Category: Property Rights

The Roundtable joined the National Association of Home Builders (NAHB) and National Federation of Independent Business (NFIB) today, in an amicus brief requesting the nation’s highest court to accept a case that addresses significant property rights issues.

The Roundtable joined the National Association of Home Builders (NAHB) and National Federation of Independent Business (NFIB) today, in an amicus brief requesting the nation’s highest court to accept a case that addresses significant property rights issues.

• In Love Terminal Partners, LP v. United States, developers and investors acquired rights to construct and provide flight service from a passenger terminal at Love Field airport near Dallas, Texas.  The venture never proved profitable.  The U.S. Congress subsequently codified a third-party agreement between affected cities, airlines, and the DFW airport regarding interstate air travel to and from the Dallas area.  The Love Terminal investors were not a party to that agreement, which gave the City of Dallas authority to demolish their terminal.  The agreement also provided the terminal could “never” be used for passenger service.

• The Love Terminal owners thereafter sued the U.S. government for a Fifth Amendment property “taking” by effectuating the agreement in federal law.  At trial, the land owners won a $133.5 million “just compensation” award.  On appeal, however, the Federal Circuit reversed and entirely erased the trial court’s award.  The Love Terminal property owners thus requested the U.S. Supreme Court to hear the case.  The coalition supported that petition today with its amicus brief.

• Prior Supreme Court precedents determine whether a taking has occurred under these circumstances. Penn Central (1978) considers the economic impact of land-use regulation, and whether the investor has reasonable investment expectations in the property.  Lucas (1992) establishes a “categorical” rule that a taking occurs when government regulations completely “wipe-out” the property’s economic uses.  “[T]his case presents an opportunity … to lay down the law—for the sake of consistency in both Penn Central and Lucas cases—when assessing fair market value for a property that is alleged to have prospective economic value for the buyer,” the brief explains.

• Notably, the case addresses whether income producing property needs to turn a profit to support a takings claim. In deciding no taking occurred, the intermediate appeals court stressed that revenue never exceeded the owner’s carrying costs.  The amicus brief takes issue with that finding.  It states: “By that standard virtually all start-up companies and development projects would be vulnerable because it often takes years to begin turning a profit on a new venture …. [I]t is improper to ignore the economic realities driving business decisions to invest in a property that will prove profitable in the future.”

• The brief continues: “Entrepreneurs and business investors typically have a long-term strategy, which assumes a return on investment over an extended period of time. This is especially true for home builders and commercial developers because they bear major upfront financial burdens before they can ever hope to turn a profit …. [I]t is simply wrong to say that negative cash-flow equates to zero value.  Negative cash-flow is commonly an accepted cost of doing business in the beginning of a new venture.”

The Supreme Court will decide whether (or not) it accepts the Love Terminal case likely after its next term starts in October 2019. If it does, briefing on the merits would take place next fall, and a decision would be expected by June 2020.