On Remand from the U.S. Supreme Court, Federal Circuit Affirms Ruling that Temporary Flooding Resulted in Compensable Taking

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As you may recall, last December we reported on the U.S. Supreme Court's decision in Arkansas Game and Fish Commission v. United States, in which the Supreme Court held that government-induced flooding of limited duration may be compensable.  (See Supreme Court Holds Temporary Flooding Can Be A Taking.)  The Supreme Court explained that the relevant factors in determining whether a temporary flooding rises to the level of a compensable taking include:  (i) the degree to which the invasion is intended or is a foreseeable result of authorized government action, (ii) the character of the land at issue and the owner's reasonable investment-backed expectations regarding the land's use, and (iii) the severity of the interference.  While the Supreme Court's holding effectively reversed the decision by the Federal Circuit, the Supreme Court did not affirm the $5.4 million judgment originally entered by the trial court, as it found that there were factual issues and legal theories that could potentially prove dispositive which the Federal Circuit did not address on appeal.  In light of these outstanding factual issues and legal theories, the Supreme Court remanded the matter to the Federal Circuit for further proceedings. 

Earlier this week, the Federal Circuit addressed the outstanding factual issues and legal theories, and affirmed the approximately $5.7 million judgment.  (See Arkansas Game & Fish Commission v. United States (Fed. Cir. Dec. 3, 2013).)  Just in case you don't remember the facts from last year, here is a quick overview.  

The Arkansas Game and Fish Commission owns a large area of land, which it operates as a wildlife hunting preserve and timber resource.  The property is located in a floodplain approximately 115 miles downstream of the Clearwater Dam.  Shortly after the construction of the Dam in 1948, the Army Corps of Engineers adopted a schedule of release rates.  From 1993 to 2000, however, in response to annual requests from farmers, the Army Corps temporarily deviated from the schedule.  As a result of these temporary deviations, the property experienced on average an additional 26 days of flooding per year.  The Commission asserted that the increased temporary floodings eventually resulted in the destruction of more than 18 million board feed of timber, and led to the invasion of undesirable plants requiring the Commission to undertaken significant reclamation efforts.  A trial court found that a compensable taking had occurred, and awarded the Commission approximately $5.7 million.  The Federal Circuit reversed the award, holding that a temporary flooding could not result in a compensable taking under the Fifth Amendment.  As noted above, the U.S. Supreme Court reversed the Federal Circuit's decision, and remanded for further proceedings. 

On remand, the Federal Circuit addressed the three factors outlined by the U.S. Supreme Court, as well as a duration argument asserted by the U.S. Government.  Addressing the duration issue first, the Federal Circuit rejected the Government's argument that because each annual deviation was designated as temporary, each annual deviation had to be considered independently for purposes of determining whether a taking had occurred.  The Federal Circuit stated that "[t]he government cannot obtain an exemption from takings liability on the ground that the series of interim deviations were adopted on a year-by-year basis, rather than as part of a single multi-year plan, when the deviations were designed to serve a single purpose and collectively caused repeated flooding and timber loss on the Commission's property." 

Turning to the issue of causation, the Federal Circuit explained that "[t]he government's argument is in essence a challenge to the factual findings of the trial court."  Considering the evidence, including admissions by the Army Corps, the Federal Circuit found that "the evidence supports the trial court's findings that the deviations caused a substantial increase in the periods of growing-season flooding . . . and that the flooding caused widespread damage to the trees there."    

The Federal Circuit next addressed the foreseeability factor.  The Federal Circuit first explained that "[i]n order for a taking to occur, it is not necessary that the government intend to invade the property owner's rights, as long as the invasion that occurred was 'the foreseeable or predictable result' of the government's actions."  Applying this standard, the Federal Circuit found that the damages were foreseeable because even though the Commission had notified the Army Corps of the damage resulting from the deviations, the Army Corps continued with the deviations.

As for the issue of severity, the U.S. Government argued that the increased flooding could not be considered severe because the property was part of a floodplain, and had a history of flooding on a regular basis.  The Federal Circuit dismissed this argument, stating that the "argument runs head-long into factual findings made by the trial court."  Specifically, the Federal Circuit noted that while the property was subject to flooding during the pre-deviation period, the important fact is that as a result of the deviations "the flooding lasted for significantly longer periods of time and had much more serious consequences than the flooding of the pre-deprivation period."  And, as there was no basis for overturning the trial court's findings with respect to these issues, the Federal Circuit found that the increased flooding was sufficiently severe to rise to the level of a taking.

Finally, turning to the issue of reasonable investment-backed expectations, the Federal Circuit rejected the U.S. Government's argument that because the Commission purchased the property after the construction of the Clearwater Dam and the Army Corps' adoption of release rates, the "Commission's property interest is necessarily qualified by the right of the Corps of Engineers to authorize deviations from the ordinary flowage rates at any time."  The Federal Circuit rejected the Government's argument on procedural grounds, finding that the argument had been waived because it was not raised in the trial court or on the initial appeal.  

Accordingly, after rejecting a couple of ancillary arguments by the U.S. Government, and one argument by the Commission, the Federal Circuit affirmed the approximately $5.7 million award.  Of particular note, the Federal Circuit rejected the Government's argument that the Commission's expert timber appraiser should have been excluded because he relied on his own experience and observations in order to estimate the mortality rate for declining trees and the reduced value of timber from declining trees.  The Federal Circuit stated that "[b]y their nature, appraisals are often imprecise, and the appraiser's experience can be the most important factor in establishing valuation."  Therefore, the mere fact that the appraiser relied on his experience as opposed to data or scientific literature did not by itself render his opinion inadmissible under the standard announced in Daubert v. Merrel Dow Pharmaceuticals, Inc. (1993) 509 U.S. 579.  As such, because the U.S. Government did not challenge the expert's estimates as unreliable or introduce competing evidence as to the issue of mortality, the Federal Circuit found that the expert's opinion was admissible and appropriately considered by the trial court.