Leave it to Federal Circuit Judge Timothy Dyk -- who, as far as we can tell, has never once ruled against the government in a takings case -- to conclude that the U.S. Supreme Court's recent opinion in Knick v. Township of Scott, 139 S. Ct. 2162 (2019) actually works to the detriment of property owners when it comes to the statute of limitations applicable to regulatory takings claims.
In Campbell v. United States, No. 18-2014 (Aug. 1, 2019), the plaintiffs alleged that it was a taking when their product liability tort claims against General Motors were extinguished by GM's bankruptcy. The CFC held that the claims were barred by the six-year statute of limitations, and the Federal Circuit agreed.
Here's the specifics of the plaintiffs' claim:
Relying on A & D [Auto Sales, Inc. v. United States, 748 F.3d 1142 (Fed. Cir. 2014)], on July 9, 2015, the plaintiffs here sued the government in the Claims Court alleging that the government had coerced Old GM to include in its proposed bankruptcy sale order provisions extinguishing the plaintiffs’ property interests pursuant to § 363 of the Bankruptcy Code.The plaintiffs are a group of individuals who alleged that they are victims of accidents involving GM vehicles (or are the family members or estates of such individuals), and had personal injury claims against Old GM. The plaintiffs alleged that under Michigan law they possessed successor liability claims at the time the § 363 sale closed. Michigan law provides that where there is a sale of assets from one entity to another such that there exists “a continuity of enterprise between a successor and its predecessor[,] . . . a successor [may be forced] to ‘accept the liability with the benefits’ of such continuity.”
Slip op. at 4.
The Federal Circuit assumed, without deciding, that the plaintiffs asserted a valid property interest. Slip op. at 5. The CFC concluded, however, that the claim was time barred:
In reaching this conclusion, the court stated that “[t]he complaint’s specific references to government coercive action . . . all point to activity that predates the Sale Order issued by the bankruptcy court.” J.A. 7. In other words, the court determined that the plaintiffs’ takings claim had accrued, at the latest, on July 5, 2009—more than six years before the date on which the plaintiffs filed their complaint in the Claims Court.
Slip op. at 8. As we noted above, the Federal Circuit agreed. "The question is when the alleged taking occurred." Slip op. at 10. The plaintiffs asserted that the "primary conduct which caused the taking" was the government's coercing "Old GM" into getting the bankruptcy court to extinguish the plaintiffs' tort claims. The court held that "the alleged taking occurred on July 1, 2009--when Old GM filed the proposed sale order with the bankruptcy court." Slip op. at 10-11.
And this is the really interesting part. We recommend you read at least the part of the opinion that begins on page 11. There, the court correctly noted that "[t]he standards for claim accrual in physical takings and regulatory takings are distinct, and this distinction is important." Slip op. at 11. A physical taking, after all, is "relatively simple to pinpoint." Id. The government invades your property, invites the public to do so, or physically appropriates a "stick," you kind of know that it has done so. So far, so good.
And regulatory takings can be much more difficult to recognize, much less pin down than physical invasions. Again, we've got no problem with that.
But here's where it gets metaphysical. The court concluded, that "[i]n the case of a regulatory taking, however, the taking may occur before the effect of the regulatory action is felt and the actual damage to the property interest is entirely determinable." Id. (emphasis added). Relying on Knick,'s statement that "a property owner has a claim for a violation of the Takings Clause as soon as [the] government takes his property for public use without paying for it," the Federal Circuit concluded that "the bankruptcy sale order clearly inflicted an injury on the plaintiffs by diminishing the value of their claimed property rights." Slip op. at 13. Under Knick's reasoning, the Federal Circuit concluded, the taking occurs before the property owner even feels it. How you do that, we're not quite sure (that reminds us of the cliched zen question: if a regulation takes property and the owner doesn't feel it, is there a claim?).
Now before we get all worked up about this -- the Federal Circuit seems to be saying that a takings claim accrues for statute of limitations purposes before the actual impact of the regulation is felt by the plaintiff -- we want to be sure we're reading this right. The plaintiffs argued that their claim had not fully accrued -- wasn't final or ripe -- because "the government could have changed its mind" about its action. Slip op. at 13. The court rejected that theory, concluding that even though the government might eventually back off its action, that alone doesn't prevent accrual of a ripe claim.
In our view, that goes to the temporary or permanent nature of the taking and any resulting obligation to pay compensation, and counsels for the filing of the takings complaint at the earliest possible moment. Yes, if you do that, you will likely get whipsawed with the ripeness argument (you are filing too early!), but to us it is better to fight that argument than one saying you are too late. We do have some trepidation on the search for hard date for when a regulation effects a taking, especially if the amorphous Penn Central test governs. That test is particularly opaque, meaning that a property owner reasonably could need a lot of time to figure out if there's been a taking, and then to gin up a complaint.
And something to keep in mind is that the "bad" act in regulatory takings isn't the taking itself (as we've been reminded a lot lately, takings are not inherently wrong, only takings without just compensation). So the wrongful conduct in these kind of cases is the failure of the government to meet its obligation to provide compensation when it has taken property. We're not sure how that figures into the regulatory takings statute of limitations argument exactly, but we're thinking about it.
There's a lot more going on in this decision than we can lay out in this quick blog post (real billable work calls, and we've got more than a couple of briefs due shortly). So we recommend you read the entire opinion. This is a critical issue in takings cases, and, we think, subject to a lot of manipulation, judicial and otherwise. Check it out.
And the bottom line remains the same: file as early as you can. Even if you haven't felt the effect of the government action, as the Federal Circuit says.
Campbell v. United States, No. 18-2014 (Fed. Cir. Aug. 1, 2019)