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Otay Mesa Prop., L.P. v. United States

United States Court of Appeals, Federal Circuit

March 6, 2015

OTAY MESA PROPERTY, L.P., RANCHO VISTA DEL MAR, OTAY INTERNATIONAL, LLC, OMC PROPERTY, LLC, D & D LANDHOLDINGS, LP, INTERNATIONAL INDUSTRIAL PARK, INC., (also known as Rancho De La Fuente), Plaintiffs-Appellants, KYDDLP & RDLFGFT NO. 1, LLC., Plaintiff
v.
UNITED STATES, Defendant-Cross Appellant

Page 1316

Appeals from the United States Court of Federal Claims in Nos. 06-CV-0167, 06-CV-0877, 06-CV-0876, 06-CV-1670 and 06-CV-1671, Judge Thomas C. Wheeler.

ROGER J. MARZULLA, Marzulla Law LLC, Washington, DC, argued for plaintiffs-appellants. Also represented by NANCIE GAIL MARZULLA.

JOHN EMAD ARBAB, Environment and Natural Resources Division, United States Department of Justice, Washington, DC argued for defendant-cross-appellant. Also represented by SAM HIRSCH.

Before TARANTO, SCHALL, and CHEN, Circuit Judges.

Page 1317

DECISION

SCHALL, Circuit Judge.

This is the second time this case has been before us. In Otay Mesa Property, L.P. v. United States, 670 F.3d 1358 (Fed. Cir. 2012) (" Otay Mesa I " ), we held that the United States was liable to plaintiffs Otay Mesa Property, L.P., Rancho Vista Del Mar, Otay International, LLC, OMC Property, LLC, D & D Landholdings, LP, and International Industrial Park, Inc. (collectively, " Otay Mesa" ) for the taking of property owned by them.[1] Specifically, we ruled that the U.S. Border Patrol's placement of motion sensors on five separate parcels of land owned by Otay Mesa adjacent to the Mexican border in Southern California constituted the taking of permanent easements over the parcels. Id. at 1365. We remanded the case to the United States Court of Federal Claims for a determination of the damages to which Otay Mesa was entitled as a result of the taking. Id. at 1369--70.

On remand, the Court of Federal Claims held (1) that Otay Mesa was entitled to no damages for the taking of an easement over land that could be developed for industrial use (" the development property" ); (2) that it was entitled to damages in the amount of $455,520 for the taking of an easement over land that could be used for environmental mitigation purposes (" the mitigation property" ); and (3) that interest on the $455,520 damages award should run from August 28, 2008, the date the court found Otay Mesa became aware of the taking as a result of the filing of a stipulation of liability by the government. Otay Mesa Prop., L.P. v. United States, 110 Fed.Cl. 732, 743--47 (2013) (" Otay Mesa II " ) (interest on the damages award was initially deemed to run from October 16, 2008, but the date was adjusted following a motion for reconsideration, 111 Fed.Cl. 422, 424 (2013) (" Reconsideration Decision " )).

Otay Mesa appeals the decision of the Court of Federal Claims denying damages for the taking of an easement over the development property. It also appeals the decision of the court to compute interest on the $455,520 damages award from August 28, 2008, rather than from the dates sensors were first installed on the parcels containing the mitigation property, as stated in the government's stipulation of liability. For its part, the government cross-appeals the damages award for the taking of an easement over the mitigation property.

For the reasons set forth below, we affirm the decision of the Court of Federal

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Claims denying damages for the taking of an easement over the development property. We also affirm the decision of the court awarding Otay Mesa $455,520 in damages for the taking of an easement over the mitigation property. However, we vacate the decision of the court computing interest on the $455,520 damages award from August 28, 2008. As we explain, Otay Mesa is entitled to interest computed from when sensors were first placed on its property. The dates the Border Patrol first placed sensors on Otay Mesa's property are set forth in the government's stipulation of liability. We thus affirm-in-part, vacate-in-part, and remand. On remand, the Court of Federal Claims will determine the amount of interest to which Otay Mesa is entitled on the $455,520 damages award.

Background

The facts of the case are set forth in Otay Mesa I and in the several decisions of the Court of Federal Claims. We recite here the facts pertinent to the issues now before us.

I.

Otay Mesa owns eleven contiguous parcels of largely undeveloped land adjacent to the Mexican border in the Otay Mesa area of San Diego County. Otay Mesa I, 670 F.3d at 1360. Five of those parcels, Nos. 1, 3, 4, 5, and 10, are at issue in this case. Beginning in April 1999 and continuing through November 2005, the Border Patrol placed a total of fourteen motion sensors on those parcels in order to detect illegal immigrants entering the United States from Mexico. The motion sensors are approximately one cubic foot in size and are buried underground, except for a one foot antenna that remains above the surface of the soil. Joint Appendix (" J.A." ) 1792 at ¶ 3; see also Otay Mesa II, 110 Fed.Cl. at 734.

In 2006, Otay Mesa filed suit in the Court of Federal Claims alleging, inter alia, that the installation of the sensors constituted a taking of Otay Mesa's property, entitling it to " just compensation" under the Fifth Amendment's Takings Clause. Otay Mesa Prop., L.P. v. United States, 86 Fed.Cl. 774, 775 (2009) (" Liability Decision " ).[2] On August 28, 2008, prior to the trial on liability, the government filed a document in which it stipulated that " by virtue of its placement of the 14 sensors on the five parcels of land, it had taken a property interest in the nature of an easement over the parcel of land on which the sensors have been placed." J.A. 1793 at ¶ 6; see also Liability Decision, 86 Fed.Cl. at 777, 790--91. The document stated that the Border Patrol had installed sensors during the period beginning April 1999 and ending November 2005. The document described the easement, in relevant part, as:

A perpetual and assignable easement to locate, construct, operate, maintain and repair or replace the specified underground seismic intrusion sensors on the specified parcels, including the right to ingress and egress to each sensor location. The easement shall be deemed to have commenced on the date the sensor is listed as having been installed, and will continue until the sensor is no longer needed or the property is developed. Each sensor is and shall be located so as not to affect the functionality of the property. Should the landowner desire to develop any portion of the subject parcel, the sensor will be removed or redeployed upon 30 days written notice that a grading permit has been issued

Page 1319

by the County of San Diego permitting development of all or a portion of the property. Upon removal of a sensor, the portion of the easement relating to that sensor shall terminate.

J.A. 1794 at ¶ 7; see also Otay Mesa I, 670 F.3d at 1361--62.

Based on the government's stipulation, the Court of Federal Claims held that the government was liable for the physical taking of a temporary easement over the five parcels for the purpose of installing and operating the sensors. The court reserved the determination of damages for subsequent proceedings. Otay Mesa I, 670 F.3d at 1362. Following a trial on damages, the court determined that Otay Mesa was entitled to compensation in the amount of $3,043,051, plus interest for the taking of the easement. Id.

II.

The government appealed the decision of the Court of Federal Claims. According to the government, the trial court incorrectly ruled that the taking of the easement was temporary rather than permanent. That ruling, the government contended, led the court to use the fair market rental value method of determining compensation, rather than the before-and-after method, which resulted in an erroneous calculation of Otay Mesa's damages.[3] The government argued that, under the before-and-after method, Otay Mesa was entitled to only a nominal award, in view of the court's finding that the use of the sensors had not resulted in any restriction on the functionality of the property. Id. at 1363. For its part, Otay Mesa cross-appealed the Court of Federal Claims' decision to limit the scope of the taking to five parcels of land (Nos. 1, 3, 4, 5, and 10) and the time period (April 1999 through November 2005) identified in the government's stipulation. Id.

In Otay Mesa I, we held that the Border Patrol's blanket easement to install, maintain, and service sensors on Otay Mesa's property constituted a permanent physical taking. Id. at 1365. We thus remanded the case to the Court of Federal Claims for a redetermination of damages. We stated that, " [o]n remand, the court should determine damages based upon the Border Patrol having taken a permanent blanket easement over Otay Mesa's property, as set forth in the stipulation." Id. at 1368. We agreed with the government that the Court of Federal Claims erred in ruling that the Border Patrol had temporarily taken Otay Mesa's property. We did not, however, endorse the government's view that Otay Mesa's damages should be determined based upon a before-and-after methodology. Id. at 1369. Rather, we stated:

As noted, the government has argued before us that Otay Mesa's damages should be determined based upon a before-and-after methodology. While diminution in value is a useful methodology in many cases, we reiterate that the focus of the damages analysis must always remain on awarding just compensation for what has been taken. To award just compensation, a court must sometimes deviate from ...

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