Air Pegasus of D.C., Inc. v. U.S.

• Decision Date: 21 September 2005
• Docket Number: No. 04-5108.,04-5108.
• Citation: 424 F.3d 1206
• Parties: AIR PEGASUS OF D.C., INC., Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

424 F.3d 1206

AIR PEGASUS OF D.C., INC., Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.

No. 04-5108.

United States Court of Appeals, Federal Circuit.

September 21, 2005.

COPYRIGHT MATERIAL OMITTED

Barry S. Neuman, Barry S. Neuman, P.L.L.C., of Washington, DC, argued for plaintiff-appellant. With him on the brief was Kathy Bailey, Bailey Law Group, P.C., of Washington, DC.

Elizabeth Ann Peterson, Attorney, Environment & Natural Resources Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. With her on the brief were Thomas L. Sansonetti, Assistant Attorney General, and Katherine J. Barton, Attorney. Of counsel was Susan V. Cook, Attorney, Natural Resources Section, Environment & Natural Resources Division, United States Department of Justice, of Washington, DC.

Nancie G. Marzulla, Defenders of Property Rights, of Washington, DC, argued for amici curiae National Air Transportation Association and Defenders of Property Rights. With her on the brief was Roger J. Marzulla.

Before NEWMAN, SCHALL, and DYK, Circuit Judges.

Opinion for the court filed by Circuit Judge SCHALL.

Dissenting opinion filed by Circuit Judge NEWMAN.

SCHALL, Circuit Judge.

Air Pegasus of D.C., Inc. ("Air Pegasus") appeals from the final decision of the United States Court of Federal Claims that granted the government's motion for summary judgment and dismissed Air Pegasus's complaint seeking compensation under the Fifth Amendment of the U.S. Constitution for the alleged taking of its property. Air Pegasus of D.C., Inc. v. United States, 60 Fed.Cl. 448 (2004) ("Summary Judgment"). The court granted the government's motion after determining that Air Pegasus, which had operated a heliport in the District of Columbia, did not have a cognizable property interest "over the navigable airspace above the ... South Capitol Street Heliport" that it alleged to have been taken. Id. at 459. We affirm.

BACKGROUND

I.

The facts of this case are undisputed. From February of 1992 to September 30, 2002, Air Pegasus owned and operated a heliport business at 1724 South Capitol Street, S.E., Washington, D.C. Air Pegasus did not own the South Capitol Street property, but leased it from Steuart Investment Company ("Steuart Investment"). The lease specified that Air Pegasus agreed to use the property

solely in the conduct of a private use and/or public use heliport/vertiport ... and for any uses related thereto, including but not limited to fuel sales, maintenance and repair of helicopters and other vertical take off and landing air craft and sea planes, commercial, chartered, corporate and sightseeing services and general administrative offices, and for no other purpose without the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed.

(Emphasis added). Air Pegasus entered the lease in February of 1992 and in due course renewed it through October 31, 2010.

As agreed in the lease, Air Pegasus only used the South Capitol Street property for the operation of its heliport. Air Pegasus did not actually operate any of the helicopters serviced by its heliport. Rather, its business was limited to providing, in return for a fee, a location from which helicopters could land and take off (and, perhaps, also obtain needed fueling and mechanical services). Air Pegasus's heliport therefore functioned much like an airport, only it serviced helicopters instead of airplanes (fixed-wing aircraft).

Air Pegasus's heliport business was greatly affected by events following the terrorist attacks of September 11, 2001. In particular, immediately following the attacks—in which four commercial airplanes were hijacked and three were used as weapons to attack the World Trade Center and Pentagon—the Federal Aviation Administration ("FAA") used its emergency powers to shut down virtually all commercial air traffic throughout the United States. The FAA did this by issuing "Notices to Airmen," or "NOTAMs," pursuant to 14 C.F.R. § 91.139 (2001) ("Emergency Air Traffic Rules") and 14 C.F.R. § 91.137 (2001) ("Temporary Flight Restrictions in the Vicinity of Disaster/Hazard Areas").¹ The FAA's flight ban applied to both helicopters and airplanes. Therefore, by issuing the NOTAMs, the FAA essentially grounded operations at all commercial aviation ports in the days immediately following September 11, 2001.

For most aviation ports, the FAA's flight ban merely amounted to a temporary grounding of aircraft. In fact, the FAA permitted most commercial aviation ports to resume flights as early as September 13, 2001. See 68 Fed.Reg. 7684 (Feb. 14, 2003) (final rule). However, this was not the case for Air Pegasus's heliport, as the FAA's decision allowing resumption of commercial air travel specifically excluded the area within twenty-five nautical miles of Washington, D.C. See id. Although some of the flight restrictions in the Washington, D.C. area were subsequently relaxed,² much of the area's airspace is still off limits to commercial aircrafts. This includes the airspace over 1724 South Capitol Street, S.E.

Therefore, unlike most other commercial aviation ports, Air Pegasus was not able to resume flight operations after the FAA issued its initial flight ban on September 11, 2001. This caused obvious economic hardships for Air Pegasus's heliport and, on September 30, 2002, Air Pegasus abandoned its lease and ceased business operations at the South Capitol Street Heliport.

II.

On January 10, 2003, Air Pegasus filed this lawsuit against the United States in the Court of Federal Claims, alleging that the various NOTAMs issued by the FAA after September 11, 2001, resulted in a regulatory taking of its heliport business located at 1724 South Capitol Street, S.E., Washington, D.C. (Compl.¶¶ 14-25.) More specifically, Air Pegasus alleged that it acquired through its lease with Steuart Investment, "the legal right to operate a Heliport . . . through October 31, 2010," (Id. ¶ 4) and that "[t]he NOTAMs had the immediate and intended effect of shutting down virtually all air traffic at the Heliport... [which,] in turn, made it economically nonviable to continue to operate the business under the Lease" (Id. ¶ 11). Therefore, "[s]olely as a result of the NOTAMs," Air Pegasus alleged that "the economic value of [its] business and its leasehold interest in the Property ha[d] been destroyed." (Id.)

In response, the government conceded that the flight restrictions issued by the FAA had the effect of prohibiting helicopters from flying into and out of Air Pegasus's heliport. (Answer ¶¶3, 13.) However, the government denied that the restrictions resulted in a compensable taking of any property interest of Air Pegasus. In particular, the government averred that "[t]he property interest that [Air Pegasus] allege[d][to] have been taken is not compensable under the Fifth Amendment." (Id. (second affirmative defense).)

The parties subsequently stipulated to the facts of the case and filed cross-motions for summary judgment. Air Pegasus argued that the undisputed facts showed that the FAA's flight restrictions had the effect of eliminating all economic value in its heliport and, therefore, amounted to either a categorical or non-categorical regulatory taking of its leasehold. The government, in turn, argued that the FAA's restrictions did not deprive Air Pegasus's lease of all economic value, and that even if they did have such an effect, the restrictions did not take any property that the government did not already have authority to regulate. See Summary Judgment, 60 Fed.Cl. at 453. The Court of Federal Claims ultimately sided with the government and granted summary judgment based on Air Pegasus's failure to show the taking of a cognizable property interest. Id. at 459.

The court started from the principle that, in evaluating a takings claim, a court must first "inquire into the nature of the landowner's estate to determine whether the use interest proscribed by the governmental action was part of the owner's title to begin with, i.e., whether the land use interest was a stick in the bundle of property rights acquired by the owner." See id. at 453 (quoting Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1027, 112 S.Ct. 2886, 120 L.Ed.2d 798 (1992) (internal quotation omitted)). The court stated that, under this inquiry, when "a party voluntarily enters into an area that is subject to pervasive government control, then a property right that would justify compensation under the Takings Clause may not exist." Id. at 453-54 (citations omitted). The court further stated that background principles of common law nuisance and property law can also provide the government with a defense to what would otherwise amount to a taking of private property. See id. at 457. That, according to the court, is because such "background principles" may place pre-existing limitations on the property owner's title. See id. (citing Lucas, 505 U.S. at 1028-29, 112 S.Ct. 2886).

With respect to the facts of the case, the court first noted that Air Pegasus did not dispute the federal government's sovereignty over the navigable airspace. Id. at 456. The court further noted that the airspace over Washington, D.C., was subject to regulations when Air Pegasus entered its lease in 1992, and that "the FAA... [also] retain[ed] broad authority to instantly alter air flight requirements through NOTAMs." Id. Therefore, the court concluded, "Air Pegasus entered this highly regulated area, in Washington, D.C., with the knowledge that the government reserved the power, and indeed regularly exercised its power, to restrict air flight patterns and procedures." Id. at 457.

Next, the court turned to background principles of property law to determine whether any pre-existing limitations inhered in Air Pegasus's leasehold interest. The court first concluded that the federal government's dominant servitude over navigable waterways "may constitute part...