The Roundtable joined other business groups in an amicus brief requesting that the U.S. Supreme Court accept the Love Terminal Partners, LP vs. United States case, to address whether income-producing property must turn a profit to support a constitutional takings claim.
Our brief maintains that courts should establish an important property rights case law principle – namely, that government regulators cannot evade a Fifth Amendment takings claim simply because private property does not generate positive cash flow at the start of a business venture.
The Supreme Court will decide whether to accept Love Terminal later in 2019.
The Roundtable will continue to assess worthy opportunities for amicus participation to establish important judicial precedent for the commercial real estate sector.
- In Love Terminal Partners, LP v. United States, developers and investors acquired rights to construct and provide flight service from a passenger terminal at Love Field airport near Dallas, Texas. The venture never proved profitable. The U.S. Congress subsequently codified a third-party agreement between affected cities, airlines, and the DFW airport regarding interstate air travel to and from the Dallas area. The Love Terminal investors were not a party to that agreement, which gave the City of Dallas authority to demolish their terminal. The agreement also provided the terminal could “never” be used for passenger service.
- The Love Terminal owners thereafter sued the U.S. government for a Fifth Amendment property “taking” by effectuating the agreement in federal law. At trial, the land owners won a $133.5 million “just compensation” award. On appeal, however, the Federal Circuit reversed and entirely erased the trial court’s award. The Love Terminal property owners thus requested the U.S. Supreme Court to hear the case. The coalition supported that petition today with its amicus brief.
- Prior Supreme Court precedents determine whether a taking has occurred under these circumstances. Penn Central (1978) considers the economic impact of land-use regulation, and whether the investor has reasonable investment expectations in the property. Lucas (1992) establishes a “categorical” rule that a taking occurs when government regulations completely “wipe-out” the property’s economic uses. “[T]his case presents an opportunity … to lay down the law—for the sake of consistency in both Penn Central and Lucas cases—when assessing fair market value for a property that is alleged to have prospective economic value for the buyer,” the brief explains.
- Notably, the case addresses whether income producing property needs to turn a profit to support a takings claim. In deciding no taking occurred, the intermediate appeals court stressed that revenue never exceeded the owner’s carrying costs. The amicus brief takes issue with that finding. It states: “By that standard virtually all start-up companies and development projects would be vulnerable because it often takes years to begin turning a profit on a new venture …. [I]t is improper to ignore the economic realities driving business decisions to invest in a property that will prove profitable in the future.”
- The brief continues: “Entrepreneurs and business investors typically have a long-term strategy, which assumes a return on investment over an extended period of time. This is especially true for home builders and commercial developers because they bear major upfront financial burdens before they can ever hope to turn a profit …. [I]t is simply wrong to say that negative cash-flow equates to zero value. Negative cash-flow is commonly an accepted cost of doing business in the beginning of a new venture.”
Senior Vice President & Counsel