[00:00:00] Speaker ?:
Okay.

[00:00:23] Speaker 06:
You're going to have to express yourself in a different way.

[00:00:53] Speaker 06:
Thank you very much.

[00:01:19] Speaker 06:
Thank you.

[00:01:30] Speaker 06:
Thank you.

[00:01:52] Speaker ?:
Thank you.

[00:01:53] Speaker 06:
Thank you.

[00:02:21] Speaker 06:
Thank you very much.

[00:02:41] Speaker 06:
Thank you.

[00:02:58] Speaker 06:
And if anybody has a question, how can we help?

[00:03:16] Speaker 06:
Yes, sir.

[00:03:33] Speaker 06:
All right.

[00:03:51] Speaker 06:
I'm going to turn the black one to white.

[00:04:11] Speaker 06:
I'm going to turn the red one to white.

[00:04:12] Speaker 06:
Then I made another line up in the right corner for you.

[00:04:40] Speaker 06:
Thank you.

[00:04:58] Speaker 06:
.

[00:05:24] Speaker ?:
.

[00:05:24] Speaker ?:
.

[00:05:29] Speaker 06:
Alright.

[00:05:47] Speaker ?:
The United States Court of Appeals for the Federal Circuit is now open and in session.

[00:05:54] Speaker 06:
Scott, save the United States as an honorable court.

[00:06:00] Speaker 00:
Good morning, ladies and gentlemen.

[00:06:06] Speaker 00:
We have four argued cases this morning.

[00:06:09] Speaker 00:
The first case before us is Rasmussen v. United States, docket number 145089.

[00:06:17] Speaker 00:
Mr. Littleton, it's my understanding that you want to reserve five minutes for rebuttal, is that correct?

[00:06:25] Speaker 00:
That's correct, Your Honor.

[00:06:26] Speaker 00:
Okay.

[00:06:26] Speaker 00:
You may proceed.

[00:06:32] Speaker 05:
Good morning, Your Honor.

[00:06:33] Speaker 05:
I'm Matt Littleton, representing the United States.

[00:06:36] Speaker 05:
May it please the Court, in this appeal, we ask this Court to uphold the fundamental legal principle that landowners in takings cases must be placed in the exact same financial position they would have occupied had the takings not occurred.

[00:06:51] Speaker 05:
Had the takings not occurred here, Union Pacific Railroad Company's legal easement rights would have reverted to plaintiffs.

[00:06:58] Speaker 05:
But neither Union Pacific nor the federal government

[00:07:01] Speaker 05:
would have been obligated to demolish the abandoned rail line or restore it to the condition of the surrounding farmland.

[00:07:08] Speaker 03:
There's no disagreement on that proposition, is there?

[00:07:10] Speaker 05:
I don't believe so, Your Honor.

[00:07:13] Speaker 05:
I don't think so either.

[00:07:15] Speaker 05:
That was not part of the bargain that plaintiff's predecessors in interest struck in the 19th century when they granted easement rights to the railroad.

[00:07:23] Speaker 05:
However, the Court of Federal Claims in this case valued the property in question as though

[00:07:28] Speaker 05:
Union Pacific or the federal government would have done that, leaving the plaintiffs with vacant farmland.

[00:07:34] Speaker 05:
And that was legal error.

[00:07:36] Speaker 05:
It was not harmless, because all of the witnesses at trial, including all of plaintiffs' witnesses, acknowledged that it would have an impact on the value of property, the value of farmland property, if there was an abandoned rail line running through it.

[00:07:49] Speaker 03:
What if they testified it would have an impact, or whether they would consider whether it had an impact?

[00:07:53] Speaker 05:
So there was a testimony from-

[00:07:58] Speaker 03:
nitpicking, but I thought the testimony was that any reasonable buyer would look at the condition of the property before they pulled out their checkbook.

[00:08:07] Speaker 05:
Well, that was certainly the testimony on all counts.

[00:08:12] Speaker 05:
Plaintiff's experts, however, went further.

[00:08:13] Speaker 05:
For example, Mr. Hodge, plaintiff's auxiliary expert, said that in fact it would lower the fair market value.

[00:08:20] Speaker 05:
Now, we can argue about how much

[00:08:22] Speaker 03:
But that's something the trial court didn't... Well, it may end up in being, in essence, like a peppercorn here.

[00:08:27] Speaker 03:
You're arguing for the principle.

[00:08:29] Speaker 05:
We're certain, yes.

[00:08:30] Speaker 05:
We're arguing for the principle, and it's something that the trial court must consider.

[00:08:34] Speaker 00:
There was, in fact, testimony that it wouldn't actually cost very much, right?

[00:08:39] Speaker 05:
There was testimony from...

[00:08:41] Speaker 05:
So plaintiff's appraiser didn't engage in this issue at all.

[00:08:44] Speaker 05:
He said that because of instructions from plaintiff's counsel, he didn't address the question.

[00:08:49] Speaker 03:
What was the nature of that instruction of the counsel?

[00:08:51] Speaker 03:
I couldn't find anything in the record.

[00:08:54] Speaker 03:
Was that on the record what the counsel said to the witness?

[00:08:58] Speaker 05:
No, Your Honor.

[00:08:58] Speaker 05:
It was unclear at trial exactly what they'd been instructed.

[00:09:01] Speaker 05:
It should have appeared in plaintiff's appraiser's report.

[00:09:04] Speaker 05:
However, it was not reported there.

[00:09:06] Speaker 05:
All that we know is on page 7721,

[00:09:09] Speaker 05:
A7721, you see plaintiff's appraiser's report which says, contrary to fact, this report presumes that the physical remnants of the railway would not have a negative impact.

[00:09:20] Speaker 05:
So that alone suggests that there would be an actual reduction in fair market value because of the presence of these remnants.

[00:09:29] Speaker 05:
However, plaintiff's appraiser testified that he did not consider it because he was instructed

[00:09:36] Speaker 05:
in a way that he was not to.

[00:09:39] Speaker 00:
Is this really a legal issue?

[00:09:40] Speaker 00:
I mean, you argue that it's a legal issue we should review de novo, but couldn't you characterize what the Court of Federal Claims did as simply accept the testimony of the landowner's appraiser as what would be an appropriate approach by an appraiser in this case?

[00:09:59] Speaker 05:
First of all, so there are two parts to that question.

[00:10:02] Speaker 05:
Your Honor, we think it is a legal issue because it goes to the nature of an easement.

[00:10:06] Speaker 05:
and easement is an intangible legal interest that does not obligate the easement holder to restore pre-easement conditions upon abandonment.

[00:10:13] Speaker 05:
So that's really a legal question.

[00:10:15] Speaker 05:
On the testimony issue, the testimony cited by the trial court was mostly from Mr. Stille, who was a plaintiff farmer who testified only on rebuttal.

[00:10:26] Speaker 05:
He was a lay witness, testified as to whether and how he would have reclaimed the property, but he also testified that there would be reclamation costs

[00:10:35] Speaker 05:
he hadn't calculated how much they would be.

[00:10:37] Speaker 05:
And he only testified with respect to his own property as opposed to all of the various properties in this case.

[00:10:42] Speaker 03:
Wouldn't there be testimony that in previous takings cases the government hasn't objected to the methodology that was used here?

[00:10:48] Speaker 05:
There was testimony from the plaintiff's auxiliary experts on that point.

[00:10:51] Speaker 05:
However, as the trial court noted at page A24, note 21, the government objected to that testimony, that methodology in prior cases.

[00:11:00] Speaker 05:
And in any event, it's irrelevant because all of those cases

[00:11:03] Speaker 03:
Was this an outlier case?

[00:11:05] Speaker 03:
I mean, why hasn't this come up before?

[00:11:07] Speaker 03:
Your Honor.

[00:11:08] Speaker 03:
Just from the perspective of your brief, it's just a no-brainer.

[00:11:13] Speaker 03:
I mean, you see this as one of the simplest cases you ever had to argue up here.

[00:11:19] Speaker 03:
And so I wonder why on earth hasn't this come up before?

[00:11:23] Speaker 05:
In most cases, Your Honor, once liability is established, just compensation is settled because it's just a dollar value.

[00:11:29] Speaker 05:
And that's what happened in most of the cases

[00:11:32] Speaker 05:
all of the cases that plaintiffs appraisers brought up that they're talking about.

[00:11:35] Speaker 03:
That's why they can't offer any citation.

[00:11:38] Speaker 03:
The court is familiar with the rails and trails problems going all the way back to preso, as you know.

[00:11:43] Speaker 03:
And there have been a lot of them and the value of these right-of-ways obviously varies tremendously from place to place and the condition of the right-of-way varies considerably from place to place.

[00:11:56] Speaker 03:
So you would have thought that

[00:11:58] Speaker 03:
There might even have been up around Love Canal right away where the toxic chemicals were all over that rail bed.

[00:12:05] Speaker 05:
Well, Your Honor, I don't want to speculate on any particular case, but I'd say again that most of these cases are settled, and our view is that this is such a straightforward fundamental principle that it hasn't been contested in other cases.

[00:12:18] Speaker 00:
The only reason it came up here... Even in the supplemental authority that you proposed, there are quotes in there

[00:12:26] Speaker 05:
uh... from the first thirty k saying because of the nature of this type of dispute between the government and the landowner the normal appraisal principles don't fit exactly isn't that right right i mean that what the what the plaintiff's appraiser did was in addition to receiving the instruction from counsel he said well ordinarily you don't consider a previous right of way well that's because ordinarily there's nothing there you're talking about a new road a new

[00:12:55] Speaker 05:
in position of a new easement.

[00:12:56] Speaker 05:
Whereas here, there's nothing specifically unique about rails to trails, but one unusual feature is that you're talking about a new easement allegedly being superimposed over an old easement.

[00:13:10] Speaker 05:
So that's why you have to consider the fact that the conditions created by that old easement remain in the event of abandonment.

[00:13:18] Speaker 05:
So getting back to Judge Clevenger's question, I think the fundamental point is that

[00:13:24] Speaker 05:
the legal principle holds, regardless of whether it's come up in previous cases.

[00:13:28] Speaker 05:
And we ask this court to simply affirm that principle here.

[00:13:32] Speaker 00:
But isn't it a classic case of the fact that these landowners, they didn't necessarily voluntarily give up these easements in the first instance.

[00:13:42] Speaker 00:
I mean, because of the government's desire to have a railway system, these landowners were stuck with one easement.

[00:13:49] Speaker 00:
Now they're going to get stuck with another one.

[00:13:51] Speaker 00:
And you're saying they should pay for the first one.

[00:13:53] Speaker 05:
Well, plaintiff's predecessors and interest were fully compensated for the initial easement, whether through easement deeds or formal condemnation proceedings.

[00:14:01] Speaker 05:
And the terms of those deeds did not provide that, upon abandonment, the railroad would get rid of the rail line entirely.

[00:14:11] Speaker 05:
And so plaintiffs acquired their property subject to those easements, and they can't effectively amend them now to get compensation for something that they've effectively already been compensated for.

[00:14:21] Speaker 00:
And how much money do you think that is you here?

[00:14:23] Speaker 05:
Your Honor, our appraiser argued that it was in the hundreds of thousands of dollars.

[00:14:27] Speaker 05:
Plaintiff's appraiser, you know, if on remand.

[00:14:30] Speaker 03:
Well, and your appraiser's methodology was heavily criticized by the trial judge.

[00:14:37] Speaker 05:
It was.

[00:14:37] Speaker 05:
And the trial judge said that our appraiser overstated the costs.

[00:14:40] Speaker 05:
However, that's not to say that the costs don't exist.

[00:14:42] Speaker 05:
So exactly how much it will turn out to be on remand is something for the court to consider once it has evidence from the plaintiffs.

[00:14:48] Speaker 05:
But the plaintiffs failed to carry their burden to actually present any evidence on this question.

[00:14:53] Speaker 05:
If it were our burden in the first instance to provide evidence of how much of what the fair market value of the property was and our... And the legal mistake would be harmless fair.

[00:15:03] Speaker 03:
Right.

[00:15:04] Speaker 05:
But it's not our burden.

[00:15:05] Speaker 05:
It's the plaintiff's burden.

[00:15:06] Speaker 05:
And instead of presenting affirmative evidence, they just criticized our evidence and said it was too much.

[00:15:10] Speaker 05:
And that's not enough.

[00:15:12] Speaker 05:
So unless the court has further questions, I'd like to reserve the remainder of my time for rebuttal.

[00:15:17] Speaker 06:
Okay.

[00:15:26] Speaker 04:
My name is Tom Stewart on behalf of the plaintiff's appellees in this case.

[00:15:33] Speaker 04:
And on behalf of all of the Iowa farmers in all three of these consolidated cases, we firmly believe that Judge Firestone's opinion should be summarily affirmed.

[00:15:43] Speaker 04:
This is a or should be a very simple issue on appeal because the government does not contest liability.

[00:15:50] Speaker 04:
They've chosen to appeal what is really a non-issue under

[00:15:54] Speaker 04:
appraisal standards and methodology and the law, which is also an inconsequential issue relating to damages.

[00:16:02] Speaker 00:
How do you know it's inconsequential if your appraiser never did an analysis of it?

[00:16:06] Speaker 04:
Well, for example, Your Honor, if you turn to page seven of the government's brief to put this issue in perspective, they have tried to argue that the difference between

[00:16:19] Speaker 04:
The appraisers in this case is $1,600,000 and $600,000 on the agricultural parcels, and they've tried to say that this issue will repeat itself in other rails to trails cases.

[00:16:33] Speaker 04:
But the purported difference between $1,600,000 and $600,000 was really the result of two issues that were hotly contested at trial, one of which was this cost to reclaim issue, which was very minor and inconsequential.

[00:16:48] Speaker 04:
The second one was with respect to severance damages for bisected or separated agricultural parcels.

[00:16:56] Speaker 03:
So on your inconsequential point, let's just assume that all that was at stake was $100.

[00:17:04] Speaker 03:
Why isn't that sufficient for having a case of controversy?

[00:17:08] Speaker 04:
Well, because the government is also wrong legally, Your Honor, with respect to the standard.

[00:17:13] Speaker 03:
Are you going to give up the inconsequential point?

[00:17:17] Speaker 04:
I just wanted to make the point, Your Honor.

[00:17:18] Speaker 04:
I'm not giving it up.

[00:17:19] Speaker 04:
Not a lot is at stake here.

[00:17:21] Speaker 04:
Not a lot is at stake.

[00:17:22] Speaker 04:
Yeah, I appreciate that.

[00:17:22] Speaker 04:
OK.

[00:17:23] Speaker 04:
And I just wanted to make the point that Judge Firestone, on page 200 of the transcript, identified with that issue and said she was not overwhelmed with this entire discussion.

[00:17:32] Speaker 00:
And in fact, the... So it may be that the government has decided to take these particular landowners and to push the point so that it doesn't have to

[00:17:45] Speaker 04:
make this argument every single time so it may be only a hundred dollars to you but it could be a hundred times whatever to the government right I understand that your honor but since they're also wrong legally with respect to the standard for determination of the highest and best use I don't want to give up this issue of inconsequential because actually the cost associated with the cost to reclaim is a factor that appraisers do consider and should consider

[00:18:13] Speaker 04:
with respect to the determination of highest and best use.

[00:18:16] Speaker 04:
And the testimony.

[00:18:17] Speaker 04:
Mr. Frazier didn't do that here, did he?

[00:18:20] Speaker 04:
Yes.

[00:18:20] Speaker 04:
In fact, our appraiser, Mr. Hodge, testified specifically.

[00:18:24] Speaker 04:
That he took into account the reclamation costs.

[00:18:27] Speaker 04:
Yes.

[00:18:27] Speaker 04:
And that they were inconsequential.

[00:18:30] Speaker 04:
And in fact, if you look at Judge Fierstein.

[00:18:32] Speaker 02:
Do you think the government's wrong when it says your expert testified that he was instructed to exclude them?

[00:18:40] Speaker 04:
Our appraisers were not instructed, Your Honor, to exclude or not to consider the cost of reclamation.

[00:18:48] Speaker 04:
They were instructed to appraise the property as if it was unencumbered in the before condition, which is exactly what this Court has said.

[00:18:55] Speaker 02:
Is that the same thing?

[00:18:57] Speaker 02:
What do you mean by unencumbered in the before condition?

[00:19:00] Speaker 04:
Unencumbered in the before condition means that as if the easement was not in place at the time it took.

[00:19:06] Speaker 02:
And what's easement are you talking about here?

[00:19:08] Speaker 04:
Easement is the original railroad purposes easement on this farmer's land.

[00:19:13] Speaker 00:
Right.

[00:19:13] Speaker 00:
So how would he not consider that, but still be considering the cost of removing the items that were part of the easement?

[00:19:23] Speaker 04:
I think the answer, Your Honor, is in the appraisal standards themselves, in the yellow book, there is a three-part test that has been developed over decades.

[00:19:35] Speaker 04:
And this decision by the appraisers is the most important in the appraisal process to determine the highest and best use.

[00:19:43] Speaker 04:
And the three-part test is that it first has to be, the use has to be physically possible.

[00:19:49] Speaker 04:
The second test is it has to be legally permissible.

[00:19:52] Speaker 02:
I'm confused why you're talking about the expired railroad easement in the first place.

[00:19:56] Speaker 02:
Your landowners have already been compensated for that.

[00:20:00] Speaker 02:
Aren't we talking about the new rails to trails easement?

[00:20:03] Speaker 02:
Well, yes, Your Honor.

[00:20:04] Speaker 02:
They have been.

[00:20:05] Speaker 02:
So when we do that, don't we compare what the property value is absent the easement and with the easement?

[00:20:15] Speaker 02:
Why is the expired easement relevant to this at all?

[00:20:18] Speaker 04:
Well, they have to be paid, Your Honor, for the taking of their reversionary interest, which is their reversionary interest in that railroad purposes easement.

[00:20:27] Speaker 04:
It has been supplanted with a hiking and... And the reversionary interest is what?

[00:20:31] Speaker 02:
The land would have reverted to them when the easement expired in the condition that the railroads left it, right?

[00:20:37] Speaker 02:
Yes.

[00:20:38] Speaker 02:
And so isn't that what we're comparing?

[00:20:39] Speaker 02:
The condition the railroads left it in with

[00:20:43] Speaker 02:
the value of it encumbered by the government's new easement?

[00:20:48] Speaker 04:
Yes, but under the appraisal standards, the determination of highest and best use is that land is to be assumed that it is the same as agricultural land before and after.

[00:21:01] Speaker 04:
In other words, it's not appraised as a hiking and biking trail easement.

[00:21:06] Speaker 04:
It's not appraised as a railroad purposes easement.

[00:21:09] Speaker 04:
It's appraised as if it's agricultural land, which is vacant and ready for use as agricultural land.

[00:21:16] Speaker 03:
Is that because agricultural use surrounds the easement property?

[00:21:20] Speaker 02:
Yes, Your Honor.

[00:21:20] Speaker 02:
It's part of the larger parcel.

[00:21:22] Speaker 03:
In other words, the appraisal is possible.

[00:21:24] Speaker 02:
If the government had taken land in the middle of a farm for a chemical factory and had decided to give it back,

[00:21:33] Speaker 02:
as is, and then decided to put some kind of a new easement on it, you wouldn't assume that that land was pristine farmland.

[00:21:40] Speaker 02:
You would assume it was in the condition of the land after the chemical factory had been vacated, right?

[00:21:47] Speaker 04:
No, you would, under that scenario, you would appraise that land as if it was agricultural land.

[00:21:52] Speaker 02:
So you're putting your client in a better position than it would have been if the government hadn't taken a new easement, aren't you?

[00:21:58] Speaker 02:
No, I believe we're putting the... How is that not possible?

[00:22:01] Speaker 02:
If the farmers had this

[00:22:03] Speaker 02:
land reverted to them from the railroad company.

[00:22:07] Speaker 02:
They would have to make the reclamation costs themselves, right?

[00:22:12] Speaker 02:
Unlikely, Your Honor.

[00:22:13] Speaker 04:
I don't believe they're responsible for the reclamation costs.

[00:22:15] Speaker 00:
Isn't that what Iowa law says?

[00:22:17] Speaker 00:
Basically that the railroad has the right to remove the remnants within one year if it wants to, but it's completely discretionary with the railroad.

[00:22:26] Speaker 00:
So if it leaves the remnants

[00:22:28] Speaker 00:
then the landowner has to deal with those revenants if it wants to use the land for some other purpose.

[00:22:33] Speaker 04:
And under the appraisal methodology, Your Honor, well, first of all, if you look at the rails and ties, they obviously have substantial value.

[00:22:42] Speaker 00:
But that gives the valuation, not the legal method.

[00:22:44] Speaker 00:
I mean, wouldn't you, you could balance the cost of removal with the cost of whatever that would, the rails and the ties would be, right?

[00:22:54] Speaker 00:
Isn't that what an appraiser would do?

[00:22:56] Speaker 04:
Well, the appraiser is instructed to follow the yellow book, which is the uniform standards for federal land acquisitions.

[00:23:04] Speaker 04:
And the yellow book instructs them to do a before and after appraisal.

[00:23:08] Speaker 04:
The before appraisal is as if the land was part of the larger parcel and was vacant and available for such use as part of the larger parcel.

[00:23:21] Speaker 04:
And in this case, since the highest investment... That's your problem.

[00:23:23] Speaker 02:
It wasn't available for use like the larger potter's salt until the reclamation was done.

[00:23:29] Speaker 04:
That's what the appraisers are instructed to assume under the Yellow Book, Your Honor.

[00:23:32] Speaker 04:
Well, what if we conclude that's legal error?

[00:23:35] Speaker 04:
Well, if that's legal error, then the appraisal standards themselves would not be followed.

[00:23:40] Speaker 02:
I think your reading of that Yellow Book might be legal error.

[00:23:44] Speaker 02:
Because you're suggesting that the land is in a condition different than it actually is.

[00:23:49] Speaker 02:
And I believe it's fiction.

[00:23:52] Speaker 02:
Let me ask you a hypothetical.

[00:23:53] Speaker 02:
Suppose the land value would cost you a million dollars to reclaim as farmland, but the government came in and took a new rails to trails easement.

[00:24:04] Speaker 02:
Do you say we don't consider that million dollar reclamation cost at all?

[00:24:07] Speaker 04:
I don't believe so under the Yellow Book, Your Honor.

[00:24:10] Speaker 00:
But the Yellow Book says, the appraiser shall estimate the value of the land for its highest and best use, but must consider physical characteristics of the land and must bear in mind that the property must be valued in its as-is condition.

[00:24:23] Speaker 00:
I mean, I don't think the Yellow Book is as formulaic as you're making it out to be.

[00:24:28] Speaker 04:
Well, I believe that falls under the judgment of the appraisers in all of these Rails to Trails cases.

[00:24:32] Speaker 04:
But what that really says is they have to utilize or consider

[00:24:37] Speaker 04:
the physical attributes of the land to determine what the highest and best use of the land is under the financially feasible test.

[00:24:45] Speaker 03:
Under Judge Hughes' question, if it's not financially feasible... How would you take the hypothetical Judge Hughes has been giving you, one where during the life of the easement before the Rails to Trails, there were toxic chemicals or something put on the ground that would obviously impair agricultural use?

[00:25:04] Speaker 03:
So how does the existence of those toxic chemicals key into highest and best use?

[00:25:11] Speaker 03:
The easement goes right through agricultural property.

[00:25:15] Speaker 03:
No towns anywhere near, no possibility of high rises or anything else.

[00:25:19] Speaker 03:
Only possible use is agrarian, right?

[00:25:21] Speaker 03:
Right.

[00:25:22] Speaker 03:
So now I have an easement through agrarian property that the highest and best use is going to be agrarian.

[00:25:31] Speaker 03:
But it's poisoned with toxic chemicals.

[00:25:33] Speaker 03:
It would be against the law to farm it in its current condition.

[00:25:37] Speaker 04:
What do you do then?

[00:25:39] Speaker 04:
The Yellow Book instructs in that situation, if it's not financially feasible to treat that highest and best use as agricultural land, they can't treat that as highest and best use as agricultural land.

[00:25:50] Speaker 03:
Same thing applies to the highest use.

[00:25:53] Speaker 03:
What would be the highest and best use of this polluted easement?

[00:25:57] Speaker 04:
It would basically be contaminated and worthless land.

[00:26:01] Speaker 04:
under the Yellow Book standards.

[00:26:04] Speaker 04:
And so in this situation, if it's a million dollars to reclaim farmland, and it's not financially feasible to reclaim that farmland, then the highest and best use of that is not agricultural land.

[00:26:16] Speaker 04:
And it can't be treated as agricultural land.

[00:26:18] Speaker 03:
But if it's financially feasible to reclaim, the burden of making it financially feasible falls on the government, not on the lander.

[00:26:27] Speaker 03:
Well, I'm not sure.

[00:26:29] Speaker 03:
Isn't that where your case is?

[00:26:31] Speaker 04:
That's what Iowa law says with respect to the railroads being able to salvage the rails and ties.

[00:26:37] Speaker 04:
Under the Yellow Book standard, if the farmer can reclaim that land, and it's an inconsequential cost, as plaintiffs' experts testified to... Well, if it's inconsequential cost, on remand you can argue that, but you didn't start from that position that it was an inconsequential cost.

[00:26:56] Speaker 02:
You started from the position that we can't consider that cost at all.

[00:26:59] Speaker 04:
No, I didn't.

[00:27:00] Speaker 04:
I apologize, Ron.

[00:27:02] Speaker 04:
I don't believe we started from that position at all.

[00:27:04] Speaker 04:
We have said from the very beginning that there has to be a financially feasible test under the yellow book to determine what the highest and best use of the property is.

[00:27:13] Speaker 02:
It's not financially feasible to reclaim the land for farm use, but it costs X amount of dollars to do that.

[00:27:19] Speaker 02:
You think the government should bear the X amount of dollars, not your clients.

[00:27:23] Speaker 02:
I don't believe there is any cost to assess against either party.

[00:27:26] Speaker 02:
Well, you're not answering the question, though, because the government thinks there is a cost here.

[00:27:31] Speaker 02:
If you think there's zero cost, then on remand you're going to win, but let's assume there's a cost.

[00:27:35] Speaker 02:
Who bears it?

[00:27:36] Speaker 04:
I believe under that circumstance, if it goes a year and nobody reclaims it in Iowa, then the farmers would have to reclaim their land at their cost.

[00:27:45] Speaker 04:
I believe under the Yellow Book, that is inconsequential.

[00:27:49] Speaker 00:
So you're saying the yellow book is somehow because of the way you walk through the process.

[00:27:53] Speaker 00:
You ignore a true fair market value analysis?

[00:27:57] Speaker 04:
No, I believe it is a true fair market value analysis, Your Honor, because the government is really trying to blur the concept of fair market value and highest and best use.

[00:28:06] Speaker 04:
You have to establish the fair market value based on the highest and best use.

[00:28:11] Speaker 04:
Under the Olson case by the Supreme Court in 1934,

[00:28:15] Speaker 04:
and under the Board of County Supervisors case that this court decided in 2002, the test is whether the land is adaptable, which is the physically possible test, and whether it is easily converted, which is the financially feasible test.

[00:28:30] Speaker 04:
And if it is easily converted under the financially feasible test, that becomes the highest and best use of the land, and it then therefore has to be appraised as if it is vacant and ready for such use.

[00:28:42] Speaker 03:
Well, that's the latter stage.

[00:28:44] Speaker 03:
That's where the rub is.

[00:28:48] Speaker 03:
I don't think the government necessarily disagrees with you in that series of sentences up to the very last one.

[00:28:55] Speaker 04:
The very last one being that it has to be appraised.

[00:28:58] Speaker 03:
Well, you're going to look at it as if there's never been any impairment to the property.

[00:29:03] Speaker 03:
You've decided that whatever impairment of the property wasn't sufficient to stop it from having a highest and best use of x.

[00:29:11] Speaker 03:
And then the next step is, OK, now you look at the property as though it had never been impaired.

[00:29:19] Speaker 04:
And I believe that's exactly what the Yellow Book requires, Your Honor.

[00:29:22] Speaker 04:
Under Section 815 of the Yellow Book, it specifically says that once it is determined that it's financially feasible and it becomes the highest and best use of the property, it is then to be appraised as if it is vacant and ready for such use.

[00:29:38] Speaker 04:
There is nothing in the Yellow Book at anywhere

[00:29:41] Speaker 04:
that authorizes or allows the government to charge these landowners for the physical remnants or to deduct the purported cost to reclaim.

[00:29:49] Speaker 04:
There is no authority whatsoever for that provision.

[00:29:52] Speaker 04:
And so I believe it is absolutely correct.

[00:29:53] Speaker 04:
So the government says the authority of the contrary is the Constitution.

[00:29:58] Speaker 04:
Well, I believe that just compensation requires under the Fifth Amendment that they be paid the fair market value of their land.

[00:30:05] Speaker 04:
And the fair market.

[00:30:06] Speaker 03:
So in your judgment, this case boils down to a constitutional law case.

[00:30:09] Speaker 04:
It's always a constitutional law case under the Just Compensation Provision.

[00:30:13] Speaker 03:
Why shouldn't the government prevail under the Constitution?

[00:30:16] Speaker 03:
Say, I'm sorry, your reading of the Yellow Book is unconstitutional.

[00:30:20] Speaker 04:
Because I believe our reading of the Yellow Book is absolutely correct, as it's been applied in all of these cases.

[00:30:26] Speaker 03:
If it puts on the government the burden of the cost of making the property available for its highest and best use.

[00:30:34] Speaker 04:
because I believe the standards under the yellow book require that.

[00:30:37] Speaker 03:
But you're being circular.

[00:30:38] Speaker 03:
What I'm asking you is whether or not the provision 8.15 is constitutional.

[00:30:46] Speaker 03:
I believe 8.15 is constitutional, and I believe these... Because you believe that the cost of making the property usable for its highest and best use should be taxed to the government in these circumstances, not to the landowner.

[00:31:00] Speaker 04:
I apologize I'm over my time, Your Honor, but I believe the

[00:31:02] Speaker 04:
It's no different for commercial, industrial, or residential parcels either, which the same remnants were present for those parcels, just like they were present for the agricultural parcels as well.

[00:31:15] Speaker 04:
I'm sorry.

[00:31:15] Speaker 04:
You exceeded my time.

[00:31:16] Speaker 00:
Thank you, Your Honor.

[00:31:26] Speaker 01:
Thank you.

[00:31:27] Speaker 01:
Thank you, Your Honor.

[00:31:27] Speaker 00:
You both spent a lot of time discussing the Yellow Book in your brief.

[00:31:33] Speaker 00:
So what's your position with respect to the Yellow Book?

[00:31:35] Speaker 00:
Do you agree that the Yellow Book would support the landowner's position here?

[00:31:40] Speaker 05:
No, Your Honor.

[00:31:42] Speaker 05:
Well, first of all, as Judge Cleverner was alluding to at the end of counsel's argument, it's ultimately irrelevant what the Yellow Book says, because this is a question of law.

[00:31:51] Speaker 05:
Just compensation is a question of constitutional law, not appraisal methodology.

[00:31:56] Speaker 05:
Fundamentally is why this is a legal and not a factual question.

[00:32:00] Speaker 05:
But second, in terms of the yellow book, the yellow book clearly states that hypothetical conditions such as the one plaintiffs adopted is only appropriate if it is legally required.

[00:32:10] Speaker 05:
It was not legally required here to assume for purposes of valuation that the abandoned rail line was actually not there.

[00:32:18] Speaker 05:
And to get into your point.

[00:32:21] Speaker 00:
When would it be legally required to assume a hypothetical condition?

[00:32:26] Speaker 05:
I don't want to speculate, but it's quite rare, one would think, because you're valuing the before and after.

[00:32:32] Speaker 05:
And what's valued for the plaintiffs is the property they would have had, had the taking not occurred.

[00:32:39] Speaker 05:
And the Plaintiffs' Council has not argued that the railroad, even if it took up the ties and the tracks, what you're talking about as illustrated on page 20 of our opening brief, the photo of Mr. Stilley's property,

[00:32:54] Speaker 05:
This is a huge amount of land.

[00:32:56] Speaker 05:
And so even if the railroad had decided that it was worthwhile to come back and take the ties and tracks off, why on earth would it have gone through with a bulldozer and eliminated all of those miles of elevated track and fertilized and seeded the soil underneath to make it ready for agricultural use?

[00:33:15] Speaker 03:
That's a specific answer to his argument on 8.15.

[00:33:19] Speaker 03:
He said once you determine it's feasible,

[00:33:22] Speaker 03:
evaluate as if it was vacant and ready for such use.

[00:33:25] Speaker 05:
So that is the valuation for highest and best use.

[00:33:29] Speaker 05:
And we acknowledge that the fact that this property, we agree it's the highest and best use.

[00:33:35] Speaker 03:
Well, you heard what he said.

[00:33:36] Speaker 03:
I mean, an ordinary listener might be sitting in the audience and say, well, that sounds pretty good, what he just said.

[00:33:41] Speaker 03:
That's why I asked him whether I have to rule that the Yellow Book is unconstitutional in its face.

[00:33:46] Speaker 05:
You don't, Your Honor.

[00:33:47] Speaker 05:
Because what the Yellow Book says is, yes, property is valued.

[00:33:51] Speaker 05:
taking into consideration its highest and best use.

[00:33:53] Speaker 05:
And the fact of the highest and best use, as explained in our reply brief, means that it's reasonably possible for the conversion to occur.

[00:34:01] Speaker 03:
And that takes into consideration the condition of the property when you're asking what its highest and best use is.

[00:34:05] Speaker 05:
It does.

[00:34:06] Speaker 05:
But then once the highest and best use is determined, that is not the same thing as fair market value.

[00:34:11] Speaker 05:
As Judge Hughes' hypothetical alludes to, the fact that the highest and best use

[00:34:16] Speaker 05:
might be agricultural, doesn't mean that you value the land as though it were completely vacant.

[00:34:24] Speaker 05:
The ultimate valuation has to take into account development costs.

[00:34:27] Speaker 05:
And the cases we cite in our opening brief about the subdivision are just an example of that.

[00:34:32] Speaker 03:
But whether it be a subdivision or any kind of- Are you saying when he said you value it as if it's vacant and ready for such use, you would say that this property is not ready for agricultural use when it

[00:34:45] Speaker 03:
is not level and when it may have obstructions on it.

[00:34:48] Speaker 05:
No, Your Honor.

[00:34:49] Speaker 05:
I want to be clear about this.

[00:34:50] Speaker 05:
Our position.

[00:34:51] Speaker 05:
So what's valued here is not the individual corridor.

[00:34:55] Speaker 05:
It's the larger parcel that these plaintiffs have.

[00:34:58] Speaker 05:
And so what they have is mostly agricultural land that's vacant.

[00:35:02] Speaker 05:
But they also now have, in the situation in which the taking didn't occur,

[00:35:07] Speaker 05:
they would have in a part of the land had an abandoned rail line running through it.

[00:35:10] Speaker 03:
So you're valuing what the farmland is worth per acre, and then you're giving them that value for however many acres or parts of that the easement occupies?

[00:35:20] Speaker 05:
So we concede that the highest and best use of the entire parcel as a whole is agricultural.

[00:35:25] Speaker 05:
And implicit in that concession is the idea that it would be reasonably possible for the abandoned rail line to be converted to agricultural use.

[00:35:35] Speaker 05:
But that does not mean that it wouldn't cost anything to make that conversion.

[00:35:40] Speaker 05:
And the question is, who bears the cost of converting that abandoned rail line into agricultural use?

[00:35:46] Speaker 05:
That is a completely separate question from the highest and best use.

[00:35:50] Speaker 05:
There is nothing in the yellow book that says that the highest and best use is always the fair market value.

[00:35:55] Speaker 05:
As this court said in the Prince William County line of cases, you need to consider the current condition of the property.

[00:36:00] Speaker 05:
Yes, it's an element of highest and best use, but independent of highest and best use,

[00:36:04] Speaker 05:
If the current condition reduces fair market value, which all the plaintiff's experts conceded, then you have to consider it as well.

[00:36:10] Speaker 00:
But the Court of Federal Claims has always interpreted the Yellow Book the way that the landowner is interpreting it here, has it not?

[00:36:17] Speaker 05:
No, Your Honor.

[00:36:18] Speaker 05:
The Court of Federal Claims has never, certainly in this context, interpreted the Yellow Book to mean that once you determine what the value of the land is, as if it were ready for the highest and best use, that that automatically is fair market value.

[00:36:31] Speaker 05:
Plaintiffs haven't cited any cases in support of that position.

[00:36:34] Speaker 05:
We've cited cases supporting the position that it's patent error, once you determine highest and best use, to disregard the development costs necessary to make that land adaptable for its highest and best use.

[00:36:45] Speaker 03:
What do you do with a future case where the rail easement had, they'd been taking toxic chemicals across the easement, they poisoned the earth, but it's in agricultural land?

[00:36:57] Speaker 03:
Does the fact that that condition of the easement bear on the highest and best use?

[00:37:01] Speaker 05:
It may, in a given case, it may be that the land is so contaminated that the highest and best use, in fact, would not be agricultural.

[00:37:10] Speaker 05:
We don't have that situation here, because... Well, I'm thinking about future cases.

[00:37:15] Speaker 03:
I'm thinking about others.

[00:37:16] Speaker 03:
I mean, here we have a situation where there's hardly much consequence to the harm of the land from the leftovers from the rail easement.

[00:37:24] Speaker 03:
But what happens if they're significant ones?

[00:37:26] Speaker 05:
Well, it could come into play in two ways.

[00:37:28] Speaker 05:
One, it could come into play in the initial determination of highest and best use.

[00:37:33] Speaker 05:
If it was so extreme that the land couldn't be converted financially, it wouldn't be financially reasonable to convert it, then it might change the highest and best use, which then would impact fair market value.

[00:37:44] Speaker 05:
Or, alternatively, it could be more like this case, where it's not so significant as to impact the overall highest and best use, but it is significant in the sense that the landowner is going to have to pay to convert that land in a condition that

[00:37:59] Speaker 05:
makes it adaptable for the highest and best use.

[00:38:01] Speaker 03:
So it could be either way, but the point is... You can have situations, for example, different from this one, like if you're going through agricultural land, but say it's in New England, which is hilly and valleys, and so there are a lot of bridges and a lot of major structure that would have to be removed hypothetically in order to farm the land.

[00:38:23] Speaker 05:
Right, and that might, in a particular case, it might be such a

[00:38:28] Speaker 03:
What you're telling me is the dollar, the cost of removing the impediment is going to tell me what the highest and best use is.

[00:38:36] Speaker 05:
Right, because one element of highest and best use is whether it's financially feasible to achieve that use.

[00:38:42] Speaker 05:
But either way, even if it's financially feasible, the question is who bears that cost?

[00:38:46] Speaker 05:
And that's really what this comes down to in this case, is that we agree that it would be financially feasible, or at least in most cases.

[00:38:54] Speaker 05:
Our appraiser did a parcel by parcel analysis

[00:38:58] Speaker 05:
Would the farmer reclaim this particular land?

[00:39:01] Speaker 05:
Would it be worthwhile, depending on how much it would cost?

[00:39:03] Speaker 05:
And we can argue about how much it would cost in any given case.

[00:39:07] Speaker 00:
Well, that's what Judge Firestone thought, that that's where the looking at the remnants, that's where it came in, to say, is it so much that it would affect the highest and best use?

[00:39:18] Speaker 00:
And then she concluded that it wasn't.

[00:39:20] Speaker 00:
And she said, once I've considered it for that purpose, I don't consider it again.

[00:39:24] Speaker 05:
Right.

[00:39:24] Speaker 05:
And the first part was right, and the second part was wrong.

[00:39:27] Speaker 00:
Alright, thank you.