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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2010
- **Citation:** 559 U.S. 1106

## Text

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No.

Su Whe
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

i

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

oe a rer grr See li
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

lV

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

Vv

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

vl

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
er ]

NE a 5 5 5 65 5 4450 409.0 40 eew seed oe 8

]

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

2

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

(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.

(c) Administrator
(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.

4
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.

5

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

6

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.

7

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.

8

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

9

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.

10
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.

11

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.

12

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).

13

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

14

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

15

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.

16

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.

17

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).

18

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

19

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

20

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

21

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).

22

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.

23

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.

24
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

la

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

2a

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.

3a

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
I.

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

4a

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.

5a

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.

6a

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

7a

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

8a

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).

9a
DISCUSSION

I.

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.
A.

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.*

B.

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.

C.

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

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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

35a

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

36a

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

38a

“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

40a

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.

43a
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.

(c) Protection of confidential information

(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.

(c) Issuance of stock to Secretary of the Treasury
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.
(C) One additional Under Secretary of
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

(C) shall be appointed to staggered 4-year
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.
(c) Compensation
The Directors of the Corporation who are employed in
the Department shall receive no additional
compensation for their service

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386017_1421%3A1. Public record. Not legal advice.