United States v. King Mountain Tobacco Co.

• Decision Date: 17 September 2015
• Docket Number: No. 1:14–CV–3162–RMP.,1:14–CV–3162–RMP.
• Citation: 131 F.Supp.3d 1088
• Parties: UNITED STATES of America, Plaintiff, v. KING MOUNTAIN TOBACCO COMPANY, INC., Defendant.
• Court: U.S. District Court — District of Washington

131 F.Supp.3d 1088

UNITED STATES of America, Plaintiff,

v.KING MOUNTAIN TOBACCO COMPANY, INC., Defendant.

No. 1:14–CV–3162–RMP.

United States District Court, E.D. Washington.

Signed Sept. 17, 2015.

Kenneth Elliot Sealls, Washington, DC, for Plaintiff.

Randolph H. Barnhouse, Justin J. Solimon, Johnson Barnhouse & Keegan LLP, Los Ranchos Albuquerque, NM, John Adams Moore, Jr., Adam Moore Law Firm, Yakima, WA, for Defendant.

ORDER DENYING KING MOUNTAIN'S MOTION FOR SUMMARY JUDGMENT

ROSANNA MALOUF PETERSON, Chief Judge.

BEFORE THE COURT is King Mountain Tobacco Company, Inc.'s Motion for Summary Judgment, ECF No. 41. The Court heard telephonic oral argument on the motion on September 16, 2015. Trial Attorney Kenneth Sealls appeared on behalf of the United States, and Randolph Barnhouse appeared on behalf of King Mountain. The Court has reviewed the motions, considered the parties' arguments, and is fully informed.

BACKGROUND

The Court incorporates by reference its Order regarding various motions, ECF No. 46, in which the Court recounts the procedural and factual background of this cases.

DISCUSSION

A. Takings Clause

King Mountain moves for summary judgment in its favor on the basis that the FETRA assessments constitute an unconstitutional taking under the Fifth Amendment and therefore are invalid. ECF No. 41. First, King Mountain argues that the FETRA assessments are per se takings, citing Horne, et al. v. USDA, ––– U.S. ––––, 135 S.Ct. 2419, 192 L.Ed.2d 388 (2015), in support of its argument. Second, King Mountain argues in the alternative that the FETRA assessments are regulatory takings under Eastern Enterprises v. Apfel, 524 U.S. 498, 118 S.Ct. 2131, 141 L.Ed.2d 451 (1998) (plurality opinion).

i. Relevant Law

The final clause of the Fifth Amendment provides: "nor shall private property be taken for public use, without just compensation." Const. amend. V. The Takings provision "does not prohibit the taking of private property, but instead places [conditions] on the exercise of that power:" (1) the taking must be for a "public use," and (2) "just compensation" must be paid to the owner. Brown v. Legal Foundation of Wa., 538 U.S. 216, 231, 123 S.Ct. 1406, 155 L.Ed.2d 376 (2003) ; First English Evangelical Lutheran Church of Glendale v. Los Angeles Cnty., Ca., 482 U.S. 304, 315–16, 107 S.Ct. 2378, 96 L.Ed.2d 250 (1987). The Supreme Court has emphasized the role of the takings doctrine as "barring 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."

Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 537, 125 S.Ct. 2074, 161 L.Ed.2d 876 (2005).

Thus, the Court conducts a two-step inquiry when analyzing a takings claim. First, the Court determines whether a "taking" has occurred: "that is, whether the complained-of government action constitutes a ‘taking,’ thus triggering the requirements of the Fifth Amendment." Horne v. USDA, 750 F.3d 1128, 1136 (9th Cir.2014)reversed on other grounds by Horne v. USDA, ––– U.S. ––––, 135 S.Ct. 2419, 192 L.Ed.2d 388 (2015). Second, the Court asks whether the government provided "just compensation" to the property owner. Id. The party challenging government action bears the burden of proving that the action constitutes an unconstitutional taking. Eastern Enterprises v. Apfel, 524 U.S. 498, 522, 118 S.Ct. 2131, 141 L.Ed.2d 451 (1998).

The Supreme Court has recognized broadly two types of takings. Historically, the Court has recognized the "classic taking" or "paradigmatic taking" in which the government directly appropriates or physically invades private property. Lingle, 544 U.S. at 537, 125 S.Ct. 2074 ; Eastern Enterprises, 524 U.S. at 522, 118 S.Ct. 2131. Such physical invasion constitutes a per se taking and creates a "clear rule" establishing "a categorical duty to compensate the former owner, regardless of whether the interest that is taken constitutes an entire parcel or merely a part thereof." Tahoe–Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 535 U.S. 302, 322, 122 S.Ct. 1465, 152 L.Ed.2d 517 (2002).

The Supreme Court has applied this "clear rule" when the government took possession of a leasehold and physically occupied the property for its own use, United States v. General Motors Corp., 323 U.S. 373, 65 S.Ct. 357, 89 L.Ed. 311 (1945) ; when the government appropriated part of a rooftop to provide for the installation of television cables, Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 102 S.Ct. 3164, 73 L.Ed.2d 868 (1982) ; and when the government used private airspace to fly an airplane into a government airport, United States v. Causby, 328 U.S. 256, 66 S.Ct. 1062, 90 L.Ed. 1206 (1946). See Tahoe Sierra, 535 U.S. at 322, 122 S.Ct. 1465 (referencing these examples). Although some of these per se takings may have been implemented through regulation, see Loretto, 458 U.S. at 423, 102 S.Ct. 3164, their defining feature is a physical possession or invasion of private property, and the Court applied the clear rule to each.

In later Supreme Court jurisprudence, the Court recognized the concept of regulatory takings, in which government regulation proves to be "so onerous that its effect is tantamount to a direct appropriation or ouster...." Lingle, 544 U.S. at 537, 125 S.Ct. 2074. Whether government action constitutes a regulatory taking is "a question of degree" that "cannot be disposed of by general propositions." Penn. Coal Co. v. Mahon, 260 U.S. 393, 416, 43 S.Ct. 158, 67 L.Ed. 322 (1922). Accordingly, determining whether challenged government action amounts to a regulatory taking involves an "essentially ad hoc, factual inquir[y]." Penn Central Transp. Co. v. City of New York, 438 U.S. 104, 124, 98 S.Ct. 2646, 57 L.Ed.2d 631 (1978).

Within the regulatory takings doctrine, the Court has identified another form of per se taking that results whenever a regulation completely "deprives an owner of ‘all economically beneficial uses' of his land." Tahoe Sierra, 535 U.S. at 330, 122 S.Ct. 1465 (quoting Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1019, 112 S.Ct. 2886, 120 L.Ed.2d 798 (1992) ) (emphasis in original). Under Lucas, a regulation need not result in an actual physical invasion or possession of private property to constitute a "total taking"; if the regulation "prohibits all economically beneficial use of land," the clear rule applies and the government has a categorical duty to compensate the owner. Lucas, 505 U.S. at 1030, 112 S.Ct. 2886. The regulatory per se taking rule established in Lucas does not apply to the imposition of FETRA assessments in this case because there is no challenge of the government's taking of land.

Additionally, the Supreme Court has referred to the government action in Loretto, requiring installation of television cables on private property, both as a classic per se taking and as a regulatory per se taking. Compare Tahoe Sierra, 535 U.S. at 322, 122 S.Ct. 1465 (grouping Loretto with other classic per se takings cases), with Lingle, 544 U.S. at 538, 125 S.Ct. 2074 (referring to the rule established in Loretto as one of "two categories of regulatory action"). However, the distinction is irrelevant to this Court's analysis, because Loretto involved a physical invasion or possession of private property, and there has been no physical invasion or possession of private property here.

If a challenged government action does not fall within either of these two categories constituting regulatory per se takings (Lucas or Loretto ), then the court does not apply the clear rule test but instead must determine whether the challenged action nonetheless constitutes a regulatory taking under the balancing factor test set forth in Penn Central Transp. Co. v. City of New York, 438 U.S. 104, 98 S.Ct. 2646, 57 L.Ed.2d 631 (1978). Lingle, 544 U.S. at 538, 125 S.Ct. 2074. The Court considers "the economic impact of the regulation on the claimant," "the extent to which the regulation has interfered with distinct investment-backed expectations," and "the character of the governmental action—for instance, whether it amounts to a physical invasion or instead merely affects property interests through some public program adjusting the benefits and burdens of economic life to promote the common good." Id. at 538–39, 125 S.Ct. 2074 (quoting Penn Central, 438 U.S. at 124, 98 S.Ct. 2646 ) (internal quotation marks omitted). Government action must impose a severe enough burden on private property rights that it is the "functional[ ] equivalent to the classic taking in which government directly appropriates private property or ousts the owner from his domain." Id. at 539, 125 S.Ct. 2074.

ii. Takings Analysis

a. Per Se Takings

From the outset, there is no allegation that government agents physically entered King Mountain's property or safe-deposit box and physically took possession of King Mountain's money in order to collect the FETRA assessments. To the contrary, notification of the assessments came by invoice, and King Mountain was independently responsible to wire the money to the government. Failure to do so resulted not in a physical occupation or shut-down of King Mountain's operations but in the accrual of interest on the assessments imposed. Nevertheless, King Mountain contends that the FETRA assessments constitute a per se taking comparable to the taking in Horne, et al. v. USDA, ––– U.S. ––––, 135 S.Ct. 2419, 192 L.Ed.2d 388 (2015).

In Horne, the USDA's California Raisin Marketing Order required raisin growers to physically set aside a portion of their crop for the government. Horne, 135 S.Ct. at 2424. The Government could then dispose of the set aside raisins as it deemed appropriate. Id. The Supreme Court held that the Raisin Marketing Order was "a clear physical taking" because "[a]ctual raisins [were] transferred from the growers to the Government." Id. at 2428.

King Mountain spends the majority of its argument citing to the petitioner's brief before ...