Textainer Equipment Management Limited v. United States ( 2014 )

In the United States Court of Federal Claims
No. 08-610C
(Filed: April 22, 2014)
)
TEXTAINER EQUIPMENT )
MANAGEMENT LIMITED, et al., ) Standing To Bring Takings Claim;
) Assignment of Claims Act; Subrogation;
Plaintiffs, ) RCFC 17 Substitution; Physical
v. ) Possession and Use for Public Purpose;
) Interest on takings claim
THE UNITED STATES, )
)
Defendant. )
)
Lars H. Liebeler, Washington, DC, for plaintiffs.
Robert C. Bigler, Civil Division, United States Department of Justice,
Washington, DC, with whom were Stuart F. Delery, Assistant Attorney General, Bryant
G. Snee, Acting Director, and Franklin E. White, Jr., Assistant Director, for defendant.
OPINION
FIRESTONE, Judge.
This is the court’s fifth decision in this case. 1 Previously, the court determined
that the government’s decision to take title and possession of shipping containers that the
government had leased from TOPtainer Container Management & Sales (“TOPtainer”), 2
but were owned by plaintiff, Capital Lease Limited (“Capital”), gave rise to a potential
1
Previous decisions in this case are Textainer Equip. Mgmt. Ltd. v. United States, No. 08-610,
2013 WL 1984382 (Fed. Cl. May 15, 2013); Textainer Equip. Mgmt. Ltd. v. United States, No.
08-610, 2012 WL 5465983 (Fed. Cl. Nov. 6, 2012); Textainer Equip. Mgmt. Ltd. v. United
States, 105 Fed. Cl. 69 (2012); Textainer Equip. Mgmt. Ltd. v. United States, 99 Fed. Cl. 211(2011).
2
TOPTainer is no longer in business. See Textainer, 2013 WL 1984382, at *1.
taking of property without just compensation in contravention of the Fifth Amendment
to the U.S. Constitution. Textainer, 2012 WL 5465983, at *8. Specifically, the court
found that the government’s decision to take title to and possession of plaintiffs’ shipping
containers which the U.S. military used in Iraq gave rise to a taking because the
government knew the containers belonged to Capital but elected to keep the containers
for military use 3 without paying Capital. 4 Id. Although the court found the government
liable for a taking of Capital’s containers, the court denied summary judgment on the
grounds that there were disputed facts as to whether Capital owned all of the 477
containers Capital claimed were taken by the government.
Until this final round of briefing, the actual ownership status of many of the
containers has been unclear. 5 However, after discovery, plaintiff Green Eagle
Investments N.V. (“Green Eagle”), Capital’s successor, entered into a series of
3
After the filing of the complaint, it was determined that 122 of these containers were in use by
the United States Marine Corps in Okinawa, Japan. Textainer, 99 Fed. Cl. at 216.
4
As discussed below, the court determined that the government’s decision to take title to and
possession of plaintiffs’ containers despite Capital’s notice that it owned the containers and
wanted them returned was a sovereign act. The court found that it was that notice that
distinguished Capital’s takings claim from other plaintiffs that were dismissed because those
other plaintiffs had not provided the government with notice. The court concluded that the
government had not taken the containers of those other plaintiffs because without notice the
government could claim that it was a bona fide purchaser for value of those containers.
Textainer, 2012 WL 5465983, at *5-14.
5
Plaintiffs have had an extremely difficult time determining the proper party to bring its claim.
Textainer is the name of the leasing company that took control of Capital’s containers after
Capital merged with Green Eagle. Until recently, plaintiff argued that Green Eagle was Capital’s
successor and the only surviving entity of the Capital merger. Then, Green Eagle notified the
court that Capital was still in existence, though it was a shell entity in the process of winding
down. Textainer, 2013 WL 1984382, at *3. Thus, Capital has been substituted as the real party
in interest along with its successor, Green Eagle.
2
stipulations with United States regarding the ownership and value of the subject 477
containers. These stipulations are summarized as follows: (1) Capital owned 258
containers at the time of the taking at a value of $485,899.64; (2) Capital Lease GmbH
(“GmbH”), a wholly-owned subsidiary of Capital, owned 22 containers at the time of the
taking at a value of $33,496.87; (3) P&R Equipment and Finance Corporation (“P&R”)
owned 197 containers at the time of the taking at a value of $219,024.99; (4) Capital
purchased 99 of P&R’s containers, with a value of $153,250.57, after the date of the
taking as part of several larger transactions that resulted in Capital buying 95,441
containers from P&R between 2005 and 2007; (5) Green Eagle, as the successor to
Capital, purchased 98 of P&R’s containers, with a value of $218,024.99, after the date of
the taking as a part of a transaction involving its purchase of 35,814 additional containers
in 2009. Jt. Stip., ECF No. 157, at 1-3.
Pending before the court are plaintiffs’ motion for summary judgment and the
government’s cross-motion for summary judgment under Rule 56 of the Rules of the
United States Court of Federal Claims (“RCFC”). Plaintiff seeks to establish ownership
and, thus, just compensation for all 477 containers in the amounts claimed above together
with interest based on the Moody’s Composite Index of Yields on Aaa Long Term
Corporate Bonds (“Moody’s Rate”) from the date of the taking. The government seeks a
ruling that Capital is not entitled to just compensation for any of the 477 containers, and
that interest, if established, should be limited to the rate under the Declaration of Takings
Act (“DTA”), 40 U.S.C. § 3116.
3
For the reasons that follow, the court finds that plaintiffs are entitled to summary
judgment with regard to their claim for just compensation for the 258 containers owned
by Capital at the time of the taking in the amount of $485,899.64 with interest as set forth
below and that the government is entitled to summary judgment with regard to all
remaining claims. 6
I. STANDARD OF REVIEW
Under RCFC 56, summary judgment is appropriate “if the movant shows that
there is no genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.” RCFC 56(a). The court’s task is to determine whether a genuine
issue of material fact exists, and not “to weigh the evidence and determine the truth of the
matter . . . .” Anderson v. Liberty Lobby, 477 U.S. 242, 249 (1986). As it does for all
RCFC 56 motions, the court views the evidence in a light most favorable to the
nonmoving party, drawing reasonable inferences in its favor. See Schooner Harbor
Ventures, Inc. v. United States, 569 F.3d 1359, 1362 (Fed. Cir. 2009); Galvin v. Eli Lilly
& Co., 488 F.3d 1026, 1031 (D.C. Cir. 2007). If the court finds that a rational trier of
fact could not find for the nonmoving party, then there is no genuine issue for trial and
the movant is entitled to summary judgment. Ricci v. DeStefano, 557 U.S. 557, 586
(2009) (quoting Matsushita Elec. Industr. Co. v. Zenith Radio Corp., 475 U.S. 574, 587
(1986)).
II. DISCUSSION
6
The court has held several oral arguments in this case and has concluded that an additional
argument on the present motions for summary judgment is not warranted.
4
A. Capital and Green Eagle Lack Standing to Maintain a Takings Claim
for Containers Owned by P&R and GmbH
The elements for establishing a takings claim under the Fifth Amendment are
well-settled and are not disputed by the parties. The court first must determine whether
the claimant has established a property interest for purposes of the Fifth Amendment.
Klamath Irr. Dist. v. United States, 635 F.3d 505, 511 (Fed. Cir. 2011). If a property
interest is established, the court then must determine whether all or a part of that interest
has been appropriated by the government for a public use. Id. Put another way, the
government’s actions must appropriate a benefit for the government at the expense of the
property owner. Moden v. United States, 404 F.3d 1335, 1339 (Fed. Cir. 2005) (quoting
Ridge Line v. United States, 346 F.3d 1346, 1356 (Fed. Cir. 2003)).
The government does not dispute that Capital and Green Eagle have standing to
assert a claim in connection with the 258 containers Capital owned at the time the
government took title. Instead, the government argues that the United States did not
engage in sovereign conduct when it elected to keep Capital’s containers. However, the
government does challenge plaintiffs’ standing to seek compensation for the 197
containers that were owned by P&R on the date of taking and the additional 22 containers
that were owned by Capital’s subsidiary, GmbH, on the date of taking. The court will
first examine the government’s standing arguments with regard to containers owned by
P&R and GmbH before turning to the argument regarding plaintiffs’ containers and,
finally, the issue of the proper interest rate to apply.
1. P&R Containers
5
With respect to the 197 containers owned by P&R, the government argues that
neither Capital nor Green Eagle has standing to seek just compensation because neither
owned the containers at the time of the taking, citing United States v. Dow, 357 U.S. 17,
20-21 (1958), for the proposition that just compensation is due at the time of the taking to
the owner at that time, not an owner at an earlier or later date. The government argues
that, to the extent that plaintiffs contend they acquired P&R’s claim for just compensation
for the 197 containers when they later purchased those containers, their claim is barred by
the Assignment of Claims Act. 7
7
Two anti-assignment statutes restrict the manner in which private entities may voluntarily
assign contracts with, and claims against, the government. These two statutes are often referred
to collectively as the “Assignment of Claims Act” or the “Anti-Assignment Acts,” and are
codified at 41 U.S.C. § 15 and 31 U.S.C. § 3727. Delmarva Power & Light Co. v. United States,
542 F.3d 889, 892 (Fed. Cir. 2008); Fireman’s Fund Ins. Co. v. England, 313 F.3d 1344, 1349
(Fed. Cir. 2002). The statute applicable here is 31 U.S.C. § 3727, the Assignment of Claims Act.
The Act provides, in relevant part:
(a) In this section, “assignment” means—
(1) a transfer or assignment of any part of a claim against the United States
Government or of an interest in the claim; or
(2) the authorization to receive payment for any part of the claim.
(b) An assignment may be made only after a claim is allowed, the amount of the
claim is decided, and a warrant for payment of the claim has been issued. The
assignment shall specify the warrant, must be made freely, and must be
attested to by 2 witnesses. The person making the assignment shall
acknowledge it before an official who may acknowledge a deed, and the
official shall certify the assignment. The certificate shall state that the official
completely explained the assignment when it was acknowledged. An
assignment under this subsection is valid for any purpose.
31 U.S.C. § 3727(a)-(b).
6
Plaintiffs do not dispute that they did not own the containers at the time of the
taking and do not dispute that they do not have a claim authorized under the Assignment
of Claims Act. Rather, they argue that they have standing to seek just compensation on
two grounds. First, plaintiffs argues that they were subrogated to P&R’s just
compensation claim and, for that reason, the claim is exempt from the Assignment of
Claims Act. Second, they argue on policy grounds that the Assignment of Claims Act
does not apply to this case.
a. Plaintiffs Are Not Subrogated to P&R’s Claims
Plaintiffs argue that their claims for just compensation are subrogation claims
under the contract between Capital and P&R—the contract that allowed Capital to lease
P&R’s containers to TOPtainer, and for TOPtainer to then lease those containers to the
government. Under those contracts, Capital had assumed the risk of loss of P&R’s
containers, was required to buy insurance for the containers, and eventually was required
to buy all of P&R’s containers, including those taken by the government at the end of the
lease term. According to plaintiffs, this contractual arrangement with P&R effectively
subrogated them to P&R’s claim for just compensation. Because subrogation claims are
ordinarily exempt from the Assignment of Claims Act, plaintiffs argue, their claims are
exempt from the Assignment of Claims Act. In support of this argument, plaintiffs rely
on United States v. Aetna Cas. & Sur. Co., 338 U.S. 366 (1949), and Saint John Marine
Co. v. United States, 92 F.3d 39 (2d Cir. 1996). 8
8
In Aetna, the Supreme Court held that the insurance company that paid a tort victim harmed by
the United States became equitably subrogated to the victim’s tort claim against the government.
7
The court agrees with the government that plaintiffs’ contractual arrangement with
P&R did not effectively subrogate Capital to P&R’s claim for just compensation. While
the Supreme Court and other courts have recognized exemptions to the Assignment of
Claims Act, these exemptions are very narrow and do not extend to the facts of this case.
In Dow, the plaintiff acquired property after it had been condemned and physically
occupied—but before a formal declaration of taking had been filed—and thereafter
brought a claim for just compensation. Addressing the question of whether the claim for
just compensation vested in the owner at the time the United States took possession of the
property or when the government filed a formal declaration of taking, the Supreme Court
held that a claim for just compensation based on the voluntary acquisition of property
previously taken by the government can only give rise to a claim by the subsequent
purchaser if that purchaser satisfies the requirements under the Assignment of Claims
Act. Dow, 357 U.S. at 20-21. The Court determined that the claim for just compensation
vested when the government took possession and thus the taking claim belonged to the
property owner at the time of the take. Id. at 20 (“[I]t is undisputed that ‘(since)
compensation is due at the time of taking, the owner at that time, not the owner at an
earlier or later date, receives payment.’” (quoting Danforth v. United States, 308 U.S.
271, 284 (1939)); see also Palazzolo v. Rhode Island, 533 U.S. 606, 628 (2001) (citing
Because the assignment occurred by operation of law, the Supreme Court held that the
Assignment of Claims Act did not apply. In Saint John Marine, the Second Circuit relied on
Aetna to hold that a lien created by a maritime agreement served to assign a claim against the
United States without triggering the Assignment of Claims Act. Both cases turn on assignments
that arise from independent legal relationships, i.e., by operation of law. Plaintiffs argue that the
same principle should apply here.
8
Danforth, 308 U.S. at 284). Applying those principles to this case, the court finds that,
absent an exception, plaintiffs’ claims based on P&R’s containers are barred by the
Assignment of Claims Act.
In this regard, the court agrees with the government that plaintiffs are not entitled
to an exemption from the Assignment of Claims Act based on their agreement with P&R.
Because plaintiffs did not take on the legal obligation to pay just compensation in the
event of a taking, plaintiffs are not subrogated to P&R’s taking claim. Although
plaintiffs had the opportunity to include a provision covering such takings in the
agreement with P&R, they did not do so. Without such a provision, there is no
mechanism for the assignment of a taking claim through operation of law, regardless of
whether Capital assumed the risk of loss and acquired insurance to cover losses. In Dow,
the court noted that “There were readily available contractual means by which he could
have protected himself vis-a-vis his grantors against the contingency that his claim
against the United States would be subsequently invalidated by the Anti-Assignment
Act.” Dow, 357 U.S. at 27. For example, in the present case, plaintiffs could have
negotiated for P&R to pursue the takings claim against the government and to then pay
over the funds to plaintiffs. However, because they did not do so, the Assignment of
Claims Act bars plaintiffs from recovering for the containers owned by P&R at the time
of the taking. 9
9
If plaintiffs are instead arguing that they are subrogated to P&R’s claims for a tort committed
by the government in keeping the containers, that claim is outside the jurisdiction of this court.
See 28 U.S.C. § 1491(a)(1) (The United States Court of Federal Claims shall have jurisdiction to
render judgment upon any claim . . . not sounding in tort.”).
9
b. Policy Is Broader Than Plaintiffs Claim
Plaintiffs further argue that, because the Assignment of Claims Act is
fundamentally a statute designed to protect the United States from fraud, claim
trafficking, and potential conflicting claims, finding an exemption is appropriate in this
case because it will not undermine the fundamental purpose of the Act. According to
plaintiffs, their purchase of P&R’s taken containers as part of a pre-existing agreement
entered into before the taking does not implicate the policy concerns that the Act is
designed to address. Thus, they argue on policy grounds that there is no reason to apply
the Assignment of Claims Act.
The government disagrees, arguing that the Assignment of Claims Act not only
applies but that the policy concerns of the Act are broader than plaintiffs claim.
Specifically, the government argues that, as discussed in Kingsbury v. United States, 563
F.2d 1019, 1024 (Ct. Cl. 1977), the Assignment of Claims Act preserves for the
government defenses and counterclaims which might not be available against the
assignee, and therefore the United States is also protected from a loss of those defenses
and counterclaims.
Plaintiffs’ contention that their claim should be exempt from the Assignment of
Claims Act on policy grounds, regardless of whether subrogation applies, is
unpersuasive. While it is no doubt true that the Assignment of Claims Act is intended, in
the first instance, to protect the government from fraud, conflicting claims, and potential
liability to multiple parties, those are not the only reasons for its application. Among the
reasons for precluding the transfer of takings claims is the concern that different defenses
10
may apply depending upon who owns the property on the date of taking. United States v.
Shannon, 342 U.S. 288, 292 (1952) (quoting Grace v. United States, 76 F. Supp. 174, 175
(D. Md. 1948)); see also Palazzolo, 533 U.S. at 628 (“A blanket rule that purchasers with
notice have no compensation right when a claim becomes ripe is too blunt an instrument
to accord with the duty to compensate for what is taken.”). Thus, one party cannot
simply step into the shoes of another when seeking just compensation for property
belonging to another on the date of the taking. 10 The Assignment of Claims Act’s
legitimate policy goal of preserving defenses is therefore furthered by applying the Act
here. Plaintiffs’ claims for just compensation in connection with P&R’s containers must
therefore be DENIED.
2. Capital Lease GmbH Containers
With respect to the 22 containers owned by GmbH, the government argues that
plaintiffs lack standing to bring claims for just compensation, as with the containers
owned by P&R. Plaintiffs argue in response that they should have standing on two
grounds. First, they argue that, as the sole stockholder of GmbH, they own the assets of
GmbH and may step into its shoes as its alter ego. Second, plaintiffs argue that, if they
10
For example, while the court need not resolve the question at this time, P&R may not actually
be entitled to state a takings claim on its own behalf in the first instance. Capital gave notice to
the government that TOPtainer did not own its containers and thus could not sell them, but there
is no evidence that P&R gave such notice to the government. In such circumstances, P&R likely
would not be entitled to state a taking claim on its own behalf, and the government could be
prejudiced by allowing plaintiffs to bring those claims as their own. This is especially true in a
case such as this, where the notice provided to the government is a critical factor in establishing
liability. As a result, plaintiffs may simply be wrong in assuming that P&R has a right to just
compensation.
11
may not bring GmbH’s claims, GmbH itself should be permitted to join this litigation
under RCFC 17.
a. Plaintiffs Do Not Own GmbH’s Assets
The government argues that plaintiffs do not have standing to pursue a takings
claim with respect to the 22 containers that were owned by GmbH because, although
Capital is a stockholder in GmbH, GmbH is a separate legal entity distinct from Capital.
As a result, the government argues, Capital cannot be presumed to have owned the
containers belonging to GmbH at the time of the taking, citing Dole Food Co. v.
Patrickson, 538 U.S. 468, 474-75 (2003), for the general rule that two separate
corporations are regarded as distinct legal entities even if the stock of one corporation is
owned wholly by the other and that the parent cannot be presumed to have legal title to
the assets of the subsidiary solely on this basis.
Plaintiffs argue in response that Capital should be allowed to pursue the claim of
its subsidiary because Capital Lease GmbH, as Capital’s wholly-owned subsidiary, is in
fact the alter ego of Capital and thus Capital may bring a claim on its behalf. In support,
plaintiffs rely on several cases in the Fourth and Tenth Circuits that they argue
demonstrate that a wholly-owned subsidiary is an alter ego of the parent for purposes of
standing and claim preclusion. 11 In the alternative, plaintiffs argue that GmbH should be
11
In Saudi v. V. Ship Switz., the 4th Circuit held that a relationship where the subsidiary is a
“mere corporate vehicle” is sufficient to establish privity for purposes of claim preclusion. 93
Fed. App’x 516, 520-21 (citing Robinson v. Volkswagenwerk AG, 56 F.3d 1268, 1275 (10th Cir.
1995); Whitehead v. Viacom, 233 F. Supp. 2d 715, 721 (D. Md. 2002); Buckley v. Airshield
Corp., 977 F. Supp. 375, 378-79 (D. Md. 1997)). In Robinson, the 10th Circuit held that a
controlling, “near alter ego” relationship was sufficient to establish privity for purposes of claim
12
allowed to join this suit pursuant to RCFC 17 as the real party in interest for the 22
containers if it is found to be the owner.
The court agrees with the government that Capital does not have standing to seek
compensation because, as a corporate parent, it cannot be presumed to own Capital Lease
GmbH’s assets and thus does not own the 22 containers belonging to GmbH. There is
simply no evidence before the court to allow the court to find that Capital’s ownership of
GmbH’s stock alone made Capital the owner of the 22 containers. Plaintiffs’ reliance on
cases showing wholly-owned subsidiaries as alter egos for the purposes of standing and
claim preclusion is misplaced. Parents and their subsidiaries are generally considered to
be entirely separate entities, Dole, 538 U.S. at 474 (citing First Nat’l City Bank v. Banco
Para El Comercio Exterior de Cuba, 462 U.S. 611, 625 (1983)), and plaintiffs have
presented no evidence to demonstrate that such a relationship exists here. Because
plaintiffs have failed to provide such evidence to demonstrate that GmbH was Capital’s
alter ego, plaintiffs’ cases are unpersuasive. Accordingly, the court sees no reason not to
apply the general rule, articulated by the Supreme Court, and find that that shareholder
Capital is not presumed to be the owner of GmbH’s corporate assets.
b. Substitution Under RCFC 17 Is Not Appropriate
Plaintiffs argue that, if GmbH is the real party in interest for these containers, they
are permitted an opportunity under RCFC 17 to join them here. Plaintiffs contend that
preclusion. 56 F.3d at 1275. While the cases hold that privity between a parent and subsidiary
can be demonstrated by an alter ego relationship for purposes of claim preclusion, plaintiffs have
presented no evidence that the relationship between Capital and GmbH is actually that of an alter
ego.
13
they were not aware of GmbH’s ownership until recently, and thus could not have
brought a motion for substitution earlier. Additionally, plaintiffs argue that permitting
GmbH’s joinder would not be prejudicial to the government and denying the motion
would serve no policy objective.
The government argues in response that plaintiffs’ request for substitution under
RCFC is not based on an understandable mistake, and that the request comes too late in
the litigation to be appropriate. According to the government, plaintiffs could have
settled the ownership issues earlier if they had investigated them, which would have
informed them of GmbH’s status. The government contends that plaintiffs’ current
request is due to plaintiffs’ own failures or omissions, and that the court is under no
obligation to correct them.
The court agrees with the government that plaintiffs’ request to substitute GmbH
as the real party in interest under RCFC 17 for the 22 containers comes too late. Under
RCFC 17, “[t]he court may not dismiss an action for failure to prosecute in the name of
the real party in interest until, after an objection, a reasonable time has been allowed for
the real party in interest to ratify, join, or be substituted into the action. After ratification,
joinder, or substitution, the action proceeds as if it had been originally commenced by the
real party in interest.” RCFC 17(a)(3). Under this rule, courts must allow a reasonable
opportunity for a plaintiff to substitute the real party in interest. However, “when the
determination of the right party to bring the action was not difficult and when no
excusable mistake ha[s] been made, then Rule 17(a)(3) is not applicable and the action
should be dismissed.” 6A Charles Alan Wright, Arthur R. Miller, Mary Kay Kane,
14
Richard L. Marcus & Adam N. Steinman, Federal Practice and Procedure § 1555 (3d
ed.).
As discussed above, the present litigation has been delayed repeatedly by
plaintiffs’ failure to resolve the issues of ownership. See supra, note 5. In this case,
plaintiffs have spent much of the last six years identifying various parties that they
contend were the real parties in interest. Finally, in November 2013, plaintiffs, after
repeated discovery attempts by the government, informed the court that they had
identified GmbH as the owner of these containers. See Jt. Status Rep., ECF No. 155, at
2. Even so, plaintiffs waited several months to move for substitution, and even then only
did so as an alternative argument. As a result, this request is simply too late. As the
events in this case occurred nearly a decade ago, permitting plaintiffs to join GmbH here
would effectively extend the statute of limitations on the action, placing a greater burden
on the government to accommodate plaintiffs’ inability to resolve questions of ownership
which existed from the outset of this case. As the court has been given no reason to
believe that a timely discovery of the ownership status of the containers was difficult, the
court finds no excusable mistake for plaintiffs’ failure to join GmbH at a stage of this
litigation prior to the third and final round of summary judgment motions. Plaintiffs’
request to join GmbH to the action at this late date is therefore DENIED and plaintiffs’
claims for just compensation in connection with GmbH’s containers must also be
rejected.
B. The Government Is Liable for a Taking of Capital’s Containers
15
The government next asks that the court reconsider its ruling that the government
is liable for a Fifth Amendment taking of the 258 containers actually owned by Capital at
the time the government took title and possession of the containers, arguing that the court
erred in concluding that the United States acted in a sovereign capacity when it
appropriated plaintiffs’ property interest. The government argues that the decision of the
United States to take title and possession of Capital’s containers after receiving notice
from Capital was a proprietary act and that Capital has never identified a sovereign act.
The government further argues, relying on Alaska Airlines v. Johnson, 8 F.3d 791, 798
(Fed. Cir. 1993), and DSI Corp. v. United States, 655 F.2d 1072, 1074 (Ct. Cl. 1981), that
United States did not take Capital’s containers for a public benefit. As a result, according
to the government, the United States cannot be held liable for a taking.
In this connection, the government also seeks to distinguish this case from
Armstrong v. United States, 364 U.S. 40 (1960), where the Supreme Court found a taking
in a contractual context. In Armstrong, the government entered into a contract with a
shipbuilder for the construction of Navy personnel boats. Armstrong, 364 U.S. at 41.
The contract provided that, if the shipbuilder defaulted, the United States could terminate
the contract, require the shipbuilder to transfer title, and require the shipbuilder to deliver
all completed and uncompleted work to the government. Id. When the shipbuilder
defaulted, the government exercised its right to require it to transfer the boat hulls still
under construction to the government. Id. At the time of the transfer, the suppliers of the
boat materials possessed valid state law liens on the materials. Id. at 41-42. However,
the suppliers’ liens could not be enforced against the United States due to sovereign
16
immunity. Id. at 42. As a result, the Court found, the application of sovereign immunity
destroyed the liens at issue and caused a compensable taking of the suppliers’ liens. Id. at
48-49.
The government argues that Armstrong does not provide any precedent for this
case because the government in this case never took valid title from TOPtainer as a bona
fide purchaser for value. The government argues that assertion of control over the
containers by the United States was “wrongful,” and therefore gives rise only to a claim
for conversion of the containers. In support of this argument, the government relies on
State Sav. Bank of Ortley v. United States, 59 Ct. Cl. 621 (1924), in which the Court of
Claims held that it lacked jurisdiction to entertain the plaintiff’s conversion claim where
the Federal Reserve accepted coupon bonds that it had been notified were stolen, and
Morgan Guar. Trust Co. v. Third Nat’l Bank, 529 F.2d 1141, 1143 (1st Cir. 1976), which
held that a bank that was notified of the owner’s claim prior to accepting stolen treasury
bills was not a bona fide purchaser and thus was guilty of a conversion. Based on these
cases, the government concludes that, unlike Armstrong, the government in this case has
not obtained any property rights that a private company or individual could not obtain
and, thus, no taking occurred.
Capital argues in response that the government, by taking physical possession of
its property for use by the military, has established a per se taking and that there is no
basis for reconsideration of the court’s previous determination of taking liability.
The court agrees with Capital and declines the government’s invitation to
reconsider its earlier ruling. Regardless of whether the government’s actions may also be
17
characterized as a tort, the critical issue in this case is whether the government is liable
for a taking of property. Contrary to the government’s contention, the fact that the
government’s behavior might also give rise to a tort claim does not alter this result. See
City of Monterey v. Del Monte Dunes at Monterey, Ltd., 526 U.S. 687, 717 (1999) (“The
city argues that because the Constitution allows the government to take property for
public use, a taking for that purpose cannot be tortious or unlawful. We reject this
conclusion. . . . When the government repudiates this duty, either by denying just
compensation in fact or by refusing to provide procedures through which compensation
may be sought, it violates the Constitution. In those circumstances the government's
actions are not only unconstitutional but unlawful and tortious as well.”). The court finds
that the government is liable for a taking in this case because the government did
appropriate Capital’s containers for a public benefit in the form of continued military use.
The principle distinction between a tort and taking relates to the purpose of the
government’s action. A tort is intended to remedy an injury to property without regard to
public benefit. See Ridge Line, 346 F.3d at 1355 (discussing distinction between a taking
and a tort). A taking, in contrast, turns on whether the government has acted for a public
benefit. Moden, 404 at 1342 (citing Ridge Line, 346 F.3d at 1356). Here, the undisputed
facts demonstrate that the government decided to keep Capital’s containers for a public
purpose. First, when the United States continues to physically occupy and use property
after a lease expires, a taking occurs. See Prudential Ins. Co. of Am. v. United States,
801 F.2d 1295, 1300 n.13 (Fed. Cir. 1986) (citing Kimball Laundry Co. v. United States,
338 U.S. 1 (1959); United States v. General Motors Corp., 323 U.S. 373 (1945)).
18
Second, military conduct that appropriates private property for its use is recognized as
giving rise to a taking. See Argent v. United States, 124 F.3d 1277, 1281 (Fed. Cir.
1997). Here, the United States decided to keep and use the containers belonging to
Capital past the end of its lease without just compensation and did so for a military use,
satisfying the requirement of a public purpose. 12 The fact that the government was
initially acting in a proprietary capacity when it paid TOPtainer for the containers
belonging to Capital does not convert the government’s decision to keep those same
containers after Capital notified it that TOPtainer had no right to sell the containers and
sought their return into a proprietary act. As a result, the government is liable for taking
plaintiffs’ containers for a public use and the court declines the opportunity to reconsider
its prior opinions.
C. A Combination of the Declaration Of Takings Act Rate with the
Moody’s Rate Is the Correct Interest Rate
When the court first considered the issue of interest, the court held that the interest
rate under the DTA, 13 rather than the Moody’s Rate, was likely the correct interest rate
because the plaintiffs failed to provide any evidence to support the application of the
Moody’s Rate. Textainer, 99 Fed. Cl. at 223. Since that time, plaintiffs have argued that
the DTA rate alone is not sufficient to provide just compensation and, citing Hughes
12
As discussed above, it is undisputed that many of the subject containers were located in
Okinawa, Japan after this lawsuit was filed. Textainer, 99 Fed. Cl. at 216. The government has
never argued or presented any evidence to show that plaintiffs’ other containers were not
similarly being used by the government when they were taken. As this court found previously,
this use clearly satisfies the requirements to demonstrate a taking.
13
The DTA rate is based on the the one-year Treasury yield rate set by the Federal Reserve (“52-
week T-bill” or “Treasuries”).
19
Aircraft Co. v. United States, 86 F.3d 1566, 1574 (Fed. Cir. 1996), to argue that this court
should exercise its discretion and apply the Moody’s Rate.
The government argues in response that the court should not reconsider its initial
ruling and should apply the DTA rate. According to the government, while the DTA rate
is now very low, the reason for the delay in securing compensation rests with plaintiffs.
As a result, the government argues, applying the Moody’s Rate would reward plaintiffs
for their failure to resolve the ownership issue more quickly.
The court finds, in its discretion, that a combination of both rates is appropriate to
use in this case. For the period from when the lawsuit was filed until 2009, the DTA rate
should be applied. Thereafter, the Moody’s Rate should be applied. The court’s primary
goal in determining a correct interest rate is to employ an interest calculation that does
not simply “yiel[d] a higher or lower payment, but rather . . . is the more accurate
measure of the economic harm to property owners.” NRG Co. v. United States, 31 Fed.
Cl. 659, 670 n.8 (1994). In making this determination, the court is to choose an interest
rate that puts the property owner in as good a financial position as if the compensation
were given concurrently with the taking. Kirby Forest Indus. v. United States, 467 U.S.
1, 10 (1984).
With these standards in mind, the court is persuaded that in this instance an
objective “reasonably prudent investor” would have sought yields consistent with the
Moody’s Rate. See Pitcairn v. United States, 547 F.2d 1106, 1124 (Ct. Cl. 1976),
(“[L]ong-term corporate bond yields are an indicator of broad trends and relative levels
20
of investment yields or interest rates. They cover the broadest segment of the interest rate
spectrum.”).
In addition, the court finds that it is appropriate to compound interest annually.
Compound interest may be necessary “to accomplish complete justice” under the Just
Compensation Clause. Dynamics Corp. of Am. v. United States, 766 F.2d 518, 519 (Fed.
Cir. 1985) (citations and quotation marks omitted). Compound interest is also in accord
with prudent investment practices. Brunswick Corp. v. United States, 36 Fed. Cl. 204,
219 (1996) (“[I]nterest rates shall be compounded annually since no prudent,
commercially reasonable investor would invest at simple interest.”). Thus, plaintiffs are
entitled to interest, compounded annually, based on the DTA rate until 2009 and then to
present based on the Moody’s Rate.
III. CONCLUSION
For the foregoing reasons, the plaintiffs’ motion for summary judgment is
GRANTED-IN-PART and DENIED-IN-PART and the government’s cross-motion for
summary judgment is GRANTED-IN-PART and DENIED-IN-PART. The parties
shall file a proposed judgment consistent with this opinion for the court’s review no later
than May 9, 2014.
IT IS SO ORDERED.
s/Nancy B. Firestone
NANCY B. FIRESTONE
Judge
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