FREEDOM BUNKER DAILY May 31, 2019
The Supreme Court is now considering whether it wants to review Love Terminal Partners v. United States, an important takings case decided by the Federal Circuit last year. The odds against any given case being taken by the Court are almost always high. But I hope this one beats them. If allowed to stand, the Love Terminal ruling would have dangerous implications for many future cases involving takings claims against the federal government. NYU/University of Chicago law professor Richard Epstein—probably the nation's leading takings scholar—has a good description of the somewhat convoluted facts of the case:
The deregulation movement of the late 1970s had its intended consequence of hastening competition among airlines. But it also created a backlash in one market, Dallas-Fort Worth, located in the backyard of [future] Speaker of the House Jim Wright. Wright feared that vigorous competition to the new Dallas/Fort Worth airport (DFW) would come from the Love Field airport, the home of the upstart Southwest Airlines, which was now poised for the first time to expand operations into the interstate market. Wright thought that flights from Love Field would reduce the air traffic at DFW, which in turn would reduce the revenues needed to fund the debt service on DFW bonds. So in 1979, he induced Congress to pass the Wright Amendment, which perversely restricted all flights out of Love Field outside of Texas and four contiguous states—Arkansas, Louisiana, New Mexico, and Oklahoma—to aircraft that had 56 or fewer seats….
By 2004, Southwest mounted an effective campaign to "free Love Field," which prompted American Airlines to make Southwest an offer it could not refuse. Both companies, the two airlines concluded, would be better off by cartelizing the market by dividing a limited number of gates at Love Field and DFW between them. In order to put this plan into action, however, the two airlines, the DFW Airport Authority, and the two cities (Dallas and Fort Worth) had to reduce the capacity of Love Field. They decided to do so by getting rid of twelve state-of-the-art gates—six at the main terminal and six on Lemmon Avenue—serving Love Field, which were owned by the company Love Terminal Partners (LTP). Flights from these gates could crater the American/Southwest alliance. So these five parties (Southwest, American Air, Dallas, Fort Worth, and DFW) prevailed on Congress in October 2006 to pass the Wright Amendment Reform Act (WARA) which provided that "The City of Dallas shall reduce as soon as practicable, the number of gates available for passenger air service at Love Field to no more than 20 gates. Thereafter, the number of gates available for such service shall not exceed a maximum of 20 gates." And shortly thereafter, Dallas condemned LTP's gates and promptly razed them. That's one way to ground the competition.
Sadly, an antitrust suit that LTP filed against the Five Parties Agreement was blocked on the ground that those laws were overridden when Congress blessed the deal under WARA. At this point, LTP had only one option, which was to seek just compensation for its demolished gates. In two careful opinions, in 2011 and 2016, Judge Margaret Sweeney in Federal Claims Court awarded LTP $133.5 million for the physical destruction of the gates. But LTP's case then crashed unexpectedly on appeal when, in 2018, Judge Timothy Dyk of the Federal Circuit upended the entire operation. Judge Dyk insisted that zero compensation was required for the simple reason that LTP could not prove that the gates in question had any market value prior to their destruction: No party is entitled to compensation for the destruction of worthless property.
As Epstein and others point out, the Federal Circuit decision sets a dangerous precedent in two ways. First, the main reason why Judge Dyk concludes that LTP's property rights had no value is that it was not making a profit at the time of the taking. But that ignores the fact that property that isn't making any profit at time X still has value because it might become profitable in the future. There was good reason to think that the gates owned by LTP would become more profitable over time. As Epstein points out, "we know that the zero valuation put on the property by Judge Dyk has to be wrong, because if the Lemmon Avenue gates were worthless, why would the five parties secure the passage of WARA to authorize their destruction?" LTP's competitors wanted the gates destroyed precisely because they did have value: as potential competition for other airport facilities in the area.
More:
https://freedombunker.com/2019/05/31/the-supreme-court-should-take-the-love-terminal-takings-case/
