R&j Holding Co v. The Redevelopment Authority Of

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 10-1047
_____________
R&J HOLDING COMPANY;
RJ FLORIG INDUSTRIAL COMPANY, INC.,
Appellants
v.
THE REDEVELOPMENT AUTHORITY OF THE
COUNTY OF MONTGOMERY;
DONALD W. PULVER;
GREATER CONSHOHOCKEN IMPROVEMENT
CORP.;
TBFA PARTNERS, L.P.,
_____________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
District Court No. 2-06-cv-01671
1
District Judge: The Honorable C. Darnell Jones, II
Argued September 15, 2011
Before: SLOVITER, SMITH, and NYGAARD, Circuit
Judges
(Filed: December 9, 2011)
Richard L. Bazelon (Argued)
Michael A. Shapiro
Bazelon, Less & Feldman
1515 Market Street
Suite 700
Philadelphia, PA 19102
Counsel for Appellant
Charles L. Becker
Kline & Specter
1525 Locust Street
19th Floor
Philadelphia, PA 19102
Maria T. Guerin
John F. Smith, III (Argued)
Reed Smith
1650 Market Street
2500 One Liberty Place
2
Philadelphia, PA 19103
Counsel for Appellee The Redevelopment
Authority of Montgomery County
H. Robert Fiebach (Argued)
Jennifer M. McHugh
Cozen O’Connor
1900 Market Street
3rd Floor
Philadelphia, PA 19103
Ronald J. Offenkrantz
Lichter, Gliedman & Offenkrantz
551 Fifth Avenue
24th Floor
New York, NY 10176
Counsel for Appellees Donald W. Pulver and
Greater Conshohocken Improvement Corp.
Barbara W. Mather (Argued)
Pepper Hamilton
18th & Arch Street
3000 Two Logan Square
Philadelphia, PA 19103
Counsel for Appellee TBFA Partners, L.P.
________________
3
OPINION
________________
SMITH, Circuit Judge.
This is the latest action in a long series of disputes
that followed the attempted condemnation of commercial
property in Conshohocken, Pennsylvania. Seeking to
revitalize the Conshohocken waterfront, the
Redevelopment Authority of Montgomery County (the
“Authority”) – at the behest of developer Donald Pulver
– attempted to condemn Plaintiffs’ property, which was
home to a successful steel processing business. The
Plaintiffs fought the condemnation in state court.
Plaintiffs prevailed, and were awarded their attorneys’
fees and expenses.
But because the Authority held title to Plaintiffs’
property throughout the state court action, Plaintiffs filed
a claim in federal court, seeking the “just compensation”
promised by the Fifth Amendment. The District Court
rejected Plaintiffs’ claim, essentially because they had
never asked the Redevelopment Authority whether it
would simply give them “just compensation.” Turning
again to the state courts, Plaintiffs did so, and were
rebuffed because the Pennsylvania Eminent Domain
Code does not provide for “just compensation” in these
situations. Thus denied, Plaintiffs returned to federal
4
court, still seeking their “just compensation.” The
District Court dismissed their case, holding that Plaintiffs
should have brought their federal claims as part of their
second action in state court.
We will reverse.
I
The District Court had jurisdiction pursuant to 28
U.S.C. §§ 1331 and 1343(a)(3) over Plaintiffs’ federal
claims under the Fifth and Fourteenth Amendments and
42 U.S.C. § 1983. The District Court had supplemental
jurisdiction pursuant to 28 U.S.C. § 1367(a) over
Plaintiffs’ state claims forming part of the same case or
controversy. The District Court’s December 2, 2009
Order was a final decision disposing of all of Plaintiffs’
claims. Plaintiffs timely filed their Notice of Appeal on
December 28, 2009. We have appellate jurisdiction
pursuant to 28 U.S.C. § 1291.
We exercise plenary review over a District Court
order dismissing a complaint. See Pension Benefit Guar.
Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1197
(3d Cir. 1993). On a motion to dismiss, “we must
‘accept all factual allegations as true, construe the
complaint in the light most favorable to the plaintiff, and
determine, whether under any reasonable reading of the
complaint, the plaintiff may be entitled to relief.’”
5
Gelman v. State Farm Mut. Auto. Ins. Co., 583 F.3d 187,
190 (3d Cir. 2009) (quoting Phillips v. Cnty. of
Allegheny, 515 F.3d 224, 233 (3d Cir. 2008)).
II
At all times relevant to this lawsuit, Plaintiff R&J
Holding Company (the “owner”) owned the parcel of
land located at 110 Washington Street, Conshohocken,
Pennsylvania. Plaintiff RJ Florig Industrial Company
was R&J Holding’s lessee and operated a steel
processing business on the land. The Defendant
Redevelopment Authority of Montgomery County is a
government agency with the power of eminent domain.
Defendant Donald Pulver, a land developer, is the
principal of Defendants Greater Conshohocken
Improvement Corporation and TBFA Partners, L.P. For
ease of reference, we will refer to the three as “the Pulver
Defendants.”
In 1986, the Authority and the Pulver Defendants
conceived a plan to redevelop certain land, including the
subject property, situated in Montgomery County,
Pennsylvania. They entered into a series of agreements,
under which the Authority was to condemn as blighted
the Plaintiffs’ real property and convey it to the Pulver
Defendants. Importantly, the agreements provided that
the Authority could initiate condemnation proceedings
6
against the property only when directed to do so by
Pulver.
On July 11, 1996, at Pulver’s direction, the
Authority filed a Declaration of Taking for the subject
property. This had the effect of transferring title to the
property to the Authority. See 26 Pa. Cons. Stat. Ann. §
1-402(a) (1997). 1 The owner opposed the taking, arguing
that it was unlawful because – by giving the Pulver
Defendants the power to determine whether and when to
initiate condemnation proceedings – the Authority had
improperly delegated its eminent domain powers. The
Common Pleas Court approved the taking over the
owner’s objection, and the owner appealed this ruling to
the Pennsylvania Commonwealth Court.
The Commonwealth Court reversed in an opinion
dated February 13, 2001. It agreed with the owner that
the Authority had given the Pulver Defendants the power
to determine whether and when to condemn the subject
property. It held that such a delegation of eminent
domain power was unlawful, as eminent domain is
1
Section 1-402 is part of Pennsylvania’s Eminent
Domain Code, 26 Pa. Cons. Stat. Ann. § 1-401 et seq.
The Code was repealed and replaced in 2006, but the
provisions of the pre-2006 Code are at issue in this case.
See In re De Facto Condemnation and Taking of Lands,
972 A.2d 576, 580 n.2 (Pa. Commw. Ct. 2009).
7
inherently a sovereign power and cannot be exercised by
a private party. The court therefore invalidated the
taking and remanded the case to the Court of Common
Pleas. In re Condemnation of 110 Washington Street,
767 A.2d 1154, 1160-61 (Pa. Commw. Ct. 2001).
On remand, the owner petitioned for fees and
expenses under §§ 1-406 and 1-408 of the Eminent
Domain Code. These sections provide that an owner
who successfully resists a condemnation action (i.e., a
prevailing condemnee) is entitled to “reasonable
appraisal, attorney and engineering fees and other costs
and expenses actually incurred because of the
condemnation proceeding.” Pa. Cons. Stat. Ann. § 1-408
(1997). The court awarded the owner $550,959.73. See
R&J Holding Co. v. Redevelopment Auth. of Cnty. of
Montgomery, 885 A.2d 643, 647 (Pa. Commw. Ct. 2005).
In late 2002, Plaintiffs filed a § 1983 suit in federal
court against the Authority and the Pulver Defendants.
Their complaint asserted (among other claims) a Fifth
Amendment takings claim seeking just compensation.
Plaintiffs alleged – as they do here – that they were
deprived of certain fundamental property rights,
including the right to improve the property and the right
to sell the property.
The Defendants moved to dismiss on ripeness
grounds. Under Williamson County Regional Planning
8
Commission v. Hamilton Bank, 473 U.S. 172 (1985), if a
state provides an adequate procedure for seeking just
compensation, a Fifth Amendment takings claim is not
ripe until the owner has availed itself of the procedure
and been denied just compensation. See id. at 194. This
is because the Fifth Amendment does not prohibit the
taking of property; it only prohibits the taking of property
without just compensation. See id. at 194 & n.13; Cnty.
Concrete Corp. v. Town of Roxbury, 442 F.3d 159, 164
(3d Cir. 2006) (noting that under Williamson County, a
takings claim is not ripe until “the plaintiff has
unsuccessfully exhausted the state’s procedures for
seeking ‘just compensation,’ so long as the procedures
provided by the state were adequate”).
The District Court determined that Pennsylvania’s
Eminent Domain Code allows an aggrieved property
owner to seek just compensation in these circumstances
by filing an inverse-condemnation action. See R&J
Holding Co. v. Redevelopment Auth. of the Cnty. of
Montgomery, No. 02-cv-9530, 2003 WL 22387034, at
*4-6 (E.D. Pa. Oct. 15, 2003). Because the owner had
not yet filed an inverse-condemnation action seeking just
compensation, the District Court dismissed the takings
9
claim on ripeness grounds. Id. (citing Williamson
County, 473 U.S. at 194-95).2
Plaintiffs then filed an inverse-condemnation
action in the Montgomery County Court of Common
Pleas. Asserting that they had suffered a taking during
the unlawful condemnation proceeding, Plaintiffs argued
that they were entitled to compensation under
Pennsylvania’s Eminent Domain Code. At the same
time, Plaintiffs invoked England v. Louisiana State
Board of Medical Examiners, 375 U.S. 411 (1964), to
reserve their federal claims for federal court. The Court
of Common Pleas agreed with the Plaintiffs and ordered
the parties to appear before a board of viewers to
determine the amount of damages. The Authority
appealed.
The Commonwealth Court reversed. It held that
the Eminent Domain Code does not entitle a prevailing
condemnee to compensatory damages. Rather, the Code
2
The owner had also asserted a substantive due process
claim for improper delegation of authority. The District
Court dismissed that claim on statute-of-limitations
grounds. The owner appealed the dismissal of that claim
(but not the dismissal of its takings claim), and we
affirmed in a non-precedential opinion. See R&J
Holding Co. v. Redevelopment Auth. of Cnty. of
Montgomery, 165 F. App’x 175 (3d Cir. 2006).
10
limits a prevailing condemnee’s recovery to the out-of-
pocket expenses available under §§ 1-406 and 1-408.
Because the owner had already recovered expenses under
§§ 1-406 and 1-408, the court concluded that the
Plaintiffs had received all the relief to which they were
entitled under the Code. See R&J Holding Co. v.
Redevelopment Auth. of the Cnty. of Montgomery, 885
A.2d 643, 649-50 (Pa. Commw. Ct. 2005). Plaintiffs’
brief before the Commonwealth Court repeatedly
invoked their rights under the Pennsylvania Constitution,
but never directly mentioned their rights under the United
States Constitution. The Commonwealth Court’s opinion
never explicitly addressed whether denying just
compensation violated the state or federal constitutions.
The owner asked the Pennsylvania Supreme Court
to review the Commonwealth Court’s decision, but it
declined to do so.3
Having been denied relief, Plaintiffs returned to
federal court and filed the current action. They asserted
essentially the same Fifth Amendment takings claim that
they had asserted in the first federal lawsuit, as well as
assorted claims under state law. Defendants moved to
3
Plaintiffs renewed their purported reservation of federal
claims in their briefing before the Commonwealth Court
and in their Petition for Allowance of Appeal to the
Pennsylvania Supreme Court.
11
dismiss, arguing (among other things) that the takings
claim was barred by the doctrine of claim preclusion.
The District Court agreed, dismissed the claim, and
declined to exercise supplemental jurisdiction over the
state-law claims. See R&J Holding Co. v.
Redevelopment Auth. of Montgomery Cnty., No. 06-1671,
2009 WL 4362567 (E.D. Pa. Nov. 30, 2009).
This appeal followed.
III
While the District Court addressed only
Defendants’ arguments regarding claim preclusion,
Defendants assert numerous grounds for affirming the
District Court, including claim preclusion, issue
preclusion, failure to state a claim, and the statute of
limitations. We address each in turn.
III.A
Under the Full Faith and Credit Statute, 28 U.S.C.
§ 1738, “judicial proceedings . . . shall have the same full
faith and credit in every court within the United States . .
. as they have by law or usage in the courts of” the state
from which they emerged. Section 1738 “has long been
understood to encompass the doctrines of res judicata, or
‘claim preclusion,’ and collateral estoppel, or ‘issue
preclusion.’” San Remo Hotel v. City & Cnty. of S.F.,
545 U.S. 323, 336 (2005). To determine the effect of a
12
Pennsylvania court judgment, we are required to apply
Pennsylvania’s claim- and issue-preclusion law. See
Kremer v. Chem. Const. Corp., 456 U.S. 461, 466 (1982)
(“Section 1738 requires federal courts to give the same
preclusive effect to state court judgments that those
judgments would be given in the courts of the State from
which the judgments emerged.”).
Claim preclusion, or res judicata, is a defense
asserted when a case is essentially identical to one that
has previously been adjudicated. In many jurisdictions,
claim preclusion extends not only to those claims
actually asserted in a previous action, but also to all those
claims which could have been asserted. Pennsylvania’s
law of claim preclusion was summarized by the state
supreme court in Balent v. City of Wilkes-Barre, 669
A.2d 309, 313 (Pa. 1995): “Any final, valid judgment on
the merits by a court of competent jurisdiction precludes
any future suit between the parties or their privies on the
same cause of action. Res judicata applies not only to
claims actually litigated, but also to claims which could
have been litigated during the first proceeding if they
were part of the same cause of action.” For claim
preclusion to apply, Pennsylvania requires that the two
actions share the following four conditions: (1) the thing
sued upon or for; (2) the cause of action; (3) the persons
and parties to the action; and (4) the capacity of the
parties to sue or be sued. See Bearoff v. Bearoff Bros.,
13
Inc., 327 A.2d 72, 74 (Pa. 1974). But we need not
consider whether all of these elements are present.
Because the Plaintiffs clearly stated their intention to
split their state and federal claims during the second state
action and the Defendants raised no objections, the
Defendants have acquiesced to the Plaintiffs’ claim
splitting.4
4
The Dissent argues that the Plaintiffs had already
waived their federal rights when they failed to assert
them as preliminary objections in the first state action.
The Dissent is correct that failure to raise certain matters
as a preliminary objection constitutes a waiver, but those
matters are specifically enumerated by statute:
“Preliminary objections shall be limited to and shall be
the exclusive method of challenging (1) the power or
right of the condemnor to appropriate the condemned
property unless the same has been previously
adjudicated; (2) the sufficiency of the security; (3) any
other procedure followed by the condemnor; or (4) the
declaration of taking. Failure to raise these matters by
preliminary objections shall constitute a waiver thereof.”
Pa. Cons. Stat. Ann. § 1-406 (1997) (emphasis added).
In this action, Plaintiffs do not challenge the validity of
the taking, the security supplied, or the procedure used.
Rather, Plaintiffs challenge the sufficiency of their
compensation. This is not an issue that must be raised by
preliminary objections, so it cannot have been waived.
14
As we held in Bradley v. Pittsburgh Board of
Education, 913 F.2d 1064 (3d Cir. 1990), Pennsylvania
follows Section 26(1) of the Restatement (Second) of
Judgments, which provides that claim preclusion shall
not apply where:
(a) The parties have agreed in terms
or in effect that the plaintiff may split his
claim or the defendant has acquiesced
therein; or
(b) The court in the first action has
expressly reserved the plaintiff’s right to
maintain the second action.
Id. at 1072 (quoting Restatement (Second) of Judgments
§ 26(1)). We also held in Bradley, pursuant to the
commentary in the Restatement, that “[t]he failure of the
defendant to object to the splitting of the plaintiff’s claim
is effective as an acquiescence in the splitting of the
claim.” Id. (quoting Restatement (Second) of Judgments
§ 26(1)(a) cmt. a (1982)). We further noted that the
Restatement explicitly mentioned cases where “the
opposing party may acquiesce in the federal claim being
split off and reserved.” Id. at 1073 (quoting Restatement
(Second) of Judgments § 86, cmt. f).
In Coleman v. Coleman, 522 A.2d 1115, 1120 (Pa.
Super. 1987) (en banc), the Pennsylvania Superior Court,
15
quoting Restatement Sections 26(1) (a) and (b), held that
“[t]he law of Pennsylvania is in accord with the approach
taken by the Restatement.” Id. In a prior case, the
Pennsylvania Supreme Court explained: “Though such
splitting of actions is not favored it is not impermissible
when the parties and the court agree on that method of
adjudicating the action.” Keystone Bldg. Corp. v.
Lincoln S&L Ass’n, 360 A.2d 191, 196 n.10 (Pa. 1976).
Neither the briefs of the parties nor our own
research has uncovered any Pennsylvania case which
would call Bradley’s interpretation of Pennsylvania law
into question. As such, Bradley controls the outcome
here. On the very first page of their state complaint,
Plaintiffs noted their intent to reserve their federal claims
for adjudication in a federal forum. Plaintiffs reiterated
their intent to reserve their federal claims in their filings
before the Pennsylvania Commonwealth Court and the
Pennsylvania Supreme Court. Defendants uttered not a
word about the reserved federal claims while Plaintiffs
prosecuted their state claims all the way to the
Pennsylvania Supreme Court. They cannot now benefit
from their silence.5
5
The Pulver Defendants argue that such consent cannot
bind them because they were not parties to the first
action. But the defense of claim preclusion can be
asserted only by parties that did participate in the first
16
Note that our decision relies solely on our
interpretation of Pennsylvania claim preclusion law.
Plaintiffs originally styled their reservation of federal
claims as an England reservation. In England v.
Louisiana State Board of Medical Examiners, 375 U.S.
411 (1964), the Supreme Court held that “when a federal
court abstains from deciding a federal constitutional issue
to enable the state courts to address an antecedent state-
law issue, the plaintiff may reserve his right to return to
federal court for the disposition of his federal claims.”
San Remo, 545 U.S. at 339 (discussing England).
England was decided in the context of Pullman
abstention, under which a federal court postpones
exercise of its properly-invoked jurisdiction and directs
the parties to state court because the outcome may be
decided by an antecedent question of state law. See R.R.
action. See Balent, 669 A.2d at 313 (“Any final, valid
judgment on the merits by a court of competent
jurisdiction precludes any future suit between the parties
or their privies on the same cause of action.” (emphasis
added)). To the extent the Pulver Defendants are
asserting that they are in privity with the Authority and
therefore participated in the first action, they cannot have
it both ways. Either they are in privity and are bound by
the Authority’s implied consent, or they are not in privity
and lack standing to assert the defense of claim
preclusion.
17
Comm’n of Tex. v. Pullman Co., 312 U.S. 496 (1941).
England reservations have been permitted outside
the Pullman context, including in cases sent to state court
to fulfill the ripeness requirements of Williamson County.
See, e.g., Fields v. Sarasota Manatee Airport Auth., 953
F.2d 1299, 1306 (11th Cir. 1992). But the availability of
an England reservation in the Williamson County context
has been called into question by San Remo Hotel v. City
& County of San Francisco, 545 U.S. 323 (2005), in
which the Supreme Court held that plaintiffs could not
rely on England to avoid the bar of issue preclusion in a
takings case. See id. at 338. Yet we need not consider
the continued viability of England in the Williamson
context. Regardless of whether Plaintiffs’ statement was
valid as an England reservation, it provided notice to
Defendants of Plaintiffs’ intent to split their state and
federal claims. And Plaintiffs reiterated their intent to
reserve their federal claims in filings before the
Pennsylvania Commonwealth Court and the
Pennsylvania Supreme Court. Defendants’ failure to
object constitutes implied consent under Pennsylvania
law. Thus, pursuant to 28 U.S.C. § 1738, we faithfully
apply Pennsylvania law in concluding that Plaintiffs’
claims are permitted.6
6
Defendants suggest that San Remo undermines our
holding in Bradley. But Bradley contained two entirely
18
III.B
Defendants have raised several alternative bases
for affirming the District Court’s judgment, namely issue
preclusion, failure to state a claim, and the statute of
limitations. “We ordinarily decline to consider issues not
decided by a district court, choosing instead to allow that
court to consider them in the first instance.” Forestal
Guarini SA v. Daros Int’l, Inc., 613 F.3d 395, 401 (3d
Cir. 2010). But given the vintage of this dispute, we
think it appropriate, as a matter of judicial economy, to
accelerate its resolution to the extent reasonably possible.
These three issues are properly before us and have been
fully briefed. We exercise our discretion to resolve them
now.7
independent holdings: first, that an England reservation
was available under the circumstances of that case, 913
F.2d at 1072; second, that the defendants had – as a
matter of Pennsylvania state law – impliedly consented to
Bradley splitting his state and federal claims, id. at 1072-
73. Even if we assume (without deciding) that Bradley’s
first holding is no longer good law, there is no reason to
conclude that Bradley’s second holding was undermined
in any way by San Remo.
7
Defendants also object to plaintiffs’ request for punitive
damages and plaintiffs’ suit against Mr. Pulver in his
19
Just as claim preclusion bars re-litigation of an
entire case, issue preclusion bars re-litigation of discrete
issues, even in a case based on an entirely different
claim. The fundamental question is whether the issue has
been actually decided by a court in a prior action. See
McNeil v. Owens-Corning Fiberglas Corp., 680 A.2d
1145, 1147-48 (Pa. 1996) (“[W]hen an issue of fact or of
law is actually litigated and determined by a valid final
judgment, and determination of the issue was essential to
judgment, the determination on that issue is conclusive in
a subsequent action between the parties, whether on the
same or a different claim.”).
The parties agree that the Plaintiffs avoided
directly raising their federal claims before the
Pennsylvania state courts. And in its opinion holding
that the Eminent Domain Code did not provide for “just
compensation” under the circumstances of this case, R&J
Holding Co. v. Redevelopment Auth. of the Cnty. of
Montgomery, 885 A.2d 643, 650 (Pa. Commw. Ct. 2005),
the Pennsylvania Commonwealth Court never directly
addressed whether such an interpretation was permitted
under the United States Constitution.
Nonetheless, the Defendants assert that issue
preclusion should apply. Defendants’ argument runs as
individual capacity. We leave these and any remaining
issues for initial consideration by the District Court.
20
follows: The Plaintiffs did argue that an interpretation of
the Eminent Domain Code denying just compensation
could conflict with the Pennsylvania Constitution. Since
the Commonwealth Court had the constitutional
argument before it, the court must necessarily have
decided that its interpretation of the Eminent Domain
Code was permissible under the Pennsylvania
Constitution (even though the court never actually said
so). See Grubb v. Pub. Utils. Comm’n of Ohio, 281 U.S.
470, 477-78 (1930) (“The question of the constitutional
validity of the order was distinctly presented by the
appellant’s petition and necessarily was resolved against
him by the judgment affirming the order. Omitting to
mention that question in the opinion did not eliminate it
from the case or make the judgment . . . any less an
adjudication of it.”); Balent, 669 A.2d at 315 (Pa. 1995)
(“[W]e must assume that the court properly considered
the constitutional implications, before making its final
determination that the taking was non-compensable.”).
Finally, the Pennsylvania and United States constitutions
have been interpreted co-extensively by Pennsylvania
courts. See United Artists Theater Circuit, Inc. v. City of
Phila., 635 A.2d 612, 616 (Pa. 1993) (“[T]his Court has
continually turned to federal precedent for guidance in its
‘taking’ jurisprudence, and indeed has adopted the
analysis used by the federal courts.”). Therefore, by
determining the state constitutional issue, the
Commonwealth Court determined the federal
21
constitutional issue.
We disagree. First, even assuming the
Commonwealth Court’s opinion inherently considered
the federal constitutionality of its interpretation of the
Eminent Domain Code, that has no bearing on whether
there are alternative means for obtaining just
compensation (such as a § 1983 suit). Second, this chain
of logic stretches too far. The parties never actually
litigated the federal constitutionality of the Pennsylvania
Eminent Domain Code and the state courts never actually
decided it. A past conclusion that the Takings Clause of
the Pennsylvania Constitution and the Takings Clause of
the United States Constitution are co-extensive does not
constitute a present determination that an interpretation
of state law accords with the United States Constitution,
particularly when the federal constitutionality of that
interpretation was never directly presented to the state
court.
We hold that issue preclusion does not bar
Plaintiffs’ suit.
III.C
Defendants also assert that Plaintiffs have failed to
state a claim because this is not a taking. TBFA argues
that without an accompanying attempt to take physical
possession of the property, transfer of title to the
22
government does not constitute a taking. TBFA also
argues that the Plaintiffs have abandoned any argument
based on regulatory takings precedent. The Authority,
Pulver, and GCIC argue that even if regulatory takings
precedent is applied, this is not a taking. We conclude
that this is a per se taking because title to the land
actually passed from Plaintiffs to the Authority when the
Authority filed a Declaration of Taking on July 11, 1996.
In Yee v. Escondido, 503 U.S. 519 (1992), the
Supreme Court explained that “[w]here the government
authorizes a physical occupation of property (or actually
takes title), the Takings Clause generally requires
compensation.” Id. at 522 (emphasis added). In United
States v. Lynah, 188 U.S. 445 (1903), as a first step
towards determining whether there had been a taking, the
Court noted: “Was there a taking? There was no
proceeding in condemnation instituted by the
government, no attempt in terms to take and appropriate
the title.” Id. at 468. This implies that had such an
attempt occurred, the Court would have held there to be a
taking.
Defendants dismiss Yee as a regulatory takings
case. But while Yee was indeed a regulatory takings
case, the Supreme Court had to formulate some way to
decide whether it was a regulatory takings case. In both
Yee and Lynah, the first question asked was “Did the
government take title or possession of the land?” While
23
the Court answered in the negative in both cases,
answering in the affirmative would have obviated any
need for considering regulatory takings jurisprudence.
In addition, the nature of the Authority’s action
belies any argument that this was a regulatory taking.
Had the Authority been successful in state court, it
intended to take physical possession of the property. The
lines of precedent for per se and regulatory takings are
separate and distinct. See Tahoe-Sierra Preservation
Council, Inc. v. Tahoe Regional Planning Agency, 535
U.S. 302, 323-24 (2002) (holding it “inappropriate to
treat cases involving physical takings as controlling
precedents for the evaluation of a claim that there has
been a ‘regulatory taking,’ and vice versa”). Because the
Authority’s acquisition of the property would have ended
as a per se taking, it must have begun as a per se taking.8
8
Supreme Court precedent does suggest that in some rare
cases, regulatory takings may be considered the
equivalent of per se takings. The Court has identified
only two situations in which this would occur: first,
where regulation compels physical invasion of an
owner’s property; second, where regulation deprives an
owner of all economically beneficial use of their
property. See Lucas v. S.C. Coastal Council, 505 U.S.
1003, 1015-18 (1992). Neither situation is at issue here.
24
The only contrary authority cited by the
Defendants is Horne v. USDA, No. CV-F-08-1549, 2009
U.S. Dist. LEXIS 115464 (E.D. Cal. Dec. 11, 2009). In
that case, the District Court considered the
constitutionality of a raisin marketing order under which
a certain portion of the raisin crop was required to be
transferred to the Raisin Administrative Committee as
“reserve tonnage.” The District Court concluded that
“the transfer of title to the reserve tonnage does not
constitute a physical taking.” Id. at *76. The Ninth
Circuit, though affirming the judgment of the District
Court, rested its analysis on a sounder analytical
framework, concluding that “the Raisin Marketing Order
applies to the Hornes only insofar as they voluntarily
choose to send their raisins into the stream of interstate
commerce.” Horne v. USDA, No. 10-15270, 2011 U.S.
App. LEXIS 15284, at *23 (July 25, 2011). In other
words, in order to participate in the world of raisin
marketing, growers must surrender a portion of their crop
as an entrance fee. But whether growers choose to sell in
interstate commerce (and pay the fee) is entirely their
prerogative. To the extent the District Court in Horne
was stating a broader position, we cannot agree.
Yee and Lynah seem to indicate that a per se taking
can be triggered by either: (1) a physical occupation of
the owner’s land or (2) a transfer of title. We agree.
Practice involving federal government takings confirms
25
that transfer of title is a watershed moment. When the
federal government is involved in condemnation
proceedings, it can file a Declaration of Taking and pay
estimated just compensation. If it does so, title passes
immediately, and this set of events marks the “taking.”
See United States v. Dow, 357 U.S. 17, 22-23 (1958)
(noting that the filing of a declaration and payment of
just compensation works a transfer of title and that “[t]he
scheme of the Taking Act makes it plain that when the
Government files a declaration before it has entered into
possession of the property the filing constitutes the
‘taking’”). In addition, Federal Rule of Civil Procedure
71A(i)(1) prohibits judges from dismissing a
condemnation proceeding “if the plaintiff has already
taken title, a lesser interest, or possession as to any part
of” the property. Rather, the court “must award
compensation for the title, lesser interest, or possession
taken.” Id. Again, this implies that transfer of title
constitutes a taking, for which just compensation must be
paid.
The parties do not dispute that transfer of title
occurred by operation of Pennsylvania’s Eminent
Domain Code. See 26 Pa. Cons. Stat. Ann. § 1-402(a)
(1997) (repealed 2006) (“[T]he title which the
condemnor acquires in the property condemned [passes]
to the condemnor on the date of [the filing in court of the
declaration of taking.]”). As the Supreme Court has
26
explained, its “jurisprudence involving condemnations
and physical takings is as old as the Republic and, for the
most part, involves the straightforward application of per
se rules.” Tahoe-Sierra, 535 U.S. at 322. Because title
was actually transferred to the Authority, we hold that
this was a per se taking.
III.D
Finally, the Defendants assert that the Plaintiffs’
claims are barred by the statute of limitations. We
disagree.
Defendants appear to be arguing that the takings
claims at issue here can be equated with improper
delegation claims that were dismissed on statute of
limitations grounds by the District Court in the first
federal action. See R&J Holding Co. v. Redevelopment
Auth. of the Cnty. of Montgomery, No. 02-cv-09530,
2003 WL 22387034, at *6-*9 (E.D. Pa. Oct. 15, 2003),
aff’d, 165 F. App’x 175 (3d Cir. 2006) (not precedential).
They cannot. Plaintiffs’ claims here are clearly distinct.
Defendants also cite several pieces of literature
arguing that the Williamson County “ripeness” label is
incorrect and misleading or that plaintiffs should
generally only be able to proceed in state court on takings
27
claims. 9 These arguments are unpersuasive in light of the
Supreme Court’s repeated description of Williamson
County’s requirements as a ripeness issue. See, e.g.,
Williamson County, 473 U.S. at 186 (“Because
respondent has not yet obtained a final decision regarding
the application of the zoning ordinance and subdivision
regulations to its property, nor utilized the procedures
Tennessee provides for obtaining just compensation,
respondent’s claim is not ripe.”). These arguments also
ignore the fundamental basis of the Williamson opinion:
simply put, until just compensation has been denied, an
owner has not suffered a constitutional injury and does
not have a federal takings claim. See id. at 194 n.13
(“[B]ecause the Fifth Amendment proscribes takings
without just compensation, no constitutional violation
occurs until just compensation has been denied.”).
As we held in Whittle v. Local 641, International
Brotherhood of Teamsters, 56 F.3d 487, 489 (3d Cir.
9
See Thomas E. Roberts, Fifth Amendment Taking
Claims in Federal Court: The State Compensation
Requirement and Principles of Res Judicata, 24 Urb.
Law, 479, 501-03 (1992); Thomas E. Roberts, Facial
Takings Claims Under Agins-Nectow: A Procedural
Loose End, 24 U. Haw. L. Rev., 623, 634-35 (2002);
Douglas T. Kendell et al., Choice of Forum and Finality
Ripeness: The Unappreciated Hot Topics in Regulatory
Takings Cases, 33 Urb. Law 405, 407-09 (2001).
28
2005): “[A] cause accrues when it is sufficiently ripe
that one can maintain suit on it.” Plaintiffs’ takings claim
did not accrue until the Pennsylvania Supreme Court
denied review in the second state action on March 21,
2006. See R&J Holding Co. v. Redevelopment Auth. of
the Cnty. of Montgomery, Nos. 1018 &1019 MAL 2005
(Pa. Mar. 21, 2006). Because this action was filed on
April 21, 2006, it is of no moment whether we adopt the
statute of limitations put forward by the Plaintiffs
(twenty-one years) or the statute of limitations put
forward by the Defendants (two years). The action is
timely.
III.D
In light of its dismissal of the federal claims, the
District Court properly declined to exercise jurisdiction
over Plaintiffs’ state law claims. But “[s]ince we will
reinstate [Plaintiffs’ federal claims], we must vacate that
portion of the district court’s order dismissing without
prejudice [Plaintiffs’] pendent state law claims
. . . . The standard for exercising discretion to dismiss
state claims pendent on a viable federal claim differs
from the standard governing dismissal when the federal
claim itself lacks merit.” Markowitz v. Ne. Land Co., 906
F.2d 100, 106 (3d Cir. 1990).
29
IV
We conclude that Plaintiffs’ suit cannot be barred
on the grounds of claim preclusion, issue preclusion,
failure to state a claim, or the statute of limitations.
This is the latest in a long series of actions
following the condemnation of a single piece of property.
We are aware that the parties and the courts have
expended substantial resources over the years in efforts
to resolve the underlying dispute. But the Plaintiffs –
having reserved their federal rights in state court and
having received no objection from the Defendants – are
entitled to a federal forum for their federal claims.
We will reverse and remand to the District Court
for further proceedings consistent with this opinion. 10
10
Citing United States v. Bodcaw, 440 U.S. 202 (1979),
the Dissent asserts that a remand would be futile because
the damages sought by the Plaintiffs exceed the scope of
damages available to them under the Fifth Amendment.
We disagree. Just compensation is limited to damages
sought “for the property,” id. at 203, and thus Bodcaw
excluded appraisal fees incurred in a condemnation
action from the scope of just compensation, see id. at
204. Such indirect costs are not the result of an
impairment of property rights. But here Plaintiffs seek
30
compensation for their inability to fully utilize, develop,
and sell their property. There can be no question that
these are rights inhering in the property itself, unlike the
indirect costs excluded by Bodcaw. To the extent some
of Plaintiffs’ claims seek both direct and indirect costs,
we leave it to the District Court to consider the scope of
those claims and, if appropriate, to limit them.
31
R&J Holding Company, RJ Florig Industrial Company, Inc.
v. The Redevelopment Authority of the County of
Montgomery, No. 10-1047.
Nygaard, J. Dissenting.
In its singular focus upon R.J. Florig’s procedural
machinations, I believe the majority has erred. Three
conclusions compel my dissent: 1.) R.J. Florig’s federal
claims have been waived; 2.) the issues raised in the federal
claims have been conclusively addressed by the state court;
and 3.) the lack of a federal remedy moots the federal claims.
The Pennsylvania Eminent Domain Code “is intended
. . . to provide a complete and exclusive procedure and law to
govern all condemnations of property for public purposes and
the assessment of damages therefor. . . .” 26 P.S. § 1-303
(1996). In that vein, the Code states that “[a]ll preliminary
objections shall be raised at one time and in one pleading.”
26 P.S. § 1-406(c) (1996). Moreover, “[f]ailure to raise these
matters by preliminary objections shall constitute a waiver
thereof.” 26 P.S. § 1-406(a) (1996). The Commonwealth
Court said that “preliminary objections are intended as a
procedure to resolve expeditiously the factual and legal
challenges to a declaration of taking before the parties
proceed to determine damages.” In re Condemnation by City
of Coatesville, 898 A.2d 1186, 1189 n. 7 (Pa. Cmwlth. 2006).
The problem, however, is that R.J. Florig never raised its
federal claims. Rather, it stated in a footnote to its
preliminary objections:
R.J. Florig Company is not
presenting in this case its federal
1
constitutional and civil rights
claims, including the claims that
the actions of the Authority and
others constitute a taking of
private property for purported
public use without just
compensation and a deprivation of
property without due process of
law in violation of the Fifth and
Fourteenth Amendments of the
Unites States Constitution. R.J.
Florig Company reserves its right
to litigate these federal claims in
federal court.
Preliminary Objections, p. 2 n. 1. While R.J. Florig declared
that it was “not presenting” its claims, the Code does not
authorize parties to make such a choice. They are limited by
the law. See § 1-406(c). By the terms of the Code, R.J.
Florig’s failure to raise these claims in its preliminary
objections must be regarded as a waiver of those claims.
Accordingly, R.J. Florig’s abandoned federal claims should
not have been considered by the District Court.
Moreover, as the District Court determined, the issues
raised in R.J. Florig’s federal complaint have been
conclusively ruled upon in state court. We already
affirmed—in an earlier decision—the District Court’s denial
of R.J. Florig’s section 1983 claim as time-barred. In its
federal complaint, R.J. Florig premises its remaining federal
takings claim by characterizing the Commonwealth Court’s
holding in its inverse condemnation action as follows:
2
Plaintiffs pursued just
compensation for taking of their
property rights in state court
under Pennsylvania law but
Pennsylvania appellate courts
conclusively determined that
Pennsylvania does not provide a
remedy for taking of Plaintiffs’
property rights during the
unlawful de jure condemnation of
their property, regardless of the
extent of the taking.
Complaint, ¶ 107 (emphasis added). This statement
misconstrues the Commonwealth Court’s ruling. The
Commonwealth Court determined the following:
In this case, R & J Holding
already received costs and
expenses under Section 408 of the
Eminent Domain Code. Thus,
they are not entitled to any more
costs and expenses under any
other Section of the Eminent
Domain Code because the Code
does not require that a condemnee
be made whole. Moreover, R & J
Holding is seeking damages under
502(e) which only applies when
“no declaration of taking therefor
has been filed”. To apply this
Section to this case, this Court
would have to insert the word
3
“valid” before “declaration of
taking.” Because a declaration of
taking was filed in this case,
damages under Section 502(e) are
not available to R & J Holding.
R & J Holding Company v. The Redevelopment Authority of
the County of Montgomery, 885 A.2d 643, 650 (Pa. Cmwlth.
2005) (internal citations omitted). The Commonwealth Court
ruled that, because this case originated in a declaration of
taking, it is a de jure condemnation. R.J. Florig’s successful
defense against the declaration under the Code’s de jure
provisions enabled it to regain title to its property and receive
attorney’s fees and costs in the amount of $550,959.73. The
Commonwealth Court determined that, having received these
remedies, R.J. Florig was not permitted to simply re-label the
very same taking as an inverse de facto condemnation and go
back to court seeking another remedy.
Therefore, the Commonwealth Court did not rule that
R.J. Florig was without a remedy. To the contrary, it ruled
that the 1996 taking of R.J. Florig’s property was
conclusively litigated and fully remedied in accordance with
the Pennsylvania Eminent Domain Code, and as a result it
could not be re-litigated. R.J. Florig wishes to read the
decision as pointing to a gap in the scheme of just
compensation permitted under the Code when, in fact, the
decision closed the door to them. Its federal Fifth
Amendment taking claim is, in every respect, the de facto
condemnation claim raised and dismissed in state court. Res
judicata requires that we respect the state court’s ruling by
affirming the District Court’s dismissal of the claim.
Therefore, even were we to assume that the federal claims
4
were properly severed from the state claim, res judicata
precludes our jurisdiction to consider them again.
Finally, even were we to ignore the relevance of
waiver and res judicata to this case, the majority’s remand is
perplexing because there is simply no remedy available at
law. In R.J. Florig’s complaint for its federal taking claim, it
seeks just compensation for, inter alia, their inability to
“redevelop, sell, or lease the Florig Property . . . [for their
inability to] expand and/or relocate the steel processing
business for a period of more than five years . . . [and for]
causing plaintiffs to spend thousands of hours in dealing with
the imminent threat of condemnation.” Complaint, p. 27.
The problem is that such damages are not prescribed by the
concept of just compensation under the United States
Constitution. In fact, the Pennsylvania Eminent Domain
Code, under which this case was litigated, provided R.J.
Florig with a wider range of relief than is available under
federal law.
I agree with the majority that an actual—rather than a
de facto—taking occurred here because title to the property
transferred at the declaration of taking. There can be no other
conclusion. This, however, has consequences for the
parameters of the constitutional right to just compensation.
As the Supreme Court said:
This Court has often faced the
problem of defining just
compensation. One principle
from which it has not deviated is
that just compensation “is for the
property, and not to the owner.”
5
As a result, indirect costs to the
property owner caused by the
taking of his land are generally
not part of the just compensation
to which he is constitutionally
entitled.
United States v. Bodcaw, 440 U.S. 202, 203 (1979) (internal
citation omitted). In its analysis, the Bodcaw Court spoke of
a particular federal statute that, under certain circumstances,
authorized attorney’s fees and litigation expenses where—as
was the case here—“a condemnation action is dismissed as
being unauthorized . . . .” It concluded, however, that “such
compensation is a matter of legislative grace rather than
constitutional command,” and it denied relief presumably
because no such statute applied in that case. Id. at 204. In the
same way, R.J. Florig does not cite to, nor can I find any
federal statute that would authorize any remedy beyond that
which it has already received under the Pennsylvania Eminent
Domain Code. Re-titling this de jure action as a de facto
condemnation does not change this fact.
Alternatively, construing the condemnation as a
regulatory taking does not change the analysis. In
circumstances that were analogous to this case, the Supreme
Court said the following with regard to a constitutional right
to just compensation.
Even if the appellants' ability to
sell their property was limited
during the pendency of the
condemnation proceeding, the
appellants were free to sell or
6
develop their property when the
proceedings ended. Mere
fluctuations in value during the
process of governmental
decisionmaking, absent
extraordinary delay, are “incidents
of ownership. . . .”
Agins v. City of Tiburon, 447 U.S. 255, 263 n. 9 (1980)
(overruled on other grounds in Lingle v. Chevron U.S.A. Inc.,
544 U.S. 528 (2005)) (quoting Danforth v. United States, 308
U.S. 271, 285 (1939)). R.J. Florig was never denied the
ability to operate its business, eventually regained title to the
property, and ultimately sold it at market value. I see no
basis for distinguishing R.J. Florig’s multiple claims for
damages from “incidents of ownership.” As a result, even
were we to analogize this case to a regulatory taking, no relief
is warranted.
In Williamson, the Supreme Court said: “[B]ecause
the Fifth Amendment proscribes takings without just
compensation, no constitutional violation occurs until just
compensation has been denied.” Williamson County
Regional Planning Com'n v. Hamilton Bank of Johnson City,
473 U.S. 172, 195 (1985). Here, even if waiver and the
doctrine of res judicata are ignored, R.J. Florig has not
demonstrated any basis to claim that, by resorting to the
remedies available under the Pennsylvania Eminent Domain
Code, they have been unjustly compensated. As a result, their
claim is moot.
For all of these reasons, I dissent.
7