Reading the fact section of the Federal Circuit's recent opinion in Katzin v. United States, No. 16-2636 (Nov. 19, 2018), will make your eyes glaze over. It's all about some property on an island near Puerto Rico, and is full of maps, diagrams, history, and even a photo of some "Keep Out" signs the feds erected. Important, but for someone who isn't involved in the case, somewhat of a slog to get through.
Give it a read and see if you don't agree.
But here's the short story: both the plaintiffs and the feds think they own the land, a ten-acre parcel whose most prominent feature is an old gun emplacement. The Court of Federal Claims after a trial concluded that the plaintiffs owned the property, and that it had been physically taken when a federal official sent a fax to a prospective purchaser claiming that the feds, not the plaintiffs, owned the land. The prospective purchaser and others, quite naturally, declined to buy.
After a very detailed recital of the facts, the Federal Circuit first rejected the government's claim the plaintiffs missed the six-year Tucker Act statute of limitations. Yes, the government had claimed title before it sent the fax to the buyer, but "both parties agree that a mere government assertion of ownership does not constitute a taking." Slip op. at 14. It wasn't until the official sent the fax that the government arguably interfered with the property's actual use. And that, the court held, was the key date triggering the statute of limitations. Score one for the property owner.
On the merits, however, the panel majority concluded that the sending of the fax and the resultant wiping out of the property's ability to be sold, was not a physical taking. Of course, this wasn't a classic physical occupation claim, but more like the the government taking over possession of one of the key sticks in the owner's bundle - the right to alienate the land:
The Claims Court concluded that the Beasley fax did just that: “the government has made a claim of ownership to part of plaintiff’s property, and it has communicated that claim to prospective purchasers of plaintiffs’ land, which actions plaintiffs claim have prevented them from exercising their right to sell Parcel 4.” Id. at 480. The Claims Court therefore concluded that the Beasley fax was a physical taking requiring just compensation. Id. at 482.
Slip op. at 15. The panel majority disagreed, concluding that the fax was the "mere sharing of information" about the government's claim to the property, and was not a physical taking:
We hold that the government’s mere sharing of information about its claim of ownership to real property with a third party does not constitute a physical taking (or a per se regulatory taking) of that property. The Claims Court erroneously explained that government action categorically effects a taking when it “prohibits or prevents a landowner from exercising his or her property rights because of a government claim of ownership of those rights.” See Katzin II, 127 Fed. Cl. at 479. This broad standard is contrary to the circumscribed role that the Supreme Court assigned to per se takings, as described above.
Slip op. at 17.
No physical occupation of the land, and no wipeout of use. Yes, it kind of killed the property's marketability, but "[a]t most, the Beasley fax disseminated information about the government’s claims, and the market incorporated that information into its valuation of the property. This lowering of the market value is a far cry from a total deprivation of all economically beneficial use of Parcel 4. The lowering of the market value without a legal restraint on alienability generally does not constitute a physical or per se regulatory taking’." Slip op. at 18.
The fax, the majority concluded, was like the lis pendens in Kirby Forest Industries, Inc. v. United States, 467 U.S.1 (1984), which the Supreme Court held was simply notice that the feds were in the process of taking land, and not any kind of restriction on other uses of that land while the "sale" (condemnation) was ongoing. Here, telling a potential buyer that "hey, we own the land, not the seller" may have thwarted the sale (and all sales), but "[t]he fax did not prohibit Plaintiffs from taking any action with respect to the gun mount or the peninsula." Slip op. at 20.
Finally, the majority refused to reach the third question presented: who actually owns the disputed land, because "even if Plaintiffs were to establish title to the peninsula, because the Beasley fax was not a physical taking, Plaintiff is not entitled to just compensation under a physical takings theory." Slip op. at 21.
The dissent by Judge Newman, by contrast, concluded that the plaintiffs possessed title, and that the fax was a physical taking because the right to alienate property "harkens back to the Statute of Quia Emptores in the year 1290," and is a fundamental stick in the bundle. The plaintiffs introduced evidence that the fax wiped out that right, and critically, the government did not introduce contradictory evidence:
The panel majority writes that “[a]t most, the Beasley fax disseminated information about the government’s claims, and the market incorporated that information into its valuation of the property.” Maj. Op. at 18. Indeed so, for thereafter the Katzins have been unable to sell their property. CFC Op. at 481–82. The Court of Federal Claims found that the “evidence of unsalability has not been contravened by the government.” CFC Op. at 482. My colleagues assign no error to that finding.
Dissent at 9. As is often the case in appellate opinions, the failure by one side or the other to meet its burden of proof below on critical elements inexplicably did not come into play in the majority opinion, so count us convinced on the point Judge Newman makes here. To us, the failure of the government to rebut the evidence that the fax killed the property's market should have resolved the question of whether that stick had been wiped out.
It is another question, of course, whether having taken that entire stick, the government could be on the hook for a taking because the owner arguably could have done something else with the land other than sell it. Read footnote 3 (Dissent at 10) for how Judge Newman rebuffed the analogy to the Kirby Forest lis pendens.
Finally, we also think Judge Newman got the order of analysis right, when she concluded that the determination of who actually owns the land was the predicate question, and that title needed to be resolved before determining whether there was a taking.
With a 2-1 decision from the national "takings court," is this a candidate for a cert petition? Hard to say, but we will keep an eye out.
Katzin v. United States, No. 16-2636 (Fed. Cir. Nov. 19, 2018)
