McGuire v. U.S.
Ninth Circuit Court of Appeals Case No. 06-15812
December 24, 2008
The Facts and the Case Below
The Chapter 11 debtor, a farmer named McGuire, filed an inverse condemnation action against the United States for $2 million in compensation for the Bureau of Indian Affairs ("BIA") dismantling a bridge over a canal, which prevented him from having access to a large portion of a parcel of land he had leased earlier from an Indian tribe with the approval of the BIA. (Inverse condemnation is "the taking of property by a government agency which so greatly damages the use of a parcel of real property that it is the equivalent of condemnation of the entire property.")
The bankruptcy court held, in denying the government's motion to dismiss the case on sovereign immunity grounds, that 1) the Tucker Act, 28 U.S.C. § 1491, waived governmental immunity; 2) the bankruptcy court "should maintain jurisdiction of the action in the interests of judicial economy and not unduly burdening McGuire," and 3) the proceeding was not a "core proceeding" and so it needed to report its findings and recommendations to the district court for action. Accordingly, the district court reviewed the bankruptcy court's findings and recommendations and denied the government's motion to dismiss and remanded to the bankruptcy court for trial.
After trial the bankruptcy court "found that the United States had committed a regulatory taking of McGuire’s leasehold interest and recommended an award of $1,132,059.60 in damages." The district court agreed that there had been a taking, but "that McGuire's claim was not ripe for review because the government never denied an application for a permit to construct a new bridge." McGuire appealed.
Ripeness
The Ninth Circuit panel overturned the district court saying: "we hold that McGuire’s takings claim is ripe because he sufficiently complied with the permitting system as practiced by the BIA." Although the pertinent BIA regulations prescribed a permitting procedure which McGuire had not completely followed, he had followed the "prevailing practice," as had been established at trial, and "tried a variety of additional strategies to maintain access to the Leased Property." "In short, McGuire did everything reasonably within his power to prevent removal of the bridge and, when those efforts proved ineffective, to build a new one."
Sovereign Immunity and Bankruptcy/District Court Jurisdiction: The Tucker and Little Tucker Acts
The United States must have expressly waived its sovereign immunity in order for an action to be maintained against it. The "two principal federal statutes authorizing suit against the United States [are] the Tucker Act and the Little Tucker Act."
These two acts waive sovereign immunity, as specified within each. The Tucker Act states:
If Sovereign Immunity Prevented Jurisdiction, Why Resolve Ripeness Issue?
In a footnote the Ninth Circuit Panel explained this question as follows:
Even though the Ninth Circuit held that the Court of Federal Claims must resolve the merits of McGuire's takings claim, this claim is an asset in his Chapter 11 case over which the bankruptcy court retains jurisdiction.
Dismissal or Transfer?
Given the uncontested district court jurisdiction over the bankruptcy, coupled with authority from the Federal Circuit Court of Appeals [through the opinion Quality Tooling v. United States, 47 F.3d 1569 (Fed. Cir. 1995)] indicating that the district court had jurisdiction over the Tucker Act claim, we conclude it would be in the interest of justice to transfer the action to the Court of Federal Claims, rather than dismissing it.
The bankruptcy court held, in denying the government's motion to dismiss the case on sovereign immunity grounds, that 1) the Tucker Act, 28 U.S.C. § 1491, waived governmental immunity; 2) the bankruptcy court "should maintain jurisdiction of the action in the interests of judicial economy and not unduly burdening McGuire," and 3) the proceeding was not a "core proceeding" and so it needed to report its findings and recommendations to the district court for action. Accordingly, the district court reviewed the bankruptcy court's findings and recommendations and denied the government's motion to dismiss and remanded to the bankruptcy court for trial.
After trial the bankruptcy court "found that the United States had committed a regulatory taking of McGuire’s leasehold interest and recommended an award of $1,132,059.60 in damages." The district court agreed that there had been a taking, but "that McGuire's claim was not ripe for review because the government never denied an application for a permit to construct a new bridge." McGuire appealed.
Ripeness
The Ninth Circuit panel overturned the district court saying: "we hold that McGuire’s takings claim is ripe because he sufficiently complied with the permitting system as practiced by the BIA." Although the pertinent BIA regulations prescribed a permitting procedure which McGuire had not completely followed, he had followed the "prevailing practice," as had been established at trial, and "tried a variety of additional strategies to maintain access to the Leased Property." "In short, McGuire did everything reasonably within his power to prevent removal of the bridge and, when those efforts proved ineffective, to build a new one."
Sovereign Immunity and Bankruptcy/District Court Jurisdiction: The Tucker and Little Tucker Acts
The United States must have expressly waived its sovereign immunity in order for an action to be maintained against it. The "two principal federal statutes authorizing suit against the United States [are] the Tucker Act and the Little Tucker Act."
These two acts waive sovereign immunity, as specified within each. The Tucker Act states:
The United States Court of Federal Claims shall have jurisdiction to render judgment upon any claim against the United States founded either upon the Constitution, or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort.The Little Tucker Act is for smaller claims against the U.S. and allows for concurrent district court jurisdiction over
[a]ny . . . civil action or claim against the United States, not exceeding $ 10,000 in amount, founded either upon the Constitution, or any Act of Congress, or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort.The Court concluded:
Read together, these statutes provide for jurisdiction solely in the Court of Federal Claims for Tucker Act claims seeking more than $10,000 in damages, and concurrent district court jurisdiction over claims seeking $10,000 or less.But the Ninth Circuit panel also noted that the "statutory basis for federal district court jurisdiction in this case is founded not on the Tucker Act, but on the Bankruptcy" statutes. 28 U.S.C. § 1334(b) provides that
. . . .
McGuire’s takings claim falls within the scope of the Tucker Act. A takings claim is the type of claim founded on the Constitution for which the Tucker Act grants jurisdiction in the Court of Federal Claims.
. . . .
McGuire claimed $2,000,000 in damages, well in excess of the $10,000 jurisdictional amount. Thus McGuire could have brought his takings claim in the Court of Federal Claims.
. . . notwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.But while this provision gives the district court jurisdiction, "there is no corresponding statute that provides a waiver of sovereign immunity." As a result, the Tucker Act's provision for the Court of Federal Claims makes it "the proper court to entertain the merits of McGuire's takings claims."
If Sovereign Immunity Prevented Jurisdiction, Why Resolve Ripeness Issue?
In a footnote the Ninth Circuit Panel explained this question as follows:
Although we conclude in Section II that sovereign immunity barred the district and bankruptcy courts from hearing the merits of the claim, we reach the question of ripeness because we consider it a predicate to transferring the case to the Court of Federal Claims.Continued Bankruptcy/District Court Role in spite of Lack of Jurisdiction over Takings Claim
. . . .
[J]udicial economy and courtesy to transferee courts dictates that we resolve threshold issues first before invoking the transfer statute.
Even though the Ninth Circuit held that the Court of Federal Claims must resolve the merits of McGuire's takings claim, this claim is an asset in his Chapter 11 case over which the bankruptcy court retains jurisdiction.
Dismissal or Transfer?
Given the uncontested district court jurisdiction over the bankruptcy, coupled with authority from the Federal Circuit Court of Appeals [through the opinion Quality Tooling v. United States, 47 F.3d 1569 (Fed. Cir. 1995)] indicating that the district court had jurisdiction over the Tucker Act claim, we conclude it would be in the interest of justice to transfer the action to the Court of Federal Claims, rather than dismissing it.
by: Andrew Toth-Fejel
Bankruptcy Litigation Support for Attorneys
Andy@BLSforAttorneys.com
Please note that this writer is not licensed to practice law in Oregon. This means that he is not legally permitted to give any legal advice or provide and legal services. This Bulletin and the entire contents of this website is written only for attorneys. and is not intended for the public. If any non-attorney is reading this, you must consult an attorney about ANYTHING you read here. Nothing in this website is intended to be nor should be read as being legal advice to anyone.
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