Petition for Writ of Certiorari — Acceptance Insurance Companies v. United States

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Supreme Court of the Anited States

ACCEPTANCE INSURANCE COMPANIES, INC.,

Petitioner,

Vv.

UNITED STATES,

Respondent.

On Petition for Writ of Certiorari to the United

States Court of Appeals for the Federal Circuit

PETITION FOR WRIT OF CERTIORARI

PATRICK GRIFFIN, Esq. Lewis S. WIENER

KUTAK ROCK, LLP RONALD R. Massumi*

THE OMAHA BUILDING SUTHERLAND ASBILL &

1650 FARNAM STREET BRENNAN LLP

OMAHA, NEBRASKA68102 1275 PENNSYLVANIA AvVE., NW

402.346.6000 - PHONE Wasuincton, D.C. 20004

202.383.0100 - PHONE

202.637.3593 - FAX

* Counsel of Record

Counsel for Petitioner

December 29, 2009

Becker Gallagher - Cincinnati, OH - Washington, D.C. - 800.890.5001

QUESTIONS PRESENTED

Petitioner, which conducted a federally regulated

crop insurance business, was prevented from selling

its crop insurance business by the regulator's assertion

of authority to approve or deny the sale. Petitioner

brought a takings claim based on the denial of the sale

and the events it precipitated. The questions

presented are:

1. May a fundamental property right, such as the

night of disposition, be entirely negated merely because

a regulator has some authority with respect to the

exercise of that right?

2. Is the Federal Circuit’s rigid doctrine requiring

a taking be “pinpointed” to a single act and rejecting

the concept that a taking can result from the sum of a

series of interconnected events consistent with the

practical, ad hoc approach frequently articulated by

this Court in its takings cases, for example, Penn

Central Transp. Co. v. City of New York?

RULE 29.6 CORPORATE DISCLOSURE

STATEMENT

Petitioner Acceptance Insurance Companies Inc.,

was a publicly held insurance holding company, now in

bankruptcy. Among its wholly-owned operating

companies was American Growers Insurance

Company, a crop insurance company, now in

liquidation under supervision of the Nebraska

Department of Insurance.

TABLE OF CONTENTS

QUESTIONS PRESENTED .................-- i

RULE 29.6 CORPORATE DISCLOSURE

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TABLE OF CONTENTS .........---22-e evens ill

TABLE OF AUTHORITIES .................. v

OPINIONS AND ORDERS BELOW ........... 1

Pie A EE. 0 8 5 es i-os bo 0054s bk ee 1

CONSTITUTIONAL AND STATUTORY

ep i PPT SCTE TPT r Ce Te Tere 1

STATEMENT OF THE CASE ................ 4

REASONS FOR GRANTING THE WRIT ...... 10

I. In holding that Acceptance had no cognizable

property right to sell its crop insurance assets

because of the general regulatory oversight of

the RMA, the Federal Circuit has abandoned

the usual regulatory takings analysis in favor of

a rigid rule holding that a fundamental property

right, such as an insurance company’s right to

sell its assets, no longer exists if regulation, to

some degree or in some circumstances, touches

Cian BrCIINEy TERE 5 wo ee vc ke teseteese® 10

II. The Federal Circuit’s doctrine that it is

necessary to pinpoint a single, discrete act as

constituting the taking results in an artificial

till —— ll, ll, Sl lal, al, Me hi le

division of related series of acts that should

cumulatively determine whether a _ taking

occurred and what type it was, thereby

subverting this Court’s practice of according

takings claims realistic, ad hoc scrutiny. .... 18

Co bowie ace wn aves ke wees OeRS 23

APPENDIX

Appendix A: Federal Circuit Opinion, dated

ge Br Pere rey Pere la

Appendix B: Court of Federal Claims Opinion

and Order, dated September 25, 2008 ..... 2la

Appendix C: Statutes

7 US.C. § 1504 - 1524 2... ccc ccc cece 44a

= 37 2 C—O sa -& ees _— — 8 aE EE es CO zF--—UC Cr

TABLE OF AUTHORITIES

CASES

Ambase Corp. v. United States,

58 Fed. Cl. 32 (Fed. Cl. 2003) ............. 12

Branch v. United Siates,

69 F.3d 1571 (Fed. Cir. 1995), cert. denied,

) gek Bs) : ae 20

Brown v. Legal Found. of Washington,

ee a GD ob ceo tere eceeeeeres 21

California Housing Sec., Inc. v. United States,

959 F.2d 955 (Fed. Cir.), cert. denied,

Se WE, RIED ove cies cree sacessuces 12

Cienega Gardens v. United States,

331 F.3d 1319 (Fed. Cir. 2003) ............ 12

Connolly v. Pension Benefit Guar. Corp.,

a: ee ED “oes oh eee spa vnecees 16

Golden Pac. Bancorp v. United States,

15 F.3d 1066 (Fed. Cir. 1994) ............. 12

Lucas v. South Carolina Coastal Council,

505 U.S. 1003 (1992) ........... 10, 16, 17, 20

Palazzolo v. Rhode Island,

oS BRE 0) i) } 11, 21

Penn Central Transp. Co. v. City of New York,

438 U.S. 104 (1978) ......... 10, 11, 16, 18, 21

Stevens v. City of Cannon Beach,

De APs BEG GEMUED ps cecccceveseveceess 17

Thykkuttathi v. United States,

88 Fed. Cl. 293 (Fed. Cl. 2009) ............ 12

Yee v. Escondido,

PERS wav cecesvecevescveces 21

CONSTITUTION

ee rena: ]

STATUTES

7 U.S.C. § 1501 - 1524.................. 2,4,13

Us are 8

a 2,4, 13

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OPINIONS AND ORDERS BELOW

The opinion of the Court of Appeals for which

review is sought is Acceptance Insurance Companies

Inc. v. United States, 583 F.3d 849 (Fed. Cir. 2009),

reprinted at App. la. The Court of Appeals affirmed

the judgment of the Federal Court of Claims

dismissing the case, 48 Fed. Cl. 111 (Fed. Cl. 2008),

reprinted at App. 21a.

Other opinions and orders in this case that are not

significantly relevant to the matters at issue in this

petition are reported or available at 503 F.3d 1328

(Fed. Cir. 2007); 72 Fed. Cl. 299 (Fed. Cl. 2006); 2006

WL 3538946 (D. Neb. Dec. 7, 2006).

JURISDICTION

The judgment of the Court of Appeals for the

Federal Circuit for which review is sought was entered

on October 1, 2009. This Court has jurisdiction under

18 U.S.C. § 1254(1) to review the judgment of the

Court of Appeals by writ of certiorari.

CONSTITUTIONAL AND STATUTORY

PROVISIONS

The Fifth Amendment to the United States

Constitution provides:

No person shall be held to answer for a capital,

or otherwise infamous crime, unless on

presentment or indictment of a Grand Jury,

except in cases arising in the land or naval

forces, or in the Militia, when in actual service

in time of War or public danger; nor shall any

b ve A

person be subject for the same offence to be

twice put in jeopardy or life or limb; nor shall be

compelled in any criminal case to be a witness

against himself, nor be deprived of life, liberty,

or property, without due process of law; nor

shall private property be taken for public use,

without just compensation.

The Risk Management Agency, a subagency of the

Department of Agriculture, was established pursuant

to 7 U.S.C. § 6933 to supervise the Federal Crop

Insurance Corporation and to administer and oversee

all aspects of the Federal Crop Insurance Act, App.

44a, 7 U.S.C. §§ 1501-1524. Section 6933 states:

§ 6933. Office of Risk Management

(a) Establishment

Subject to subsection (e)' of this section, the

Secretary shall establish and maintain in the

Department an independent Office of Risk

Management.

(b) Functions of Office of Risk Management

The Office of Risk Management shall have

jurisdiction over the following functions:

(1) Supervision of the Federal Crop

Insurance Corporation.

(2) Administration and oversight of all

aspects, including delivery through local

offices of the Department, of all programs

authorized under the Federal Crop

Insurance Act (7 U.S.C. 1501 et seq.).

' So in original. There is no subsection (e) in this section.

(3) Any pilot or other programs involving

revenue insurance, risk management

savings accounts, or the use of the futures

market to manage risk and support farm

income that may be established under the

Federal Crop Insurance Act or other law.

(4) Such other functions as the Secretary

considers appropriate.

(1) Appointment

The Office of Risk Management shall be

headed by an Administrator who shall be

Appointed by the Secretary.

(2) Manager

The Administrator of the Office of Risk

Management shall also serve as Manager of

the Federal Crop Insurance Corporation.

(d) Resources

(1) Functional coordination

Certain functions of the Office of Risk

Management, such as human resources,

public affairs, and legislative affairs, may be

provided by a consolidation of such functions

under the Under Secretary of Agriculture for

Farm and Foreign Agricultural Services.

(2) Minimum provisions

Notwithstanding paragraph (1) or any other

provision of law or order of the Secretary,

the Secretary shall provide the Office of Risk

Management with human and capital

resources sufficient for the Office to carry

out its functions in a timely and efficient

manner.

STATEMENT OF THE CASE

This is a regulatory takings case. At the time of the

alleged taking, Acceptance Insurance Companies Inc.

(Acceptance) was a publicly-traded insurance holding

company. Among its wholly-owned operating

subsidiaries was a crop insurance company, American

Growers Insurance Company (American Growers),

through which Acceptance engaged in the business of

crop insurance and participated in the federal crop

insurance program which subsidizes crop insurance

and reinsures participating writers of such insurance.

See App. 4a, 583 F.3d 849, 851 (Fed. Cir. 2007). The

Federal Crop Insurance Corporation (FCIC) is a wholly

owned government corporation within the Department

of Agriculture that provides reinsurance to private

crop insurance providers. App. 3a, 583 F.3d at 851.

The Risk Management Agency (RMA) is a sub-agency

within the Department of Agriculture that has

authority to supervise the FCIC and administer all

programs authorized by the Federal Crop Insurance

Act (FCIA). 7 U.S.C. § 6933 (establishment and

authority of RMA); App. 44a, 7 U.S.C. §§ 1501-1524

(FCIA). Federal regulation of crop insurers who accept

federal reinsurance is in addition to the pre-existing

system of state insurance regulation by which the

domiciliary state regulator, in this case the Nebraska

Department of Insurance (NDOI), has primary

regulatory authority over insurers domesticated in the

state. The state regulator, among other things,

establishes the solvency requirements for insurance

companies. Moreover, when a crop insurer fails to

meet financial requirements, the state insurance

commissioner, not the RMA, has the authority to put

the insurer into rehabilitation or liquidation.

In November of 2002, American Growers disclosed

it had suffered a $130 million loss in the third quarter

of that year. App. 5a, 583 F.3d at 852. This quarterly

loss caused American Growers’ policyholder surplus to

fall below the amount required by the NDOI. App. 5a,

583 F.3d at 852. Such a capital surplus shortfall is a

matter of impaired corporate capital at a particular

point in time; it does not mean that the long term

profitability of the underlying book of business is

impaired. If an insurer’s book of business has the

prospect of being profitable over time, the insurer can

sell the book to another insurer that has the capital to

assume that business and manage it for future profit.

An insurer’s book of business therefore can have value

even if the insurer no longer can operate under

applicable state regulations due to a shortfall of

required capital surplus.

Ordinarily, insurance regulators would welcome

the transfer of an insurance business portfolio from a

weakened insurer to a different insurer that has the

financial and managerial wherewithal to assume the

business. Such a transfer solves the problem created

by the impairment of the selling insurer while avoiding

putting the insurance company into rehabilitation or

liquidation.

On November 18, 2002, Acceptance entered into a

non-binding letter of intent with Rain and Hail, LLC

(Rain & Hail), a strong and respected crop insurer in

the federal crop insurance program, pursuant to which

Acceptance would sell the crop insurance business to

Rain & Hail for not less than $21.5 million. App. 5a,

583 F.3d at 852; App. 24a, 84 Fed. Cl. at 113. Because

the insurance assets to be sold were reinsured by the

FCIC, the proposed transaction was subject to

approval by the RMA. App. 5a, 583 F.3d at 852 The

RMA and the Director of the NDOI mutually

understood that if the RMA refused to approve the

sale, the NDOI would immediately seize control of

American Growers and the crop insurance book of

business. The RMA and the NDOI further understood

that the NDOI would defer to the RMA with respect

to the redistribution of the book of business to other

crop insurers if the NDOI were to place American

Growers in liquidation.

On November 22, 2002, the RMA rejected the

proposed sale, concluding the sale would be

detrimental to the public interest in that it would

adversely affect the interests of farmers and

taxpayers.” App. 6a, 583 F.3d at 582. Discovery

revealed that the supposed public detriment was the

agency's perceived risk that former agents of American

Growers might sue the RMA if the transfer resulted in

the termination of their agencies.’ Later that same

day, as the RMA knew would happen, the NDOI took

control of American Growers and all of its assets. See

App. 25a, 84 Fed. Cl at 113. As a consequence, the

RMA entirely dispossessed Acceptance of the crop

insurance business it had operated through American

Growers. As also was expected, the RMA assumed

authority over the redistribution of the crop insurance

* Prior to this, the RMA had approved such transfers of crop

insurance business from a weakened insurer to a stronger one, for

example, when American Growers, with the RMA’s

encouragement, assumed the portfolio of a failing crop insurer

some years earlier.

* This never before had been cited by the RMA as a reason for

which a transfer could be rejected.

portfolio to other crop insurers, including Rain & Hail,

in the liquidation proceeding. App. 6a, lla, 583 F.3d

at 852, 854; App. 25a, 84 Fed. Cl. at 113. By blocking

the sale to Rain & Hail and redirecting Acceptance’s

assets to other insurers, the RMA caused Acceptance

to suffer a complete and permanent loss of its property

interest in its crop insurance business, including its

portfolio of 360,000 in-force policies. This constituted

a taking of Acceptance’s property. Acceptance received

nothing for property that a buyer the day before had

been willing to purchase for not less than $21.5

million.

On December 9, 2003, Acceptance filed a complaint

in the United States Court of Federal Claims alleging

that the actions of the RMA constituted a taking

without just compensation in violation of the Fifth

Amendment. On February 10, 2004, the Government

filed a first motion to dismiss for lack of subject matter

jurisdiction and for failure to state a claim asserting,

among other things, jurisdiction of the case resided

exclusively in district court not the Court of Federal

Claims. On August 13, 2004, that motion was denied.

On April 11, 2005, Acceptance filed a first amended

complaint.

In December 2005, the case was transferred to a

different judge in the court of Federal Claims. The

parties thereafter completed discovery. On February

10, 2006, the Government filed a renewed motion to

dismiss on grounds that had already been raised and

specifically rejected by the first judge assigned to the

case. In the alternative, the Government moved for

summary judgment. Acceptance opposed the

Government’s second motion to dismiss and cross-

moved for summary judgment.

In its renewed motion to dismiss, the Government

argued, as it had in the first motion to dismiss, that

the Court of Federal Claims lacked subject matter

jurisdiction because Section 1506(d) of the FCIA, 7

U.S.C. § 1506(d), grants exclusive jurisdiction to the

federal district courts in cases involving the FCIC or

the RMA. Acceptance Ins. Cos. Inc. v. United States,

503 F.3d 1328, 1336-37 (Fed. Cir. 2007).

The court never ruled on the cross-motions for

summary judgment. Rather, the judge to whom the

case was reassigned granted the motion to dismiss and

transferred the case to district court on the basis that

the district courts have exclusive jurisdiction over all

cases involving the FCIC or the RMA. Acceptance

then filed a motion to retransfer the case to the Court

of Federal Claims under 28 U.S.C. § 1631. The district

court denied the motion to retransfer, and Acceptance

appealed that decision to the Court of Appeals for the

Federal Circuit. The Circuit court held that the FCIA

does not divest the Court of Federal Claims of Tucker

Act jurisdiction in takings cases involving the FCIC or

the RMA where the United States is the proper

defendant. 503 F.3d at 1329, 1333. The Circuit court

ordered the District Court to transfer the case back to

the Court of Federal Claims for adjudication of

Acceptance’s takings claim. Id. at 1338-39.

Notwithstanding that the parties had long since

completed discovery; the cross-motions for summary

judgment remained pending; the Government already

had filed two motions to dismiss; and the court had set

a trial date, on April 30, 2008, the Government filed

yet a third motion to dismiss raising entirely new

arguments. The Court of Federal Claims granted this

motion on September 25, 2008 and dismissed the case

with prejudice. App. 21a-43a, 84 Fed. Cl. 111.

Acceptance timely appealed this decision to the

Court of Appeals for the Federal Circuit. The Federal

Circuit upheld the dismissal on the grounds that by

entering a regulated industry in which transfers of

crop insurance business from one insurer to another

are subject to oversight by the RMA, Acceptance did

not have a sufficient property interest necessary to

maintain a Fifth Amendment takings claim. The court

also held that Acceptance could not premise a takings

claim on the series of events beginning with the

rejection of the sale to Rain & Hail and culminating in

the RMA’s assertion of dominion and control over the

crop insurance policies and their redistribution by the

RMA to other crop insurers. Rather, to have a claim

Acceptance must pinpoint a particular, single act of

the agency that constituted the alleged taking, which

in the court’s view had to be the RMA’s rejection of the

sale, an act which could not be sufficient basis for a

takings claim because Acceptance had given up the

right of disposition by entering the field of regulation.

Acceptance requests that this Court grant a writ of

certiorari to review this judgment of the Court of

Appeals for the Federal Circuit.

REASONS FOR GRANTING THE WRIT

I. In holding that Acceptance had no cognizable

property right to sell its crop insurance assets

because of the general regulatory oversight of

the RMA, the Federal Circuit has abandoned

the usual regulatory takings analysis in favor

of a rigid rule holding that a fundamental

property right, such as an insurance

company’s right to sell its assets, no longer

exists if regulation, to some degree or in some

circumstances, touches that property right.

This case presents an opportunity for this Court to

address the Federal Circuit’s departure from normal

regulatory takings analysis in regulated industries

cases. The Federal Circuit has created a rule whereby

the existence of regulation itself destroys any

cognizable property interest touched by regulation,

thus vitiating any possible takings claim, and entirely

sidestepping the searching analysis that would

otherwise be required in a takings case.

The most prominent touchstones in _ the

jurisprudence of regulatory takings are Penn Central

Transp. Co. v. City of New York, 438 U.S. 104, 124

(1978) and Lucas v. South Carolina Coastal Council,

505 U.S. 1003, 1015 (1992). The Federal Circuit’s

opinion never reaches the multi-factor analyses called

for by these cases.‘ Rather, the court declares that

* Penn Central Transp. Co. v. City of New York, 438 U.S. 104, 124

(1978) (considerations include the regulation’s economic effect on

the owner, character of the government action, and extent to

which it interferes with owner’s reasonable investment-backed

expectations); Lucas v. South Carolina Coastal Council, 505 U.S.

Acceptance never had a property interest in the

disposition of its crop insurance business and,

therefore, the RMA could not have committed a taking

by rejecting the proposed sale to Rain & Hail. App.

17a-18a, 583 F.3d at 857-58.

This is so, the court concludes, because the RMA

had the authority to approve or disapprove the sale of

the crop insurance portfolio to a different crop insurer.

“[Blecause the RMA had the authority to deny the sale

of the policies at issue, Acceptance . . . did not possess

the unfettered right to sell or otherwise transfer the

policies, thus precluding the existence of a cognizable

property interest.” App. 17a-18a, 583 F.3d at 858. The

problem with this reasoning is that the three

fundamental attributes of ownership, the rights “to

possess, use and dispose of” the property, do not have

to be entirely “unfettered” by regulation in order to

exist.°

1003, 1015 (1992) (“we have generally eschewed any ‘set formula’

for determining how far is too far, preferring to ‘engag{e] in . . .

essentially ad hoc, factual inquiries.”) (quoting Penn Central, 438

U.S. at 124); Palazzolo v. Rhode Island, 533 U.S. 606, 618 (2001)

(whether a regulatory taking has occurred depends on “a complex

of factors”).

° Until regulatory action reaches the point where the economic

value of the owner’s property is completely destroyed so as to

constitute a per se taking under Lucas, the Penn Central analysis

applies. The Penn Central test is explicitly designed to deal with

regulatory impairments that are less than total. It thus requires

examination of the degree of economic harm suffered and the

degree to which investment-backed expectations are thwarted.

438 U.S. at 124.

For example, the owners of a bank have a right to

possess the bank free of government seizure, unless

the bank gets into financial trouble as statutorily

defined. Statutory bank seizures “do not constitute

regulatory takings under the Fifth Amendment

because investors in banks do not have a reasonable

investment-backed expectation that regulators will not

seize banks that are deemed to be in trouble.”

Thykkuttathil v. United States, 88 Fed. Cl. 293, 296

(Fed. Cl. 2009) (citing Golden Pac. Bancorp v. United

States, 15 F.3d 1066, 1074 (Fed. Cir. 1994)), accord,

California Housing Sec., Inc. v. United States, 959 F.2d

955, 956-57 (Fed. Cir.) (bank owners have no

“historically rooted expectation” of takings

compensation if a bank is seized when statutory

criteria for seizure are met), cert. denied, 506 U.S. 916

(1992). Likewise, a bank seizure not moored to the

statutory criteria could well constitute a compensable

taking.® The absence of reasonable investment-backed

expectations in one circumstance does not mean the

absence of such reasonable expectations in other

circumstances. Thus, the Federal Circuit’s holding

that there is no cognizable right to disposition of

property unless it is entirely “unfettered” is plainly

incorrect.

* «Elven in an area regulated as heavily as banking, numerous

possible government actions would invoke the Fifth Amendment.

For example, confiscating a healthy and legally compliant bank

....” Ambase Corp. v. United States, 58 Fed. Cl. 32, 51 (Fed. Cl.

2003). “The range of expectations that is reasonable may be

reduced in proportion to the amount of regulation, but this is not

a blanket rule that disqualifies parties’ expectations without

inquiry.” Cienega Gardens v. United States, 331 F.3d 1319, 1350

(Fed. Cir. 2003).

The consequence of the Federal Circuit’s error is

that Acceptance is deprived of any cognizable interest

in the disposition of its property merely because the

RMA has general supervisory authority over the crop

insurance program, including the asserted authority to

review and pass upon proposed sales of a book of

business from one crop insurer to another. The

Federal Circuit’s own bank seizure cases show that the

dissipation of a cognizable property interest must be

tied to particular criteria set forth in statute or

regulation, and the property interest is obviated only

to the extent of the stated criteria because those

criteria define the boundary past which the property

interest is abrogated.

In this case, the RMA acted under a statute giving

it general supervisory authority over the federal crop

insurance program. 7 U.S.C. § 6933 (establishing the

RMA and its authority over the federal crop insurance

program). See also, the Federal Crop Insurance Act,

App. 44a; 7 U.S.C. §§ 1501-1524. There are no

statutory provisions or regulations identifying or

explaining the criteria under which the RMA shall

approve or deny a proposed bulk sale of a block of crop

insurance business from one crop insurer to another.

One might presume that the RMA’s general authority

could include the ability, for example, to deny a sale

that would result in the transfer of crop insurance

policies to another insurer that would not have the

financial or managerial wherewithal to handle the

increased risk and responsibility of the additional

policies. In that event, it might be said that

Acceptance had no reasonable investment-backed

expectation to execute such a sale. But nothing of the

sort was the case here. Rain & Hail was a strong and

stable company with a sterling reputation in the crop

insurance industry.

Here the sale was denied for a reason having

nothing to do with the merits of the transaction itself,

the quality of the purchaser or the preservation of

coverage for insured farmers. A seller might well

anticipate that in a regulated environment it could not

have a reasonable expectation of being able to execute

a sale that was fraudulent, or to an unqualified

purchaser or that impaired continuing coverage to the

insureds. Here the RMA’s stated reason why the sale

would be detrimental to the interests of taxpayers and

farmers was the RMA’s concern that former agents of

American Growers might sue the RMA. No history,

custom, statute or regulation put Acceptance on notice

that what otherwise should have been a routine sale

would be blocked for such a strained, irrelevant,

unexpected and unprecedented reason. Although the

RMA was presumptively within its rights under its

general authority over the crop insurance program to

extend its approval prerogative to foreclose the risk

that it might be sued by disgruntled agents, that

certainly was not something that Acceptance or any

insurer in the industry could have anticipated.

Acceptance certainly would not have foreseen being

denied the right to sell based on the RMA’s perceived

fear of lawsuits. The RMA’s action may have been

perfectly proper and within its authority, but it was

certainly no more “expected” than being struck by a

bolt of lightning.

While it is true, as the Federal Circuit notes, App.

I6a, 583 F.3d at 857, that “existing rules and

understandings” and “background principles,” such as

state, federal or common law, help define the contours

of property rights for purposes of takings analysis, if

this reasoning is going to be used to completely

extinguish so fundamental a property right as the

right of disposition, those rules, understandings and

background principles must be clearly discernible. If

that were not the case, it would be absurd to say that

a person entering a regulated industry “voluntarily”

relinquishes a given property right.’

In the bank seizure cases cited above, the Federal

Circuit was careful not to say that a bank’s right to be

free from government seizure is completely

extinguished simply because seizure is possible in

certain circumstances. Rather, that right cuts off only

at the point where the statutory criteria for seizure,

such as unsound condition, are met. In this case, by

contrast, there is no nuanced examination of the

statutory background, criteria or markers. The court

jumps directly from the fact that denial of a crop

insurance transfer is theoretically possible to the

conclusion that Acceptance was completely divested of

a cognizable property right to sell its policies the

minute it voluntarily entered into the regulated world

of crop insurance.

This un-nuanced, absolutist view that possible

interference with property rights upon entry into a

regulated industry is the same as the total

extinguishment of them fatally undermines the

’ According to the Federal Circuit, “by voluntarily entering into

the federally regulated crop insurance business, Acceptance

relinquished its right to freely transfer American Growers’

insurance policies, in exchange for the benefits of the crop

insurance program, such as being reinsured by the government for

certain losses.” App. 17a, 583 F.3d at 857.

regulatory takings analysis that this Court has

developed. One never reaches the Penn Central

factors, for example, if it can so readily be concluded

that there is no property interest by virtue of entry

into a regulated industry.® Given the pervasiveness of

industry regulation in the modern world, the Federal

Circuit’s willingness to leap directly to a holding of no

cognizable property interest in any circumstances

obliterates the fact that regulation undermining

fundamental property rights is_ ordinarily

circumstance specific. A bank can be seized if it

becomes unsound, but not otherwise. A sale of

® This Court has recognized that there is a relationship between

the scope and degree of regulation in a regulated industry and the

“investment-backed expectations” factor in the Penn Central

analysis. Thus, in Connolly v. Pension Benefit Guar. Corp., 475

U.S. 211, 227 (1986), the Court found that employers in

multiemployer pension plans “had more than sufficient notice” of

potential exposure to withdrawal penalties. That “sufficient

notice” negated any supposed investment-backed expectations to

the contrary. This Court, however, has never come near stating

that entering an industry in which regulation, under some

circumstances, touches a fundamental property right — such as

the right that insurance companies have to dispose of their

business portfolios — means that no such right of disposition exists

at all. Further, while citations to the “investment-backed

expectations” passage in Penn Central have been ubiquitous in

this Court’s takings cases for over three decades since Penn

Central, there has been no direct holding clarifying the meaning

of the phrase. Nor has this Court had occasion to expound on how

the concept should be applied in what may well be one of its most

important applications: the availability of takings claims to

participants in the vast segments of the economy that constitute

regulated industries. This case presents an opportunity for the

Court to consider how long-standing, but still not fully developed,

concepts such as Penn Central's “investment-backed expectations”

and Lucas’ “background principles” inform the takings analysis in

modern regulated industries.

securities can be enjoined if it is tainted by

misrepresentations. The proper approach to the

“background principles” contained in the regulatory

scheme is to use them to identify the particular

circumstances under which a property right may be

abrogated. Then in those circumstances it can rightly

be inferred that there was no reasonable expectation

of a compensable taking. But outside those

circumstances, both the expectation and the property

right should exist.°

In sum, the fact of entering a regulated industry in

which certain property rights may be curtailed in

certain circumstances does not mean that those

property rights do not exist at all. That is why a

searching, ad hoc analysis of the particular

circumstances under consideration, together with the

arguably relevant regulatory “background,” must be

made in order to say whether the acts and events in

question abrogated a property right that should fairly

be said to still exist notwithstanding some impairment

or impairment in some circumstances. Declaring the

* As stated in Lucas, the Supreme Court’s resort to existing rules

or understandings to define the range of interests that qualify for

protection as “property” under the Fifth Amendment recognizes

that the Takings Clause does not require compensation when an

owner is barred from putting property to a use that is proscribed

by those existing rules or understandings. 505 U.S. at 1030. By

logical extension, what is not proscribed persists as “property”

potentially subject to compensation for its taking. Thus, a court

must necessarily make a scrupulous analysis of what the

background law really is and what it really proscribes. “Our

opinion in Lucas . . . would be a nullity if ‘background law’ —

regardless of whether it is really such — could eliminate property

rights.” Stevens v. City of Cannon Beach, 510 U.S. 1207 (1994)

(SCALIA, J., dissenting from the denial of certiorari).

property right dead on arrival and for all purposes

because it will not be operative in certain

circumstances — which is essentially what the Federal

Circuit did in this case — is not enough. That approach

in effect evades the regulatory takings analysis

required by Penn Central on false logic and advances

a new stream of Federal Circuit “regulated industry”

takings cases that will undercut takings claims in

regulated industry cases so broadly that it could lead

perilously close to a per se exception from takings

liability in regulated industry cases.

The potentially profound effects of the Federal

Circuit’s approach on vast and multifarious regulated

industries, and untold numbers of persons and entities

who operate within those regulated industries,

recommend this case for the Court’s review and

examination. This Court should grant the writ in

order to address whether or under what circumstances

it is correct to say that a person has lost a

fundamental! property right by virtue of entry into a

regulated industry.

Il. The Federal Circuit’s doctrine that it is

necessary to pinpoint a single, discrete act as

constituting the taking results in an artificial

division of related series of acts that should

cumulatively determine whether a taking

occurred and what type it was, thereby

subverting this Court’s practice of according

takings claims realistic, ad hoc scrutiny.

Distilled to its essence, this case is ultimately an

appropriation in three steps, beginning with (1) the

RMA’s denial of the proposed sale, (2) which it knew

would precipitate seizure of American Growers by the

Nebraska Department of Insurance, (3) after which the

RMA would assume control over the distribution of the

crop insurance policies to other crop insurers. The

RMA was fully aware that each step would lead to the

next. As a result of this chain of events, Acceptance

was entirely dispossessed of the crop insurance

business it operated through American Growers. As

the RMA also expected, the RMA assumed authority

over the redistribution of the crop insurance portfolio

to other crop insurers — Acceptance’s erstwhile

competitors, including Rain & Hail — in the liquidation

proceeding. App. 6a, lla, 583 F.3d at 852, 854; App.

25a, 84 Fed. Cl. at 113. Thus, the RMA’s blocking of

the sale and the redirection of the policies to other

insurers necessarily and predictably resulted in the

categorical taking and permanent loss of all of

Acceptances’s property interest in the crop insurance

business, including the portfolio of insurance policies

that it had intended to sell to Rain & Hail. Acceptance

received nothing for property that a buyer, the day

before the RMA ignited the chain of events, had been

willing to purchase for more than $21.5 million.

The Court of Federal Claims had correctly

described Acceptance’s claim in terms of a

constellation of operative facts: “The “transfer of

Acceptance’s assets, accomplished by the RMA without

compensation to Acceptance, as well as the RMA’s

exercise of control over the crop insurance policies, and

its redistribution of the policies to other crop insurers

forms the basis of Plaintiff's regulatory takings claim.”

App. 25a-26a, 84 Fed. Cl. at 113.

The Federal Circuit refused to look at the events as

a whole, notwithstanding that, as a matter of common

sense, it is obvious that they were interrelated. They

were, in the most literal sense of the term, a “chain of

events.” The refusal to condone the sale led to the

forced failure which led to the appropriation and

redistribution by the RMA of the policies to private

parties, all in connection with the “public good” in

avoiding the presumed risk of suits against the RMA

by insurance agents.

Taken as a whole, these events make out a

categorical takings case under Lucas. The Federal

Circuit avoided considering this by insisting that a

taking must be “pinpointed” as residing in a single act.

The plaintiff must “pinpoint the precise action that it

contends constituted conduct the government could not

engage in without paying compensation.” App. 13a,

583 F.3d at 855.

Acceptance characterizes the alleged taking as

consisting of several distinct actions viewed in

concert. We have stated, however, that such a

“characterization . . . is too broad” because “it

does not pinpoint what step in the sequence of

events ... constituted conduct that the

government could not engage in without paying

compensation.”

App. 12a-13a; 583 F.3d at 855 (quoting Branch v.

United States, 69 F.3d 1571, 1575 (Fed. Cir. 1995),

cert. denied, 519 U.S. 810 (1996)).

This rigorously applied “pinpoint” doctrine appears

to be the Federal Circuit’s own innovation, and is

inconsistent with this Court’s flexible, realistic, ad hoc

approach to takings analysis.’® There is no logical

reason why a taking cannot be found in the sum of a

series of interconnected events. The Federal Circuit’s

command to pinpoint a precise step that constitutes

the taking can make the final result of the actions

appear to be detached from the earlier steps. That is

what happened here. The court concluded that the

taking had to be found in the initial act of denying

approval of the sale to Rain & Hail. This made the

fact of the RMA’s assertion of control over the policies

and their redistribution by the RMA immaterial in the

eyes of the court. In Acceptance’s view, of course, the

appropriation of the policies was the very

consummation of the taking.

The court’s doctrinaire segmentation of connected

events makes it impossible for the court seriously to

consider the fact that the rejection of the sale in this

case was the means by which the RMA positioned

itself to assert control over the policies during the

NDOI’s liquidation proceeding and redistribute them

to other insurers .n a setting that would insulate it

from the feared risk of lawsuits by insurance agents.

” Brown v. Legal Found. of Washington, 538 U.S. 216, 1417-18

(2003) (Supreme Court’s regulatory takings jurisprudence is

characterized by essentially ad hoc, factual inquiries designed to

allow careful examination and weighing of all circumstances); Yee

v. Escondido, 503 U.S. 519, 523 (1992) (regulatory takings cases

necessarily entail “complex factual assessments of the purposes

and economic effects of government actions”); Penn Central, 438

U.S. at 124 (takings analyses are “essentially ad hoc, factual

inquiries”); Palazzolo at 633, 634-45 (The outcome depends largely

upon the particular circumstances of the case. No one factor is

“talismanic” under Penn Central; “the temptation to adopt what

amount to per se rules in either direction must be resisted.”)

(O’CONNOR, J., concurring).

All this falls by the wayside because the court

pinpoints the taking at the moment the sale was

disapproved. After that, nothing matters,

notwithstanding that Acceptance is dispossessed of its

portfolio of crop insurance, and the RMA assumes

control of the policies, after the disapproval of the sale.

In this way, perhaps the most telling and critical parts

of the story are rendered irrelevant as far as the

Federal Circuit is concerned. This result is

counterintuitive at the least.

The pinpoint doctrine, as this case shows, has the

potential to divert a court from the necessity of

grappling with the facts in a comprehensive, realistic

way. It also seems inevitably fated to constrict the

range and variety of compensable takings even where

the loss, as here, is total and concrete. Indeed, these

propositions seem proved by the court’s opinion itself.

After finding the denial of the sale to be the point at

which any taking had to have occurred, the court then

blithely concludes that Acceptance could not have

suffered a physical taking of its crop insurance

business because Acceptance, through its ownership of

American Growers, continued to possess the crop

insurance policy portfolio after that point. App. 19a,

583 F.3d at 858-859. Well, indeed, that was true — for

amoment. But, as was fully anticipated, within hours

after the rejection by RMA, the NDOI seized American

Growers, and then in due course the RMA itself

asserted dominion and control of the redistribution of

the crop insurance policies to other companies. Viewed

as an unbroken chain of events, which it was, this

certainly appears to be a taking. The Circuit Court’s

opinion is entirely inadequate to convincingly establish

that it was not.

Regulatory takings by their nature can be

complicated and often take place in complex settings.

The Federal Circuit’s hyperformalistic doctrine does

not promote the practical realism that this Court has

consistently said should prevail in the analysis of

regulatory takings. This Court should grant the writ

in order to address the Federal Circuit’s doctrine

holding that a taking cannot result from the sum of a

series of interconnected events.

CONCLUSION

The Federal Circuit’s doctrines that a fundamental

property right vanishes when one enters a regulated

industry in which the right can be infringed in some

circumstances and that a taking cannot properly be

found in the sum of a series of events but must be

pinpointed to a single governmental act, reveal a

pronounced drift by that Court toward black letter

rules that are neither correct nor consonant with this

Court’s flexible, realistic, weighing and balancing

approach. If the Federal Circuit’s approach to these

questions is not corrected, the effect on persons

participating in regulated industries could be a

profound narrowing of protected property rights and

cognizable takings claims. This case therefore is

worthy of certiorari. For these reasons, this Court

should grant the writ in order to address the validity

and direction of the Federal Circuit’s reasoning in

regulated industry takings cases, as exemplified in the

case presented.

Respectfully submitted,

Lewis S. Wiener

Ronald R. Massumi*

SUTHERLAND ASBILL &

BRENNAN LLP

1275 Pennsylvania Avenue, NW

Washington, D.C. 20004

202.383.0100 - phone

202.637.3593 - fax

* Counsel of Record

OF COUNSEL:

Patrick Griffin, Esq.

KUTAK ROCK, LLP

The Omaha Building

1650 Farnam Street

Omaha, Nebraska 68102

402.346.6000 - phone

Counsel for Petitioner Acceptance Insurance

Companies Inc.

APPENDIX

APPENDIX A

United States Court of Appeals

for the Federal Circuit

2009-5015

[Decided October 1, 2009]

ACCEPTANCE INSURANCE COMPANIES, INC.,

Plaintiff-Appellant,

UNITED STATES,

)

v. )

)

Defendant-Appellee. )

)

Appeal from the United States Court of Federal

Claims in case No. 03-CV-2794, Judge Thomas C.

Wheeler.

Lewis S. Wiener, Sutherland Asbill & Brennan

LLP, of Washington, DC, argued for plaintiff-

appellant. Of counsel were Ronald Massumi and G.

Brendan Ballard; and Patrick B. Griffin, Kutak Rock

LLP, of Omaha, Nebraska.

Michael N. O’Connell, Trial Attorney, Commercial

Litigation Branch, Civil Division, United States

Depariment of Justice, of Washington, DC, argued for

defendant-Appellee. With him on the brief were

Michael F. Hertz, Acting Assistant Attorney General,

Jeanne E. Davidson, Director, and Mark A. Melnick,

Assistant Director.

DECIDED: October 1, 2009

Before RADER, PLAGER, and SCHALL, Circuit

Judges.

SCHALL, Circuit Judge.

Acceptance Insurance Companies, Inc.

(“Acceptance”) seeks reversal of the decision of the

United States Court of Federal Claims that dismissed

its claim for a compensable taking under the Fifth

Amendment. Acceptance Ins. Cos. v. United States, 84

Fed. Cl. 111 (2008) (“Dismissal Order”). Acceptance

brought suit alleging that, when the Risk Management

Agency (“RMA”), a component of the Department of

Agriculture, declined to approve a proposed sale of

certain crop insurance assets to Rain and Hail LLC

(“Rain & Hail”), the government rendered those assets

valueless and, consequently, effected a categorical

taking in violation of the Fifth Amendment. The Court

of Federal Claims dismissed Acceptance’s takings

claim pursuant to RCFC 12(b)(6) for two reasons. Id.

at 120. First, the court held that Acceptance had not

alleged a legally cognizable property interest for

purposes of the Fifth Amendment. Id. at 115~—17.

Second, the court held that, even if there was a legally

cognizable property interest, Acceptance’s claim was

precluded under the line of cases following the

Supreme Court’s decision in Omnia Commercial Co. v.

United States, 261 U.S. 502 (1923). See Dismissal

Order, 84 Fed. Cl. at 117-20. Because the Court of

Federal Claims did not err in holding that Acceptance

had failed to allege a legally cognizable property

interest for Fifth Amendment purposes, we affirm.

BACKGROUND

Our decision in Acceptance Insurance Cos. v.

United States, 503 F.3d 1328 (Fed. Cir. 2007)

(“Remand Decision”), which is discussed below, sets

forth most of the pertinent facts. Additional facts

recited herein are drawn from Acceptance’s First

Amended Complaint (“Compl.”). See, e.g., Papasan v.

Allain, 478 U.S. 265, 283-86 (1986) (stating that

courts must accept the well-pleaded facts in the

complaint as true when reviewing a dismissal for

failure to state a claim); Cambridge v. United States,

558 F.3d 1331, 1335 (Fed. Cir. 2009) (looking to the

well-pleaded facts in »he complaint).

The Federal Crop Insurance Corporation (“FCIC”)

is a wholly-owned government corporation within the

Department of Agriculture, established to regulate the

crop insurance industry. Federal Crop Insurance Act,

7 U.S.C. §§ 1501, et seq. (“FCIA”); see Remand

Decision, 503 F.3d at 1330. Private insurance

companies offer crop insurance and are then reinsured

(and regulated) by the FCIC. See Remand Decision,

563 F.3d at 1330. When a private insurance provider

is eligible for reinsurance through the FCIC, the

insurance provider and the FCIC enter into a

Standard Reinsurance Agreement (“SRA”), pursuant

to which the policies issued by the private insurance

provider to producers of agricultural commodities are

reinsured. Id.; Compl. { 6. See generally 7 U.S.C.

§ 1508 (outlining the considerations and requirements

that govern crop reinsurance). The RMA is an agency

within the Department of Agriculture whose purpose

is to supervise the FCIC. See 7 U.S.C. § 6933. Its

responsibilities include the “[aJdministration and

oversight of all aspects . . . of all programs authorized

under the [FCIA]” and “any other functions as the

Secretary considers appropriate.” See id.; Remand

Decision, 503 F.3d at 1330 & n.2. Among other things,

the RMA has the authority to approve or disapprove

certain transactions that affect the FCIC, such as

transactions concerning insurance policies that are

governed by SRAs. See, e.g., 7 U.S.C. §§ 1508(h), (k); 7

C.F.R. §§ 400.703—.706 (providing that the RMA will

review submissions pertaining to provisions of

insurance policies); Compl. { 4."

Acceptance is a publicly traded insurance holding

company. At the time relevant to this case, one of its

holdings was American Growers Insurance Co.

(“American Growers”), a corporation organized under

the laws of Nebraska. American Growers provided crop

insurance policies that were reinsured pursuant to the

federal crop insurance program and, as such, were

regulated by the FCIC/RMA.” See Compl. 4{ 6-8, 13.

* We note that, for purposes of this appeal, the parties do not

contest whether the RMA acted within its authority when it

rejected the particular transaction at issue, the proposed sale to

Rain & Hail.

? Neither Acceptance nor the government contends that the FCIC

and the RMA cannot be considered as one for the purposes of this

appeal.

American Grow rs’ reinsurance relationships were

governed by SRAs with the FCIC. See id. { 6. The

company therefore was required to comply with certain

coverage levels, prices, and premium rates determined

by the FCIC. See id. { 8. Because American Growers

was organized under the laws of Nebraska, it also was

regulated by the Nebraska Department of Insurance

(“NDOI”). See id. 1 7.

In November of 2002, American Growers disclosed

that it had suffered a $130 million loss, causing its

policyholder surplus to fall below mandated levels.’

Acceptance’s Br. 4. Subsequently, on November 18,

2002, Acceptance entered into a non-binding letter of

intent with Rain & Hail, another company in the crop

insurance business. Under the letter of intent, the

parties contemplated that Rain & Hail would purchase

the crop insurance portfolio serviced by American

Growers. See Compl. 47 9—11; Remand Decision, 503

F.3d at 1330—31. According to the letter of intent, Rain

& Hail proposed to purchase approximately 360,000 of

American Growers’ insurance policies for $21.5

million. See Compl. 44 10, 12. Acceptance states that,

“(blecause the insurance assets to be purchased by

Rain and Hail were reinsured by the FCIC and [were]

subject to the FCIC’s general oversight authority over

the crop insurance industry, the transaction between

Acceptance and Rain & Hail was subject to approval

by the RMA.” Compl. { 13; see Remand Decision, 503

F.3d at 1330-31. The Administrator of the RMA,

however, rejected the proposed sale. According to

* Policyholder surplus refers to the amount of an insurance

company’s assets, in excess of its obligations, that could be used

to pay policyholders for insured losses.

Acceptance, this was because the Administrator

determined the sale would be “detrimental” to the

interests of farmers and taxpayers. See Compl.

q7 15-16.

On November 22, 2002, the RMA “ordered

American Growers to cease and desist [from]

marketing and selling . . . amy new insurance contracts

under its reinsurance agreements with the FCIC.”

Compl. 7 18; see Remand Decision, 503 F.3d at

1330-31. In addition, the RMA notified American

Growers that the FCIC would not reinsure any new

insurance contracts for it. See Remand Decision, 503

F.3d at 1330-31. Soon thereafter, as a result of

American Growers’ poor financial condition, the NDOI

placed the company under supervision and in statutory

liquidation. See id. at 1331. Acceptance contends that

the RMA then took control of the liquidation and

redistributed a portion of American Growers’ policies

to other crop insurance companies. See Remand

Decision, 503 F.3d at 1331. Acceptance received no

compensation for the policies that the RMA

redistributed. Acceptance alleges that these actions, in

concert, effectively put American Growers out of

business and rendered Acceptance’s property (its

interest in American Growers) valueless. Compl.

q1 18, 19.

II.

In due course, Acceptance filed suit in the Court of

Federal Claims, alleging that “[w]hen the RMA, acting

as agent of the United States, rejected the proposed

Rain and Hail/Acceptance transaction .. ., it effected

a taking of Acceptance’s property, namely certain of

Acceptance’s assets, which were to be sold to Rain and

Hail, for public use.” Compl. { 24. As explained in the

Remand Decision, the government responded with a

motion to dismiss for lack of jurisdiction, arguing that

7 U.S.C. § 1506(d) granted exclusive jurisdiction to the

district courts over all suits against the FCIC. Remand

Decision, 503 F.3d at 1331. Eventually, the Court of

Federal Claims granted the government’s motion to

dismiss for lack of jurisdiction and transferred the case

to the United States District Court for the District of

Nebraska. Id. at 1331-32; see Acceptance Ins. Co. v.

United States, 72 Fed. Cl. 299 (2006). However, on

appeal of the district court’s denial of Acceptance’s

motion to retransfer to the Court of Federal Claims,

we held that, while 7 U.S.C. § 1506(d) provides

exclusive jurisdiction in the district courts for suits

against the FCIC, it does not divest the Court of

Federal Claims of jurisdiction over a takings claim

brought against the United States. See Remand

Decision, 503 F.3d at 1338-39. Following our decision,

Acceptance’s action was returned to the Court of

Federal Claims.

With the case back in the Court of Federal Claims,

the government filed another motion to dismiss, but

this time for failure to state a claim under RCFC

12(bX6). On September 25, 2008, the court granted the

government’s motion and dismissed Acceptance’s

takings claim. Dismissal Order, 84 Fed. Cl. at 112. The

court did so for two reasons. First, relying primarily on

the rationale in cases such as Mitchell Arms, Inc. v.

United States, 7 F.3d 212 (Fed. Cir. 1993), it concluded

that Acceptance had not alleged a legally cognizable

property interest for purposes of the Fifth

Amendment. Dismissal Order, 84 Fed. Cl. at 115-17.

Despite Acceptance’s arguments that the property

interest taken by the government was American

Growers’ tangible insurance portfolio, the court

identified the property interest that Acceptance had

alleged was taken as its “interest in selling its

property to Rain and Hail.” Id. at 116. In

characterizing the property interest this way, the court

noted that Acceptance’s complaint focused on the

RMA’s rejection of the proposed sale as the alleged

taking and that, following the RMA’s rejection of the

sale, Acceptance still “retained possession of the

insurance portfolio at issue.” Id. In further support of

its conclusion that Acceptance had not alleged a

cognizable property interest, the court noted that

Acceptance had voluntarily entered into an area of

pervasive government regulation and that any alleged

property interest was dependent on the pertinent

regulations. Id. at 116-17.

As an alternative rationale for dismissing

Acceptance’s claim, the court held that, even assuming

the existence of a cognizable property interest, the

property interest, at most, was “a letter of intent to

enter into an agreement [and not even] an actual

contract.” Dismissal Order, 84 Fed. Cl. at 119. Starting

from that premise, the court ruled that the Omnia

Commercial, 262 U.S. at 508-513, line of

cases—holding that a viable taking does not occur

when the government merely causes the loss of

benefits of a contract or simply frustrates business

eer a the “taking” of that interest.

See Dismissal Order, 84 Fed. Cl. at 117-120.

Acceptance has timely appealed to this court. We have

jurisdiction pursuant to 28 U.S.C. § 1295(a)(3).

DISCUSSION

As noted, the Court of Federal Claims dismissed

Acceptance’s takings claim on the pleadings pursuant

to RCFC 12(bX6). In order to avoid dismissal for

failure to state a claim, a complaint must allege facts

“plausibly suggesting (not merely consistent with)” a

showing of entitlement to relief. See Bell Atl. Corp. v

Twombly, 550 U.S. 544, 557 (2007); Cambridge, 558

F.3d at 1335. At the same time, a court is “not bound

to accept as true a legal conclusion couched as a

factual allegation.” Twombly, 550 U.S. at 555 (quoting

Papasan, 478 U.S. at 286). “The question of whether a

complaint was properly dismissed for failure to state

a claim upon which relief could be granted is one of

law, which we review independently.” Highland

States, 48 F.3d 1166, 1170 (Fed. Cir. 1995).

The Fifth Amendment to the United States

Constitution proscribes the taking of private property

“for public use, without just compensation.” U.S.

Const. V, cl. 4. “Real property, tangible property, and

intangible property, all may be the subject of takings

claims.” Conti _v. United States, 291 F.3d 1363,

1338-39 (Fed. Cir. 2002) (citing Lucas v. S.C. Coastal

Council, 505 U.S. 1003, 1019 (1992), Ruckelshaus v.

Monsanto Co., 467 U.S. 986, 1003-04 (1984), and

Andrus vy. Allard, 444 U.S. 51, 65 (1979)).

A “taking” may occur either by physical invasion or

by regulation. See, e.g., Lucas, 505 U.S. at 1014—15.

The Supreme Court has long recognized that “if

regulation goes too far it will be recognized as a

10a

taking.” Penn. Coal Co. v. Mahon, 260 U.S. 393, 415

(1922); see, e.g., Lucas, 505 U.S. at 1014-19; Am.

Pelagic Fishing Co. v. United States, 379 F.3d 1363,

1371 (Fed. Cir. 2004); Maritrans Inc. v. United States,

342 F.3d 1344, 1351 (Fed. Cir. 2003); Conti, 291 F.3d

at 1339. This case concerns an alleged regulatory

taking.

When evaluating whether governmental action

constitutes a taking without just compensation, a court

employs a two-part test. First, the court determines

whether the claimant has identified a cognizable Fifth

Amendment property interest that is asserted to be

the subject of the taking. Second, if the court concludes

that a cognizable property interest exists, it

determines whether that property interest was

“taken.” See, e.g., Palmyra Pac. Seafoods, L.L.C. v.

United States, 561 F.3d 1361, 1364 (Fed. Cir. 2009);

Air Pegasus of D.C., Inc. v. United States, 424 F.3d

1206, 1212—13 (Fed. Cir. 2005); Am. Pelagic Fishing,

379 F.3d at 1372; Conti, 291 F.3d at 1339. “[W]e do not

reach this second step without first identifying a

cognizable property interest.” Air Pegasus, 424 F.3d at

1213; see, e.g., Am. Pelagic Fishing, 379 F.3d at 1372.

If.

On appeal, Acceptance goes to some length to

explain its takings claim. It states that, “as a direct

consequence of the RMA’s rejection of the sale of assets

to Rain & Hail,” it “lost the entirety of the crop

insurance business it conducted through its wholly-

owned crop insurance subsidiary, American Growers,

including a large and valuable portfolio of in-force

lla

policies.” Acceptance’s Br. 8. Amplifying, Acceptance

points out that after the RMA refused to approve the

sale of American Growers, the NDOI seized control of

the company’s policies. Thereafter, according to

Acceptance, the RMA controlled the disposition and

redistribution of the American Growers insurance

portfolio. Acceptance argues that these actions

collectively constituted a categorical taking.

Contending that the Court of Federal Claims’ basis

for dismissal was incorrect, Acceptance argues that the

court incorrectly characterized the asserted property

interest as only involving “the taking of a contract or

a proposed sale.” In Acceptance’s view, this

characterization was incorrect because it alleged the

taking of neither a contract nor a proposed sale, but

instead consistently emphasized that the government

took actual property—namely, the American Growers

crop insurance business. Thus, Acceptance urges,

because the government took actual property, it

(Acceptance) did assert a cognizable property interest,

and therefore its takings claim is distinguishable from

those asserted in cases such as Mitchell Arms, 7 F.3d

212.

Acceptance points out that in Mitchell Arms,

because the plaintiff actually retained possession of its

property—..e., the firearms at issue—the “only affected

interest was the right to sell imported assault weapons

in the United States, which existed only by virtue of a

revocable federal permit to do so.” Acceptance’s Br.

11-12. In contrast, according to Acceptance, it is not

complaining of the loss of the right in a particular use

of its property—i.e., the right to sell its property—but

rather the actual loss of the property itself—i.e., the

entire crop insurance business of American Growers.

12a

Responding, the government argues that the Court

of Federal Claims correctly found no cognizable

property interest. The government points out that

American Growers’ insurance policies were at all times

subject to, and governed by, the pertinent FCIC

regulatory scheme, which provides the RMA with the

authority to reject certain proposed transactions. The

government argues that, as a result, the court

correctly ruled that no taking could occur because the

“taking alleged relates to a right to exclude” that

Acceptance never possessed—namely, “the right to

exclude the Government from reviewing sales of crop

insurance policies.” Gov't Br. 22-23. Additionally,

according to the government, the court correctly held

that, although the government may have precluded

Acceptance from realizing a business expectation by

preventing the proposed sale, that expectation was

entirely dependent upon the RMA’s approval of the

sale.*

As the first step in our analysis, we must identify

what, if anything, was the subject of the alleged

taking. See Branch v. United States, 69 F.3d 1571,

1575 (Fed. Cir. 1995) (“In analyzing a takings claim, a

court must first determine what was taken.”). As just

noted, in its. briefing on appeal Acceptance

characterizes the alleged taking as consisting of

several distinct actions viewed in concert. We have

* Both parties make arguments about whether the Court of

Federal Claims correctly dismissed Acceptance’s claim based on

the Omnia Commercial line of cases. Because we hold that

Acceptance failed to assert a cognizable property interest, we do

not reach those arguments.

13a

stated, however, that such a “characterization .. . is

too broad” because “it does not pinpoint what step in

the sequence of events . . . constituted conduct that the

government could not engage in without paying

compensation.” Id. (rejecting the plaintiff's

characterization of the alleged “taking,” which

consisted of several distinct events); see, e.g., Kitt v.

United States, 277 F.3d 1330, 1336 (Fed. Cir. 2002)

(stating that analysis of a takings claim requires

identifying the precise governmental action that is the

subject of the claim); Creppel v. United States, 41 F.3d

627, 634 (Fed. Cir. 1994) (*[T]his court must determine

when the events fixing any potential Government

liability [for a taking] occurred.”). Notwithstanding the

arguments in its brief, Acceptance’s First Amended

Complaint and statements to the court pinpoint the

precise action that it contends constituted conduct the

government could not engage in without paying

compensation. That action was the RMA’s rejection of

the proposed sale to Rain & Hail of American Growers’

portfolio of insurance policies.

Looking to the complaint, as we must when

reviewing a dismissal pursuant to RCFC 12(bX6),

Acceptance consistently focuses on the RMA’s rejection

of the proposed sale. See generally Compl. {4 21—30.

Specifically, Acceptance states: “The RMA exercised its

regulatory authority in rejecting the proposed Rain

and Hail/Acceptance transaction, rendering valueless

American Growers’ insurance assets .. . .,” Compl.

{ 21; “Acceptance held a reasonable investment backed

expectation that the RMA would approve the proposed

Rain and Hail/Acceptance transaction,” id. { 23.

Moreover, in the paragraph that summarizes its

takings claim, Acceptance asserts that “[w]hen the

RMA . . . rejected the proposed Rain and

l4a

Hail/Acceptance transaction .. . it effected a taking of

Acceptance’s property.” Id. { 24. Indeed, except for a

solitary paragraph in the “Facts” section, which merely

provides additional background about the RMA’s later

actions, see id. { 18, Acceptance’s First Amended

Complaint focuses exclusively on the RMA’s rejection

of the proposed sale to Rain & Hail as the alleged

taking.

Moreover, at oral argument—not only in this

appeal, but in the previous appeal relating to the same

takings claim, see Remand Decision—Acceptance

made it clear that it alleges a taking occurred when

the RMA rejected the proposed sale. In the previous

appeal, because the court was skeptical about whether

Acceptance had in fact brought a takings claim, the

court asked “[c]an you help me identify the taking

here?” See Oral Arg., Aug. 8, 2007, 1:01-1:30,

available at http-://oralarguments.cafc.uscourts.gov/

mp3/ 2007-1127.mp3. Responding, Acceptance stated

that it “asserts a Fifth Amendment takings claim

based _on the government’s action in preventing

Acceptance from selling its in-force crop insurance

business and other insurance related assets .. . .” Id.

(emphasis added). When asked to be more specific,

Acceptance reiterated that the alleged taking occurred

“[wlhen fit] wanted to sell its in-force insurance

policies to Rain & Hail,” but was prevented from doing

so by the RMA. See id. at 2:07—14. In fact, Acceptance

pinpointed the RMA’s action as the alleged taking two

other times during the same oral argument. See id. at

3:34—46 (“As a consequence of the RMA .. . saying [it]

would not authorize or approve of the requested

transaction.”); id. at 4:40—5:05 (“It is the regulatory

action of denying the sale .. . .”). At the same time,

Acceptance was consistent during oral argument in

15a

this appeal, emphasizing that a taking allegedly

occurred when the RMA rejected the proposed sale of

American Growers’ portfolio. See, e.g., Oral Arg., Aug.

5, 2009, 6:04-6:16, available at http://oralarguments

.cafc.uscourts.gov/mp3/2009-5015.mp3 (“The taking is

the frustration of saying we will not approve the sale,

.-.. ); id. at 7:45-8:00 (“Court: They did not take that

property. Acceptance: They certainly did your

Honor... . By saying to Acceptance, you may not sell

those policies to Rain & Hail.”).°

In short, the action that allegedly constituted

conduct that the government could not engage in

without paying compensation was the RMA’s rejection

of the proposed sale to Rain & Hail of American

Growers insurance policy portfolio. We therefore must

determine what interest, if any, was affected when

that action occurred and whether Acceptance

possessed a legally cognizable Fifth Amendment

property right in that interest.

The Court of Federal Claims determined that the

interest that was affected by the RMA’s action was

Acceptance’s interest in selling American Growers’

crop insurance policies to Rain & Hail. See Dismissal

Order, 84 Fed. Cl. at 116. It also determined that such

interest was not a legally cognizable property interest

for purposes of the Fifth Amendment. See id. at

° Identifying the alleged “taking” as the RMA’s rejection of the

proposed sale is consistent with Acceptance’s $21.5 million request

for damages, which was the value of the proposed sale rejected by

the RMA. See Compl. {7 10, 12, 27.

16a

116—17. We agree with the court on both counts. The

first point requires little discussion. Plainly, what the

RMA’s action affected was Acceptance’s ability to

freely sell American Growers’ insurance portfolio to

Rain & Hail. The critical question is whether this was

a legally cognizable property interest.

It is well settled that “existing rules and

understandings’ and ‘background principles’ derived

from an independent source, such as state, federal, or

common law, define the dimensions of the requisite

property rights for purposes of establishing a

cognizable taking.” Conti, 291 F.3d at 1340; see Lucas,

505 U.S. at 1029-30; Am. Pelagic Fishing, 379 F.3d at

1376 (“We determine whether an asserted right is one

of the rights in the bundle of sticks of property rights

that inheres in a res by looking to ‘existing rules or

understandings’ and ‘background principles’ derived

from an independent source such as state, federal, or

common law.” (quoting Lucas, 505 U.S. at 1030)).

These existing rules often define “the citizen’s relation

to the physical thing,” which may include the right to

possess, use, and dispose of the property at issue. See,

e.g., United States v. Gen. Motors Corp., 323 U.S. 373,

378 (1945) (explaining that the Fifth Amendment is

not concerned “with other collateral interests which

may be incident to. . . ownership”); Conti, 291 F.3d at

1340.

Under the “background principles” and rules

existing when Acceptance entered into the crop

insurance business, Acceptance could not freely

transfer the policies at issue. Rather, such action was

subject to the RMA’s approval. Therefore, Acceptance

did not possess a cognizable Fifth Amendment

property interest in freely selling American Growers’

17a

portfolio of insurance policies to Rain & Hail. See, e.g.,

Am. Pelagic Fishing, 379 F.3d at 1381 (“Because the

right to use . . . was not inherent in its ownership of

the [property], [but instead was totally dependent

upon the regulatory scheme,] American Pelagic did not

suffer the loss of a property interest ... when its...

permits were revoked.”); Conti, 291 F.3d at 1342

(affirming dismissal for failure to state a claim because

“(tlhe absence of crucial indicia of a property right,

[such as the right to sell, assign, or otherwise

transfer,] coupled with the government’s irrefutable

retention of the right to suspend, revoke, or modify

[the plaintiffs] permit, compels the conclusion that”

there was no cognizable property right).

As a general matter, we have no reason to assume

that an insurance company, such as American

Growers, does not have a property right in the

contracts of insurance (the policies) it sells. Similarly,

we have no reason to assume that such property right

does not include the common law right to sell or assign

i*s interest in the contracts. However, be that as it

aiay, by voluntarily entering into the federally

regulated crop insurance business, Acceptance

relinquished its right to freely transfer American

Growers’ insurance policies, in exchange for the

benefits of the crop insurance program, such as being

reinsured by the government for certain losses. See,

e.g., Am. Pelagic Fishing, 379 F.3d at 1379 (“Because

it was already in place by the time [the plaintiff]

purchased the Atlantic Star, the [regulatory scheme]

was an ‘existing rule’ or ‘background principle [ |’ of

federal law that inhered in [the plaintiffs] title to the

vessel.” (quoting Lucas, 505 U.S. at 1029-30)).

Accordingly, because the RMA had the authority to

deny the sale of the policies at issue, Acceptance,

18a

through American Growers, did not possess the

unfettered right to sell or otherwise transfer the

policies, thus precluding the existence of a cognizable

property interest. See, e.g.. Am. Pelagic Fishing, 379

F.3d at 1374 (rejecting an alleged property interest in

permits and authorization letters because the

government retained the right to deny or sanction

those permits and letters); Conti, 291 F.3d at 1341-42

(finding no cognizable property interest in a fishing

permit because the plaintiff did not have “[t)he right| ]

to sell, assign, or otherwise transfer” the permit and

“the government at all times retained the right to

revoke, suspend, or modify the permit”). In other

words, when the RMA decided to disapprove of the sale

to Rain & Hail, there was no right to freely alienate

the policies extant in Acceptance/American Growers

with which that decision interfered. Essentially,

Acceptance asks us to recognize a cognizable property

night in a decision by the RMA not to exercise its

authority to reject the sale of insurance policies subject

to the crop insurance regulatory scheme. We decline to

do that. See Conti, 291 F.3d at 1342 n.5 (finding no

cognizable property right “in the government’s

discretionary decision not to exercise its explicitly

granted authority to revoke, suspend, or modify the

permit” (citing Bowen v. Public Agencies Opposed to

Soc. Sec. Entrapment, 447 U.S. 41, 55 (1986))). Even

assuming that the RMA had previously approved of

other similar transactions, any expectation that the

RMA would approve of future transactions does not

rise to the level of a cognizable property interest

because simply “enjoying a use of .. . property that the

government chose not to disturb,” although could have,

does “not equate to a cognizable property interest.”

Am. Pelagic Fishing, 379 F.3d at 1377 (“[T}here is a

distinction between simply not being disturbed in the

19a

particular use of one’s property and having the nght to

that use of the property. Clearly, in order for there to

be a cognizable property interest sufficient to support

a takings claim, the latter must be true.”).

Acceptance argues, however, that because its

physical property—specifically, American

Growers—was actually “taken,” it did suffer a taking.

According to Acceptance, American Pelagic Fishing,

Conti, and Mitchell Arms are_ therefore

distinguishable. In each of those cases, Acceptance

urges, the plaintiff retained physical possession of the

property in question and was only prevented from

using the property in a particular manner—e.g.,

selling the property. We disagree. When the RMA

rejected the proposed sale of American Growers’

policies to Rain & Hail, the government did not

actually “take” American Growers. Rather, Acceptance

still maintained possession of American Growers and

held the same property interest as it had prior to the

RMA’s rejection—a property interest that included

having American Growers subject to the coverage and

capital requirements of the pertinent crop insurance

regulations. Put another way, when the RMA rejected

the proposed sale, Acceptance possessed no more or no

less of a property interest in American Growers than

it did prior to the RMA’s rejection.

In sum, contrary to Acceptance’s arguments, when

the RMA rejected the proposed sale, it did not actually

take American Growers’ insurance policy portfolio.

Rather, Acceptance, through its ownership of

American Growers, retained possession of the polices,

but was barred from selling them to a particular

buyer, Rain & Hail. As a result, it was prevented from

realizing a business expectation. Under these

20a

circumstances, Acceptance’s takings claim is not

distinguishable from our decisions in American Pelagic

Fishing, Conti, and Mitchell Arms, where physical

property was retained but a business expectation was

frustrated.

CONCLUSION

For the foregoing reasons, Acceptance did not have

a cognizable property interest for Fifth Amendment

purposes in the ability to freely transfer American

Growers’ portfolio of insurance policies. Thus, there

was no cognizable property interest that could be

“taken” when the RMA rejected the proposed sale to

Rain & Hail. We thus affirm the decision of the Court

of Federal Claims that dismissed Acceptance’s takings

claim pursuant to RCFC 12(b)\(6). Because we have

ruled that Acceptance failed to allege a cognizable

property interest, we do not need to address the

parties’ arguments relating to the Court of Federal

Claims’ alternative rationale under the Omnia

Commercial line of cases for dismissing Acceptance’s

claim.

AFFIRMED

2la

APPENDIX B

In the United States Court of Federal Claims

No. 03-2794

(Filed: September 25, 2008)

ACCEPTANCE INSURANCE

COMPANIES INC.,

Plaintiff,

THE UNITED STATES,

)

v. )

)

Defendant. )

)

Fifth Amendment; Regulatory Taking Claim;

Proposed Sale of Crop Insurance Policies From

One Private Party to Another; No Legally

Cognizable Property Interest; Omnia Line of

Cases; Rule 12(bX6).

Lewis S. Wiener, with whom were Ronald R. Massumi

and G. Brendan Ballard, Sutherland, Asbill &

Brennan LLP, Washington, D.C., Patrick Griffin,

Kutak Rock, LLP, Omaha, Nebraska, Of Counsel, for

Plaintiff.

22a

Michael N. O’Conneill, with whom were Gregory G.

Katsas, Assistant Attorney General, Jeanne E.

Davidson, Director, and Mark A. Melnick, Assistant

Director, United States Department of Justice,

Commercial Litigation Branch, Civil Division,

Washington, D.C., Kimberley E. Arrigo, USS.

Department of Agriculture, Of Counsel, for Defendant.

OPINION AND ORDER

WHEELER, Judge.

In this Fifth Amendment takings case, Plaintiff

Acceptance Insurance Companies, Inc. (“Acceptance”)

seeks just compensation for damages resulting from

the actions of the Risk Management Agency (“RMA”)

in blocking the proposed sale of certain crop insurance

policies and other tangible and intangible insurance

assets to a private third party purchaser. This case is

before the Court on Defendant’s motion under Rule

12(bX6) of the Court of Federal Claims (“RCFC”) to

dismiss for failure to state a claim upon which relief

may be granted. For the reasons stated below, the

Court finds that Plaintiff has failed to state an

actionable claim, and accordingly, Defendant’s motion

to dismiss is GRANTED.

23a

Bac und’

Acceptance, a publicly-traded insurance holding

company based in Nebraska, alleges that the United

States, through the regulatory actions of the RMA,’

effected a taking of Plaintiffs property by blocking the

proposed sale of certain of its crop insurance assets to

a private third party purchaser. Am. Compl. at { 24.

During the time relevant to this dispute,

Acceptance held a wholly-owned subsidiary, American

Growers Insurance Company (“American Growers”),

through which Acceptance engaged in the crop

insurance and property and casualty insurance

businesses. See id. at 4 7. American Growers was in

the business of underwriting a substantial number of

insurance policies within the federal crop insurance

' The facts recited herein are taken from the parties’ briefs on

Defendant’s April 30, 2008 supplemental motion to dismiss and

Plaintiff's amended complaint, filed on April 11, 2005. The Court

is satisfied that the material facts necessary to decide the issue

presented are not in dispute.

* Congress created the RMA within the U.S. Department of

Agriculture (“USDA”) in 1996 to supervise the already existing

Federal Crop Insurance Corporation (“FCIC”). See 7 U.S.C. § 6933

(2006). Congress created the FCIC in 1938 through the Federal

Crop Insurance Act (“FCIA”), 7 U.S.C. §§ 1501 et seq., to regulate

and re-insure the nation’s crop insurance industry, by providing

reinsurance to private insurers offering crop insurance to farmers.

See 7 U.S.C. § 1503 (2006); Compl. at 1] 4, 6. The reinsurance

relationship between the FCIC and private crop insurance

companies is governed by a contract referred to as the Standard

Reinsurance Agreement (“SRA”). Compl. at 4 6. The FCIC is a

wholly-owned government corporation that, like the RMA, exists

within the USDA. See Tex. Peanut Farmers v. United States, 409

F.3d 1370, 1372 (Fed. Cir. 2005).

24a

program, as well as crop insurance policies pursuant

to state insurance laws that are not a part of the

federal crop insurance program. Id. As a private

insurance company reinsured by the FCIC, American

Growers was regulated by the FCIC and was required

to, among other things, use the coverage levels, prices,

premium rates, and transitional yields determined by

the FCIC. Id. at { 8.

In November 2002, American Growers announced

that it had suffered a $130 million loss in the third

quarter. Pl.’s Resp. at 3, June 20, 2008. As a result,

American Growers’ policyholder surplus fell far below

the minimum amount required by the state insurance

regulator, the Nebraska Department of Insurance

(“NDOI”). Id. In order to remedy this situation,

Acceptance, on November 18, 2002, entered into a

non-binding letter of intent with Rain and Hail, LLC

(“Rain and Hail”) detailing the terms of a proposed

sale of most of Acceptance’s “crop insurance assets.”

Am. Compl. at { 10. Although structured as a sale of

assets, the proposed transaction was in fact a sale by

Acceptance of American Growers. Id. at { 11.

Generally, Rain and Hail agreed to purchase this

property from Acceptance for a fair market value

determined to be not less than $21.5 million. Id. at

GW 10, 12.

After Acceptance and Rain and Hail executed the

letter of intent, on or about November 20, 2002, Rain

and Hail’s president and other representatives met

with RMA officials to discuss the terms of the proposed

sale. Id. at { 1-4. Shortly thereafter, however, the deal

began to fall apart. Plaintiff alleges that on November

22, 2002, RMA administrator Ross Davidson advised

Acceptance and Rain and Hail that the RMA would not

25a

approve the proposed transaction. Id. at J 15. Plaintiff

asserts that Mr. Davidson rejected the transaction

because it would be detrimental to the interests of

farmers and taxpayers. Id. at { 16.

After the RMA’s rejection of the sale on the terms

proposed, Rain and Hail ultimately determined not to

purchase American Growers’ policies. Plaintiff alleges

that absent the exercise of Mr. Davidson’s regulatory

authority to reject the proposed sale, the transaction

would have taken place and Acceptance would have

received fair market value for its property. Id. at { 17.

Thus, according to Plaintiff, the RMA essentially

rendered Acceptance’s property worthless through its

action in rejecting the proposed sale. Id. at ¥ 19.

Moreover, on the same day as the collapse of the

Rain and Hail deal, and in view of American Growers’

already precarious financial position, the NDOI placed

American Growers under supervision, freezing the

business and prohibiting transfer of any crop

insurance policies. Pl.’s Resp. at 4, June 20, 2008. The

RMA continued to control the disposition of American

Growers’ crop insurance portfolio through its ultimate

liquidation, subsequently transferring the crop

insurance policies to other approved crop insurance

providers, including Rain and Hail. Id. Acceptance

received no compensation from the distribution of

these policies. Id.

Acceptance filed its Fifth Amendment takings claim

in this Court on December 12, 2003. The transfer of

Acceptance’s assets, accomplished by the RMA without

compensation to Acceptance, as well as the RMA’s

exercise of control over the crop insurance polices, and

its redistribution of the policies to other private crop

26a

insurers, forms the basis of Plaintiffs regulatory

takings claim. Id.

Defendant filed a motion to dismiss pursuant to

RCFC 12(bX1) or, in the alternative for summary

judgment, which Senior Judge Robert H. Hodges

denied on August 13, 2004. On February 10, 2006,

Defendant filed a renewed motion to dismiss pursuant

to RCFC 12(bX]1) or, in the alternative for summary

judgment. Among other things, Defendant argued that

Congress granted the United States district courts

exclusive jurisdiction over suits challenging the RMA’s

actions concerning the FCIC. Def.’s Mot. To Dismiss at

11, Feb. 10, 2006. Following oral argument, this Court

granted Defendant’s motion and concluded that,

because Congress withdrew this Court’s Tucker Act

jurisdiction over claims against the FCIC, the case

should be transferred to a United States district court

under 28 U.S.C. § 1631. Acceptance Ins. Cos., Inc. v.

United States, 72 Fed. Cl. 299, 305 (2006). This Court

transferred the case to the United States District

Court for the District of Nebraska, which denied

Plaintiffs motion to transfer the case back to this

Court. Acceptance Ins. Cos., Inc. v. United States, No.

8:06CV609, 2006 WL 3538946, at *4 (D. Neb. Dec. 7,

2006). Plaintiff appealed and on October 2, 2007, the

United States Court of Appeals for the Federal Circuit

held that because Plaintiffs suit did not involve the

FCIC, but rather was a suit against the United States,

7 U.S.C. § 1506(d) did not divest this Court of

jurisdiction to hear the case. Acceptance Ins. Cos., Inc.

v. United States, 503 F.3d 1328, 1338 (Fed. Cir. 2007).

The Federal Circuit thus reversed the district court’s

denial of Plaintiffs motion for retransfer and

instructed the district court to transfer the suit back to

this Court. Id. at 1338-39. Defendant then filed the

27a

present motion to dismiss on April 30, 2008. Briefing

on Defendant’s motion was completed on July 7, 2008,

and the Court heard oral argument on July 17, 2008.

Discussion

A. RCFC 12(bX6) Standard of Review

It is well-settled that a complaint should be

dismissed under RCFC 12(bX6) “when the facts

asserted by the claimant do not entitle him to a legal

remedy.” Lindsay v. United States, 295 F.3d 1252,

1257 (Fed. Cir. 2002). When considering a motion to

dismiss for failure to state a claim upon which relief

may be granted, the Court “must accept as true all the

factual allegations ir. the complaint, and [the Court]

must indulge all reasonable inferences in favor of the

non-movant.” Sommers Oil Co. v. United States, 241

F.3d 1375, 1378 (Fed. Cir. 2001) (citations omitted);

see also Huntleigh USA Corp. v. United States, 63

Fed. Cl. 440, 443 (2005). While detailed factual

allegations in the complaint are not necessary, “a

plaintiffs obligation to provide the ‘grounds’ of his

‘entitle{ment] to relief requires more than labels and

conclusions, and a formulaic recitation of the elements

of a cause of action will not do... .” Bell Atl. Corp. v.

Twombly, 127 S.Ct. 1955, 1964-65 (2007) (citations

omitted).

Under the Tucker Act, the Court of Federal Claims

has exclusive jurisdiction to render judgment upon any

claim against the United States for money damages in

excess of $10,000 that is “founded either upon the

Constitution, or any Act of Congress or any regulation

of an executive department, or upon any express or

implied contract with the United States, or for

28a

liquidated or unliquidated damages in cases not

sounding in tort.” 28 U.S.C. 1491(a)(1) (2006). Thus, “a

claim for just compensation under the Takings Clause

must be brought to the Court of Federal Claims in the

first instance, unless Congress had withdrawn the

Tucker Act grant of jurisdiction in the relevant

statute.” E. Enters. v. Apfel, 524 U.S. 498, 520 (1998);

Acceptance, 503 F.3d at 1336. “If there is a taking, the

claim is ‘founded upon the Constitution’ and within the

jurisdiction of the [Court of federal Claims].”

Preseault v. Interstate Commerce Comm’n, 494 U.S. 1,

12 (1990) (quoting United States v. Causby, 328 U.S.

256, 267 (1946)). A takings claim against the United

States may be based on the acts of agents of the

United States, if the authority to carry out those acts

was validly conferred by Congress to the agents and if

those acts are within the constitutional power of

Congress. See Acceptance, 503 F.3d at 1337.

B. Takings Analysis

The Takings Clause of the Fifth Amendment

provides that “private property [shall not] be taken for

public use, without just compensation.” U.S. Const.

amend. V, cl. 4. “The purpose of the takings clause is

to prevent ‘Government from forcing some people alone

to bear public burdens which, in all fairness and

justice, should be borne by the public as a whole.” Air

Pegasus of D.C., Inc. v. United States, 424 F.3d 1206,

1212 (Fed. Cir. 2005) (quoting Penn Cent. Transp. Co.

v. City of N.Y., 438 U.S. 104, 123 (1978)).

The Supreme Court has recognized two kinds of

compensable takings: (1) actual takings, through the

Government’s physical invasion or appropriation of

private property, or (2) regulatory takings, through

29a

government regulations that unduly burden private

property interests. See Huntleigh USA Corp. v. United

States, 525 F.3d 1370, 1378 (Fed. Cir. 2008). In the

present case, Plaintiff has alleged a regulatory taking.

Pl.’s Resp. at 6-7, June 20, 2008 (“When the RMA

prevented Acceptance from selling the book of business

to Rain and Hail, thereby preventing Acceptance from

realizing the value of the business, that act constituted

a regulatory taking of a cognizable property interest.”).

The Federal Circuit has “developed a two-part test

for determining whether ‘fairness and justice’ require

compensation for burdens imposed by a particular

governmental action.” Huntleigh, 525 F.3d at 1377. As

the first step, the court must determine whether the

claimant has established a legally cognizable property

interest, for purposes of the Fifth Amendment. Id.

(citing Am. Pelagic Fishing Co. v. United States, 3'79

F.3d 1363, 1372 (Fed. Cir. 2004)). “[OJnly persons with

a valid property interest at the time of the taking are

entitled to compensation.” Id. (citing Wyatt v. United

States, 271 F.3d 1090, 1096 (Fed. Cir. 2001)); see also

Air Pegasus, 424 F.3d at 1215 (“[A] claimant seeking

compensation from the government for an alleged

taking of private party must, at a minimun, assert

that rts property interest was actually taken by the

government action.”); Yuba Natural Res., Inc. v.

United States, 904 F.2d 1577, 1581 (Fed. Cir. 1990)

(“It is a well settled principle of Fifth Amendment

Taking law, however, that the measure of just

compensation is the fair value of what was taken, and

not the consequential damages the owner suffers as a

result of the taking.”). The Supreme Court has found

the Takings Clause to encompass governmental

encroachments on real property, personal property,

and intangible property interests. See, e.g., Lucas v.

30a

S.C. Coastal Council, 505 U.S. 1003, 1020 (1992)

(government regulation restricting use of beachfront

property); Andrus v. Allard, 444 U.S. 51, 65 (1979)

(government regulation prohibiting sale of Indian

artifacts containing the feathers of endangered birds);

Ruckelshaus v. Monsanto Co., 467 U.S. 986,1003-04

(1984) (government regulation requiring public

disclosure of trade secrets by applicants for pesticide

registrations).

Once the court has identified a valid property

interest, it must determine whether the government

action at issue amounted to a compensable taking of

that property interest. Huntleigh, 525 F.3d at 1378;

Am. Pelagic Fishing, 379 F.3d at 1372. However, if the

claimant fails to demonstrate the existence of a legally

cognizable property interest, the court does not

proceed with this second step. Air Pegasus, 424 F.3d at

1213.

1. Plaintiff Has Not Established a _ Legally

Cognizable Property Interest.

With regard to the first inquiry, “the Constitution

does not itself create or define the scope of ‘property’

interests protected by the Fifth Amendment.” Air

Pegasus, 424 F.3d at 1213. “Instead, ‘existing rules

and understandings’ and ‘background principles’

derived from an independent source, such as state,

federal, or common law, define the dimensions of the

requisite property rights for purposes of establishing

a cognizable taking.” Id. (quoting Maritrans Inc. v.

United States, 342 F.3d 1344, 1352 (Fed. Cir. 2003)).

Although contracts, leases, and other agreements may

be considered property within the meaning of the Fifth

Amendment, the Government’s appropriation of which

3la

may trigger the resulting obligation to pay just

compensation, “not every exercise of governmental

power that interferes with, or frustrates, performance

of a contract constitutes a compensable taking.”

Kearney & Trecker Corp. v. United States, 688 F.2d

780, 783 (Cl. Ct. 1982) (citing Lynch v. United States,

292 U.S. 571, 579 (1934) and Omnia Corp. v. United

States, 261 U.S. 502, 510-11 (1923)).

To explain what constitutes a cognizable Fifth

Amendment property interest, courts have

distinguished between a plaintiffs actual property and

its “collateral interest.” See, e.g., Air Pegasus, 424 F.3d

at 1215; Mitchell Arms, Inc. v. United States, 7 F.3d

212, 217 (Fed. Cir. 1993); Schooner Harbor Ventures

Inc. v. United States, 81 Fed. Cl. 404, 412-13 (2008).

“The Fifth Amendment concerns itself solely with the

‘property,’ i.e. with the owner’s relation as such to the

physical thing and not with the other collateral

interests which may be incident to his ownership.”

Mitchell Arms, 7 F.3d at 217 (quoting United States v.

General Motors Corp., 323 U.S. 373, 378 (1945)).

In Mitchell Arms, the plaintiff asserted that the

Government took its property when it revoked a

permit which would allow the plaintiff to import

semi-automatic rifles into the United States after

plaintiffs purchase of the firearms. 7 F.3d at 213.

Rejecting plaintiff's takings claim, the Federal Circuit

declined to hold that plaintiffs investment-backed

reliance on the issued import permits constituted

“property” within the meaning of the Fifth

Amendment. Id. at 215. Although the Government

“took” from plaintiff the ability to realize an

expectation in the ultimate market disposition of the

rifles, this was a “collateral interest” incident to

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plaintiffs ownership of the rifles. Id. at 217. Such

property, the court held, is not protected by the Fifth

Amendment, since plaintiff retained complete control

over its property. Id. (“[Plaintiff] could have done

anything it wished with the rifles, except import them

into the United States in their original

configuration.”).

In Air Pegasus, the plaintiff alleged a regulatory

taking of its heliport business following the Federal

Aviation Administration’s post-September 11 decision

to ban all commercial air travel within 25 nautical

miles of Washington, D.C., except at a few select

locations. See 424 F.3d at 1209-10. The Federal Circuit

rejected the plaintiffs takings claim, finding that the

plaintiff did not have a cognizable property interest

because it did not actually own any helicopters. Id. at

1215. The Federal Circuit added that the plaintiffs

“economic injury [was] not the result of the

government taking [its] property, but [was] the more

attenuated result of the government’s purported

taking of other people’s property.” Id. This derivative

injury, the Federal Circuit held, could “not form the

basis for a viable takings claim.” Id.

In Schooner, the plaintiffs claimed property

interest consisted of its interest to sell its property to

the Navy for the development of a housing project

without conditions or additional financial burden. 81

Fed. Cl. at 412. Relying on the holdings in Mitchell

Arms and Air Pegasus, the Court of Federal Claims

found the plaintiffs interest to be collateral to its

physical ownership in the property. Id. at 413.

“Whereas, the right to alienate the property is a

cognizable property interest, the right to sell the

property to the government at a particular price and

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without conditions is not a cognizable property interest

which is protected by the Fifth Amendment.” Id. at

414.

Here, Plaintiff has not demonstrated that it has a

protected property right in its crop insurance business,

as required for the Government’s actions to constitute

a compensable taking. Plaintiff asserts a present

property interest in the insurance portfolio and

associated assets that constituted Acceptance’s crop

insurance business, i.e. its book of crop insurance. P1.’s

Resp. at 3, 6, June 20, 2008. Plaintiff claims that its

crop insurance business was the subject of government

regulation when the RMA allegedly prevented

Acceptance from selling the book of business to Rain

and Hail, thereby preventing Acceptance from

realizing the value of the business. Id. at 3, 6-7. This

action, Acceptance argues, constituted a regulatory

taking of a cognizable property interest. Id. at 6-7.

However, following the RMA’s rejection of the Rain

and Hail transaction, Plaintiff retained possession of

the insurance portfolios at issue. In fact, the actions of

the RMA, at best, interfered with Plaintiffs interest in

selling its property to Rain and Hail under the terms

of the proposed, non-binding agreement. The RMA did

not interfere with the property itself. Despite the fact

that Plaintiff was interested in selling its property to

Rain and Hail, and certainly had the right to do so,

this interest is not a compensable property right.

Further, although Rain and Hail did sign a letter of

intent to purchase Plaintiffs crop insurance assets,

this letter was non-binding, and certainly does not

equate to an actual contract between the parties. Thus,

Acceptance’s interest in completing its transaction

with Rain and Hail without any involvement from the

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Government must be characterized as a collateral

interest that is not protected by the Fifth Amendment.

Mitchell Arms, 7 F.3d at 217; Air Pegasus, 424 F.3d at

1215; Schooner, 81 Fed. Cl. at 413-14.

Moreover, when a plaintiff voluntarily enters into

an area which, from the start, is subject to pervasive

government control, its enforceable rights sufficient to

support a takings claim against the United States are

extinguished. See Mitchell Arms, 7 F.3d at 216; Air

Pegasus of D.C., Inc. v. United States, 60 Fed. Cl. 448,

453-54 (2004) (“If a party voluntarily enters into an

area that is subject to pervasive government control,

then a property right that would justify compensation

under the Takings Clause may not exist.”) aff'd 424

F.3d 1206 (Fed. Cir. 2005). As the Federal Circuit has

explained, “[t]he chief and one of the most valuable

characteristics of the bundle of rights commonly called

‘property’ is ‘the right to sole and exclusive possession

— the right to exclude strangers, or for that matter

friends, but especially the Government.” ell

Arms, 7 F.3d at 215 (quoting Hendler v. United States,

952 F.2d 1364, 1374 (Fed. Cir. 1991)). Thus, “[t}he

reason enforceable rights sufficient to support a

taking[s] claim” cannot arise in such an area is that

when a citizen voluntarily enters such an area, the

citizen cannot be said to possess ‘the right to exclude’

because it is impossible for a citizen in an area subject

to government control to possess this right.” Id.

(quoting Hendler, 952 F.2d at 1374).

Although mere participation in a heavily regulated

environment does not bar a plaintiff from showing that

it has a property interest compensable under the Fifth

Amendment, “courts must consider whether the

affected ‘right of use’ is dependent upon the regulatory

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scheme or whether ‘an independent or preexisting

right of use under common law applies.” Page v.

United States, 51 Fed. Cl. 328, 339 (2001) (quoting

Maritrans Inc. v. United States, 40 Fed. Cl. 790, 798

(1998)). If the interest was independent of the

regulatory scheme, courts have found that a

compensable taking has occurred. See, e.g., Cienega

Gardens v. United States, 331 F.3d 1319, 1334 (Fed.

Cir. 2003) (finding that federal statutes preventing the

prepaying of federally subsidized mortgages were a

taking of property despite heavy regulation of the

federal housing program). In contrast, courts have

found property interests to be dependent on a

regulatory scheme when pervasive regulation exists in

the area. See, e.g., Bowen v. Pub. Agencies Opposed to

Soc. Sec. Entrapment, 477 U.S. 41, 55 (1986) (holding

no property interest existed where State of California

voluntarily entered into national socia! security

program for its employees and then was prevented

from terminating its participation due to an act of

Congress); Conti v. United States, 48 Fed. Cl. 532, 540

(2001), aff'd, 291 F.3d 1334 (Fed. Cir. 2002) (finding no

property interest for fisherman whose permit was

altered by a new regulation permitted under existing

statutory scheme).

Acceptance acquired American Growers not long

before the proposed transaction with Rain and Hail.

By doing so, Acceptance voluntarily entered a

regulatory scheme knowing that the FCIC retained its

statutory authority to regulate private crop insurance

companies, pursuant to 7 U.S.C. § 1501. Plaintiff

cannot dispute that its claimed property interest, the

book of crop insurance assets, is subject to the existing

regulatory scheme for the crop reinsurance industry,

as administered by the RMA. Thus, Plaintiff's property

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interest cannot be said to be a property right protected

under the Fifth Amendment takings clause. Mitchell

Arms, 7 F.3d at 216; Air Pegasus, 60 Fed. Cl. at

455-57.

Plaintiff has failed to establish a legally cognizable

property interest, precluding recovery under the Fifth

Amendment. Huntleigh, 525 F.3d at 1377. Accordingly,

the Court need not proceed with the second step in the

takings analysis. Air Pegasus, 424 F.3d at 1213.

2. The Omnia Line of Cases Precludes

Plaintiffs Claim.

Even assuming Plaintiff could establish a property

interest in its crop insurance portfolio, the line of

serge commencing with Omnia Commercial Co.,

Inc. United States, 261 U.S. 502 (1923), also

i Plaintiffs takings claim. As Defendant

asserts in its motion, the Supreme Court, beginning

with Omnia, has held that a compensable taking can

never occur in cases where government actions caused

the loss of a commercial sale from one private party to

another, but did not actually take the contract in

question. Def.’s Mot. at 5, Apr. 30, 2008. In Omnia, the

plaintiff possessed a contractual right to purchase a

large quantity of steel from the seller at a low fixed

price. However, before the seller could deliver any steel

to the plaintiff, the Government requisitioned the

seller’s entire production of steel plate for the year

1918, because of need for the war effort, and directed

the seller not to fulfill its contract with the plaintiff.

Omnia, 261 U.S. at 507. The Supreme Court affirmed

the decision of the Court of Claims rejecting the

plaintiffs claim that the Government’s action of

requisitioning the seller’s steel had effected a taking

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for public use of its property in the contract. Id. at 508,

514. While acknowledging the plaintiffs property

interest in its contract, within the meaning of the Fifth

Amendment, the Supreme Court nonetheless held that

the plaintiff's loss was merely “consequential” and one

for which takings law afforded no remedy. Id. at

510-11. Although the plaintiff had suffered an

undeniable loss, the Supreme Court declared that

“destruction of, or injury to, property is frequently

accomplished without a ‘taking’ in the constitutional

sense.” Id. at 508. The Supreme Court added that

there are many laws and governmental regulations

that injuriously affect the value of private property but

for which no remedy is afforded. Id. at 508 (“If, under

any power a contract or other property is taken for

public use, the government is liable; but, if injured or

destroyed by lawful action, without a taking, the

government is not liable.”) In rejecting Omnia’s

takings claim, the Court noted that “[flrustration and

appropriation are essentially different things.” Id. at

513.

This principle has remain unchanged, and has been

affirmed in a wide variety of takings claims where the

Government, acting in either a regulatory or

commercial capacity, has caused the loss of the

benefits of a contract or frustrated business

expectations. In each of these cases, the plaintiff failed

to receive its expected compensation from private

agreements as a results of the Government’s actions.

See Air Pegasus, 424 F.3d 1209-10; NL Indus. v.

United States, 839 F.2d 1578, 1579 (Fed. Cir. 1988);

Kearney & Trecker, 688 F.2d 780 (Ct. Cl. 1982).

In Air Pegasus, the Federal Circuit characterized

the Omnia court’s view on takings as finding a

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“significant difference between an injury to one’s

property interest and a taking of one’s property

interest.” 424 F.3d at 1216. Similarly, in NL Indus.

the Federal Circuit rejected the takings claim of a

spent nuclear fuel processor whose significant

investment in developing spent nuclear fuel rod

transport vehicles for a reprocessing facility was

rendered valueless after the Government banned the

operation of the facility. 839 F.2d at 1579. The Federal

Circuit agreed with the trial court that Omnia by itself

was authority enough to support its holding that

frustration of a business by loss of a customer was not

a taking. Id. at 1579.

Again, in Kearney & Trecker, the Court of Claims

relied on Omnia to find that the Government did not

appropriate the plaintiff seller’s contract with the third

party buyer for a made-to-order aerodefense machine

by issuing a directive that required the plaintiff to

expedite delivery for the Air Force’s order of the same

machine. 688 F.2d at 783. The court rejected the

plaintiffs argument that”[w]hat was appropriated was

not just the [machine], but (the plaintiff's) investment

backed expectation to produce and deliver a [machine]

to [the buyer] at a date certain.” Id. at 782. The court

held that the frustration of the plaintiffs

“expectations” was not compensable, because the

Government had not appropriated any of the nights the

plaintiff had under its contract, but only made it

impossible for the plaintiff to perform it. Id. at 782-83.

“Omnia makes it clear that the mere frustration of a

contract resulting from the government’s exercise of its

power of eminent domain is not a ‘taking’ for which

just compensation must be awarded.” Id. at 783.

39a

More recently, in Palmyra Pac. Seafoods, L.L.C. v.

United States, the Court of Federal Claims held that

government regulations designating an area as a

National Wildlife Refuge and prohibiting commercial

fishing within did not constitute a taking of the

plaintiffs’ commercial fishing licenses. 80 Fed. Cl. 228,

233 (2008). At most, the plaintiffs’ claim amounted to

a frustration of purpose, which the court found not to

be compensable under the principles laid out in

Omnia. Id.

As Acceptance and Rain and Hail only had a letter

of intent to enter into an agreement and not an actual

contract, Plaintiffs takings claim is less compelling

than those of the plaintiffs in Omnia, Air Pegasus, and

Kearney & Trecker, all of whose existing contracts

were directly impacted by the government’s actions.

Under the same reasoning as those cases, however,

Plaintiffs claim must also be rejected because RMA’s

alleged action in rejecting or failing to approve the

sale, did not effectuate an immediate taking of the crop

insurance assets in question. Rather, at most, the

government's actions frustrated Plaintiffs business

expectations, which does not amount to a compensable

taking under the Omnia line of cases. Omnia, 261 U.S.

at 513; Kearney & Trecker, 688 F.2d at 783; Palmyra,

80 Fed. Cl. at 233.

Plaintiff makes several unsuccessful attempts to

distinguish Omnia and its progeny. First, Plaintiff

argues that the Omnia cases are distinguishable on

the basis that the plaintiffs in those cases possessed a

mere contract expectancy rather than a present

property interest. Pl.’s Resp. at 8, June 20, 2008.

However, the Supreme Court in Omnia made no

distinction between a mere contractual expectancy and

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a present property interest and, in fact, found that the

plaintiff did have a property interest. 261 U.S. at 508

(‘The contract in question was property within the

meaning of the Fifth Amendment.”). Further, as

Defendant notes in its reply brief, Acceptance is in a

weaker position than the plaintiffs in the Omnia line

of cases. See Def.’s Reply. at 2, July 7, 2008.

Specifically, the plaintiffs in the Omnia line of cases

had binding contracts or leases interfered with by

governmental regulation or action while Acceptance

only had a non-binding letter of intent with Rain and

Hail. Id. Even in the few cases Plaintiff relies on for

support, including Tulare Lake Basin Water Storage

Dist. v. United States, 49 Fed. Cl. 313 (2001), and

Cienaga Gardens, 331 F.3d 1319, the plaintiffs had

contractually-conferred rights sufficient to meet the

Fifth Amendment property interest requirement and,

as a result, the plaintiffs in both cases succeeded in

their takings claims. Cienaga Gardens, 331 F.3d at

1335 (holding that the legislation was “aimed at the

contract rights themselves in order to nullify them”);

Tulare Lake, 49 Fed. Cl. at 324 (holding that water use

restrictions imposed by the Government effected a

taking of property of water users who had contract

rights entitling them to the use of a specified quantity

of water). Moreover, Plaintiff has not shown that the

Government appropriated the benefits of Acceptance’s

crop insurance assets for itself, in contrast to Cienega

Gardens and Tulare Lake, where the courts upheld the

plaintiffs’ takings claims. Cienaga Gardens, 331 F.3d

at 1335 (“Where Congress’ actions have the effect of

‘keep[ing] [the contract] alive for the use of the

government’ rather than ‘bring[ing] the contract to an

end,’ a court should conclude that there has been a

taking.”) (comparing Omnia, 261 U.S. at 213); Tulare

Lake, 49 Fed. Cl. at 317-18 (“[T] he contract holder can

4la

recover only if the government has actually

appropriated the contract itself, i.e., stepped into the

shoes of the contracting party and assumed the rights

and responsibilities under the contract.”).

Second, Plaintiff asserts that Omnia precludes

takings claims where the injury to contractual

expectations is only consequential or derivative of an

action taken against third parties or of general

applicability. Pl.’s Resp. at 11, June 20, 2008.

Therefore, Plaintiff contends, if the action is

specifically directed at a plaintiff, rather than at a

third party, then Omnia does not preclude the plaintiff

from alleging a cognizable takings claim even if that

claim is premised solely on a contractual expectancy.

Id. As such, Plaintiff argues that even if Acceptance’s

takings claim was not premised on its present property

interests in its crop insurance business, it still has a

potential takings claim based on the RMA’s action

directed specifically against Acceptance by preventing

the sale to Rain and Hail. Id. The Court is not

persuaded by Plaintiffs attempts to distinguish Omnia

and the related cases where the plaintiffs suffered a

loss of business as a result of the government’s

regulation of a third party. As Defendant notes in its

Reply, the Federal Circuit recently rejected a similar

attempt to distinguish Omnia in Huntleigh, 525 F.3d

at 1381. Def.’s Reply at 7-8, July 7, 2008. In Huntleigh,

the Federal Circuit held that, because the plaintiff in

Omnia had an existing contractual relationship at

which the Government squarely directed its actions,

the facts in Omnia were more favorable to the plaintiff

than the facts in that case. Huntileigh, 525 F.3d at

1381. The Federal Circuit added that, in Omnia

although the Government requisitioned the steel plate

that was meant for Omnia and directed the seller not

42a

to comply with its contract, there was no taking

because this lawful government action did not

appropriate the contract but orly rendered

performance of the contract impossible. Id. (citing 261

U.S. at 507, 511). In this case, no contract existed

between Acceptance and Rain and Hail at the time of

the RMA’s actions. Moreover, the Government’s

actions at most resulted in the frustration of

Acceptance’s business interest in trying to revive its

failing business, but did not appropriate any of

Acceptance’s crop insurance assets, and thus, did not

constitute a taking of Plaintiffs property.

C. RMA’s Authority to Approve or Reject

Transactions.

Defendant also argues that the RMA has no

authority to approve or reject the sale of assets from

one insurer to another. Def.’s Mot. Dismiss at 8, Apr.

30, 2008. Thus, Defendant states the Court need not

resolve the factual dispute regarding whether RMA

rejected the Rain and Hail transaction because to the

extent that it did, the RMA acted outside its authority

and such action cannot amount to a taking. Id. at 9-10.

Given that Plaintiffs property interest cannot be said

to be a property right protected under the Fifth

Amendment takings clause, the Court need not

consider this position.

Conclusion

Based upon the foregoing, Defendant’s motion to

dismiss under RCFC 12(bX6) is GRANTED. The Clerk

is directed to dismiss Plaintiffs complaint with

prejudice.

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IT IS SO ORDERED.

s/Thomas C. Wheeler

THOMAS C. WHEELER

Judge

44a

APPENDIX C

United States Code

Title 7. Agriculture

Chapter 36. Crop Insurance

Subchapter I. Federal Crop Insurance Act

7 U.S.C. § 1501. Short title and application of

other provisions

This subchapter may be cited as the “Federal Crop

Insurance Act”. Except as otherwise expressly

provided the provisions in Titles I to IV, inclusive,

shall not apply with respect to this subchapter, and

the term “Act” wherever it appears in such titles shall

not be construed to include this subchapter.

7 U.S.C. § 1502. Purpose; definitions; protection

of information; relation to other laws

(a) Purpose

It is the purpose of this subchapter to promote the

national welfare by improving the economic stability of

agriculture through a sound system of crop insurance

and providing the means for the research and

experience helpful in devising and establishing such

insurance.

(b) Definitions

As used in this subchapter:

(1) Additional coverage

The term “additional coverage” means a plan of

crop insurance coverage providing a level of

coverage greater than the level available under

catastrophic risk protection.

45a

(2) Approved insurance provider

The term “approved insurance provider” means a

private insurance provider that has been approved

by the Corporation to provide insurance coverage to

producers participating in the Federal crop

insurance program established under this

subchapter.

(3) Board

The term “Board” means the Board of Directors of

the Corporation established under section 1505(a)

of this title.

(4) Corporation

The term “Corporation” means the Federal Crop

Insurance Corporation established under section

1503 of this title.

(5) Department

The term “Department” means the United States

Department of Agriculture.

(6) Loss ratio

The term “loss ratio” means the ratio of all sums

paid by the Corporation as indemnities under any

eligible crop insurance policy to that portion of the

premium designated for anticipated losses and a

reasonable reserve, other than that portion of the

premium designated for operating and

administrative expenses.

(7) Organic crop

The term “organic crop” means an agricultural

commodity that is organically produced consistent

with section 6502 of this title.

(8) Secretary

The term “Secretary” means the Secretary of

Agriculture.

(9) Transitional yield

The term “transitional yield” means the maximum

average production per acre or equivalent measure

46a

that is assigned to acreage for a crop year by the

Corporation in accordance with the regulations of

the Corporation whenever the producer fails—

(A) to certify that acceptable documentation of

production and acreage for the crop year is in

the possession of the producer; or

(B) to present the acceptable documentation on

the demand of the Corporation or an insurance

company reinsured by the Corporation.

(1) General prohibition against disclosure

Except as provided in paragraph (2), the Secretary,

any other officer or employee of the Department or

an agency thereof, an approved insurance provider

and its employees and contractors, and any other

person may not disclose to the public information

furnished by a producer under this subchapter.

(2) Authorized disclosure

(A) Disclosure in statistical or aggregate form

Information described in paragraph (1) may be

disclosed to the public if the information has

been transformed into a statistical or aggregate

form that does not allow the identification of the

person who supplied particular information.

(B) Consent of producer

A producer may consent to the disclosure of

information described in paragraph (1). The

participation of the producer in, and the receipt

of any benefit by the producer under, this

subchapter or any other program administered

by the Secretary may not be conditioned on the

producer providing consent under this

paragraph.

(3) Violations; penalties

Section 2276(c) of this title shall apply with respect

to the release of information collected in any

47a

manner or for any purpose prohibited by this

subsection.

(d) Relation to other laws

(1) Terms and conditions of policies and plans

The terms and conditions of any policy or plan of

insurance offered under this subchapter that is

reinsured by the Corporation shall not-

(A) be subject to the jurisdiction of the

Commodity Futures Trading Commission or the

Securities and Exchange Commission; or

(B) be considered to be accounts, agreements

(including any transaction that is of the

character of, or is commonly known to the trade

as, an “option”, “privilege”, “indemnity”, “bid”,

“offer”, “put”, “call”, “advance guaranty”, or

“decline guaranty”), or transactions involving

contracts of sale of a commodity for future

delivery, traded or executed on a contract

market for the purposes of the Commodity

Exchange Act (7 U.S.C. 1 et seq.).

(2) Effect on CFTC and Commodity Exchange Act

Nothing in this subchapter affects the jurisdiction

of the Commodity Futures Trading Commission or

the applicability of the Commodity Exchange Act (7

U.S.C. 1 et seq.) to any transaction conducted on a

contract market under that Act by an approved

insurance provider to offset the approved insurance

provider’s risk under a plan or policy of insurance

under this subchapter.

7 U.S.C. § 1503. Federal Crop Insurance

Corporation; creation; offices

To carry out the purposes of this subchapter, there is

hereby created as an agency of and within the

Department a body corporate with the name “Federal

48a

Crop Insurance Corporation”. The principal office of

the Corporation shall be located in the District of

Columbia, but there may be established agencies or

branch offices elsewhere in the United States under

rules and regulations prescribed by the Board.

7 U.S.C. § 1504. Capital stock of Corporation

(a) Subscription by United States

The Corporation shall have a capital stock of

$500,000,000 subscribed by the United States of

America, payment for which shall, with the approval

of the Secretary, be subject to call in whole or in part

by the Board.

(b) Appropriations

There is authorized to be appropriated such sums as

are necessary for the purpose of subscribing to the

capital stock of the Corporation.

Receipts for payments by the United States of America

for or on account of such stock shall be issued by the

Corporation to the Secretary of the Treasury and shall

be evidence of the stock ownership by the United

States of America.

(d) Cancellation of receipts; nonliability of Corporation

Within thirty days after September 26, 1980, the

Secretary of the Treasury shall cancel, without

consideration, receipts for payments for or on account

of the stock of the Corporation outstanding on

September 26, 1980, and such receipts shall cease to

be liabilities of the Corporation.

7 U.S.C, § 1504a. Capitalization of Corporation

The payment for capital stock in the Federal Crop

Insurance Corporation shall be effected by transfer of

funds on the books of the Treasury Department to the

credit of the Corporation.

49a

7 U.S.C. § 15605. Management of Corporation

(a) Board of Directors

(1) Establishment

‘The management of the Corporation shall be vested

in a Board of Directors subject to the general

supervision of the Secretary.

(2) Composition

The Board shall consist of only the following

members:

(A) The manager of the Corporation, who shall

serve as a nonvoting ex officio member.

(B) The Under Secretary of Agriculture

responsible for the Federal crop insurance

program.

Agriculture (as designated by the Secretary).

(D) The Chief Economist of the Department of

Agriculture.

(E) One person experienced in the crop

insurance business.

(F) One person experienced in reinsurance or

the regulation of insurance.

(G) Four active producers who are policy

holders, are from different geographic areas of

the United States, and represent a cross-

section of agricultural commodities grown in the

United States, including at least one specialty

crop producer.

(3) Appointment of private sector members

The members of the Board described in

subparagraphs (FE), (F), and (G) of paragraph (2)--

(A) shall be appointed by, and hold office at the

pleasure of, the Secretary;

(B) shall not be otherwise employed by the

Federal Government;

50a

terms, as determined by the Secretary; and

(D) shall serve not more than two consecutive

terms.

(4) Chairperson

The Board shall select a member of the Board to

serve as Chairperson.

(b) Vacancies

Vacancies in the Board so long as there shall be four

members in office shall not impair the powers of the

Board to execute the functions of the Corporation, and

four of the members in office shall constitute a quorum

for the transaction of the business of the Board.

The Directors of the Corporation who are employed in

the Department shall receive no additional

compensation for their services as such Directors but

may be allowed necessary traveling and subsistence

expenses when engaged in business of the Corporation,

outside of the District of Columbia. The Directors of

the Corporation who are not employed by the Federal

Government shall be paid such compensation for their

services as Directors as the Secretary shall determine,

but such compensation shall not exceed the daily

equivalent of the rate prescribed for grade GS-18

under section 5332 of Title 5 when actually employed,

and actual necessary traveling and subsistence

expenses, or a per diem allowance in lieu of

subsistence expenses, as authorized by section 5703 of

Title 5 for persons in Government service employed

intermittently, when on the business of the

Corporation away from their homes or regular places

of business.

(d) Manager of Corporation

The manager of the Corporation shall be its chief

executive officer, with such power and authority as

5la

may be conferred by the Board. The manager shall be

appointed by, and hold office at the pleasure of, the

Secretary.

(e) Expert review of policies, plans of insurance, and

related material

(1) Review by experts

The Board shall establish procedures under which

any policy or plan of insurance, as well as any

related material or modification of such a policy or

plan of insurance, to be offered under this

subchapter shall be subject to independent reviews

by persons experienced as actuaries and in

underwriting, as determined by the Board.

(2) Review of Corporation policies and plans

Except as provided in paragraph (3), the Board

shall contract with at least five persons to each

conduct a review of the policy or plan of insurance,

of whom--

(A) not more than one person may be employed

by the Federal Government; and

(B) at least one person must be designated by

approved insurance providers pursuant to

procedures determined by the Board.

(3) Review of private submissions

Ifthe reviews under paragraph (1) cover a policy or

plan of insurance, or any related material or

modification of a .policy or plan of insurance,

submitted under section 1508(h) of this title—

(A) the Board shall contract with at least five

persons to each conduct a review of the policy or

plan of insurance, of whom--

(i) not more than one person may be

employed by the Federal Government; and

(ii) none may be employed by an approved

insurance provider; and

52a

(B) each review must be completed and

submitted to the Board not later than 30 days

prior to the end of the 120-day period described

in section 1508(h\4XD) of this title.

(4) Consideration of reviews

The Board shall include reviews conducted under

this subsection as part of the consideration of any

policy or plan or insurance, or any related material

or modification of a policy or plan of insurance,

Froposed to be offered under this subchapter.

(5) Funding of reviews

Each contract to conduct a review under this

subsection shall be funded from amounts made

available under section 1516(bX2XMAXii) of this

title.

(6) Relation to other authority

The contract authority provided in this subsection

is in addition to any other covtracting authority

that may be exercised by the Board under section

1506(1) of this title.

7 U.S.C. § 1506. General powers

(a) Succession

The Corporation shall have succession in its corporate

name.

(b) Corporate seal

The Corporation may adopt, alter, and use a corporate

seal, which shall be judicially noticed.

The Corporation may purchase or lease and hold such

real and personal property as it deems necessary or

convenient in the transaction of its business, and may

dispose of such property held by it upon such terms as

it deems appropriate.

(d) Suit

53a

Subject to section 1508(j(2MA) of this title, the

Corporation, subject to the provisions of section 1508(j)

of this title, [FN'] may sue and be sued in its corporate

name, but no attachment, injunction, garnishment, or

other similar process, mesne or final, shall be issued

against the Corporation or its property. The district

courts of the United States, including the district

courts of the District of Columbia and of any territory

or possession, shall have exclusive original

jurisdiction, without regard to the amount in

controversy, of all suits brought by or against the

Corporation. The Corporation may intervene in any

court in any suit, action, or proceeding in which it has

an interest. Any suit against the Corporation shall be

brought in the District of Columbia, or in the district

wherein the plaintiff resides or is engaged in business.

(e) Bylaws and regulations

The Corporation may adopt, amend, and repeal

bylaws, rules, and regulations governing the manner

in which its business may be conducted and the powers

granted to it by law may be exercised and enjoyed.

(f) Mails

The Corporation shall be entitled to the use of the

United States mails in the same manner as the other

executive agencies of the Government.

(g) Assistance

The Corporation, with the consent of any board,

commission, independent establishment, or executive

department of the Government, including any field

service thereof, may avail itself of the use of

information, services, facilities, officials, and

employees thereof in carrying out the provisions of this

subchapter.

' So in original.

54a

(h) Collection and sharing of information

(1) Surveys and investigations

The Corporation may conduct surveys and

investigations relating to crop insurance,

agriculture-related risks and losses, and other

issues related to carrying out this subchapter.

(2) Data collection

The Corporation shall assemble data for the

purpose of establishing sound actuarial bases for

insurance on agricultural commodities.

(3) Sharing of records

Notwithstanding section 1502(c) of this title,

records submitted in accordance with this

subchapter and section 7333 of this title shall be

available to agencies and local offices of the

Department, appropriate State and Federal

agencies and divisions, and approved insurance

providers for use in carrying out this subchapter,

such section 7333 of this title, and other

agricultural programs.

(i) Expenditures

The Corporation shall determine the character and

necessity for its expenditures under this subchapter

and the manner in which they shall be incurred,

allowed, and paid, without regard to the provisions of

any other laws governing the expenditure of public

funds and such determinations shall be final and

conclusive upon all other officers of the Government.

(j) Settling claims

The Corporation shall have the authority to make final

and conclusive settlement and adjustment of any claim

by or against the Corporation or a fiscal officer of the

Corporation.

(k) Other powers

The Corporation shall have such powers as may be

necessary or appropriate for the exercise of the powers

55a

herein specifically conferred upon the Corporation and

all such incidental powers as are customary in

corporations generally.

(1) Contracts

The Corporation may enter into and carry out

contracts or agreements, and issue regulations,

necessary in the conduct of its business, as determined

by the Board. State and local laws or rules shall not

apply to contracts, agreements, or regulations of the

Corporation or the parties thereto to the extent that

such contracts, agreements, or regulations provide

that such laws or rules shall not apply, or to the extent

that such laws or rules are inconsistent with such

contracts, agreements, or regulations.

(m) Submission of certain information

(1) Social security account and employer

identification numbers

The Corporation shall require, as a condition of

eligibility for participation in the multiple peril

crop insurance program, submission of social

security account numbers, subject to the

requirements of section 405(cX2XC iii) of Title 42,

and employer identification numbers, subject to the

requirements of section 6109(f) of Title 26.

(2) Notification by policyholders

Each policyholder shall notify each individual or

other entity that acquires or holds a substantial

beneficial interest in such policyholder of the

requirements and limitations under this

subchapter.

(3) Identification of holders of substantial interests

The Manager of the Corporation may require each

policyholder to provide to the Manager, at such

times and in such manner as prescribed by the

Manager, the name of each individual that holds or

56a

acquires a substantial beneficial interest in the

policyholder.

(4) “Substantial beneficial interest” defined

For purposes of this subsection, the term

“substantial beneficial interest” means not less

than 5 percent of all beneficial interests in the

policyholder.

(n) Actuarial soundness

(1) Projected loss ratio as of October 1, 1995

The Corporation shall take such actions as are

necessary to improve the actuarial soundness of

Federai multiperil crop insurance coverage made

available under this subchapter to achieve, on and

after October 1, 1995, an overall projected loss ratio

of not greater than 1.1, including—

(A) instituting appropriate requirements for

documentation of the actual production history

of insured producers to establish recorded or

appraised yields for Federal crop insurance

coverage that more accurately reflect the

associated actuarial risk, except that the

Corporation may not carry out this paragraph

in a manner that would prevent beginning

farmers (as defined by the Secretary) from

obtaining Federal crop insurance;

(B) establishing in counties, to the extent

practicable, a crop insurance option based on

area yields in a manner that allows an insured

producer to qualify for an indemnity if a loss

has occurred in a specified area in which the

farm of the insured producer is located;

social security account and employee

identification nmumbers of participating

producers, agents, and loss adjusters and using

the numbers to identify insured producers,

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agents, and loss adjusters who are high risk for

actuarial purposes and insured producers who

have not documented at least 4 years of

production history, to assess the performance of

insurance providers, and for other purposes

permitted by law; and

(D) taking any other measures authorized by

law to improve the actuarial soundness of the

Federal crop. insurance program while

maintaining fairness and effective coverage for

agricultural producers.

(2) Projected loss ratio

The Corporation shall take such actions, including

the establishment of adequate premiums, as are

necessary to improve the actuarial soundness of

Federal muitiperil crop insurance made available

under this subchapter to achieve an overall

projected loss ratio of not greater than 1.0.

(3) Nonstandard classification system

To the extent that the Corporation uses the

nonstandard classification system, the Corporation

shall apply the system to all insured producers in

a fair and consistent manner.

(o) Regulations

The Secretary and the Corporation are each

authorized to issue such regulations as are necessary

to carry out this subchapter.

(p) Purchase of American-made equipment and

products

(1) Sense of Congress

It is the sense of Congress that, to the greatest

extent practicable, all equipment and products

purchased by the Corporation using funds made

available to the Corporation should be American-

made.

(2) Notice requirement

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In providing financial assistance to, or entering

into any contract with, any entity for the purchase

of equipment and products to carry out this

subchapter, the Corporation, to the greatest extent

practicable, shall provide to the entity a notice

describing the statement made in paragraph (1).

(q) Redesignated (p)

(r) Procedures for responding to certain inquiries

(1) Procedures required

The Corporation shall establish procedures under

which the Corporation will provide a final agency

determination in response to an inquiry regarding

the interpretation by the Corporation of this

subchapter or any regulation issued under this

subchapter.

(2) Implementation

Not later than 180 days after June 23, 1998, the

Corporation shall issue regulations to implement

this subsection. At a minimum, the regulations

shall establish—

(A) the manner in which inquiries described in

paragraph (1) are required to be submitted to

the Corporation; and

(B) a reasonable maximum number of days

within which the Corporation will respond to all

inquiries.

(3) Effect of failure to timely respond

If the Corporation fails to respond to an inquiry in

accordance with the procedures’ established

pursuant to this subsection, the person requesting

the interpretation of this subchapter or regulation

may assume the interpretation is correct for the

applicable reinsurance year.

7 U.S.C. §§ 1506a, 1506b. Omitted

59a

7 U.S.C. § 1507. Personnel of Corporation

(a) Appointment; civil service exemption; compensation

The Secretary shall appoint such officers and

employees as may be necessary for the transaction of

the business of the Corporation pursuant to civil-

service laws and regulations, fix their compensation in

accordance with the provisions of chapter 51 and

subchapter III of chapter 53 of Title 5, define their

authority and duties, and delegate to them such of the

powers vested in the Corporation as the Secretary may

determine appropriate. However, personnel paid by

the hour, day, or month when actually employed may

be appointed without regard to civil-service laws and

regulations.

(b) Application of employees’ compensation law

Insofar as applicable, the benefits of subchapter I of

chapter 81 of Title 5, shall extend to persons given

employment under the provisions of this subchapter,

including the employees of the committees and

associations referred to in subsection (c) of this section

and the members of such committees. .

insurance companies; payment of administrative and

program expenses; sale of crop insurance through

private agents and brokers: renewals, exclusion of

compensation from premium rates, indemnification for

errors or omissions of Commission or its contractors

In the administration of this subchapter, the Board

shall, to the maximum extent possible, (1) establish or

use committees or associations of producers and make

payments to them to cover the administrative and

program expenses, as determined by the Board,

incurred by them in cooperating in carrying out this

subchapter, (2) contract with private insurance

companies, private rating bureaus, and other

organizations as appropriate for actuarial services,

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services relating to loss adjustment and rating plans of

insurance, and other services to avoid duplication by

the Federal Government of services that are or may

readily be available in the private sector and to enable

the Corporation to concentrate on regulating the

provision of insurance under this subchapter and

evaluating new products and materials submitted

under section 1508(h) or 1523 of this title, and

reimburse such companies for the administrative and

program expenses, as determined by the Board,

incurred by them, under terms and provisions and

rates of compensation consistent with those generally

prevailing in the insurance industry, and (3) encourage

the sale of Federal crop insurance through licensed

private insurance agents and brokers and give the

insured the right to renew such insurance for

successive terms through such agents and brokers, in

which case the agent or broker shall be reasonably

compensated from premiums paid by the insured for

such sales and renewals recognizing the function of the

agent or broker to provide continuing services while

the insurance is in effect: Provided, That such

compensation shall not be included in computations

establishing premium rates. The Board shall provide

such agents and brokers with indemnification,

including costs and reasonable attorney fees, from the

Corporation for errors or omissions on the part of the

Corporation or its contractors for which the agent or

broker is sued or held liable, except to the extent the

agent or broker has caused the error or omission.

Nothing in this’ subsection shall permit the

Corporation to contract with other persons to carry out

the responsibility of the Corporation to review and

approve policies, rates, and other materials submitted

under section 1508(h) of this title.

(d) Allotment of funds to Federal and State agencies

6la

The Secretary may allot to bureaus and offices of the

Department or transfer to such other agencies of the

State and Federal Governments that the Secretary

requests to assist in carrying out this subchapter any

funds made available pursuant to the provisions of

section 1516 of this title.

(e) Utilization of producer cooperative associations

In carrying out the provisions of this subchapter the

Board may, in its discretion, utilize producer-owned

and producer-controlled cooperative associations.

(f) Use of resources, data, boards, and committees of

Federal agencies

The Board should use, to the maximum extent

possible, the resources, data, boards, and the

committees of (1) the Soil Conservation Service, in

assisting the Board in the classification of land as to

risk and production capability and in the development

of acceptable conservation practices; (2) the Forest

Service, in assisting the Board in the development of

a timber insurance plan; (3) the Agricultural

Stabilization and Conservation Service, in assisting

the Board in the determination of individual producer

yields and in serving as a local contact point for

farmers where the Board deems necessary; and (4)

other Federal agencies in any way the Board deems

necessary in carrying out this subchapter.

(g) Specialty Crops Coordinator

(1) The Corporation shall establish a management-

level position to be known as the Specialty Crops

Coordinator.

(2) The Specialty Crops Coordinator shall have

primary responsibility for addressing the needs of

specialty crop producers, and for providing information

and advice, in connection with the activities of the

Corporation to improve and expand the insurance

program for specialty crops. In carrying out this

62a

paragraph, the Specialty Crops Coordinator shall act

as the liaison of the Corporation with representatives

of specialty crop producers and assist the Corporation

with the knowledge, expertise, and familiarity of the

producers with risk management and production

issues pertaining to specialty crops.

(3) The Specialty Crops Coordinator shall use

information collected from Corporation field office

directors in States in which specialty crops have a

significant economic effect and from other sources,

including the extension service and colleges and

universities.

7 U.S.C. § 1508. Crop insurance

(a) Authority to offer insurance

(1) In general

If sufficient actuarial data are available (as

determined by the Corporation), the Corporation

may insure, or provide reinsurance for insurers of,

producers of agricultural commodities grown in the

United States under 1 or more plans of insurance

determined by the Corporation to be adapted to the

agricultural commodity concerned. To qualify for

coverage under a plan of insurance, the losses of

the insured commodity must be due to drought,

flood, or other natural disaster (as determined by

the Secretary).

(2) Period

Except in the cases of tobacco, potatoes, and sweet

potatoes, insurance shall not extend beyond the

period during which the insured commodity is in

the field. As used in the preceding sentence, in the

case of an aquacultural species, the term “field”

means the environment in which the commodity is

produced.

63a

(3) Exclusion of losses due to certain actions of

producer

(A) Exclusions

Insurance provided under this subsection shall

not cover losses due to--

(i) the neglect or malfeasance of the

producer;

(ii) the failure of the producer to reseed to

the same crop in such areas and under such

circumstances as it is customary to reseed;

(iii) the failure of the producer to follow good

farming practices, including scientifically

sound sustainable and organic farming

practices.

(B) Good farming practices

(i) Informal administrative process

A producer shall have the right to a review

of a determination regarding good farming

practices made under subparagraph (A\Xiii)

in accordance with an _ informal

administrative process to be established by

the Corporation.

(ii) Administrative review

(I) No adverse decision

The determination shall not be

considered an adverse decision for

purposes of subtitle H of the Department

of Agriculture Reorganization Act of 1994

(7 U.S.C. 6991 et seq.).

(IT Reversal or modification

Except as provided in clause (i), the

determination may not be reversed or

modified as the result of a subsequent

administrative review.

(iii) Judicial review

64a

(I) Right to review

A producer shall have the right to

judicial review of the determination

without exhausting any right to a review

under clause (i).

(II) Reversal or modification

The determination may not be reversed

or modified as the result of judicial

review unless the determination is found

to be arbitrary or capricious.

No policy or plan of insurance provided under

this subchapter (including a policy or plan of

insurance approved by the Board under

subsection (h) of this section) shall cover losses

due to a reduction in revenue for potatoes

except as covered under a whole farm policy or

plan of insurance, as determined by the

Corporation.

(4) Expansion to other areas or single producers

(A) Area expansion

The Corporation may offer plans of insurance or

reinsurance for production of agricultural

commodities in the Commonwealth of Puerto

Rico, the Virgin Islands, Guam, American

Samoa, the Commonwealth of the Northern

Mariana Islands, the Republic of the Marshall

Islands, the Federated States of Micronesia, and

the Republic of Palau in the same manner as

provided in this section for production of

agricultural commodities in the United States.

(B) Producer expansion

In an area in the United States or specified in

subparagraph (A) where crop insurance is not

available for a particular agricultural

commodity, the Corporation may offer to enter

65a

into a written agreement with an ‘individual

producer operating in the area for insurance

coverage under this subchapter if the producer

has actuarially sound data relating to the

production by the producer of the commodity or

similar commodities and the data is acceptable

to the Corporation.

(5) Dissemination of crop insurance information

(A) Available information

The Corporation shall make available to

producers through local offices of the

Department-—

(i) current and complete information on all

aspects of Federal crop insurance; and

(ii) a listing of insurance agents and

companies offering to sell crop insurance in

the area of the producers.

(B) Use of electronic methods

(i) Dissemination by Corporation

The Corporation shall make the information

described in subparagraph (A) available

electronically to producers and approved

insurance providers.

(ii) Submission to Corporation

To the maximum extent practicable, the

Corporation shall allow producers and

approved insurance providers to use

electronic methods to submit information

required by the Corporation.

(6) Addition of new and specialty crops

(A) Data collection

Not later than 180 days after October 13, 1994,

the Secretary shall issue guidelines for

publication in the Federal Register for data

collection to assist the Corporation § in

66a

formulating crop insurance policies for new and

specialty crops.

(B) Addition of new crops

Not later than 1 year after October 13, 1994,

and annually thereafter, the Corporation shall

report to Congress on the progress and expected

timetable for expanding crop insurance coverage

under this subchapter to new and specialty

crops.

Not later than 1 year after October 13, 1994, the

Corporation shall report to Congress on the

feasibility of offering a crop insurance program

designed to meet the needs of specialized

producers of vegetables and other perishable

crops who market through direct marketing

channels.

(D) Addition of nursery crops

Not later than 2 years after April 4, 1996, the

Corporation shall conduct a study and limited

pilot program on the feasibility of insuring

nursery crops.

(7) Adequate coverage for States

(A) Definition of adequately served

In this paragraph, the term “adequately served”

means having a participation rate that is at

least 50 percent of the national average

participation rate.

(B) Review

The Board shall review the policies and plans of

insurance that are offered by approved

insurance providers under this subchapter to

determine if each State is adequately served by

the policies and plans of insurance.

(i) In general

67a

Not later than 30 days after completion of

the review under subparagraph (B), the

Board shall submit to Congress a report on

the results of the review.

(ii) Recommendations

The report shall include recommendations to

increase participation in States that are not

adequately served by the policies and plans

of insurance.

(8) Special provisions for cotton and rice

Notwithstanding any other provision of this

subchapter, beginning with the 2001 crops of

upland cotton, extra long staple cotton, and rice,

the Corporation shall offer plans of insurance,

including prevented planting coverage and

replanting coverage, under this subchapter that

cover losses of upland cotton, extra long staple

cotton, and rice resulting from failure of irrigation

water supplies due to drought and saltwater

intrusion.

(9) Premium adjustments

(A) Prohibition

Except as provided in subparagraph (B), no

person shall pay, allow, or give, or offer to pay,

allow, or give, directly or indirectly, either as an

inducement to procure insurance or after

insurance has been procured, any rebate,

discount, abatement, credit, or reduction of the

premium named in an insurance policy or any

other valuable consideration or inducement not

specified in the policy.

(B) Exceptions

Subparagraph (A) does not apply with respect

to--

(i) a payment authorized under subsection

(bX5XB);

68a

(ii) a performance-based discount authorized

under subsection (d)(3); or

(iii) a patronage dividend, or similar

payment, that is paid—

(TD by an entity that was approved by the

Corporation to make such payments for

the 2005, 2006, or 2007 reinsurance year,

in accordance with subsection (b5\B) as

in effect on the day before the date of

enactment of this paragraph; and

(ID in a manner consistent with the

payment plan approved in accordance

with that subsection for the entity by the

Corporation for the applicable

reinsurance year.

(10) Commissions

(A) Definition of immediate family

In this paragraph, the term “immediate family”

means an _ individual’s father, mother,

stepfather, stepmother, brother, sister,

stepbrother, stepsister, son, daughter, stepson,

stepdaughter, grandparent, grandson,

granddaughter, father-in-law, mother-in-law,

brother-in-law, sister-in-law, son-in-law,

daughter-in-law, the spouse of the foregoing,

and the individual’s spouse.

(B) Prohibition

No individual (including a subagent) may

receive directly, or indirectly through an entity,

any compensation (including any commission,

profit sharing, bonus, or any other direct or

indirect benefit) for the sale or service of a

policy or plan of insurance offered under this

subchapter if—

(i) the individual has a substantial beneficial

interest, or a member of the individual’s

69a

immediate family has a_¥ substantial

beneficial interest, in the policy or plan of

insurance; and

(11) the total compensation to be paid to the

individual with respect to the sale or service

of the policies or plans of insurance that

meet the condition described in clause (i)

exceeds 30 percent or the percentage

specified in State law, whichever is less, of

the total of all compensation received

directly or indirectly by the individual for

the sale or service of all policies and plans of

insurance offered under this subchapter for

the reinsurance year.

Not later than 90 days after the annual

settlement date of the reinsurance year, any

individual that received directly or indirectly

any compensation for the service or sale of any

policy or plan of insurance offered under this

subchapter in the prior reinsurance year shall

certify to applicable approved insurance

providers that the compensation that the

individual received was in compliance with this

paragraph.

(D) Sanctions

The procedural requirements and sanctions

prescribed in section 1515(h) of this title shall

apply to the prosecution of a violation of this

paragraph.

(E) Applicability

(i) In general

Sanctions for violations under this

paragraph shall only apply to the individuals

or entities directly responsible for the

certification required under subparagraph

70a

requirements of this paragraph.

(ii) Prohibition

No sanctions shall apply with respect to the

policy or plans of insurance upon which

compensation is received, including the

reinsurance for those policies or plans.

(b) Catastrophic risk protection

(1) In general

The Corporation shall offer a catastrophic risk

protection plan to indemnify producers for crop loss

due to loss of yield or prevented planting, if

provided by the Corporation, when the producer is

unable, because of drought, flood, or other natural

disaster (as determined by the Secretary), to plant

other crops for harvest on the acreage for the crop

year.

(2) Amount of coverage

(A) In general

Subject to subparagraph (B)--

(i) in the case of each of the 1995 through

1998 crop years, catastrophic risk protection

shall offer a producer coverage for a 50

percent loss in yield, on an individual yield

or area yield basis, indemnified at 60

percent of the expected market price, or a

comparable coverage (as determined by the

Corporation); and

(ii) in the case of each of the 1999 and

subsequent crop years, catastrophic risk

protection shall offer a producer coverage for

a 50 percent loss in yield, on an individual

yield or area yield basis, indemnified at 55

percent of the expected market price, or a

comparable coverage (as determined by the

Corporation).

Tla

(B) Reduction in actual payment

The amount paid to a producer on a claim under

catastrophic risk protection may reflect a

reduction that is proportional to the out-of-

pocket expenses that are not incurred by the

producer as a result of not planting, growing, or

harvesting the crop for which the claim is made,

as determined by the Corporation.

(3) Alternative catastrophic coverage

Beginning with the 2001 crop year, the Corporation

shall offer producers of an agricultural commodity

the option of selecting either of the following:

(A) The catastrophic risk protection coverage

available under paragraph (2)A).

(B) An alternative catastrophic risk protection

coverage that--

(i) indemnifies the producer on an area yield

and loss basis if such a policy or plan of

insurance is offered for the agricultural

commodity in the county in which the farm

is located;

(ii) provides, on a uniform national basis, a

higher combination of yield and price

protection than the coverage available under

paragraph (2A); and

(iii) the Corporation determines is

comparable to the coverage available under

paragraph (2)A) for purposes of subsection

(eX2\A) of this section.

(4) Sale of catastrophic risk coverage

(A) In general

Catastrophic risk coverage may be offered by—

(i) approved insurance providers, if available

in an area; and

72a

(ii) at the option of the Secretary that is

based on considerations of need, local offices

of the Department.

(B) Need

For purposes of considering need under

subparagraph (A)ii), the Secretary may take

into account the most efficient and cost-effective

use of resources, the availability of personnel,

fairness to local producers, the needs and

convenience of local producers, and _ the

availability of private insurance carriers.

(i) In general

In full consultation with approved insurance

providers, the Secretary may continue to

offer catastrophic risk protection in a State

(or a portion of a State) through local offices

of the Department if the Secretary

determines that there is an insufficient

number of approved insurance providers

operating in the State or portion of the State

to adequately provide catastrophic risk

protection coverage to producers.

(ii) Coverage by approved insurance

providers

To the extent that catastrophic risk

protection coverage by approved insurance

providers is sufficiently available in a State

(or a portion of a State) as determined by the

Secretary, only approved insurance

providers may provide the coverage in the

State or portion of the State.

(iii) Timing of determinations

Not later than 90 days after April 4, 1996,

the Secretary shall announce the results of

the determinations under clause (i) for

73a

policies for the 1997 crop year. For

subsequent crop years, the Secretary shall

make the announcement not later than April

30 of the year preceding the year in which

the crop will be produced, or at such other

times during the year as the Secretary finds

practicable in consultation with affected crop

insurance providers for those States (or

portions of States) in which catastrophic

coverage remains available through local

offices of the Department.

(iv) Current policies

This clause shall take effect beginning with

the 1997 crop year. Subject to clause (ii) all

catastrophic risk protection policies written

by local offices of the Department shall be

transferred to the approved insurance

provider for performance of all sales, service,

and loss adjustment functions. Any fees in

connection with such policies that are not

yet collected at the time of the transfer shall

be payable to the approved insurance

providers assuming the _ policies. The

transfer process for policies for the 1997 crop

year with sales closing dates before January

1, 1997, shall begin at the time of the

Secretary's announcement under clause (iii)

and be completed by the sales closing date

for the crop and county. The transfer process

for all subsequent policies (including policies

for the 1998 and subsequent crop years)

shall begin at a date that permits the

process to be completed not later than 45

days before the sales closing date.

(5) Administrative fee

(A) Basic fee

74a

Each producer shall pay an administrative fee

for catastrophic risk protection in the amount of

$300 per crop per county.

(B) Payment of catastrophic risk protection fee

on behalf of producers

(i) Payment authorized

If State law permits a licensing fee to be

paid by an imsurance provider to a

cooperative association or trade association

and rebated to a producer through the

payment of catastrophic risk protection

administrative fees, a cooperative

association or trade association located in

that State may pay, on behalf of a member of

the association in that State or a contiguous

State who consents to be insured under such

an arrangement, all or a portion of the

administrative fee required by this

paragraph for catastrophic risk protection.

(ii) Selection of provider

Nothing in this subparagraph limits the

option of a producer to select the licensed

insurance agent or other approved insurance

provider from whom the producer will

purchase a policy or plan of insurance or to

refuse coverage for which a payment is

offered to be made under clause (i).

(iii) Delivery of insurance

Catastrophic risk protection coverage for

which a payment is made under clause (i)

shall be delivered by a licensed insurance

agent or other approved insurance provider.

(iv) Additional coverage encouraged

A cooperative association or _ trade

association, and any approved insurance

provider with whom a licensing fee is made,

75a

shall encourage producer members to

purchase appropriate levels of coverage in

order to mect the risk management needs of

the member producers.

(v) Redesignated (iv)

(vi) Repealed. Pub.L. 110-234, Title XT],

§ 12006(aX2KC), May 22, 2008, 122 Stat.

1373; Pub.L. 110-246, Title XII,

§ 12006(aX2XC), June 18, 2008, 122 Stat.

2135

The administrative fee required by this

paragraph shall be paid by the producer on the

same date on which the premium for a policy of

additional coverage would be paid by the

producer.

(D) Use of fees

(i) In general

The amounts paid under this paragraph

shall be deposited in the crop insurance fund

established under section 1516(c) of this

title, to be available for the programs and

activities of the Corporation.

(ii) Limitation

No funds deposited in the crop insurance

fund under this subparagraph may be used

to compensate an approved insurance

provider or agent for the delivery of services

under this subs

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