PVM Redwood Co., Inc. v. U.S.

• Decision Date: 13 September 1982
• Docket Number: No. 80-4096,80-4096
• Citation: 686 F.2d 1327
• Parties: PVM REDWOOD COMPANY, INC., Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1327

686 F.2d 1327

PVM REDWOOD COMPANY, INC., Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.

No. 80-4096.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Sept. 15, 1981.

Decided Sept. 13, 1982.

Leon J. Karjola, Rowland & Karjola, Eureka, Cal., for plaintiff-appellant.

Maria Arevalo Iizuka, Dept. of Justice, Washington, D. C., for defendant-appellee.

Appeal from the United States District Court for the Northern District of California.

Before MERRILL and ALARCON, Circuit Judges and VAN PELT ^*, District Judge.

MERRILL, Circuit Judge:

PVM Redwood Company, Inc. appeals the dismissal of its action for failure of its complaint to state a claim upon which relief could be granted.

PVM operates a sawmill. In its complaint it alleged that passage of the Redwood Park Expansion Act, Pub.L.No.95-250, 92 Stat. 163, 16 U.S.C. § 79b et seq., caused a taking of its property by the United States for which it is entitled to compensation under the Fifth Amendment of the United States Constitution. The District Court ruled that from the allegations of the complaint it was clear that no property right held by PVM had been taken by the Government. We agree.

The nature of PVM's alleged property right appears from Count I of its complaint. It is there alleged that under authority granted by the Act the Secretary of the Interior had acquired for the United States timber lands owned by those who had in the past supplied 98% of PVM's requirements; that this had made it impossible for them to continue to meet PVM's needs. The complaint stated:

"Prior to and during the 1977 calendar year, Plaintiff contracted and received from Louisiana-Pacific Corporation and Simpson Timber Company, ninety-eight percent (98%) of its raw materials * * *.

That after the passage of the Redwood National Park Expansion Act, Plaintiff's suppliers informed Plaintiff that they could no longer furnish said raw materials which amounted to ninety-eight percent (98%) of Plaintiff's total production * * * ".

As a consequence, it is alleged, PVM suffered an increase in production costs through a need to deal with an inferior grade of lumber and the need to retool and purchase new machinery in order to deal with that raw material. ¹ PVM has failed to distinguish between "appropriation of property and the frustration of an enterprize by reason of the exercise of a superior governmental power." United States v. Grand River Dam Authority, 363 U.S. 229, 236, 80 S.Ct. 1134, 1138, 4 L.Ed.2d 1186 (1960). PVM has not been denied use of its property; it can still run its sawmill. It had no ownership interest in its source of supply. As the Supreme Court stated in Grand River, supra, 363 U.S. at 236, 80 S.Ct. at 1138:

Here respondent has done no more than prove that a prospective business opportunity was lost. More than that is necessary as Omnia Co. v. United States, 261 U.S. 502 (43 S.Ct. 437, 67 L.Ed. 773) (1923), holds. In that case the claimant stood to make large profits from a contract it had with a steel company. But the United States, pursuant to the War Power, requisitioned the company's entire steel production. Suit was brought in the Court of Claims for just compensation. The Court, after pointing out that many laws and rulings of Government reduce the value of property held by individuals, noted that there the Government did not appropriate what the claimant owned but only ended his opportunity to exploit a contract. "Frustration and appropriation are essentially different things." Id., at 513 (43 S.Ct. at 439).

It is not clear from PVM's complaint that existing contracts had been frustrated. Rather it would seem that what had been frustrated was an expectancy based on past experience that contracts would be entered into. Grand River applies a fortiori.

We conclude that PVM "can prove no set of facts in support of (its) claim which would entitle (it) to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957) (footnote omitted), and that dismissal of this action was proper. ²

Finally PVM contends that the court erred in holding what PVM describes as an evidentiary hearing before dismissing its complaint on the pleadings. It argues that in holding a hearing, the court effectively converted the Government's Rule 12 motion to dismiss on the pleadings into a motion for summary judgment under Rule 56 and accordingly should have provided PVM with notice and an opportunity to present pertinent material. ³

We do not agree with PVM's characterization of the events below. While the court did engage in a brief colloquy with counsel for PVM (six pages of transcript), it did nothing to elicit evidence outside the pleadings; rather, it merely attempted to clarify the allegations of PVM's complaint.

JUDGMENT AFFIRMED.

ALARCON, Circuit Judge, dissenting.

I respectfully dissent. I would reverse the order dismissing the complaint and direct the district court to permit PVM to attempt to amend the pleading to state its claim in a clear and concise manner. I believe that PVM has set forth facts which establish that its property has been taken by the government.

I am in complete agreement with my colleagues' fine analysis and rejection of PVM's statutory claim for relief. I do not agree with the majority's interpretation of PVM's constitutional claim.

I. THE STATUTORY CLAIM

PVM argues that since the Expansion Act provides for employees, whose livelihoods were lost as a result of the act, it should be read to provide as well for timber industry employers who have lost their source of supply. The language of the act simply does not support this theory. ¹ The history of the act does not suggest that Congress proposed that timber industry landowners whose lands were not taken under the act should be compensated for the loss of their supply of redwood lumber or for the consequent losses to their business and property interests. There also is no reason for us to imply that such a remedy exists under the act. This court should not infer a legislative intent to compensate interests not covered explicitly by the Expansion Act. See Mitchell v. United States, 267 U.S. 341, 346, 45 S.Ct. 293, 294, 69 L.Ed. 644 (1925).

The Expansion Act does provide a remedy for some losses which would not otherwise be compensable under the fifth amendment-the loss of the livelihood of lumber industry employees. Thus, Congress obviously knew how to provide for consequential losses, yet failed to do so in the case of lumber industry employers. Congress' omission, rather than an oversight, would appear to be an intentional decision to limit the benefits for consequential injuries arising under the Expansion Act. That Congress could have, but chose not to, afford a remedy to employers such as PVM does not give us the power to rectify the situation. The Supreme Court has repeatedly invited Congress to provide for consequential damages. See, e.g., United States v. General Motors, 323 U.S. 373, 382, 65 S.Ct. 357, 361, 89 L.Ed. 311 (1944). Since the Act does not provide a remedy, the dismissal under this basis was appropriate.

II. THE CONSTITUTIONAL CLAIM

It is my view that PVM has pleaded sufficient facts to establish a constitutional claim for the taking of its "on-going contracts" for raw materials without just compensation. Because PVM alleges that the government has taken from it a personal property interest without just compensation, and the government is deemed to have admitted this for purposes of the motion to dismiss, I would remand the cause for further proceedings to determine whether PVM in fact has a personal property interest in the raw materials allegedly taken. See American Savings & Loan Ass'n v. County of Marin, 653 F.2d 364, 372 (9th Cir. 1981); Cf. United States v. 3,305.73 Acres of Land, More or Less Situated in Monroe County, State of Arkansas, 650 F.2d 938 (8th Cir. 1981) (the majority examined an instrument entitled "An Option to Purchase Standing Timber" to determine that it gave the optionee a compensable interest in the condemned lands of third persons); ² City of Oakland v. Oakland Raiders, Ltd., 32 Cal.3d 60, 64-68, 646 P.2d 835, 838, 841, 183 Cal.Rptr. 673, 676-678 (1982) (for eminent domain purposes neither federal nor state constitution distinguishes between property which is real or personal, tangible or intangible; California eminent domain law authorizes compensation for the taking of intangible property); County of San Diego v. Miller, 13 Cal.3d 684, 532 P.2d 139, 119 Cal.Rptr. 491 (1975) (California Supreme Court examined features of option contract to determine that an unexercised option to purchase land is a compensable property interest for condemnation purposes); see generally Wright and Miller, 5 Fed. Practice and Procedure § 1250 (1969). If under California law PVM has a personal property interest in the raw materials for which it has contracted, then the trier of fact must balance the competing interests to determine whether PVM is entitled to compensation.

A. The Allegations of the Complaint.

In reviewing a motion to dismiss a complaint for failure to state a claim, our function is to determine whether the plaintiff can prove any facts in support of its claim that would entitle it to relief. We must construe the pleadings in a light most favorable to the plaintiff to determine whether the allegations of the complaint, if true, would be sufficient to constitute a claim upon which relief might be granted. Bouse v. Bussey, 573 F.2d 548, 550 (9th Cir. 1977). Thus, in the matter before this court, we may affirm the district court's order of dismissal only if, as a matter of law, PVM cannot prove any set of facts in support of its claim.

In viewing the complaint, it is important to bear in mind that the objective of the Federal Rules of Civil Procedure is to avoid technicalities. See generally, Wright and Miller, 5 Fed. Practice and Procedure § 1202 (1969). As the Supreme...