Opposition Brief — Gurney v. United States, 41 Fed. Cl. 2366 (1998) (No. 97-1440)

No. 97-1440

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OCTOBER TERM, 1997

CLIFFORD F. GURNEY, ET AL., PETITIONERS

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

SETH P. WAXMAN

Solicitor General

Counsel of Record

FRANK W. HUNGER

Assistant Attorney Gene ral

DOUGLAS N. LETTER

JEFFREY CLAIR

Attorneys

De partment of Justice

Washington, D.C. 20520-0001

(202) 514-2217

QUESTION PRESENTED

Whether the espousal and settlement of claims

asserted by United States nationals against the Gov-

ernment of Iran resulted in a “taking” of property

requiring just compensation under the Fifth Amend-

ment.

(I)

TABLE OF CONTENTS

Page

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TABLE OF AUTHORITIES

Cases:

Andrus v. Allard, 444 U.S. 51 (1979) ..................0088 15

Dames & Moore v. Regan, 453 U.S. 654 (1981) 2 11.17

Goldblatt v. Hempstead, 369 U.S. 590 (1962) .......... 15

Gray v. United States, 21 Ct. Cl. 340 (18886) ............ 17

Keystone Bituminous Coal Ass’n v. DeBenedictis,

UE is A ai oii icseancecebions 13-14, 15, 16

Loretto v. Teleprompter Manhattan CATV Corp.,

SE IE CO UUEE Wilisdiiendacsnsictakssunsincentvenietasseseesdcens 16

Lucas v. South Carolina Coastal Council, 505 U.S.

UE SENET il cisbasiichdthsicendcdsnnbdendinsaapieintereswebisarsensests 16

Meade vy. United States, 2 Ct. Cl. 224 (1866), aff'd,

Be ee ee Ee WED CRIED ckcinicccdersabancadsvoascoersconsese 10

Monogahela Nav. Co. v. United States, 148 U.S.

IIE ictal wi tinicha sahcndti ccinsia snes Ceanssabsnenkecekscsessnts 11-12

National Bd. of Young Men’s Christian Ass’ns v.

United States, 395 U.S. 85 (1969) .................. 9-10, 12, 13

New York Cent. R.R. v. White, 243 U.S. 188

GE EF sanivedibApahonhiniintshnnenatntnsiracehinesiiatviavacssnrntsbercearsece 19-20

Penn Cent. Transp. Co. v. New York City, 438

ee SED cidlitstindisdedecksacdbestheckinhdaiughennsieesens a 8

Pennsylvania Coal Co. v. Mahon, 260 U.S. 393

SINE Mth eiihc hits bicndnchickinnsidivkukiouinks tonbaecceasesosecsess 14

Pittsburg Steel Co. v. Baltimore Eq. Soc’y., 226

I I co is bck aadadicdasdinenincimbaneabandanbageres 18

(IIT)

IV

Cases—Continued: Page

Regional Rail Reorganization Act Cases, 419 U.S.

PEE C PURUEE .sGccidsnravicssceenicnerninssaigatamiataccbeadescinienneiedens 11

Suitum v. Tahoe Reg’l Planning Agency, 117

Bh Shs We RGD. satcaccniinepasticcansashpheraauaddsaiibeianerneses 15

United States v. Belmont, 301 U.S. 324 (1987) ........ 17

United States v. Pink, 315 U.S. 203 (1942) ............. 17

United States v. Sperry Corp., 493 U.S. 52

CT UNNUTE ‘ccvinssivnsdshinSehadwiaebsabdadionasanadabuoioabeeeianteisnes 16, 18, 20

Ware v. Hylton, 3 U.S. (3 Dall.) 199 (1796) ............. 18

Constitution, treaty, and statutes:

U.S. Const. Amend. V (Takings Clause) ............... 2, 8, 9,

10, 11, 12, 13, 18

Declaration of the Government of the Democratic

and Popular Republic of Algeria Relating to the

Commitments Made by Iran and the United States,

SD FSi is Se I) ascdktaeninvadtintcnadnetionincsammneiaaian 3

GG SC0 hy ee ReRAis UIE bckiceescsahsvininensnectanincsenccces 4

Declaration of the Government of the Democratic

and Popular Republic of Algeria Concerning the

Settlement of Claims by the Government of the

United States of America and the Government of

the Islamic Republic of Iran, 20 I.L.M. 230 (1981) ... 3

BE Se RL MUP ccoonci vatacctscchcbdinantclitasesaniccontvs 3

BG RETA ic Bee ie Pe havnakcdcdascasabihntchaviscecebeenins 3

BG FE; Te CR BD cidkadisicacccistanidciiciintsentaian 3

BK, Sat ee As BOE iccintaneuiesinnamserondhaaanenobina 3

BPR. Rats ee Reais MEE watitsissnsKtecinvoestienioniccsounis 3

BAG Sets He Paks SUA. Keccncienineritsncalamraciectiniices 4

International Claims Settlement Act of 1949, 22 U.S.C.

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Bee Saha INE Hath cnetsccaibiiddeiehiecendvemmaboctiniibadiniens 5

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BE SI aa: PE dssidnceenioxnccnwnecdncainanttabseankanmbhegouss 5

Be REA WEEE Sncsusdssnscscnachdtmtdnisciernacagsioebinn 5

Be Ee ED, Sitinvkdgccaarsscnegsinievebdincdapenanieaniins 5

Be RFs DE bhidhnctnssnnestecnichsndsasaeaucesnbidanee nied 5

BE Ria hs WET. shb-tahixasckedngbbisssypilenpibtiisanionkbunndicmti 5

Statutes—Continued: Page

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ES er. SOLS sechouksusgpnentaneacsiscnpensiebinbiacinnée 6

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Oe TE FA. HIRI kainicicdetcinssennanitebeseqnevianvicanines 6,8

Foreign Relations Authorization Act, Pub. L. No. 99-

93, Tit. V, § 501, 99 Stat. 437 (50 U.S.C. 1701

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Sek I ee ES ic: i achecaegchaanpiosacinsepsasbinanenhs 5

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Miscellaneous:

Louis Henkin, Foreign Affairs and the Constitution

CBITID isk visscucacdiansssorsndunksstavebssounbbastidinaieancedeneshtariven 17

Restatement (Second) of Foreign Relations Law of

the United States (1965) ...........cscccccccsscosccccceveseeccens 2

U.S. Dep’t of Justice, Foreign Claims Settlement

Commission of the United States Annual Report

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eitiiaae : . RO eK 1 CR ae ete RE Rae AE et th ee

In the Supreme Court of the Anited States

OCTOBER TERM, 1997

No. 97-1440

CLIFFORD F. GURNEY, ET AL., PETITIONERS

v.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. la-

17a) is not yet reported. The opinion of the Court of

Federal Claims (Pet. App. 18a-29a) is reported at 36

Fed. Cl. 482.

JURISDICTION

The judgment of the court of appeals was entered on

December 4, 1997. The petition for a writ of certio-

rari was filed on March 3, 1998. The jurisdiction of

this Court is invoked under 28 U.S.C. 1254(1).

STATEMENT

Petitioners are United States nationals who assert

that their property interests were damaged or im-

(1)

paired by the Government of Iran during the Islamic

revolution. In 1990, petitioners’ claims against Iran,

along with similar claims of other United States

nationals, were espoused by the United States and

settled for a lump sum payment.’ The United States,

through the Foreign Claims Settlement Commission,

then adjudicated each United States national’s claim

and made awards, which were paid on a pro rata basis

out of the settlement proceeds. Petitioners maintain

that those payments do not reflect the full value of

their claims. They therefore contend that the United

States’ espousal of their claims was a “taking” of

their property without just compensation, in violation

of the Fifth Amendment. Pet. App. la-6a.

1. On November 4, 1979, the American Embassy in

Tehran was seized and American personnel were

taken hostage. In response, the President of the

United States, among other actions, blocked the

transfer or removal of all assets of the government of

Iran subject to the jurisdiction of the United States.

To resolve the ensuing diplomatic crisis, the United

States and Iran entered into an international agree-

ment that took the form of adherence to a series of

declarations by the Democratic and Popular Republic

of Algeria. This agreement, known as the Algiers

Accords, generally provided for the release of hos-

tages and return of Iranian assets. See Dames &

Moore v. Regan, 453 U.S. 654, 662-666 (1981).

| “A claim is espoused by the United States * * * when

the government of the United States, usually through diplo-

matic channels, makes it the subject of a formal claim for repa-

ration to be paid to the United States by the government of the

state responsible for the injury.” Restatement (Second) of

Foreign Relations Law of the United States § 211 cmt. b (1965).

The Accords also established procedures for resolv-

ing claims asserted by United States nationals who

alleged that their property, contract rights, or other

interests were impaired by Iran in the course of

events surrounding the breach in relations between

the two nations. The Accords provided that the two

governments would terminate litigation brought by

their nationals against the other government and

instead seek to resolve such claims through binding

arbitration. Declaration of the Government of the

Democratic and Popular Republic of Algeria Relating

to the Commitments Made by Iran and the United

States, 20 I.L.M. 223, 224 (1981) (Iran-U.S. Commit-

ments).

To further that goal, the Accords established at

The Hague the Iran-United States Claims Tribunal,

an international arbitral tribunal authorized to hear,

among other matters, claims by the United States or

United States nationals against the Government of

Iran. Declaration of the Government of the Demo-

cratic and Popular Republic of Algeria Concerning

the Settlement of Claims by the Government of the

United States of America and the Government of the

Islamic Republic of Iran, art. II(1), 20 I.L.M. 230 (1981)

(Iran-U.S. Settlement). The Tribunal was authorized

to arbitrate any claim not settled within six months

and to enter a final and binding arbitral award. Id.,

arts. I, 11(1), [V, 20 I.L.M. at 230-232.

The Accords gave the Tribunal jurisdiction over

claims of United States nationals “aris[ing] out of

debts, contracts, * * * expropriations or other

measures affecting property rights.” Iran-U.S. Set-

tlement, art. II(1), 20 I.L.M. at 231. They also gave

the Tribunal jurisdiction over certain government-to-

government disputes arising out of contractual ar-

rangements for the purchase and sale of goods and

services. I/d., art. I1(2), 20 I.L.M. at 231. Claims of

United States nationals of less than $250,000 were to

be presented to the Tribunal by the United States

government. /d., art. I11(3), 20 I.L.M. at 231. Larger

claims were to be presented by the claimants them-

selves. /bid. Finally, the Accords established a secu-

rity account, initially funded with $1 billion of pre-

viously blocked Iranian assets, to ensure payment of

Tribunal awards in favor of the United States and

United States nationals. Iran-U.S. Commitments,

Point 1(7), 20 I.L.M. at 226.

2. The United States negotiated with Iran to

resolve the small claims of United States nationals

and certain other claims of the government of the

United States.

a. In anticipation of a settlement of those claims,

Congress passed legislation in 1985 giving the For-

eign Claims Settlement Commission jurisdiction to

adjudicate the individual small claims of United

States nationals in the event that the United States

and Iran reached an agreement settling all such

claims for one lump sum. Foreign Relations Authori-

zation Act, Pub. L. No. 99-93, Tit. V, § 501, 99 Stat.

437, 50 U.S.C. 1701 note. The Foreign Claims Settle-

ment Commission is an independent agency estab-

lished within the Executive Branch and now located

within the Department of Justice. International

Claims Settlement Act of 1949, 22 U.S.C. 1621 et seq.

It has jurisdiction to “receive, examine, adjudicate,

and render final decisions” with respect to certain

individual claims of the United States and United

States nationals against a foreign government where

the United States has agreed to settle a set of such

claims en bloc, through the receipt of a lump sum

payment. 22 U.S.C. 1623(a).

In deciding individual claims, the Commission is

directed first to apply the provisions of the pertinent

claims agreement and then to apply principles of

international law, justice, and equity. 22 U.S.C.

1623(a). Members of the Commission are empowered

to take evidence and to examine witnesses in the

course of adjudicating each claim. The decision-ma-

king process, however, is not an adversarial one, and

neither the foreign government nor any other party

appears before the Commission to contest the claim-

ant’s position. 22 U.S.C. 1623(b)-(d) and (h). Claimants

are entitled to notice of the Commission’s decisions

and to an administrative hearing if dissatisfied with

the Commission’s decision. 22 U.S.C. 1623(h). The

Commission’s final action allowing or denying a claim

is conclusive and not subject to further administra-

tive or judicial review. 22 U.S.C. 1623(h).

The 1985 Act gave the Commission authority to

“receive and determine the validity and amounts of

claims by nationals of the United States against Iran

which are settled en bloc by the United States.”

Foreign Relations Authorization Act, Pub. L. No. 99-

93, Tit. V, § 501(a), 99 Stat. 487. The Act directed the

Commission to apply, in the following order, the

terms of any settlement agreement, relevant provi-

sions of the Algiers Accords, and applicable principles

of international law, justice, and equity. Jbid. It also

directed the Secretary of the Treasury to pay Com-

mission awards in accordance with the provisions of

22 U.S.C. 1626 and 1627. Pub. L. No. 99-93, Tit. V,

§ 501(b), 99 Stat. 437-438.

Those statutory provisions specify that the pro-

ceeds of a lump sum settlement subject to the Com-

mission’s jurisdiction are first deposited in a special,

interest-bearing fund established in the Treasury. 22

U.S.C. 1627(a). The Secretary of the Treasury is

authorized and directed to pay duly certified Commi-

ssion awards out of that special fund. 22 U.S.C.

1627(e). The statute further establishes a set of

priorities for the payment of Commission awards in

the event that the proceeds of the lump sum

settlement and any accrued interest are insufficient

to make full payment. Those priorities essentially

require the Secretary of the Treasury to make an

initial payment of all or a portion of the principal of

the award.” The initial payment is then followed by a

pro rata payment of outstanding principal and inter-

est based on the ratio between: (1) the total amount

remaining in the pertinent Treasury fund and (2) the

total amount of unpaid principal and interest. 22

U.S.C. 1627(e)(2) and (3).

b. On May 13, 1990, the United States and Iran

agreed to settle for a lump sum payment of $105 mil-

lion all claims of U.S. nationals of less than $250,000

as well as several claims of the Government of the

United States for unpaid loans extended to Iran by

the Unites States Agency for International Develop-

ment. See Pet. App. 30a-40a. The settlement agree-

ment provided that, in consideration of the lump sum

payment, the United States would release Iran from

all further liability on the claims subject to the

agreement. /d. at 36a. It also provided that tangible

* The International Claims Settlement Act generally pro-

vides for the payment of up to the first $1000 of the principal

of a Commission award. 22 U.S.C. 1627(c)(1). Those provisions

were, in the case of claims against Iran, modified to permit

payment of the first $10,000 of principal. Pub. L. No. 99-93,

Tit. V, § 501(b)(1), 99 Stat. 437.

and intangible property underlying the subject claims

and located in Iran would be “quitclaimed and trans-

ferred unconditionally” to the Iranian government.

Id. at 37a.

The settlement agreement referred the individual

small claims of United States nationals to the For-

eign Claims Settlement Commission for adjudication.

Pet. App. 34a. It did not, however, specify an alloca-

tion of the settlement proceeds between the United

States claims for repayment of its loans and the

claims of United States nationals. It instead stated

that distribution of the settlement “falls within the

sole competence and responsibility of the Government

of the United States.” Jbid.

The Iran-United States Claims Tribunal ratified

the settlement agreement on June 22, 1990, and the

agreement became effective on that date. Shortly

thereafter, the Department of State directed the De-

partment of the Treasury to allocate $50 million of

the settlement proceeds for payment of U.S. nation-

als, and transferred the small claims of U.S. nationals

to the Foreign Claims Settlement Commission for

individual adjudication. Pet. App. 23a.

ce. The Commission completed adjudication of all

small claims in February 1995. It granted awards on

1000 of the 3066 small claims adjudicated. Successful

claimants were awarded a principal recovery based on

the Commission’s assessment of their economic in-

jury, plus simple interest at approximately ten per-

cent, running from the date of any Iranian govern-

mental action found by the Commission to impair the

claimant’s property, through June 22, 1990, the

effective date of the government-to-government set-

tlement agreement. Pet. App. 24a.

The Commission entered awards with an aggregate

value of approximately $42 million in principal and $45

million in interest. Pet. App. 24a. The total of all

Commission awards exceeded the amount in the

special Treasury fund established for payment of

these claims.’ The Secretary of the Treasury conse-

quently made individual payments in accordance with

22 U.S.C. 1627(e)(2) and (8), which provided, in these

circumstances, for full payment of the principal

amount of every claim and a pro rata share—approxi-

mately 34.5%—of the interest awarded. Pet. App. 24a.

3. Petitioners are 22 individuals, private corpora-

tions, and educational institutions that received

payments from the Treasury in satisfaction of claims

against Iran. They filed suit against the United

States in the Court of Federal Claims, alleging that

the United States, in espousing and then settling

their claims against Iran, had taken their property

without paying constitutionally adequate compensa-

tion, in violation of the Just Compensation Clause of

the Fifth Amendment. Pet. App. 24a.

The Court of Federal Claims granted summary

judgment for the United States. Pet. App. 29a.

Applying the three-factor takings analysis set forth

in Penn Central Transportation Co. v. New York

City, 488 U.S. 104 (1978), the court held that the

espousal of petitioners’ claims did not amount to a

compensable taking. First, the court explained that

petitioners could have no reasonable, investment-

3 There was $57.8 million available for payment: the $50 |

million originally allocated from the lump sum settlement and |

an additional $7.8 in interest that had accrued on the special

Treasury fund. U.S. Dep’t of Justice, Foreign Claims Settle-

ment Commission of the United States Annual Report 7 (1995).

backed expectation that claims arising out of inter-

national commerce would remain unimpaired by gov-

ernment actions intended to restore the mutual amity

upon which such commerce depends. Pet. App. 26a.

Second, the court, in assessing the character of the

government action in question, found that the espou-

sal of petitioners’ claims was not a simple appropria-

tion of property, but rather an exercise of the

President’s long-established power to take up and

settle the claims of United States nationals when it

was deemed necessary to preserve or restore harmo-

nious international relations. Pet. App. 26a-27a.

Third, the court concluded that the espousal of

petitioners’ claims had not harmed their economic

interests, noting that “there is nothing in the record

to suggest that [petitioners] would have fared as well,

much less better, had they been forced to go it alone.”

Pet. App. 28a. It therefore held that the alleged short-

fall in petitioners’ recovery, as measured against the

Foreign Claims Settlement Commission awards, did

not rise to a Fifth Amendment “taking” of property.

4, The Federal Circuit affirmed. Pet. App. la-14a.

The court of appeals reasoned that although in its

view petitioners’ claims do not fit neatly within the

“regulatory takings” analysis, the Penn Central

factors applied by the trial court remained relevant to

evaluation of petitioners’ takings claim. Jd. at 8a.

Applying those and other factors, the court concluded

that the government’s espousal of petitioners’ claims

and the settlement agreement did not effect a compen-

sable taking.

First, the court noted that petitioners had derived a

substantial benefit from the government’s settlement

of their claims. Quoting National Board of Young

Men’s Christian Ass’ns v. United States, 395 U.S. 85,

10

92 (1969), the court stated that where, as in this case,

“the private party is the particular intended benefici-

ary of the governmental activity, ‘fairness and jus-

tice’ do not require that losses which may result from

that activity ‘be borne by the public as a whole,’ even

though the activity may also be intended incidentally

to benefit the public.” Pet. App. lla.

Second, the court reasoned that two Claims Court

cases relied on by petitioners, Meade v. United

States, 2 Ct. Cl. 224 (1866), aff’d, 76 U.S. (9 Wall.) 691

(1869), and Gray v. United States, 21 Ct. Cl. 340 (1886),

did not support petitioners’ takings claim. The court

noted that both cases involved instances in which the

United States had extinguished individual claims

against a foreign nation to further diplomatic objec-

tives. The court explained, however, that neither

case entered a monetary award for the plaintiffs or

otherwise held that compensation was required by the

Fifth Amendment. Pet. App. 1la-12a.

Finally, the court explained that petitioners’ prop-

erty interests in claims arising out of consensual

international transactions were held subject to the

government’s established power to affect the asser-

tion of claims against a foreign nation in order to

maintain a degree of international amity. Pet. App.

13a. The court concluded that, in this case, the gov-

ernment had “provided an alternative tailored to the

circumstances which produced a result as favorable to

[petitioners] as could reasonably be expected.” Jbid.

It therefore held that petitioners had failed to estab-

lish that the government had effected a compensable

taking of their property. Jd. at 14a.

Judge Clevenger filed a concurring opinion. Pet.

App. 14a-18a. In his view, “when one ventures into

international commerce, it is with knowledge of the

11

extent to which that marketplace is regulated.” Jd. at

16a. Accordingly, a “taking by espousal is not auto-

matically compensable, because no rational interna-

tional commerce plaintiff could unblushingly assert

shock or surprise that its property was seized by

espousal.” Jd. at 17a. Although he noted that “there

may be instances in which the governmental inter-

ests in espousal are so weak, or otherwise in ques-

tion, that an espoused plaintiff may successfully

show, in a rule of reason analysis, entitlement to com-

pensation,” he stated that petitioners had failed to

make that showing in this case. Ibid.

ARGUMENT

Petitioners assert (Pet. 10) that the settlement of

their claims violated the Fifth Amendment. Yet,

despite a nearly 200-year history of the government’s

espousal of individual claims against foreign nations,

petitioners are unable to cite a single case in which

such governmental action has been held to be a

“taking” requiring payment of just compensation.

The court of appeals’ decision correctly rejected peti-

tioners’ novel takings claim, and its decision is en-

tirely consistent with this Court’s precedent. Fur-

ther review is therefore unwarranted.

1. Petitioners contend (Pet. 12-15) that the court

of appeals’ decision is inconsistent with this Court’s

decisions in Dames & Moore v. Regan, supra, and the

Regional Rail Reorganization Act Cases, 419 U.S.

102 (1974), which hold that, absent a congressional

decision to withhold the remedy, the Tucker Act

affords federal jurisdiction for claims that the United

States has taken property without just compensation.

Petitioners further argue (Pet. 15-18) that the deci-

sion below is inconsistent with Monongahela Navi-

12

gation Co. v. United States, 148 U.S. 312 (1893), which

holds that where the government “takes” property,

the judiciary decides whether the compensation af-

forded is constitutionally sufficient.

Petitioners’ arguments are based on a misreading

of the court of appeals’ opinion. Nothing in the deci-

sion below purports to hold that petitioners cannot

invoke Tucker Act jurisdiction. Nor does it suggest

that, where a governmental action constitutes a com-

pensable “taking” of property, the judiciary is bound

to deem constitutionally sufficient any compensation

afforded by the Legislative or Executive Branch.

Rather, the court of appeals assumed jurisdiction

over petitioners’ Tucker Act action, evaluated peti-

tioners’ takings claim on the merits, and held that

petitioners had not established that the government’s

espousal and settlement of their claims amounted to a

“taking” implicating the Fifth Amendment require-

ment of “just compensation.” Nothing in that holding

is inconsistent with this Court’s decisions regarding

the availability of Tucker Act jurisdiction for a tak-

ings claim or the role of the judiciary in determining

whether the government has paid constitutionally

adequate compensation for a “taking” of property.

2. Petitioners assert (Pet. 18-21) that the court of

appeals’ decision, by focusing on the benefits afforded

claimants by the settlement agreement, misinter-

preted this Court’s decision in National Board of

Young Men’s Christian Ass’ns v. United States, 395

U.S. 85, 92 (1969). YMCA arose from a suit against

the United States for just compensation for losses

sustained by the plaintiff when buildings it owned in

the Panama Canal Zone were damaged by a mob of

rioters and then occupied by United States troops for

protection. This Court held that, “where * * * the

13

private party is the particular intended beneficiary of

the governmental activity, fairness and justice do not

require that losses which may result from that

activity be borne by the public as a whole, even though

the activity may also be intended incidentally to

benefit the public.” Jd. at 92 (internal quotation

marks omitted). The court of appeals in this case,

citing ibid., noted that the United States entered into

the lump sum settlement here to further the inter-

ests of both the petitioner-claimants and the United

States, that petitioners were among the specific

intended beneficiaries of the agreement, and that

petitioners had obtained recoveries that were as

favorable to them as could reasonably be expected.

Pet. App. 10a-11a, 18a.

Petitioners assert (Pet. 20-21) that YMCA’s hold-

ing should be limited to instances in which the

government invades or occupies physical property to

protect it or to further law enforcement objectives. In

petitioners’ view, any assessment of the economic

benefits afforded a takings claimant in other circum-

stances would nullify the Fifth Amendment’s “just

compensation” requirement by denying recovery

whenever “substantial” economic benefits are con-

ferred in the course of the conduct alleged to be a

“taking” of property.

Petitioners’ contentions are mistaken. First, the

principle animating YMCA—that actions intended to

benefit the property owner do not generally consti-

tute a taking—is not limited to the narrow circum-

stances in which the government furthers a law

enforcement or protective purpose. Rather, a taking

will rarely be found where the governmental action

affecting property generally confers substantial,

reciprocal benefits on the property owner. Keystone

14

Bituminous Coal Ass’n v. DeBenedictis, 480 U.S.

470, 491 (1987); Pennsylvania Coal Co. v. Mahon, 260

U.S. 393, 415 (1922).

Here, the benefits accruing to petitioners were

direct, immediate, and substantial. In lieu of an incho-

ate and uncertain claim against a foreign sovereign,

petitioners first were afforded a procedure, through

the Tribunal, for maintaining their claims. They

then were given a right to present their claims in a

nonadversarial, administrative setting before the

Commission in which no party challenged the merits

of the claim or asserted defenses to liability, and

under procedures designed to ensure that sufficient

funds would be available to pay a substantial portion of

any compensation awarded. As the trial court ob-

served, “there is nothing in the record to suggest

that [the petitioners] would have fared as well, much

less better” had petitioners been required to pursue

their claims against Iran in the courts of Iran or the

United States, or later before the Tribunal. Pet. App.

28a. In recognizing that these direct benefits mili-

tated against finding a “taking,” the court of appeals

adhered to well-established law and did not depart

from this Court’s takings precedents.

Second, petitioners err in contending that a “tak-

ing” must be found whenever the benefits received

from the governmental action do not equal or exceed

the diminution in value of the affected property inter-

est. That contention is predicated on the dubious

assumption that the “value” of petitioners’ claims is

equal to the full face value of the alleged damages plus

interest—without any discount for the possibility

that petitioners might not have prevailed on the

merits in a suit in the Tribunal or in a United States

or foreign court against the government of Iran or

15

succeeded in obtaining full satisfaction of any

resulting judgment in their favor.

Moreover, even assuming that their claims should

not be so discounted, petitioners err in asserting

(Pet. 20 n.27) that a taking occurred merely because

“whatever ‘benefit’ petitioners received was less than

what was taken from them.” “The Takings Clause

has never been read to require the States or the

courts to calculate whether a specific individual has

suffered burdens under this generic rule [of reciproc-

ity of advantage] in excess of the benefits received.”

Keystone Bituminous Coal Ass’n, 480 U.S. at 491

n.21. Petitioners’ assertion that any government

action is a taking if it diminishes the value of prop-

erty or fails to afford benefits of exactly equivalent

value has no support in the case law. Cf. Andrus v.

Allard, 444 U.S. 51, 65 (1979); Goldblatt v. Hempstead,

369 U.S. 590, 594 (1962).

Finally, contrary to petitioners’ contentions (Pet.

20-21), this is not a case in which the government has

paid only partial “compensation” for property other-

wise taken. Cf. Suitum v. Tahoe Reg’l Planning

Agency, 117 S. Ct. 1659, 1671 (1997) (Scalia, J., con-

curring in part and concurring in the judgment). It

instead involves a governmental action that, while

furthering important diplomatic objectives, also in-

herently benefitted petitioners and U.S. claimants

generally by affording them a swifter and surer

means of recovering on their claims, first in the basic

settlement through the 1981 Accords, and then in the

en bloc settlement of small claims within that

framework. In considering those benefits, the court

of appeals did not deviate from the constitutional

standard of “just compensation;” it instead adhered to

firmly established precedent holding that a “taking”

16

does not occur in the first instance where the govern-

mental action provides direct and substantial benefits

for the affected property owner.

3. Petitioners argue (Pet. 21-29) that the court of

appeals’ decision is inconsistent with Lucas v. South

Carolina Coastal Council, 505 U.S. 1003 (1992). In

that case, the Court held that governmental action

that involves a physical invasion of property or denies

all economically beneficial uses of land is a compensa-

ble taking “per se” (in the absence of a limitation

inhering in the property that potentially subjected it

to such governmental action), without further, case-

specific inquiry into the impact on the claimant or the

public interest underlying the challenged action. /d.

at 1015. The principle of Lwcas does not apply in this

case, because the government did not occupy any

physical property of petitioners, nor did it deprive

them of all economically beneficial uses of their land.

a. This Court has never held that the impairment

of a property interest in a legal claim or cause of

action amounts to a per se taking requiring payment

of just compensation. To the contrary, the Court has

recognized a per se taking only where the governmen-

tal action extinguishes the right to either occupy or

productively use real property. Government actions

that are asserted to diminish the economic value of a

claim or other property interests do not fall within

those categories or otherwise amount to a taking per

se. Compare Loretto v. Teleprompter Manhattan

CATV Corp., 458 U.S. 419 (1982) with United States

v. Sperry Corp., 493 U.S. 52, 62 n.9 (1989); Keystone

Bituminous Coal Ass’n v. DeBenedictis, 480 U.S. at

488-489 n. 18.

Petitioners could have had no reasonable expecta-

tion that their legal claims against a foreign sover-

17

eign would be held free of the government’s powers of

espousal and settlement. To the contrary, as the

court of appeals recognized, “those who engage in in-

ternational commerce must be aware that inter-

national relations sometimes become strained, and

that governments engage in a variety of activities

designed to maintain a degree of international amity.”

Pet. App. 13a. International agreements settling

claims by nationals of one state against the govern-

ment of another are an established international prac-

tice and have been used repeatedly by the United

States government since 1799. See Dames & Moore,

453 U.S. at 679-680 & n. 8; United States v. Pink, 315

U.S. 203, 229-230 (1942); United States v. Belmont,

301 U.S. 324, 330-331 (1937). The “United States has

sometimes disposed of the claims of its citizens with-

out their consent, or even without consultation with

them, usually without exclusive regard for their in-

terests, as distinguished from those of the nation as a

whole.” Dames & Moore, 453 U.S. at 680, quoting

Louis Henkin, Foreign Affairs and the Constitution

262-263 (1972).

Despite this long-established practice, petitioners

fail to cite a single case in which the espousal and

settlement of claims against a foreign nation have

been held to be a “taking” requiring payment of just

compensation. Petitioners assert (Pet. 25 n.29) that

Gray v. United States, 21 Ct. Cl. 340 (1886), stands for

that proposition. Pet. 25 n.29. Gray, however, is a

Court of Claims advisory opinion on a matter referred

to it by Congress; it expressly reserved to the legisla-

ture the question of whether any compensation would

be provided for the claims settlement at issue and

18

cannot be construed as a holding concerning the

requirements of the Fifth Amendment. Jd. at 345.*

b. Nor, even assuming that Lucas applies to

inchoate property interests like petitioners’ choses in

action,’ did the government deprive petitioners of all

economically beneficial uses of their property. Indeed,

as both lower courts found (Pet. App. 13a, 28a),

petitioners failed to show that the government’s

espousal and settlement of their claims diminished

the value of the claims in any respect. As an initial

matter, the Algiers Accords in 1981 afforded peti-

tioners substantial benefits by establishing the Iran-

United States Claims Tribunal for the resolution of

4 Gray is also factually distinguishable as it involved a

settlement that extinguished the claim entirely without, as in

this case, providing the claimant with an alternative remedy

and substantial compensation. See United States v. Sperry

Corp., 493 U.S. 52, 59 n.6 (1989). Petitioners also rely (Pet. 27

n.30, 25 n.29) on Justice Chase’s opinion in Ware v. Hylton, 3

U.S. (3 Dall.) 199 (1796). Justice Chase’s opinion in Ware, how-

ever, merely expresses the view that compensation ought to be

afforded to individual debtors whose economic interests were

adversely affected by a treaty. The case did not involve an

instance in which the government settled or extinguished the

claims of U.S. nationals against a foreign sovereign. It thus has

no relevance here.

5 Petitioners’ claims reflect, at best, a property right in a

potential recovery, not a right to interest on tangible, concrete

property or funds. Accordingly, in assessing the economic im-

pact of the government’s action on petitioners’ property, the

Fifth Amendment inquiry must focus on the extent to which

the settlement agreement affected the value of those intangible

claims. Cf. Pittsburg Steel Co. v. Baltimore Eq. Soc’y, 226 U.S.

455, 459 (1913) (“The question whether the remedy on this

contract was impaired materially is affected not only by the

precarious character of the plaintiffs right, but by considera-

tions of fact,—of what the remedy amounted to in practice.”).

19

claims against Lran and a fund to secure its awards,

thereby substituting a regular procedure for the

prior situation of grave uncertainty for claimants in

the wake of the hostage crisis. The Accords, how-

ever, provided for the United States, not the claim-

ants themselves, to present claims for less than

$250,000. See pp. 3-4, supra. The Accords themselves

therefore subjected petitioners’ claims to a signifi-

cant measure of control by the United States. Peti-

tioners do not challenge that basic feature of the

Accords.

Even so, petitioners’ prospects of prevailing in arbi-

tration before the Tribunal were uncertain. Before

the settlement agreement, the Tribunal had dis-

missed some claims as untimely and dismissed other

claims for lack of jurisdiction. Pet. App. 22a n.7. The

settlement agreement, in contrast, gave petitioners a

remedy that was not subject to those defenses. Indeed,

the agreement gave a remedy to claimants who,

because they had withdrawn claims from the Tribu

nal’s consideration or failed to meet the Tribunal’s

filing deadlines, could no longer pursue any claim

before the Tribunal. Jbid.® It also secured sums to

pay claims awards and, by referring petitioners to the

nonadversarial processes of the Foreign Claims Set-

tlement Commission, enhanced petitioners’ likelihood

of recovery.’

6 In some cases, the Commission issued claims awards in

cases in which Iran had not in fact expropriated petitioners’

property. Pet. 4 n.6.

7 That some petitioners might conceivably have obtained

greater recoveries if permitted to pursue arbitration of their

claims before the Tribunal does not establish that the govern-

ment’s actions rise to a compensable “taking” of property. Cf.

Sperry, 493 U.S. at 59 & n.6; New York Cent. R.R. v. White,

20

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.

SETH P. WAXMAN

Solicitor General

FRANK W. HUNGER

Assistant Attorney General

DOUGLAS N. LETTER

JEFFREY CLAIR

Attorneys

MAY 1998

243° U.S. 188, 202 (1917) (substitution of statutory workers

compensation remedy for common law remedies does not

deprive claimant of property without due process of law).