Federal Circuit's Economic Failings Undo the Penn Central Test

• Date: 01 September 2010

40 ELR 10914 ENVIRONMENTAL LAW REPORTER 9-2010

Federal Circuit’s

Economic Failings

Undo the Penn

Central Test

by William W. Wade, Ph.D.

William W. Wade is a resource economist with the rm

Energy and Water Economics, Columbia, Tennessee.

Editors’ Summary

Faulty understanding of standard economic and nan-

cial analysis within regulatory takings cases continues

to set this jurisprudence apart from standard tort cases,

where state of the art economic methods typically are

applied within both liability and damages phases of

the trial. Clear examples of economic nonsense can be

found in three recent decisions by the U.S. Court of

Appeals for the Federal Circuit that ignored competent

economic evidence within the Penn Central test to over-

turn temporary takings decisions. e Federal Circuit’s

ip-op between its 2003 decision in Cienega Garden

VIII and its more recent decisions in Cienega Gardens X,

Rose Acre Farms, and CCA reveals both misapplication

of “parcel as a temporal whole” from Tahoe Sierra, a

Lucas case, to Penn Central cases and faulty use of valu-

ation methods appropriate for real property to evaluate

the severity of economic impact of temporary business

income losses.Confused legal theories cannot be shoe-

horned into standard economic methods essential to

evaluate the Penn Central test.

I. Progeny of Cienega X Supplant Standard

Economic Methods With Confused Legal

Theories

irty years a fter Justice William J. Brennan’s decision in

Penn Central,1 the federal circuit created an economic tsemi-

sht of the Penn Central test in its Cienega X decision.2 Prog-

eny of Cienega X demonstrate that faulty legal theories of

economics developed in Cienega X should not displace well-

established economic theories of measuring and benchmark-

ing nancial losses. is Article takes a meta-look at recent

federal circuit and federal claims court decisions to reveal

that confused legal theories cannot be shoehorned into stan-

dard economic methods essential to evaluate the Penn Cen-

tral test.3

Progeny of Cienega X at issue are:

   (Rose Acre Farms

VI)4;

 5; and

 .6

An earlier Article by the author details the economic fail-

ings of Cienega X7; a recent Article explains the deciencies of

Rose Acre Farms’ analytic approaches to Cienega X’s Penn Cen-

tral test.8 Reliance on diminution in value of property in lieu

of loss of income led each of the federal circuit decisions astray.

Not surprisingly, CCA Associates’ post-trial memoran-

dum put the court on notice that they were playing under

protest of the Cienega X Penn Central rules.

1. Penn Cent. Transp. Co. v. New York City, 438 U.S. 104, 8 ELR 20528 (1978).

2. Cienega Gardens v. United States (Cienega X), 503 F.3d 1266 (Fed. Cir. 2007).

“Tsemisht,” or “simist,” is Yiddish for confused, befuddled, mixed up.

3. Penn Cent., 438 U.S. at 124. To establish a regulatory taking, a plainti must

provide evidence regarding: (1)the regulation’s economic impact on the claim-

ant; (2)the extent to which the regulation has interfered with distinct invest-

ment-backed expectations (DIBE); and (3) the character of the government’s

actions. e court must then balance these factors in some manner. Id.

4. 559 F.3d 1260, 39 ELR 20058 (Fed. Cir. 2009), cert. denied, 130 S. Ct. 1501

(2010).

5. 91 Fed. Cl. 580 (2010), appeal docketed (Fed. Cir. July 19, 2010).

6. 284 Fed. Appx. 810, 811 (Fed. Cir. 2008).

7. William W. Wade, 

Approaches to the Penn Central Test in Temporary Takings, 38 ELR 10486 (July

2008).

8. See William W. Wade, Penn Central’s Ad Hocery Yields

Inconsistent Takings Decisions, 42 U. L. (forthcoming 2010).

        

     

Rhode Island, June 2004. He has testied on economic elements

          

        

    

       

the author’s.

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