UNITED AFFILIATES CORPORATION et al v. USA

REPLY to Response to Motion re MOTION to Dismiss pursuant to Rule 12

Fed. Cl.March 20, 2019

IN THE UNITED STATES COURT OF FEDERAL CLAIMS (Electronically Filed March 20, 2019) ) UNITED AFFILIATES CORPORATION AND ) MINGO LOGAN COAL LLC ) ) ) ) Plaintiffs, ) ) Case No. 17-67 L v. ) ) Judge Thomas C. Wheeler UNITED STATES OF AMERICA, ) ) Defendant. ) ) UNITED STATES’ REPLY IN SUPPORT OF ITS MOTION TO DISMISS Case 1:17-cv-00067-TCW Document 39 Filed 03/20/19 Page 1 of 18 TABLE OF CONTENTS INTRODUCTION .......................................................................................................................... 1 I. Plaintiff United Admits it Holds No Compensable Property Interest to Support Its Takings Claim ..................................................................................................................... 4 II. Plaintiff Mingo Logan Alleges No State Law Property Right That Would Allow it to Dispose of Mining Waste in the Pigeonroost and Oldhouse Branch Streams ................ 7 III. Plaintiffs’ “Categorical” Takings Claim Is Barred by Law .............................................. 11 CONCLUSION ............................................................................................................................. 14 Case 1:17-cv-00067-TCW Document 39 Filed 03/20/19 Page 2 of 18 ii TABLE OF AUTHORITIES CASES A.A. Profiles, Inc. v. City of Ft. Lauderdale, 850 F.2d 1483 (11th Cir. 1988) ................................................................................................ 13 Acceptance Ins. Cos., Inc. v. United States, 583 F.3d 849 (Fed. Cir. 2009) .................................................................................................... 1 Air Pegasus of D.C., Inc. v. United States, 424 F.3d 1206 (Fed. Cir. 2005) .......................................................................................... 5, 6, 7 Am. Pelagic Fishing Co. v. United States, 379 F.3d 1363 (Fed. Cir. 2004) ...................................................................................... 2, 11, 12 Avco Cmty. Developers, Inc. v. S. Coast Reg’l Comm’n, 553 P.2d 546 (Cal. 1976) .......................................................................................................... 13 Bragg v. Robertson, 54 F. Supp. 2d 635 (S.D. W. Va. 1999) .................................................................................... 10 Conti v. United States, 291 F.3d 1334 (Fed. Cir. 2002) ...................................................................................... 3, 11, 12 Halltown Paperboard Co. v. C. L. Robinson Corp., 148 S.E.2d 721 (W. Va. 1966) .................................................................................................... 9 Hicks v. United States, 118 Fed. Cl. 76 (2014) ................................................................................................................ 1 Kaiser Aetna v. United States, 444 U.S. 164 (1979) ............................................................................................................ 12, 13 Love Terminal Partners, L.P. v. United States, 889 F.3d 1331 (Fed. Cir. 2018) ............................................................................................ 4, 13 Lucas v. S.C. Coastal Council, 505 U.S. 1003 (1992) ............................................................................................................ 4, 13 Maritrans, Inc. v. United States, 342 F.3d 1344 (Fed. Cir. 2003) .................................................................................................. 2 McCausland v. Jarrell, 68 S.E.2d 729 (W. Va. 1951) ...................................................................................................... 9 Mingo Logan Coal Co. v. EPA, 829 F.3d 710 (D.C. Cir. 2016) ...................................................................................... 4, 7, 9, 11 Mitchell Arms, Inc. v. United States, 7 F.3d 212 (Fed. Cir. 1993) ................................................................................................ 5, 6, 7 Morris Assoc. Inc. v. Priddy, 383 S.E.2d 770 (W. Va. 1989) ................................................................................................ 3, 9 Case 1:17-cv-00067-TCW Document 39 Filed 03/20/19 Page 3 of 18 iii Ohio Valley Envtl. Coal., Inc. v. U.S. Army Corps of Eng’rs, 828 F.3d 316 (4th Cir. 2016) .................................................................................................. 5, 6 Roberts v. Martin, 77 S.E. 535 (W. Va. 1913) .......................................................................................................... 9 Snyder v. Callaghan, 168 W. Va. 265, 284 S.E.2d 241 (1981) ..................................................................................... 9 Wheeler v. City of Pleasant Grove, 664 F.2d 99 (5th Cir. 1981) ...................................................................................................... 13 RULES RCFC 9(i).................................................................................................................................... 1, 7 RCFC 12(b)(6) .............................................................................................................................. 14 REGULATIONS 76 Fed. Reg. 3126 (Jan.19, 2011) ................................................................................................... 5 OTHER AUTHORITIES West Virginia Division of Natural Resources Annual Report 2016-2017, http://www.wvdnr.gov/admin/PDF/DNRAnnualReport_2017.pdf ............................................. 3 West Virginia Water Courses: A Unique Legacy of Virginia Common Lands and the Jus Publicum of the English Crown, 101 W. VA. L. REV. 407 (1998) .................................................................................................. 8 Case 1:17-cv-00067-TCW Document 39 Filed 03/20/19 Page 4 of 18 A plaintiff seeking just compensation under the Fifth Amendment must allege facts establishing a compensable property interest. Acceptance Ins. Companies, Inc. v. United States, 583 F.3d 849, 854 (Fed. Cir. 2009). And under this Court’s rules, a takings claimant must plead with clarity and specificity the property rights subject to the alleged taking. RCFC 9(i); Hicks v. United States, 118 Fed. Cl. 76, 84 (2014). The Complaint fails to meet these standards, and fails to allege that either Plaintiff holds compensable property interests in the Pigeonroost and Oldhouse Branch streams that were the subject of the EPA regulatory action alleged in the Complaint. See United States’ Motion Mot. to Dismiss & Supporting Mem. 6-7, 14-20 (ECF No. 31) (“U.S. Mot. to Dismiss”) 6-7, 14-20. Instead, the Complaint pleads alleged “rights” arising from Plaintiff Mingo Logan Coal LLC’s (“Mingo Logan”) Clean Water Act § 404 permit, Compl. ¶¶ 2, 7, 10, 14, and features vague allegations concerning land and mineral rights that the EPA did not regulate. Compl. ¶¶ 1, 13. Plaintiffs’ Response Brief clarifies that Plaintiffs do not hold compensable property interests in the Pigeonroost and Oldhouse Branch streams, and confirms that this Court should dismiss the Complaint for failure to state a claim. See Acceptance Ins. Companies, Inc. v. United States, 583 F.3d 849, 859 (Fed. Cir. 2009) (“Because we have ruled that [plaintiff] failed to allege a cognizable property interest, we do not need to address the parties’ [further] arguments”). First, Plaintiff United Affiliates Corp. (“United”) concedes that it does not hold an ownership interest of any kind in the streams that are subject to the federal action alleged in the Complaint. Pls.’ Resp. to U.S. Mot. to Dismiss 1 (“Pls.’ Resp. Br.”) (ECF No. 36). Though the Complaint is silent on this point,1 United now admits that the would-be disposal areas subject to 1 Plaintiffs’ Response Brief articulates a number of factual assertions not found in the Complaint. While the Court may take judicial notice of publicly available information, in Case 1:17-cv-00067-TCW Document 39 Filed 03/20/19 Page 5 of 18 2 the EPA’s 2011 regulatory action “are owned by three different sister companies of Mingo Logan,” and that the only property right that either Plaintiff holds with respect to the Pigeonroost and Oldhouse Branch streams is an alleged leasehold interest under which Mingo Logan — but not United — supposedly may use the streams “to construct ‘valley fills’ to dispose of excess dirt and rock” during mining operations. Pls.’ Resp. Br. 3. Because the EPA’s 2011 regulatory action concerned only the disposal of mining debris in the Pigeonroost and Oldhouse branch streams, and because United now acknowledges that it does not own any property interest in these streams, the Court should dismiss United’s regulatory takings claims. Am. Pelagic Fishing Co. v. United States, 379 F.3d 1363, 1372 (Fed. Cir. 2004) (“If the claimant fails to demonstrate the existence of a legally cognizable property interest, the court[’]s task is at an end.” (citing Maritrans, Inc. v. United States, 342 F.3d 1344, 1352 (Fed. Cir. 2003))). Second, Plaintiff Mingo Logan through its brief now claims a leasehold right “to dispose of excess dirt and rock” in the Pigeonroost and Oldhouse Branch streams. Pls. Resp. Br. 3. But no such lease right is alleged in the Complaint. And even assuming that Mingo Logan had correctly pleaded and in fact holds a lease that purports to grant disposal permissions for the streams, the lessor (supposedly one or more of Mingo Logan’s “sister companies,”id.) can convey to Mingo Logan no more rights than it holds under West Virginia law. As discussed in the United States’ opening brief, West Virginia asserts “title to the beds of the state’s rivers, creeks and streams totaling some 34,000 miles or some 5,000 named waterways in the state.”2 U.S. Mot. to Dismiss 15 & n.3,, and the Complaint alleges no facts inconsistent with state deciding this motion to dismiss the Court is not obligated to accept as true factual assertions related to private property interests that do not appear in the Complaint. 2 West Virginia Division of Natural Resources Natura Resources Annual Report 2016-2017, p. 33 available at http://www.wvdnr.gov/admin/PDF/DNRAnnualReport_2017.pdf (last visited Mar. 13, 2019). Case 1:17-cv-00067-TCW Document 39 Filed 03/20/19 Page 6 of 18 3 ownership of the Piegeonroost and Oldhouse Branch streambeds. Furthermore, even were the Court to assume that Mingo-Logan held lease rights conveyed from a private streambed owner, the greatest rights that Mingo-Logan as lessee (or any private landowner as lessor) could hold in the streams themselves is a right of “reasonable use.” Id. at 17 (citing Morris Assoc. Inc. v. Priddy, 383 S.E.2d 770 (W. Va. 1989)). Plaintiffs cite no authority to contest this point, nor do they explain how the disposal operations Mingo Logan planned under the 2007 permit, see Ex. 1 at 7 (AR025389), which would bury and obstruct more than seven miles of streams, could possibly constitute a “reasonable use.” In short, Mingo Logan does not allege — and whatever its assumed leasehold rights, cannot assert — a compensable state law property right to dispose of mining waste in the Pigeonroost and Oldhouse Branch Streams. Rather, Mingo Logan’s hoped-for disposal rights were special use rights granted by the state and federal permit system established to administer the Clean Water Act, and are not compensable under Fifth Amendment Takings law. See Conti v. United States, 291 F.3d 1334, 1340 (Fed. Cir. 2002) (“[N]o property rights are created in permits and licenses.”). Third, Plaintiffs’ brief further clarifies that the Court should dismiss Plaintiffs’ “categorical takings” claim, which, in Count I of the Complaint, is unambiguously premised upon the assertion that Plaintiffs through Mingo Logan’s § 404 permit “acquired a right to use [] property in [an] authorized manner,” Compl. ¶ 68, and then suffered a taking when the government allegedly modified the permit to “deprive United and Mingo Logan of the right to use . . . property as specifically authorized by the permit.”3 Compl. ¶ 71. Plaintiffs now admit that they have no “property right in the Section 404 permit itself.” Pls.’s Resp. Br. 12. And 3 Prior litigation makes clear that the EPA did not “modify” or “revoke” the § 404 permit, but instead acted under § 404(c) to withdraw the specification of disposal sites that were to be used under the permit. See Mingo Logan Coal Co. v. EPA, 829 F.3d 710, 715 (D.C. Cir. 2016). Case 1:17-cv-00067-TCW Document 39 Filed 03/20/19 Page 7 of 18 4 Plaintiffs are unable to cite any case that applies the Supreme Court’s Kaiser Aetna opinion to establish the “categorical rule” Plaintiffs advocate. That is because a “categorical” regulatory taking occurs only in the “‘extraordinary circumstance’ where governmental action deprives a property owner of ‘all economically beneficial uses’ of his property.’” Love Terminal Partners, L.P. v. United States, 889 F.3d 1331, 1340 (Fed. Cir. 2018) (quoting Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1017-18 (1992)). Plaintiffs allege no such facts here, and there is no basis for this Court to continue to entertain a “categorical” takings claim. I. Plaintiff United Admits it Holds No Compensable Property Interest to Support Its Takings Claim In its Response Brief, Plaintiff United concedes dispositive facts that require dismissal of its takings claims. United admits that it did not at any time own a property interest in the Pigeonroost and Oldhouse streams, which it refers to as “hollows.” Pls.’ Br. 3. Specifically, United asserts that “[t]he areas where the hollows are located are owned by three different sister companies of Mingo Logan, which are all subsidiaries of Mingo Logan’s parent company, Arch Coal.” Id. This admission is fatal to United’s claim, because the only federal government action that United claims was a “taking” of its property interests is the 2011 decision by the EPA to withdraw the Pigeonroost and Oldhouse streams from use as mining waste disposal sites — an action that did not regulate United’s property. Compl. ¶ 63 (“On January 13, 2011, the EPA published its Final Determination, which formally withdrew the specification of certain disposal sites that had previously been authorized for the discharge of dredged or fill material for the purpose of construction, operation, and reclamation of the Spruce No. 1 Surface Mine.” (quoting 76 Fed. Reg. 3126, 3128 (Jan. 19, 2011) (internal quotation marks and alterations omitted))). Although the Complaint sometimes refers to EPA’s 2011 action as a “permit revocation,” and United implies that EPA acted in some way to regulate United’s coal deposits, the plain text of Case 1:17-cv-00067-TCW Document 39 Filed 03/20/19 Page 8 of 18 5 the EPA’s Final Determination removes all doubt that the EPA’s action is confined to the regulation of the Pigeonroost and Oldhouse Branch streams: EPA’s Final Determination withdraws the specification of Pigeonroost Branch, Oldhouse Branch, and their tributaries, as described in DA Permit No. 199800436- 3 (Section 10: Coal River), as a disposal site for the discharge of dredged or fill material for the purpose of construction, operation, and reclamation of the Spruce No. 1 Surface Mine. 76 Fed. Reg. at 3128 . In other words, EPA exercised authority under the Clean Water Act to prevent Mingo Logan — not United — from disposing of mining debris in two particular streams that United now admits it does not own. And EPA took no action to regulate the extraction of United’s mineral deposits or the use of United’s land — the two property interests United alleges in the Complaint. See Ohio Valley Envtl. Coal., Inc. v. United States Army Corps of Engineers, 828 F.3d 316, 318 (4th Cir. 2016) (distinguishing between the Clean Water Act and SMCRA, which is the federal statute that mandates certain minimum requirements for state programs that regulate surface mining). Rather, as discussed in the United States’ opening brief, United’s claim is that it suffered a derivative economic injury from EPA’s regulation of property owned by a third party. U.S. Mot. to Dismiss 14-20; Compl ¶¶ 11, 64. The Federal Circuit repeatedly rejects takings claims in these circumstances. See Air Pegasus of D.C., Inc. v. United States, 424 F.3d 1206, 1215 (Fed. Cir. 2005); Mitchell Arms, Inc. v. United States, 7 F.3d 212, 217 (Fed. Cir. 1993). United attempts to distinguish its claims from those in Air Pegasus and Mitchell Arms, Pls.’ Resp. Br. 22-23, but those purported distinctions cannot survive its admission regarding the ownership of the Pigeonroost and Oldhouse Branch streams. In Air Pegasus, the Federal Circuit found no taking where a helipad operation suffered economically from the FAA’s regulation of helicopters that were key to the plaintiff’s business but which the plaintiff did not own. 424 F.3d Case 1:17-cv-00067-TCW Document 39 Filed 03/20/19 Page 9 of 18 6 at 1215-17. United argues that its claim is different because “plaintiffs do own or lease all the land where they want to engage in mining and disposal activities.” Pls.’ Resp. Br. 22. But United admits that it does not own or lease the Pigeonroost and Oldhouse Branch streams, Pls. Resp. Br. 3, and therefore does not own or lease “all of the land” where it wants to engage in “disposal activities.” And EPA did not regulate any extraction activities or take any action regarding the use of United’s land or mineral deposits. Similarly, United cannot distinguish the Federal Circuit’s ruling in Mitchell Arms, which rejects the takings claim of an assault rifle importer affected economically by a federal ban on domestic assault rifle sales. Mitchell Arms, 7 F.3d at 717. There, the Bureau of Alcohol, Tobacco and Firearms “did not take the rifles” but “‘took’ from [the plaintiff] the ability to realize an expectation in the ultimate market disposition of the rifles.” Id. United argues its claim is somehow different because, United contends, it holds a “fundamental and inherent” “right to mine” its land and minerals. Pls. Resp.’ Br. 22. But the EPA did not regulate United’s minerals, and has no authority to do so under the Clean Water Act. See Ohio Valley Envtl. Coal., 828 F.3d at 318. United contends that “[m]ountaintop mining inherently involves the creation of fill piles in the ‘hollows’ between the mountains that are mined,” and that “prohibiting the creation of fill piles necessarily prohibits the mining operations.” Pls.’ Resp. Br. 21. But this contention is a non-sequitur and no different from previously rejected arguments that a helipad owner “inherently requires” helicopter traffic to run a business, Air Pegasus, 424 F.3d at 1215-17, or that an arms dealer “inherently requires” a license to sell its rifles. Mitchell Arms, 7 F.3d at 717. United has no compensable property right in disposing of its mining waste on a third party’s property. United’s argument is also factually incorrect: the EPA’s 2011 action did not withdraw Case 1:17-cv-00067-TCW Document 39 Filed 03/20/19 Page 10 of 18 7 all mining disposal sites that had been specified in the § 404 permit regarding the Spruce mine, but rather two of the three specified sites. See Mingo Logan Coal Co., 829 F.3d at 716 (noting that Mingo Logan began operating the mine in 2007 using the Seng Creek disposal site not subject to the EPA’s later § 404(c) withdrawal action). Because United lacks a compensable property interest in any property that was regulated by the EPA’s 2011 § 404 (c) action, United fails to state a valid regulatory takings claim. II. Plaintiff Mingo Logan Alleges No State Law Property Right That Would Allow it to Dispose of Mining Waste in the Pigeonroost and Oldhouse Branch Streams Mingo Logan now says it holds a lease from its “sister companies” that authorizes Mingo Logan to dispose of mining waste in the Pigeonroost and Oldhouse Branch streams. Pls.’ Resp. Br. 3, 9. But that allegation does not appear in the Complaint and cannot be inferred from the allegations therein. The only lease mentioned in the Complaint is between United — which admits it does not own any property rights with respect to the streams — and Mingo Logan’s “predecessor in interest.” See Compl. ¶¶ 20-22. Apart from a statement that the lease “covers the mining of the Spruce No. 1 area,” Compl. ¶ 20, there are no allegations regarding Mingo Logan’s rights with respect to the streams, and no allegations concerning Mingo Logan’s supposed relationship with the “sister companies” that Plaintiffs now say own the streambeds. Plaintiffs’ allegations fall far short of what RCFC 9(i) requires. That special pleading standard exists to provide the United States and the Court clarity concerning exactly which property rights are subject to a takings claim, and to allow the Court to make a threshold determination whether a plaintiff actually holds a valid and compensable property interest. Plaintiffs’ Complaint instead muddies the waters, and its effort to supplement its pleading through assertions in its brief raises more questions than it answers. Case 1:17-cv-00067-TCW Document 39 Filed 03/20/19 Page 11 of 18 8 Even assuming that Mingo Logan pleaded facts sufficient to allege a leasehold interest in the streambeds, its regulatory takings claim cannot succeed. That is because Mingo Logan holds no more rights than its lessor could have granted, and the lessor cannot hold the rights Mingo Logan claims to assert here. First, as noted in prior briefing, the State of West Virginia asserts title to all streambeds in the state, regardless of their physical characteristics or the origin of riparian titles. U.S. Mot. to Dismiss at 15; West Virginia Division of Natural Resources Natural Resources Annual Report 2016-2017, p. 33 (“The Division of Natural Resources holds for the state the title to the beds of the states’ rivers, creeks and streams totaling some 34,000 miles or some 5,000 names waterways in the state.”); Larry W. George, Public Rights in West Virginia Water Courses: A Unique Legacy of Virginia Common Lands and the Jus Publicum of the English Crown, 101 W. VA. L. REV. 407, 466-67 (1998). And Plaintiffs do not allege facts from which the Court could discern that a private entity, as opposed to the State, owns the streambeds at issue here. Indeed, nothing about Mingo Logan’s “sister entities” and the nature of their property ownership is alleged in the Complaint. But even if Mingo Logan’s lessor holds rights to the Pigeonroost and Oldhouse branch streambeds, it could own only a right of reasonable use with respect to the waters in the streams and may take no action inconsistent with the property rights of downstream riparians. Under West Virginia law, a streambed owner holds “no property in the water itself.” Roberts v. Martin, 77 S.E. 535, 536 (W. Va. 1913). Rather, like any riparian owner, a streambed owner (or its lessee) may make only such use of the water in the stream that does not disturb its flow or impede the rights others who use the stream. Morris Assoc. Inc., 383 S.E.2d at 774. Indeed, the Case 1:17-cv-00067-TCW Document 39 Filed 03/20/19 Page 12 of 18 9 obstruction or diversion of a stream is considered a “nuisance” in West Virginia. Roberts, 77 S.E. at 538. As the West Virginia Supreme Court has summarized the law in this area: The riparian owner’s right is to have the water pass his land in its natural course. Each proprietor may make any use of the water flowing over his premises which does not essentially or materially diminish the quantity, corrupt the quality or detain it so as to deprive other proprietors or the public of a fair and reasonable participation in its benefits. The obstruction or diversion of the natural watercourse or the introduction into it of sediment, sludge, refuse or other materials which corrupt the quality of the water by upper riparian owners or users constitutes an infringement of the lower riparian owner’s property right, which may be enjoined or give rise to a cause of action for damages. Snyder v. Callaghan, 168 W. Va. 265, 272, 284 S.E.2d 241, 246 (1981) (W. Va. 1981) (emphasis added) (internal quotation marks and citations omitted). Furthermore, a downstream riparian owner injured by filling or diversion activities upstream holds a state constitutional property right that it may assert against the State of West Virginia if it issues a permit for the upstream activities. Id. at 275. Here, under its proposed plan of operations, Mingo Logan intended to bury “approximately 7.48 miles of three streams,” and to discharge treated runoff water back into those streams. Mingo Logan, 829 F.3d at 716 (D.C. Cir. 2016). Those operations are inconsistent with “reasonable use,” and propose a level of interference with the streams greater than other, more modest uses prohibited under West Virginia common law. See e.g., Roberts, 77 S.E. at 537 (diversion of water by pipe line to non–riparian land); McCausland v. Jarrell, 68 S.E.2d 729, 731 (W. Va. 1951) (construction affecting drainage of a stream); Halltown Paperboard Co. v. C. L. Robinson Corp., 148 S.E.2d 721, 723 (W. Va. 1966) (pumping water for irrigation upstream causing diminution of the stream’s downstream flow). Mingo Logan cannot plausibly allege a Fifth Amendment taking based on the federal prohibition of property use that is inconsistent with West Virginia common law. Case 1:17-cv-00067-TCW Document 39 Filed 03/20/19 Page 13 of 18 10 Mingo Logan studiously avoids any discussion of West Virginia riparian law in its brief and would have the Court believe that the Pigeonroost and Oldhouse Branch are not really “streams” at all. Pls.’ Br. 14. That is not correct. The 2007 Clean Water Act permit issued by the Corps refers to the Pigeonroost and Oldhouse Branch streams as having the character of “perennial” and “intermittent” streams, see Ex. 1 at 7 (AR025389), and prior federal litigation over these same streams confirms this conclusion. See Bragg v. Robertson, 54 F. Supp. 2d 635 (S.D. W. Va. 1999). In the Bragg case, which Plaintiffs reference in the Complaint, see Compl. ¶¶ 26-27, individual plaintiffs, including downstream riparians, sued to enjoin the issuance of various federal permits for an earlier configuration of the same planned mining operations at issue here, arguing, among other things, that the effects of mining waste disposal in the Pigeonroost stream would detrimentally affect their access to and enjoyment of the stream. 54 F. Supp. 2d at 641. The Court in Bragg found the Pigeonroost stream “to be of very good quality, with clear running water, and containing . . . beneficial aquatic life . . . .” Id. at 643 n.12. The Court also concluded that Mingo Logan’s mining plan4 threatened “permanent destruction of the stream by filling it with tons of rock and fill,” and issued a preliminary injunction pending the Court’s review of SMCRA and CWA permits. In short, there is no question that the Pigeonroost and Oldhouse Branch streams are, in fact, perennial and intermittent streams whose use is governed by West Virginia’s “reasonable use” rule. Consequently, Mingo Logan — whatever its lease rights — has no state common law right to bury or obstruct the streams. Rather, Mingo Logan’s permission to conduct disposal operations in the Pigeonroost and Oldhouse Branch streams is a “use right” granted by the state 4 At the time of the Bragg case, the permit application and mining plan were proceeding under the name of Mingo Logan’s predecessor-in-interest, Hobet Mining, Inc. See Compl. ¶¶ 23, 28. Case 1:17-cv-00067-TCW Document 39 Filed 03/20/19 Page 14 of 18 11 and federal permits it applied for, Mingo Logan, 829 F.3d at 716-17, and not compensable under Fifth Amendment Takings law. See Conti, 291 at 1340 See (“[N]o property rights are created in permits and licenses.”); Am. Pelagic Fishing Co., 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.”). III. Plaintiffs’ “Categorical” Takings Claim Is Barred by Law Because the Plaintiffs lack compensable property interests, their allegations fail to state valid takings claims, however those claims are styled. But Count I of the Complaint asserts a “categorical takings” theory that lacks any basis in the law. The Court should dismiss this claim as a matter of law, regardless of its disposition of the Plaintiffs’ Penn Central claim. Compl. ¶¶ 72-76 (Count II). Plaintiffs argue that “Kaiser Aetna sets forth a categorical rule that when the government specifically authorizes a particular use of property that induces significant reliance in the form of financial investments, the property owner acquires a right to use the property in the authorized manner, unless the permit is revoked based on stable legal rules that were well understood when the permit was issued.” Id. ¶ 68. But as Plaintiffs now acknowledge, no property rights are created in permits and licenses. See Pls.’ Resp. Br. 12 (disclaiming a “property right in the Section 404 permit itself”). That is true whether or not a permit holder has made investments or otherwise taken action in reliance on the permit. See Conti, 291 F.3d at 1340 (no taking for permit revocation despite investment in specialized fishing gear); Am. Pelagic, 379 F.3d at 1381 (no taking for permit revocation despite investment in a specialized fishing vessel). Moreover, the Kaiser Aetna case simply does not stand for the proposition Plaintiffs propose, see U.S. Mot. Case 1:17-cv-00067-TCW Document 39 Filed 03/20/19 Page 15 of 18 12 to Dismiss 12-14, and has never been cited or relied upon to support any kind of “categorical rule.” Plaintiffs mischaracterize the Supreme Court’s ruling in Kaiser Aetna, arguing that the case stands for the proposition that “when the government specifically authorizes the use of private property for a particular purpose and induces the owners to invest millions of dollars in reliance, it cannot then prohibit the authorized use without paying just compensation.” Pls.’ Resp. Br. 16. But the case did not involve a permit from the United States “specifically authorizing” anything. Rather, the Supreme Court ruled that the United States must pay just compensation if it requires a private marina owner to allow public access to the marina: “[W]e hold that the ‘right to exclude,’ so universally held to be a fundamental element of the property right, falls within this category of interests that the Government cannot take without compensation.” Kaiser Aetna v. United States, 444 U.S. 164, 179-180 (1979). Plaintiffs focus on the language in the opinion that concerns the landowner’s supposed reliance on the Army Corps’ “acquiescence” in the dredging project. Pls. Resp. Br. 16. But the Supreme Court did not find a taking on the basis of the landowner’s “reliance” interest in any specific regulatory treatment of its marina. Rather, the Court held that, as a practical matter, once the landowner had “proceeded as far as they ha[d] [t]here,” by connecting a private pond with a federal harbor, the Army Corps of Engineers would be “physically invading” the plaintiffs’ property by requiring public access — essentially invoking condemnation power to impose an easement. Kaiser-Aetna, 444 U.S. at 180. The facts at bar are nothing like these, and feature no alleged physical invasion of the Plaintiffs’ property. Plaintiffs’ misreading of Kaiser Aetna to impose some sort of “reliance”-based “categorical takings” rule has no basis in any of the cases Plaintiffs cite. Pls. Resp. Br. at 17-18. Case 1:17-cv-00067-TCW Document 39 Filed 03/20/19 Page 16 of 18 13 The Avco case involved a California statutory and common law scheme that specifically protects building permit holders who have state-law defined “vested rights” in certain building permits. See Avco Cmty. Developers, Inc. v. South Coast Reg’l Comm’n, 553 P.2d 546, 550 (Cal. 1976). Avco precedes Kaiser Aetna by several years, turns entirely on state law, and does not even address whether the revocation of a building permit would constitute a Fifth Amendment taking. The Fifth Circuit Wheeler case involved a substantive due process claim, not a takings claim, and the Court ruled that the building ordinance at issue was “arbitrary and capricious” and “unconstitutional” — not a taking that requires just compensation. See Wheeler v. City of Pleasant Grove, 664 F.2d 99, 100-101 (5th Cir. 1981). And in the A.A. Profiles case, the Eleventh Circuit, though it cites Kaiser-Aetna, does not discuss the case outside of a string of citations offered for the proposition that a taking may arise where “a governmental entity exercises its police power through regulation which restricts the use of property.” A.A. Profiles, Inc. v. City of Ft. Lauderdale, 850 F.2d 1483, 1486 (11th Cir. 1988). In reality, the Supreme Court has recognized a “categorical” regulatory taking only in the “‘extraordinary circumstance’ where governmental action deprives a property owner of ‘all economically beneficial uses’ of his property.’” Love Terminal Partners, 889 F.3d at 1340 (quoting Lucas, 505 U.S. at 1017-18). Plaintiffs do not attempt to allege a Lucas taking here. Because there is no legal basis for Plaintiffs’ invented “categorical takings” claim, the Court should dismiss Count I of the Complaint for failure to state a claim upon which relief can be granted. Case 1:17-cv-00067-TCW Document 39 Filed 03/20/19 Page 17 of 18 14 CONCLUSION Plaintiffs have not been disturbed in the use of their property; they have been denied the destructive use of natural resources that Plaintiffs do not exclusively own or control, and as to which any rights Plaintiffs hold are subject to pervasive government control. For the reasons stated above and in the United States’ opening brief, the Complaint fails to state a claim upon which relief may be granted. Accordingly, the United States moves the Court under RCFC 12(b)(6) to dismiss the Complaint with prejudice. Respectfully submitted this 20th day of March, 2019, JEAN E. WILLIAMS Deputy Assistant Attorney General United States Department of Justice Environment & Natural Resources Division /s/ JOSHUA P. WILSON United States Department of Justice Environment & Natural Resources Division Natural Resources Section P.O. Box 7611 Washington, DC 20044-7611 Telephone: (202) 305-0482 Facsimile: (202) 305-0506 joshua.wilson@usdoj.gov Attorneys for the United States Case 1:17-cv-00067-TCW Document 39 Filed 03/20/19 Page 18 of 18