Case: 18-2132 Document: 69 Page: 1 Filed: 04/22/2020
United States Court of Appeals
for the Federal Circuit
______________________
GADSDEN INDUSTRIAL PARK, LLC,
Plaintiff-Appellant
v.
UNITED STATES,
Defendant-Cross-Appellant
______________________
2018-2132, 2018-2147
______________________
Appeals from the United States Court of Federal
Claims in No. 1:10-cv-00757-EGB, Senior Judge Eric G.
Bruggink.
______________________
Decided: April 22, 2020
______________________
EDWARD LEVICOFF, The Levicoff Law Firm, PC,
Pittsburgh, PA, argued for plaintiff-appellant.
KENNETH DINTZER, Commercial Litigation Branch,
Civil Division, United States Department of Justice,
Washington, DC, argued for defendant-cross-appellant.
Also represented by ERIC JOHN SINGLEY, JOSEPH H. HUNT,
ROBERT EDWARD KIRSCHMAN, JR., FRANKLIN E. WHITE, JR.
______________________
Before WALLACH, TARANTO, and STOLL, Circuit Judges.
Case: 18-2132 Document: 69 Page: 2 Filed: 04/22/2020
2 GADSDEN INDUSTRIAL PARK, LLC v. UNITED STATES
STOLL, Circuit Judge.
This appeal and cross-appeal concern an alleged taking
by the U.S. Environmental Protection Agency (EPA) from
Gadsden Industrial Park (GIP) of certain steelmaking
material located on a parcel of real property in Gadsden,
Alabama. GIP appeals the trial court’s just compensation
awards, arguing that they should be increased. The
Government appeals the trial court’s conclusion that GIP
had a cognizable property interest in certain material the
EPA recovered from the parcel. For the reasons set forth
below, we affirm-in-part, reverse-in-part, and vacate-in-
part.
BACKGROUND
This case involves GIP’s takings claim for “slag,”
“kish,” and “scrap.” The parties do not dispute the trial
court’s definitions of these terms. Slag, a byproduct of steel
manufacturing, is “a non-ferrous material that separates
during smelting.” Gadsden Indus. Park, LLC v. United
States,
138 Fed. Cl. 79, 92 (2018) (Decision). Kish is “a
ferrous byproduct of a blast furnace operation in various
sizes that has economic value.”
Id. at 94. Scrap refers to
“metal of various sizes that may or may not be ferrous, but
that can be either recycled into steel manufacturing or sold
for other purposes. It is typically finished steel product . . .
and is thus not a byproduct.”
Id. at 92.
I
In 2002, GIP purchased certain real and personal
property at an auction of a steel mill’s bankruptcy estate,
as reflected in the bankruptcy trustee’s Bill of Sale. GIP
specifically omitted some real property from the purchase,
including a parcel known as the “Eastern Excluded
Property.” GIP did, however, purchase certain personal
property located on the Eastern Excluded Property.
Alabama law governs the contract covering GIP’s asset
purchase.
Case: 18-2132 Document: 69 Page: 3 Filed: 04/22/2020
GADSDEN INDUSTRIAL PARK, LLC v. UNITED STATES 3
Relevant to this appeal, the Eastern Excluded Property
contains two large piles of material, comprising, among
other things, large quantities of slag, kish, and scrap. At
the time of GIP’s purchase, each pile occupied more than
ten acres of land, contained an estimated three to four
million cubic yards of material, and was more than eighty
feet high. J.A. 3091 ¶ 4. Each pile was a state-licensed
industrial landfill. Transcript of Proceedings at 209:10–
210:13, Gadsden Indus. Park, LLC v. United States,
No. 10-757 (Fed. Cl. June 26, 2017), ECF No. 169; 1
J.A. 3091 ¶¶ 2–4, 3106.
The bankruptcy trustee identified the assets for sale in
the auction as “[a]ll materials, whether raw materials or
by-products, situated within the boundaries of the real
property being sold, including kish and scrap.” 2 J.A. 2586.
The identified assets included “inventory,” which itself
included “by[-]products of manufacturing including but not
limited to kish and miscellaneous other materials and
assorted scrap.” J.A. 2612. Prior to making its purchase,
GIP drafted a “Purchaser’s Itemization of Excluded Items
1 The Court of Federal Claims held a seven-day trial
in two waves, first from June 26–29, 2017 and then from
July 26–28, 2017. The transcript of the trial proceedings is
consecutively paginated across seven volumes, with each
day corresponding to a separate volume. Transcript of
Proceedings, Gadsden Indus. Park, LLC v. United States,
No. 10-757 (Fed. Cl. June 26–29, 2017 & July 26–28, 2017),
ECF Nos. 169, 171, 173, 175, 178, 180, 182. We hereinafter
refer to trial testimony by citing the transcript page or
pages where it appears using “Trial Tr.”
2 “[T]he real property being sold” refers to all of the
real property of the steel mill’s bankruptcy estate offered
for sale to the highest bidder in the bankruptcy auction.
See J.A. 2581, 2586, 3092 ¶¶ 5–9, 3173 ¶¶ 5–6, 3180–89
¶¶ 1,10, 13, 20, 26, 31, 32A.
Case: 18-2132 Document: 69 Page: 4 Filed: 04/22/2020
4 GADSDEN INDUSTRIAL PARK, LLC v. UNITED STATES
from Sale.” J.A. 2639. Relevant here, GIP excluded certain
items from “inventory”:
1. With reference to the property identified in
“ATTACHMENT 5 – INVENTORY,” Purchaser
excludes:
A. All miscellaneous other materials.
B. All by-products of production other than kish
and 420,000 cubic yards of slag which are located
on the Excluded Real Property as is described on
Exhibit B to the deed from Seller to Purchaser of
even date herewith, together with a reasonable
period of time to remove such items.
Id. (emphasis added).
In 2003, the EPA began investigating claims of
contaminants leaching from the piles on the Eastern
Excluded Property. Over the course of several years, the
EPA determined that contaminants from the piles were
migrating from the Eastern Excluded Property and began
communicating with GIP regarding ownership and
environmental remediation issues. At the same time, GIP
began discussing with Watkins Metal Co. the separation of
recoverable metals from the Eastern Excluded Property.
GIP and Watkins drafted, but did not consummate, an
“Agreement to Process Kish,” which provided that for $70
per ton of output, Watkins would “separate and screen the
Kish in order for [GIP] to reclaim and sell the metals in the
Kish.” J.A. 2861 ¶¶ 3, 5. Under the non-finalized
agreement, Watkins would have had an exclusive right to
separate recoverable metals from the piles so long as
Watkins reclaimed 500 tons of metal per month, in addition
to the right to withdraw from the agreement should
recovery become unprofitable. J.A. 2862 ¶ 12.
In October 2008, the EPA decided to remediate the
environmental problems on the Eastern Excluded Property
by having contractors reduce the size of the piles through
Case: 18-2132 Document: 69 Page: 5 Filed: 04/22/2020
GADSDEN INDUSTRIAL PARK, LLC v. UNITED STATES 5
recovery and sale of saleable material from the piles. Once
the contractors had extracted saleable material, the EPA
planned to cap what was left of the piles. 3 From
October 2009 to February 2013, contractors recovered
material from the piles, selling 245,890 tons of material for
about $13.5 million. J.A. 3093–94 ¶¶ 15–16. The EPA and
its contractors also recovered and used 92,500 cubic yards
of slag onsite for environmental remediation. Trial
Tr. 1367:5–8.
Mr. Casey, the owner of GIP, testified at trial that prior
to the start of the EPA’s recovery operation, GIP had
removed about 15,000 cubic yards of its allotment of slag,
using some, selling some, and giving some away. Trial
Tr. 206:17–207:9. As of March 2008, GIP had not removed
any kish from the Eastern Excluded Property.
In 2013, the project became unprofitable, and the EPA
shut it down. At that point, the EPA contractors had
processed approximately 50% of the material in the piles.
Ultimately, the EPA contractors spent $14.5 million on the
recovery operation, about a million more than income from
sales. Trial Tr. 1242:18–1243:6. The EPA never capped
the piles. Instead, the EPA “compacted the materials to
minimize leachate,” leaving further remediation to state
environmental authorities. J.A. 3086. GIP did not attempt
its own recovery operation during the EPA’s remediation
project.
II
GIP sued the Government in the United States Court
of Federal Claims, alleging a Fifth Amendment takings
3 Capping each pile would involve regrading it to
allow placement of a clay cap over the entire pile to stop
hazardous leachate from seeping from the pile. See Trial
Tr. 640:25–642:25.
Case: 18-2132 Document: 69 Page: 6 Filed: 04/22/2020
6 GADSDEN INDUSTRIAL PARK, LLC v. UNITED STATES
claim for the slag, kish, and scrap 4 recovered from the
Eastern Excluded Property by the EPA. At trial, GIP
sought damages of $755,494 for 92,500 cubic yards of slag.
Applying a fair market value theory, Mr. Gleason, GIP’s
damages expert, calculated just compensation for the kish
and scrap taken by the EPA at around either $9.8 million
or $10.4 million, depending on the geographic market used
in the calculation. 5 Trial Tr. 1277:10–18.
Mr. Gleason valued the kish and scrap taken by
estimating their net present value as of June 4, 2008, the
date GIP alleges the takings occurred. 6 See Trial
Tr. 1225:19–1226:7, 1260:24–1261:20. Two elements of
Mr. Gleason’s damages calculation are relevant here:
4 The Government contends that GIP “did not allege a
taking of ‘scrap’—as distinct from the alleged takings of
‘kish’ and slag’—until it filed its post-trial brief.” Appellee’s
Br. 61–62. The Court of Federal Claims considered the
Government’s position and concluded that GIP’s takings
claim for scrap was tried by consent. While we see no error
in the trial court’s conclusion, we need not reach this issue
because we affirm the trial court’s award of no damages as
discussed below.
5 Mr. Gleason also offered a lost profits damages
theory, which the trial court rejected as “not the
appropriate measure of just compensation.”
Decision,
138 Fed. Cl. at 97 (citing United States v. Gen. Motors
Corp.,
323 U.S. 373, 379 (1945)). Addressing the merits,
the trial court found that “Mr. Gleason’s lost profit
calculation suffers from many of the same defects
discussed” with respect to his fair market value calculation
“due to the unreliable calculation of avoided costs.”
Id.
at 97 n.5. Our discussion of avoided costs applies equally
to both of Mr. Gleason’s damages theories.
6 The Government did not offer a competing date of
taking at trial.
Case: 18-2132 Document: 69 Page: 7 Filed: 04/22/2020
GADSDEN INDUSTRIAL PARK, LLC v. UNITED STATES 7
revenue and costs. To calculate revenue, Mr. Gleason
approximated a June 2008 price for the kish and scrap and
applied that price to the actual volume of material
recovered by the EPA contractors. Trial Tr. 1262:7–
1263:10. Mr. Gleason also estimated GIP’s avoided costs—
the costs GIP hypothetically would have incurred by
partnering with Watkins to conduct its own recovery
operation. See Trial Tr. 1230:4–14, 1242:12–17, 1330:7–
1331:17. To get a net present value of the kish and scrap
as of June 4, 2008, Mr. Gleason subtracted avoided costs
from revenue and applied a discount rate to that number.
See Trial Tr. 1259:18–1262:15, 1276:4–1277:14.
To approximate the June 2008 price, Mr. Gleason used
an industry publication to relate the contractors’ sales
price to the market price of a comparison metal over the
course of the EPA’s remediation project. See Trial
Tr. 1267:3–1268:11, 1270:11–1271:15. Mr. Gleason then
applied that relationship to the average market price of the
comparison metal from April 2008 to June 2008, which
yielded a price of $483 per ton. Id.; Trial Tr. 1262:20–
1263:12. At trial, Mr. Gleason conceded that his
approximated June 2008 price was “historically . . . a very
high price” that lasted only “[f]ive or six months” before
taking a dive. Trial Tr. 1262:20–1264:6, 1265:19–1266:3.
Overall, Mr. Gleason projected the revenue from a
June 2008 sale of kish and scrap to be $19,873,418,
significantly more than the EPA contractors’ $13.5 million
in revenue. Trial Tr. 1273:17–21; J.A. 3094 ¶ 16.
To determine GIP’s avoided costs, Mr. Gleason
assumed that GIP would have consummated its agreement
with Watkins to process kish for $70 per ton. Trial
Tr. 1239:24–1240:23. He further relied on a purported oral
modification to the agreement under which GIP would not
pay Watkins anything for recovered material that GIP sold
for less than $70 per ton. Trial Tr. 1247:14–1248:18.
Because GIP already employed sales and administrative
personnel, Mr. Gleason assumed that GIP would incur no
Case: 18-2132 Document: 69 Page: 8 Filed: 04/22/2020
8 GADSDEN INDUSTRIAL PARK, LLC v. UNITED STATES
additional administrative, sales, or overhead costs as a
result of partnering with Watkins. Trial Tr. 1257:12–
1258:3. He also assumed that the sales price of the
recovered materials would include freight. Trial
Tr. 1256:22–1257:3. Mr. Gleason concluded that GIP’s
avoided costs were about $4.9 million. Trial Tr. 1258:4–6.
The Government argued that Mr. Gleason’s fair
market valuation suffered from at least two flaws. First,
the Government asserted that Mr. Gleason’s use of the
historically high June 2008 sales price for all material was
improper because the material was sold over a longer
period of time, during which a purchaser would have
expected the price to fall. Second, the Government
maintained that Mr. Gleason’s reliance on the Watkins
agreement to calculate avoided costs was unfounded due to
critical distinctions between Watkins and the EPA
contractors. For example, the evidence did not suggest that
Watkins had a similar processing capacity as the EPA
contractors, and Watkins had the right to walk away from
the project if it became unprofitable.
Following a seven-day trial, the Court of Federal
Claims concluded that “GIP purchased kish, assorted
scrap, and 420,000 cubic yards of slag at the bankruptcy
auction,” that “each material was present on the Eastern
Excluded Property[,] and that it was used or sold by EPA.”
Decision, 138 Fed. Cl. at 90. Additionally, the trial court
held that the EPA’s remediation project effected a
compensable taking of GIP’s slag, scrap, and kish.
Id.
Accordingly, the trial court awarded GIP $755,494 for the
EPA’s taking of 92,500 cubic yards of slag.
Id. at 100.
Regarding the scrap and kish, however, the Court of
Federal Claims found that GIP had failed to provide
“sufficient reliable proof of what a willing buyer would have
paid for the scrap and kish.”
Id. First, the trial court
agreed with the Government that Mr. Gleason’s
“construction of an artificial sales price as of June 2008 for
Case: 18-2132 Document: 69 Page: 9 Filed: 04/22/2020
GADSDEN INDUSTRIAL PARK, LLC v. UNITED STATES 9
materials sold later was inappropriate,” because a buyer
would know that it would not instantly recover the value of
the materials sold and “would be presumed to know that
the price in June 2008 was abnormally high.”
Id. at 99.
Second, the trial court deemed Mr. Gleason’s avoided costs
calculations flawed at least because they assumed that all
of the risk in GIP’s hypothetical recovery project “would
have been borne by Watkins, which, in actuality,
maintained the right to walk away from the recovery
operation by the terms of the draft agreement.”
Id. The
trial court further criticized GIP’s avoided costs
calculation, characterizing assumptions drawn from the
EPA contractors’ records as “highly questionable,” due to
differences in the EPA contractors’ processing capacity and
the capacity required of Watkins to maintain exclusivity.
Id. at 99–100. The trial court also concluded that GIP
would have experienced other costs unaccounted for by
Mr. Gleason.
Id. Unable to calculate just compensation
with reasonable certainty, the trial court awarded GIP zero
damages for the EPA’s taking of GIP’s kish and scrap. See
id. at 100.
The Government and GIP appeal. We have jurisdiction
pursuant to 28 U.S.C. § 1295(a)(3).
DISCUSSION
The Government asserts that the Court of Federal
Claims erred in concluding that the EPA took GIP’s slag.
For its part, GIP contends that the trial court should have
awarded just compensation for 405,000 cubic yards of slag
rather than only 92,500 cubic yards of slag. GIP further
argues that the trial court erred by awarding GIP no just
compensation for its kish and scrap after concluding that
the kish and scrap had value and that the EPA had taken
them. We address these arguments in turn, first
considering the parties’ arguments with respect to slag,
and then turning to their arguments regarding kish and
scrap.
Case: 18-2132 Document: 69 Page: 10 Filed: 04/22/2020
10 GADSDEN INDUSTRIAL PARK, LLC v. UNITED STATES
We review the Court of Federal Claims’ legal
conclusions de novo and its fact findings for clear error.
Holland v. United States,
621 F.3d 1366, 1374 (Fed. Cir.
2010) (citing Cal. Fed. Bank, FSB v. United States,
245 F.3d 1342, 1346 (Fed. Cir. 2001)). A fact finding is
“clearly erroneous” when “the reviewing court on the entire
evidence is left with the definite and firm conviction that a
mistake has been committed.” Am. Pelagic Fishing
Co. v. United States,
379 F.3d 1363, 1371 (Fed. Cir. 2004)
(quoting Glendale Fed. Bank, FSB v. United States,
239 F.3d 1374, 1379 (Fed. Cir. 2001)).
I
The Government asserts that the trial court erred in
holding that GIP had proven the requisite property
interest to establish a takings claim for slag. “Whether a
taking under the Fifth Amendment has occurred is a
question of law with factual underpinnings.”
Cary v. United States,
552 F.3d 1373, 1376 (Fed. Cir. 2009)
(citing Alves v. United States,
133 F.3d 1454, 1456
(Fed. Cir. 1998)). The plaintiff in a takings case bears the
burden to demonstrate a protectable property interest. See
Palmyra Pac. Seafoods, L.L.C. v. United States,
561 F.3d
1361, 1364–65 (Fed. Cir. 2009).
According to the Government, the Court of Federal
Claims erred when it concluded “that the Government took
[GIP’s] slag—as differentiated from the tons of slag that
remain on th[e] property.” Cross-Appellant’s Br. 32. GIP
does not dispute that following completion of the EPA’s
remediation project, slag remains on the Eastern Excluded
Property. Instead, GIP responds that the presence of slag
is “irrelevant to whether a taking occurred,” because the
EPA “embalm[ed] permanently” all remaining materials at
the conclusion of its remediation project, thereby
preventing GIP from recovering its full allotment of slag.
Appellant’s Resp. Br. 32, 35 (quoting
Decision, 138 Fed. Cl.
at 96). Accordingly, GIP seeks increased just
Case: 18-2132 Document: 69 Page: 11 Filed: 04/22/2020
GADSDEN INDUSTRIAL PARK, LLC v. UNITED STATES 11
compensation to account for 405,000 cubic yards of slag—
the amount remaining in GIP’s allotment when the EPA’s
remediation project began. We agree with the
Government.
GIP has not demonstrated that the EPA’s presence and
operations on the Eastern Excluded Property intruded on
any of GIP’s property rights to slag. GIP specifically
excluded from its purchase “[a]ll by-products of production
other than kish and 420,000 cubic yards of slag.” J.A. 2639.
As a matter of law, the Exclusion List that GIP itself
drafted conveyed title to GIP in 420,000 undifferentiated
cubic yards of slag on the Eastern Excluded Property. See
Wheeler v. First Ala. Bank of Birmingham,
364 So. 2d
1190, 1194 (Ala. 1978) (“The construction of a written
document is a function of the court. If the document is
unambiguous, its construction and legal effect is a question
of law.” (citations omitted)). As GIP concedes, slag is
fungible, and the Bill of Sale included no limitations that
would restrict GIP’s 420,000 cubic yards of slag to any
particular subset of the whole of the slag on the Eastern
Excluded Property. Appellant’s Resp. Br. 24. Nothing in
the Bill of Sale granted GIP first rights to mine slag from
the piles, the right to exclude others from the Eastern
Excluded Property, or any other property right that the
EPA could take by merely temporarily excluding GIP from
the Eastern Excluded Property. Indeed, GIP repudiates
any notion that the Bill of Sale granted it the right to mine
the piles,
id. at 1–3, and GIP specifically excluded the
Eastern Excluded Property parcel from its purchase of real
property, J.A. 3092 ¶ 8. GIP was entitled to no more than
420,000 cubic yards of slag, and the evidence
overwhelmingly indicates that even after the EPA’s
remediation project, sufficient slag remained on the
Eastern Excluded Property for GIP to recover its full
allotment. See Trial Tr. 545:3–24, 1365:12–1366:1;
J.A. 3091 ¶ 4.
Case: 18-2132 Document: 69 Page: 12 Filed: 04/22/2020
12 GADSDEN INDUSTRIAL PARK, LLC v. UNITED STATES
GIP argues that the EPA prevented it from recovering
its full allotment of slag because, as the trial court found,
the EPA “embalm[ed] permanently” all material remaining
in the Eastern Excluded Property piles after concluding its
recovery operation. Appellant’s Resp. Br. 35 (quoting
Decision, 138 Fed. Cl. at 96). On this record, however, the
trial court’s finding is clearly erroneous.
The Court of Federal Claims did not cite any evidence
to support its finding that the remaining material was
“embalm[ed] permanently.”
Id. Indeed, the trial court
elsewhere noted that the EPA had not capped 7 the piles
after concluding its recovery operation.
Id. at 90. Nor did
GIP cite any evidence to support the trial court’s finding
that materials were “embalm[ed] permanently.” During
oral argument, counsel for GIP pointed to Mr. Casey’s
testimony that when the EPA contractors left the site, the
slag on the Eastern Excluded Property was “mixed with
trash and therefore is unusable.” Oral Arg. at 5:03–37,
30:44–31:01 (citing J.A. 265–66). In the same discussion,
however, Mr. Casey admitted that at the time of purchase,
the piles were “industrial landfills” into which the
bankrupt steel mill had deposited “about ten different
types of trash.” Trial Tr. 209:20–210:13. He further
testified that during the EPA’s recovery operation, the EPA
“took the slag and put it over with the trash that they
weren’t using from the north and south pile.”
Id.
Therefore, the trial court’s finding that the slag was
unusable after the EPA’s remediation project is belied by
the record.
7 During oral argument, counsel for GIP
acknowledged that the EPA never capped the piles. Oral
Arg. at 6:50–7:18, http://oralarguments.cafc.uscourts.gov
/default.aspx?fl=2018-2132.mp3. Counsel interpreted the
trial court’s use of the phrase “embalm[ed]” to mean that
the material was “unusable.”
Id.
Case: 18-2132 Document: 69 Page: 13 Filed: 04/22/2020
GADSDEN INDUSTRIAL PARK, LLC v. UNITED STATES 13
GIP’s argument that the finding was supported by the
trial judge’s firsthand observations during a site visit is
easily disposed of. Appellant’s Resp. Br. 7, 35. The trial
court’s opinion does not mention any site visit, let alone
rely on a site visit to support its finding that materials were
“embalm[ed] permanently.” The only discussions of a site
visit during trial do not mention “embalmed” material and
instead support the notion that recoverable material
remains on the Eastern Excluded Property. See, e.g., Trial
Tr. 1092:24–1093:4 (trial judge noting “[t]he piles have
been gone through since [the EPA contractors] left, and yet
what’s left seems to be a lot of ferrous kind of material
that’s magnetic”); Trial Tr. 1170:24–1173:15 (noting site
visit observation of leachate on the south Eastern Excluded
Property pile, and trial judge’s observation that the EPA’s
leftover material on a third pile was still adhering to a
magnet).
Additional witness testimony further supports the
notion that after the conclusion of the EPA’s remediation
project, the Eastern Excluded Property piles contained
recoverable material. For example, Mr. Brady, who
worked on the Eastern Excluded Property piles as a site
manager for an EPA contractor, testified that he was sure
that metal and a significant amount of slag remain in the
piles following the conclusion of the EPA’s remediation
project, and that he did not know of anything that would
prevent a party “willing to make the investment” from
“mining the rest of the material” in the piles. Trial
Tr. 1008:9–22. And a project manager for an EPA
contractor who worked on the Eastern Excluded Property
when the EPA began winding down its recovery operation
testified that at the end of the project, the EPA “just
ensur[ed] that the piles were rounded and that runoff
would go into the ditch.” Trial Tr. 894:1–12. We find no
record support for the trial court’s finding that material
was “embalm[ed] permanently” at the conclusion of the
EPA’s project.
Case: 18-2132 Document: 69 Page: 14 Filed: 04/22/2020
14 GADSDEN INDUSTRIAL PARK, LLC v. UNITED STATES
Because GIP has no claim to any particular subset of
slag on the Eastern Excluded Property and the trial court
erred in finding that the EPA somehow prevented GIP
from recovering its full allotment of slag, GIP cannot
establish a cognizable property interest in the slag that the
EPA recovered. Accordingly, we vacate the trial court’s
award of damages for 92,500 cubic yards of slag.
II
Regarding kish and scrap, GIP argues that the trial
court “was duty-bound to fashion an appropriate damage
award,” and “had no discretion to award zero damages as
just compensation” after it found that the kish and scrap
the EPA recovered had value. 8 Appellant’s Br. 38–40. But
“[o]nce a taking has been established, it is the
[property ]owner who bears the burden of proving an actual
loss has occurred.” Otay Mesa Prop., L.P. v. United States,
779 F.3d 1315, 1323 (Fed. Cir. 2015) (citing Bd. of Cnty.
Supervisors of Prince William Cnty. v. United States,
276 F.3d 1359, 1364 (Fed. Cir. 2002)). “To carry its burden,
the [property ]owner must show actual damages ‘with
reasonable certain[t]y,’ which ‘requires more than a guess,
but less than absolute exactness.’”
Id. (quoting Precision
Pine & Timber, Inc. v. United States,
596 F.3d 817, 833
(Fed. Cir. 2010)). We hold that the trial court in a takings
case is not obligated to fashion its own award when a
plaintiff has not provided evidence sufficient to determine
just compensation with reasonable certainty.
We find no takings cases—nor does GIP cite any—
supporting the notion that the trial court must fashion its
8 We agree with the trial court that GIP had a
cognizable property interest in all of the kish and scrap on
the Eastern Excluded Property. The Bill of Sale did not
limit the amounts of kish and scrap that GIP purchased.
J.A. 2586, 2612, 2639.
Case: 18-2132 Document: 69 Page: 15 Filed: 04/22/2020
GADSDEN INDUSTRIAL PARK, LLC v. UNITED STATES 15
own award in the absence of evidence sufficient to
determine an appropriate measure of just compensation
with reasonable certainty. The cases identified by GIP
merely stand for the proposition that the trial court has the
discretion to make its own findings on damages rather than
adopting in full either party’s damages theory.
GIP relies on Whitney Benefits, which cites Almota
Farmers for the proposition that “[w]hen private property
is taken for a public purpose, the Constitution requires the
taker to pay the owner ‘just compensation’ and imposes on
the court the duty of determining what compensation is
just.” Whitney Benefits, Inc. v. United States,
18 Cl. Ct.
394, 407 (1989) (emphasis added) (citing Almota Farmers
Elevator & Warehouse Co. v. United States,
409 U.S. 470
(1973)); see also Appellant’s Br. 25. As an initial matter,
we note that as a decision from the Claims Court, Whitney
Benefits is not binding authority on this court. See K-Con,
Inc. v. Sec’y of Army,
908 F.3d 719, 726 (Fed. Cir. 2018).
Additionally, Whitney Benefits did not address a situation
where the plaintiff had failed to prove just compensation
with reasonable certainty. Rather, the trial court in
Whitney Benefits largely adopted the plaintiffs’ just
compensation calculation, making modifications as it
deemed appropriate based on extensive evidence from both
parties regarding valuation of the subject property. 18 Cl.
Ct. at 407–16. Similarly, Almota Farmers does not obligate
a trial court to calculate just compensation. Rather,
Almota Farmers merely holds that, for just compensation
purposes, improvements to leasehold property should be
assessed at their fair market value in place on the
leasehold property over their useful life, without regard to
the remaining term of the
lease. 409 U.S. at 473. Nothing
in Almota Farmers suggests that the plaintiff did not
present sufficient evidence to allow the trial court to
determine just compensation with reasonable certainty.
GIP’s reliance on Otay Mesa for the same proposition is
similarly unavailing. In Otay Mesa, we affirmed the Court
Case: 18-2132 Document: 69 Page: 16 Filed: 04/22/2020
16 GADSDEN INDUSTRIAL PARK, LLC v. UNITED STATES
of Federal Claims’ independent formulation of a just
compensation award when it “was confronted with
conflicting evidence and relatively extreme valuations”
from the plaintiff and the
Government. 779 F.3d at 1326.
“We detect[ed] nothing inappropriate with the Court of
Federal Claims looking at the evidence as a whole and
using its own methodology to calculate a damages award.”
Id. We further noted “that it is both correct and important
for a trial court to use its flexibility to tailor a fair and
reasonable result based on the evidence it credits or rejects.”
Id. (emphasis added) (citing Precision
Pine, 596 F.3d at
832–33). GIP correctly notes that, in endorsing the trial
court’s use of its own methodology to determine just
compensation, we stated: “the [trial] court had few options
in determining a just compensation award other than
creating its own valuation.”
Id. But we did not hold that
the trial court must fashion its own award; rather, we held
that it may do so. Moreover, the Otay Mesa trial court had
sufficient record evidence to fashion an award that was
“within the range of credible testimony” and “reasonable on
the evidence.”
Id. at 1327. Contrary to GIP’s suggestion,
Otay Mesa did not hold that a trial court must fashion its
own just compensation award when not presented with
sufficient evidence to do so with reasonable certainty.
Consistent with these principles, the Court of Federal
Claims in this case acknowledged that it “may award
damages, even if [it] does not fully credit [a] party’s
methodology.”
Decision, 138 Fed. Cl. at 100 (quoting
Precision
Pine, 596 F.3d at 833). It found, however, that it
was “not given sufficient reliable proof of what a willing
buyer would have paid for the scrap and kish” to
independently determine a damages award.
Id. On this
record, the trial court did not err.
The trial court found Mr. Gleason’s calculations
unreliable due to his reliance on what it deemed ill-founded
assumptions to calculate avoided costs and his use of an
inflated June 2008 sales price to calculate revenues for
Case: 18-2132 Document: 69 Page: 17 Filed: 04/22/2020
GADSDEN INDUSTRIAL PARK, LLC v. UNITED STATES 17
material sold later. We cannot say that the Court of
Federal Claims erred in these findings. On this record, a
reasonable fact finder may well have been able to
approximate the revenues from sales of kish and scrap
using a more accurate methodology not presented by
Mr. Gleason. But there is little in the record to allow any
calculation with reasonable certainty of GIP’s avoided
costs, a critical component of the just compensation
calculation under both a fair market value theory and a lost
profits theory.
The only evidence GIP offered to prove just
compensation was Mr. Gleason’s testimony regarding his
calculations based on the non-finalized Watkins
agreement. The record also contained evidence of the EPA
contractors’ recovery costs. It was not unreasonable for the
trial court to conclude that neither provided sufficient
evidence to calculate just compensation with reasonable
certainty.
The trial court reasonably found that certain
assumptions underlying Mr. Gleason’s avoided costs
calculations rendered them unreliable. By crediting the
oral addendum to the Watkins agreement, Mr. Gleason
assumed Watkins would willingly provide GIP with free
labor to recover any material from the piles which GIP
could not sell for a profit. The trial court did not err in
finding this assumption unreasonable. Mr. Gleason also
assumed that Watkins would process the same amount of
material at the same capacity as the EPA contractors
regardless of market prices. Mr. Gleason thus essentially
discarded the provision allowing Watkins to walk away if
the agreement became unprofitable, thereby shifting all
the risk of a drop in prices to Watkins while assuming
Watkins would complete the contract. Trial Tr. 1247:14–
1248:18, 1330:7–18. The trial court did not err in finding
this second assumption unreasonable.
Case: 18-2132 Document: 69 Page: 18 Filed: 04/22/2020
18 GADSDEN INDUSTRIAL PARK, LLC v. UNITED STATES
Further undermining Mr. Gleason’s avoided costs
calculations, the evidence does not support the notion that
Watkins had the same capacity to process material as the
EPA contractors. Watkins thought it would take at least
ten years to process the piles, while the EPA contractors
processed half the piles in approximately four years. Trial
Tr. 384:8–13, 545:3–18; J.A. 3094 ¶ 16. And if Watkins
processed the minimum tonnage required under the
Watkins agreement, it would take Watkins around forty
years to process the same amount of material that the EPA
contractors processed in approximately four years. Trial
Tr. 1312:1–14. Mr. Gleason acknowledged that if it took
Watkins longer to process the piles, there would be a longer
period of discounting for his fair market valuation,
resulting in reduced value for the same volume of material.
See Trial Tr. 1353:8–1354:17. Nonetheless, Mr. Gleason
assumed that Watkins would follow the same material
processing schedule as the EPA contractors, at around a
third of their costs. Trial Tr. 1247:14–1248:18, 1258:4–6,
1330:7–18. The trial court did not err in finding this
assumption unreasonable.
Mr. Gleason also did not account for additional costs
GIP would have incurred had it run its own recovery
project, such as those associated with supervising the
Watkins operation and loading, marketing, and selling
recovered material. Trial Tr. 1257:12–1258:3, 1349:19–
1350:16. The trial court did not err in noting this
deficiency.
With respect to evidence of the EPA contractors’ costs,
even GIP concedes that they are not an appropriate proxy
to assess GIP’s avoided costs. Mr. Gleason testified that
the EPA and GIP ran “two totally different operations” on
the Eastern Excluded Property with “different activities,
different goals, [and] objectives,” and “that account for
different costs.” Trial Tr. 1299:20–1300:9. It was therefore
reasonable for the trial court to conclude that neither the
Case: 18-2132 Document: 69 Page: 19 Filed: 04/22/2020
GADSDEN INDUSTRIAL PARK, LLC v. UNITED STATES 19
Watkins agreement nor the EPA contractors’ costs
provided competent evidence of GIP’s avoided costs.
As the Court of Federal Claims recognized,
Mr. Gleason’s calculations arbitrarily lowered GIP’s
avoided costs at every turn. At a minimum, Mr. Gleason’s
unreliable calculations left open too many variables for the
trial court to resolve on its own with reasonable certainty
based on the evidence available. Left without competent
evidence relating to a critical component of the damages
calculation, the trial court did not err in determining that
that it could not independently fashion a just compensation
award. We therefore affirm the trial court’s award of zero
damages for the Government’s taking of kish and scrap.
CONCLUSION
We have considered the parties’ remaining arguments
and do not find them persuasive. For the foregoing
reasons, we reverse the Court of Federal Claims’ decision
that GIP had a cognizable property interest in the slag
recovered by the EPA, vacate the trial court’s award of just
compensation for 92,500 cubic yards of slag, and affirm the
trial court’s award of zero just compensation for kish and
scrap.
AFFIRMED-IN-PART, REVERSED-IN-PART, AND
VACATED-IN-PART
COSTS
No costs.
