Otay Mesa Property, L.P. v. United States , 779 F.3d 1315 ( 2015 )

United States Court of Appeals
for the Federal Circuit
______________________
OTAY MESA PROPERTY, L.P., RANCHO VISTA
DEL MAR, OTAY INTERNATIONAL, LLC, OMC
PROPERTY, LLC, D & D LANDHOLDINGS, LP,
INTERNATIONAL INDUSTRIAL PARK, INC.,
(also known as Rancho De La Fuente),
Plaintiffs-Appellants
KYDDLP & RDLFGFT NO. 1, LLC.,
Plaintiff
v.
UNITED STATES,
Defendant-Cross Appellant
______________________
2013-5122, 2014-5002
______________________
Appeals from the United States Court of Federal
Claims in Nos. 06-CV-0167, 06-CV-0877, 06-CV-0876, 06-
CV-1670 and 06-CV-1671, Judge Thomas C. Wheeler.
______________________
Decided: March 6, 2015
______________________
ROGER J. MARZULLA, Marzulla Law LLC, Washington,
DC, argued for plaintiffs-appellants. Also represented by
NANCIE GAIL MARZULLA.
2 OTAY MESA PROPERTY, L.P. v. US
JOHN EMAD ARBAB, Environment and Natural Re-
sources Division, United States Department of Justice,
Washington, DC argued for defendant-cross-appellant.
Also represented by SAM HIRSCH.
______________________
Before TARANTO, SCHALL, and CHEN, Circuit Judges.
SCHALL, Circuit Judge.
DECISION
This is the second time this case has been before us.
In Otay Mesa Property, L.P. v. United States, 670 F.3d
1358 (Fed. Cir. 2012) (“Otay Mesa I”), we held that the
United States was liable to plaintiffs Otay Mesa Property,
L.P., Rancho Vista Del Mar, Otay International, LLC,
OMC Property, LLC, D & D Landholdings, LP, and Inter-
national Industrial Park, Inc. (collectively, “Otay Mesa”)
for the taking of property owned by them. 1 Specifically,
we ruled that the U.S. Border Patrol’s placement of
motion sensors on five separate parcels of land owned by
Otay Mesa adjacent to the Mexican border in Southern
California constituted the taking of permanent easements
over the parcels. Id. at 1365. We remanded the case to
the United States Court of Federal Claims for a determi-
nation of the damages to which Otay Mesa was entitled as
a result of the taking. Id. at 1369–70.
On remand, the Court of Federal Claims held (1) that
Otay Mesa was entitled to no damages for the taking of
an easement over land that could be developed for indus-
trial use (“the development property”); (2) that it was
1 In relevant part, the Fifth Amendment requires
that the United States pay “just compensation” whenever
it takes private property for public use. U.S. Const.
amend. V (“[N]or shall private property be taken for
public use, without just compensation.”).
OTAY MESA PROPERTY, L.P. v. US 3
entitled to damages in the amount of $455,520 for the
taking of an easement over land that could be used for
environmental mitigation purposes (“the mitigation
property”); and (3) that interest on the $455,520 damages
award should run from August 28, 2008, the date the
court found Otay Mesa became aware of the taking as a
result of the filing of a stipulation of liability by the
government. Otay Mesa Prop., L.P. v. United States, 110
Fed. Cl. 732, 743–47 (2013) (“Otay Mesa II”) (interest on
the damages award was initially deemed to run from
October 16, 2008, but the date was adjusted following a
motion for reconsideration, 111 Fed. Cl. 422, 424 (2013)
(“Reconsideration Decision”)).
Otay Mesa appeals the decision of the Court of Feder-
al Claims denying damages for the taking of an easement
over the development property. It also appeals the deci-
sion of the court to compute interest on the $455,520
damages award from August 28, 2008, rather than from
the dates sensors were first installed on the parcels
containing the mitigation property, as stated in the gov-
ernment’s stipulation of liability. For its part, the gov-
ernment cross-appeals the damages award for the taking
of an easement over the mitigation property.
For the reasons set forth below, we affirm the decision
of the Court of Federal Claims denying damages for the
taking of an easement over the development property.
We also affirm the decision of the court awarding Otay
Mesa $455,520 in damages for the taking of an easement
over the mitigation property. However, we vacate the
decision of the court computing interest on the $455,520
damages award from August 28, 2008. As we explain,
Otay Mesa is entitled to interest computed from when
sensors were first placed on its property. The dates the
Border Patrol first placed sensors on Otay Mesa’s proper-
ty are set forth in the government’s stipulation of liability.
We thus affirm-in-part, vacate-in-part, and remand. On
remand, the Court of Federal Claims will determine the
4 OTAY MESA PROPERTY, L.P. v. US
amount of interest to which Otay Mesa is entitled on the
$455,520 damages award.
BACKGROUND
The facts of the case are set forth in Otay Mesa I and
in the several decisions of the Court of Federal Claims.
We recite here the facts pertinent to the issues now before
us.
I.
Otay Mesa owns eleven contiguous parcels of largely
undeveloped land adjacent to the Mexican border in the
Otay Mesa area of San Diego County. Otay Mesa I, 670
F.3d at 1360. Five of those parcels, Nos. 1, 3, 4, 5, and 10,
are at issue in this case. Beginning in April 1999 and
continuing through November 2005, the Border Patrol
placed a total of fourteen motion sensors on those parcels
in order to detect illegal immigrants entering the United
States from Mexico. The motion sensors are approxi-
mately one cubic foot in size and are buried underground,
except for a one foot antenna that remains above the
surface of the soil. Joint Appendix (“J.A.”) 1792 at ¶ 3; see
also Otay Mesa II, 110 Fed. Cl. at 734.
In 2006, Otay Mesa filed suit in the Court of Federal
Claims alleging, inter alia, that the installation of the
sensors constituted a taking of Otay Mesa’s property,
entitling it to “just compensation” under the Fifth
Amendment’s Takings Clause. Otay Mesa Prop., L.P. v.
United States, 86 Fed. Cl. 774, 775 (2009) (“Liability
Decision”). 2 On August 28, 2008, prior to the trial on
liability, the government filed a document in which it
2 From our review of the record, it appears that
plaintiff KYDDLP & RDLFGFT No. 1, LLC., is not named
as an appellant here because the parcel it owns, or at one
time owned, No. 9, is not at issue on appeal.
OTAY MESA PROPERTY, L.P. v. US 5
stipulated that “by virtue of its placement of the 14 sen-
sors on the five parcels of land, it had taken a property
interest in the nature of an easement over the parcel of
land on which the sensors have been placed.” J.A. 1793 at
¶ 6; see also Liability Decision, 86 Fed. Cl. at 777, 790–91.
The document stated that the Border Patrol had installed
sensors during the period beginning April 1999 and
ending November 2005. The document described the
easement, in relevant part, as:
A perpetual and assignable easement to locate,
construct, operate, maintain and repair or replace
the specified underground seismic intrusion sen-
sors on the specified parcels, including the right to
ingress and egress to each sensor location. The
easement shall be deemed to have commenced on
the date the sensor is listed as having been in-
stalled, and will continue until the sensor is no
longer needed or the property is developed. Each
sensor is and shall be located so as not to affect
the functionality of the property. Should the
landowner desire to develop any portion of the
subject parcel, the sensor will be removed or rede-
ployed upon 30 days written notice that a grading
permit has been issued by the County of San Die-
go permitting development of all or a portion of
the property. Upon removal of a sensor, the por-
tion of the easement relating to that sensor shall
terminate.
J.A. 1794 at ¶ 7; see also Otay Mesa I, 670 F.3d at 1361–
62.
Based on the government’s stipulation, the Court of
Federal Claims held that the government was liable for
the physical taking of a temporary easement over the five
parcels for the purpose of installing and operating the
sensors. The court reserved the determination of damag-
es for subsequent proceedings. Otay Mesa I, 670 F.3d at
6 OTAY MESA PROPERTY, L.P. v. US
1362. Following a trial on damages, the court determined
that Otay Mesa was entitled to compensation in the
amount of $3,043,051, plus interest for the taking of the
easement. Id.
II.
The government appealed the decision of the Court of
Federal Claims. According to the government, the trial
court incorrectly ruled that the taking of the easement
was temporary rather than permanent. That ruling, the
government contended, led the court to use the fair mar-
ket rental value method of determining compensation,
rather than the before-and-after method, which resulted
in an erroneous calculation of Otay Mesa’s damages. 3 The
government argued that, under the before-and-after
method, Otay Mesa was entitled to only a nominal award,
in view of the court’s finding that the use of the sensors
had not resulted in any restriction on the functionality of
the property. Id. at 1363. For its part, Otay Mesa cross-
appealed the Court of Federal Claims’ decision to limit
the scope of the taking to five parcels of land (Nos. 1, 3, 4,
5, and 10) and the time period (April 1999 through No-
vember 2005) identified in the government’s stipulation.
Id.
In Otay Mesa I, we held that the Border Patrol’s blan-
ket easement to install, maintain, and service sensors on
Otay Mesa’s property constituted a permanent physical
taking. Id. at 1365. We thus remanded the case to the
3 As we noted in Otay Mesa I, the usual measure of
compensation for a temporary taking is the fair rental
value of the property for the period of the taking, where-
as, for a permanent taking, the owner is typically entitled
to the diminution in the fair market value of the property.
670 F.3d at 1364. The latter measure of compensation is
sometimes referred to as the “before-and-after” method.
OTAY MESA PROPERTY, L.P. v. US 7
Court of Federal Claims for a redetermination of damag-
es. We stated that, “[o]n remand, the court should deter-
mine damages based upon the Border Patrol having taken
a permanent blanket easement over Otay Mesa’s proper-
ty, as set forth in the stipulation.” Id. at 1368. We agreed
with the government that the Court of Federal Claims
erred in ruling that the Border Patrol had temporarily
taken Otay Mesa’s property. We did not, however, en-
dorse the government’s view that Otay Mesa’s damages
should be determined based upon a before-and-after
methodology. Id. at 1369. Rather, we stated:
As noted, the government has argued before
us that Otay Mesa’s damages should be deter-
mined based upon a before-and-after methodology.
While diminution in value is a useful methodology
in many cases, we reiterate that the focus of the
damages analysis must always remain on award-
ing just compensation for what has been taken.
To award just compensation, a court must some-
times deviate from the traditional permanent tak-
ing-diminution in value and temporary taking-
rental value approaches.
Id.
We thus instructed that, on remand, the Court of
Federal Claims “will have discretion in identifying a
methodology that fulfills the goal of awarding Otay Mesa
just compensation.” Id. We emphasized that what was
important was for the focus to be on awarding just com-
pensation for exactly what had been taken in the case.
We identified what had been taken as “a minimally
invasive permanent easement to use undeveloped land
that is unilaterally terminable by Otay Mesa.” Id. at
1368.
Turning to Otay Mesa’s cross-appeal, we concluded
that the Court of Federal Claims had not clearly erred
when it limited the scope of the taking to the parcels of
8 OTAY MESA PROPERTY, L.P. v. US
land and the period of time identified in the government’s
stipulation. Id. at 1370. Accordingly, we affirmed-in-part
and vacated-in-part the decision of the Court of Federal
Claims. We remanded the case to the court for further
proceedings consistent with our opinion. Id.
III.
On remand, the Court of Federal Claims approached
the damages issue by considering the two types of land
that make up parcels 1, 3, 4, 5, and 10. The court deter-
mined, and the parties generally agree, that of the 897
acres of land at issue, approximately 278 acres are suita-
ble for development (the development property), while
approximately 619 acres are suitable for environmental
mitigation purposes (the mitigation property). 4 Otay
Mesa II, 110 Fed Cl. at 734, 738, 740. The court held that
Otay Mesa was entitled to no damages for the taking of
an easement over the development property. Based upon
the evidence before it, the court determined that the
sensor easement “would have no material effect” on the
development property because Otay Mesa could have any
sensors removed upon thirty days written notice that the
4 In valuing real property, a primary consideration
is its “highest and best use”—i.e., its most profitable use.
Some of Otay Mesa’s property’s highest and best use is as
mitigation land, which is land that qualifies under federal
and state regulations for use by developers to offset
development of other environmentally sensitive land.
Otay Mesa II, 110 Fed. Cl. at 735–36. Because developers
may find it difficult to locate appropriate mitigation land,
landowners can profit from selling certain land that
compensates for adverse effects on protected species and
habitats. Id. at 736. The balance of Otay Mesa’s property
has a highest and best use as land suitable for standard
industrial development. Id. at 738.
OTAY MESA PROPERTY, L.P. v. US 9
property had been approved for development. Id. at 734,
744.
The Court of Federal Claims determined, however,
that Otay Mesa was entitled to $455,520 in damages for
the taking of an easement over the mitigation property.
This figure represented five percent of the $9,110,400 fair
market value appraisal for the mitigation property. Id. at
747. Faced, on the one hand, with Otay Mesa’s argument
that the placement of the sensors on the mitigation prop-
erty had reduced the value of the property by forty per-
cent, and on the other, by the government’s contention
that the sensor placement had not had any effect on the
value of the property, the court stated:
Despite the Court’s conclusion that the conflicting
evidence tilts in Defendant’s favor, the Court is
not convinced that a landowner would willingly
convey an interest in land to the Government for
absolutely no compensation whatsoever, nor that
the encumbrance has absolutely no effect on the
value of the subject property. . . . Here, Plaintiffs
undeniably face a risk that their environmentally
sensitive property will not be approved for mitiga-
tion use. The Court does not assess this risk to be
anywhere near the 40 percent level advocated by
[Otay Mesa’s expert], but the risk is significant
enough that the Court cannot accept the Govern-
ment’s position of a zero impact either. For Plain-
tiffs to assume this risk without any compensation
for the admitted Fifth Amendment taking would
leave Plaintiffs in a worse position than before the
taking occurred. . . . [I]t is plausible that the Gov-
ernment’s sensor easement might prevent the use
of Plaintiffs’ property for mitigation purposes.
Even if this outcome never occurs, Plaintiffs’ as-
sumption of the risk should be ascribed some val-
ue.
10 OTAY MESA PROPERTY, L.P. v. US
Id. at 746–47.
In its decision, the Court of Federal Claims awarded
Otay Mesa interest from October 16, 2008, “the date,” the
court stated, “on which [Otay Mesa] became aware of the
taking through the Government’s filing of the stipula-
tion.” Id. at 747. Otay Mesa moved for reconsideration
on the issue of interest. It argued that interest should
run from April 1999, when the first sensor was installed
on its property, not from the date when the government
filed its stipulation of liability in 2008, which, in any
event, was August 28, 2008, not October 16, 2008. The
court granted the motion for the limited purpose of setting
August 28, 2008, as the starting date for the computation
of interest. Reconsideration Decision, 111 Fed. Cl. at 424.
In all other respects it denied it. The court acknowledged
“the existence of ample case law holding that interest in a
Fifth Amendment taking should run from the date of the
taking.” Id. at 423. It determined, though, that that
proposition did not apply in this case. The court pointed
out that, in arriving at its $455,520 damages award, it
had ascribed a value (five percent) to the risk Otay Mesa
assumed in having its property subjected to the govern-
ment’s easement. Pointing to August 28, 2008, the court
stated that, before that date, “only the Government knew
that the sensors were in use on Otay Mesa’s property.”
Id. at 424. The court reasoned, “[i]f no person or entity
outside of the Government was aware of the sensors until
the disclosure date in 2008, the risk on which the Court’s
damages award is based did not exist until 2008.” Id.
On July 22, 2013, the Court of Federal Claims entered
judgment awarding Otay Mesa damages in the amount of
$455,520, with interest computed on that amount from
August 28, 2008. Otay Mesa’s current appeal and the
government’s cross-appeal followed. We have jurisdiction
pursuant to 28 U.S.C. § 1295(a)(3).
OTAY MESA PROPERTY, L.P. v. US 11
DISCUSSION
Following a damages trial, we review the Court of
Federal Claims’ legal conclusions de novo and its factual
findings for clear error. Ind. Mich. Power Co. v. United
States, 422 F.3d 1369, 1373 (Fed. Cir. 2005); Am. Pelagic
Fishing Co. v. United States, 379 F.3d 1363, 1371 (Fed.
Cir. 2004). “A finding is ‘clearly erroneous’ when alt-
hough there is evidence to support it, the reviewing court
on the entire evidence is left with the definite and firm
conviction that a mistake has been committed.” Renda
Marine, Inc. v. United States, 509 F.3d 1372, 1378 (Fed.
Cir. 2007) (quoting United States v. U.S. Gypsum Co., 333
U.S. 364, 395 (1948)).
As noted above, Otay Mesa appeals the denial of
damages for the taking of an easement over the develop-
ment property. The government cross-appeals the award
of damages for the taking of an easement over the mitiga-
tion property. And Otay Mesa appeals the court’s deci-
sion not to award interest from the date sensors were first
installed on the parcels containing mitigation property. 5
We first address Otay Mesa’s appeal with respect to the
development property.
I.
A.
The Court of Federal Claims found that the “Border
Patrol’s sensor easement would have no material effect on
5 In its motion for reconsideration, Otay Mesa re-
quested that interest run from the date the first sensor
was installed, in April 1999. Reconsideration Decision,
111 Fed. Cl. at 424. On appeal, Otay Mesa argues that
interest should run from the date a sensor was first
installed on each respective parcel containing mitigation
property.
12 OTAY MESA PROPERTY, L.P. v. US
the developable land” and denied damages for the gov-
ernment’s easement over that portion of Otay Mesa’s
property. Otay Mesa II, 110 F.3d at 734. While Otay
Mesa’s expert witness testified that the easement caused
a ten percent diminution in the value of the development
property, the court found much of that evidence to be
“minimally persuasive,” and instead credited the govern-
ment’s evidence to the contrary. After weighing the
competing evidence, the court ultimately held that Otay
Mesa “failed to prove actual damages with respect to a
diminution in value of developable land.” Id.
On appeal, Otay Mesa contends that it met its burden
of showing a fair and reasonable approximation of dam-
ages as to the development property. See Ark. Game &
Fish Comm’n v. United States, 736 F.3d 1364, 1379 (Fed.
Cir. 2013); Precision Pine & Timber Inc. v. United States,
596 F.3d 817, 833 (Fed. Cir. 2010). It argues that all that
was required to prove its damages case was “reasonable
certainty,” not absolute precision. Otay Mesa states that,
in addition to its diminution in value theory, it presented
evidence showing that other parties, such as utility com-
panies and the Border Patrol itself, paid relatively large
sums for easements over the development property in
question and other nearby land owned by Otay Mesa. It
points to testimony suggesting that the very existence of
the easement could negatively affect the ability to receive
project approvals. Otay Mesa argues that the court
ignored much of this evidence and, thus, its decision to
deny damages was clearly erroneous. It contends that the
court’s holding amounts to a conclusion that Otay Mesa
would have conveyed the easement to the government for
no consideration at all.
In response, the government contends that Otay Me-
sa’s evidence was not ignored, but, rather, was considered
and found to be insufficient, or was not probative of
damages. The government points out that the Court of
Federal Claims discounted Otay Mesa’s expert witness’s
OTAY MESA PROPERTY, L.P. v. US 13
valuation as being premised on faulty assumptions. The
government also states that evidence relating to prior
easements over Otay Mesa’s property was not presented
during the remand trial and that, in any event, those
easements were not probative of damages because they
were not examples of the “minimally invasive” or “unilat-
erally terminable” easements at issue here. Unlike the
prior easements, the government points out, the sensor
easements require the Border Patrol to remove or rede-
ploy the sensors upon thirty days written notice. The
government reasons that, because Otay Mesa failed to
provide reliable expert witness evidence or to produce any
comparable easement sales, the court’s decision to credit
the government’s valuation and to deny damages was not
clearly erroneous.
B.
We conclude that the Court of Federal Claims’ deci-
sion to deny damages for the easement over 278 acres of
development property was not clear error. As an initial
matter, the fact that a taking occurred does not itself
establish what compensation should be awarded. What is
critical in the determination of just compensation is not
the gain to the government from the taking, but the
actual loss to the landowner. United States ex rel. Tenn.
Valley Auth. v. Powelson, 319 U.S. 266, 281 (1943) (noting
the “well settled rule” that it is “the owner’s loss, not the
taker’s gain, which is the measure of compensation for the
property taken”); United States v. Chandler-Dunbar
Water Power Co., 229 U.S. 53, 80–81 (1913) (“[I]n a con-
demnation proceeding, the value of the property to the
government for its particular use is not a criterion.”).
Once a taking has been established, it is the landowner
who bears the burden of proving an actual loss has oc-
curred. Bd. of Cnty. Supervisors of Prince William Cnty.,
Va. v. United States, 276 F.3d 1359, 1364 (Fed. Cir. 2002).
To carry its burden, the landowner must show actual
damages “with reasonable certainly,” which “requires
14 OTAY MESA PROPERTY, L.P. v. US
more than a guess, but less than absolute exactness.”
Precision Pine, 596 F.3d at 833.
During the trial on remand, Otay Mesa presented just
one expert, Randy Tagg. Mr. Tagg, who is an appraiser,
testified as to the damages resulting from the taking of an
easement over the development property. Mr. Tagg’s
assertion that there was a ten percent diminution in the
value of the development property was based on the prior
testimony of a witness from the 2009 trial and on the
results of a telephonic market survey. Otay Mesa II, 110
F.3d at 743. In weighting the credibility of Mr. Tagg’s
damages assessment, the Court of Federal Claims found
that the prior testimony contained “pervasive generali-
ties” and was based on the “mistaken assumption” that
the easement does not limit the number of sensors. Id.
The court also found that Mr. Tagg’s telephonic market
survey of land developers was “casual, undocumented,
and narrow,” consisting of only seven telephone calls and
four responses. Id. at 744. Two of the responsive partici-
pants, the court noted, refused to provide any estimate of
diminution of value, while the other two responses were
“minimally persuasive,” as they were also premised on the
erroneous assumption that the easement does not limit
the number of sensors allowed on the property. Id. Mr.
Tagg, the court stated, “exchanged no written correspond-
ence with these developers, and his work files [did] not
contain any notes of his conversations with them.” Id. at
739. It was the judgment of the court that, considering
foundational flaws of Mr. Tagg’s valuation, a “ten percent
reduction in value [was] dubious.” Id. at 744.
On the other hand, the Court of Federal Claims found
the testimony of the government’s expert witness—who
testified that the easement would have no impact on the
development property—to be “much more instructive.” Id.
The government’s expert, Stephen Roach, an appraiser in
San Diego, based his valuation on the wording of the
easement itself. First, Mr. Roach concluded that the
OTAY MESA PROPERTY, L.P. v. US 15
easement was limited to no more than fourteen sensors.
Id. at 740. Second, he found that the language stating
that, “should the landowner desire to develop any por-
tion . . . , the sensor will be removed or redeployed upon
30 days written notice that a grading permit has been
issued by the County of San Diego” meant there could be
no measurable effect on the suitability of the development
property for future development. Id. That conclusion was
buttressed by the prior testimony of Richard Shick, one of
the government’s experts from the 2009 trial. Mr. Shick,
who is project manager for the County of San Diego
Department of Public Works, was designated as the most
knowledgeable in his department on the impact of ease-
ments on the process of receiving grading permits for the
development of land. Id. His work responsibilities in-
cluded issuing grading permits for development of land
within the central and southern regions of San Diego
County, where Otay Mesa’s property lies. J.A. 889. His
opinion in 2009 was that the easement would likely not
prevent his department from issuing a grading permit,
but might result in an “advisory note” on the development
plans advising the applicant to notify the United States
within thirty days of issuance. Otay Mesa II, 110 F.3d at
737.
We agree with the Court of Federal Claims that the
government’s position on the development property is
much more persuasive than that of Otay Mesa. Otay
Mesa presents no persuasive argument why, in view of
the language of the stipulation, it was clear error for the
court to credit the government’s zero-damage valuation
over its own clearly flawed ten-percent-diminution valua-
tion. The Court of Federal Claims properly exercised its
judgment in its role as the trier of fact by weighting the
credibility of the respective witnesses and their before-
and-after valuations of the land.
Otay Mesa’s contention that the Court of Federal
Claims ignored relevant evidence stems from its belief
16 OTAY MESA PROPERTY, L.P. v. US
that the trial court was required to construct a damages
valuation from evidence presented during the 2009 trial,
despite such evidence never being formally presented
during the remand trial. Although we believe the trial
court was properly within its discretion in denying dam-
ages based on the evidence presented during the trial on
remand, we nevertheless address Otay Mesa’s argument.
Specifically, although Otay Mesa concedes that it was
unable to find any “comparable” easements sales, it urges
that the Court of Federal Claims should have used prior,
tangentially-related easement sales to create its own
valuation of the property. The prior easements identified
by Otay Mesa are easements that it sold for underground
pipelines for sewer, water, gas, and electricity; they also
are easements for roads and overhead power lines. While
those sales may show that substantial value has been
paid for easements over the subject land, we are unper-
suaded that the mere existence of easements that are
neither “minimally invasive” nor “unilaterally terminable”
provides a basis for determining that the Court of Federal
Claims committed clear error in accepting the govern-
ment’s zero-damages valuation. Unassisted by expert
reports or trial testimony on how those utility and road
easements relate to the permanent sensor easements at
issue here, the court was left to speculate as to how those
easements would factor into a supposedly proper “just
compensation” calculation. The court was not obligated to
construct a damages award for Otay Mesa when it had
substantial, credible evidence before it indicating that no
actual loss was suffered. Vaizburd v. United States, 384
F.3d 1278, 1284–85 (Fed. Cir. 2004) (rejecting the “propo-
sition that a court may not adopt one party’s credible
appraisal over the other party’s less credible appraisal”
and holding that the taking “did not diminish the market
value of the [landowner’s] property”).
In Precision Point, we concluded that a trial court is
not necessarily stuck with the “stark choice” of accepting
OTAY MESA PROPERTY, L.P. v. US 17
or rejecting a party’s valuation, but it did not foreclose
that option. 596 F.3d at 832. “As the fact finder in the
bench trial, the judge is responsible for deciding what
evidence to credit or reject and what result to reach,”
which is precisely what the trial judge did here. Id. at
833. As we explained in Precision Point, while we may
know more on an appeal from a bench trial than from a
jury trial as a result of a written opinion, it “does not alter
th[e] judge’s discretion to weigh evidence or our standard
of review.” Id. Similarly, in Yaist v. United States, the
court noted that, where comparable sales data is lacking,
it is permissible to fashion a damages award from “other
evidence,” so long as it is “premised on a reasonably
informed basis.” 17 Cl. Ct. 246, 257 (1989). Contrary to
Otay Mesa’s contentions, it is doubtful whether the prior
easement sales, without more, could have provided a
“reasonably informed basis” to value a unique sensor
easement that is minimally invasive, unilaterally termi-
nable, and must also not affect the functionality of the
land for development purposes.
Finally, Otay Mesa calls it a “paradox” and “irrecon-
cilable” that, as a temporary easement, the encumbrance
had substantial value, yet as a permanent easement it
was denied damages. But as we explained in Otay Mesa
I, the prior valuation was based exclusively on the rental
value of the property for skydiving and parachute train-
ing. 670 F.3d at 1368. That rental market methodology
was erroneous. Id. Indeed, we explicitly instructed the
Court of Federal Claims on remand not to “overlook
exactly what has been taken by the Border Patrol—a
minimally invasive permanent easement to use undevel-
oped land that is unilaterally terminable by Otay Mesa.”
Id. We reminded the court that, “should Otay Mesa wish
to develop any portion of the property, any affected sensor
will be removed or redeployed upon 30 days written
notice” of a grading permit issuance. Id. at 1369. And,
we gave the court great leeway “to fashion an appropriate
18 OTAY MESA PROPERTY, L.P. v. US
measure of compensation.” Id. In our view, considering
the whole record before the court, it was not clear error to
accept the government’s position and to deny damages for
the development property.
II.
A.
Following the damages trial on remand, the Court of
Federal Claims rejected the government’s zero-percent
diminution valuation of the mitigation property, as well
as Otay Mesa’s forty-percent-diminution valuation. Otay
Mesa II, 110 Fed. Cl. at 746. The court then exercised its
discretion in formulating a damages award that it be-
lieved accounted for the real, but minimal, risk that the
property would be rejected for mitigation use due to the
sensor easement over it. Id. at 747. It awarded $455,520
for the taking of a permanent easement over Otay Mesa’s
mitigation property—an award of five percent of the
property’s $9,110,400 fair market value. Id.
The government now cross-appeals that award. It ar-
gues that the damages award is based on clearly errone-
ous factual findings and that it is inconsistent with other
conclusions in the Court of Federal Claims’ damages
decision. Specifically, the government contends that the
court found that the easement would not affect the biolog-
ical resources of the mitigation land. See id. at 745. In
addition, it notes that the court found that, even after the
sensors were placed on its property, Otay Mesa used
portions of the property for mitigation purposes. Recon-
sideration Decision, 111 Fed. Cl. at 424. It further points
out that evidence was presented during the 2009 trial
indicating that the sensors would have no measurable
impact on the use of Otay Mesa’s land for mitigation
purposes. Otay Mesa II, 110 Fed. Cl. at 737. The gov-
ernment, in other words, argues that there is no credible
evidence from which the Court of Federal Claims could
OTAY MESA PROPERTY, L.P. v. US 19
conclude that there was a five percent risk that the prop-
erty would not be approved for mitigation use.
Otay Mesa responds that, even though the Court of
Federal Claims arrived at a damages award that neither
party suggested, it was well within its broad discretion to
do so. It argues that the court had ample evidence from
which it could conclude that Otay Mesa’s land might not
be approved for mitigation use. It contends that its
appraiser, Mr. Tagg, as well as its other witnesses, testi-
fied that there would be a diminution in the value of land
as mitigation property as a result of an easement that
provides for installation of sensors, as well as for ingress
and egress to and from the sensors. It points, for exam-
ple, to its expert on mitigation, James Carter, who testi-
fied that ingress and egress to the sensors, in addition to
the redeployment and relocation of the sensors, would
negatively impact the ability to find a management com-
pany that would take title to the land. J.A. 681–82. It
explains that the Court of Federal Claims did not sua
sponte fashion an arbitrary “risk” award, as it is charac-
terized by the government, but that the court laid out
factual bases for awarding a five percent diminution in
value due to the identified risk.
B.
We conclude that the Court of Federal Claims proper-
ly exercised its discretion in shaping an award that ac-
counted for the potential that the mitigation property
might not be approved for mitigation use. As noted above,
we explicitly instructed that “on remand the Court of
Federal Claims will have discretion in identifying a
methodology that fulfills the goal of awarding Otay Mesa
just compensation.” Otay Mesa I, 670 F.3d at 1369.
During the damages trial on remand, the court was
confronted with conflicting evidence and relatively ex-
treme valuations for the mitigation property—proposals
of zero percent or forty percent diminution in value.
20 OTAY MESA PROPERTY, L.P. v. US
Recognizing that the “Plaintiffs undeniably face a risk
that their environmentally sensitive property will not be
approved for mitigation use,” but that the risk was not
“anywhere near the 40 percent [diminution in value] level
advocated by Mr. Tagg,” the court chose its own valuation
that captured what it perceived as the risk of a “potential
denial of a mitigation request.” Otay Mesa II, 110 Fed. Cl.
at 734, 746. It explained that, “[e]ven if this outcome
never occurs, Plaintiffs’ assumption of the risk should be
ascribed some value.” Id. at 746. It found that Otay
Mesa would not have willingly assumed that risk for its
mitigation property without some, albeit minimal, consid-
eration. Id.
We detect nothing inappropriate with the Court of
Federal Claims looking at the evidence as a whole and
using its own methodology to calculate a damages award.
Contrary to the government’s assertion, the court’s deci-
sion to ascribe its own valuation to the damages associat-
ed with the mitigation land is consistent with both our
instruction on remand and our case law. In Precision
Pine, discussed above, we made clear that a trial court
need not accept either party’s damages position. 596 F.3d
at 832–33. We explained that it is both correct and im-
portant for a trial court to use its flexibility to tailor a fair
and reasonable result based on the evidence it credits or
rejects. Id.; see also Seravalli v. United States, 845 F.2d
1571, 1575 (Fed. Cir. 1988) (“[Trial] courts necessarily
must have considerable discretion to select the method of
valuation that is most appropriate in the light of the facts
of the particular case.”). Here, where the parties took
divergent and extreme positions, and the court believed
that the landowner was in a worse position after the
taking, the court had few options in determining a just
OTAY MESA PROPERTY, L.P. v. US 21
compensation award other than creating its own valua-
tion. 6
Moreover, the government overlooks that many of the
arguments it advances for why it was not clear error for
the Court of Federal Claims to deny damages for the
easement over the development property likewise apply to
the court’s decision to award damages for the easement
over the mitigation property. When a trial court provides
a damages award that is within the range of credible
testimony, it is not an appellate court’s role to reweigh the
evidence or second-guess the finder of fact. E.g., Rapid
Transit Co. v. United States, 295 F.2d 465, 467 (10th Cir.
1961) (finding that “[s]ince the award was well within the
range of credible testimony this court may not reweigh
the evidence or retry the facts”), cert. denied, 369 U.S.
819. The Court of Federal Claims’ five-percent award for
the mitigation property—like its denial of damages for the
development property—is reasonable on the evidence.
III.
A.
Last, we address Otay Mesa’s appeal with respect to
the date from which interest on its damages award should
be calculated. Following the trial on remand, the Court of
Federal Claims awarded compound interest from October
16, 2008, the date on which it believed Otay Mesa first
became aware of the taking through the government’s
stipulation. Otay Mesa II, 110 Fed. Cl. at 747. On recon-
sideration, the trial court “acknowledge[d] the existence of
6 To the extent the government contends that the
court’s methodology is inconsistent with the methodology
used in the original damages decision, that decision was
based on the notion that the taking was temporary in
nature. As discussed above, that methodology was incor-
rect and was based on a rental value calculation.
22 OTAY MESA PROPERTY, L.P. v. US
ample case law holding that interest in a Fifth Amend-
ment taking should run from the date of the taking,” but
declined to adjust the date beyond granting a change from
October to August 2008, when the government’s stipula-
tion was first filed. Reconsideration Decision, 111 Fed. Cl.
at 423. The court believed that “[i]f no person or entity
outside of the Government was aware of the sensors until
the disclosure date in 2008, the risk on which the Court’s
damages award is based did not exist until 2008.” Id.
On appeal, Otay Mesa argues that the case law is un-
equivocal that interest must be calculated from the date
of the taking. And it argues that the date of the taking
cannot be disputed, as the government expressly listed
the dates that each sensor was first installed on the
subject property in its 2008 stipulation. In response, the
government defends the Court of Federal Claims’ deci-
sion. It does so, not by arguing that the case law allows
for interest to be computed from some other point in time
other than the date of the taking, but, rather, by contend-
ing that, since no damage occurred before 2008, the court
essentially applied an interest rate on zero damages from
the date of the taking until the date of the government’s
stipulation. It argues that before the stipulation Otay
Mesa did not know about the sensors and therefore could
not have suffered any damages on which interest could be
compounded. Awarding Otay Mesa interest from a date
prior to the 2008 stipulation, the government contends,
would place it in a better position than if the taking had
never occurred.
B.
We hold, as a matter of law, that interest on Otay Me-
sa’s damages award must be calculated from the date
sensors first encumbered Otay Mesa’s property. The
Supreme Court has long held that “just compensation”
includes interest compounded from the date of a taking
when payment for the taking does not coincide with the
OTAY MESA PROPERTY, L.P. v. US 23
taking itself. Phelps v. United States, 274 U.S. 341, 344
(1927); Seaboard Air Line Ry. Co. v. United States, 261
U.S. 299, 306 (1923). In Phelps, the Court recognized that
the “Plaintiffs’ property was taken before its value was
ascertained or paid.” 274 U.S. at 344. It explained that
the “[j]udgment in 1926 for the value of the use of the
property in 1918 and 1919, without more, [was] not
sufficient to constitute just compensation.” Id. The Court
instructed that the landowner was “entitled to have the
full equivalent of the value of such use at the time of the
taking paid contemporaneously with the taking.” Id.
Thus, “if disbursement of the award is delayed, the
owner is entitled to interest thereon sufficient to ensure
that he is placed in as good a position pecuniarily as he
would have occupied if the payment had coincided with
the appropriation.” Kirby Forest Indus., Inc. v. United
States, 467 U.S. 1, 10 (1984) (citing Phelps, 274 U.S. at
344 and Seaboard, 261 U.S. at 306). In order for an
owner to be placed in “as good a position pecuniarily,”
interest must be added to the damages award in order to
compensate for the time value of money and the potential
opportunity the owner has lost to earn income on its
damages award as a result of the taking. It is now axio-
matic that “the Fifth Amendment’s reference to ‘just
compensation’ entitles the property owner to receive
interest from the date of the taking to the date of payment
as a part of his just compensation.” United States v.
Thayer-W. Point Hotel Co., 329 U.S. 585, 588 (1947); see
also Jacobs v. United States, 290 U.S. 13, 17 (1933)
(“[J]ust compensation is comprehensive, and includes all
elements, ‘and no specific command to include interest is
necessary when interest is part of such compensation.’”).
Here, as in Kirby Forest, the government stipulated to
the precise date of its taking. It conceded in its 2008
stipulation that “by virtue of its placement of the 14
sensors specified above on the listed parcels of land, it has
taken a property interest in the nature of an easement.”
24 OTAY MESA PROPERTY, L.P. v. US
J.A. 1793 at ¶ 6 (emphasis added). It stipulated that the
“easement shall be deemed to have commenced on the
date the sensor is listed as having been installed.” J.A.
1794 at ¶ 7. The stipulation also enumerates the dates
that each sensor was first installed: dates ranging from
April 1999 to November 2005. J.A. 1793 at ¶ 5. Because
the government’s payment of consideration for its taking
was not paid contemporaneously with the taking, Otay
Mesa is now entitled to interest “sufficient to ensure that
[it] is placed in as good a position pecuniarily as [it] would
have occupied if the payment had coincided with the
appropriation.” Kirby Forest, 467 U.S. at 10.
We are not persuaded by the Court of Federal Claims’
and the government’s justifications for why interest
should not begin to run until the date of the government’s
stipulation. To begin with, delaying the running of inter-
est until Otay Mesa supposedly first knew about the
taking would be contrary to the established precedent just
discussed. Moreover, if the government’s easement
created a risk that Otay Mesa’s mitigation land might be
denied approval for mitigation use as of 2008, then the
sensor easement would have also created the same risk
when the land was first encumbered. Otay Mesa’s
knowledge of the easement is irrelevant to whether the
easement objectively created that risk. Finally, if interest
is not computed from the date of the taking, but instead
from the date a landowner is first made aware of the
taking, the government is presented with an incentive to
delay disclosure of physical invasion for as long as possi-
ble. We see no logic in creating such an incentive.
Accordingly, we vacate the decision of the Court of
Federal Claims to award interest from August 28, 2008,
and remand for recalculation of the interest owed to Otay
Mesa. As noted, Otay Mesa argues before us that interest
should be calculated based on the different dates that the
respective parcels constituting the mitigation property
were first encumbered by a sensor easement. The gov-
OTAY MESA PROPERTY, L.P. v. US 25
ernment has not proposed a method for calculating inter-
est in the event that we rule against it. On remand, after
receiving the views of the parties, the Court of Federal
Claims will be in a position to formulate a methodology
for calculating interest.
CONCLUSION
For the foregoing reasons, we affirm-in-part and va-
cate-in-part the decision of the Court of Federal Claims.
The case is remanded to the court for further proceedings
consistent with this opinion.
AFFIRMED-IN-PART, VACATED-IN-PART, and
REMANDED
COSTS
Each party shall bear its own costs.