Federal Circuit Affirms Missouri River Restoration is Per Se Taking of Farmland

On June 16, 2023, the Federal Circuit for the Court of Appeals affirmed that the U.S. Army Corps of Engineers’ work to restore the Missouri River to its natural condition caused intermittent flooding and constituted a per se taking of farmland. The court determined that because the intermittent flooding would continue into the future, it was a permanent flowage easement and therefore a taking. The court also reversed the trial court’s denial of damages for destroyed crops. It held that lost crops were not a consequential damage of the taking, but a separate compensable property interest. 

Background

Under the Flood Control Act of 1944 (FCA), the U.S. Army Corps of Engineers (the Corps) began making modifications to the Missouri River to control the river and allow use of the flood plain. Pub. L. No. 78-534, 58 Stat. 887 (codified at 33 U.S.C. § 701 et seq.). The Corps completed the reservoir system in 1967. The plan had its intended effect. By March 2005, 95 percent of the floodplain was developed for agricultural, urban, and industrial uses. The Corps management system, however, prioritized flood control and recreation over wildlife. Although these modifications allowed substantially all the Missouri River’s floodplain to be developed, they also eliminated the habitat of certain endangered species. Realizing the environmental impact of the plan, in 1986, Congress authorized the Corps to purchase land adjacent to the River to recreate lost habitats.

In 2000, the Fish and Wildlife Service (FWS) issued a biological opinion (BiOp) recommending several changes to comply with the Endangered Species Act. The Corps, believing that these changes would increase the risk of flooding, declined. Litigation ensued and the Corps created the 2004 Master Manual to comply with a court order. In re Operation of Mo. River Sys. Litig., 305 F. Supp. 2d 1096, 1099 (D. Minn. 2004). The 2004 Master Manual no longer ranked priorities and implemented changes (2004 Changes) intended to “restor[e] the Missouri River to a more natural state.”

Procedural History

In 2014, 372 plaintiffs brought suit claiming that the 2004 Changes caused frequent and severe flooding on their farms between 2007 and 2014 that amounted to permanent, physical takings under the Fifth Amendment. The Court of Federal Claims split the action into two phases. In Phase I, it determined that 28 out of the 44 “bellwether” plaintiffs established that the 2004 Changes caused the flooding, the flooding was foreseeable, and that the flooding was severe enough to be a taking. Ideker Farms, Inc. v. United States, 136 Fed. Cl. 654 (2018).

During Phase II, the trial court awarded damages to three representative plaintiffs for diminution in property value. It also awarded severance damages for costs incurred to mitigate damages caused by the taking. Ideker Farms, Inc. v. United States, 151 Fed. Cl. 560, 567 (2020). However, the trial court determined that any crops destroyed were consequential damages and, thus, denied the plaintiffs’ request for compensation. Both parties appealed.

Claim Accrual and the Statute of Limitations

On appeal, the Corps argued that the lower court lacked jurisdiction. The Corps claimed that plaintiffs’ claims accrued in 2007 and were, therefore, barred by the applicable six-year statute of limitations. 28 U.S.C. § 2501. The Corps also claimed the lower court’s December 31, 2014, accrual date was arbitrary. The Federal Circuit rejected both arguments.

A claim accrues “when all the events have occurred which fix the liability of the Government” and the plaintiff “was or should have been aware” that the claim existed. Goodrich v. United States, 434 F.3d 1329, 1333 (Fed. Cir. 2006). Under the stabilization doctrine, a plaintiff may postpone litigation until “the situation becomes stabilized” and the final damages can be ascertained.

Here, the events “which fixed the liability of the Government” were not immediate, but instead occurred gradually through recurring flooding. Furthermore, these events were ongoing because the Corps continued to make modifications to the Missouri River through 2014. As a result, the Federal Circuit affirmed that the lower court correctly applied the stabilization doctrine.

The Federal Circuit also affirmed that the Corps failed to establish that the plaintiffs should have been aware of their claims by 2007. The plaintiffs had no reason to know what caused the flooding or scope of the damages until experiencing several years of flooding. Additionally, the December 31, 2014, accrual date was not arbitrary “given the complex nature of the flooding, its effects here, the relevant time period, and the time Plaintiffs needed to consult experts to establish causation.”

The Fifth Amendment Takings Clause

The Takings Clause of the Fifth Amendment prohibits the government from appropriating private property for public use without just compensation. U.S. Const. amends. V, XIV. In Arkansas Game & Fish Comm'n v. United States, the Supreme Court established a five-factor test to determine whether government actions causing temporary, intermittent flooding constituted a taking or a trespass. See 568 U.S. 23 (2012). The Court of Federal Claims applied the Arkansas Game & Fish factors to determine that the Corps committed a taking.

On appeal, the Federal Circuit disagreed with the lower court’s use of the multi-factor test. In Arkansas Game & Fish, government action caused temporary, intermittent flooding. Here, the Corps “has not ceased and does not plan to cease flooding Plaintiffs’ lands.” Because it was foreseeable that the 2004 Changes would continue to cause intermittent flooding into the future, a permanent taking occurred. The fact that the flooding is intermittent, as opposed to continuous, is only relevant when determining the amount of compensation, not whether a taking occurred.

Thus, the court concluded it was “clear enough” that a permanent flowage easement is a per se taking, not a trespass.

Causation

On appeal, the Corps also argued that the district court erred in determining that the 2004 changes caused the damages to the plaintiffs’ farms. The Corp argued that when making this determination, the court should have compared the current state of the Missouri River to the state of the river before the Corps made any changes in order to “consider both [flood] risk-increasing and [flood] risk decreasing government actions.” In short, the Corps argued that because it had mitigated the risk of flood damage at one point it may later increase the chance of flooding.

However, when determining causation courts will only consider actions which mitigate flood risks when the flood increasing action was contemplated at the time of the flood risk reducing action. John B. Hardwicke Co. v. United States, 467 F.2d 488, 490–91 (Ct. Cl. 1972). The Corps argued that because it provided flood protection an “eventual return to the pre-project status quo” must be contemplated. 

The court disagreed, finding that this would be unfair and inequitable. Additionally, the Corps prioritized flood control under the 1944 FCA. Thus, the 2004 Changes were not within the scope of the original project. In conclusion, although the Corps increased the plaintiffs’ property value through its original modifications, it cannot later take the property through the 2004 Changes without providing compensation.

Compensation for Crop Damage

The plaintiffs also cross-appealed the district court’s order denying their claim for crop damages. Consequential damages, such as lost profits or the cost of moving into a new building, are not within the scope of the Fifth Amendment and therefore are not compensable.

The Federal Circuit Court of Appeals held that the destroyed crops were a direct result of the permanent flowage easement. The court held that this differed from a claim of lost revenue. Because the Corps appropriated two distinct property interests, it must provide compensation for both. The Federal Circuit remanded to the trial court to calculate the value of the immature crops.