United States v. 50 Acres of Land

PETITIONER:United States
RESPONDENT:50 Acres of Land
LOCATION:United States Courthouse

DOCKET NO.: 83-1170
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 469 US 24 (1984)
ARGUED: Oct 02, 1984
DECIDED: Dec 04, 1984

ADVOCATES:
H. Louis Nichols – on behalf of Respondent
Joshua I. Schwartz – on behalf of Petitioner

Facts of the case

Question

Audio Transcription for Oral Argument – October 02, 1984 in United States v. 50 Acres of Land

Warren E. Burger:

We’ll hear arguments next in United States against 50 Acres of Land.

Mr. Schwartz.

Joshua I. Schwartz:

Thank you, Mr. Chief Justice, and may it please the Court:

This case is here on writ of certiorari to the United States Court of Appeals for the Fifth Circuit.

The question presented is whether when the United States takes property belonging to a state or local government for federal use it is obliged by the just compensation clause of the Fifth Amendment to pay compensation measured by reference to the cost of a substitute facility rather than the usual standard in condemnation cases, the fair market value of the property that was taken by the United States, even though in the particular case a market exists for the kind of property that was taken and it is found that the fair market value measure is reasonably ascertainable in the particular case.

The Court of Appeals answered the question in the affirmative; the government contends that the answer should be no.

The case arises from the taking of a 50 acre site occupied by a sanitary landfill, occupied by the Respondent, the city of Duncanville, Texas.

That site was taken, along with an adjacent site which was in private ownership prior to the taking to accommodate a Corps of Engineers flood control project, the site would be flooded by the project, and therefore the United States was obliged to pay compensation for it.

The taking was carried out pursuant to the so-called quick take provisions of the Declaration of Taking Act, which was effective on October 3, 1978.

Estimated just compensation of just under $200,000 was deposited into the registry of the court, and it was later released to Respondent.

Following the taking, Respondent employed a temporary landfill site which was in private ownership for an interim period and later, approximately two years later, began to use a new site located in Ellis County, Texas, consisting of somewhat over 113 acres that it had purchased and used as a substitute site.

The usable capacity of the substitute site, according to the uncontradicted evidence, was somewhat greater than three times that of the site that the United States had acquired from the City of Duncanville.

A dispute arose in the District Court between the parties as to the proper measure of compensation for the taking.

The government contended that the usual fair market value standard should be applied.

Respondent claimed that it was entitled to recover the entire sum that it alleged it had expended and would in the future expend in improving… in acquiring and improving the substitute site in Ellis County.

The District Court was unwilling to resolve the issue at the threshold.

Instead, it determined to allow both theories to go to the jury.

Both parties were allowed to present evidence in support of their respective theories.

The jury was asked by special questions to return alternative verdicts: one, the finding of substitute facilities standard of compensation; the other, the fair market value measure of compensation.

The jury’s verdicts were $723,000, a bit over $723,000 for a substitute facilities measure, and $225,000 for the fair market value measure.

The District Court then proceeded to enter judgment against the United States, but on the government’s theory as to the amount of just compensation, the District Court held that in a case such as this where fair market value is ascertainable and it is found that a market exists for the property of the kind taken, that is the measure that is required to be employed under this Court’s decisions; and furthermore, the District Court found that the Respondent had not ever carried its burden of presenting… had not in any event presented a prima facie case as to what a reasonable substitute facilities compensation award might be, the District Court observing that the only testimony proffered by Respondent pertained to the site they had actually acquired, a site that was three times as large as the site that was taken, and the District Court also observing that the testimony suggested that Respondent had paid in excess of fair market value for its substitute site.

The Court of Appeals reversed.

The Court of Appeals conceded that this case was, in their language, rather different from a typical substitute facilities case in that in this case fair market… there was no claim that fair market value was either unavailable or unworkable; nevertheless concluded that Respondent was entitled to have its compensation measured by reference to the cost of the substitute facility.

The Court of Appeals did attach a significant caveat, however, to that holding.

It held that Respondent was not entitled to the benefit of the advantages that accrued from purchasing a larger site, and that on remand, the case was remanded for a new trial so that on remand the jury could be instructed to make an appropriate deduction from the substitute facility cost to wash out the windfall that might otherwise result from the fact that the Respondent had purchased a more, a larger and more capacious landfill site.

The government’s position, as it has been throughout this case, is that the fair market value standard, which is ordinarily preferred in this Court’s cases, is the proper measure of compensation for the taking of Respondent’s landfill site.

In the final analysis, our submission is that what is lacking in the Court of Appeals rationale and in Respondent’s argument is any explanation of what is… what is defective about the Preferred fair market value standard of compensation.

It does not seem to be controverted that the Court’s decisions establish that the fair market value standard is the preferred mechanism.

The Court’s cases make two essential points in support of that proposition.

The first is that market value assists, in an economy such as ours, measures what Justice Frankfurter called the external… has in it what Justice Frankfurter called the external validity of values that make it a fair measure of public obligation to compensate the loss incurred by a property owner as a result of the taking of his property for public use.

Joshua I. Schwartz:

The point is that various individuals may have different use values for property, but if we are to have any common standard and a just compensation clause that says the government must pay someone for its property, there has to be a kind of lingua franca, a common standard of compensation, and Justice Frankfurter explained and the Court has quite uniformly held that fair market value provides that objective standard.

The Court has also observed that the fair market value standard has the considerable advantage of case of administration, although it is not… there are always arguments as to what fair market value might be in a particular case, the method is relatively easy to apply and has less complications and speculations associated with it than competing methods.

The Court has, however, recognized two situations in which fair market value may… a departure from fair market value may be warranted.

The first is the situation where a market simply does not exist for the kind of property that was taken, and this exception, it has been noted, may well apply to cases where taking of public property such as a condemnation of a bridge, a sewer line or a road which frequently simply do not exist or don’t have any counterparts in the private sector.

The Court’s opinion in the Lutheran Synod case suggests, although it does not hold, that in that kind of case it may be appropriate to use a substitute facilities measure of compensation, and in fact, the government concedes that point in our brief in those case, and it seems only reasonable where fair market value simply is not a workable system, or market value in one sense simply doesn’t exist, it is pointless to insist that the courts apply it.

But there is no claim in this case, just as there is no–

William H. Rehnquist:

Mr. Schwartz, you say that in the case of sewers and water lines, fair market value simply doesn’t exist.

Are you saying that a finder of fact, properly instructed with valuation instructions in that kind of a case, in hearing testimony, couldn’t place a value on, say, a sewer line?

Joshua I. Schwartz:

–Well, our question… a value could be placed on it, but our… the problem is what would the right kind of testimony be?

The usual methods of establishing the normal fair market value standard, which is to look to what a hypothetical buyer would pay a hypothetical seller, are very difficult to apply because no one would buy a sewer line, or it is at least typically assumed that no one would buy, no one–

Byron R. White:

At least there haven’t been any sales.

Joshua I. Schwartz:

–There haven’t been any sales, there’s no income from the property to capitalize, so that the… to say that a jury properly… a trier of fact properly instructed with the proper evidence is to beg the question.

The question is what proper evidence there would be in developing–

William H. Rehnquist:

Well, but you know, in cases where there are no comparable sales, you can go to sometimes to reproduction cost.

Why can’t you do that in the case of a sewer line?

Joshua I. Schwartz:

–Your Honor, I don’t think I disagree with what you said.

Our point is that the substitute facilities measure which we concede is applicable to that kind of taking of public property is really not any different from a reproduction cost measure which is sometimes applied in the taking of private property.

You do the same, although the labels are different in each case, when no comparables are available and perhaps there is no income to capitalize, you lock at what it would cost to build the substitute, and then you discount for the… for either depreciation or the added value of the–

William H. Rehnquist:

But why not say that is one form of fair market value rather than saying where fair market value can’t be ascertained you resort to substitute facilities.

Well, it isn’t market value, is it?

I mean, it’s fair value, but it isn’t market value.

Joshua I. Schwartz:

–It’s a fair value, and I don’t… I think it’s… I’m not sure it makes all that much difference.

It is true that terminologically, for reasons that may be perfectly arbitrary, the courts have referred to reproduction costs as the third and least preferred of the fair market value methods.

It is in a sense quite different from the others, and if we wanted to use the label substitution costs, both for a private case in which reproduction cost is appropriate, as the last alternative, the alternative of last resort, and for public cases where it is the alternative of last resort, the law wouldn’t be any different.

It seems to me it is just a semantic question.

In any event, we tried to make clear in our brief that the kind of situation where substitute facilities is appropriate for a public entity is the same kind of situation where reproduction costs would be appropriate for a private entity.

We don’t see it as a principle that has anything to do with the nature of the entity that owns the property taken, in other words.

It is a principle that has to do with the market… whether there will be evidence available as to what the market would bear for that kind of property.

But the point in this case, of course, is that this is not that kind of case.

It is conceded that their fair market value was ascertainable.

Joshua I. Schwartz:

In fact, Respondent’s expert witnesses testified that this landfill site would have sold in the open market, and they adduced comparable sale evidence, and they assigned the fair market value to the property.

Sandra Day O’Connor:

Well, Mr. Schwartz, I guess there is language in our cases that something other than fair market value can be used in two instances: one, if you don’t have a fair market value, which you have been discussing; or secondly, where it is manifestly unjust to the owner or the public to apply a fair market value principle.

Now, did the court below attempt to analyze this case within that framework to determine whether it is manifestly unjust here to use fair market value?

Joshua I. Schwartz:

No.

The court–

Sandra Day O’Connor:

Could, could a case like this, where you are taking a landfill, for example, or some other public facility that must be replaced, would it ever be appropriate to analyze it in terms of that manifestly unjust standard?

Could it fit?

Joshua I. Schwartz:

–Your Honor, I hesitate to say no, never, but I think the pertinent question that needs to be answered is why would it be… try to understand why it might be manifestly unjust in a particular case, and neither the Court of Appeals nor Respondent has explained why it might be manifestly unjust.

But it seers to me that there are a number of reasons that have been thrown out–

Sandra Day O’Connor:

Well, okay, would it include the fact that inevitably this local government is going to have to acquire a substitute because it is under an obligation to dispose of trash and garbage; and secondly, because it is going to have to make a substantial additional expenditure to do it over and above acquiring the land, if those were the facts?

Joshua I. Schwartz:

–We are not satisfied that either of those would establish the kind of manifest injustice, and I would like to… that the Court has in mind, to the best of my understanding, and I would like to explain why that is so.

The Court of Appeals focused on the first of the points that you made.

Although they didn’t actually say that there was an impermissible or unjust divergence between the so-called indemnity principle of just compensation and fair market value, they did, but in distinguishing this Court’s decision in Lutheran Synod say, this case is different because there’s an obligation to replace the property.

We don’t think that the obligation to replace the property is a sufficient distinction for several reasons, and most of what I have to say follows the line of analysis that is in Justice White’s concurring opinion in the Lutheran Synod case.

Certainly private entities frequently have either a legal… may well have legal obligations to replace property, and in any event, certainly have the same pragmatic imperatives to replace property that a public condemnee may experience.

The Court’s opinion in Lutheran Synod points out that noncommercial property owners, the most obvious and important example of which is homeowners, hold their property for use and not for its stream of income or its investment value, typically, and certainly if the Highway Department puts an interstate highway through your home, it is difficult to conceive of any greater imperative to replace that home, and I submit that irrespective of legal or practical obligation, a public body such as Respondent doesn’t have a greater necessity to replace the facility.

Sandra Day O’Connor:

Well, it may have a more immediate necessity.

If what has been taken is the public water supply or the, in this case, sanitary landfill, the city or the county has an obligation tomorrow to have something in place to take care of that.

Joshua I. Schwartz:

The homeowner has an equal–

Sandra Day O’Connor:

The homeowner can go rent something temporarily.

Sure, you need a place to live, but it is not the same.

The public entity has an obligation to keep these public services going.

Now, can that be a factor in determining what is manifestly unjust?

Joshua I. Schwartz:

–It still seems to me that you need something else.

In fact, the argument made in Lutheran Synod which the Court found to be factually inapplicable there, that the necessity of replacement might, the Court said might, and expressly reserved the question which we have here today, might be sufficient to show injustice, was based on two claims: one, the claim of need to replace, and second, the claim that the replacement facility would for some significant reason beyond the local… the condemnee’s control, be greater than the fair market value.

Unless there is that disparity in existence, it seems logically irrelevant to worry about whether you need to replace it because fair market value should be a sufficient replacement.

In this case neither the Respondent nor the Court of Appeals has explained why it is that it is in the nature of things that a replacement site is more expensive.

If that is not so, fair market value doesn’t impose a hardship, and the reed to replace, while it may be relevant, is not a sufficient condition for–

Sandra Day O’Connor:

Well, what if the cost of the substitute was significantly less?

It might be to the government’s advantage to compel a substitute facility cost measure because you could pay the local government less.

Joshua I. Schwartz:

–We are aware of that, and in our brief we have made our choice.

We concede that the fair market value standard is the applicable one.

The cases generally suggest that that is true, that fair market value should be paid when it is in excess of the substitute facility’s cost, and the reasoning behind that is whether or not the municipality actually chooses to make that use of its property, if it owns property and has the legal right to sell it, it has… it could, at least hypothetically, sell it in the marketplace, take the money, and then recreate that… carry out its function at another site.

And we agreed that the rule must work both ways, and yet we suggest that it ought to work in the manner that fair market value is the standard either way.

In fact, I was going to point out it is our submission that it is possible to read the record to suggest that in this case the Respondent may well be receiving quite a fair shake, quite an advantageous deal by getting fair market value compensation.

Respondent’s claim for a far greater sum is based on its testimony as to what it actually paid for its replacement site.

That testimony was that they paid some $583,000 for the site, but the government’s appraisers who testified on that question, who were the only ones who testified as to what the fair market value of that site was, said that it was not in excess of $200,000.

So that is obviously one of the defects in this–

Byron R. White:

Well, how did the jury come in with $750,000?

Joshua I. Schwartz:

–The truth is, Your Honor, we don’t have any way of knowing.

The jury picked a number that was much lower than Respondent’s claim and much higher than ours, and one of the problems that we see in a substitute facilities standard, even if it is corrected, as the Court of Appeals acknowledged it had to be, by a far more rigorous instruction than was actually given, that some discounting was needed, it is still quite difficult to know how the jury will proceed, and we relieve that there is a substantial risk of unfair prejudice to the United States because the jury or other trier of fact will be confronted with some… could be confronted with some very large numbers.

And again, even if they… we just don’t see the need to depart from the fair market value system.

But if I could continue to explain where I am going, the other fact which appears to be undisputed here is that the new site was three times… had three times the useful life of the old site.

If you put that fact together with the evidence that suggests this site had a fair market value of one third of what was actually paid, one could come to the conclusion that the substitute facilities cost, the reasonable substitute facilities cost for an equivalent facility may have been less than the fair market value.

Byron R. White:

Well, wouldn’t the Court of Appeals adjustments take care of that?

Joshua I. Schwartz:

Well, that on… on that we have several difficulties.

The first thing is the Court of Appeals said–

Byron R. White:

Well, wasn’t it aimed at that?

Joshua I. Schwartz:

–The Court of Appeals said that–

Byron R. White:

If the substitute facility is obviously twice as big, or lasts twice as long, I would suppose the adjustments would take care of that.

Joshua I. Schwartz:

–Well, there is some possibility of that.

There are several reasons for being concerned that that is not an adequate response.

The first is that the Court of Appeals declined to prescribe how this should be done.

It said one way you might do it is the way the Second Circuit suggested in a case called Certain Property in the Borough of Manhattan, which requires a quite mechanical discounting for the added lifetime, and the government obviously would be far better protected under that system than it would be under the instruction given here.

And yet the Court of Appeals explicitly declined to require that.

And that obviously gives us unease.

Byron R. White:

But it did vacate the–

Joshua I. Schwartz:

It did, but it placed us in quite a grey area, where we do not see… and the other… and of course, there is also the question of the Court of Appeals’ other adjustment.

The Court of Appeals said yes, it may be that the price paid for a substitute facility was unreasonable in this case.

That is a question for the jury.

Joshua I. Schwartz:

The question is how is the jury to decide that?

We would submit the only way a jury can know whether a price is reasonable is to lock at the fair market value of a substitute facility.

But that entails a new item of complication, that is, to present comparable sales as to the new facility.

And that in fact happened in this case, a point which I regret not emphasizing in my brief.

The government’s appraisers went out and did two sets of appraisals.

They appraised comparable sales to establish the value, the fair market value of the substitute site and found that what had been paid was grossly in excess of fair market value.

But if you are going to make that adjustment and you are going to make the other adjustment, it seems to me that there are essentially two possibilities.

Either it will be done rigorously and you will have gone all the way around the barn and ended up back where you started out, or else somewhere along the line some prejudice to the government will have crept in because it wasn’t done rigorously, because the jury was dazzled by some large numbers that were brought out.

Those things suggest to us that there is no reason to change what the Court has called a clear, easily administrable rule.

No suggestion… there has been no showing here that the kind of manifest injustice that the Court has suggested might be relevant actually arose here.

The kinds of reasons that have typically been suggested as to why there might be unjustice seem to us insufficient.

If you pay an unreasonable price for a substitute site, it is not unjust that the condemnee bear that price.

If you take a much larger, more valuable substitute site, it seems to us not unjust that the condemnee should, which has the benefit of what it bought with that extra cost, should bear that.

Byron R. White:

–Didn’t you have a chance to put on your evidence?

I gather you did; you put on your evidence as to what this substitute facility was worth.

Joshua I. Schwartz:

Yes, Your Honor.

In fact, we–

Byron R. White:

You said you were the only evidence about that.

Joshua I. Schwartz:

–We… the government presented a… presented evidence to challenge many of the items in this list of figures which is in the petition appendix at 16a and 17a that the Respondent presented, and I think we seriously challenged in the jury’s eyes many of those figures.

Byron R. White:

Well, you did… you did it as well as you could, and the jury just didn’t believe you.

Joshua I. Schwartz:

Well–

Byron R. White:

Or they didn’t accept your story, anyway.

Joshua I. Schwartz:

–Well, I don’t think it is fair to say that we did it as well as we could.

Of course, the Court of Appeals–

Byron R. White:

Well, you had your chance, though.

Joshua I. Schwartz:

–Well, the Court of Appeals agreed that we were handicapped by an improper District Court instruction which did not direct the jury to do what it should have done.

But the other thing is the government made a deliberate choice not to go through cost by cost because the government, while it was interested in protecting its flank, did not choose to try this case entirely on the two alternative theories; only partially so.

We did what we thought was necessary to let some of the air out of the other side’s case, and yet we did not want to present a… take them, take the jury all the way around the barn ourselves.

It seemed to us that that was–

Byron R. White:

Well, then, I guess you are stuck with it if we think the substitute facility view is all right; you are stuck with the Court of Appeals deductions from this $750,000, I take it.

Joshua I. Schwartz:

–Well, we don’t really know what that will amount to.

Byron R. White:

On remand, on remand are they going to redetermine the value of the substitute facility or just determine some deductions?

Joshua I. Schwartz:

My understanding of the terms of the remand is that we will have an entirely new trial, so I don’t suppose the government would be stuck, but again, if I may make the point–

Byron R. White:

Why would they set aside the 750,000 valuation as a base from which to make some deductions?

Joshua I. Schwartz:

–I believe the Court of Appeals was persuaded by the government’s argument to this extent, that there was a fundamental lack of a proper standard in the District Court’s instruction, so there was no telling what that $750,000 represented, whether it just represented some ad hoc notion of compromise.

Warren E. Burger:

Let me go back, Counsel.

Isn’t the basic rule fair market value unless it is not ascertainable?

Joshua I. Schwartz:

That would be our submission.

The Court’s cases, as Justice O’Connor pointed out, have always held open the possibility that some other kind of unjustice could be demonstrated.

Our submission is simply that nothing of that kind has been shown here.

We don’t think the Court needs to decide that there could never be any other circumstance, but nothing in the nature of the taking of a public property where fair market value exists and is readily ascertainable presents that kind of unjustice.

And that seems to be the end of the matter.

And if there are no further questions, I–

Warren E. Burger:

I suppose if the federal government was taking a local airport, you might have difficulty finding a fair market value of the airport as such unless it was adaptable for development, real estate development.

Would that be the type of case where they might turn to some other standard?

Joshua I. Schwartz:

–An airport case might be, although it might be that there… that a low… as an airport has some special features, a large, assembled tract, but it might be that, depending on the area you are in, that plain, raw, undeveloped land would essentially be fungible.

It would be a question of the improvements.

It would be a factual question as to whether or not there were comparable sales, and I don’t think I can give a categorical answer.

That is the kind of a case in which–

Byron R. White:

It really would be hard to sell O’Hare Airport, wouldn’t it?

Joshua I. Schwartz:

–I would think so, although maybe in some areas a small private, relatively small airport might be different.

I don’t think I can give a categorical answer to that.

But that would be the kind of case in which it would be open to contend that the fair market value standard really isn’t workable.

And this case, we submit, is quite different.

Warren E. Burger:

Mr. Nichols?

H. Louis Nichols:

Mr. Chief Justice, and may it please the Court:

This case is noted on your docket as being United States of America v. 50 Acres of Land, et al., and I represent the et al. I represent 28,000 citizens in the City of Duncanville whose sanitary landfill was taken by the United States and who seek to receive just compensation under the Fifth Amendment for a public facility which was taken and which had to be replaced by the local government.

The question is what is just compensation, not just what is any compensation, but what is just compensation where a local facility is being taken by the federal government and which must be replaced not net year sometime, but has to be replaced tomorrow?

You know, you pick up your garbage; you have got to put it down someplace.

Everybody wants you to pick it up, but nobody wants you to put it down in their neighborhood.

H. Louis Nichols:

So it isn’t a matter of going out and buying you another piece of land tomorrow and start dumping garbage there.

You’ve got to find you a piece of land, you’ve got to find it in an area where you’re not going to have a lot of neighborhood opposition.

William H. Rehnquist:

Mr. Nichols, how much time elapsed in this case between the first notice you had of the condemnation and the actual taking by the government, the dispossessing?

H. Louis Nichols:

Your Honor, they gave us the immediate notice and says, like I say, normally we’d give you 90 days, but we want it immediately because we don’t want you to pollute our lake anymore, so you go out and get you another site.

And they… and I filed a motion to give us more time, and we were able to work out a month or two, while we went out and acquired a temporary facility that was owned by someone else that we could use temporarily.

If you use the federal government’s position that only market value is the proper measure of damages.

they would not even pay the $110,000 that we had to spend as extra expenses temporarily while we were trying to find another facility.

So they wanted it… in the file there’s a letter from Colonel Wall that says normally we would give you 90 days, but we want to get this site immediately, and we know it is going to be a job for you to get another site, but you go out and set it anyhow, so we did.

William H. Rehnquist:

What, did you have less than 90 days or more than 90 days?

H. Louis Nichols:

Oh, we had only, we had only about two months, less than 90 days.

They wanted it immediately.

I got a little time by going into court and filing a motion, dragging my feet, while we were trying to find another location.

But they wanted it the next day.

Warren E. Burger:

You referred, Mr. Nichols, to the language of the Constitution–

H. Louis Nichols:

Yes.

Warren E. Burger:

–which is the starting point, but hasn’t that language been embellished by construction to place on the meaning of the Constitution fair market value as the primary–

H. Louis Nichols:

Well, this Court has not said that, Your Honor.

This Court has not… as a matter of fact, this Court has said that fair market value is not the only measure of compensation.

Warren E. Burger:

–Not the only, no, but isn’t that the starting point through the law generally?

I am not speaking of our Court here.

H. Louis Nichols:

The starting point is just compensation, that what is just compensation.

Just compensation is just indemnification, and this Court has said that the way you get to just indemnification is by the adoption of certain workable rules, and that we have applied market value as being a workable rule in some circumstances, but in other circumstances it may not be a proper rule to be followed by this Court.

So I think we have to find out what teachings do we receive from this Court because you know and I know that what just compensation in the Fifth Amendment means is what you say it means.

I mean, this is the bottom line, the end of the line; what you say is just compensation is just compensation.

So what have you said in the past as to what is just compensation?

First, you’ve said that we have not determined what is just compensation under the Fifth Amendment where a public facilities property is being condemned.

You noticed that in the Lutheran Synod case.

And Mr. Justice White noted that we will reserve that to another day.

Well, this is that day.

This is the day for you to decide what is just compensation when a public facility has been taken and which must be replaced, what is just indemnification to the community which has lost a public facility which had to be immediately replaced to protect the public health of the community.

H. Louis Nichols:

Now, that is really what we are here to decide today.

Sandra Day O’Connor:

Well, now, Mr. Nichols, I guess your city had the right to go out and condemn another parcel and take it right away.

H. Louis Nichols:

They have a right to get it in about 30 days, but the problem is not solved by that, Your Honor.

The problem… getting the land is just the beginning of it.

The problem is solved in going out and satisfying the state that this is a suitable site for which you can receive a permit, and satisfying the state’s requirements as to how you may use that site.

There’s no problem buying a piece of land.

That’s no problem.

You know, you may not be very interested in landfill, but wait until you try to locate one in somebody’s neighborhood, and then you will find out what the interest is.

Sandra Day O’Connor:

Or a prison.

H. Louis Nichols:

Or a prison, sure.

So in this instance, certain things had to be done.

We went out first, we found this piece of land that we could buy, and we found a piece of land where there won’t be a lot of neighborhood opposition.

That’s one thing you don’t want, a lot of neighborhood opposition.

We found a piece of land which could be used, and it was within a reasonably close distance.

You know, you don’t want a landfill a hundred miles away where the garbage trucks have got to go a hundred miles every day.

So you try to find one as close to the city as you can get.

And we found one reasonably close, two miles further away, but on a better highway, so you get there in about the same amount of time.

Then we made the application to the state for a permit on this.

We had public hearings on this.

Everybody had an opportunity to be heard.

They then take about 120 days to decide whether we are going to give you a permit on it.

Then they give you a permit and say, well, you can use this if you do this, this, this and this, one of which was to remove a natural gas pipeline that ran through this property that cost os $334,000 to move.

That was removed as a public safety measure.

Sandra Day O’Connor:

Now, would the cost of that be includable in the substitute cost figure that you would urge?

H. Louis Nichols:

Yes, it was included.

Sandra Day O’Connor:

And that the CA 5 would allow to be considered on remand?

H. Louis Nichols:

It was, it was included.

Let me talk about what happened in the trial court for a moment and what happened in the Court of Appeals.

This case was tried in the trial court because the judge would not decide which was a proper measure, since you had not decided it.

And the court said we will try it both ways, so we tried it both ways.

H. Louis Nichols:

We offered this, and there wasn’t any question but what we could sell our piece of land.

You know, landfill sites are hard to come by, and the private landfill companies would like to buy one that is already permit, the neighbors are already happy with it, you’ve got not problem.

So we tried it both ways.

We put on the evidence of what we could get for our land.

In the meanwhile, we had already bought, permitted, equipped and were operating the new landfill site at that time.

William H. Rehnquist:

The temporary one or the–

H. Louis Nichols:

The permanent one.

William H. Rehnquist:

–The permanent one.

H. Louis Nichols:

We had spent $1,276,000 for that site.

Much of that expense would have been attributable and charged off whether we were buying a 50 acre site or a 113 acre site.

The moving of the pipeline, the building of a road for access to it, satisfying, getting engineer studies made–

William H. Rehnquist:

You are saying in effect, Mr. Nichols, that anything, any damage that was really proximately caused to you by the condemnation ought to be picked up by the government.

H. Louis Nichols:

–I’m saying that any reasonable expense that was reasonably necessary to provide a reasonably adequate substitute facility.

William H. Rehnquist:

Well, but I think you are going against a large body of condemnation law there because traditionally, for instance, the owner of a small business whose site is condemned gets the fair market value of the site, but he gets nothing for good will, nothing for moving expenses.

Congress enacted a bill a few years ago that said over and above just compensation, we will pay you for these sort of items, but that has never been thought to be part of just compensation.

H. Louis Nichols:

Well, the Circuit Court, the Second Circuit, and the California Court has held that where you have a public condemnee, it’s a unique situation and you use different rules to determine, to determine the loss sustained by the community.

William H. Rehnquist:

Well, why should that, why should a public condemnee such as your client be any different from a small businessman who suffers incompensible causal damage as a result of a condemnation?

H. Louis Nichols:

Two reasons, Your Honor, I believe.

One, or first is they acquire and hold property, use property for an entirely different purpose, as a public condemnee.

William H. Rehnquist:

Well, so what?

So what?

H. Louis Nichols:

Well, you asked me why I think there’s a difference, and I think–

William H. Rehnquist:

You say it’s a different purpose–

H. Louis Nichols:

–They do–

William H. Rehnquist:

–Why should the different purpose make any difference?

H. Louis Nichols:

–Because this Court has said to the function of the Fifth Amendment is to see that fairness and equity are the result of the condemnation pay, and if–

William H. Rehnquist:

Well, you can make that argument just as well in the case of your small businessman as you can in the case of your local government.

H. Louis Nichols:

–And the other reason that goes with that is that the local government has a duty, either legally or factually, to replace the facility.

William H. Rehnquist:

Why has that got anything–

H. Louis Nichols:

Private individuals–

William H. Rehnquist:

–No, why has that got anything to do with it?

I know you are stating that, but why does that bear on the question?

H. Louis Nichols:

–It bears upon the fact that that relates to the loss sustained by the community upon the condemnation of a public facility, and this Court has said that the objective to be reached in just compensation is to indemnify for loss sustained.

Now, the loss–

William H. Rehnquist:

The small, the small businessman is either going to have to get back in business or starve.

H. Louis Nichols:

–He may not get back in business at all.

He may get enough money to live off the interest of it.

Byron R. White:

Well, usually people like to get back in business.

H. Louis Nichols:

Not necessarily, Your Honor.

I think maybe, but in this instance, and the whole basis for this holding of the Fifth Circuit was the basis that the city was obligated, obligated to acquire a substitute facility.

Now, that was a… and that was the way the case was tried in the trial court.

William H. Rehnquist:

But now, I still don’t understand from your submission, you have repeated the phrase several times, that the city was obligated to do this.

H. Louis Nichols:

Yes, Sir.

William H. Rehnquist:

Why does that make any difference?

H. Louis Nichols:

Because it relates to the damage sustained by the city, and the Fifth Amendment is an indemnification provision, and if they have to replace it, they are entitled to be indemnified for the loss sustained, and the loss to a public entity that has to replace a facility is not the loss of the 50 acres, but the loss sustained by the community is the cost of acquiring a needed substitute facility.

That’s the loss.

William H. Rehnquist:

But what… no case from this Court supports that proposition, does it?

H. Louis Nichols:

That’s because this Court says we haven’t ruled on that question yet.

There will be in a month or two, I guess.

William H. Rehnquist:

Suppose the only place you could get would require a road that cost $80 million to get to the place?

Would that be the cost?

H. Louis Nichols:

Well, let me say–

Thurgood Marshall:

World the government have to pay eighty–

H. Louis Nichols:

–Well, it would be, Your Honor, it would be the cost if that was a reasonable and necessary expense to provide a reasonably adequate substitute facility, and the other side of the coin is suppose it only cost $1000 and the land was worth $200,000, I think all we are entitled to is the reasonable cost of a reasonably adequate substitute facility, whether it is more or less of the value of the land being condemned, because that is the loss and damage sustained by the public.

Now, this case was tried on the basis that the jury would be asked to determine the reasonable cost of providing a reasonably adequate and necessary substitute facility.

As a matter of fact, if you will read the record, the charge to the jury was not objected to by the government, but as a matter of fact, was tailored to meet the government’s position that the cost of the substitute facility would include the words “the reasonable cost”, which the court put in,

“of a reasonably adequate substitute facility. “

which the court put in, and that was what the jury was asked to decide.

Byron R. White:

–Well, the government, did the government agree from the very outset that it would go to the jury on this bifurcated instruction?

H. Louis Nichols:

No, sir.

H. Louis Nichols:

We both, we both objected.

I claimed strongly that substitute facilities doctrine was–

Byron R. White:

Was the only one.

H. Louis Nichols:

–Based… our claims held–

Byron R. White:

And the government said the–

H. Louis Nichols:

–And they said ours is the only one, except that I tried mine much stronger both ways than they tried theirs.

They felt rather confident on the–

Thurgood Marshall:

–Did you try the case below?

H. Louis Nichols:

–Yes, I did.

Thurgood Marshall:

Before the jury?

H. Louis Nichols:

I have tried it from the very beginning.

Thurgood Marshall:

Now I understand.

H. Louis Nichols:

And–

Warren E. Burger:

Let me pose this question to you.

H. Louis Nichols:

–Yes.

Warren E. Burger:

I don’t know how big Duncanville is but I suppose–

H. Louis Nichols:

Twenty-eight thousand, Your Honor.

–How many?

H. Louis Nichols:

Twenty-eight thousand.

Warren E. Burger:

You have got a local courthouse, state courthouse.

H. Louis Nichols:

There’s a state courthouse.

Warren E. Burger:

Now, if the United States came along and said we want to build a federal building there, everybody would like to have the federal building, but in determining value, it is pretty hard to find a market for your courthouse because not many people want to buy a courthouse as such, and I thought it was understood that these alternative methods were to meet that kind of a situation where you can’t really find the fair market value of a local county courthouse of 28,000, a city of 28,000 people.

So there you might get something other than… you’d have to have another value, so you might go to reproduction cost or something like it.

H. Louis Nichols:

Or you buy it, if that is the… if the facts support that, if that’s the… if the facts support it, that you could not sell it or that that was an unfair method.

Now, what this Court has said in previous cases is that when market value has been too difficult to find, that is an occasion where you can deviate from it, or when its application would result in manifest injustice to the owner or public, and in that instance it would be to our little public or the government’s big public, it would be manifestly unjust to the little public or the big public.

Sandra Day O’Connor:

Well, do you think this case fits that proviso?

H. Louis Nichols:

Yes, I do, Your Honor, and the reason I make that is because the undisputed testimony in this case is that there were no other sites available for a sanitary landfill.

The undisputed evidence is that the price which we paid was the price that we had to pay to get this site, and they got the 113 acres to avoid having to pay severance damages.

They could not have gotten it for any less, they could not have gotten another site, and this is the only site that we knew of that would have been permitted by the state to use as a landfill.

Sandra Day O’Connor:

Well, now, the Court of Appeals didn’t appear to me at least to be making a determination on the manifest unjust result basis.

H. Louis Nichols:

Well, I think that they… that when you read the fact that they were referring to, the Borough of Manhattan Case and the Borough of Brooklyn case and the Red Bluff, California case, they were taking a position there, I believe, that whether there is a market value or not, that if the facility must be replaced, that the cost of a substitute facility is a proper measure of damages to reimburse the loss sustained by the public where there is a public condemnee.

In this instance, the Court attempted to deal with that in the manner in which it was submitted to the Court.

First, the Court let in evidence showing that we got a bigger tract of land, that we had more acres, we had more area for landfill, and they had an itemized expense of every dollar we spent.

That all went to the jury.

They knew we spent $1,276,000 where we had a landfill that would last longer and hold more garbage.

The case was argued to the jury not… we did not argue that we wanted $1,276,000 from the jury.

We argued that what we were entitled to was what the jury found to be the reasonable cost of a reasonably adequate substitute facility which we had to acquire to protect the public health of our people.

They knocked of $500,000 some odd for what we had spent in making the very adjustments that the Fifth Circuit says should be made in order to be sure that there’s not a windfall.

The jury made those–

Byron R. White:

Why didn’t you cross-petition up here?

H. Louis Nichols:

–I did, and you turned it down so fast I couldn’t hardly catch my breath.

Byron R. White:

That’s right, you did, and you wanted us to set aside the remand.

H. Louis Nichols:

Yes, simply because I had the question raised… the government hadn’t objected to the instructions.

The trial court hadn’t ruled on them.

It wasn’t raised in the Circuit Court, but the Circuit Court remanded, and I just thought it wasn’t right.

I just thought if I could get my $723,000 up here, if I would ask you to give it to me.

I don’t think I’m going to get it now, you know.

I’d like to.

[Laughter]

It’s like we’d all like to be rich and good looking, but I don’t think I’m going to be any more of that today than I’m going to get that judgment.

But anyhow, the point is, the point is that if the purpose of the Fifth Amendment is to indemnify a local community for its loss, then you determine what the loss is, and then… that’s what the jury tried to decide there, and they made every adjustment that the Circuit Court talked about.

Warren E. Burger:

Well, you are treating indemnification and compensation as being, having the same content, meaning the same thing.

H. Louis Nichols:

This Court has said that the purpose of the just compensation clause is indemnification.

That’s what you all said, and I believe it’s true.

John Paul Stevens:

Mr. Nichols, can I ask you a perhaps a question which will display my ignorance to you, but the Fifth Amendment talks about the taking of private property for public use without just compensation.

I know there are some lower court cases, but has this Court ever said that the taking of public property shall be paid for by just compensation?

H. Louis Nichols:

As I recall, this Court has said that they haven’t said that yet, but that doesn’t mean that there are lower courts that construe that language in the Fifth Amendment to apply to public property being taken by a paramount public authority.

And they have… no one has really challenged that that I know of.

John Paul Stevens:

I understand the government doesn’t challenge it, but I just… is it… we have never, or have we ever said that the right standard is just compensation?

H. Louis Nichols:

I have not found a case where you said that.

H. Louis Nichols:

I have not found a case… but I have never found a case where that question was really seriously raised by anybody.

Now, what you do find, what you do find in your cases in brief is that the United States government takes the position and they argue that.

They don’t argue market value in this situation.

They take the position that if you don’t have to replace that public facility, then we don’t have to pay you anything, or we pay you nominal value.

I don’t think they take that position.

H. Louis Nichols:

Well, they have taken that position in cases cited in the brief and cases cited in the Fifth Circuit opinion.

Byron R. White:

Well, I know, but you mean they wouldn’t pay you market value for what you could sell this land for?

H. Louis Nichols:

They say, they say that in some cases, if you do no have to replace it, you have been relieved of the cost of the maintenance of the facility–

Byron R. White:

I thought your opposition here stood up and said it is always market value, whether it is going to cost you that much or not.

H. Louis Nichols:

–Well, that’s what he’s arguing today, Your Honor, but there are other cases where the United States government is a party where they have argued and urged and received a finding that they will receive only nominal value.

Byron R. White:

That may be.

That isn’t their submission here, though.

H. Louis Nichols:

Certainly it isn’t.

They could be–

Byron R. White:

All right, it isn’t.

H. Louis Nichols:

–The consistency of the government’s position in this case has been their inconsistency because in one case they were arguing market value only, only market value.

Byron R. White:

By the way, what statute did the United States proceed under here?

H. Louis Nichols:

I don’t believe I can tell you that.

Byron R. White:

Does the statute they proceeded under, do they give the procedure as to how compensation is to be determined?

H. Louis Nichols:

They give the Quick, prescribed procedure for acquiring possession–

Byron R. White:

Does that happen to use any words about what the measure of damages is?

H. Louis Nichols:

–No, sir, it does not.

Byron R. White:

The statute doesn’t say a word about that.

H. Louis Nichols:

No, it does not.

It seems to me that–

Byron R. White:

You mean they can’t turn this into a statutory case.

H. Louis Nichols:

–No, sir.

You know, I’ve heard this… I’ve been sitting here two days now.

You all have argued statutes, you’ve argued what Congress intended.

What now we are talking about is only what does the just compensation clause of the Fifth Amendment mean where a public facility has been acquired by the federal government and where the local entity had to replace that public facility in order to protect the health of the community.

H. Louis Nichols:

Now, that is what… it is so simple that you don’t have to go back and find out what Congress intended or how many other laws there are.

What does the Constitution mean when it’s days you are entitled to just compensation?

In this case, the federal government says that since there is a market value, that market value is just the compensation we are entitled to, just the compensation, not that it is just compensation, but just the compensation we are entitled to.

And the question here is what is just, just indemnity to a local community who through no fault of its own lost a facility they had to go out and replace the next day?

Byron R. White:

What would be your position if the government gave you notice and you, just about six months before you were going to fill up that landfill?

Within six months you are going to have to go out and replace it for this $1,200,000, and the government gives you notice and says six months from now we want that property, just at the very time where it will be of absolutely no use to you whatsoever for a landfill, and you will have to go get another one.

So you would say that they could have your property for nothing?

H. Louis Nichols:

I would say that I could not be damaged, and that–

Byron R. White:

Well, you have a piece of property there that now you can build buildings on it, and–

H. Louis Nichols:

–I don’t know whether you could or not.

Now, you just added some little something to it that you had not–

Byron R. White:

–No, the landfill was–

H. Louis Nichols:

–If I had a piece of land–

Byron R. White:

–What was the, what was the testimony at the trial?

How did they have market value?

How did they arrive at market value, what that piece of property could be sold for?

H. Louis Nichols:

–What that piece of property would sell for today permitted as a landfill and with so many acres of it filled and so many acres of it unfilled.

That’s what–

Byron R. White:

And what was the use of the land that was filled?

H. Louis Nichols:

–It could probably in that area… and this is what is customary… could probably be used for open space, park area, grow trees, because you can’t build over the landfill, and for years you’ve got methane gas coming out of it.

So it’s really not usable for any commercial activity.

Byron R. White:

But you could sell it for something apparently.

H. Louis Nichols:

Well–

Byron R. White:

The testimony was you could sell this property including–

H. Louis Nichols:

–As a landfill.

Byron R. White:

–Including the piece that was filled.

H. Louis Nichols:

Well, it could be sold as a landfill, no question about it, not a word, but you asked what it would be worth after that.

The value, in my opinion, in that location, based upon the evidence, and I’m only giving my opinion–

Byron R. White:

Would be zero?

H. Louis Nichols:

–I heard that argument earlier.

Byron R. White:

Would be zero, would be zero.

On my facts, the value would be zero, is that it?

H. Louis Nichols:

Oh, I think it may have some value.

But I don’t know that we’ve been damaged.

And that’s not a situation where we were replacing a required public facility with one that was similar.

Now, if we had six months left… let’s just take it one little… if we had only six months left of that facility when it was taken over by the government, we would only be entitled to what it would cost to acquire a facility that was good for six months.

Now, how much you had to pay for it is not just going out and buying one acre, you fill up one acre in six months, but how much do you have to spend to make it a permitted, public facility?

We say in this instance that market value is not the proper measure of damages; market value wouldn’t even reimburse us for the $110,000 we spent for temporary use.

We say that if the purpose of the just compensation clause is to compensate or indemnify the public for its loss, then we are entitled to whatever it cost, reasonably, to provide a reasonable facility.

That’s the instructions that were given to the jury at my request and at the government’s request.

I think that if you will read the opinion in the United States v. Borough of Manhattan cited in the brief, you will find a rule of law that I would say is the proper rule of law and one to be considered and adopted by this Court, since you have not ruled on it in the past, and it is this:

One, the substitute facility doctrine has been developed to meet the unique needs of public condemnees.

In addition to citing numerous cases, this Court also cites cases where school grounds, playgrounds, parking lots in other jurisdictions, the Second Circuit particularly, have approved the substitute facility as the measure of damages there, even if there was a market value of the property being condemned.

Simply stated, this rule assures that sufficient damages will be awarded to finance the replacement of the condemned facility.

The substitute facility… and this is your language… is not an exception carved out of the market value test, it is an alternative method available in public condemnation proceedings, alternative method available in public condemnation proceedings, citing other cases from the Second and Ninth Court.

Where circumstances warrant, it is another arrow in the trier’s bow when confronted with the issue of just compensation.

When public condemnee proves that there is a duty to replace a condemned facility, it is entitled to the cost of constructing a functionally equivalent substitute, the cost of constructing a functionally equivalent substitute, whether the cost be more or less than the market value of the facility taken, more or less.

It works both ways, cuts both ways.

Byron R. White:

You would apply that rule–

H. Louis Nichols:

That if the structure… sir?

Warren E. Burger:

–You would apply that rule to the hypothetical I gave you about taking your local courthouse, that if you could build another or for less, then you’d–

H. Louis Nichols:

Then that’s all we’re entitled to, a replacement, a reasonably adequate substitute facility.

Warren E. Burger:

–But if you built it 40 years ago, you probably couldn’t build it for that much money today.

H. Louis Nichols:

You can’t, you see, you can’t build a new bridge or a new highway for that much… for what it cost to build it originally, but no one contends that you only get a 90 percent depreciate the bridge when you are going to replace the bridge.

They give you a new bridge, and that’s no problem.

And we’re not even asking for that.

All we are asking for is replacement of the facility.

And finally–

Byron R. White:

What do you think the rule is that there is no duty to replace?

Then it is market value, isn’t it?

H. Louis Nichols:

–I think if there is no duty to replace–

Byron R. White:

Or is it zero?

H. Louis Nichols:

–I think that the Court has not ruled on that, and the Circuits hold both ways.

Byron R. White:

How about your–

H. Louis Nichols:

What I think?

I think that it should be zero because the duty is to indemnify the loss.

If there has been no loss, there is no indemnification called for.

Finally, I say that if a structure is reasonably necessary for the public welfare, compensation is measured not in terms of value but by the loss to the community occasioned by the condemnation.

Thank you very much.

Warren E. Burger:

Do you have anything further, Mr. Schwartz?

Joshua I. Schwartz:

A few factual points if time permits.

Justice Stevens, the question about the applicability of the just compensation clause to taking of publicly owned property is addressed at page 16 of our brief at Note 9.

Justice White, the cross-petition that was filed in this case, I just want to remind the Court, concerned a procedural question about the plain error rule.

John Paul Stevens:

May I just follow up on that?

I know it was addressed in Note 9, but is it… am I correct in understanding that although the Court has held that there is the power to condemn, there has been no holding on what the measure of compensation is?

Joshua I. Schwartz:

I think–

John Paul Stevens:

That’s what I understood Note 9 to say.

Joshua I. Schwartz:

–I think that’s right.

Those cases did not address it, and Lutheran Synod suggests that that is an open question.

Justice O’Connor, you mentioned a point which we think significant.

The public condemnee is better off than a private condemnee in one respect; it, too, has the power of condemnation.

With respect to Respondent’s claim that there was no other property that could be taken, we think the record suggests that that claim be judged skeptically.

One of the government’s comparable sales in this case was the site which Respondent used on an interim basis for the two years prior to the acquisition of the Ellis County site.

That site not only could have been condemned, but in fact did trade hands in the private market during the two year period that Respondent was using it.

That’s one of the comparable sales.

Comparable sales show that its value was about a quarter to… a quarter of that rate that Duncanville paid in this case.

Finally… and these are only illustrations of the problems that crop up if you are to entertain a substitute facilities measure, Respondent suggested that the State of Texas required the removal of the pipe, gas pipeline in this case.

At page 418 of the transcript, Mr. Nichols reading from the terms of the permit, the permit, said no waste disposal operation shall be accomplished within 30 feet of any petroleum products pipeline or within 20 feet of its corresponding easement.

In this case, that meant a total of 50 feet on either side.

Thurgood Marshall:

I still have a problem with the fact, what was wrong with the instructions to the jury?

Joshua I. Schwartz:

Assuming–

Thurgood Marshall:

You have a jury verdict pursuant to instructions.

You didn’t object to the instructions did you?

Joshua I. Schwartz:

–We had a global objection that we made clear from the very start that this theory ought not be entertained at all, and not clear why we had to object specifically as to how you ought to frame the instruction that we said ought not be given.

Thurgood Marshall:

But you didn’t object to the instruction.

Joshua I. Schwartz:

We didn’t object to the–

Thurgood Marshall:

So if the instruction is all right, you lose.

Joshua I. Schwartz:

–If that instruction was all right, but we contend that it was not.

The Court of Appeals agreed that it was not all right.

So we think that this case is not likely to turn on this point.

I see my time has concluded.

Warren E. Burger:

Thank you, Counsel.

The case is submitted.

The Honorable Court is now adjourned until tomorrow at 10:00.