Petition for Writ of Certiorari — Wallace v. Montana (No. 08-1395)
Supreme Court brief2009
Ask Donna
What actually matters in this document.
Text
\H W
No.
Desa ry eo. .
urge Oa US
081395 may 11 2009
Bn The
OFFICE OF THE CLERK
Supreme Court of the Anited States
LEN WALLACE, et al.,
Petitioners,
STATE OF MONTANA, et al.,
Respondents.
On Petition For Writ Of Certiorari
To The Montana Supreme Court
PETITION FOR WRIT OF CERTIORARI
AND APPENDIX VOLUME I
RICHARD M. STEPHENS*
*Counsel of Record
JOHN M. GROEN
SAMUEL A, RODABOUGH
BRIAN D. AMSBARY
GROEN STEPHENS &
KLINGE LLP
11100 NE 8th St., Ste. 750
Bellevue, Washington 98004
Telephone: (425) 453-6206
ARTHUR V. WITTICH
WITTICH LAW OFFICES, P.-C
602 Ferguson Ave., Ste. 5
Bozeman, Montana 59718
Telephone: (406) 585-5598
Attorneys for Wallace, et al.
JOHN E. BLOOMQUIST
DONEY CROWLEY BLOOMQUIST
PAYNE UDA P.C.
44 West 6th Ave.
P.O. Box 1185
Helena, Montana
59624-1185
Telephone: (406) 443-2211
Attorney for Kafka, et al.
WARD E. 'TALEFF
TALEFF LAW OFFICE, P.C.
P.O. Box 609
Great Falls, Montana
59403-0609
Telephone: (406) 791-9400
Attorney for Bridgewater,
et al.
Attornevs for Petitioners
COCKI.E LAW BRIEF PRINT
OR CALL COLLECT
QUESTIONS PRESENTED FOR REVIEW
1. When evaluating a regulatory taking under
the Court’s Penn Central factors, does presence in a
highly regulated industry preclude the reasonable-
ness of investment-backed expectations as a matter of
law?
2. For the purpose of determining whether a
regulatory taking has occurred under the Penn
Central factors, what considerations are included in
the “character of the governmental action” fa:tor?
3. Is the “character of the governmenta: action”
factor merely a rephrasing of the “economic impact”
factor and limited to a consideration of the intru-
siveness of the regulation?
4. Where state law allows a business to con-
tinue to provide its customers with a particular
service, but new legislation limits the fees the busi-
ness can charge to $0.00, thereby resulting in com-
plete destruction of the business, is there a taking
under this Court’s Penn Central jurisprudence?
il
PARTIES TO THE PROCEEDING
This proceeding involves two Montana Supreme
Court actions. Petitioners include the Plaintiffs in the
first proceeding, Len and Pamela Wallace and their
business, Big Velvet Ranch. Co-plaintiffs Bruce and
Shirley Buhmann and Circle Eagle Game Farm are
not Petitioners to this Court. Petitioners also include
the Plaintiffs from the second proceeding, Kim J.
Kafka and Cindy R. Kafka as husband and wife and
as members of the Diamond K. Ranch Enterprises
L.L.C. Petitioners also include Plaintiff-Intervenors
in the second proceeding, Jack Bridgewater and Myra
Bridgewater as husband and wife and as members of
Phantom Bull Elk Ranch, L.L.C. Other Plaintiff-
Intervenors, namely Jim and Barbara Bouma, are not
Petitioners before this Court.
Respondents include the Defendants below in
both proceedings, namely the State of Montana; the
State’s Attorney General, Mike McGrath; the Director
of the State’s Department of Fish, Wildlife and Parks
(DFWP), Jeff Hegener; and the DFWP itself. Respon-
dents also include Defendant-Intervenors from both
cases below, Sportsmen for 1-143 and Montana
Wildlife Federation.
The only parent companies or wholly owned
subsidiaries are the two limited liability companies
identified above. Petitioners are unaware of whether
there are any parent companies or wholly owned
subsidiaries of the Defendants or Defendant-
Intervenors.
ili
TABLE OF CONTENTS
Page
QUESTIONS PRESENTED FOR REVIEW. ........
PARTIES TO THE PROCEEDING ..................... li
CT ENE TY 656i ciséssavadscnceeasecterncaeseieveasannns 1
Pe Pe vis isiniedsiciceeec 1
CONSTITUTIONAL AND STATUTORY PRO-
Fee I BO genic denise scecccesecncceectasecness 2
STATEMENT OF THE CAGE.............. eeceeeaeeteakas 2
Factual Background Common to All................ 2
Factual Background Regarding the Wallaces.... 5
Factual Background Regarding the Kafkas..... 7
Factual Background Regarding the Bridge-
Proceedings before the Montana _ District
I cscs see see ceca ee eee 10
Proceedings before the Montana Supreme
Covi dics winivicea nateaceueedecaee nae een on een 10
REASONS FOR GRANTING THE WRIT ........... 16
I. REVIEW SHOULD BE GRANTED TO
RESOLVE A SIGNIFICANT CONFLICT
AMONG STATE AND FEDERAL COURTS
ON WHETPER BUSINESS OWNERS OP-
ERATING IN A HIGHLY REGULATED
INDUSTRY CAN EVER HAVE REASON-
ABLE INVESTMENT-BACKED EXPEC-
TATIONS UNDER PENN CENTRAL. ........ 19
lv
TABLE OF CONTENTS —- Continued
Page
il. THE PETITION SHOULD BE GRANTED
TO ADDRESS CONFLICTS AMONG
LOWER COURTS REGARDING PENN
CENTRAL'S “CHARACTER OF THE GOV-
ERNMENTAL ACTION” FACTOR ............. 26
Sn ee en oa baa aineeieaees 31
APPENDICES
Volume I
Buhmann, et al. v. State of Montana, et al.,
Montana Supreme Court, No. 05-478............. App. 1
Kafka, et al. v. The Montana Department of
Fish Wildlife and Parks, et al., Montana
Supreme Court, No. 05-146.........0..0..0.00...... App. 123
Volume II
Findings of Fact, Conclusions of Law and
Order in Buhmann, et al. v. State of
Montana, et al., Montana First Judicial
District Court, Cause No. ADV-2002-555.... App. 293
Findings of Fact, Conclusions of Law, and Decree
Regarding Taking Liability in Kafka, et al. v.
The Montana Department of Fish Wildlife and
Parks, et al., Montana Twelfth Judicial District
Court, Cause No. DV-02-059 ...................006 App. 335
Order Denying Rehearing in Buhkmann, Supreme
SIS BU, Ce avid hevacn cis iesicathceceensesecscnades App. 397
TABLE OF CONTENTS — Continued
Page
Order Denying Rehearing in Kafka, Supreme
pe I I sioroe sca cc seveadpxciniadaicnvisesenieerss App. 399
The Complete Text of Initiative No. 143 (I-143)
from 2000 Voter Information Pamphlet —
Pages 77-79, published by the Montana
CTY OE IO ois cca sccsescsecccsccesspessesevens App. 402
v1
TABLE OF AUTHORITIES
FEDERAL CASES
Allied-General Nuclear Services, Inc. v. United
States, 839 F.2d 1572 (Fed. Cir. 1988).................... 22
Armstrong v. United States, 364 U.S. 40 (1960) ....18, 26
Boston Chamber of Commerce v. Boston, 217
IE ss os 5 occ dea panasiinens baanobeaukdesianbaaweneosceens 29
Cienega Gardens v. United States, 331 F.3d
Re A, i INE xn su anacencvecercvusvesaesssiverenvexscvessoes 22
Cienega Gardens v. United States, 503 F.3d
BN i EP viknscsyetcssasscnrsascsessacsnhisvsrenses since
Covington & Lexington Turnpike Road Co. v.
BANGIOG, 166 U.S. STS (IGG) .....00sceccssscescosoveesesss 25
Duquesne Light Co. v. Barasch, 488 U.S. 299
re Ca sn ba cua donadapaeneunen 25
Esposito v. South Carolina Coastal Council,
ee ee BO CREE CIT, TLD voc sccsensscscccscssccsceccsvecnsss 18
In re: Chicago, Milwaukee, St. Paul and Pacific
st. Co., 799 F.2a 317 (7th Cir. 1966) ....................... 29
Kimball Laundry Co. v. United States, 338 U.S.
aoe glass oy cea cgay uSeidodnuckenseieabectes 29
Lingle v. Chevron USA, Inc., 544 U.S. 528
tate Ll occas beal ecunuvennuesere ieexweraucnsuneee passim
Pennsylvania Central Transportation Co. ov.
City of New York, 438 U.S. 104 (1978) ........... passim
Pennsylvania Coal Coa. v. Mahon, 260 U.S. 393
NG, ce cztacecnc seks ch caaeunistucthiacksbeladvecvelonten 16, 17, 30, 31
Vil
TABLE OF AUTHORITIES — Continued
Page
Rose Acre Farms, Inc. v. United States, 559
ee ee Ce Oe vices cn puneccncanbasccnncwoseens 22, 27
Ruckelshaus v. Monsanto Co., 467 U.S. 986
PR oS ae 19, 20, 22
Stone v. Farmers’ Loan & Trust Co. (Railroad
Commission Cases), 116 U.S. 307 (1886)
Tennessee Scrap Recyclers Ass’n v. Bredesen,
556 F.3d 442 (6th Cir. 2009)
United Nuclear Corp. v. United States, 912 F.2d
ee ee IN es visa cancesjaccsacauensaauesccrsstenvaceesn, aa
Yancey v. United States, 915 F.2d 1534 (Fed.
Cir. 1990)
STATE CASES
Buhmann v. Montana, 201 P.3d 70, 348 Mont.
205 (2008) passim
Department of Agriculture v. Mid-Florida
Growers, Inc., 521 So.2d 101 (Fla. 1988)
In re Marriage of Hull, 712 P.2d 1317 (Mont.
1986)
Kafka v. Montana Department of Fish, Wildlife
& Parks, 201 P.3d 8, 348 Mont. 80 (2008) passim
Wensmann Realty, Inc. v. City of Eagan, 734
N.W.2d 623 (Minn. 2007)
V11)
TABLE OF AUTHORITIES — Continued
Page
FEDERAL STATUTES
- Ra ED |: SaRUA EROS NIE ROSIER Awe Rn PC Se 2
STATE STATUTES
BOTT WOU. Li WE, GH. 17, 6 OS ovccecetincccecccccsecscsccvcocccsee 2
Mont. Code Ann. § 70-1-104(4).......... eee eee Moma 29
Mont. Code Ann. § 87-4-406(1).................c eee RRR R RE RoE 3
Mont. Code Amn. § 87-46-46 14(7)........cccccccccccccescescccccescsseetd
Mont. Code Ann. § 87-4-419(1)............ ccc cece ee esc eee neces 3
BEOMG. COGS AMT), F BF RoESL occccccccescccesscccccccscccveccosecceess 4
CONSTITUTIONAL PROVISIONS
U.S. Const., amend. XIV, § 1.............. SPN eer cep eee ETE 2
MF ey 6 ic I sa ccacecccuvasetsdsdunedenenexeonceciees passim
OTHER AUTHORITIES
E. R. Claeys, The Penn Central Test and
Tenstons in Liberal Property Theory, 30
HARV. ENVTL. Li. REV. SSO (ZO0G) ......cerceseseserecresesees 17
OPINIONS BELOW
The decision of the Montana Supreme Court in
the Wallace matter is entitled Buhmann v. Montana
and is reported at 201 P.3d 70, 348 Mont. 205 (2008),
reproduced at Appendix (App.) 1-122. The decision of
the Montana Supreme Court denying Petitioners’
petition for rehearing was issued on February 10,
2009, and is reproduced at App. 397-398. The trial
court’s Findings of Fact and Conclusions of Law and
Order is reproduced at App. 293-334.
The decision of the Montana Supreme Court in
Kafka v. Montana Department of Fish, Wildlife &
Parks is reported at 201 P.3d 8, 348 Mont. 80 (2008),
and is reproduced at App. 123-292. The decision of
the Montana Supreme Court denying Petitioners’
petition for rehearing was issued on February 10,
2009, and is reproduced at App. 399-401. The trial
court’s Findings of Fact, Conclusions of Law and
Decree is reproduced at App. 335-396.
o-—
JURISDICTION
The decisions of the Montana Supreme Court
denying rehearing were entered on February 10,
2009. App. 397-398; 399-401. These cases draw into
question the validity of a state statutc, enacted by
initiative as I-143 (appended as App. 402-410), on the
ground that it is repugnant to the Constitution and
laws of the United States. Therefore, this Court has
jurisdiction over this matter pursuant to 28 U.S.C.
§ 1257.
CONSTITUTIONAL AND STATUTORY
PROVISIONS AT ISSUE
This case involves the takings clause of the Fifth
Amendment to the United States Constitution:
Nor shall private property be taken for pub-
lic use, without just compensation.
ld.
This case also involves Section 1 of the Four-
teenth Amendment to the United States Constitution:
Nor shall any state deprive any person of
life, liberty, or property without due process
of law.
Id
STATEMENT OF THE CASE
Factual Background Common to All
From 1917 to this day, the State of Montana
declares that game farm animals are private proper-
ty. App. 296. Moreover, Montana law provides that
the acquisition, breeding, harvest and sale of game
farm animals is a lawful “business or occupation.”
1917 Mont. Laws, ch. 173, § 84, cited in App. 188,
{ 103. Game farm animals such as elk are also
3
termed “alternative livestock.” Mont. Code Ann. § 87-
4-406(1).
The primary purpose of acquiring and breeding
elk is to sell to customers the right to enter the pri-
vate ranch to hunt and shoot a trophy elk. This was
the business of the Petitioners.
Because the Petitioners’ game farms were ex-
tremely large, the shooting of game farm elk was
similar to a hunting experience in the wild. However,
Montana law remains very clear that laws applicable
to hunting wild game animals do not apply to alter-
native livestock. See Mont. Code Ann. § 87-4-414(7).
In short, roaming these large ranches looking for an
opportunity to shoot privately owned elk is not consid-
ered “hunting” under Montana law.
For decades, Montana regulation of alternative
livestock ranching consisted of requiring licenses,
fencing, and recordkeeping of animals. Privately-
owned elk must be maintained in captivity. See Mont.
Code Ann. § 87-4-419(1). To prevent the transfer of
disease between private elk and their wild counter-
parts, the state has established various reporting,
testing, fencing, and transport regulations. App. 193,
q 109.
Until 2000, the state had never regulated the
price one could charge for the shooting of privately
owned elk at an alternative livestock ranch. Nor did
the state even require alternative livestock ranches
to obtain permission before charging fees for the
4
shooting of game on these ranches. That right was
inherent in the private ownership of the animals.
The fee charged to shoot trophy elk was the
primary source of income for alternative livestock
ranches. Some ranches raised elk to supply herds to
other ranches which sold the opportunity to shoot the
game farm animals, thereby making fees charged for
the shooting of elk the basis for their income as well.
Against this background, Montana voters in
November of 2000 enacted Initiative No. 143 (1-143).
This initiative was unabashedly intended to destroy
the alternative livestock industry, but in a “carefully
crafted” way so as to potentially avoid liability for a
regulatory taking under the Fifth Amendment.’
I-143 (App. 402) made the following changes to
Montana law. First, 1-143 repealed Mont. Code Ann.
§ 87-4-431, which previously encouraged development
of alternative livestock ranches. App. 409.° Second, it
banned the transfer of game farm licenses. Third, and
most importantly, it prohibited game farm ranches
from charging a fee to customers who seek the oppor-
tunity to shoot privately owned elk. Although the
‘ Justice Nelson, in his dissenting opinion in Kafka, quotes
the argument of counsel for the Defendant-Intervenors who
drafted 1-143. App. 197, J 114
* Former Mont. Code Ann. 87-4-431 stated: “the production
of alternative livestock provides a viable economic opportunity
for any private property owner as well as the traditional live-
stock producers who are interested in diversifying their ranch
productivity.”
privately owned elk can still be shot, the owner
cannot receive payment for providing that opportuni-
ty.
The results of I-143 were as they were intended —
a complete obliteration of the game farm industry.
Factual Background Regarding the Wallaces
Len and Pamela Wallace (hereinafter “the Wal-
laces”) moved to Ravalli County, Montana in 1991,
and purchased 3,800 acres. App. 299. Thereafter, the
Wallaces established a private elk ranch on the
property, which they later named the Big Velvet
Ranch.
Big Velvet Ranch began in 1992 after the Wal-
laces obtained a state game farm license. They then
purchased material and equipment to build enclo-
sures and facilities, removed all wild deer and elk
from their property, installed fenced enclosures,
imported elk purchased from elsewhere, and con-
structed a lodge on additional property they pur-
chased to accommodate their customers. App. 299.
In order to keep elk within their property, the
Wallaces constructed more than 25 miles of fencing
(e.g., nine-foot fences with eight-foot high tensile
mesh, as well as an electrified perimeter fence). App.
300. The state required game farms to have special-
ized handling facilities designed specifically for elk
which were not useful in the handling of any other
animals.
6
The Wallaces also purchased innovative tractor
and truck equipment to install and maintain the
fences. The Wallaces installed solar powered auto-
mated gates, and handling facilities and chutes. They
also designed and developed a prototype feed truck
that allowed one employee to deliver feed to more
than 900 animals in a single day.
Elk are susceptible to tuberculosis and brucello-
sis. After a three-year testing process, Big Velvet
Ranch was granted tuberculosis and brucellosis free
certifications. App. 299.
Elk are also susceptible to Chronic Wasting
Disease (CWD). There is no known method of testing
jive animals for CWD. App. 297. Accordingly, no herd
could be certified as being CWD-free. Nevertheless,
the Wallaces began voluntarily testing al] dead ani-
mals on the ranch for CWD in 1998, before it became
mandatory to do so. For four years thereafter, the
Wallaces tested over 700 animals for CWD, all with
negative results.
Big Velvet Ranch retained the services of veteri-
narians to care for the elk. Every elk on the ranch
was inspected, wormed, blood tested, and assessed on
an annual basis. A computer software system was
developed specifically to chart and track the health
conditions of each animal, and to comply with all
state and federal regulations.
Guests of Big Velvet Ranch paid the Wallaces
differing amounts depending on the sex of the elk and
the size of the antlers, resulting in an average of
7
$7,000 for shooting a mature bull elk (e.g., over 5
years old). These customer payments for mature bull
elk comprised the majority of Big Velvet Ranch reve-
nues. Between 1995 and 2000, Big Velvet Ranch
hosted more than 600 clients. From 1997 through
1999, the Wallaces annually harvested over 100
mature bulls on average.
On November 7, 2000, the date I-143 was
enacted, the Wallaces owned over 850 elk. The fair
market value of these elk was over $5.5 million
dollars. App. 301. However, I-143 prohibited the
Wallaces from selling their animals to clients for
shooting. Faced with the high maintenance and
feeding costs and no ongoing revenue stream, the best
the Wallaces could do was salvage some of the elk for
$238,000. App. 301. The Wallaces have been denied
any public compensation. App. 297.
Factual Background Regarding the Kafkas
The Kafkas are long-time farmers and ranchers
who own and lease real property in Hill County,
Montana. App. 337. The Kafkas’ farm and ranch
operations at the time of passage of I-143 consisted of
raising grain and beef cattie, and breeding and rais-
ing alternative livestock, primarily privately owned
elk. App. 339.
Prior to applying for an alternative livestock
ranching license, the Kafkas conducted extensive
research into the alternative livestock industry,
available markets for privately owned elk, and the
8
statutory and regulatory requirements then in effect
for raising privately owned elk in Montana.
Like the Wallaces, the Kafkas invested signifi-
cant capital to acquire privately owned elk, fences,
licenses and facilities necessary to begin the alterna-
tive livestock operation. The Kafkas’ business was
specifically structured towards marketing animals to
members of the public for shooting their elk. App.
340.
In 1999, the State issued a license to the Kafkas.
Upon receiving the license, the Kafkas began to
market their alternative livestock animals, mainly
privately owned bull elk, for shooting at the Diamond
K. Ranch. Prior to the passage of I-143, these animals
were worth $5,000 to $6,000 each. App. 349. Their
value in any limited out of state market was $1,700 to
$1,800. App. 349.
The Kafkas’ elk shooting operation was economi-
cally successful. The Kafkas were able to meet their
short-term debt obligations with their bank, regain
capital from the significant outlay for fencing expen-
ditures, acquire additional animals for fee shooting
purposes, and continue to expand their marketing
efforts after only two years of selling elk shooting
opportunities.
Upon passage of I-143, the Kafkas’ previously
legal and economically successful use of their alterna-
tive livestock animals was deemed illegal as the
Kafkas could no longer receive a fee or any other
remuneration for the shooting harvest of privately
9
owned elk on their property. In addition, as a result of
I-143, any transfer of Kafkas’ alternative livestock
ranch licenses was prohibited. As a result of I-143,
Kafkas’ game farm business has no value whatsoever.
Factual Background Regarding the Bridgewaters
Jack and Myra Bridgewater operate an alterna-
tive game farm in Broadwater County, Montana.
They operate under the name “Phantom Bull Elk
Ranch, LLC.” The Bridgewaters first became involved
in the alternative game farm business in the early
1990s. App. 355.
Similar to the other Petitioners, the Bridge-
waters received a state license to operate a game
farm. App. 355. Their focus in the alternative game
farm business was the development of trophy bull elk
for shooting purposes.
Prior to I-143’s enactment, the Bridgewaters
received an average of $8,000.00 to $9,000.00 per bull
elk. Following adoption of I-143, there is no Montana
market for the animals. Although the Bridgewaters
were able to find an out-of-state buyer for some of
their animals, the price they obtained did not cover
the cost of raising and caring for the animals. App.
177, 7 85.
As with the other Petitioners, the Bridgewaters
invested significant capital in making improvements
to their property which were unique to a game farm.
10
As a result of I-143, their business has been de-
stroyed.
Proceedings before the Mcntana District Courts
In the Wallaces’ case, the district court denied
their request for a jury trial and bifurcated the labil-
ity and damages portion of the case. A bench trial was
held from November 30, 2004 to December 2, 2004.
The district court entered its decision that I-143 did
not cause a taking of the Wallaces’ property interests
under either the Montana Constitution or the Fifth
Amendment. App. 334. The Wallaces appealed to the
Montana Supreme Court. Montana does not have an
intermediate court of appeals.
The Kafkas brought an action in another county
seeking compensation for the taking of their business.
The Bridgewaters subseguently intervened. After a
bench trial, the district court rejected their Fifth
Amendment claims. See App. 396. The Kafkas and
Bridgewaters appealed to the Montana Supreme
Court.
Proceedings before the Montana Supreme Court
Hearings in the two cases were held on the same
day, September 13, 2006. The court issued its deci-
sions on the same day, December 31, 2008. In both
cases, an identical four to three majority of the court
held that no taking had occurred as a result of 1-143.
11
The court’s decisions both hinged on whether
takings occurred based on the test announced by this
Court in Pennsylvania Central Transportation Co. v.
City of New York, 438 U.S. 104 (1978). In Penn Cen-
tral, this Court identified “several factors that have
particular significance” in conducting the “essentially
ad hoc, factual inquir[y]” into whether a particular
governmental action constitutes a taking. 438 US.
at 124. These factors include: “[t]he economic impact
of the regulation on the claimant,” “the extent to
which the regulation has interfered with distinct
investment-backed expectations,” and “the character
of the governmental action.” Id.
Regarding the investment-backed expectation
factor, the Montana Supreme Court held that the
Petitioners’ expectations could net be reasonable as a
matter of law. For instance, in the Kafka decision,
the court initially recognized that Petitioners had
investment-backed expectations that they could
charge a fee to shoot elk. Indeed, such expectations
formed the basis of investing “significant financial
resources on their respective operations to begin
with.” App. 179, 7 89. Nevertheless, the court found
that these expectations could not be reasonable.
According to the majority, it was unreasonable to
invest money expecting to be able to charge a fee for
shooting elk because
the state never assured appellants they
would always be permitted to charge a fee to
shoot livestock.
App. 182, J 92.
12
The court in the Wallaces’ case reached the same
conclusion. After citing cases involving highly regu-
lated industries, the court concluded that “claimants
operating in such [highly regulated] fields should
expect that the government can effectively regulate
them out of business.” App. 52-53, 7 84.
By contrast, the dissent in Kafka reasoned:
Here, the Ranchers’ investment-backed ex-
pectations certainly included the expectation
that the regulatory scheme would be ad-
justed over time, as had been the case over
the preceding 75 years. However, I-143 did
not “adjust” the regulatory scheme; rather it
rendered the scheme’s existence entirely
pointless, since none of the businesses in the
industry can survive after I-143. I cannot
agree with the Court’s fanciful suggestion
that the Ranchers should have expected the
passage of such a regulation, i.e., one that
would render all of the other existing regula-
tions moot.
App. 263, 4] 203; App. 266, {J 206.
The dissent continued its diametrically opposed
view to the majority:
The Court points out that “the State never
assured [the Ranchers] they would always be
permitted to charge a fee to shoot alternative
livestock in Montana.” Opinion, ¥ 92.
With all due respect, the foregoing prop-
osition 1s preposterous. The right to receive
remuneration, in one form or another, for
13
one’s lawful goods and services has always
been a part of this country’s economic sys-
tem. It is one thing to regulate the prices at
which goods and services may be sold, but it
is quite another to impose a price ceiling of
$0.00. No business would, or should, ever ex-
pect that the State may require it to offer its
goods and services for free.
App. 283, at | {230-31 (emphasis in original, cita-
tions omitted).
The Montana Supreme Court also wrestled with
what the “character of the governmental action”
factor entailed. The court concluded that it referred
only to the degree of intrusiveness of the government
regulation.
Thus, under the “character of the govern-
mental action” prong courts should inquire
concerning the magnitude or character of
the burden imposed by the regulation, and
determine whether it is functionally compa-
rable to governmental appropriation or inva-
sion of private property.
App. 170, q 71.
More revealing is the court’s application of that
factor. In Kafka, the court concluded:
(T]he type of intrusion upon the alternative
livestock embodied by I-143 is minimal. The
animals have not been seized by virtue of
I-143 — they still belong to the appellants.
Moreover, Appellants may still sell their an-
imals to out-of-state markets for any usage,
14
and may even allow others to shoot them in
Montana, so long as no fee is charged. It is
well-established that regulations which im-
pair or significantly decrease the profit-
able use of property do not amount to a
taking.
App. 178, { 87 (emphasis added). The dissent notes
the contradictory nature of describing the intrusion
as “minimal” and claiming that the Ranchers
“should have reasonably anticipated that the
Game Farm industry might be phased out.”
... “Phasing out” an entire industry is cer-
tainly not the result one would reasonably
anticipate from a regulation whose intrusion
on property interests is “slight” and “mini-
mally intrusive.”
App. 201, 7 119 (quoting App. 182, { 93).
Similarly, in the Wallaces’ case, the court con-
cluded:
(T]hus, from the perspective of regulatory
takings law, the character of the government
action embodied in J-143 had a minimally in-
trusive effect on appellants’ bundle of proper-
ty rights in the alternative livestock.
App. 57, 7 91.
Regarding the economic impact factor, the trial
court found and the Montana Supreme Court agreed
that the economic impact on the Wallaces was signifi-
cant. App. 323; see also App. 301 (97% reduction in
value to the alternative livestock). In Kafka, the trial
court found that the economic impact was not “se-
vere,” but was nonetheless “substantial.” App. 171-72,
at { 74. The ranchers had invested their income into
development of the ranches and, therefore, had not
yet shown a profit on their income taxes. The Mon-
tana Supreme Court, however, held:
[W]e agree with appellants that the District
Court underestimated the economic impact
that I-143 had on their alternative livestock.
Unlike their real estate interests, appellants’
(sic) have demonstrated that their alterna-
tive livestock suffered a significant devalua-
tion as a result of I-143.
App. 171-72, { 84 (recognizing that the Kafkas’ ani-
mals suffered a devaluation of 70% and the Bridge-
waters suffered a devaluation of 95%). Nevertheless,
the majority found no taking occurred.
The Dissent concluded that regulations
may incidentally impact the value of busi-
nesses in the industry, they are not even re-
motely in the same league as [-143, which
did not “regulate” alternative livestock
ranches in the usual sense, but instead delib-
erately wiped out the economic viability of
these businesses.
App. 264, { 204. Ilence, the dissent concluded that
the economic impact factor “weighs very heavily in
favor of the Ranchers’ claims.” App. 277, 4 221 (em-
phasis in original).
16
Petitioners filed separate petitions for rehearing
two weeks later pursuant to Montana Supreme Court
Rule 20. Chief Justice Karla Gray had retired at the
time the Montana Supreme Court’s decisions were
issued. The petitions for rehearing were denied on
February 10, 2009 by an evenly divided court, three
to three, with no replacement for Chief Justice Gray
to break the tie. App. 397, 400.
As evidenced by the Montana Supreme Court
opinions in these cases, the federal question as to
whether Petitioners had experienced an uncompen-
sated taking under the Fifth Amendment originated
with the original complaints they filed in state court
and ended with the Montana Supreme Court’s rejec-
tion of the claims. App. 8-9, {| 10; App. 131, { 9.
¢
REASONS FOR GRANTING THE WRIT
The Montana Supreme Court has decided impor-
tant federal questions involving the Fifth Amend-
ment’s protection of rights in property. These
decisions, however, conflict with precedents of other
state and federal courts.
This Court’s regulatory takings jurisprudence is
often considered to have begun with Pennsylvania
Coal Co. v. Mahon, 260 U.S. 393 (1922), although
some would argue that it significantly predates 1922."
See App. 214, 9] 140-47 (Nelson, J. dissenting)
17
Nevertheless, Mahon recognizes that regulation is a
modern necessity but still warns that regulation can
go “too far” and result in a taking. /d. at 414-15.
Fifty-six years later, in Penn Central, the Court
gave a framework for deciding whether regulation of
private property goes “too far.” That framework
involves consideration of at least three factors.’
The strength of the multi-factor Penn Central
test is its flexibility, borne out of the recognition that
regulations come in a variety of shapes, sizes and
intensity and apply to a variety of property interests
which are correspondingly diverse. Hence, the analy-
sis requires an “ad hoc factual inquiry.” Penn Central,
438 U.S. at 124.
While the strength of the Penn Central multi-
factor test may be its flexibility, that flexibility may
also be its weakness. Its flexibility can be stretched so
far out of shape that its application leads to no recog-
nizable degree of predictability. While the ability to
take into account a wide variety of facts is important,
the Penn Central test must have enough clarity to
lead to somewhat predictable results. Otherwise,
Legal scholars have argued that the Penn Central factors
were not intended to be rigid categories, but rather “serve a
modest, argument-framing function. Namely, the factors act
more or less as placeholders, which help lawyers and judges to
focus their arguments on a few considerations that everyone can
understand.” FE. R. Claeys, The Pern Central Test and Tensions
in Liberal Property Theory, 30 Harv. ENvTL. L. REV. 339, 343
(2006)
18
injustice results if one’s constitutional rights depend
completely upon the subjectivity of the decision-maker.
Judge Hall expressed a similar concern in Esposi-
to v. South Carolina Coastal Council, 939 F.2d 165
(4th Cir. 1991):
It is all too easy in a takings case to become
enmeshed in the various tests, factors, and
doctrines the Supreme Court has applied
through the years... . The Court’s “tests” are
not rigid, unforgiving yardsticks to be slav-
ishly applied notwithstanding a draconian
result. On the contrary, the tests are guide-
lines for resolving the question at the bottom
of every case: whether the claimant has been
“forci[ed] ... alone to bear [a] public burden
[| which, in all fairness and justice, should
be borne by the public as a whole.”
Id. at 172 (Hall, J. dissenting) (quoting Armstrong v.
United States, 364 U.S. 40, 49 (1960)). Here, the
complete destruction of businesses is a draconian
result.
A well-fashioned test for the protection of consti-
tutional rights must have some degree of predictabili-
ty in order to ensure that one’s rights are not
completely at the mercy of the decision-maker. Here,
the factual impacts of I-143 are not disputed, yet the
justices on the Montana Supreme Court had widely
differing views on whether the Fifth Amendment
provides protection to Petitioners. Of course, nuances
in constitutional theory may often be the subject of
differing views. However, the result of I-143 was
19
unmistakable — obliteration of Petitioners’ businesses
in a completely unprecedented fashion. Nevertheless,
a sharply divided court, using the same Fifth
Amendment precedents, cannot come anywhere close
to agreement on the constitutional implications.
Further clarity in the Penn Central test is sorely
needed, clarity which can only come from this Court.
This case presents an opportunity for the Court
to provide the needed guidance and increased clarity
to ensure justice — that one’s rights do not depend
completely upon the subjective views of the decision-
maker who will decide one’s rights.
i.
REVIEW SHOULD BE GRANTED TO RESOLVE
A SIGNIFICANT CONFLICT AMONG STATE
AND FEDERAL COURTS ON WHETHER
BUSINESS OWNERS OPERATING IN A HIGHLY
REGULATED INDUSTRY CAN EVER HAVE
REASONABLE INVESTMENT-BACKED
EXPECTATIONS UNDER PENN CENTRAL
The Montana Supreme Court concluded that
Petitioners’ investment-backed expectations could not
be reasonable because they operated in a highly regu-
lated industry. App. 180. This conclusion is completely
at odds with several decisions of this Court and others.
For instance, Ruckelshaus v. Monsanto Co., 467 U.S.
986 (1984), makes clear that the reasonableness of
one’s investment-backed expectations is influenced
most by the nature of the regulations, not by a
20
superficial characterization of one’s business as being
within a “highly regulated” category of endeavors.
In Ruckelshaus, the Court was considering
whether trade secrets were taken by an EPA regula-
tion that mandated disclosure of pesticide formulas.
Monsanto had claimed a taking of its trade secrets
under regulations during two different time periods.
This Court found that at the time the regulatory
framework put Monsanto on notice that its trade
secrets might be disclosed, the company had no
reasonable investment-backed expectation of non-
disclosure. Hence, no taking occurred during that
regulatory timeframe. Conversely, when trade se-
crets were submitted to the EPA under a regulatory
framework where confidentiality could be expected
to be maintained, the owner had a reasonable
investment-backed expectation that the trade se-
crets would remain just that — secret.
Significantly, this Court also found that the
interference with investment-backed expectations in
the latter category was so significant that a taking
was found without regard to the other Penn Central
factors, even though the pesticide manufacturing
industry was undoubtedly highly-regulated. Ruckel-
shaus, 467 U.S. at 1005, 1013-14.
The Montana Supreme Court decisions also
stand in direct conflict with cases decided by the
Court of Appeals for the Federal Circuit, the first of
which appears to be on all fours with the Petitioners’
21
situation — Yancey v. United States, 915 F.2d 1534
(Fed. Cir. 1990).
In Yancey, turkey farmers sought compensation
under the Fifth Amendment after a federally-imposed
quarantine, premised upon disease prevention, pro-
hibited the interstate shipment of turkeys. Several
significant facts parallel the facts in the present
cases. First, the Yanceys’ turkeys were not diseased.
Id. at 1536. Neither were Petitioners’ elk. Second, the
cost of keeping the turkeys alive was cost prohibitive,
so the Yanceys sold the turkeys for slaughter and
received $20,887 for the stock. Id. The Petitioners’ elk
quickly became a financial burden in that their value
was less than the cost of maintaining them. App. 177,
q 85.
In deciding the taking question, the Yancey court
reiied on Department of Agriculture v. Mid-Florida
Growers, Inc., 521 So.2d 101 (Fla. 1988) (destruction
of healthy citrus trees to avoid spread of disease was
a compensable taking). Yancey, 915 F.2d at 1540.
The opinion below in the Wallaces’ case at-
tempted to distinguish Yancey by claiming that the
Yanceys had “no reason to expect that a healthy flock
of turkeys would have to be suddenly destroyed.”
App. 62, { 98.
This statement is simply incorrect. A month
before the Yanceys bought their flock, there was a
serious outbreak of Avian Influenza in the region. 915
F.2d at 1536. Moreover, the federal government’s
authority to impose quarantines to contro] Avian
22
Influenza dated as far back as 1962. Id. at i538.
Clearly, the possibility of disease outbreaks was
known to both the Yanceys and the Petitioners.
However, when government regulation significantly
devalues healthy animals, the Fifth Amendment
applies differently in the Federal Circuit than in
Montana.
The conflict among courts as to whether presence
in a highly regulated field precludes a regulatory
taking is also evident from the recent Federal Circuit
decision in Rose Acre Farms, Inc. v. United States,
559 F.3d 1260 ‘Fed. Cir. 2009).
In Rose Acre, the Federal Circuit found no taking
of eggs which had been quarantined, primarily be-
cause the diminution in value was merely 10%.
However, in addressing the reasonable investment-
backed expectations factor, the Court held Rose Acre
had reasonable investment-backed expectations even
though it operated in a highly regulated industry
because the new regulations supposedly causing the
taking were “unprecedented.” /d. at 1276. This deci-
sion is consistent with Ruckelshaus, but contrary to
the approach used by the Montana Supreme Court.’
* Other decisions follow the same path of reviewing the
nature of regulations. Cienega Gardens v. United States, 331
F.3d 1319, 1350-51 (Fed. Cir. 2003); United Nuclear Corp. uv.
United States, 912 F.2d 1432, 1436 (Fed. Cir. 1990).
Although the Court distinguished United Nuclear from its
earlier decisicn in Allied-General Nuclear Services, Inc. v.
United States, 839 F.2d 1572 (Fed. Cir. 1988), the resolution of
(Continued on following page)
23
In the present case, it is undisputed that prior to
passage of I-143, Montana had never regulated the
fees for shooting privately owned elk. Nevertheless,
the Montana Supreme Court concluded that game
farms had become controversial, therefore, Petition-
ers should have known that the state could “outlaw
Game Farms entirely.” App. 182, 9 92. Of course,
many businesses are controversial. That does not
mean they can be effectively regulated out of exis-
tence without compensation.
The dissent in Kafka warned of the absurd and
unfair result of the court’s reasoning in other busi-
ness endeavors, such as insurance, coal-fired electri-
cal plants, gasoline, banks, and grain farmers. App.
264-65, J 204. The potential list is unending.
Additionally, the Montana court’s conclusion that
there can be no regulatory taking under the Fifth
Amendment when the industry is highly regulated
conflicts with a long history of decisions recognizing
that takings can occur when government regulates
the prices charged by businesses, even in highly
regulated industries.
At its essence, I-143 is a price control. It does not
prohibit owning game farm animals. It does not
takings cases in highly regulated fields appears to be all over
the doctrinal map, leaving lower courts, regulators and property
owners without paths to follow, let alone boundaries between
broadly defined areas where the Fifth Amendment provides
protection and where there is none
24
prohibit keeping them in captivity. In fact, the re-
quirement that game farm animals be kept separate
from the State’s free-roaming wild elk remains. It
does not prohibit the shooting of game farm animals.
Instead, it regulates the price which can be charged
for shooting private elk and dictates that the dollar
price be $0.00.
For over a century, this Court and others have
recognized that price regulations may be lawful, but
they can result in an uncompensated taking:
This power to regulate is not a power to de-
stroy, and limitation is not the equivalent of
confiscation. Under pretense of regulating
fares and freights, the state cannot require
a railroad corporation to carry persons or
property without reward; neither can it do
that which in law amounts to a taking of pri-
vate property for public use without just
compensation, or without due process of law.
Stone v. Farmers’ Loan & Trust Co. (Railroad Com-
mission Cases), 116 U.S. 307, 331 (1886).
More recently, the Seventh Circuit has explained:
The argument that because railroads are
heavily regulated their owners must put up
with diminutions in value fares no better.
Regulation may diminish the value of prop-
erty without “taking” it. Railroads have long
been subject to regulation that diminishes
their profitability. But it does not follow that
diminution by all means is permitted.
25
In re: Chicago, Milwaukee, St. Paul and Pacific R.
Co., 799 F.2d 317, 325 (7th Cir. 1986) (citations omit-
ted); see also Duquesne Light Co. v. Barasch, 488 U.S.
299, 307-08 (1989) (“A rate is too low if it is ‘so unjust
as to destroy the value of [the] property for all the
purposes for which it was acquired,’ and in so doing
‘practically deprive[s] the owner of property without
due process of law.’” (quoting Covington & Lexington
Turnpike Road Co. v. Sandford, 164 U.S. 578, 597
(1896))).
The Montana Supreme Court’s explanation of
how Penn Central’s reasonable investment-backed
expectations factor applies in highly regulated indus-
tries is completely contrary to the way this and other
courts have historically analyzed the issue. The Court
should grant the Petition to provide a more cohesive
understanding of the role this factor plays in the
analysis of takings claims to assist property owners,
regulators and courts nationwide.
If this Petition were granted, Petitioners would
argue that presence in a highly regulated industry
does not preclude reasonable investment-backed
expectations as a matter of law. Here, Petitioners’
expectations were objectively reasonable because the
regulation of prices was completely unprecedented
and the state had explicitly encouraged the develop-
ment of the industry I-143 destroyed.
26
IT.
THE PETITION SHOULD BE GRANTED
TO ADDRESS CONFLICTS AMONG
LOWER COURTS REGARDING
PENN CENTRAL’S “CHARACTER OF THE
GOVERNMENTAL ACTION” FACTOR
In Penn Central, it appears that this Court’s
reference to the “character of the governmental
action” may have originally involved looking to see
whether the governmental action was a _ physical
invasion or whether it was a regulatory burden. See
Lingle v. Chevron USA, Inc., 544 U.S. 528, 539 (2005)
(quoting Penn Central, 438 U.S. at 124). However,
Penn Central also recognized that a regulatory taking
involved essentially “ad hoc, factual inquiries” and
suggested that the three factors were not exclusive.
438 U.S. at 124. Courts should accordingly consider
any facts which help one determine whether a particu-
lar burden “in all fairness and justice, should be borne
by the public as a whole.” Armstrong, 364 U.S. at 48.
The Montana Supreme Court’s cenclusion that
the “character of the governmental action” factor is
simply a reference to the degree of intrusion in prop-
erty rights conflicts with the analysis of other courts.
As with the Court’s descriptor of regulations that
go “too far,” the phrase “character of the government-
al action” has left the courts, property owners and
regulators with little understanding of what can and
should be considered in determining whether just
compensation must be paid.
27
The trial courts in these cases found the “charac-
ter of the governmental action” factor to weigh
against finding a taking because the regulation
substantially advanced a legitimate governmental
interest. App. 53, 7 85; App. 138, 4 21. The Montana
Supreme Court recognized that approach was no
longer valid after Lingle. App. 13, { 16, n.2; App. 53,
q 85,n.5; App. 168-69, 7] 70-71.
Nevertheless, other courts, even after Lingle, still
inquire whether the regulation substantially ad-
vances a legitimate governmental interest. For in-
stance, in Rose Acre Farms, 559 F.3d 1260, the
Federal Circuit concluded that “character of the
governmental action” referred to the purpose and
importance of the governmental regulation Jd. at
1278-81; see also Cienega Gardens v. United States,
503 F.3d 1266, 1279 (Fed. Cir. 2007) (referring to the
strength of the governmental interest in the context
of assessing the character of the governmental ac-
tion); Tennessee Scrap Recyclers Ass’n v. Bredesen,
556 F.3d 442 (6th Cir. 2009) (“character of the gov-
ernmental action” analysis involved consideration of
the importance of the regulation’s purpose).
If the effectiveness of a regulation in achieving
an important governmental interest is outside the
scope of deciding takings claims as Lingle indicates,
then “character of the governmental action” factor
cannot still involve review of the importance of the
governmental purpose. Otherwise, the government
could merely assert an extremely important, i.e.,
28
lifesaving, purpose to immunize its regulations from
the Takings Clause.
Uncertainty of what constitutes the “character
of the governmental action” factor unfortunately
abounds. For instance, California and Minnesota
courts appear to focus on the way in which the bur-
dens are distributed as part of the “character of the
governmental action” inquiry.
We believe that the appropriate focus of the
character inquiry should be on “the nature
rather than the merit of the governmental
action.” Small Prop. Owners of San Francts-
co v. City & County of San Francisco, 141
Cal.App.4th 1388, 47 Cal.Rptr.3d 121, 136
(2006). Although the relevant considerations
may vary depending on the circumstances of
the case, an important consideration involves
whether the regulation is general in applica-
tion or whether the burden of the regulation
falls disproportionately on relatively few
property owners.
Wensmann Realty, Inc. v. City of Eagan, 734 N.W.2d
623, 639 (Minn. 2007) (emphasis in original).
Petitioners agree that these considerations
should be included in any takings inquiry. Of course,
the Montana Supreme Court did not include mean-
ingful consideration that I-143 singled out a particu-
lar business with relatively few participants and
placed the entire economic burden of the new policy
on their shoulders.
29
In the absence of direction from this Court,
courts have developed widely different views on what
the “character of the governmental action” inquiry
actually involves. While the Montana Supreme Court
purports to emphasize the impact on the property
owner, its narrow focus precludes consideration of
other facts which naturally influence common under-
standings of fairness and justice. Additionally, by
focusing on the degree of intrusiveness alone, the
“character of the governmental” action factor is
relegated to a mere redundancy to the economic
impact factor.°
* The conclusion that [-143 had a minimal intrusive effect
on Petitioners is inconsistent with the Montana Court’s recogni-
tion that the economic impact was significant or substantial.
App. 323; App. 71-72, at {| 74. However, the Court attempted to
characterize the economic impact as being less severe by assert-
ing that one’s property rights in intangible business assets are
entitled to no protection from the Fifth Amendment in the
regulatory taking context, even though “intangible business
assets are statutorily recognized forms of property in Montana.”
App. 157, 755 (citing Mont. Code Ann. § 70-1-104(4); In re
Marriage of Hull, 712 P.2d 1317, 1820-21 (Mont. 1986)). The
only circumstance in which intangible assets would be protected
by the Montana judiciary is if the government acted “with the
intent of operating a similar business.” App. 158, at 9 56. This
conflicts with this Court’s oft-repeated maxim that the focus of
the Fifth Amendment is not on what the government has gained,
but on what the property owner lost. Kimball Laundry v. United
States, 338 U.S. 1, 13 (1949) (citing Boston Chamber of Com-
merce v. Boston, 217 U.S. 189, 195 (1910)). The State’s intent
should have no bearing on whether these assets are compensa-
ble. See dissent, App. 272-73, 4 214
30
If review is granted, Petitioners will argue that
the “character of the governmental action” factor
should include a variety of considerations. For in-
stance, typical zoning regulations limit land use in a
way which both enhances and restricts properties’
values. See Pennsylvania Coal, 260 U.S. at 415 (not-
ing that an “average reciprocity of advantage” was
deemed to justify many laws). I-143 provided no
benefits to game farmers — only a fatal financial
burden that was imposed on them and them alone.
Petitioners will contend that the “character of the
governmental action” involves review of any fact
which tends to show that fairness and justice dictate
that the cost of the regulation should be borne by the
public as a whole.
The “character of the governmental action” factor
does not simply consist of the degree of intrusiveness,
nor is it a review of the importance of its purpose.
Rather, this factor calls for a review of what the
regulation actually does. As noted above, I-143 does
not regulate the operation of game farms in any way
other than prohibiting the transfer of the licenses and
prohibiting the payment of money for shooting pri-
vately owned elk. This is what I-143 does. The regu-
lation of fees to $0.00 supports the conclusion that
Petitioners should be compensated for the destruction
of their businesses.
—————__—____——. @¢ ——_______—__—-
31
CONCLUSION
Despite this Court’s admonition that the primary
factor among the Penn Central factors is the economic
impact to the property owner, Lingle, 544 U.S. 539-
40, the Montana Supreme Court has ignored this
fundamental principle which comes from the very
purpose of the takings clause. Instead, the Montana
Supreme Court attempts to justify the devastating
impact of I-143 on Petitioners by applying the other
factors in ways which conflict with the approach of
this, and other, Courts.
I-143 is not a regulation that raises the concern
that “Government hardly could go on” if just compen-
sation were required. Mahon, 260 U.S. at 413. As
noted by the dissent in the Wallaces’ case,
It is one thing to strengthen fencing, testing,
and reporting requirements through “addi-
tional restrictions,” as the Legislature did
over the years. But it is quite another to re-
quire alternative livestock ranchers to oper-
ate with no income through the expedient of
prohibiting remuneration for the key eco-
nomic activity on which their businesses de-
pended: fee shooting.
App. 73, { 116. No amount of stretching or constrict-
ing the other Penn Central factors should lead to the
results adopted in Montana. Petitioners urge the
Court to grant this Petition so that the Court may
39
Va
add clarity and provide guidance on how the Penn
Central factors are to be applied.
DATED: May 11, 2009
Respectfully submitted,
RICHARD M. STEPHENS*
*Counsel of Record
GROEN STEPHENS & KLINGE LLP
11100 NE 8th St., Ste. 750
Bellevue, Washington 98004
Telephone: (425) 453-6206
ARTHUR V. WITTICH
WITTICH LAW OFFICES, PC
602 Ferguson Ave., Ste. 5
Bozeman, Montana 59718
Telephone: (406) 585-5598
JOHN E. BLOOMQUIST
DONEY CROWLEY BLOOMQUIST PAYNE UDA P.C.
44 West Sixth Avenue
P.O. Box 1185
felena, Montana 59624-1185
Telephone: (406) 443-2211
WARD E. TALEFF
TALEFF LAW OFFICE, P.C
P.O. Box 609
Great Falls, Montana 59403-0609
Telephone: (406) 791-9400
Attorneys for Petitioners
App. 1
348 Mont. 205, 201 P.3d 70 (2008)
Supreme Court of Montana.
Bruce BUHMANN, Shirley Buhmann, Circle
Eagle Game Farm, Len Wallace, Pamela Wallace,
and Big Velvet Ranch, Plaintiffs and Appellants,
v.
STATE of Montana, Mike McGrath,
and Jeff Hagener, Defendants and Appellees,
Sportsmen for I-143, Montana Wildlife Federation,
Defendant-Intervenors and Appellees.
No. 05-473.
Argued Sept. 13, 2006.
Submitted June 20, 2007.
Decided Dec. 31, 2008.
Rehearing Denied Feb. 10, 2009.
Background: Owners and operators of alternative
livestock game farms brought an action against the
State alleging that initiative measure which pro-
hibited fee-shooting on alternative livestock game
farms and prohibited the transfer of alternative
livestock licenses constituted a taking of their private
property. After the Blaine County District Court
granted State’s motion for change in venue, following
a bench trial the District Court of the First Judicial
District, County of Lewis and Clark, Dorothy Mc-
Carter, P.J., entered judgment for the State. Owners
appealed.
Holdings: The Supreme Court, Patricia O. Cotter, J.,
held that:
App. 2
(1) State was entitled to change venue
of action from county in which it was brought
to county containing State capital;
(2) as a matter of first impression,
owners were not entitled to a jury trial on
issue of whether initiative measure consti-
tuted a regulatory or categorical taking;
(3) Montana Constitution did not pro-
vide any greater constitutional protection
against the regulatory taking of private
property than the Fifth Amendment to the
United States Constitution;
(4) even if their categorical taking
claims were cognizable, initiative measure
did not result in a categorical taking of
owners alternative livestock and related
equipment;
(5) economic impact factor of regula-
tory taking analysis weighed in favor of a
finding of a compensable taking; but
(6) character of government action fac-
tor of regulatory taking analysis weighed
against a finding of a regulatory taking; and
(7) reasonable investment-backed ex-
pectaticns factor of regulatory taking analy-
sis weighed against a finding of a regulatory
taking.
Affirmed.
Jim Rice, J., concurred in part and dissented in
part, and filed opinion.
App. 3
James C. Nelson, J., dissented and filed opinion,
in which Wm. Nels Swandal, J., joined.
Wm. Nels Swandal, J., dissented and filed
opinion.
See also 309 Mont. 473, 47 P.3d 847.
For Appellants: Arthur V. Wittich (argued),
Wittich Law Firm, P.C., Bozeman, Montana, Richard
M. Stephens (argued), Groen, Stephens & Klinge,
LLP, Bellevue, Washington.
For Appellees: Hon. Mike McGrath, Montana
Attorney General, Chris D. Tweeten, (argued),
Assistant Attorney General, Helena, Montana.
For Defendant-Intervenors and Appellees: Jack
R. Tubolske (argued), Tuholske Law Office, P.C., Sarah
K. McMillan, Attorney at Law, Missoula, Montana.
Justice PATRICIA O. COTTER delivered the
Opinion of the Court.
{11 Bruce and Shirley Buhmann (Buhmanns),
owners and operators of the Circle Eagle Game Farm,
and Len and Pamela Wallace (Wallaces), owners and
operators of the Big Velvet Ranch, appeal an order of
the First Judicial District Court which denied their
takings claims under the Fifth Amendment to the
U.S. Constitution and Article II, Section 29 of the
Montana Constitution. These claims alleged that the
enactment and enforcement of initiative measure no.
143 (1-143), which was approved by the citizens of
Montana on November 7, 2000, constituted a taking
App. 4
of their private property and that they were entitled
to just compensation for this taking. For the reasons
set forth below, we affirm the District Court.
FACTUAL AND
PROCEDURAL BACKGROUND
{2 The case at bar involves takings claims very
similar to claims we recently addressed in Kafka uv.
Mont. Dept. of Fish, Wildlife and Parks, 2008 MT 460,
348 Mont. 80, 74 P.3d 8, 2008 WL 5413504. Insofar as
the background information and our decision and
reasoning in Kafka applies to the case at bar, we will
refer to that case. Where the arguments and issues
raised by the present appellants are distinct from
those raised by the parties in Kafka, we will address
their merits accordingly.
{3 The appellants in this case were owners and
operators of alternative livestock game farms (Game
Farms) within the state of Montana. The Game Farm
industry is premised on the notion that individuals
are willing to pay significant amounts of money to
shoot captive animals, primarily elk, within the
confines of a Game Farm. Since 1917, it has been
lawful for individuals to own alternative livestock,
such as elk, and keep them in captivity. Game Farms
are heavily regulated by the Montana Department of
Fish, Wildlife, and Parks (FWP) because of the threat
posed by chronic wasting disease (CWD), a fatal
disease of the central nervous system of captive and
free-ranging animals such as mule deer, white-tailed
App. 5
deer, and Rocky Mountain elk. Kafka, { 2. To operate
a Game Farm, the owner/operator must possess an
alternative Game Farm license and comply with the
rigorous and extensive licensing requirements set
forth in Title 87, chapter 4, part 4, MCA. See Kafka,
Tq 2, 8.
{4 On November 7, 2000, the voters of
Montana passed I-143, which made two significant
changes to the regulation of Game Farms in
Montana. See Kafka, {4 6-9. First, it prohibited fee-
shooting on Game Farms in Montana. Second, I-143
prohibited licensees from transferring their alterna-
tive livestock licenses to others. These changes had a
significant impact on the Game Farm industry in
Montana because the vitality of the Game Farm
industry was premised upon the profits derived from
fee-shooting. The ban on the transfer of licenses was
significant because it essentially prohibited Game
Farm owners from selling those Game Farms to
others, since a Game Farm could not operate without
a valid license. I-143 did not, however, eliminate all
uses of alternative livestock as it still permitted
Game Farm operators to own herds, harvest the
animals for their meat or antlers, or sell them in out-
of-state markets where fee-shooting was legal. Kafka,
q{ 7-8.
(5 The enactment and enforcement of I-143 led
to several lawsuits in both state and federal court in
Montana. At the time of this suit, the Buhmanns
resided in Blaine County, Montana, and owned and
operated the Circle Eagle Game Farm, a twenty-nine
App. 6
acre game farm which was regulated by FWP. The
Buhmanns began the Circle Eagle Ranch in 1997
after applying for and receiving a loan from the state of
Montana’s Department of Commerce. The Buhmanns’
loan application included a business plan describing
an elk-breeding program they planned to institute.
This plan included the annual selling of wholesale
mature bulls to shooting operations, and the selling of
retail mature cows to other breeding operations. The
Buhmanns and the Circle Eagle Ranch received an
alternative livestock license through FWP which
allowed them to keep sixty elk. They began selling elk
in 1999. In addition to selling elk, the Buhmanns also
sold a mineral supplement for captive deer and elk
called Sweet Pro.
46 The Wallaces started the Big Velvet Ranch
in Ravalli County, Montana, after obtaining a Game
Farm license in 1992. The Big Velvet Ranch eventu-
ally encompassed roughly 2000 acres. In the course of
developing their ranch, the Wallaces purchased mate-
rial for fencing and other infrastructure, constructed
a lodge on the property, removed the native deer and
elk, and then imported alternative livestock (elk)
from other locations. The Wallaces raised captive elk,
and provided opportunities for the fee-shooting of elk
on the Big Velvet Ranch. Under this service, clients
would come and stay on the Big Velvet Ranch and be
guaranteed to shoot an elk within the confines of the
ranch. Additionally, the Wallaces bred captive elk for
other Game Farms.
App. 7
{ 7 According to the factual assertions in their
complaint, the Wallaces invested millions of dollars in
developing the Big Velvet Ranch, and took a number
of measures to ensure that their alternative livestock
was of the highest quality and was disease-free. In
1999, after a three-year testing process, the Big
Velvet Ranch was certified as tuberculosis-free, and
in 2001 certified as brucellosis-free. Additionally, the
Wallaces tested roughly 700 animals from the Big
Velvet Ranch for CWD, and all those tests came back
negative. The Wallaces also claim they developed
prototype feed trucks, and appropriate facility
modifications which would allow them to maintain a
high nutritional level of the elk, at a cost of over
$600,000. The Wallaces further stated that they took
other measures, including the hiring of a veterinarian
and the development of extensive monitoring
systems, to ensure that their operation established a
reputation as one of the most successful private elk
ranches in the United States.
78 From 1997 through 1999, the Wallaces
claim to have harvested over 100 mature bulls and
earned gross revenues of over $1 million per year. The
Wallaces allege that their ranch guests would pay on
average $7,000 for hunting mature bull elk, and that
this comprised the majority of the ranch’s revenues.
Between 1995 and 2000, the Wallaces hosted more
than 600 clients.
719 After the passage of I-143, and its inter-
pretation by the Attorney General’s office and FWP,
the Wallaces claim that their existing and prospective
App. 8
customers cancelled their plans to visit the Big Velvet
Ranch, and that many demanded refunds on their
deposits. Similarly, there was a cancellation of
promised purchases of animals and feed from the
Circle Eagle Ranch. The Wallaces claim that in order
to stem the financial hemorrhaging at the ranch, they
contacted various Indian tribes in Montana to assess
their interest in receiving approximately 500 animals
from the Big Velvet Ranch. After obtaining the
appropriate permits, the Wallaces thereafter entered
into an agreement with the Crow Indian Tribe to
transfer some of their animals. After the first
shipment of 67 elk, the Wallaces were enjoined in the
First Judicial District Court from transferring any
more of their alternative livestock to the Crow Indian
Reservation to be released in an unfenced area. The
Wallaces appealed the issuance of this injunction to
this Court, and it was upheld in Hagener v. Wallace,
2002 MT 109, 309 Mont. 473, 47 P.3d 847. The
Wailaces also sought injunctions against the
enforcement of I[-143 in Ravalli County District
Court, as well as separately in the federal district of
Montana, both of which were denied. Moreover, Len
Wallace was tried and convicted in Justice Court for
violating I-143’s ban on fee-shooting.
710 On June 6, 2002, the Wallaces and
Buhmanns filed a joint action against the state of
Montana, Attorney General Mike McGrath, and FWP
Director Jeff Hagener in the Seventeenth Judicial
District Court, Blaine County, seeking damages for
the taking of their private property under the Fifth
App. 9
Amendment and Article II, Section 29 of the Montana
Constitution. The Wallaces and Buhmanns alleged
that [-143 violated the Fifth Amendment’s prohibition
on the taking of private property without just
compensation, as well as Article II, Section 29’s
prohibition on a damaging of their property. The
Wallaces and Buhmanns alleged that I-143 affected a
taking of their private property rights without just
coripensation “by specifically taking the only viable
source of profitability (i.e., shooting animals for a fee),
and thereby destroying the Montana breed stock sale
market, and prohibiting the transfer of licenses.” The
Wallaces and Buhmanns alleged that the State
enforced 1-143 to the detriment of their property
rights and that this enforcement imposed new
retroactive liabilities on them, damaging their vested
property rights as well. Additionally, the Wallaces
and Buhmanns alleged that by prohibiting the
transfer of their licenses and the value of their
investments in their Game Farms to others, the State
took not only their “property rights and licenses, but
also the profitable use of the land, and the increased
value of the land as a result of the prior issued
licenses.” The Buhmanns and Wallaces also alleged
that McGrath and Hagener violated their constitutional
rights by enforcing I-143 against them, and brought a
claim for relief under 42 U.S.C. § 1983.’
1
At the close of appellants’ case-in-chief, the District Court
granted the State’s motion to dismiss the § 1983 claim for failure
(Continued on following page)
App. 10
{ 11 The precise nature of the Buhmanns’ and
Wallaces’ claims differed slightly. Because the Buh-
manns did not provide fee-shooting services, their
business operations were not directly affected by I-
143. However, by eliminating the in-state market fer
fee-shooting, I-143 had a significant economic impact
on the profitability of their breeder operation and
their marketing of Sweet Pro. The Wallaces, on the
other hand, were directly affected since the Big Velvet
Ranch provided fee-shooting services.
{12 On July 22, 2002, the State filed a motion
to change the venue of the case from Blaine County to
the First Judicial District, Lewis and Clark County,
pursuant to § 25-2-116, MCA. On August 16, 2002,
the Wallaces and Buhmanns filed a motion to sever
the parties, pursuant to M.R. Civ. P. 21. In the mo-
tion, the Buhmanns argued that their action should
remain in Blaine County, while the Wallaces argued
that they should be able to pursue their cause of
action in Ravalli County under a complaint they filed
there on August 6, 2002. On August 28, 2002, the
Blaine County District Court denied the motion to
sever and granted the State’s motion to change the
venue of the case to Lewis and Clark County.
4¥ 13 On September 17, 2002, the First Judicial
District Court, Judge Dorothy McCarter presiding,
assumed jurisdiction over the appellants’ suit. On
to proof. Appellants did not object at the time, and do not
challenge the dismissal of this claim on appeal.
App. 11
October 10, 2002, the District Court granted a motion
filed by appellees Sportsmen for I-143 and Montana
Wildlife Federation to intervene in this matter.
Initially, the District Court set a jury trial to hear
appellants’ claims. However, the State subsequently
filed a motion to bifurcate the proceedings, arguing
that the issue of whether the State was liable for a
taking should be decided solely by the District Court.
If the State was found liable, then the issue of
damages would be submitted to a jury. The appellants
resisted the State’s motion, asserting that they were
entitled to a jury trial on the issue of takings liability.
914 The State also filed a motion seeking
summary judgment on appellants’ takings claims.
One aspect of the State’s motion dealt with the issue
of whether appellants could assert a categorical
takings claim with respect to their personal property
(e.g., alternative livestock, and Game Farm equipment).
The State argued that under the authority of Lucas v.
S.C. Coastal Council, 505 U.S. 1003, 112 S.Ct. 2886,
120 L.Ed.2d 798 (1992), a categorical taking claim
may be asserted only for claims regarding a taking of
land, and not for a taking of personal property or
other property interests. See Kafka, 67-69 (noting
the distinction between categorical and regulatory
takings claims). Since the appellants’ land all
retained significant value in spite of the passage of I-
143, a categorical taking claim would fail in this case.
Additionally, the State argued that it was further
entitled to summary judgment on appellants’ regula-
tory takings claims.
App. 12
{15 After holding a hearing on these motions
on October 6, 2004, the District Court granted a
portion of the State’s motion, concluding that the
question of whether there had been a_ taking
presented a question of law to be determined by the
District Court without a jury. If a taking was found
by the District Court, it would submit the issue of
damages to a jury. Additionally, while the District
Court ultimately denied the State’s summary
judgment mction and concluded that it would hold a
bench trial on appellants’ takings claims, it agreed
with the State that under Lucas, personal property
could not form the basis for a categorical takings
claim. Moreover, the District Court agreed with a
legal argument raised in the State’s brief that the
same analysis, based on federal law, applied to
takings claim, whether brought under Article II,
Section 29 of the Montana Constitution or the Fifth
Amendment to the U.S. Constitution.
{16 Beginning on November 30, 2004, the
District Court held a three-day bench trial on
appellants’ takings claims. The District Court heard
testimony from Bruce Buhmann, Len Wallace, Dr.
Peter Nickerson (Dr. Nickerson), an economist and
expert witness for appellants, as well as other
witnesses for both parties. The District Court also
received a number of exhibits into evidence. Based on
this evidence and testimony, the District Court made
a number of factual findings with respect to the
App. 13
Wallaces’ and Buhmanns’ operations and property
interests.”
4 17 With respect to the Wallaces, the District
Court found that they had complied with the
licensing requirements set forth by FWP in the
operation of the Big Velvet Ranch. The District Court
noted that as the Wallaces sought to expand their
operation over the years, they had applied with FWP
for the necessary expansion permits. In 1997, the
Wallaces were denied an expansion request by FWP
which would have added approximately 1000 acres to
the then-existing roughly 2000 acre ranch. After this
denial, the Wallaces decided to sell their property out
of a concern that they would not have enough grazing
land for their elk. They subsequently acquired a
Game Farm in Wisconsin to provide grazing land for
their animals, but were prevented from shipping the
* In this connection, we note that much of the analysis by
the District Court and argument by the partics during the bench
trial, focused on the purposes and objectives of I-143, and
whether it accomplished the goals of preventing outbreaks of
CWD, preserving Montana’s “fair chase” hunting heritage, and
preventing the privatization or commercialization of wildlife.
However, as we observed in Kafka, recent United States
Supreme Court jurisprudence has foreclosed an inquiry into the
efficacy or purposes of a regulatory change (which are best
considered as “due process” concerns) in the realm of regulatory
or categorical takings analysis. See Kafka, J] 70-71 (discussing
Lingle v. Chevron U.S.A., Inc., 544 U.S. 528, 125 S.Ct. 2074, 161
L.Ed.2d 876 (2005)). In other words, for purposes of the takings
analysis in this case, it is immaterial whether or not 1-143 is
effective in achieving any of the objectives or concerns it was
designed to address.
App. 14
animals back and forth due to outbreaks of CWD on
Game Farms in several states, including Montana.
Additionally, the District Court found that prior to I-
143, the Wallaces had difficulty marketing their elk
outside of Montana because of a moratorium on
interstate elk shipments from Montana as a result of
a CWD outbreak on a Montana Game Farm in 1997.
The District Court further found that an outbreak of
CWD on another Game Farm impacted the ability of
the Wallaces to sell their property and that it was
still on the market at the time I-143 went into effect.
{18 The District Court found that after the
passage of I-143, the Wallaces began selling off their
elk and Game Farm equipment at a “substantial loss”
compared with their pre-I-143 value. Between 1997 and
1999, the Wallaces spent approximately $666,166 to
purchase elk. Len Wallace testified that the value of
his elk herd prior to I-143 was roughly $5.5 million.
After I-143, he liquidated the herd for approximately
$238,000, and in some cases simply donated his elk to
various organizations. Additionally, the Wallaces sold
some of their specialized equipment, which cost
approximately $600,000 to purchase, for $150,000.
The District Court found that the net income from the
Big Velvet Ranch for the four-year period prior to I-
143 was $1,480,452. Financial records prepared by
Dr. Nickerson demonstrated that the Wallaces had a
basis of $4,595,123 in their business. Between 1994
and 2003, the records indicated numerous sales of
parcels of land ranging between ten and forty acres,
totaling more than $1 million dollars, as well as two
App. 15
sales of property to another ranch for more than $5
million dollars.
4 19 In total, the District Court concluded that
the Wallaces suffered a significant, but not complete,
loss of value to their Game Farm business as a result
of I-143. The District Court quantified this loss as a
fifty percent reduction in the value of their business.
This figure apparently took into account the fact that
while the Wallaces’ elk suffered a _ significant
devaluation, the real estate associated with the Big
Velvet Ranch had in fact appreciated. The District
Court further found that while the market for
alternative livestock elk had declined, alternative
livestock could still be bred and sold to Game Farms
in other states.
{20 With respect to the Buhmanns, the District
Court found that when they initially purchased the
land on which the Circle Eagle Game Farm is located
in the mid-1980’s, they had no intention of operating
a Game Farm but chose that course much later. The
District Court found that the Buhmanns purchased
all of their elk in 1997 for $29,500, and began selling
them in 1999. Their total sales receipts through 2000
were $8,948, and they received $11,963 from elk sales
in 2001 and 2002. They anticipated selling approx-
imately 10 calves a year for about $30,000. With
respect to their sales of Sweet Pro, the District Court
found they had gross sales for this product of
approximately $68,000 between 2000 and 2002. For
the overall period of their business from 1997 to 2002,
they had a net business loss of $41,325. With respect
App. 16
to the impact on their business from I[-143, the
District Court found that no aspect of that business
was prohibited because they did not operate a fee-
shooting operation. However, I-143 did affect the
market for both their alternative livestock and Sweet
Pro. The District Court concluded that the Buhmanns
suffered a net loss of $22,000 as a result of I-143.
{21 In its conclusions of law, the District Court
began by restating its determination that the same
legal analysis, based upon federal law, applied to
claims whether brought under the Fifth Amendment
or Article Il, Section 29. Moreover, the District Court
stated that a categorical takings claim did not lie in
this case under Lucas because categorical takings
apply only to takings of land. The District Court then
went on to reject appellants’ claims for a regulatory
taking under the analytical framework set forth in
Penn Central Transp. Co. v. New York City, 438 U.S.
104, 98 S.Ct. 2646, 57 L.Ed.2d 631 (1978). See Kafka,
{41 67-73 (discussing Penn Central regulatory takings
analysis). The reasoning and analysis of the District
Court will be discussed in greater detail below.
{22 ‘The Wallaces and Buhmanns now appeal
the denial of their takings claims by the District
Court. They present the following issues on appeal:
{23 Issue One: Did the District Court
err in changing the venue of the proceedings
to Lewis and Clark County and denying
appellants’ motion to sever the Wallaces’
claims?
App. 17
{24 Issue Two: Did the District Court
err in concluding that liability for appellants’
takings claims would be decided by the court
instead of a jury?
{25 Issue Three: Did the District
Court err in concluding that Article II,
Section 29 of the Montana Constitution does
not provide any greater’ constitutional
protection against the taking of private
property than the Fifth Amendment to the
U.S. Constitution, and that the same legal
analysts applies to takings claims brought
under the Fifth Amendment to the U.S.
Constitution and Article II, Section 29 of the
Montana Constitution?
{26 Issue Four: Did the District
Court err in denying appellants’ claim that I
143 affected a categorical taking of their
personal property?
{ 27 Issue Five: Did the District Court
err in concluding that I-143 did not affect a
regulatory taking of appellants’ private
property?
STANDARD OF REVIEW
728 We review a district court’s findings of fact
under the clearly erroneous standard, and _ its
conclusions of law for correctness. Roe Family, L.L.C.
u. Lincoln Co. Bd. ef Commrs., 2008 MT 70, J 12, 342
Mont. 108, 7 12, 179 P.3d 514, 4] 12. A finding of fact
is clearly erroneous if it is not supported by
App. 18
substantial evidence, if the trial court misappre-
hended the effect of the evidence, or if our review of
the record convinces us that a mistake has been
committed. Roe Family, { 12.
DISCUSSION
| 29 Issue One: Did the District Court err in
changing the venue of the proceedings to Lewis and
Clark County and denying appellants’ motion to sever
the Wallaces’ claims?
{730 The Seventeenth Judicial District Court,
Blaine County, granted the State’s motion to transfer
the case to Lewis and Clark County where the merits
of appellants’ takings claims were ultimately decided.
The appellants argue that the District Court erred in
granting the change of venue. In its order, the Blaine
County District Court found that a change of venue
was proper under § 25-2-116, MCA, which reads as
follows:
25-2-116. Multiple claims. In an action
involving two or more claims for which this
part designates more than one as a proper
place of trial, a party entitled to a change of
place of trial on any claim is entitled to a
change of place of trial on the entire action,
subject to the power of the court to separate
claims or issues for trial under Rule 42(b) of
the Montana Rules of Civil Procedure.
731 Although the Wallaces’ and Buhmanns’
complaint asserted only two counts, the District
App. 19
Court determined that they asserted more than two
claims for purposes of the statute because the specific
allegations and relief sought by the Buhmanns was
sufficiently distinct from the specific allegations and
relief sought by the Wallaces. The District Court
observed that it is the nature of the rights asserted
and demand for relief sought that determines the
number of claims, rather than a formal designation in
the complaint itself. The District Court noted that the
Wallaces and Buhmanns each uetailed different
locations and businesses which were differently
affected by I-143, and that the damages in each case
differed based not only on these different locations
but also on the duration of the effect, the type of the
business, and the extent of the respective parties’
investments.
{32 The District Court also noted that because
their claims were brought against the state of
Montana, the proper venue for the claims, pursuant
to § 25-2-126, MCA, would be either the county of the
plaintiffs’ respective residences or Lewis and Clark
County. That statute reads in pertinent part as
follows:
The proper place of trial for an action against
the state is in the county in which the claim
arose or in Lewis and Clark County. In an
action brought by a resident of the state, the
county of the plaint ‘f’s residence is also a
proper place of trial.
Section 25-2-126(1), MCA.
App. 20
{33 Here, the parties resided in different
counties. The Buhmanns resided in Blaine County,
while the Wallaces resided in Ravalli County.
Therefore, while Blaine County would be a proper
venue under the statute for the Buhmanns, it would
not be proper for the Wallaces. Thus, under § 25-2-
126(1), MCA, Lewis and Clark County would be the
only appropriate venue for all parties. Since the State
was entitled to a change of venue under § 25-2-116,
MCA, by virtue of the presence of multiple claims, the
Blaine County District Court concluded that a change
of venue to Lewis and Clark County was appropriate.
{ 34 Additionally, the District Court denied a
motion filed by the appellants to keep the Buhmanns’
claims in Blaine County, and allow the Wallaces to
sever their claims and pursue a newly-filed complaint
in Ravalli County. On the one hand, the District
Court concluded that the Buhmanns had failed to
show good cause under M.R. Civ. P. 42(b), to separate
the claims, and further failed to demonstrate how
their access to court in Lewis and Clark County
would be impractical or expensive. With respect to
the Wallaces’ motion to sever, the District Court
denied that motion under the authority of Emery v.
Federated Foods, Inc., 262 Mont. 83, 863 P.2d 426
(1993), for the simple reason that the motion to sever
had yet not been filed at the time the State filed its
motion for change of venue.
135 On appeal, the Wallaces and Buhmanns
maintain the District Court erred in its application
and interpretation of these statutes, and assert that
App. 21
they simply do not cover scenarios involving multiple
plainti.fs. They maintain that tne District Court’s
inte » vation unfairly deprives them of their right to
che venue. They argue that the intent of these
ste ites is to prevent plaintiffs from adding spurious
claims to prevent defendants from obtaining a
favorable venue, a concern not present in this case.
{| 36 With respect to the denial of the motion to
sever, the appellants argue that the District Court’s
decision not to consider the motion due to its timing
directly contravenes the holdings in both DML, Inc. v.
Fulbright, 2005 MT 204, 328 Mont. 212, 119 P.3d 93,
and Emery. Appellants argue that the doctrine that
propriety of venue is determined as of time of the
complaint, applies only in situations where the
composition of the parties changes, and was not
intended to freeze in time all activities occurring in a
case — including the motion to sever which was filed
here. Accordingly, they argue that the motion to sever
should have been considered and granted by the
District Court.
{37 The State maintains that DML controls
and demonstrates that the District Court correctly
permitted a change of venue to Lewis and Clark
County. With respect to the motion to sever, the State
points out that the decision of whether to sever
claims lies within the District Court’s discretion
under § 25-2-116, MCA, and M.R. Civ. P. 42(b), in
furtherance of convenience and to avoid prejudice.
Here, the District Court explicitly found that the
appellants failed to make a showing justifying the
App. 22
invocation of M.R. Civ. P. 42(b). The State asserts that
appellants have not challenged this finding on
appeal.
{38 “The determination of whether a county is
the proper place for trial is a question of law involving
the application of the venue statutes to pleaded facts.”
DML, 47. Our review of such decisions is plenary,
meaning we determine whether the district court’s
ruling was legally correct. DML, 97. We conclude
that the Blaine County District Court did not err in
permitting the State to change the venue of
appellants’ cause of action to Lewis and Clark County.
q 39 In DML, this Court interpreted § 25-2-116,
MCA, as follows:
By the words of § 25-2-116, MCA, “a party
entitled to a change of place of trial on any
claim is entitled to a change of place of trial
on the entire action.” This statute con-
templates a multiple claim situation in
which the county where the plaintiff files is
proper for one claim but not for one or more
of the others. As recognized by the Evidence
Commission Comments to § 25-2-116, MCA,
this Court has ruled consistently that a
defendant entitled to a change of venue on
one claim should have it on the entire action.
DML, { 16.
740 Here, it is patent that venue in Lewis and
Clark is proper with respect to the Buhmanns’ claims
by virtue of § 25-2-126(1), MCA. Because the Wallaces
App. 23
reside in Ravalli County, venue is appropriate there,
or in Lewis and Clark County. Under DML, therefore,
the State is entitled to a change of venue with respect
to the entire action. See DML, 727 (Gray, C.J.,
concurring) (concluding that change of venue is
appropriate under § 25-2-116, MCA, when action
consists of multiple claims, venue statutes designate
more than one county for one or more claims, and
action is brought in a county which is proper for one,
but not all, of those claims). Since Lewis and Clark
County is an appropriate venue for all parties in this
case, the District Court did not err in aliowing the
change of venue.
{41 With respect to the Blaine County District
Court’s refusal to consider the motion to sever, we
agree with the State that the District Court acted
within its discretion in denying such motion.
Decisions as to trial administration matters, such as
a motion to bifurcate or sever, are within the “broad
discretion” of the district court. Jarvenpaa v. Glacier
Elec. Cooperative, Inc., 1998 MT 306, { 12, 292 Mon‘.
118, J 12, 970 P.2d 84, { 12. In this case, regardless ot
whether the District Court could or should have
considered the merits of the motion to sever, it stated
clearly in its order that appellants had failed to
demonstrate good cause to sever, as required under
M.R. Civ. P. 42(b). Appellants do not challenge this
finding. Thus, we affirm the Blaine County District
Court’s decisions as to venue and severance.
App. 24
{ 42 Issue Two: Did the District Court err in
concluding that liability for appellants’ takings claims
would be decided by the court instead of a jury?
{143 In its October 22, 2004 Decision and Order,
the Lewis and Clark County District Court granted a
motion filed by the State to bifurcate the liability and
damages phases of these proceedings, allowing the
former to be determined solely by the District Court,
while the latter would be heard by a jury if the
District Court determined the State was liable for an
uncompensated taking. The District Court concluded
that the question of whether there was a taking is a
question of law, and that a property owner’s right toa
jury trial was limited to the issue of damages.
{44 The District Court determined that its
position was consistent with City of Monterey v. Del
Monte Dunes at Monterey, Ltd., 526 U.S. 687, 119
S.Ct. 1624, 143 L.Ed.2d 882 (1999) — a case relied
upon by appellants for their argument that they were
entitled to a jury trial on the issue of takings liability.
The District Court considered whether the issues of
damages and liability were intertwined, or were
distinct and should be presented separately, and
concluded there was no practical reason to subject
jurors to evidence unrelated to the issue of damages.
Additionally, the District Court determined that it
needed adequate time to consider liability before
proceeding with a trial on damages — an exercise that
would be moot if liability was decided in favor of the
State.
App. 25
{45 Appellants maintain that the District
Court erred and wrongfully denied them their right to
a jury trial on the issue of takings liability. Citing to
Howard v. State, 198 Mont. 470, 647 P.2d 828 (1982)
and Butte Country Club v. Metro. Sanitary and Storm
Sewer Dist. No. 1, 164 Mont. 74, 519 P.2d 408 (1974),
appellants maintain that individuals asserting
inverse condemnation claims have historically been
entitled to jury trials. Citing to Matter of C.L.A., 211
Mont. 393, 685 P.2d 931 (1984), they further argue
that under Article II, Section 26 of Montana
Constitution, their fundamental right to a trial by
jury is guaranteed as to all class of cases in which the
right was enjoyed when the Montana Constitution
was adopted in 1889. Appellants argue that this class
of cases extends beyond those common-law actions
recognized in 1889, and includes modern-day actions
that involve rights and remedies of the _ sort
traditionally enforced in an “action at law,” such as
the takings claims they presented here.
7 46 Under the authority of Del Monte Dunes,
appellants argue that their suit for an uncom-
pensated taking of their property is an action at law,
and that the reasoning in Del Monte Dunes is
supported by Montana cases, including Solberg uv.
Sunburst Oil & Gas Co., 70 Mont. 177, 225 P. 612
(1924) and Chessman v. Hale, 31 Mont. 577, 79 PB. 254
(1905). See Del Monte Dunes, 526 U.S. at 709-10, 119
S.Ct. at 1638 (action sounding in tort and seeking
legal relief is an action at law); see also Little v. Little,
127 Mont. 152, 155-56, 259 P.2d 343, 344 (1953)
App. 26
(actions at law include actions to recover specific
personal property with damages). Appellants main-
tain that the Lucas and Penn Central tests for
analyzing takings claims are factual inquiries which
are properly allocated to a jury. They therefore argue
that the District Court erred in concluding that the
determination as to whether a taking has occurred is
a question of law, and maintain instead that it is a
question of fact.
{47 The State maintains that because there is
no established tradition of trials by jury in regulatory
takings cases in Montana, this Court decides this
issue on a “clean slate.” The State then asserts that
appellants’ reliance on Del Monte Dunes is misplaced
because that case involved solely the question of
whether a plaintiff was entitled to a jury trial under
the Seventh Amendment to the United States
Constitution for an action brought under 42 U.S.C.
§ 1983. The State maintains that Del Monte Dunes
did not address the question of whether plaintiffs are
generally entitled to a jury trial on the issue of
liability in takings cases. The State notes that other
jurisdictions, such as California, have generally held
that the issue of liability in a takings claim is a
question of law for the court, with a right to a jury
trial available on the issue of damages. Accordingly,
the State urges affirmance of the District Court on
the grounds that the question of whether a taking has
occurred is primarily a legal question to which no
right to jury trial exists.
App. 2
41/48 Whether an individual is entitled to a jury
trial presents a question of law which we review de
novo for correctness. Supola v. Mont. Dept. of Justice,
Drivers License Bureau, 278 Mont. 421, 423, 925 P.2d
480, 481 (1996). As an initial matter, we agree with
the State that the question before the Court is one of
first impression in the state of Montana. Appellants
are correct in observing that in both Howard and
Butte Country Club, the trial courts apparently
afforded claimants jury trials in inverse con-
demnation cases. See Howard, 198 Mont. at 472, 647
P.2d at 829; Butte Country Club, 164 Mont. at 76, 519
P2d at 409. However, neither case provides any
analysis or discussion which would bear on the issue
of whether appellants’ categorical and regulatory
takings claims should be submitted to a jury, and
neither case has ever been cited as authority on this
point of law.
{49 We therefore turn to Del Monte Dunes,
upon which the State and the appellants rely for their
opposite positions. In that case, a property owner (Del
Monte Dunes) brought an action against the city of
Monterey under 42 U.S.C. § 1983 based on its
repeated denial of Del Monte Dunes’ request for a
development permit. Each time Del Monte Dunes
submitted a development request, the city of
Monterey denied it and imposed more rigorous
demands on Del Monte Dunes. Del Monte Dunes, 526
U.S. at 694, 119 S.Ct. at 1631. Eventually, Del Monte
Dunes appealed these denials to the city council, and
was again denied. Del Monte Dunes consequently
App. 28
filed a suit in federal district court alleging, among
other things, that the denial amounted to an
uncompensated taking under the Fifth Amendment.
Del Monte Dunes, 526 U.S. at 698, 119 S.Ct. at 1633.
The takings claims in that case were ultimately
submitted to a jury, which returned a verdict in favor
of Del Monte Dunes. Del Monte Dunes, 526 U.S. at
701, 119 S.Ct. at 1634. The question of whether the
takings claim was properly submitted to the jury was
later affirmed by the Ninth Circuit. The Ninth
Circuit’s decision was subsequently appealed to the
United States Supreme Court.
{50 One of the issues considered by the Del
Monte Dunes court was whether it was proper for the
district court to submit the question of liability for
takings to the jury, instead of having the issue
decided by the district court without the aid of a jury.
Del Monte Dunes, 526 U.S. at 707, 119 S.Ct. at 1637.
Del Monte Dunes asserted that its right to a jury trial
was conferred by the Seventh Amendment and 42
U.S.C. § 1983, and the United States Supreme Court
agreed. Del Monte Dunes, 526 U.S. at 710-12, 119
S.Ct. at 1638-40. In its reasoning, the Del Monte
Dunes court explained that because an action under
§ 1983 sounds primarily in tort, it was of a type of
action cognizable under the common law, and thus a
cause of action for which the Seventh Amendment
provides a trial by jury. Del Monte Dunes, 526 U.S. at
709-10, 119 S.Ct. at 1638.
App. 29
751 In reaching this conclusion, the United
States Supreme Court explicitly rebuffed an argu-
ment advanced by the city of Monterey that there was
no common law right to a jury in eminent domain
proceedings. In doing so, the Supreme Court high-
lighted the fact that the tortious nature of a § 1983
claim was wholly independent from the nature of
underlying right giving rise to the § 1983 claim itself.
As Justice SCALIA notes ... we have
declined in other contexts to classify § 1983
actions based on the nature of the underlying
right asserted, and the city provides no per-
suasive justification for adopting a different
rule for Seventh Amendment purposes. Even
when analyzed not as a § 1983 action sim-
pliciter, however, but as a § 1983 action seek-
ing redress for an uncompensated taking,
Del Monte Dunes’ suit remains an action at
law.
Although condemnation proceedings spring
from the same Fifth Amendment right to
compensation which, as incorporated by the
Fourteenth Amendment, is applicable here, a
condemnation action differs in important
respects from a § 1983 action to redress an
uncompensated taking.
Del Monte Dunes, 526 U.S. at 711-12, 119 S.Ct. at
1639 (citations omitted).
4152 The Supreme Court explained this point
further as follows:
App. 30
Condemnation proceedings differ from the
instant cause of action in another funda-
mental respect as well. When the govern-
ment condemns property for public use, it
provides the landowner a forum for seeking
just compensation, as is required by the
Constitution. If the condemnation proceed-
ings do not, in fact, deny the landowner just
compensation, the government’s actions are
neither unconstitutional nor unlawful. Even
when the government takes property without
initiating condemnation proceedings, there is
no constitutional violation unless or until the
state fails to provide an adequate post
deprivation remedy for the property loss. in
this case, however, Del Monte Dunes was
denied not only its property but also just
compensation or even an adequate forum for
seeking it. That is the gravamen of the
§ 1983 claim.
Del Monte Dunes, 526 U.S. at 714-15, 119 S.Ct. at
1641 (quotations and citations omitted).
{53 In conclusion, the Supreme Court then
clarified the scope of its holding with the following
admonition:
We note the limitations of our Seventh
Amendment holding. We do not address
the jury’s role in an ordinary inverse
condemnation suit. The action here was
brought under § 1983, a context in which
the jury’s role in vindicating constitutional
rights has long been recognized by the
federal courts. A federal court, moreover,
App. 31
cannot entertain a takings claim under
§ 1983 unless or until the complaining land-
owner has been denied an adequate post dep-
rivation remedy. Even the State of California,
where this suit arose, now provides a facially
adequate procedure for obtaining just com-
pensation for temporary takings such as this
one. Our decision is also circumscribed in its
conceptual reach. The posture of the case
does not present an appropriate occasion to
define with precision the elements of a tem-
porary regulatory takings claim; although
the city objected to submitting issues of
liability to the jury at all, it approved the
instructions that were submitted to the jury
and therefore has no basis to challenge them.
Del Monte Dunes, 526 U.S. at 721-22, 119 S.Ct. at
1644 (emphasis added).
{54 The Del Monte Dunes Court thus took
great pains to expressly limit its holding to actions
brought under § 1983, and deliberately chose not to
address the province of the jury in an ordinary in-
verse condemnation suit, or, by extension, a regula-
tory or categorical takings claim such as presented
here.
{55 In this connection, we also find that
Chessman, Matter of C.L.A., and Sunburst Oil & Gas,
upon which appellants rely, are not particularly
helpful in deciding the issue presently before the
Court. Those cases simply establish that a right toa
jury trial exists for the class of cases which existed at
the time the Montana Constitution was adopted.
App. 32
Chessman, 31 Mont. at 584-88, 79 P. at 256-57. “The
rule in Montana is that our state constitution only
guarantees the right to a jury trial in the class of
cases in which the right was enjoyed when the
constitution was adopted.” Matter of C.L.A., 211
Mont. at 396, 685 P.2d at 933. However, none of these
cases demonstrate that Montanans enjoyed a right to
jury trial on the issue of liability in an inverse
condemnation, or categorical or regulatory takings
case.
(56 In this case, the District Court concluded
that appellants would be entitled to a jury trial on the
issue of damages if liability for the takings claim was
established. The weight of authority tends to support
the view that the right to jury trial in inverse
condemnation suits — and, by extension, regulatory or
categorical takings claims — is limited solely to the
issue of damages. Hensler v. City of Glendale, 8
Cal.4th 1, 32 Cal.Rptr.2d 244, 876 P.2d 1043, 1052
(1994); Tibbs v. City of Sandpoint, 100 Idaho 667, 603
P.2d 1001, 1004 (1979); Dept. of Agriculture and
Consumer Servs. v. Mid-Florida Growers, Inc., 521
So.2d 101, 104 (Fla.1988); Deisher v. Kan. Dent. of
Transp., 264 Kan. 762, 958 P.2d 656, 663 (1998);
Cumberland Farms, Inc. v. Town of Groton, 262 Conn.
45, 808 A.2d 1107, 1126-27 (2002); Galvis v. State,
Dept. of Transp., 140 Wash.App. 693, 167 P.3d 584,
589 (Div. 2 2007); See also New Port Largo, Inc. uv.
Monroe Co., 95 F.3d 1084, 1092 (llth Cir.1996)
(concluding specifically that there is no jury require-
ment for deciding whether a regulatory takings has
App. 33
occurred). Under these authorities, the District Court
presumptively satisfied appellants’ constitutional
right to a jury trial by providing a jury trial on the
issue of damages.
757 Against this weight of authority, appel-
lants have not cited a single case in which a court has
held that the issue of liability in a categorical or
regulatory takings case must be submitted to a jury.
Although the question of whether a taking has
occurred is in the nature of an “ad hoc, factual
inquiry,” see Kafka, | 69, it appears that both state
and federal courts are in near universal agreement
that whether the facts show that a regulatory or
categorical taking has occurred is ultimately a
question of law for the court. E.g., Mayhew v. Town of
Sunnyvale, 964 S.W.2d 922, 932-33 (Tex.1998);
Chancellor Manor v. United States, 331 F.3d 891, 898
(Fed.Cir.2003); Alevizos v. Metro. Airports Commn.
of Minneapolis and St. Paul, 298 Minn. 471, 216
N.W.2d 651, 660-61 (1974); Seiber v. State By and
Through the Bd. of Forestry, 210 Or.App. 215, 149
P.3d 1243, 1246 (2006); Vulcan Materials Co. v. City of
Tehuacana, 369 F.3d 882, 886-87 (5th Cir.2004); but
see, Noghrey v. Town of Brookhaven, 48 A.D.3d 529,
852 N.Y.S.2d 220, 221 (2 Dept.2008) (submitting the
question of whether a regulatory taking has occurred
for a jury’s determination). In fact, the authority in
this area strongly supports the District Court’s
determination that “[wJhether a compensable taking
has occurred is a question of law based on factual
underpinnings.” Am. Pelagic Fishing Co., L.P. v.
App. 34
United States, 379 F.3d 1363, 1371 (Fed.Cir.2004)
(citing Maritrans, Inc. v. United States, 342 F.3d
1344, 1350-51 (Fed.Cir.2003)); Moldon v. Co. of Clark,
188 P.3d 76, 79 (Nev.2008); State v. Dunn, 888 N.E.2d
858, 861 (Ind.App.2008); Scott v. Co. of Custer, 178
P.3d 1240, 1243 (Colo.App.2007).
7158 Under § 26-1-201, MCA, “all questions of
law” are to be decided by the court, while questions of
fact go to the jury pursuant to § 26-1-202, MCA.
While takings claims arguably present “mixed
questions of fact and law,” see Del Monte Dunes, 526
U.S. at 721, 119 S.Ct. at 1644, and while it may be
that some cases in the regulatory or categorical
takings arena present questions of fact which should
be submitted to a jury, the appellants here have not
articulated what specific factual questions needed to
be resolved by a jury in this case. In fact, it appears
from the record that there were no factual disputes
concerning the effects of I-142 on appellants’ busi-
nesses and private property. Instead, the dispute
centered on whether, as a legal matter, 1-143 con-
stituted a regulatory or categorical taking.
{59 In sum, we decline at this time to adopt a
bright-iine rule regarding the role of a jury in the
context of categorical or regulatory takings claims.
However, we conclude that the District Court did not
err in this case by reserving for itself the question of
whether the State was liable for an uncompensated
taking. Given the primarily legal nature of takings
inquiries, a jury determination should be required
only in those cases in which the resolution of a factual
App. 35
dispute is necessary in order to determine whether a
taking has occurred. Here, there appears to have
been no such dispute. The appellants have not
pointed to any factual question which should have
been decided by a jury, nor for that matter do they
complain that any of the District Court’s factual
findings were in error. Instead, the gravamen of the
appellants’ challenge is that the District Court made
an incorrect legal determination that a regulatory or
categorical taking had occurred. Under these par-
ticular circumstances, therefore, we hold that the
District Court did not err in deciding the takings
question without the presence of a jury.
760 Issue Three: Did the District Court err in
concluding that Article II, Section 29 of the Montana
Constitution does not previde any greater constitu-
tional protection against the taking of private property
than the Fifth Amendment to the U.S. Constitution,
and that the same legal analysis applies to takings
claims brought under the Fifth Amendment to the
U.S. Constitution and Article ll, Section 29 of the
Montana Constitution ?
9461 In its Decision and Order of October 22,
2004, the District Court, citing to Western Energy Co.
v. Genie Land Co., 227 Mont. 74, 737 P2d 478 (1987),
concluded that the same legal analysis, based on
federal law under Penn Central, applies to takings
claims whether brought under the U.S. or Montana
Constitution. Appellants argue that the District
Court erred in reaching this conclusion, and assert
that Article II, Section 29 of the Montana
App. 36
Constitution provides greater protection than the
Fifth Amendment, thus requiring a different analysis.
This provision reads as follows:
Eminent domain. Private property shall
not be taken or damaged for public use
without just compensation to the ful] extent
of the loss having been first made to or paid
into court for the owner. In the event of
litigation, just compensation shall include
necessary expenses of litigation to be award-
ed by the court when the private property
owner prevails.
Mont. Const., Art. IT, § 29.
{62 Appellants assert that the constitutional
protection against “taking and damaging” of property
is a fundamental right because it occurs in Article II
of the Montana Constitution and, therefore, the State
must show a compelling interest that is narrowly-
tailored to impose the least restraints possible on
their properiv interests. Appellants maintain that the
State has faiied to meet this burden because it failed
to demonstrate that I-143 substantially advanced any
purported legitimate state interests such as
protecting the tradition of fair chase hunting in
Montana, or preventing the spread of CWD. See
Opinion, {16 n.2. Appellants assert that their
position is supported by the plain language of Article
II, Section 29, which protects against a “taking” or
“damaging.” Therefore, the inquiry is whether Article
II, Section 29 of the Montana Constitution affords
greater, more expansive rights than does the Fifth
App. 37
Amendment to the U.S. Constitution, to the extent
that a wholly separate regulatory takings analysis
need be performed under the Montana Constitution.
{63 As we noted in Kafka, we have generally
looked to federal case law for guidance when
considering takings claims brought under Article II,
Section 29 — a practice that is consistent with that of
other states with similar or identical language in
their state constitutions. See Kafka, { 30. Appellants
and the Dissent have seized upon the “damaging”
language in Article II, Section 29 to argue for a
sweeping new interpretation of this provision.
7 64 It is important to bear in mind that Article
II, Section 29 protects against a “taking” and
“damaging” of private property. We take this occasion
to reaffirm the position taken in Kafka, that the
protection against a “taking” of private property
under Article II, Section 29 is coextensive with the
protection given under the Fifth Amendment. Kafka,
{7{ 30-31. In other words, a takings analysis based on
federal law under Penn Central or Lucas is to be
applied to takings claims whether brought under the
U.S. or Montana Constitutions. This practice is in
accord with the overwhelming majority of states that
have similar or identical language in their state
constitutions.
{65 The question then becomes what type of
protection, and accompanying analysis, is provided
against a “damaging” of private property. This “or
damaged” language was adopted verbatim from the
App. 38
1889 Montana Constitution, and already has a well-
established meaning. In Less v. City of Butte, 28
Mont. 27, 72 P. 140 (1903), the plaintiff sued the city
for damages to his property occasioned by a change in
the grade and excavation of the street abutting his
residence. As a result of the change, Less was
confronted with a street graded and excavated to the
depth of about seven feet below his home. Less
claimed that his ability to use and enjoy his property
had been significantly infringed, as had his access to
the public street. The District Court awarded him
$500, and the city appealed. In affirming the district
court, this Court stated:
Constitutions which provide that “private
property shall not be taken for public use
without just compensation” are but declar-
atory of the common law, and contemplate
the physical taking of property only. Under
constitutions which provide that property
shall not be “taken or damaged” it is
universally held that “it is not necessary that
there be any physical invasion of the
individual’s property for public use to entitle
him to compensation.” Root v. B.A. & P. Ry.
Co., 20 Mont. 354, 51 Pac. 155, and cases
cited. The owner of a city lot “has a kind of
property in the public street for the purpose
of giving to such land facilities of light, of air,
and of access to the street.” Bohm v. Ry. Co.,
129 N.Y. 576, 29 N.E. 802, 14 L.R.A. 344.
“These easements are property, protected by
the Constitution from being taken = or
damaged without just compensation.” Root v.
App. 39
B.A. & P. Ry. Co., supra. Moreover, it may
frequently occur that “the consequential
damage may impose a more serious loss
upon the owner than a temporary spoliation
or invasion of the property.” City of Atlanta v.
Green, 67 Ga. 386.
Less, 28 Mont. at 32, 72 P at 141 (other citations
omitted).
166 Subsequently, in Knight v. City of Billings,
197 Mont. 165, 642 P.2d 141 (1982), we were called
upon to address plaintiffs’ complaints for inverse
condemnation arising out of the improvements to
24th Street in Billings, which expanded the roadway
to such an extent that the parties’ front yards were
unusable and the noise and traffic horrific for the
homes now virtually atop these new traffic lanes.
Relying upon Less and the “or damaged” language of
Article II, Section 29, we concluded that the private
property interests of the plaintiffs had been
interfered with to such an extent as to constitute a
“taking” by inverse condemnation. We cautioned,
however, that our holding was limited to the unique
situation before us “where a physical taking across
the street occurred.” Anight, 197 Mont. at 174, 642
P.2d at 146.
{67 It thus appears that the “or damaged”
language of the provision has been interpreted to
apply to eminent domain proceedings, including inverse
condemnation proceedings, where private property is
taken or damaged for public use. In fact, during the
debate over the 1972 Montana Constitution. the
App. 40
committee discussed this provision strictly in the
context of eminent domain proceedings, using
property taken for highway construction as the
primary example in explaining what occurs when the
offer by the government is, for example, too low or too
high. See Montana Constitutional Convention,
Verbatim Transcript, March 9, 1972, pp. 1825-28.
{68 Notably, the California state constitution
contains the identical language as Article II, Section
29. California courts have, over the history of this
provision, repeatedly been asked to expand the
circumstances under which a private property owner
may recover, with proponents contending that the “or
damaged” language infers an intention to expand the
scope of the provision outside the realm of eminent
domain or public works. California courts have
resisted this notion. As recently as 1995, in the case
of Customer Co. v. City of Sacramento, 10 Cal.4th
368, 41 Cal. Rptr.2d 658, 895 P.2d 900 (1995), the
Supreme Court of California, sitting en banc, rejected
an attempt by a store owner to recover damages to
his store occasioned by police action that was taken to
enforce criminal laws. The court stated that “(t]he
California Constitution of 1879 added the phrase ‘or
damaged’ to the just compensation provision, but this
change was not intended to expand the scope of the
constitutional compensation provision beyond the
ambit of eminent domain and public improve-
ments.”Customer Co., 41 Cal.Rptr.2d 658, 895 P.2d at
906 (citation omitted)
App. 41
469 The point of the foregoing discussion is
that the “or damaged” language of Article IT, Section
29 is intended to apply to damage to real and private
property occasioned by a taking of real property for
public use. Neither the 1889 or 1972 Montana
Constitutions evince any intent that it apply to
regulatory takings or damages resulting therefrom.
Moreover, the provision mandates that private
property not be taken or damaged for public use
without just compensation “having been first made to
or paid into court for the owner.” This language
obviously contemplates a condemnation of property by
the State, and the recognition that the appropriation
will cause determinable consequential damages to
property owners affected thereby-damages which can
be ascertained at the time of the taking. Simply put, the
plain language of Article II, Section 29 does not
suggest that the provision was intended to apply to
the types of damages a regulatory taking might
arguably cause over time, after a regulation has
taken its toll om a property owner. And, notably,
neither the appellants nor the Dissent have cited a
single case for the proposition that the “or damaging”
language — which, incidentally, is present in roughly
half of the state constitutions in this country, see
Kafka, { 30, n. 5 — is intended to provide any greater
protections in the regulatory taking context than does
the Fifth Amendment to the U.S. Constitution, or
that it applies to anything other than the
consequential damages to the property of persons
affected by a physical condemnation, or similar
actions, initiated by the State.
App. 42
{70 The Dissent claims to have contradicted
this proposition by citing to Wild Rice River Estates v.
City of Fargo, 705 N.W.2d 850 (N.D.2005), and
Manufactured Housing Communities v. State, 142
Wash.2d 347, 13 P3d 183 (2000). However, an
examination of these cases confirms the accuracy of
the analysis and conclusions presented in this
Opinion with respect to the meaning of the “or
damaged” language in Article II, Section 29.
{71 Manufactured Housing did involve a
regulatory taking claim under the Washington State
Constitution, employing an analysis which was
distinct from that employed under the Fifth Amend-
ment. Manufactured Housing, 13 P.3d at 187.
However, this case is not supportive of the Dissent’s
criticism. First, Manufactured Housing did not
discuss the meaning of the “or damaged” language in
the Washington State Constitution in the context of a
regulatory takings claims. Thus, the significance of
the Dissent’s citation to this case in the present
context is unclear. Second, the Washington takings
test has four distinct inquiries, which are grounded
partly in federal and partly in state law. Manu-
factured Housing, 13 P.3d at 187. The Dissent,
however, does not propose a distinct new test, or
indeed, any analogous test. Rather, the Dissent
simply argues that the federal tests should not apply,
and that, instead, whenever there is any damage to
private property by state action, compensation 1s
required — whether the action was actually a taking
or not. This amounts to a radically scaled-back Penn
App. 43
Central analysis: There need be no inquiry into the
character of the government action or the reasonable
investment-backed expectations of the claimant;
rather, the only inquiry is whether there was any
economic impact. Since the Dissent does not provide
any guidance or bright line as to how much economic
impact is enough to trigger a damaging —- relying
more on a “I know it when I see it” reflex (see Dissent,
¥ 167) — it is difficult to envision how the State could
confidently afford to regulate anything under such a
regime. Arguably, any private property owner whose
property was “damaged” by state action, whether in
the form of restrictions, fees, or regulations, would be
entitled to seek compensation therefore from the
public fisc. As Justice Holmes noted in Pennsylvania
Coal, “[glovernment hardly could go on if to some
extent values incident to property could not be
diminished without paying for every such change in
the general law.” Pennsylvania Coal Co. v. Mahon,
260 U.S. 393, 394, 43 S.Ct. 158, 159 (1922).
472 Moreover, while Wild Rice did discuss the
“or damaged” language in the North Dakota State
Constitution, neither Wild Rice itself, nor the cases
upon which it relied, involved or discussed any
regulatory takings claims. In Wild Rice, the North
Dakota Supreme Court, in interpreting identical
language in its state constitution stated the following:
Under N.D. Const. art. I, § 16, “[p]rivate
property shall not be taken or damaged for
public use without just compensation.” This
Court has said our state constitutional
App. 44
provision is broader in some respects than its
federal counterpart because the state pro-
vision “‘was intended to secure to owners,
not only the possession of property, but also
those rights which render possession valu-
able.’”
Wild Rice, 705 N.W.2d at 856 (quoting Grand Forks-
Traill Water Users, Inc. v. Hjelle, 413 N.W.2d 344, 346
(N.D.1987)).
{73 Wild Rice relied upon Grand Forks, which
in turned relied upon Donaldson v. City of Bismarck,
71 N.D. 592, 3 N.W.2d 808, 816 (1942). Donaldson, in
turn, relied upon King v. Stark County, 67 N.D. 260,
271 N.W. 771 (1937). None of these cases applied the
“or damaged” language in the context of a regulatory
takings claim even remotely similar to the claim at
bar. However, in King, the North Dakota Supreme
Court specifically described the meaning of the “or
damaged” language in its state constitution. Because
the analysis is King is instructive regarding the
Dissent’s contentions, we quote it at length:
When the Fifth Amendment to the Consti-
tution of the United States was adopted, it
was therein provided that private property
could not be taken by the United States for
public use without just compensation. And
the earlier State Constitutions likewise so
provided. But this guaranty was too narrow.
It insured compensation only in those cases
where property was taken. The severity of
the rule and the tnjustice resulting from its
application were recognized. In England, by
App. 45
act of Parliament, compensation has been
allowed since 1845 for damage caused by the
construction of public works. In this country
a wide diversity in the holdings of the courts of
the several jurisdictions arose as to the
meaning of the terms “taken” and “damaged.”
In 1870, the people of the State of Illinois
amended their Constitution so that it
provided that property should not be taken
or damaged for public use without just
compensation. And when the Constitution of
the State of North Dakota was adopted this
provision was inserted therein as section 14.
Its history has been traced and its effect
somewhat considered by this court hereto-
fore. Nearly all of the State Constitutions
now contain this provision. Under it the
courts have uniformly held that there is
hability not only for property taken, but
also for consequential damages to property
arising from the acts of the authorities in
constructing public works. It is not necessary
that there be a direct injury to the property
itself in order to create this liability. It is
sufficient to warrant a recovery if there be
“some direct physical disturbance of a right,
either public or private, which the plaintiff
enjoys in connection with his property, and
which gives to it an additional value, and
that by reason of such disturbance he has
sustained a special damage with respect to
his property in excess of that sustained by
the public generally.” And the diminution in
value of property resulting from the acts
App. 46
complained of is special and peculiar within
the meaning of the rule.
King, 271 N.W. at 773-74 (internal citations omitted).
474 The Dissent faults the Court for its
“originalist” approach to Article II, Section 29, and for
declining to adopt its construction of Article II,
Section 29. Begging the question of why “originalist”
is equivalent to “abhorrent,” (see Dissent, {{ 178,
178), the fact is that virtually none of the legal
rhetoric and argument posited by the Dissent here
was presented by the appellants themselves — either
in the District Court or before this Court. We
routinely admonish parties that we do not consider a
party's change in legal argument, or new theories
raised on appeal. State v. Rahn, 2008 MT 201, J 22,
344 Mont. 110, 7 22, 187 P.3d 622, | 22. Based on the
issues actually raised and argued by the parties, and
their failure to either effectively address our existing
jurisprudence under Article IJ, Section 29, or argue
for an expansion of existing law, we conclude that
appellants have failed to establish that in the
regulatory takings context, the “or damaged” lan-
guage in Article II, Section 29 of the Montana
Constitutior affords more expansive rights than does
the Fifth Amendment to the U.S. Constitution.
Accordingly, we hold that the District Court did not
err 1n concluding that the takings analysis based on
federal law under Penn Central applied to the
regulatory takings claims brought against the State
in this case.
App. 47
{75 Issue Four: Did the District Court err in
denying appellants’ claim that 1-143 affected a
categorical taking of their personal property?
{76 In its Decision and Order of October 22,
2004, the District Court rejected the notion that
appellants’ alternative livestock could be the object of
a categorical takings claim under Lucas. A categorical
taking occurs when a regulation or state action forces
an owner to sacrifice all economically beneficial uses
in the name of the common good, leaving the property
“economically idle.” Kafka, { 68. In Lucas, the United
States Supreme Court seemed to imply that such
categorical takings claims could apply only to land,
and not to personal property:
Where the State seeks to sustain regulation
that deprives land of all economically
beneficial use, we think it may resist
compensation only if the logically antecedent
inquiry into the nature of the owner’s estate
shows that the proscribed use interests were
not part of his title to begin with. This
accords, we think, with our “takings”
jurisprudence, which has traditionally been
guided by the understandings of our citizens
regarding the content of, and the State’s
power over, the “bundle of rights” that they
acquire when they obtain title to property. It
seems to us that the property owner
necessarily expects the uses of his property
to be restricted, from time to time, by various
measures newly enacted by the State in
legitimate exercise of its police powers; “[a]s
App. 48
long recognized, some values are enjoyed
under an implied limitation and must yield
to the police power.” Pennsylvania Coal Co. v.
Mahon, 260 U.S. [393] at 413, 43 S.Ct. [158],
at 159. And in the case of personal property,
by reason ef the State’s traditionally high
degree of control over commercial dealings,
he ought to be aware of the possibility that
new regulation might even render his
property economically worthless (at least if
the property’s only economically productive
use is sale or manufacture for sale). See
Andrus v. Allard, 444 U.S. 51, 66-67, 109
S.Ct. 318, 62 L.Ed.2d 210 (1979) (prohibition
on sale of eagle feathers). In the case of land,
however, we think the notion pressed by the
Council that title is somehow held subject to
the “implied limitation” that the State may
subsequently eliminate all economically
valuable use is inconsistent with the
historical compact recorded in the Takings
Clause that has become part of our
constitutional} culture.
Lucas, 505 U.S. at 1027-28, 112 S.Ct. at 2899-2900
(footnotes omitted).
{77 The District Court recognized that the
Federal Circuit Court of Appeals has seemingly
concluded that personal property could be the object
of a categorical takings claim, see e.g., Maritrans, 342
F.3d at 1353-54, but chose to rely upon Lucas and
concluded that private property, such as the alter-
native livestock in this case, could be the object of a
regulatory, but not categorical, takings claim.
App. 49
{78 The appellants argue that the District
Court erred in this conclusion as well. They argue
that the portion of Lucas relied upon by the District
Court is dicta, and further assert that no appellate
court in the country has ever stretched this language
in Lucas to preclude categorical takings of personal
property. Instead, appellants urge this Court to rely
upon Maritrans and conclude that their alternative
livestock and related equipment can form the object
of a categorical taking.
{ 79 We agree with the appellants that some
courts in the Federal Circuit seem to have
entertained claims for categorical takings of personal
property. In Maritrans, for instance, the Federal
Circuit Court of Appeals considered whether a change
in federal shipping regulations requiring oil carriers
to use double hull tank barges caused a private
company to sacrifice all economically beneficial uses
of its single hull tank barges. Maritrans, 342 F.3d at
1354. Ultimately, the Federal Circuit Court of
Appeals determined that no categorical taking of the
ships had occurred, because the single hull ships still
retained some beneficial use after the change in
regulations. Maritrans, 342 F.3d at 1354-55.
7 80 Ultimately, we need not resolve the
question of whether personal property, by itself, can
form the object of a categorical takings claim.” Even if
~ However, we do note that, contrary to appellants’ claims,
some courts have interpreted Lucas in just such a manner. See,
(Continued on following page)
App. 50
a categorical taking of appellants’ alternative live-
stock and related equipment was cognizable, we
would nevertheless conclude that their categorical
takings claims fail because the alternative livestock
still have beneficial uses after the passage of 1-143, as
the District Court concluded. The alternative
livestock could be sold to out-of-state breeder operations
or harvested for their meat and antlers. Granted, this
may not be a profitable use of the alternative
livestock, but in order to make a claim for a
categorical taking, appellants must show that I-143
took all of the property’s economically beneficial use.*
See Lucas, 505 U.S. at 1019 n. 8, 112 S.Ct. at 2895
n. 8. Indeed, as the Maritrans court itself noted,
Taking away a property's most beneficial use
does not by itself constitute a compensable
taking. Andrus, 444 U.S. at 65-66, 100 S.Ct.
318. In Andrus, the Court stated that “[al]t
least where an owner possesses a full
‘bundle’ of property rights, the destruction
of one ‘strand’ of the bundle is not a taking.”
Id. Only where Congress takes away every
e.g., Hawkeye Commodity Promotions, Inc. v. Vilsack, 486 F.3d
430, 441 (8th Cir.2007) (holding that Lucas categorical taking
rule “protects real property only”).
“The reasons why the out-of-state markets were not
profitabic are beyond the scope of a categorical takings analysis.
[ndeed, in this case it would be difficult, if not impossible, to
isolate just how much of the profitability of sale to out-of-state
markets was affected by previous outbreaks of CWD on Game
Farms in Montana, or on other market forces unrelated to the
passage of 1-143.
App. 51
beneficial use does a categorical taking occur.
Id.
Maritrans, 342 F.3d at 1354.
47 81 Accordingly, while we express no view on
whether a Lucas categorical takings analysis could
apply to takings of personal property, we hold in this
case that appellants have failed to demonstrate that a
categorical taking has occurred. Thus, we affirm the
District Court.
{82 Issue Five: Did the District Court err in
concluding that 1l-143 did not effect a regulatory
taking of appellants’ private property?
{83 Inits Findings of Fact, Conclusions of Law,
and Order dated May 2, 2005, the District Court
denied appellants’ claims for regulatory takings
under Penn Central. See Kafka, {{ 66-72 (describing
in detail the three-factor Penn Central regulatory
takings analysis). Under the economic impact factor
of this analysis, see Kafka, { 72, the District Court
made the following findings: (1) I-143 prohibited the
Wallaces’ fee-shooting business entirely, and elim-
inated the in-state market for the Buhmanns but did
not prohibit the sales of their elk and Sweet Pro feed
supplements to out-of-state buyers; (2) neither the
Wallaces nor Buhmanns lost any significant value in
their land or improvements; (3) both the Wallaces and
Buhmanns lost substantial value in their elk herds:
(4) both parties lost future expected profits; (5) both
businesses had already been negatively affected by
prior outbreaks of CWD, and that CWD was in fact
App. 52
one of the reasons why appellants could not profitably
dispose of their alternative livestock to out-of-state
markets; and (6) the Wallaces had already made a
decision to get out of the Game Farm business prior
to the passage of I-143. Based on these findings, the
District Court concluded that the economic impact
factor of the Penn Central regulatory takings analysis
test favored the appellants.
{ 84 With respect to the appellants’ “investment-
backed expectations,” see Kafka, 72, the District
Court found that, while the appellants knew that the
Game Farm industry was highly controversial and
heavily regulated, the appellants relied on the
regulatory scheme in place when they entered the
industry, and had invested significant sums of money
on the expectation that the industry would never be
regulated out of business. However, the District Court
noted that under Penn Central, this investment-
backed expectation is measured from an objective
standpoint in terms of its reasonableness. The
District Court, citing to Mitchell Arms, Inc. v. United
States, 7 F.3d 212 (Fed.Cir.1993) and Allied-General
Nuclear Servs. v. United States, 839 F2d 1572
(Fed.Cir.1988), see Kafka, 4] 58-59 (discussing Mitchell
Arms and Allied-General), noted that courts have
held such investment-backed expectations to a very
high standard when claimants are operating in
highly regulated fields such as firearms exportation
(Mitchell Arms) and plutonium recycling (Allied-
General). Moreover, claimants operating in such fields
should expect that the government can effectively
App. 53
regulate them out of business. In this regard, the
District Court distinguished a case relied upon by
appellants, Yancey v. United States, 915 F.2d 1534
(Fed.Cir.1990), and held that this factor weighed in
favor of the State and against finding a compensable
taking.
7 85 Finally, with respect to the “character of
the governmental action” prong, see Kafka, {| 70-71,
the District Court concluded that this factor weighed
in favor of the State because I-143 was a valid
exercise of the State’s police power to protect health
and welfare, and that it affected an industry which
was already subject to significant governmental]
regulation.”
786 Appellants maintain that the District
Court erred in balancing the Penn Central factors and
concluding that I-143 did not effect a taking of their
private property, in particular the alternative
livestock and specialized Game Farm equipment. With
respect to the economic impact factor, appellants agree
with the conclusion that this amounted to a significant
impact. However, appellants assert that the District
Court understated this impact because it evaluated
the business as a whole, including the real estate
(which had appreciated in spite of I-143), when
appellants argue they did not claim a taking of their
* The District Court’s analysis under this factor, as it
inquired to a certain extent into the purpose and propriety of I-
143, would no longer be valid under Lingle. See 4 16 n. 2
App. 54
real property, but only of the business itself. They
assert that a finding that I-143 led to a fifty-percent
reduction in their business is misleading because it
includes in the computation the value of appreciated
real estate. Instead, the Wallaces argue the impact
should be measured in terms of the market value of
the alternative livestock before I-143 ($5.5 million
dollars), versus its market value _ afterwards
($238,000). Similarly, the Wallaces argue that the
true economic impact on their business by I-143 was
that it destroyed it. The Buhmanns maintain [-143
had a similar impact on their business as well.
87 With respect to the character of the
governmental action factor, appellants argue that this
factor also weighs in favor of a compensable taking
because I-143 does not address the problems
associated with Game Farms (i.e., threat from CWD,
or threatening the heritage of fair chase hunting)
since it still permits the existence of Game Farms. In
actuality, appellants argue, I-143 is nothing more
than a price control measure designed to protect the
State’s competing enterprise of selling licenses for the
shooting of wild, non-captive game. Finally, under the
investment-backed expectations factor, appellants
maintain that the District Court erred in relying
upon Mitchell Arms and Allied-General, and that an
analysis under Yancey supports their position.
Appellants argue that they are not complaining that
a particular regulation has made Game Farms more
expensive, but that 1-143 directly prohibited the sale
of a product in a manner contrary to their reasonable
App. 55
investment-backed expectations, because the State
has never exercised any regulation over the fees
charged for privately shooting alternative livestock.
While the participants in the Game Farm industry
might have reasonably expected that they would have
to maintain extra fencing or increase testing of their
livestock, they had no reason to anticipate state
interference in the price they would be able to charge
for fee-shooting. Thus, they argue, this factor should
weigh in their favor.
{188 As we noted at the outset of this Opinion,
many of the arguments raised in the case at bar were
previously addressed in Kafka. At this point, we will
highlight the relevant portions of the Kafka decision
insofar as they address appellants’ challenge to the
District Court’s Penn Central analysis. As an initial
matter, we note that because the appellants in this
case, like those in Kafka, allege that a mix of property
interests have been taken by I-143, and do not allege
that I-143 took all of their property interests (i.e.,
appellants do not claim that I-143 impacts the real
property comprising their Game Farms at all) we will
consider each of those business interests separately
for purpose of a regulatory takings analysis. Kafka,
q 37.
{189 Regarding the regulatory taking of
intangible assets, i.e., appellants’ businesses in this
case, we held in Kafka that businesses themselves
cannot be taken unless the government physically
condemns those businesses and runs them itself. See
Kafka, { 55-63. In Kafka we analyzed both the
App. 56
Mitchell Arms and Allied-General decisions in
reaching this conclusion. Therefore, for the reasons
set forth in Kafka, we hold that appellants’
businesses in this case were not taken by I-143.
{90 Accordingly, this leaves appellants’ elk and
related Game Farm equipment. Under the economic
impact prong of Penn Central, we agree with the
District Court that I-143 had a significant impact on
the value of the Wallaces’ and Buhmanns’ alternative
livestock. For purposes of this factor, the District
Court found that the Wallaces had _ invested
approximately $666,166 in elk purchases from 1997
through 1999. Before 1-143 the market value of the
alternative livestock (approximately 850 head of elk)
was roughly $5.5 million; after [-143, the Wallaces
liquidated the herd for $238,000." The Wallaces’ Game
Farm equipment (the specialized feeding trucks) were
purchased for roughly $600,000 and sold for $150,000.
The Buhmanns similarly had invested ir the
alternative livestock, and although the ban on fee-
shooting did not directly prohibit them from breeding
‘In this case, appellants did not provide any expert
testimony concerning the change in the fair market value of the
alternative livestock before and after 1-143. In Kafka, expert
testimony was in fact presented showing that alternative
livestock before 1-143 was worth $5,000 per head, while after I-
143 the livestock was worth $500 per head. This represented a
roughly 90% devaluation. Kafka, 4 84. Here, no comparable
testimony was provided. However, given the size of the Wallaces’
herd (850 elk) and utilizing the evaluation figures employed in
Kafka, the Wallaces’ herd lost approximately 95% of its fair
market value
App. 57
alternative livestock, it did cause a similar deval-
uation in their herd and also impacted their ability to
sell Sweet Pro in Montana. Accordingly, the economic
impact factor weighs in appellants’ faver.
791 However, with respect to the appellants’
investment-backed expectations and character of the
governmental action factors, we agree with the
District Court that these factors weigh against
finding a compensable taking. As we noted in Kafka,
while I-143 impaired the profitable use of alternative
livestock, it still allowed appellants every other use of
their alternative livestock; thus, from the perspective
of regulatory takings law, the character of the
governmental action embodied in I-143 had a
minimally intrusive effect on appellants’ bundle of
property interests in the alternative livestock. See
Kafka, |{ 87-88. The same would be true with respect
to the Wallaces’ specialized Game Farm equipment,
as it could still be sold to out-of-state markets. Thus,
while we disagree with the analysis employed by the
District Court under this factor because it inquired
into the purposes and propriety of I-143 in a manner
foreclosed by Lingle, (see Opinion, {| 80), we nonethe-
less agree with the District Court’s conclusion that
this factor weighs against finding a compensable
taking. See Wells Fargo Bank v. Talmage, 2007 MT
45, 9 23, 336 Mont. 125, 4 23, 152 P.3d 1275, | 23
(stating that we will affirm a district court’s decision
even if it reaches the right result for the wrong
reason).
App. 58
{92 Similarly, under the investment-backed
expectations prong, the regulative and speculative
nature of the industry does play a significant role in
determining whether a certain set of investment-
backed expectations are “reasonable.” As we did in
Kafka, we conclude that appellants in this case could
not maintain a reasonable investment-backed expec-
tation that Game Farms, and by extension fee-
shooting, would always be legal in Montana. See
Kafka, {| 89-93. In this connection, we agree with
the District Court that Yancey does not alter the
regulatory takings analysis in this case. In Yancey,
Andrew and Elizabeth Yancey (Yanceys) owned and
operated a turkey breeding operation in Rockingham
County, Virginia. Yancey, 915 F.2d at 1536. In 1983,
the Yanceys acquired a rafter of turkey breeder hens
for purposes of selling the hatching eggs to customers
in other states. In mid-October 1983, an outbreak of a
pathogenic Avian Influenza occurred in Lancaster
County, Pennsylvania, prompting the United States
Department of Agriculture (USDA) to impose a
quarantine in that state, which was later extended to
Rockingham County, Virginia as well. The quarantine
prohibited the Yanceys from the interstate shipping of
live poultry, manure from the poultry, litter used by
the poultry, as well as carcasses, eggs and certain
equipment. Although the Yanceys’ flock was not
affected by the influenza, they were unable to make
productive use of the flock as they intended, and had
to maintain the flock at a cost of $1,800 per week.
They ultimately decided to slaughter the flock and
sell it for meat, although the flock had not been
App. 59
raised to be economically viable for that purpose.
They received $20,887 for the flock.
q¥ 93 The Yanceys subsequently filed a $63,566
indemnity claim with the USDA, representing the
lost value from the flock as a result of the quarantine.
The claim was denied and they filed a takings claim
in the U.S. Claims Court under the Fifth Amend-
ment. The claims court granted the Yanceys’ Fifth
Amendment claim, and the government appealed. On
appeal, the Federal Circuit Court of Appeals had to
determine whether the effects of the quarantine
constituted a compensable taking under the Fifth
Amendment. Yancey, 915 F.2d at 1539.
794 The Yancey court applied the regulatory
takings analysis from Penn Central. It noted that the
claims court had found that the Yanceys’ flock had
suffered a 77% devaluation as a result of the quar-
antine, because the healthy breeder flock would have
been worth $91,616 if the quarantine had not been in
place, and, further, that the Yanceys had no other
alternative viable use for the flock other than
slaughtering them so long as the quarantine remained
in place. Yancey, 915 F.2d at 1539. Moreover, the court
of appeals noted the lower court finding that the
Yanceys only learned about the quarantine through
the newspaper the day before it took effect and that
they had investment-backed expectations to sell the
hatching eggs to customers outside of Virginia — an
action that was foreclosed by the immediate,
unforeseen and disparate impact upon the Yanceys by
the quarantine. Yancey, 915 F.2d at 1540.
App. 60
4% 95 In affirming the claims court’s decision,
the Yancey court explicitly distinguished its case from
Galloway Farms, Inc. v. United States, 834 F.2d 998
(Fed.Cir.1987). In Galloway Farms, the Federal
Circuit Court of Appeals held that a grain embargo
imposed against the Soviet Union by President
Jimmy Carter did not give rise to a compensable
takings claim on behalf of grain farmers in the
United States, in part because the grain embargo left
open other markets. Galloway Farms, 834 F.2d at
1003. The Yancey court found its case distinguishable
because the claims court had found that the Yanceys
had no other choice but to sell their turkeys for
substantially less than their value, while the grain
farmers in Galloway Farms still had available
markets. Yancey, 915 F.2d at 1541-42. The court
concluded that “[w]hen adverse economic impact and
unanticipated deprivation of an investment backed
interest are suffered, as when the poultry quarantine
forced the Yanceys to sell their turkey flock, compen-
sation under the Fifth Amendment is appropriate.”
Yancey, 915 F.2d at 1542.
196 We agree with the District Court that
Yancey is distinguishable from the present case with
respect to the investment-backed expectations factor
of the Penn Central analysis. As a threshold matter,
we note that the investment-backed expectations are
measured from an objective, not subjective, stand-
point of reasonableness. See Cienega Gardens uv.
United States, 331 F.3d 1319, 1346 (Fed.Cir.2003)
(“This factor also incorporates an objective test — to
App. 61
support a claim for a regulatory taking, an investment-
backed expectation must be ‘reasonable.’”). Moreover,
the inquiry into the reasonableness ot the investment
backed expectation is unique to each case and cannot
be reduced to any “set formula.” See Palazzolo v. R.I.,
533 U.S. 606, 636, 121 S.Ct. 2448, 2467, 150 L.Ed.2d
592 (2001) (O’Connor, J., concurring).
7197 In Yancey, the Court of Appeals was bound
by factual determinations from the Court of Claims
which supported the conclusion that the quarantine
in that case was completely unexpected. The findings
by the District Court in this case cut the other way,
because the District Court noted that under an
objective standard of reasonableness, the appellants
could not maintain an expectation that the Game
Farm industry would be permitted to continue
indefinitely. The District Court specifically found that
a previous outbreak of CWD on a Montana Game
Farm in 1997 had already impeded the Wallaces’ sale
of alternative livestock to out-of-state markets after
the imposition of a moratorium on out-of-state sales,
and that their ability to sell the Big Velvet Ranch
before the passage of I-143 was negatively impacted
from the previous CWD outbreaks. Addittonally, the
appellants were aware of the highly controversial
nature of Game Farms and the fact that CWD
presented significant risks making it a_ highly
regulated industry.
798 With respect to the “reasonableness” of
investment-backed expectations, the analogy between
the Game Farm industry and other industries such as
App. 62
the importation of firearms discussed in Mitchell
Arms, or the plutonium recycling industry discussed
in Allied-General, is actually quite apt, because at the
time these Game Farms were in existence, CWD
posed a very serious threat to the native elk and deer
populations within Montana, given that it was
impossible to completely prevent alternative livestock
from escaping the confines of a Game Farm.
Moreover, there was no live test for CWD which is a
permanent and irreversible disease. Hagener, { 25.’
Moreover, the District Court explicitly found that the
exact incubation period and means of transmitting
CWD are not completely understood. In fact, it was
primarily the grave threat posed by CWD which
required the extensive regulation of the Game Farm
industry in Montana. See Kafka, { 8. It was against
the backdrop of these inherent dangers. that
appellants were operating. Moreover, these dangers
were publicly known and very controversial among
many members of the public. Thus, unlike Yancey,
where the poultry producers would have no reason to
expect that a healthy flock of turkeys would have to
be suddenly destroyed, those in the Game Farm
industry knew that their alternative livestock carried
with them an inherent danger of spreading CWD
which could never be eliminated and which could
’ As we noted in Hagener, it was limitations on testing for
CWD which led the legislature to impose a moratorium on new
Game Farms in 2000. This moratorium was a response to an
outbreak of CWD on a Phillipsburg Game Farm in 1999
Hagener, 4 25.
App. 63
prove uncontrollable if it made its way into the
genetic make-up of the native wildlife populations.
These facts, together with the highly regulated
nature of the industry, must be considered when
evaluating the “reasonableness” of appellants’
investment-backed expectations.
{99 As we noted in Kafka, the Penn Central
analysis calls for a balancing of the factors in order
““‘to identify regulatory actions that are functionally
equivalent to the classic taking in which government
directly appropriates private property or ousts the
owner from his domain.’” Kafka, { 94 (quoting Lingle,
544 U.S. at 539, 125 S.Ct. at 2082). After weighing
the factors in the case, we conclude that the economic
impact factor weighs in favor of a compensable
taking, while the character of the governmental
action and reasonable investment-backed expec-
tations factors do not. Accordingly, for the same
reasons we denied similar claims in Kafka, we
conclude the District Court did not err in denying
appellants’ regulatory takings claims. See Kafka,
q 94.
CONCLUSION
{ 100 Based upon the foregoing, we affirm the
District Court.
App. 64
We concur: _ KARLA M. GRAY, W. WILLIAM
LEAPHART and DEBORAH KIM CHRISTOPHER’,
Jed.
Justice JIM RICE, concurring in part and
dissenting in part.
7101 I concur with the Court’s resolution of
Issues One, Two and Three. I dissent from Issues
Four and Five, as I would hold that a taking of
Plaintiffs’ property was effectuated by the enactment
of I-143 under the analysis provided by Justice
Nelson’s dissenting opinion in Kafka.
Justice JAMES C. NELSON, dissenting.
7 102 I dissent from the Court’s decision on
Issues Three, Four, and Five. I do so for the reasons
articulated in my dissent in the companion case,
Kafka v. Montana Dept. of Fish, Wildlife and Parks,
2008 MT 460, {7 96-248, 348 Mont. 80, {4 96-248,
201 P3d 8, YY 96-248, 2008 WL 5413504 (Nelson,
Rice, & Swandal, JJ., dissenting) (hereinafter, “Kafka
Dissent”), and for the additional reasons set forth
below. I do not express any views on the Court’s
resolution of Issues One and Two.
* District Court Judge DEBORAH KIM CHRISTOPHER
sitting for Justice JOHN WARNER.
App. 65
I. INTRODUCTION
4103 As it did in Kafka, the Court again holds
that business owners in the alternative livestock
industry are entitled to no compensation whatsoever
for the outright destruction of their businesses by
Initiative No. 143 (“Initiative” or “I-143”). The State
encouraged people to embark on this “viable economic
opportunity,” facilitated their investment of millions
of dollars into such enterprises, and granted them a
statutory right to perpetual renewal of their business
licenses. Then, the State up and legislated the
businesses out of existence. According to the Court,
such action does not constitute a taking or damaging
of property under Article II, Section 29 of the
Montana Constitution.
{104 In reaching this conclusion, and in spite
of the plain language of Article II, Section 29, the
Court makes the astounding pronouncement that
Article II, Section 29 is little more than a constitutional
redundancy — an empty provision guaranteeing nothing
beyond what the federal courts deem compensable
under the Fifth Amendment to the United States
Constitution. This pronouncement finds no support in
the text of Article II, Section 29, which is facially
broader than the Fifth Amendment. It finds no
support in the history of Article II, Section 29 and its
predecessor, Article III, Section 14 of the 1889
Constitution, which were intended to provide greater
protection than the Fifth Amendment against
infringements on Montanans’ property rights. It finds
no support in the prior decisions of this Court, which
App. 66
recognize independent protections of property under
the Montana Constitution. And it is contrary to the
Constitutional Convention delegates’ charge that this
Court “revitalize” the civil rights of Montanans.
7 105 Rather, the Court’s decision is based on
one single proposition: that the delegates to the 1889
and 1972 Constitutional Conventions and the voters
who approved these Constitutions intended for the
meaning of “taking” and “damaging” property to be
frozen in time. Adopting an originalist interpretation
of Article II, Section 29, the Court rejects the notion
that the terms “taking” and “damaging” together
were meant to provide a broader range of protection
than extant Fifth Amendment jurisprudence
provides. Instead, the Court prefers to restrict Article
II, Section 29 to only those situations which were not
covered by the Fifth Amendment in the late
nineteenth century: “determinable consequential
damages” resulting from public works projects. I
strenuously dissent from this emasculation of Article
II, Section 29.
{ 106 Both the Fifth Amendment and Article II,
Section 29 require just compensation for the taking
and damaging of property effected by I-143. I
comprehensively analyzed this issue under the Fifth
Amendment in Kafka (see Kafka Dissent, {4 177-240);
and since there are no material factual distinctions
between Kafka and the present case, it is not
necessary to repeat that analysis here. Rather, I focus
in this Dissent primarily on Article II, Section 29 and
explain why, contrary to the Court’s decision, this
App. 67
provision entitles the Buhmanns and the Wallaces
(collectively, “the Ranchers”) to just compensation.
First, however, I address several factual and legal
issues argued by the Sportsmen, the State, and the
Ranchers in this case. I addressed some of these
issues in Kafka; accordingly, I simply reiterate the
critical points here as foundation for the ensuing
analysis.
Il. PRELIMINARY FACTUAL AND LEGAL
ISSUES
A. The Sportsmen’s Explanation of I-143
{107 It has been a lawful “business or
occupation” in this State since 1917 to acquire, breed,
own, harvest, sell, and otherwise control privately
owned game animals on an alternative livestock
ranch. This activity has been regulated, and the
regulations have become more rigorous over the
years. At the same time, however, the Legislature has
enacted provisions designed specifically to protect the
business owners’ interests — e.g., through statutory
recognition of their alternative livestock as “private
property” and their businesses as “viable economic
opportunities,” and through the statutory guarantee
that their alternative livestock ranch licenses would
' The Court prefers the term “game farm.” Opinion, ] 3
The statutory scheme, however, uses the term “alternative
livestock ranch.” See § &87-4-406(2), MCA. “Game farm” is
nowhere mentioned. Accordingly, | use the term “alternative
livestock ranch.”
App. 68
be renewed each year upon payment of the renewal
fee and compliance with al] recording and reporting
requirements. See generally Kafka Dissent, {{ 103-
109.
47 108 I-143, which was passed on November 7,
2000, gutted the alternative livestock industry and
rendered the regulatory scheme pointless. The
Sportsmen, who were “the principle forces behind the
passage of [-143,” sought to snuff out alternative
livestock ranching without the public’s having to foot
the bill. To that end, they “carefully crafted” a citizen
initiative (I-143) to prohibit remuneration for
shooting alternative livestock on alternative livestock
ranches, thereby forcing all businesses in the
industry to operate, essentially, without any income.
See Kafka Dissent, {4 114-120. As counsel for the
Sportsmen explained during oral argument:
There was a recognition by my clients that if
they passed a statute that simply said,
“Every game farm is done tomorrow,” that
that would be a very difficult takings claim
to defend against. And we didn’t want to
have to go down that road. And so the
statute was carefully crafted to address the
problem in a way that was not offensive to
taking but at the same time benefitted the
wildlife and the wildlife management of this
State.
The assertion that the Sportsmen’s
transparent charade is “not offensive” to the
guarantee of just compensation for a taking
App. 69
or damaging of private’ property is
preposterous.
47 109 In any event, the Sportsmen did not
detail their intentions to the voters. Rather, according
to the Sportsmen, “[floremost among the issues
presented to the voters in I-143 were concerns about
disease, loss of fair chase hunting ethics and
European style privatization of wildlife.” In other
words, the Sportsmen told the voters not that I-143
had been “carefully crafted” to obliterate an entire
industry — an industry that had been sanctioned,
encouraged, and nurtured by the State for 83 years,
no less — but that I-143 was “aimed” at the alluring
goal of “protecting Montana’s wildlife and hunting
heritage from a variety of dangers posed by game
farms.” An analysis of the Initiative, however, reveals
that it did not actually address any of these dangers.
As a matter of fact, the Sportsmen tacitly admit that
I-143 was a fraud on Montana voters.
7110 For instance, regarding disease, the
Sportsmen paint a grim picture. They state that
“(clontact between game farm animals and wildlife
can result in disease and parasite transmission, with
devastating impacts to native wildlife.” They
complain that “[glame farm enclosures require only a
single fence and do not prevent nose to nose contact
between wild ungulates and game farm animals.”
Plus, “liJt is virtually impossible to keep game farm
animals from coming into contact with wild animals,
as escaped animals are a fact of life for game farm
owners.” Moreover, aside from direct contact, “[slome
App. 70
diseases are transmitted by intermediate hosts,
making any form of enclosure ineffective for disease
prevention.”
{111 The Sportsmen argued these concerns to
the voters. Indeed, the Sportsmen cite the 2000 Voter
Information Pamphlet for the proposition that “[oJne
of I-143’s primary purposes was to minimize the CWD
threat to Montana’s wildlife.” (““CWD” is short for
“chronic wasting disease.”) Accordingly, given these
concerns, one would expect [1-143 to target the
problems related to diseases, perhaps through more
stringent fencing and enclosure’ requirements,
additional testing requirements, or even an outright
seizure of all alternative livestock along with a
prohibition on private ownership of alternative
livestock. However, I[-143 did none of these things. As
the Sportsmen acknowledge, “[glame farms licensed
prior to November 2000, are still legal in Montana,
even after I-143,” and “[g]ame farm operators are free
to ‘acquire, breed, grow, pursue, handle, sell or
dispose’ of game farm animals.” I-143 imposed no new
fencing or testing requirements. It does not prohibit
people from owning alternative’ livestock on
alternative livestock ranches, and it does not address
the problem of transmission of diseases through
intermediate hosts or inadequate fencing. In spite of
the dire threat posed by diseases, the Sportsmen's
initiative contains nothing addressing that issue.
{112 As for hunting ethics, the Sportsmen
state that “Montana has a proud heritage of ethical
hunting and the protection of wildlife, and I-143 was
App. 71
intended to protect the state’s interest in those
traditions.” They assert that “[iJn addition to the
enormous economic benefits of traditional big game
hunting, Montanans hold dear their hunting tradition
as an important component of their western
heritage,” particularly “the concept of fair chase
hunting.” The Sportsmen explain that they and other
citizens “opposed the ‘penned hunts’ offered by many
game farms” because “[slhooting an animal in an
enclosed facility is repugnant to these ethical hunting
traditions.” Again, citing the 2000 Voter Information
Pamphlet, the Sportsmen state that “(t]he protection
of fair chase hunting, as an ethical consideration for
Montanans, was an integral part of I-143’s provisions
to eliminate penned shoots.”
4113 I-143, however, contains no “provisions to
eliminate penned shoots.” I[-143 did three things: it
prohibited the establishment of any new alternative
livestock ranches; it revoked the right of existing
alternative livestock businesses to transfer their
alternative l
This text is long and has been trimmed here. Open the source document for the complete record.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.