Federal Circuit Takings Case: Set Up for Supreme Court Review

Casitas Municipal Water v. US (Fed. Cir. 2009) (en banc denial) (MAYER, SCHALL , and MOORE*)

Casitas is not a patent case, it is a takings case involving regulatory restrictions on water use imposed by US Government. The Federal Circuit has jurisdiction over this takings claim against the US Government because it is on appeal from the Court of Federal Claims (CFC). Although the Federal Circuit has denied the Federal Government’s motion for en banc rehearing, a set of diverging opinions sets this case in position for likely Supreme Court review.

History: The Ventura River Project provides water supply to Ventura County, California. In 1956, the US Government granted the local government the “perpetual right to use all water that becomes available through the construction and operation of the Project.” Then, in 1997, steelhead trout living in the Project became an endangered species under the Endangered Species Act (ESA), and the US Government required that Casitas construct a fish ladder and divert water over the fish ladder. Casitas complied, but filed suit in the CFC alleging that the Federal Government had taken its property without just compensation (and also under breach of contract). The CFC classified the Government action as “regulatory” rather than a “physical.” In takings law, compensation for regulatory takings is much more difficult to obtain, and Casitas admitted that it could not prove the required elements. This conclusion followed the Federal Government argument that “it did not seize, appropriate, divert, or impound any water, but merely required water to be left in the stream.”

Appeal: On appeal, the Federal Circuit reversed. Writing for the majority, Judge Moore concluded “that the government physically appropriated water that Casitas held a usufructuary right in.”

Here, the government admits for the purposes of summary judgment that it required Casitas to build the fish ladder facility, which is a man-made concrete structure that was not a portion of the existing … The government also admits that the operation of the fish ladder required water, which prior to the fish ladder’s construction flowed into the Casitas Reservoir … Specifically, the government admits that the operation of the fish ladder includes closing the overshot gate …and that the closure of this gate causes water that would have gone into the Casitas Reservoir via the Robles-Casitas Canal to be diverted into the fish ladder. … These admissions make clear that the government did not merely require some water to remain in stream, but instead actively caused the physical diversion of water away from the Robles-Casitas Canal … and towards the fish ladder, thus reducing Casitas’ water supply.

In dissent, Judge Mayer rejected the physical takings argument. At base, he argued, Casitas does not actually own the water. Rather, under California law, all water sources within California “belong to the public.” Even if Casitas did own the water flow, Mayer would have seen the endangered species requirements as regulatory because the requirements simply force a specific use of the water rather than take it away.

En Banc Rehearing: In what looks like a 7-5 (or 6-6) vote, the Federal Circuit denied a rehearing en banc. Judge Moore wrote a new opinion defending her original approach in the original opinion. In particular, Judge Moore focused on the “facts as presented” in the case. “[T]he government conceded (1) that Casitas had a property right in the water diverted from the Ventura River, and (2) that the government required Casitas to build and operate the fish ladder in such a way as to permanently appropriate water in which Casitas had the conceded property right.” Based on those two facts, the holding of a physical takings was easy.

Judge Gajarsa would have heard the case en banc. Gajarsa (joined by Chief Judge Michel and Judge Dyk) saw the taking as clearly regulatory in form because nothing had actually been taken by the US Government.

This denial implicates fundamental questions regarding takings law. The panel majority’s opinion suggests that a government action can be construed to be a physical taking even if no physical proprietary interest has actually been taken by the United States. This is contrary to present Supreme Court law and contrary to our case law. Accepting this analysis of the panel majority eliminates the fine distinction and balance that has been established by the Supreme Court between physical and regulatory takings. Moreover, it eliminates the ability of the legislature to provide for limited and parsimonious legislation protecting endangered species.

Notes:

  • Republican vs. Democrat: Moore’s position is clearly one of stronger property rights while Gajarsa/Mayer’s position is in favor of regulatory power of the government. It appears that this decision falls along political lines. Those thinking of the regulation as a physical taking (Moore, Schall, Rader, JJ) are all Republican appointees. Three of the five thinking of the regulation as regulatory in nature are Democratic appointees (Linn, Dyk, Gajarsa, JJ are all Clinton appointees; Michel, CJ, and Mayer, J, are Reagan appointees). At least three of the four other judges voted to deny a rehearing. Of those four, three are Republican appointees (Newman, Lourie, Prost, JJ, are all Republican appointees; Bryson, J, is a Clinton appointee). As you can see here, eight of the twelve active Federal Circuit judges are Republican appointees.
  • En Banc Denial
  • Original CAFC Opinion: Casitas Mun. Water Dist. v. United States, 543 F.3d 1276 (Fed. Cir. 2008).
  • Original CFC Opinion

22 thoughts on “Federal Circuit Takings Case: Set Up for Supreme Court Review

  1. What may be interesting here if this does go up to the Supreme Court is how it interacts with the proposed bankruptcy legislation that would apparently allow cram downs of security in real property.

  2. Well, I live in Ventura County, and this was a much easier call than it’s been made out by many to be:

    “You (Casitas) can do whatever you want with the water; all of it; forever.

    One has only to note this from the en banc dissent: “it eliminates the ability of the legislature to provide for limited and parsimonious legislation protecting endangered species.” to understand the only/most important factor to many as to why the fed govt should be allowed to change the rules of the game … after the “game” is in progress.

    Gee; sounds a lot like what the PTO “leadership” has been trying to do to applicants these past few years, doesn’t it?

  3. “Judge Mayer rejected the physical takings argument. At base, he argued, Casitas does not actually own the water. Rather, under California law, all water sources within California “belong to the public.” Even if Casitas did own the water flow, Mayer would have seen the endangered species requirements as regulatory because the requirements simply force a specific use of the water rather than take it away.”

    Anyone who has ever lived in California understands that this is the only workable result. This case is just one of many loud last gasps of the greedy. Eventually they will come to terms.

  4. “Max, he didn’t mention the EPO specifically, I was just saying that he was wanting us to tighten up in much the same way that the EPO does. The comparison was my own, not his, he just brought up tougher standards.”

    You mean he wants you to reject all amendments as being directed to new matter, as they do in europe? ;)

    They actually have a legit reason for doing that in europe, a reason that doesn’t exist here.

    Now how about making examiners adhere to a relatively objective standard for obviousness?

  5. “What the gov should have just done is instead of making them make a ladder using the water from the project they should have just made them get the fish out one by one and take them to the appropriate area by hand every time it looked like a fish wanted to go to the other area. Then the Casitas people would have asked politely to be able to operate a ladder using the water in question. Problem solved.”

    Credit where credit is due – That’s funny.

  6. No beirbelly I couldn’t find one, but you can ask the PTOS to make it available, they did film it, it was broadcast live at the least.

    Max, he didn’t mention the EPO specifically, I was just saying that he was wanting us to tighten up in much the same way that the EPO does. The comparison was my own, not his, he just brought up tougher standards.

  7. I just typed up a huge response and it was taken away by this DAM SIGN IN BS THAT ROBS ME OF EVERY OTHER POST.

    Bottom line. The gov presented my point above in a failtastic way by defining the water that became available as the water in the lake rather than simply letting the plain meaning of the Article 4 provision be in effect and/or defining the term in such a way as “water that is not required for the operation of the project”.

    Very bottom line. Failtastic presentation of an argument results in fail. Great case. I’m surprised that the CAFC didn’t see through the fail in the argument and get to the meat of the matter and judge according to what the plain meaning of the terms meant rather than spewing out garbage about the gov “appropriating” where the water will go:

    “We agree with Casitas that Article 4 constitutes a promise by the United States that Casitas shall have the perpetual right to water made available by construction and operation of the Project and that the United States will not appropriate any of the Project water for other uses (i.e., fish ladder or delivery under water contracts).”

    Besides the fact that the water was never made available the gov did not appropriate where the water will go. The Casitas people had the choice to comply with the regulation or not (go to jail or shutdown the operation?). Choosing to comply is an operation cost and they’re to pay those. End of story.

    What the gov should have just done is instead of making them make a ladder using the water from the project they should have just made them get the fish out one by one and take them to the appropriate area by hand every time it looked like a fish wanted to go to the other area. Then the Casitas people would have asked politely to be able to operate a ladder using the water in question. Problem solved.

  8. 6: thanks for your report. But why “not completely”? May I ask, which part of the EPO service does Judge Linn have trouble with?

  9. “I heard J. Linn speak today, he was pretty good. He went on and on about how we need to crack down on 112 stuff a la Miyazaki, and also he seemed to want us to be more careful about new matter situations as well and shift more towards, but not completely to, the EPO standards.”

    Is there a link to any presentations on this?

  10. Who cares? Not the fish. They are happy and busy climbing their new ladder. Ask a fish who owns the water and you’ll get a blank stare in return.

  11. 6: I’ve seen some applications assigned to examiners in art units in the 4000′s — none of which are listed on the USPTO website. I’ve read that these are new examiners not yet assigned to any actual art unit. Is this correct?

  12. “Why don’t they simply say that the water required to operate the fish ladder is not water that “became available”"

    The government made this argument, and the opinion includes the refutation of the argument. I don’t believe even the dissenter’s bought this particular line of reasoning.

    Scalia would probably not support the governments position.

  13. I heard J. Linn speak today, he was pretty good. He went on and on about how we need to crack down on 112 stuff a la Miyazaki, and also he seemed to want us to be more careful about new matter situations as well and shift more towards, but not completely to, the EPO standards.

  14. You’re welcome. That’s what we’re here for. It’s no wonder our quality is at an all time high. :)

    Moore should write a third opinion explaining how the municipality held a right to water that did not become available through the construction and operation of the Project. Then she would have set the case up in such a way as to be in proper condition for the SC to rule on an actual disagreement. Of course, she probably cannot explain that, because it is impossible, so there probably is no disagreement other than her and her majority wanting to read rights into an agreement that the minority (and any unbiased reader) can plainly see are not present.

  15. Thanks 6. That is the sort of brilliant logic and reasoning we get in about 75% of the office actions from you guys.

  16. Predicion: if Cert is granted, Scalia writes up the opinion as I just set forth above in his spare time one morning and the others concur, case is remanded to the CFC.

  17. “California. In 1956, the US Government granted the local government the “perpetual right to use all water that becomes available through the construction and operation of the Project.”"

    Why don’t they simply say that the water required to operate the fish ladder is not water that “became available” and is instead water that “is not available” through the operation of the Project. This seems apparent since the operation of the project in accordance with the federal endangered species requirement for a ladder no longer makes that water available.

    How do people make such simple cases so complex? They simply weren’t entitled to the water in the first place since it wasn’t “made available through the operation of the project”.

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