action on April 13,
1994. However, EMI voluntarily chose not to renew its leasehold
interest in August of 1990. Thus, as of February 28, 1991, EMI
possessed no valid property interest from which it could assert a
takings claim.

EMI attempts to sidestep this critical requirement by arguing
that the government action constituting the taking occurred in
1990, before the April 13, 1994 final action. In other words, EMI
argues that government delay prior to February 28, 1991
amounted to a permanent taking of its leasehold interest to mine
the Cane property. Indeed, the trial court reasoned that "if a
permit had been granted before August 1990, [EMI] would have
extended the lease for as long as necessary to mine all the
merchantable coal in the ground." E. Minerals, 39 Fed. Cl. at
626. The trial court excused EMI's decision to relinquish its
leasehold interest because it determined that the permit
application, and thus the lease renewal, would have been futile.
However, such speculatory reasoning belies the bedrock
requirement that the existence of a valid property interest is
necessary in all takings claims. See U.S. Const. amend. V. It is
true that the futility exception may sometimes excuse a property
owner from submitting "multiple applications when the manner
in which the first application was rejected makes it clear that no
project will be approved.” Heck v. United States, 134 F.3d 1468,
1472 (Fed. Cir. 1998). However, the futility exception can never
excuse the prerequisite that there exist a valid property ihterest
for all takings cases.

The fact remains that EMI chose to relinquish its leasehold
interest well before OSM's final decision. If EMI had renewed its
lease, it may have been able to assert a permanent taking of its
leasehold interest to mine the Cane property. However, we cannot
allow the voluntary relinquishment of a property interest jo
transform a temporary taking into a permanent. taking.°

° Temporary takings are not different in kind from permanent
takings. First English Evangelical Lutheran Church v. L.A. County
Calif., 482 U.S. 304, 321, 96 L. Ed. 2d 250, 107 S. Ct. 2378 1987)

(continued...)

lla

Moreover, although EMI continued to pursue the permit
application, it never informed OSM that it had relinquished its
leasehold interest. Had OSM been aware of this fact, it would
have been required to deny immediately the permit application
because EMI no longer had a right of access to mine the
property. See 30 C.F.R. § 778.15 (2001). For this reason, EMI
cannot legally assert a permanent takings claim subsequent to
February 28, 1991, and moreover, for the reasons discussed
below, we find that there has been no compensable taking prior
to February 28, 1991.

B. Extraordinary Delay

EMI argues that as of 1990, extraordinary government delay
in processing its permit application constituted a taking.
However, we hold that any delay in processing the permit
application was not sufficiently "extraordinary" to constitute a
taking.

We note that the existence and initiation of permit
proceedings does not itself constitute a taking. Indeed,
government "could hardly go on if to some extent values
incident to property could not be diminished without paying for
every such change in the general law." Pa. Coal Co. v. Mahon,

(...continued)

A temporary taking occurs when what would otherwise be a
permanent taking is temporally cut short. For example, a temporary
taking may occur when a court invalidates a regulation after the
taking has already occurred. See, e.g., Tabb Lakes, Ltd. v. United
States, 10 F.3d 796, 800 (Fed. Cir. 1993). A temporary taking may
also occur when the government elects to discontinue regulations
after a taking has occurred. Tahoe-Sierra Pres. Council, Inc. v.
Tahoe Reg'l. Planning Agency, 216 F.3d 764, 778 (9th Cir. 2000),
cert. granted, /50 L. Ed. 2d 749, 121 S. Ct. 2589 (June 29, 2001).
The essential element of a temporary taking is a finite start and end
to the taking. In this case, as discussed above, the taking ended by act
of law when EMI voluntarily relinquished its valid property interest.
Thus, EMI is only entitled to assert a temporary taking from 1990
(when EMI asserts that OSM began its campaign of "extraordinary
delay") through February 28, 1991 (when EMI gave up its leasehold
interest).

12a

260 U.S. 393, 413, 67 L. Ed. 322, 43 S. Ct. 158 (1922). The
mere requirement that "a person obtain a permit before
engaging in a certain use of his or her property does not itself
‘take’ the property in any sense: after all, the very existence of
a permit system implies that permission may be granted."
United States v. Riverside Bayview Homes, Inc., 474 U.S. 121,
126-27, 88 L. Ed. 2d 419, 106 S. Ct. 455 (1985). Moreover,
mere "fluctuations in value during the process of governmental
decisionmaking, absent extraordinary delay, are incidents of
ownership." First English Evangelical Lutheran Church v. L.A.
County, Calif., 482 U.S. 304, 320, 96 L. Ed. 2d 250, 107 S. Ct.
2378 (1987).

However, it is true that a taking may occur by reason of
"extraordinary delay in governmental decisionmaking." Tabb
Lakes, 10 F.3d at 803. Other courts have recognized that
extraordinary delay must be "substantial" and that the Supreme
Court has condoned delays up to "approximately eight years."
Kawaoka v. City of Arroyo Grande, 17 F.3d 1227, 1233 (9th
Cir. 1994) (citing Williamson County Reg'l Planning Comm'n
v. Hamilton Bank of Johnson City, 473 U.S. 172, 87 L. Ed. 2d
126, 105 S. Ct. 3108 (1985)); see also Tahoe-Sierra, 216 F.3d
at 781-82 (holding that a temporary development moratorium -
of up to forty months did not constitute a temporary taking);
Dufau v. United States, 22 Cl. Ct. 156, 163 (Cl. Ct. 1990)
(holding that permit delay of sixteen months did not constitute
a temporary taking). The length of the delay is not necessarily
the primary factor to be considered when determining whether
there is extraordinary government delay. Because delay is
inherent in complex regulatory permitting schemes, we must
examine the nature of the permitting process as well as the
reasons for any delay. Moreover, it is the rare circumstance that
we will find a taking based on extraordinary delay without a
showing of bad faith. Cf. Tabb Lakes, 10 F.3d at 799.

Complex regulatory schemes often require detailed
information before the issuance of a permit. The nature of the
regulatory scheme is especially critical when the permitting
process requires detailed technical information necessary to
determine environmental impacts. Governmental agencies that

|

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i
TT _ ee

ae ae san

l3a

implement complex permitting schemes should be afforded
significant deference in determining what additional
information is required to satisfy statutorily imposed
obligations. Finally, we must recognize that delay in the
permitting process may be attributable to the applicant as well
as the government.

A brief synopsis of the application process demonstrates that
OSM did not cause any extraordinary delay in this case. EMI
applied for the permit at issue in October of 1984. In December
of 1984, OSM informed EMI that the application was missing
at least twenty-eight items of required administrative
information. In March of 1985, after EMI provided the required
information, OSM informed EMI that the application was
administratively complete. Subsequently, OSM began its
technical review of the application. In May of 1985, OSM
informed EMI that its application did not contain all of the
information necessary to complete the technical review. OSM
requested at least eighteen specific items of information
necessary to complete its technical review. Among other things,
OSM requested that EMI provide documentation demonstrating
that the mining operations (1) would not physically alter the
flow of the nearby Cane Creek, (2) would not chemically alter
the waters, (3) would not adversely impact the biological
ecosystem of Cane Creek, and (4) would not adversely affect
the aesthetic and environmental integrity of the nearby Fall
Creek Falls State Park ("State Park"). One month later, EMI
provided a letter response to the OSM request.

In September of 1985, OSM informed EMI that its letter
failed to include much of the information requested, and that
additional "considerable information" would be necessary. In
December of 1985, OSM informed EMI of at least twenty-nine
specific pieces of information necessary to establish the
environmental impact of mining on Cane Creek and the State
Park. EMI did not respond to the request, and instead, in
January of 1986, applied for SOAP funding. In July of 1986,
OSM denied the permit application based on its conclusion that
the mining operations would cause adverse impacts to the area
due to excessive noise and adverse hydrologic consequences.

~ 14a

EMI then appealed this decision to an ALJ. Throughout 1987,
the appeal progressed before the ALJ. In January of 1988, the
ALJ ordered OSM to provide another detailed TDL explaining
exactly what information was required. OSM issued the
additional TDL in February of 1988.

Again EMI did not respond to the request, and instead applied
for SOAP funding. During the next year, EMI failed to respond
to the February 1988 TDL. In May of-1988, OSM noted that
EMI had not yet responded to the TDL, and informed EMI that
its SOAP application was placed on hold due to the existence
of administrative violations attributable to Bernos. In July of ~
1989, Bernos paid the civil penalties owed on the administrative
violations. Over the next few months, SOAP funds were used
to hire an engineering firm to investigate the hydrology of the
area and prepare a geological report. In April of 1990, EMI
submitted the report to OMS. In July of 1990, OMS informed
EMI that the SOAP report was inadequate and did not address
all of the deficiencies in the application. Specifically, OSM
noted that "little useful data was collected from the phase 1
SOAP study" and informed EMI that additional testing would
be necessary to judge the full hydrological impact of mining
operations. In August of 1990, EMI chose not to extend its
leasehold interest in the Cane property. On February 28, 1991,
EMI's leasehold interest in the Cane property was terminated.

Prior to this date, the record does not support a finding that
there was "extraordinary" government delay. Indeed, the trial
court determined that the delay did not become extraordinary
until late 1990. E. Minerals, 36 Fed. Cl. at 548. The trial court
reasoned that after 1990, "OSM's policy was to stop [EMI's]
development without taking a final action." E. Minerals, 39
Fed. Cl. at 625. However, OSM's decision in July of 1990 to
require additional information does not constitute extraordinary
delay. As discussed above, we recognize that OSM has
considerable technical expertise in determining the level of
information necessary to provide an adequate hydrological
study. OSM determined that the phase 1 SOAP study provided
"very little useful hydrogeologic data" and that additional wells
and pumping tests would be required. As noted, we must afford

lSa

OSM significant deference in determining the extent of
information necessary for a complete hydrogeologic report.
Moreover, we also note that much of the delay through 199]
was caused by the failure of EMI to respond to OSM's requests
for information, and the appellate process before the ALJ.’
Finally, we observe that the trial court's finding of bad faith
delay on the part of OSM throughout the entire permitting
process is inadequately supported. For these reasons, we hold
F that the plaintiff failed to establish the requisite showing of
extraordinary government delay to constitute a temporary taking
prior to February 28, 1991. Any finding by the trial court to the
: contrary is clearly erroneous.

IV. CONCLUSION

Because EMI voluntarily relinquished its leasehold interest on
February 28, 1991, it may only assert a takings claim prior to
that date. There was no extraordinary government delay
sufficient to constitute a taking. Accordingly, we reverse the

judgment of the Court of Federal Claims, and dismiss the cross-
appeals as moot. In view of this conclusion, we need not
consider any of the other arguments submitted by the parties.

REVERSED. COSTS. Nocosts.

el elie ee fod

” We also note that some of the delay was due to EMI's pursuit
of SOAP funding. It is important to point out that SOAP funding is
not a guaranteed right in the permitting process. See 30 U.S.C. §
1257(c) (1994); 30 C.F.R. § 795 (2001). Applying for SOAP funding
is an elective process and does not guarantee that the permit --———
applicant will receive funding.

l6a

Appendix B —-—- Opinion and Order of the United States
Court of Federal Claims Dated and Filed October 2,
1996

EASTERN MINERALS INTERNATIONAL, INC., et al.,
Plaintiffs, v. UNITED STATES OF AMERICA, Defendant.

No. 94-1098 L
UNITED STATES COURT OF FEDERAL CLAIMS

36 Fed. Cl. 541; 1996 U.S. Claims LEXIS 173; 43 ERC
(BNA)1655

October 2, 1996, Filed

COUNSEL: Raymond D. Battocchi and John R. Powell,
McLean, Virginia, for plaintiffs.

Marc A. Smith, United States Department of Justice,
Washington, D.C., for defendant.

JUDGES: Robert H. Hodges, Jr., Judge
OPINION: OPINION & ORDER, HODGES, Judge.

This case is before the court after trial on the merits. Plaintiffs
allege a taking of their property interests, and they seek just
compensation.

Facts

The Wyatts purchased property in eastern Tennessee in 1953.
In 1975, the Wyatts entered an installment contract to sell some
of the land to Milton Bernos, and they retained a royalty
interest. The parties later amended the contract to extend the
closing date and increase the Wyatt's royalty interest to 3.5% of
the gross sales price on all coal mined from the property. The
1975 contract was canceled in 1978.'

' The cancellation agreement provided that in exchange for the
principal payment of $175,000, the Wyatts conveyed 175,000 tons of
coal to Bernos.

17a

Congress enacted the Surface Mining Control and
Reclamation Act in 1977. SMCRA required states to develop
regulatory programs for mining or submit to a federal program.
It also established permitting requirements and prohibited
surface mining without a permit. Until 1982, Tennessee
administered the Act under federal provisions. In August 1982,
Tennessee received conditional approval of a permanent
regulatory program. In 1984, the Interior Department's Office of
Surface Mining assumed direct federal enforcement of
Tennessee's program.

Cane Company bought property from the Wyatts in 1979. The
Wyatts retained a 3.5% royalty interest. Cane leased the
property to Eastern Minerals International, a company that
Bernos formed in 1979. Eastern had the exclusive right to mine
coal on the property. The lease was to expire in February 1991,
but Eastern could extend the lease for four additional ten-year
terms. Colten Company and Van Buren Minerals had a similar
agreement. Van Buren is another company formed by Bernos in
1979,

; The Tennessee Department of Conservation, Division of
Surface Mining granted Eastern two one-year permits to disturb
33 acres of the Cane property to mine underground coal.
Eastern excavated a box cut on the property to mine in the
i Sewanee Seam, and it constructed a sediment pond, a backfill
area, and roads to and from the box cut. The last permit expired
in 1982.

SMCRA prohibits surface coal mining operations that will
adversely affect any publicly owned park, unless it is approved
by regulatory authorities. The Tennessee DSM made no explicit
finding of adverse effect. Defendant contends that the first two
Eastern permit applications were not subject to the adverse
effects provision. According to the Government, the provision

CAA Eat lth Maat ate Sal in saa tea ant ie WAC ves i it

* According to plaintiff, all of the properties purchased by Cane
and Colten were part of the property initially purchased by the Wyatts
and included in the property Bernos contracted to purchase in 1975.
Defendant contends that this fact is irrelevant.

18a

was included in Tennessee's 1982 conditionally approved plan.

Eastern applied to DSM for a third permit in 1982. DSM
denied the permit in 1984, and Eastern appealed to the
Tennessee Board of Reclamation Review. The Tennessee
Commissioner required Eastern to withdraw its application and
submit an administratively complete application. In 1984, the
Office of Surface Mining assumed federal enforcement of
Tennessee's program and set forth the standards applicable in
Tennessee. After that, Eastern submitted its permit application
to OSM rather than to DSM.

OSM denied Eastern's permit on July 2, 1986. Its reasons for
denial were excessive noise and probable hydrologic
consequences. Eastern appealed the permit denial. An
administrative law judge heard the appeal in June 1987. He
asked OSM to make findings concerning hydrologic and noise
impacts. OSM agreed to render a complete decision on adverse
effects including hydrological effect and noise.

Eastern's right to extend its lease expired on August 31, 1990.
Plaintiff did not extend the lease because it did not want to
incur additional rent liability. Eastern believed that OSM would
never grant the permit. Bernos and Eastern continued to pursue
the permit application because they hoped to negotiate a lease
extension with Cane. OSM denied Eastern's permit in April
1994 because Eastern had not provided certain information
requested in a technical deficiency letter.

Plaintiffs' Arguments
Plaintiffs argue that:

(1) They have suffered a categorical taking, relying on the
three-pronged test set forth in Loveladies Harbor, Inc. v. United
States, 28 F.3d 1171, 1179 (Fed. Cir. 1994). According to
plaintiffs, (a) the Government has denied them economically
viable use of their property; (b) they had distinct investment-
backed expectations; and (c) the character of the governmental
action rises to the level of a taking.

(2) Eastern and Van Buren lost their leases as a result of
OSM's refusal to grant Eastern Minerals a permit to mine, and

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19a

the Wyatts' 3.5% royalty interest was rendered worthless. A
taking occurred on or about August 31, 1990, when Eastern lost
its right to extend its lease, because of the Government's
extraordinary delay in rendering a decision on the permit
application.

(3) Bernos entered into a contract to buy property from the
Wyatts to profit from mining coal. Likewise, Eastern and Van
Buren entered into leases with Cane and Colten solely to make
a profit.

(4) The Wyatts purchased the subject property to arrange for
coal mining, and reserved a royalty interest when they
contracted with Bernos and Cane so that they could profit from
the coal mining operations.

(5) Plaintiffs’ expectations were reasonable at all times.
Before SMCRA, no federal permit requirements existed. After
SMCRA, expectations were reasonable because mining had
occurred on the property for many years and permits had been
granted. Plaintiffs’ investment of funds in reliance on the
permits was reasonable.

(6) Coal mining cannot be prohibited on the subject property
by Tennessee's common law nuisance doctrine because mining
occurred regularly from 1953 to 1981. Possible noise and
lowered water quality do not qualify as nuisances.

Defendant's Arguments
Defendant argues that:

(1) Plaintiff Bernos does not have standing because none of
the property interests allegedly taken was owned by Bernos on
the date of taking. Additionally, the permit application that
forms the basis for plaintiffs' claims was filed by Eastern
Minerals and not by Bernos. Even a sole shareholder does not
have standing to assert a claim in his own name for a wrong to
a corporation.

(2) Plaintiffs Mary Anne Wyatt, Nancy Wyatt Zorn, and
Wilson W. Wyatt, Jr. also have no standing to sue because they
did not acquire their interests in the subject property until after

20a

the alleged date of taking.

(3) Plaintiff Van Buren's claims are not ripe because it never
sought a mining permit from OSM.

(4) Plaintiff Eastern Mineral's claims are only partially ripe
because it applied for a permit to mine on only one of its five
tracts. Eastern's failure to apply for permits to mine the other
tracts renders takings claims regarding those tracts premature
and that only claims relating to the lands subsumed in the 1984
permit application are ripe. -

(5) Plaintiffs identify no final agency action on the alleged
date of taking that could trigger a right to just compensation.
Plaintiffs must base regulatory takings claims on final agency
action because a claim cannot be evaluated until the agency has
arrived at a definitive position regarding how to apply the
regulation at issue.

(6) Two final agency actions could form the basis of a takings
claim, but a claim based on either date must fail. Plaintiffs’
mining application was denied in July 1986 and in April 1994.
The 1986 claim is barred by the statute of limitations, and the
1994 claim deprives plaintiffs of standing because they no
longer owned the lease in 1994. Plaintiffs chose ne’*’_r date as
the basis of their claim, but argue that the takir sccurred in
1990.

(7) Delay cannot form the basis of a permanent takings claim.

(8) Plaintiffs have not shown economic impact, investment-
backed expectations, or that the character of governmental
action rises to the level of a taking. Because plaintiffs base their
economic impact argument on extraordinary delay, plaintiffs
can claim only a temporary taking. No case holds that delay can
result in a permanent taking.

(9) Alternatively, plaintiffs or factors beyond government
control caused any extraordinary delay.

(10) Plaintiffs’ interests had no value before the governmental
action; they have not suffered economic impact. The Cane
property had a negative value after applying the discount rate,

_

Ba aa eee MER Ee ee oe

2la

and the Colten property was worth only $270,000. The Wyatt's
royalty interest was worthless,

(11) Plaintiffs do not hold reasonable investment-backed
expectations because the Sewanee coal seam is highly variable
and unpredictable such that no one would have an expectation
of profitably mining the coal on the property. Plaintiffs should
have known that their mining would have adverse effects on the
neighboring state park, and that plaintiffs’ expectations should
have been informed by SMCRA, which was enacted two years
before plaintiffs obtained their interests.

(12) The character of governmental action weighs against
finding a taking because OSM sought to prevent a nuisance.
Plaintiffs’ activities threatened to cause substantial harm in the
community.

Discussion

I. Failure to State a Claim Upon Which Relief Can Be
Granted
A. Standing

Only the owner of property at the time of a taking is entitled
to compensation. Dow v. United States, 357 U.S. 17, 20, 2 L.
Ed. 2d 1109, 78S. Ct. 1039 (1958) (citation omitted). Plaintiff
Bernos is the sole shareholder of plaintiff corporations, but he
did not hold any personal interest in the leases at the time of the
taking. The lease agreements were entered into between Cane
Company and Eastern Minerals, and between Colten Company
and Van Buren Minerals.

Bernos does not have standing via his position as president
and sole shareholder of the companies. A shareholder does not
have standing to assert a claim in his own name for a wrong to
a corporation. Smith Setzer & Sons, Inc. v. South Carolina
Procurement Review Panel, 20 F.3d 1311, 1317 (4th Cir. ] 994)
(citation omitted). As this court recently noted:

“Individuals undertake to establish separate legal entities for
doing business to garner favorable consequences under
federal and state tax and corporatelaw. The voluntary legal
arrangements cannot be invoked for one purpose and

22a
disregarded for another. At least, no party has advocated a
principled reason for doing so. Nor can the property
transfers be deemed ministerial, matters of form, or
otherwise irrelevant to a takings analysis.”

Preseault v. United States, 27 Fed. Cl. 69, 88 n. 11 (1992).
Plaintiff Bernos does not have standing.

The Wyatt children acquired an interest in the subject
property in 1991, over a year after the alleged date of taking. As
they did not own an interest on the date of taking, the Wyatt
children do not have standing to sue here.

B. Ripeness
1. Eastern Minerals

Eastern's claim is based on five separate tracts of land, but it
submitted a permit application for only one tract. According to
defendant, this renders Eastern's claims as to the other four
tracts unripe.

In cases involving a legislatively-established application
process, the takings claim normally does not arise "until after
a permit has been sought and denied and the effect of the denial
results in economic detriment." Conant v. United States, 12 Cl.
Ct. 689, 691-92 (1987). Plaintiffs are not required toexhaust
such procedures if it would be futile to do so. Jd. at 693.

The futility exception serves "to protect property owners from
being required to submit multiple applications when the manner
in which the first application was rejected makes it clear that no
project will be approved." Southern Pacific v. Los Angeles, 922
F.2d 498, 504 (9th Cir. 1990), cert denied, 502 U.S. 943, 116 L.
Ed. 2d 333, 112 S. Ct. 382 (1991). Additional filings in this
case would have been wasteful until plaintiffs knew the
Government's position on the first application. Plaintiffs were
not required to file additional permit applications before the
Government had decided the merits of the first application.

Other proposals would have been denied by OSM. Various
federal and state offices were opposed to any mining on the
subject properties, and OSM's broad reading of the "adverse

23a

—
effects" provision made it unlikely that Eastern would obtain a
permit to mine any of the tracts.

Moreover, Eastern did not need permits for the other tracts.
Most of the Sewanee coal on the property could have been
reached from the single 33-acre surface mining operation
covered by the one permit application. Eastern's claim is ripe
for adjudication.

2. Van Buren

The Government asserts that Van Buren's claim is not ripe for
adjudication because it did not submit a separate permit
application. Plaintiffs argue that submitting a separate
application would have been futile because Van Buren would
have faced the same problems that Eastern encountered.
According to plaintiff, mining the Van Buren coal after the
Eastern tracts was the most profitable use of the land.

A!though Van Buren may have faced the same delay Eastern
endured, this is the sort of speculation that the ripeness doctrine
seeks to avoid. See Southern Pacific, 922 F.2d at 504. Each
plaintiff must satisfy the threshold requirement of a single
meaningful application to maintain the futility exception. Id.
We do not wish to read the meaningful proposal requirement so
narrowly as to allow legal technicalities to undermine common-
sense justice, but the Government was entitled to have
meaningful notice of Van Buren's potential interest. Van
Buren's claim is not ripe.

II. Necessity of Final Agency Action

The Government argues that a takings claim cannot be
evaluated until an agency has arrived at a final position
regarding how the regulation at issue will apply. See
Williamson County Regional Planning Com'n v. Hamilton Bank
of Johnson City, 473 U.S. 172, 190-91, 87 L. Ed. 2d 126, 105S.
Ct. 3108 (1985). Because plaintiffs identify two final agency
actions but base their claim on neither, the Government argues
that plaintiffs fail to state a claim. According to defendant, if
plaintiffs did base their claim on either final agency action, the
claim would be barred by the statute of limitations or by the

24a
principle that a plaintiff must own an interest in the property on
the date of the taking.

Plaintiffs base their takings claim on a theory of
extraordinary government delay that rendered their lease
interests valueless. The Government recognizes that courts have
found delay to be a basis for temporary takings, but never for a

7 - permanent taking. That no court has found a fact situation that
supports such a theory does not necessarily mean that the
concept does not exist. Were defendant's theory to prevail, the
Government could withhold action on a permit indefinitely and
avoid liability for a taking. The Government would have no
incentive to consider a permit application in a timely manner.

Plaintiffs’ 1984 permit application was not denied until 1994.
According to plaintiffs, government delay became extraordinary
in 1990. Extraordinary delay in the permit review process can
result in a permanent taking without the necessity of final
agency action. The delay becomes extraordinary at some point
and results in a constructive permit denial that supplants final
agency action. Plaintiffs have stated a claim upon which relief
can be granted.’

III. Regulatory Takings Merits-Analysis

The Federal Circuit has adopted a two-tiered approach to
analyzing takings claims. See M & J Coal Co. v. United States,
47 F.3d 1148, 1153-54, cert. denied, 133 L. Ed. 2d 18, 116 S.
Ct. 53 (1995). First, we must determine whether the proscribed
activity is a "stick" in plaintiffs’ bundle of property rights. /d. at
1154 (citing Lucas v. South Carolina Coastal Council, 505 U.S.
1003, 1027, 120 L. Ed. 2d 798, 112 S. Ct. 2886 (1992)). If so,
we consider whether the Government has interfered with the
right such that it must pay compensation. Id. Considerations
relevant to the second tier include the economic impact of the
regulation, whether the regulation interfered with distinct

> Plaintiffs base their claim on extraordinary delay beginning in
1990 rather than the 1986 permit denial, so we need not address the
Government's statute of limitations argument. If the taking occurred
in 1990, the claim is not barred by the statute of limitations.

25a

investment-backed expectations, and the character of the
governmental action. Id. (citing Penn Central Transportation
Co. v. New York, 438 U.S. 104, 124, 57 L. Ed. 2d 631, 98S. Ct
2646 (1978)).

A. Property Rights

Property rights are determined by state and common law.
Store Safe Redlands Associates v. United States, 35 Fed. Cl
726, 1996 WL 325922 * 7 (Fed. Cl. 1996) (citing Lucas, 505
U.S. at 1030).

The Cane and Colten leases executed in 1979 gave Eastern
the right to remove "all coal and other minerals included in the
Landlord's Estates, whether or not now known to exist..."
According to Tennessee law, a lease conveying mineral rights
provides the lessee with a real property interest in the minerals.
See Bates v. Georgia Fertilizer Co., 144 Tenn. 32, 229 S.W.
153, 157 (Tenn. 1921); Stanton v. Herbert & Sons, 141 Tenn.
440, 211 SW. 353 (Tenn. 1919).

Tennessee recognizes that a royalty interest is "classified as
realty." J.M. Huber Corp. v. Square Enterprises Inc., 645
S.W.2d 410, 413 (Tenn. Ct. App. 1982). The right to receive a
royalty constitutes a real property interest in the mineral estate.
Id. Under Tennessee law, both Eastern Minerals and the Wyatts
owned property interests.

Citing Lucas, the Government argues that plaintiffs must first
establish that they had a compensable expectancy to be free of
the regulatory requirements imposed on mining in order to
establish a regulatory taking. According to defendant, SMCRA
and longstanding Federal and State regulations preclude the
possibility that the property interests could have entailed the
right to be free of regulatory control. This theory was rejected
in Store Safe.

Plaintiffs argue that neither SMCRA nor the pre-existing
State/Federal regulatory atmosphere had any impact on their
property interests. We agree. Mere awareness that Eastern's
permits could be affected by future regulations does not destroy
plaintiffs’ property interests. Plaintiffs who choose to do

Dian i ele a ce

26a

business in a heavily regulated industry do not forfeit all
property interests.

The reasonableness of plaintiffs’ investment backed
expectations relates to whether government regulation effected
a taking of their property interest rather than whether plaintiffs
owned acompensable property interest. Store Safe Redlands, 35
Fed. Cl. 726, 1996 WL 325922 *8.

B. Government Interference
1. Economic Impact

Plaintiffs argue that as a result of the Government's
extraordinary delay, their lease interests were rendered
valueless. Defendant contends that it is not responsible for
plaintiffs' voluntary relinquishment of their leases. Plaintiffs
could not be expected to have renewed the leases if they were
reasonably certain that necessary permits would not be granted.
Extraordinary government delay may result in a constructive
permit denial. Otherwise, the Government could delay action on
a permit indefinitely and the property owner would have no
recourse. Plaintiffs satisfy the economic impact prong where a
delay is truly extraordinary.

Eastern resubmitted its permit application to OSM in October
1984. In December, OSM informed Bernos that Eastern's permit
application was deficient. In March 1985, OSM told Eastern
that its application was administratively complete, but that a
permit would not be issued if the mining operation would
adversely affect the park.

OSM sent Eastern a technical deficiency letter in May 1985.
Eastern responded on June 25. An OSM official anticipated that
a permit would be issuéd by November 1, and he requested a
compliance review.

In December 1985, OSM asked for additional technical
information. Rather than responding formally, Eastern applied
to OSM for funds under the Small Operator Assistance

27a

Program.* Under that program, OSM conducts necessary
drilling and testing for small operators.

Several Tennessee agencies and one Federal agency expressed
concems regarding plaintiffs' proposed operations. An
employee's note to the file referenced state Opposition and lack
of additional technical information necessary to grant the
permit. OSM denied Eastern's permit on July 2, 1986. Eastern
appealed on July 30. An administrative law judge heard the
appeal in June 1987, and directed OSM to inform Eastern of
any additional information it needed to decide the permit
application. In February 1988, OSM issued a technical
deficiency letter. Plaintiffs reapplied for SOAP funds.

In 1988 and 1989, OSM suspended plaintiffs’ application for
SOAP funds several times. By late 1989, OSM lifted the
Suspension and began developing the SOAP project. SOAP
engaged a consulting group to conduct tests and prepare a report
for OSM.

The consulting group issued a preliminary report in December
1989. OSM rejected the report because it believed that the
report was flawed. OSM spent the next several years attempting
to develop specifications for a project that would produce the
hydrologic and geologic information needed for Eastern's
permit application.

- In October 1990, two months after plaintiffs’ right to extend
the leases expired, OSM determined that it was necessary to
conduct a fracture analysis on plaintiffs' property, and it
received a bid for the work. A final report on the fracture
analysis was submitted to OSM in February 1992, but OSM did
not accept the results of this test. A year and a half later, OSM
sent Eastern a third technical deficiency letter.

In 1991, the parties filed a joint request with the

* The Government argued that plaintiffs were not eligible for SOAP
funds because they planned to mine more than the maximum allowed.
If plaintiffs had mined more than the maximum amount, the only
sanction would have been reimbursement of the SOAP funds.

28a

Administrative Law Judge for a consent decision. The motion
noted that "the permit denial of July 2, 1986 has been
effectively withdrawn . . . all that remains is OSM's review of
EMC Permit Application. . . ." The administrative law judge
issued a consent decision incorporating the motion. At the time,
OSM was still reviewing the Eastern application that it received
in 1984.

Plaintiffs’ right to extend the leases expired on August 31,
1990. Plaintiffs did not extend the lease because they did not
want to incur rent liability; it seemed to them that OSM would
never grant the permit. After their nght to extend the lease
expired, Bernos and Eastern continued to pursue-the permit
application in hope that they could negotiate a new lease with
Cane. In April 1994, OSM denied Eastern's permit because it
had not provided the information requested in the third
technical deficiency letter.

The Government delayed consideration of plaintiffs’ permit
application for an extraordinary length of time. Plaintiffs
relinquished their lease interests because they believed the
permits would never be granted and could not afford to incur
rent liability in the mere hope that the Government would act.
We determined at trial that the Government had no intention of
ever granting the permit. The fact that the leases were
relinquished voluntarily may affect our calculation of just
compensation, but it does not deprive plaintiffs of the necessary
showing of economic impact.

2. Investment-Backed Expectations

Plaintiffs must show that they took an interest in the property
"in reliance on a state of affairs that did not include the
challenged regulatory regime." Loveladies, 28 F.3d at 1177.
One who obtains an interest in property with knowledge of a
restraint does not have a reliance interest and has assumed the
risk of economic loss. Jd.

Plaintiffs obtained the leases in 1979, two years after SMCRA
was enacted. They obtained two permits during the interim

29a

phase of SMCRA in 1980 and 1981.5 The Government argues
that the provision that prohibits any adverse effects on public
parks did not apply when those permits were issued, but that
plaintiffs should have known that the provision eventually
would be enforced. Thus, they are deprived of investment-
backed expectations.

The adverse effects provision was enforced during the interim
phase of SMCRA. See Hodel v. Virginia Surface Mining &
Reclamation Ass'n Inc., 452 U.S. 264, 69 L. Ed. 2d 1, 1018. Ct.
2352 (1981). In Hodel, the Court noted that provisions of
SMCRA, including the adverse effects provision, are effective
during the interim period on their own terms. Jd. at 269 & n.2.

Tennessee's 1982 conditionally approved permanent
regulatory program expanded the definition of adverse effect.
Plaintiffs' permit was denied in 1986 after the Office of Surface
Mining assumed direct federal enforcement of Tennessee's
program. Plaintiffs leased the property in reliance on a state of
affairs that did not include the definition of adverse effect that
formed the basis of the permit denial. Plaintiffs reasonably
relied on the two permits they received under SMCRA when
they invested in the property.

Defendant argues that the Sewanee coal seam is so highly
variable and unpredictable that plaintiffs’ expectation of profit
was unreasonable. At the same time, it emphasizes that Wyatt
sold the Cane property for more than $5 million and that Bernos
sold his mineral interest in the Colten property for $ 2.5 million.
We assume that these market prices accurately reflect value.
Evidence at trial showed that plaintiffs were not unreasonable
in expecting that the subject land contained coal and that coal
exploration would be profitable. Plaintiffs' investment in the
box cut and other activities with the expectation of gaining

* SMCRA was implemented in an interim and a permanent phase.
The interim program mandated enforcement of only some of the Act's
provisions whereas during the permanent phase, a regulatory program
mandating compliance with all of the federal standards was adopted for
each state.

30a

profit was reasonable.
3. Character of Governmental Action

This prong of the regulatory takings analysis addresses the
degree and result of a regulation. Plaintiffs must show that "the
government action went beyond the type of government land-
use regulation that is a cost all citizens must pay for living in
organized society." Bowles v. United States, 23 Cl. Ct. 443,
446-47 (1991) (citing Pennsylvania Coal Co. v. Mahon, 260
U.S. 393, 413, 415-16, 67 L. Ed. 322, 43 S. Ct. 158 (1922)).
This inquiry:

“examines the challenged restraint under the lens of state

nuisance law. If the regulation prevents what would or

legally could have been a nuisance, then no taking occurred.

The state merely acted to protect the public under its

inherent police powers.”

Creppel v. United States, 41 F.3d 627, 631 (Fed. Cir. 1994).

To show that plaintiffs’ planned activities are prohibited under
the state's common law nuisance doctrine, the Government
must "identify background principles of nuisance and property
law that prohibit the uses [the landowner] now intends in the
circumstances in which the property is presently found." Lucas,
505 U.S. at 1031.

A per se nuisance is one in which the injury is certain rather
than speculative. State v. Feezell, 218 Tenn. 17, 400 S.W.2d
716, 719 (1966). "Where injury from a nuisance is not real and
immediate and certain to occur, but only uncertain or
contingent, the nuisance will not be enjoined anticipatory to its
going into operation.” Id. Coal mining is not a per se nuisance,
and the Government did not show that injury to property from
plaintiffs’ activities was certain.

Coal has been mined on the Wyatt's property since at least
1954. "The fact that a particular use has long been engaged in
by similarly situated owners ordinarily imports a lack of any
common-law prohibition." Lucas, 505 U.S. at 1031.

- Coal mining may constitute a nuisance in certain

3la

circumstances, but the Government presented no convincing
evidence that plaintiffs’ proposed activities would constitute a
nuisance. Defendant argues that OSM prevented the proposed
mining operation from causing "nuisance-like" impacts upon a
nearby state park from water pollution and noise. According to
defendant, plaintiffs’ mining operation threatened to cause
substantial harm in the community and to endanger public
health and safety. It cites various statutes that identify pollution
and noise as nuisances under Tennessee law. In fact, neither the
noise nor the hydrology concerns that OSM raised constituted ‘
a nuisance.

Tennessee granted permits to mine in 1980 and 1981. The
State was not concerned with potential nuisance problems.
Plaintiffs' 1984 permit was denied on the basis of "adverse
effects." These adverse effects never were proven and cannot
form the basis for a nuisance exception to takings law.

Conclusion

The claims of plaintiffs Bernos, Van Buren Minerals, Mary
Anne Wyatt, Nancy Wyatt Zorn, and Wilson W. Wyatt, Jr., are
dismissed for the reasons stated. The property interests of
plaintiffs Eastern Minerals International, Wilson W. Wyatt, Sr.,
and Anne D. Wyatt were rendered valueless through
extraordinary delay by the United States in acting on their
permit requests. The parties will agree on an appropriate
valuation for the property taken and notify the court no later
than November 1. We are available at any time to assist counsel
in determining damages if necessary.

Robert H. Hodges, Jr. Judge

32a

Appendix C ~—— Opinion and Order of the United States
Court of Federal Claims Dated and Filed November
25, 1997

EASTERN MINERALS INTERNATIONAL, INC., et al.,
Plaintiffs, v UNITED STATES OF AMERICA, Defendant.

No. 94-1098 L
UNITED STATES COURT OF FEDERAL CLAIMS

39 Fed. Cl. 621; 1997 U.S. Claims LEXIS 271; 140 Oil &
GasRep. 59

November 25, 1997, Filed

COUNSEL: Raymond D. Battocchi, John R. Powell, McLean,
Virginia, for plaintiffs.

Marc A. Smith, United States Department of Justice,
Washington, D.C., for defendant.

OPINIONBY: Robert H. Hodges, Jr.
OPINION: OPINION & ORDER, HODGES, Judge.

This case involves a taking by the United States of plaintiffs’
right to mine coal in Tennessee. After plaintiffs made
substantial investments in a mineral lease and in preparing the
land, the Government destroyed the fruits of those investments
by purposely delaying action on plaintiffs' application until after
their lease expired. The United States took plaintiffs’ right to
mine coal and their night to renew the mining lease.

We dismissed the claims of plaintiffs Milton Bernos Sr., Van
Buren Minerals, Mary Ann Wyatt, Nancy Wyatt Zorn, and
Wilson W. Wyatt, Jr. See Eastern Minerals International, Inc.
v. United States, 36 Fed. Cl. 54] (1996). Van Buren's claim is
not ripe for adjudication, so the value of the coal seams on the
Colten property is not included in our damages valuation. Jd.
at 548. We enter judgment for plaintiffs Wilson W. Wyatt, Sr.,
Anne D. Wyatt, and Eastern Minerals International, Inc.

33a

Facts

Cane Tennessee, Inc. bought the property at issue from
Wilson W. Wyatt, Sr., and Anne D. Wyatt in 1979. The Wyatts
retained a 3.5% mineral royalty interest. Cane leased the
property in 1979 to Eastern Minerals International, Inc., a
company formed by Milton Bernos, Jr. Eastern had the
exclusive right to mine coal on the property. The lease was to
expire in February 1991, but Eastern had the right to extend the
lease for four additional ten-year terms. The right to extend the
lease expired in August 1990.

The Tennessee Department of Conservation, Division of
Surface Mining, granted Eastern two one-year permits in 1980
and 1981 to disturb 33 acres of the Cane property to mine the
Sewanee seam. Eastern excavated a box cut on the property and -
constructed a sediment pond, a backfill area, and roads to and
from the box cut.

Eastern applied for a third permit in 1982, and Tennessee
denied the permit in May 1984. Pursuant to a consent order
before the Tennessee Board of Reclamation Review, Eastern
withdrew its application. The United States Office of Surface
Mining (OSM) assumed federal enforcement of Tennessee's
program in late 1984. Eastern then submitted its permit
application to OSM rather than to the state agency.

OSM's standard practice was to respond promptly when it
received a permit application. The first step in the application
review process was to determine whether the applications were
administratively complete. Most applications contained errors,
so OSM dealt with deficiencies on a regular basis. Despite this
practice, OSM required six months to determine that Eastern's
application was administratively complete.

OSM sent two technical deficiency letters to Eastern in 1985.
In response, Eastern applied to OSM for monetary assistance in
obtaining the required information. The application for
assistance was placed on hold because OSM was planning to
deny the permit.

OSM denied Eastern's permit in July 1986, ostensibly because

34a

the noise of the mine could have an adverse impact on a nearby
state park. This was Tennessee's concern, not OSM's. Eastern
appealed the permit denial. The administrative law judge who
heard the appeal in June 1987 was not impressed by OSM's
noise allegations. OSM raised hydrological concerns in the
permit denial letter, but lacked data to support them. Because
the judge did not want to resolve the case "piecemeal," he asked
OSM to make findings concerning the alleged hydrological
impacts. He directed OSM to inform plaintiffs promptly what
hydrological information it needed. OSM consumed four years
pursuing that information.

Eastern's right to extend its lease expired on August 31, 1990.
It did not extend the lease because it believed that OSM would
never grant the permit. In fact, OSM never would have granted
the permit. The Government would not have approved the coal
mine because Tennessee did not want it near a state park.

Unreasonable Delay in Denial

The Tennessee Wildlife Resources Agency expressed
opposition to the Eastern Minerals permit in 1984.' The State
felt that the mine would have adverse impacts on Fall Creek
Falls State Park and on the recreation, hunting, and fishing
experiences of visitors to the park. Because the State had joint
reviewing authority for the permit under the applicable
regulations, Eastern's permit would not be granted if the State
objected.’

' "Because the [Department of Conservation] is concerned with
maintaining the aesthetic and environmental integrity of the Park . .
. we would recommend that mining regulatory authorities (DSM or
OSM) deny any request to mine this site."; See also Defendant's
Exhibit 194 ("Our [Tennessee's] position remains that the permit be
denied.")

2 The State's opposition continued throughout the permit
application process. The Commissioner of the Tennessee Department
of Conservation wrote Mr. Bernos in 1989, pointing out that the
department had opposed Eastern's permit in writing five separate

(continued...)

35a

Eastern sought aid from OSM in obtaining the information
that the agency was requiring. The Small Operator Assistance
Program (SOAP) was available to provide such assistance.
Before the SOAP program could begin studies to provide the
necessary hydrological information, the SOAP application was
placed on hold and then denied when OSM denied Eastern's
permit in 1986. The permit was denied before SOAP studies
could be commissioned to provide information. OSM's standard
practice was to make a technical decision only after it had
received all the information it needed.

An internal OSM memorandum dated July 1985 states that
because OSM did not have a strong defense to points raised by
Eastern in its response to a technical deficiency letter, OSM
“would have to hang [its'] hat[] elsewhere."? OSM denied
Eastern's application in 1986, for adverse noise impact on Fall
Creek Falls State Park. An administrative law judge ruled that
the 1986 denial of the permit was premature because OSM did
not have all the information necessary regarding the
hydrological impact question. OSM requested additional
information from Eastern to supplement the hydrological
impact information.

After appeal of the permit denial, the SOAP process began
again. In May 1988, an OSM attomey placed the SOAP
application on hold because of an outstanding reclamation order
on the Eastern box cut. This reclamation order and an
accompanying cessation order had been issued in 1986 when
the permit was denied by OSM. Despite the appeal before the
Office of Hearings and Appeals, OSM used the reclamation
order as a reason for delaying the SOAP application. In
September 1988, the SOAP study was placed on hold, this time

_+..continued)
times. Despite the studies being conducted, the Commissioner
concluded by stating that "the department must continue its stated
Opposition to any proposed Mining in this area.”

* In other words, in order to stop this project, OSM would have
to find another basis for denying the permit.

36a

to determine if the study would be worth the expense. The
SOAP study was placed on hold yet again in May 1989 due to
another outstanding reclamation order. The issues were resolved
and the SOAP process resumed.

SOAP personnel and OSM permitting personnel collaborated
to determine what studies were necessary to satisfy the
hydrological impact question. Despite close coordination
between the two, the Permitting Division said that it was not
satisfied with SOAP's report. In

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386009_1113%3A1. Public record. Not legal advice.