Resource Investments, Inc. v. United States
(Case No. 2014-5069, Fed.Cir. May 12, 2015)
Resource Investments Inc. (“Plaintiff”) applied for state permits to build a landfill. Plaintiff applied for a Clean Water Act (“CWA”) permit from the Army Corps of Engineers (“Corps”) because the landfill project affected wetland areas. After the Corps rejected Plaintiff’s CWA permit on September 30, 1996, Plaintiff filed suit under the Administrative Procedures Act (“APA”) challenging the Corps’ denial of the CWA permit. The district court upheld the permit denial, but the Ninth Circuit reversed. On May 4, 1998, with a Ninth Circuit appeal pending, Plaintiff filed a complaint in the Claims Court alleging that the Corps’ denial of the CWA permit as a taking in violation of the Fifth Amendment. The Claims Court dismissed the action, citing 28 USCA § 1500, which provides that the Claims Court “shall not have jurisdiction of any claim for or in respect to which the plaintiff or his assignee has pending in any other court any suit or process against the United States.” (Id.) The Court of Appeals affirmed.
In March 1994, the Corps required a federal environmental impact statement for the landfill site. After the Corps' draft statement preliminarily concluded that Resource Investments had not ruled out alternatives to the landfill, Resource Investments asked the Corps to terminate the environmental impact review process, which the Corps did in June 1996.The Corps denied Resource Investments' CWA permit in September 1996. The next month, Resource Investments filed an APA action in U.S. district court, challenging the denial of the permit.
While Plaintiff’s Claims Court action was pending, the Supreme Court decided United States v. Tohono O’Odham Nation, 131 S.Ct. 1723, holding that “[t]wo suits are for or in respect to the same claim, precluding jurisdiction in the [Claims Court], if they are based on substantially the same operative facts, regardless of the relief sought in each suit.” (Id. at
1731.) On June 10, 2011, the government filed a motion to dismiss the takings action in light of Tohono.
Dismissal under 28 U.S.C. § 1500 requires (1) an earlier-filed suit or process pending in another court, and (2) claims in the earlier-filed case that are for or in respect to the same claims asserted in the later-filed COFC action. (Brandt v. U.S., 710 F.3d 1369 (Fed. Cir. 2013).) Plaintiff did not dispute that the district court permit action constituted an earlier- suit under section 1500.
The second inquiry required the Court to compare court IV of the district court action with the Claims Court action to determine whether they are “for or in respect” each other. (28 U.S.C. section 1500.) In Keene Corp. v. United States, 508 U.S. 200 (1993) the Supreme Court held the relevant comparison under section 1500 considers whether the two suits were “based on substantially the same operative facts.” (Id. at 212.) The Tohono case addressed an issue unresolved in Keene, whether the section 1500 bar “applied to two actions based on the same operative facts that sought completely different relief.” (Tohono, at 1727-28.)
Here, the Claims Court held that the same operative facts test was satisfied because both suits were based on the denial of the CWA permit and the resulting economic injury to Resource Investments. Plaintiff argued that the denial of the permit was merely a background fact and not an operative fact in the Claims Court. The Court rejected this argument holding the CWA permit denial was not a mere background fact but the basis for both actions—as both actions addressed the Corps action.
In determining whether the two cases were “based on substantially the same operative facts...the Supreme Court analogized section 1500 to res judicata...” the test approved by Tohono. (Id.) Under Tonono “the question is whether the second Claims Court takings suit would have been barred by res judicata if it had been brought in a district court.” (Id.) In Tohono, the Supreme Court articulated the nineteenth century “act or contract” test as: “The true distinction between demands or rights of action which are single and entire, and those which are several and distinct, is, that the former immediately arise out of one and the same act or contract, and the latter out of different acts or contract.” (Tohono at 1730.)
The Court applied the act-or-contract test to conclude that § 1500 applied because a district court complaint and a Claims Court complaint both alleged that the Government failed to promote the plaintiff's product and replaced that product with a Government-developed alternative. In the Claims Court, Plaintiff alleged a breach of an implied agreement. In the district court, Plaintiff alleged a breach of fiduciary duty. The Court concluded that both actions were based on the same conduct. The appellant “was, therefore, alleging that the same conduct gave rise to different claims based upon purportedly distinct legal theories.” (Id.)
In response, Plaintiff alleged that even if its permanent takings claim was barred, its temporary takings claim would survive section 1500. Plaintiff claimed the CWA permit denial was not an operative fact with respect to its temporary takings claim “because that claim was based on the delay in the permitting process rather than the ultimate denial of the permit.
Plaintiff’s claim failed for two reasons.
First, Plaintiff did not sufficiently allege a temporary takings claim its original complaint. “[A] plaintiff’s obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” (Bell Atl. Corp. v Twombly, 550 U.S. 544 (2007).)
Second, the Court could not consider the more extensive temporary takings allegations in Plaintiff’s amended Claims Court complaint. “The amended Claims Court complaint is irrelevant because of ‘the longstanding principle that the jurisdiction of the Court depends upon the state of things at the time of the action brought.’” (Keene, supra, 508 U.S. at 207.)
Underlying this case is the argument as to whether a CWA permit was ever required. The Ninth Circuit overturned the district court’s ruling upholding the Corps’ permit denial. In reversal, the Ninth Circuit held the district court lacked authority to require a CWA permit because, under the Resource Conservation and Recovery Act, 42 U.S.C. sections 6941- 6949, the regulation of municipal solid waste in landfills constructed on wetland areas lies solely with the EPA. Seems Plaintiff could have argued the taking resulted from the Corps’ assertion a CWA permit was required when, in fact, it was not.
Thierry R. Montoya is a Shareholder in the Firm’s Santa Ana office and the Chair of the Construction Law Department. He represents clients in environmental, land use, construction, and eminent domain matters across the state, and in federal jurisdictions throughout the United States.