Argument Recap

Last week, the Federal Circuit heard oral argument in Ideker Farms, Inc. v. United States, a case that concerns the federal government’s liability for taking private property. Specifically, in this case, the Federal Circuit is reviewing the conclusion of the Court of Federal Claims that the government’s action was the cause-in-fact of flooding damage and that, as a result, a taking-by-flooding occurred. The government appealed the CFC’s judgment, while Ideker Farms cross-appealed. The panel hearing the oral argument included Chief Judge Moore and Judges Prost and Taranto. This is our argument recap.

Brian Toth argued for the government. He began by asserting the CFC erred in its causation analysis by failing to examine the baseline for determining whether a taking occurred, in particular by not considering what would have occurred absent any improvement by the government. One judge asked why the CFC rejected the government’s baseline argument (and then found there was no landowner expectation in the dramatic change of the flood control). Toth responded by arguing that reasonable expectations do not play a role in the causation analysis. Anyway, he continued, even if they did, the original operation of the flood control system should be excluded from the analysis because Congress’s intent was to preserve endangered species. Another judge then asked whether flood control was a top priority for Congress. In response, Toth asserted that while flood control was a top priority, since the inception of the relevant statute Congress has made clear it will change over time.

One judge then asked whether the property owners would expect the government to stop making flood control a priority. Toth responded that one can set the subjective expectation of property owners aside by looking at the situation objectively through Congress’s purposes. Furthermore, he argued, the flooding on the plaintiffs’ properties would not have been any different without the government’s adjustment to the flood control system.

Donald Verrilli argued for Ideker Farms. Verrilli laid out what he identified as a few key findings by the CFC. First, he asserted, the government used flood control to create farmland and further induced the plaintiffs to farm the land. Second, he argued, the plaintiffs relied on this inducement and then the government dismantled much of the flood control system because of the Endangered Species Act. Third, he said, this shift caused severe flooding on the plaintiffs’ land, flooding that would not have occurred had the government not made the shift.

In response, one judge asked what the most compelling finding was. Verrilli responded that the key was the finding concerning what the landowners reasonably contemplated when they made their investments, because if they expected the flood protection to continue then the landowners are entitled to recover. One judge asked whether the original landowners expected the flood protection to continue forever. Verrilli responded that expectation is just one factor and, he argued, the focus should be on the government’s specific act to create a water habitat on the plaintiffs’ land.

Regarding the cross-appeal by Ideker Farms, Verrilli argued that the takings accrual period began when the landowners realized the taking had occurred. He asserted, however, that the landowners still get to recover for the entire injury suffered. One judge asked what the compensation regarding crop loss would be. Verrilli responded that present and future crop damage should be included.

In rebuttal, Toth argued that precedent indicates potential harvest should not be considered. One judge countered that other takings cases have included loss of timber in damages. In response, Toth maintained that the rationale for including destruction of crops is not the same as the rationale for including destruction of timber.

Verrilli, in his rebuttal, argued diminution of value applies to the whole period of the flood. One judge asked if the Federal Circuit should vacate and remand on the issue of damages. Verrilli agreed.

We will continue monitoring this case and report on developments.