Chang v. U.S.

• Decision Date: 13 October 1988
• Docket Number: No. 88-1120,88-1120
• Citation: 859 F.2d 893
• Parties: Herman CHANG, Patrick Conners, William Guthrie, Warren Parkhurst, John Register and John Woodward, Plaintiffs-Appellants, v. The UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 893

859 F.2d 893

Herman CHANG, Patrick Conners, William Guthrie, Warren

Parkhurst, John Register and John Woodward, Plaintiffs-Appellants, v. The UNITED STATES, Defendant-Appellee.

No. 88-1120.

United States Court of Appeals, Federal Circuit.

Oct. 13, 1988.

T. Gerald Treece, Houston, Tex., argued for plaintiffs-appellants. With him on the brief was Harry H. Walsh, III, Huntsville, Tex.

Terrence S. Hartman, Commercial Litigation Branch, Dept. of Justice, Washington, D.C., argued for defendant-appellee. John R. Bolton, Asst. Atty. Gen., David M. Cohen, Director and Paul J. Ehlenbach, Commercial Litigation Branch, Dept. of Justice, Washington, D.C., were on the brief for defendant-appellee. Also on the brief were Marilyn L. Muench, Chief Counsel, William B. Hoffman, Attorney-Advisor, Office of Foreign Assets Control and D. Brian Hufford, Attorney-Advisor, Dept. of the Treasury, of counsel.

Before NIES, ARCHER and MICHEL, Circuit Judges.

MICHEL, Circuit Judge.

Mr. Herman Chang and the five other individuals named in the complaint (plaintiffs) appeal the judgment of the United States Claims Court in Chang v. United States, 13 Cl.Ct. 555 (1987), granting the government's motion to dismiss their complaint for failure to state a claim upon which relief could be granted. We affirm.

Background

Plaintiffs were working as petroleum engineers in Libya under private, written employment contracts entered into in 1985 Most important to the present appeal was the executive order provision codified at 31 C.F.R. Sec. 550.205, which provided: "Except as authorized, no U.S. person may perform any contract in support of an industrial or other commercial or governmental project in Libya." Each of the plaintiffs in this case falls within the definition of "United States person" set forth in 31 C.F.R. Sec. 550.308 as "any United States citizen, permanent resident alien, juridical person organized under the laws of the United States, or any person in the United States."

with Sirte Oil Company (Sirte), a Libyan corporation. In January 1986, President Reagan declared a national emergency because of a threat to the national security and foreign policy of the United States posed by the policies and actions of the Libyan government, and he imposed economic sanctions on Libya in retaliation for that country's role in promoting international terrorism. See Exec.Order No. 12543, 51 Fed.Reg. 875 (Jan. 9, 1986); Exec.Order No. 12544, 51 Fed.Reg. 1235 (Jan. 10, 1986). The executive orders were issued pursuant to the President's delegated authority under the International Emergency Economic Powers Act (IEEPA), 50 U.S.C. Secs. 1701-1706 (1982). The executive orders also authorized and directed the Secretary of the Treasury (Secretary) to promulgate regulations to implement the sanctions. Those regulations, entitled the Libyan Sanction Regulations, were issued by the Secretary at 51 Fed.Reg. 1354-59 (Jan. 10, 1986) (published at 31 C.F.R. Sec. 550 (1986)).

The above regulations affecting the plaintiffs' employment contracts were effective as of February 1, 1986. Under 31 C.F.R. Sec. 550.701, willful violations of any provision of the regulations were subject to the penalties set forth in section 206 of the IEEPA, 50 U.S.C. Sec. 1705, which included fines of as much as $50,000 and/or imprisonment for as long as 10 years. The plaintiffs chose to comply with the regulations and returned to the United States on or by February 1, 1986. ¹

The plaintiffs filed their complaint in the Claims Court on June 16, 1986, alleging that the termination and irretrievable loss of their employment contracts with Sirte, which was the practical result of the enactment of the Libyan Sanction Regulations by the United States government, was a taking under the Fifth Amendment for which they were owed just compensation. The Claims Court granted the government's motion to dismiss for failure to state a claim upon which relief could be granted. 13 Cl.Ct. 555, 561 (1987).

OPINION

I.

As this court has recently stated, "a motion for judgment on the pleadings should be granted only where 'it appears to a certainty that plaintiff is entitled to no relief under any state of facts which could be proved in support of his claim.' " Owen v. United States, 851 F.2d 1404, 1407 (Fed.Cir.1988) (citation omitted). "[I]n reviewing the grant of a judgment for the defendant on the pleadings, we must assume each well-pled factual allegation to be true and indulge in all reasonable inferences in favor of the nonmovant." Id. This same standard of review applies where a case is dismissed because the complaint fails to state a claim upon which relief could be granted. See Selva & Sons, Inc. v. Nina Footwear, Inc., 705 F.2d 1316, 1320-22 (Fed.Cir.1983).

II.

The Fifth Amendment provides, in part pertinent to this appeal: "nor shall private property be taken for public use, without just compensation." U.S. Const Amend. V. The Supreme Court has noted that the language of the Fifth Amendment "does not prohibit the taking of private property, but instead places a condition on the exercise of that power." First English Evangelical Lutheran Church v. County of Los Angeles, 482 U.S. 304, 107 S.Ct. 2378, 2385, 96 L.Ed.2d 250 (1987). "[T]he Amendment makes clear that it is designed not to limit the governmental interference with property rights per se, but rather to secure compensation in the event of otherwise proper interference amounting to a taking." Id. at 2386 (emphasis in original). Furthermore, the Amendment is also designed " 'to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.' " Penn Central Transportation Co. v. New York City, 438 U.S. 104, 123, 98 S.Ct. 2646, 2658, 57 L.Ed.2d 631 (1978) (quoting Armstrong v. United States, 364 U.S. 40, 49, 80 S.Ct. 1563, 1569, 4 L.Ed.2d 1554 (1960)).

The Supreme Court has also made clear that there is no " 'set formula' for determining when 'justice and fairness' require that economic injuries caused by public action be compensated by the government, rather than remain disproportionately concentrated on a few persons." Penn Central, 438 U.S. at 124, 98 S.Ct. at 2659 (citation omitted). As a result, "[o]rdinarily [courts] must engage in 'essentially ad hoc, factual inquiries.' " Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 426, 102 S.Ct. 3164, 3171, 73 L.Ed.2d 868 (1982) (quoting Penn Central, 438 U.S. at 124, 98 S.Ct. at 2659). Thus, whether a particular governmental interference with property is a compensable taking requires a case-by-case factual analysis of the particular circumstances presented. See, e.g., Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1005, 104 S.Ct. 2862, 2874, 81 L.Ed.2d 815 (1984); Kaiser Aetna v. United States, 444 U.S. 164, 179-80, 100 S.Ct. 383, 392-93, 62 L.Ed.2d 332 (1979); Belk v. United States, 858 F.2d 706, 709 (Fed.Cir.1988).

There is no question that "[v]alid contracts are property, whether the obligor be a private individual, ... or the United States." Lynch v. United States, 292 U.S. 571, 579, 54 S.Ct. 840, 843, 78 L.Ed. 1434 (1934). However, as the Supreme Court observed in Connolly v. Pension Benefit Guaranty Corp., 475 U.S. 211, 223-24, 106 S.Ct. 1018, 1025-26, 89 L.Ed.2d 166 (1986):

"Contracts, however express, cannot fetter the constitutional authority of Congress. Contracts may create rights of property, but when contracts deal with a subject matter which lies within the control of Congress, they have a congenital infirmity. Parties cannot remove their transactions from the reach of dominant constitutional power by making contracts about them." Norman v. Baltimore & Ohio R. Co., 294 U.S. 240, 307-308, 55 S.Ct. 407, 415-416, 79 L.Ed. 885 (1935).

If the regulatory statute is otherwise within the powers of Congress, therefore, its application may not be defeated by private contractual provisions. For the same reason, the fact that legislation disregards or destroys existing contractual rights does not always transform the regulation into an illegal taking. Bowles v. Willingham, 321 U.S. 503, 517, 64 S.Ct. 641, 648, 88 L.Ed. 892 (1944); Omnia Commercial Co. v. United States, 261 U.S. 502, 508-510, 43 S.Ct. 437, 438, 67 L.Ed. 773 (1923).

But as the Supreme Court also recognized in Connolly, "[t]his is not to say that contractual rights are never property rights or that the Government may always take them for its own benefit without compensation." 475 U.S. at 224, 106 S.Ct. at 1026.

To guide the necessary analysis into whether the questioned governmental activities impair a valid contract to such a degree as to constitute a compensable taking, the Court in Connolly identified three factors as having " 'particular significance': (1) 'the economic impact of the regulation on the claimant'; (2) 'the extent to which the regulation has interfered with distinct investment-backed expectations'; and (3) 'the character of the governmental action.' " Id. at 225, 106 S.Ct. at 1027 (quoting Penn Central, 438 U.S. at 124, 98 S.Ct at 1026). ²

We observe that in applying the Connolly factors, the focus of our inquiry is not whether the policies and actions of the Libyan government were such that the President properly invoked his power and imposed sanctions. Rather, the proper focus when considering the Connolly factors concerns whether the President's actions amount to a "taking." In other words, the "governmental action" relevant to the plaintiffs' claim here is not that which served as the basis for the alleged taking, but that which is alleged to constitute the taking. Thus, no discovery of the "true facts" underlying the Libyan crisis need be undertaken as plaintiffs suggest.

Plaintiffs do not contend that President Reagan did not in fact declare a national emergency, and they even concede on appeal that the President has the power to take private property for public use under the IEEPA once a...