The U.S. Court of Appeals for the Third Circuit recently heard oral arguments (stream above, or download the mp3 here), in a case involving an issue we briefed recently in another circuit: whether state or federal law governs the determination of Just Compensation in federal court Natural Gas Act takings.
Now, you might automatically assume that because the case is in federal court under federal law, that federal standards for Just Compensation (and not the law of the state in which the property is located) provides the rule of decision. But it is not that simple.
Short answer to the question posed by our title: no, the state’s law of just compensation does not govern. But the state’s law of property does govern.
Thus, we think that which law governs compensation in federal condemnations is determined by the law of the state. After all, the particular “sticks” in the owner’s bundle of rights is determined by state law — as is the relevant, if hypothetical, market on the date of valuation — and if those sticks result in more compensation than the baseline required by the Just Compensation Clause, then so be it. After all, the standard for Fifth Amendment Just Compensation is the “full and perfect equivalent” for the property taken. That, we think, is dependent on how a state defines property interests, and their use and value.
Even if this results in verdicts that are not uniform nationally regarding the exact amount of compensation, it is a uniform national rule that property is defined by state law, and Just Compensation depends on what is property. The federal interest is not in defining the property taken, but in ensuring the owner receives the equivalent in cash of the value of whatever state law defines as a property interest.
Thus, because the Fifth Amendment requires compensation for all property taken (as mostly defined by state law), the district court was wrong when it ignored Pennsylvania’s property law.
Check out the briefing here:
- Brief of Appellant (property owner)
- Brief for Appellee (pipeline company)
- Reply Brief (property owner)
We shall continue to follow this issue. In the meantime, read more about the oral arguments (“Public Interest of Pipeline Takes Focus in Damages Spat “) from Courthouse News Service.