[00:00:14] Speaker ?: Thank you. [00:00:46] Speaker 06: I'm sorry. [00:01:19] Speaker ?: th th th [00:02:07] Speaker 01: The United States Court of Appeals for the Federal Circuit is now open and in session. [00:02:12] Speaker 01: God save the United States and this honorable court. [00:02:15] Speaker 00: Please be seated. [00:02:15] Speaker 00: Good morning. [00:02:16] Speaker 00: The first case for argument this morning is 16-2276, Love Terminal versus the United States. [00:02:28] Speaker 00: Mr. Lundman, whenever you're ready. [00:02:32] Speaker 02: Good morning, and may it please the Court. [00:02:34] Speaker 02: Robert Leinman, representing the United States. [00:02:36] Speaker 02: I claim to reserve four minutes for rebuttal. [00:02:38] Speaker 02: The Court of Federal Claims here made a fundamental legal error in its analysis of the Right Amendment Reform Act. [00:02:44] Speaker 02: That act did not mandate demolition of the Lemon Avenue terminal, nor did it bar plaintiffs from using that terminal for air transportation purposes. [00:02:53] Speaker 02: All three of plaintiffs' takings theories are based on this error and this misread of the act. [00:02:59] Speaker 02: To understand the Reform Act, though, you have to start with the Wright Amendment. [00:03:03] Speaker 02: And the Wright Amendment was enacted in 1980. [00:03:05] Speaker 02: It restricted flights to and from Love Field, the airport located in the city of Dallas. [00:03:12] Speaker 02: The flights could only travel to and from Love Field within Texas into four states bordering Texas. [00:03:17] Speaker 02: And there was an exception for planes with 56 or fewer seats. [00:03:21] Speaker 00: Can I just interrupt you just because we all know the background? [00:03:23] Speaker 00: OK. [00:03:24] Speaker 00: So let me just get to the heart of it. [00:03:26] Speaker 00: And this is just a general question. [00:03:28] Speaker 00: I'm not talking about the demolition here. [00:03:30] Speaker 00: I'm just talking about the Lemon Avenue terminal. [00:03:34] Speaker 00: And in the, what do we call it, WARA? [00:03:38] Speaker 00: WARA or the Form Act. [00:03:39] Speaker 00: Either way, I think it's here. [00:03:40] Speaker 00: OK. [00:03:41] Speaker 00: It did incorporate a section of the five-party agreement that allocates the stuff that says you shall abide by the contractual rights and duties you have. [00:03:51] Speaker 00: And if you look at what those rights and duties are, I want you to tell me if I'm wrong, but I think you conceded at some point in your brief that that statute incorporated the agreement which already allocated all of the 20 gates to certain airlines, which would have excluded the lemon terminal. [00:04:12] Speaker 02: I don't think the statute incorporated the five-party agreement across the board. [00:04:16] Speaker 00: Exactly. [00:04:17] Speaker 00: I'm not suggesting that. [00:04:18] Speaker 00: I'm talking about that portion of the five-party agreement that said Southwest is going to get four gates, and so-and-so is going to get five gates. [00:04:25] Speaker 00: It seems to me if the statute encompasses those contractual obligations, then the gates that are available under WARA, which is a total of 20, are already allocated under the statute. [00:04:41] Speaker 02: The statute does not allocate the gates. [00:04:43] Speaker 02: The statute sets a cap of 20, and that's right in the language of 5B. [00:04:48] Speaker 02: Who has a responsibility for allocating gates? [00:04:51] Speaker 02: Dallas had a responsibility to allocate the gates. [00:04:54] Speaker 00: But does not the statute reference that we're incorporating or whatever that they have to abide by their contractual rights and duties? [00:05:02] Speaker 00: And aren't the rights and duties specifically referred to in the statute, doesn't that include [00:05:09] Speaker 00: the rights and duties, i.e. [00:05:11] Speaker 00: the allocation of those gates as they're allocated in the leases that are in existence. [00:05:16] Speaker 02: So the statutory language, the City of Dallas pursuant to its authority to operate and regulate the airport as granted under Texas law on the Actum, Texas law is a summary of the statute set in there, shall determine the allocation of lease gates and manage love field in accordance with contractual rights and obligations existing as the effective date of this act [00:05:35] Speaker 02: for certificate air carriers providing scheduled passenger service at Love Field on July 11, 2006. [00:05:40] Speaker 02: That's 5A. [00:05:41] Speaker 02: It's not a specific reference to the five-party agreement. [00:05:45] Speaker 02: If you want a specific reference to the five-party agreement, there is one in 5D. [00:05:49] Speaker 02: It refers specifically to the agreement, but doesn't refer to the gate allocation provisions. [00:05:55] Speaker 04: But don't get that back up and say, what were the contractual rights and obligations existing with regard to the allocation of lease [00:06:05] Speaker 04: So there's a whole suite of- Were there contractual rights and obligations? [00:06:10] Speaker 02: There were. [00:06:12] Speaker 04: Dallas had- That's data point one. [00:06:14] Speaker 04: Yep. [00:06:15] Speaker 04: And so where would you find those contractual obligations? [00:06:21] Speaker 04: What contract? [00:06:22] Speaker 02: There were contractual obligations between Dallas and the lessors of the airport. [00:06:27] Speaker 02: So that included- And what were those obligations? [00:06:30] Speaker 04: Is that the contract between Dallas and the four or five airlines? [00:06:34] Speaker 04: Well, that agreement... I'm trying to get you to tell us what document contains the rights concerning the allocation of lease gates. [00:06:44] Speaker 02: There's no single document. [00:06:45] Speaker 02: This is a statement saying, the best reading of this is, Dallas, you have contractual obligations. [00:06:53] Speaker 02: The federal government in the Reform Act is not trumping or rewriting or getting Dallas off the hook. [00:06:58] Speaker 03: I think you're missing the point. [00:06:59] Speaker 03: The question is, put aside the 2006 statute. [00:07:02] Speaker 03: I think what Judge Clevinger is asking you about is, what was Dallas's obligation with respect to the lessees in concerning the allocation of gates? [00:07:13] Speaker 03: Under the contract with the lessees and under the lease, could Dallas not allocate gates to them? [00:07:23] Speaker 02: the Love Terminal Partners contract with Dallas, or? [00:07:26] Speaker 02: Yeah. [00:07:29] Speaker 02: That contract provided for the plaintiffs to have gates at that facility. [00:07:38] Speaker 03: What exactly did it say about that? [00:07:41] Speaker 02: Well, it said they had to pay so much rent, and it said they had a, I don't have all the provisions at my hand, but it said a rent and provided for a lease of various property. [00:07:50] Speaker 02: I don't know, I don't think it specified [00:07:53] Speaker 02: either the sublease or the master lease, the number of gates there. [00:07:56] Speaker 02: It provided for lease of Dallas property and payment monthly and a 50% payment of any sublease. [00:08:03] Speaker 03: What is the argument? [00:08:05] Speaker 03: Is it a covenant of good faith and fair dealing that required that they allocate some gates to them? [00:08:10] Speaker 02: So each of the contracts that Dallas had with respect to the other terminal and other gates and the airlines there, both provided them with a right to a certain number of gates, but also provided for entrance. [00:08:21] Speaker 02: And so I think that [00:08:23] Speaker 02: If a new airline wanted to use gates at the airport, they could come to Dallas and the current lessers and say, we want some of these gates. [00:08:31] Speaker 02: And there was supposed to be a good-faith allocation. [00:08:33] Speaker 02: There's a site in our brief. [00:08:34] Speaker 03: There's a good-faith allocation to the plaintiff. [00:08:39] Speaker 02: To the new entrant, if it was a new entrant. [00:08:41] Speaker 02: I guess the point, I think, from these contracts is it's not a fixed universe of folks who can use Love Field. [00:08:47] Speaker 02: It's a potentially. [00:08:48] Speaker 03: It's confusing to talk about the contracts. [00:08:51] Speaker 03: The leases, the leases, which is the property that's claimed. [00:08:55] Speaker 02: Right. [00:08:57] Speaker 02: They did not specify any gate information with respect to the claimants. [00:09:04] Speaker 00: What about Appendix 3091? [00:09:05] Speaker 00: Or actually, it's on 3089. [00:09:08] Speaker 00: This is a contract. [00:09:12] Speaker 00: And it deals with joint statement between the parties regarding right amendment issues. [00:09:17] Speaker 00: And on page two of that, it's Article 2, 3B. [00:09:23] Speaker 00: And it says, Southwest should have preferential use of 15 gates under its lease. [00:09:28] Speaker 00: American Airlines shall have preferential use of three gates. [00:09:33] Speaker 00: And somebody else is going to get two gates, which gives you the 20 gates, which is all that's allowed. [00:09:41] Speaker 00: Isn't this allocation really what is meant by the statutory provision, which kind of mandates that they're going to do whatever in accordance with these contractual rights? [00:09:52] Speaker 00: That's all I'm saying. [00:09:52] Speaker 00: I mean, that may not resolve the case. [00:09:54] Speaker 02: I mean, I'm not saying it resolves the case, but I don't think that's what it does. [00:09:56] Speaker 02: Because let me try to explain why really quickly. [00:10:00] Speaker 02: The statute doesn't refer in 5A, the provision you're talking about, doesn't refer just to this contract. [00:10:06] Speaker 02: The United States is not a party to this contract. [00:10:09] Speaker 02: This contract, you're right, between Dallas, Southwest, and the other airlines allocates the gates and answers the question of where the gates should be for Dallas and those airlines. [00:10:19] Speaker 02: But it doesn't answer it for the United States. [00:10:21] Speaker 02: And the United States, in the Reform Act, doesn't answer it either. [00:10:24] Speaker 02: It says there's going to be 20 gates. [00:10:27] Speaker 02: And you, Dallas, need to sort that out, taking into account your contractual obligations, not just this provision. [00:10:33] Speaker 02: And we know we're not talking just this provision or just this contract. [00:10:36] Speaker 00: Because in 5A, it refers to- But when the statutory language demands that Dallas shall manage the love field in accordance with the contractual rights and obligations existing as of the effective date, doesn't that therefore in the statute incorporate a congressional mandate that this is what Dallas has to do with respect to the gates? [00:10:58] Speaker 02: Well, I don't think so. [00:11:00] Speaker 02: Because the Reform Act knows how to reference, and Congress knew how to reference this specific agreement. [00:11:06] Speaker 02: And it does it in the same section in 5D. [00:11:08] Speaker 02: It says that the five-party agreement is a specific reference to it. [00:11:12] Speaker 02: This is much broader. [00:11:13] Speaker 02: It's a reference to contractual rights and obligations for balance. [00:11:17] Speaker 04: Isn't your better argument that maybe it does and maybe it doesn't, but where you're talking about the intent of Congress to clearly incorporate a contract into its statute, it requires certainty, not possibility. [00:11:32] Speaker 02: That's exactly right. [00:11:33] Speaker 04: I mean, I don't know why you're fighting it so hard. [00:11:36] Speaker 04: I mean, the shorter the matter is, one reasonably might read 5A in the statute when it says, shall determine the allocation pursuant to some contract. [00:11:47] Speaker 04: And then you look around and you say, well, is there a contract extant that allocates dates? [00:11:53] Speaker 04: Yep. [00:11:54] Speaker 04: Which one is it? [00:11:55] Speaker 04: And it's the document that the chief judge had read. [00:11:58] Speaker 02: It's this one, and even that provision, though, just one more point. [00:12:01] Speaker 04: Kennedy And is there any other, can the government point to any other contractual obligation existing as of July 11, 2006 that involved the city of Dallas and the allocation of the gate? [00:12:12] Speaker 04: Is there any other contract? [00:12:14] Speaker 02: Bursch Yes. [00:12:15] Speaker 02: Even this contract talks about the leases the city of Dallas has with airlines concerning the number of gates. [00:12:21] Speaker 02: So this contract makes clear there are other contracts, other leases dealing with gate allocation. [00:12:27] Speaker 02: So on page 3091, Judge Prost was just reading it. [00:12:32] Speaker 02: It talks about existing lease to be used for passengers. [00:12:35] Speaker 02: It references the Southwest lease. [00:12:38] Speaker 02: I'm in 3B on page 3091. [00:12:44] Speaker 02: So second line, American Airlines and Southwest agree to voluntarily surrender eight gate rights under existing leases. [00:12:51] Speaker 02: So that's the first reference to other contractual rights concerning this airline. [00:12:56] Speaker 02: this airfield. [00:12:56] Speaker 02: And if you keep going down, there's more of them existing leases. [00:13:00] Speaker 02: Each of the airlines mentioned here has a lease with the City of Dallas that concerns the number of gates. [00:13:07] Speaker 04: I do think... And is that inconsistent with B, the number of gates they had? [00:13:14] Speaker 02: I don't know what the answer is with respect to whether they had to give up gates or not. [00:13:19] Speaker 02: I think the answer is they did have to [00:13:21] Speaker 04: to reduce the gates because they had... Well, I mean, it overrides parts of it, but you'd have to read every single contract. [00:13:36] Speaker 03: I'm confused, I'm confused. [00:13:40] Speaker 03: I did not understand that the takings theory here was that the 2006 statute changed the gate allocation. [00:13:49] Speaker 03: I thought that the theory was that there was a reasonable expectation that the right amendment would be repealed and that the failure to repeal the right amendment [00:13:59] Speaker 03: was in the reaffirmation of the right amendment for a period of years in the 2006 statute was a taking and also that there was a physical taking of the term. [00:14:11] Speaker 03: Was part of the theory here that the change in the gate allocation, the alleged change in the gate allocation itself constituted a taking? [00:14:21] Speaker 02: I think that may be part of the theory, but I think their main theory is physical taking and that they could not develop a terminal free of the right amendment. [00:14:29] Speaker 02: That's what their just compensation award of $133 million is based on, a terminal free of the restrictions of the Wright Amendment. [00:14:36] Speaker 03: And the Wright Amendment enacted in 1980, and they can't have that expectation. [00:14:40] Speaker 03: The other aspect of this five-party contract, even if you read it, is incorporated in the 2006 legislation. [00:14:48] Speaker 03: It simply says that Dallas will acquire the terminal by negotiation or condemnation. [00:14:56] Speaker 03: How can it be that a direction, a federal direction to acquire something by negotiation, let's take that first, is a taking? [00:15:05] Speaker 02: That would not be a taking. [00:15:06] Speaker 02: And that demolition language is not referenced in the Reform Act. [00:15:09] Speaker 03: So it's both... It's not as though the statute or even the agreement says go out and demolish these things. [00:15:16] Speaker 03: It says negotiate with them to acquire the lease. [00:15:19] Speaker 02: Acquire the lease and get the gates down to 20 and it mentions their lease. [00:15:24] Speaker 02: By negotiation? [00:15:24] Speaker 02: Right. [00:15:25] Speaker 03: And if the post... And if that doesn't work, you do it by condemnation. [00:15:29] Speaker 03: And what happened... And they never pursued any condemnation. [00:15:32] Speaker 02: No, they stopped... Love Terminal stopped paying rent. [00:15:35] Speaker 02: And it took two years after the Reform Act. [00:15:37] Speaker 02: Love Terminal stopped paying rent. [00:15:39] Speaker 02: At that point, Dallas moved to condemn the terminal and the court granted them possession of it. [00:15:44] Speaker 02: And that was it. [00:15:45] Speaker 02: And then they destroyed it after their grant of possession and after Love Terminal stopped paying rent. [00:15:50] Speaker 03: So would it be a taking if the federal government said, well, you have a right to these gates under your lease? [00:15:56] Speaker 03: Let's assume the lease said you have the right to use six gates, let's say. [00:16:02] Speaker 03: And the federal government says, no, no, you can't use those gates anymore. [00:16:08] Speaker 03: Would that be a taking? [00:16:09] Speaker 02: Well, then we'd be in the regulatory taking world. [00:16:11] Speaker 02: We'd have to examine their expectations. [00:16:14] Speaker 02: Here, this was highly regulated. [00:16:17] Speaker 02: industry, they made it not just industry, highly regulated particular airport. [00:16:21] Speaker 02: You have to look at the economic effect and the character of the governmental action. [00:16:25] Speaker 02: We've run through all those in our brief, and I think that the takeaway here is even if the act was more targeted than it is, it would not be a taking under those factors. [00:16:38] Speaker 02: I see I'm well into my rebuttal time. [00:16:41] Speaker 02: More questions now? [00:16:42] Speaker 04: I thought that your adversary's physical taking claim was based on a theory that the Lammon Avenue facility, which they leased the property, but presumably they paid some money to build this thing, that Uncle Sam put a bulldozer to it, is their theory. [00:17:02] Speaker 02: Well, that's the physical taking theory. [00:17:03] Speaker 02: That their theory is the United States mandated the bulldozers in the Reform Act to demolish. [00:17:10] Speaker 02: There's just no demolition section of the Reform Act. [00:17:13] Speaker 03: Well, but there's no demolition section to the five-party agreement, either. [00:17:17] Speaker 03: It doesn't say, go bulldoze the thing. [00:17:19] Speaker 03: It says, negotiate with them. [00:17:21] Speaker 02: I think that's right. [00:17:22] Speaker 02: And there's a provision about removal of gates. [00:17:25] Speaker 02: I'm sure they'll argue about that. [00:17:27] Speaker 02: But that's all in the five-party agreement. [00:17:29] Speaker 02: The United States is not a party to it. [00:17:30] Speaker 02: And the Reform Act does not incorporate the whole thing. [00:17:32] Speaker 02: And it doesn't incorporate the specific parts. [00:17:34] Speaker 04: It says that facilities will be modified as necessary, up to and including demolition. [00:17:38] Speaker 02: Right. [00:17:40] Speaker 02: And it mentions that the removal of the gates of the Lemon Avenue terminal. [00:17:45] Speaker 02: Again, that's the Five Parties Deal. [00:17:47] Speaker 02: That's not the United States' deal. [00:17:49] Speaker 02: It's not mandated by the Reform Act. [00:17:51] Speaker 02: And the United States just can't be liable for $133 million when it doesn't direct the city of Dallas to do the thing the city of Dallas decided to do. [00:17:59] Speaker 02: after plaintiffs stop hanging. [00:18:00] Speaker 04: Well, as you pointed out originally, if you take out of law rob the incorporation of the contract, the entire case falls. [00:18:11] Speaker 02: I think that's right. [00:18:12] Speaker 02: And it doesn't incorporate the whole contract. [00:18:14] Speaker 02: It selectively enacts into federal law provisions, some of which parallel the contract, but not the language you mentioned about potential removal and up to including condemnation or demolition. [00:18:28] Speaker 02: specifically reference and incorporate the language in the agreement talking about the plaintiff's case. [00:18:33] Speaker 02: So the United States' role here was one that reformed and relaxed the right amendment restrictions, loosened them, but did not mandate and target plaintiff's property and leases. [00:18:57] Speaker 05: May it please the Court, Roger Marzullo appearing on behalf of Club Terminal Partners in Virginia Aerospace. [00:19:05] Speaker 05: The trial court correctly found that a Lucas-type categorical taking had occurred in this case. [00:19:13] Speaker 03: Go back for one moment to the things we've been talking about earlier. [00:19:16] Speaker 03: It is part of your theory that the government in the 2006 legislation took away the gates that your [00:19:27] Speaker 03: client was otherwise entitled to under the leases? [00:19:31] Speaker 05: That was part of the statutory requirement, Your Honor. [00:19:34] Speaker 05: Section 5A of the Reform Act requires that Dallas reduce from 32 to 20 the number of gates at Love Field. [00:19:45] Speaker 03: And that was. [00:19:46] Speaker 03: Did your client have a right under its agreements with the city of Dallas to a particular number of gates? [00:19:52] Speaker 05: No. [00:19:53] Speaker 05: There was no discussion of gates, Your Honor. [00:19:56] Speaker 05: My client had a ground lease. [00:19:58] Speaker 05: It actually had been the original Braniff Airlines lease, which allowed the conduct of air transportation services. [00:20:06] Speaker 05: So it actually had been an airline lease originally. [00:20:10] Speaker 05: It did not speak to the number of gates that were allowable under the terminal agreement, more or less. [00:20:17] Speaker 03: Well, then how could it be a taking to change the number of gates or to take away the gates? [00:20:21] Speaker 05: The taking, Your Honor, was the [00:20:25] Speaker 05: determination, the requirement, first of all, under 5A, that Dallas manage Love Field in accordance with the five-party contract, the contract of July 11, 2006. [00:20:40] Speaker 05: Section 5D speaks to the removal of gates at the Lemon Avenue facility. [00:20:49] Speaker 05: Lemon Avenue is where Love Terminal was located. [00:20:54] Speaker 05: The removal of gates at the Lemon Avenue facility, Lovefield, quote, as required by this act. [00:21:03] Speaker 03: Well, so, but if you didn't have a right to have the gates there in the first place, how could the direction to take away the gates be a taking? [00:21:10] Speaker 05: No, no. [00:21:11] Speaker 05: The gates were allowable. [00:21:13] Speaker 05: The terminal had been constructed, Your Honor, and was existing, and had been used over time. [00:21:21] Speaker 05: as an airline terminal. [00:21:24] Speaker 05: It was a second airline terminal being used at Love Field. [00:21:29] Speaker 05: It was allowable, but there was nothing in the lease that said you get six gates or you get 16 gates or you get 10 gates. [00:21:36] Speaker 03: So the right to the gates isn't itself property. [00:21:40] Speaker 05: The right to construct a terminal, to operate that terminal, was part of the property right. [00:21:48] Speaker 05: Now, the overall master plan, the Love Field [00:21:51] Speaker 05: master plan that was being redeveloped. [00:21:53] Speaker 05: That was the subject of the five-party agreement of July 11, 2006. [00:21:57] Speaker 05: It required demolition of the partner's terminal and construction of a 20-gate terminal at the location that the main terminal is actually existing now. [00:22:16] Speaker 05: And we know, as a matter of fact, from [00:22:19] Speaker 05: The city of Dallas, the case of city of Dallas versus Delta Airlines, the Fifth Circuit decided recently that those gates sold in 2014 for $60 million apiece. [00:22:32] Speaker 05: Two of them sold from United Airlines to Southwest. [00:22:35] Speaker 05: $60 million apiece. [00:22:37] Speaker 05: We know from the record that the new terminal cost $519 million. [00:22:44] Speaker 05: Now, what was the federal involvement? [00:22:46] Speaker 05: The government keeps saying, [00:22:48] Speaker 05: Why Dallas could have done this on their own? [00:22:50] Speaker 05: Well, they couldn't because of the Antitrust Act, because of federal preemption of air transportation in this country. [00:22:59] Speaker 05: In order to proceed with the redevelopment of Lovefield, which has now taken place, the city of Dallas was required to get FAA approval. [00:23:09] Speaker 05: So what does Section 5C of the Reform Act say? [00:23:13] Speaker 05: It says that [00:23:16] Speaker 05: The administrator of FAA, the secretary of transportation, shall take no action that is inconsistent with the July 11, 2006 Five-Party Agreement. [00:23:28] Speaker 05: It specifically calls out the Five-Party Agreement. [00:23:31] Speaker 05: So if you take all these sections together, all the sections of Section 5, and you take the factual circumstance that Congress had asked the local entities [00:23:43] Speaker 05: the cities of Dallas, Fort Worth, and the DFW airport authority to come up with a so-called local solution, propose that to Congress. [00:23:52] Speaker 05: They did get together. [00:23:53] Speaker 05: They signed a five-party agreement. [00:23:55] Speaker 05: They said, here is our local solution. [00:23:57] Speaker 05: We're going to take out 12 gates. [00:24:00] Speaker 03: But where were those gates going to come from? [00:24:02] Speaker 03: Kennedy-Put aside the question of whether your client had a right to gates, which you seem to agree they didn't. [00:24:08] Speaker 03: All the five-party agreement says is that... May I clarify, Your Honor? [00:24:12] Speaker 05: They had the absolute right to construct a terminal, a terminal containing gates. [00:24:19] Speaker 03: What I said is that the lease did not... Let me finish my question. [00:24:23] Speaker 03: Oh, certainly, Your Honor. [00:24:24] Speaker 03: Put aside the gate question. [00:24:27] Speaker 03: Your theory is that Section 5 of this five-party agreement is incorporated into Federal law by the 2006 statute. [00:24:35] Speaker 03: But all that says is that Dallas is going to negotiate with your clients to acquire the lease, and if necessary, to do it by condemnation. [00:24:51] Speaker 03: Let's take the first part of that. [00:24:53] Speaker 03: If the federal government says to Dallas, please negotiate with these people to acquire a lease, that's not a taking, right? [00:25:00] Speaker 05: Well, I'm not sure the word negotiate, Your Honor, is in that agreement. [00:25:03] Speaker 05: I believe the word is acquire. [00:25:05] Speaker 05: that the city of Dallas shall acquire the lease up to and including condemnation and shall demolish the gates as soon as practicable so that they may never again be used. [00:25:17] Speaker 03: How can it be a taking to tell somebody to acquire something? [00:25:21] Speaker 03: I don't understand that. [00:25:22] Speaker 03: That doesn't say acquire without compensation or acquire involuntarily. [00:25:27] Speaker 03: I mean, it just says acquire. [00:25:29] Speaker 05: Yes. [00:25:29] Speaker 05: So I would focus on the language requiring demolition of the gates so that they may never again be used. [00:25:35] Speaker 05: for air passenger service. [00:25:37] Speaker 05: Dallas was ordered by the Reform Act, was required by Section 5 of the Reform Act. [00:25:42] Speaker 03: Let's suppose the contract said, City of Dallas is directed to negotiate with your client to acquire the gates. [00:25:50] Speaker 03: That wouldn't be a take, right? [00:25:55] Speaker 05: Well, no, it doesn't sound like, because shell negotiate doesn't mean that my client has to agree to anything. [00:26:03] Speaker 03: And directing them to do it by condemnation, is that a take? [00:26:10] Speaker 05: It is in this instance, Your Honor, the City of Dallas did, the week after the passage of the Reform Act, adopt a resolution of condemnation. [00:26:22] Speaker 05: How did they value the property? [00:26:23] Speaker 05: They valued it at zero. [00:26:25] Speaker 05: Why? [00:26:26] Speaker 05: Because air transportation service was no longer an allowable use on that property. [00:26:33] Speaker 05: So in point of fact, as part of the overall redevelopment of Lovefield, the gates had to be reduced to 20. [00:26:43] Speaker 05: That's explicit in Section 5A. [00:26:46] Speaker 05: The Lovefield had to be managed. [00:26:49] Speaker 04: At that time, your client was in rears on the lease, right? [00:26:52] Speaker 05: No, Your Honor, absolutely not. [00:26:54] Speaker 05: My client continued to pay $1.8 million a year in carrying costs [00:27:00] Speaker 05: for two years after the passage of the Reform Act, and then finally said, look. [00:27:07] Speaker 05: And meanwhile, the redevelopment was going forward. [00:27:11] Speaker 05: And the client said, look, if I can't use my property, why am I continuing to pay rent and carrying costs? [00:27:20] Speaker 03: Why didn't you insist that they take the property by condemnation and then litigate the value of the property? [00:27:27] Speaker 05: Because we think that the City of Dallas was correct, that the Reform Act prohibited our clients from continuing their business because, as I indicated, Section 5D said, talks about the removal of the Act. [00:27:45] Speaker 05: This is the one that talks about no Federal funds shall be used in removal of the gates at the Lemon Avenue facility as required by this Act. [00:27:56] Speaker 05: That's a Federal statute. [00:27:57] Speaker 05: So to have litigated with the city of Dallas saying, oh, no, you actually don't have to remove those gates, as Section 5D says, and you actually don't have to proceed with the reduction to 20 gates, as the statute says, and really we can continue. [00:28:17] Speaker 05: This is an ongoing, viable, separate terminal that we can operate. [00:28:24] Speaker 05: I think that would have been a frivolous argument, quite frankly. [00:28:29] Speaker 05: So the trial court. [00:28:31] Speaker 03: What exact language in the 2006 legislation do you rely on as incorporating the five-party agreement? [00:28:38] Speaker 05: Well, I hesitate to use the word incorporation. [00:28:42] Speaker 05: I don't think that's exactly the right term. [00:28:46] Speaker 05: That's the effect, however. [00:28:48] Speaker 05: Well, it's the effect. [00:28:49] Speaker 05: When Congress says you shall. [00:28:50] Speaker 04: I mean, for your theory. [00:28:53] Speaker 05: You shall manage Love Field in accordance with contractual obligations. [00:28:57] Speaker 05: Quite frankly, and I think the Court was asking about this, note that the sentence has two mandates. [00:29:06] Speaker 05: It says the City of Dallas shall allocate dates in accordance with the five-party agreement and shall manage Love Field in compliance with the July 11th agreement. [00:29:21] Speaker 05: So those are two separate mandates, so it's not just about gate allocations. [00:29:25] Speaker 05: But the entirety of Section 5 is to utilize the local agreement, what Congress asked the local parties to come up with, and what they brought to Congress through the Senator Hutchison of Texas, as to the way in which they would agree to [00:29:51] Speaker 05: the phasing out of the right amendment in return for limiting the number of flights that could go out of Love Field. [00:30:00] Speaker 05: And the way that limitation took place was to limit the number of gates. [00:30:03] Speaker 05: You can get 10 flights out of a gate, so 10 times 20 limits you to 200 flights per day. [00:30:10] Speaker 05: That's a limitation on Love Field. [00:30:12] Speaker 05: That would have been an antitrust violation, as the district court found. [00:30:16] Speaker 05: It would have, it certainly would not have been allowable. [00:30:20] Speaker 03: under the Air Transportation Act had Congress not authorized and required the FAA not only to... The regulatory taking theory here rests on a notion that your client could reasonably anticipate the repeal of the right amendment, right? [00:30:39] Speaker 03: And the calculation of damages was based on that theory. [00:30:44] Speaker 03: But by effectively reaffirming the right amendment, [00:30:49] Speaker 03: in the 2006 legislation that that somehow constituted regulatory taking. [00:30:54] Speaker 03: Is that correct? [00:30:55] Speaker 05: Not entirely, Your Honor. [00:30:56] Speaker 05: You've sort of made two points. [00:30:59] Speaker 05: There are two expectations, I suppose, that we should talk about. [00:31:02] Speaker 05: The so-called reasonable expectations component of the pencentral analysis is tested at the time of purchase. [00:31:11] Speaker 03: At the time of purchase... Let me put it this way. [00:31:13] Speaker 03: Suppose we [00:31:15] Speaker 03: were to reject the theory that you rely on and that the Court of Federal Claims adopted, that somehow it was reasonable for you to anticipate repeal of the right amendment, and that somehow the 2006 legislation in continuing the right amendment was a take. [00:31:32] Speaker 03: Let's assume that we conclude that that is not a viable theory. [00:31:36] Speaker 05: If I may, Your Honor, that was not the theory I was going to expound, but rather that- No, no, but listen to me. [00:31:43] Speaker 03: assumed that that theory, which is part of what the Court of Federal Claims said, is incorrect, and that we disagree with the Court of Federal Claims with respect to that theory. [00:31:54] Speaker 03: What is left here? [00:31:56] Speaker 05: The Court of Federal Claims relied on the theory that the reasonable expectation tested at the time of purchase was to conduct an air transportation business. [00:32:07] Speaker 05: And Love Terminal Partners invested about $70 million [00:32:12] Speaker 03: in reliance on the expectation that there are damages rested on the notion that the right amendment would be repealed, right? [00:32:20] Speaker 05: Right. [00:32:20] Speaker 05: Well, now we're going to damages. [00:32:22] Speaker 05: That's an entirely different issue. [00:32:23] Speaker 03: That's a question. [00:32:24] Speaker 03: How can you get damages for something which wasn't a taking? [00:32:29] Speaker 05: The taking, the reasonable expectations element of Penn Central is that you could conduct an air transportation business. [00:32:38] Speaker 05: Right amendment, no right amendment. [00:32:40] Speaker 05: That's what was taken. [00:32:41] Speaker 05: That's the destroyed expectation. [00:32:45] Speaker 05: Valuation, then, looks at what did the market anticipate in 2006 at the time of the taking. [00:32:54] Speaker 05: And we were the only parties to present valuation testimony. [00:32:58] Speaker 05: We were the only party to present expert testimony on airport gate demand, and the Court relied on that expert testimony and said, based [00:33:10] Speaker 05: Debra Meehan's expert report that the, by mid-2005, the market anticipated that the Right Amendment would be repealed. [00:33:23] Speaker 05: In fact, American Airlines announced that they were opening a gate at Love Field because they anticipated the repeal of the Right Amendment. [00:33:31] Speaker 05: The, in mid-May of 2006, the city of Dallas, [00:33:40] Speaker 05: put out a study on what would be the impact of the repeal of the Right Amendment. [00:33:45] Speaker 05: And, of course, on October 13th, the Reform Act actually went into effect. [00:33:52] Speaker 05: So there was great anticipation that the Right Amendment, which was no longer necessary because DFW is one of the busiest airports in the world and no longer needs protection from this smaller airport at Love Field. [00:34:07] Speaker 05: which is dominated by Southwest. [00:34:09] Speaker 05: Southwest has 97% of the flights out of that airport. [00:34:15] Speaker 00: Thank you. [00:34:16] Speaker 00: Thank you, Your Honor. [00:34:20] Speaker 00: Three minutes of rebuttal. [00:34:23] Speaker 02: Thank you, Your Honor. [00:34:25] Speaker 02: I'll start with the last point here. [00:34:26] Speaker 02: Reasonable investment backed expectations. [00:34:30] Speaker 02: Their theory is that they had reasonable expectations to build this 16-gate terminal [00:34:36] Speaker 02: that could fly anywhere in the United States. [00:34:39] Speaker 02: And that's what the CFC's reasonable investment backed expectations is based on and the calculation of damages. [00:34:45] Speaker 02: And that is not a reasonable expectation because that was barred since 1980 by the Wright Amendment. [00:34:52] Speaker 02: They invested in 1999. [00:34:54] Speaker 02: You cannot have a reasonable investment backed expectation that the Wright Amendment simply was not going to be on the books. [00:34:59] Speaker 02: We actually know what happened. [00:35:01] Speaker 02: The Reform Act comes along and it relaxes the Wright Amendment but doesn't repeal it immediately. [00:35:06] Speaker 02: And there can't be, for the reasons we've said in our brief, a reasonable expectation that federal law will be changed in a way that makes your speculative investment on an airline terminal. [00:35:16] Speaker 04: And whose testimony was it that established that particular investment back to expectation you just described? [00:35:23] Speaker 04: I think that was- 16-gauge flying anywhere. [00:35:25] Speaker 02: I don't have the page. [00:35:26] Speaker 02: I think that was Mr. Nall's testimony. [00:35:28] Speaker 02: They did a study in 2002, which post-dates, sorry, 2008, which, sorry. [00:35:36] Speaker 02: The study post-dates their complaint in this case and looked at what the value would be of a 16-gate fly-anywhere terminal. [00:35:45] Speaker 02: There's nothing in the record that predates the Reform Act that shows that value. [00:35:52] Speaker 02: I also want to touch very quickly on 5B of the Reform Act. [00:35:55] Speaker 04: A flying anywhere terminal would require the repeal of the right amendment, right? [00:35:59] Speaker 02: Entirely, right. [00:36:00] Speaker 02: And that didn't happen immediately, and definitely didn't happen before they made their investments. [00:36:06] Speaker 02: And so they cannot have a reasonable. [00:36:07] Speaker 03: So suppose we were to agree with you. [00:36:10] Speaker 03: that the notion that the right amendment would be repealed was not something that they could rely on, that the 2006 Act wasn't a taking in so far as it continued for a period of the year as the right amendment. [00:36:23] Speaker 03: What is left, according to your understanding, of their case? [00:36:26] Speaker 02: What's left then, I think, is their physical demolition argument. [00:36:31] Speaker 03: Because the regulatory taking was rested entirely on the notion of the repeal of the right amendment? [00:36:36] Speaker 02: I think so. [00:36:36] Speaker 02: I think that's their reasonable investment-backed expectation. [00:36:38] Speaker 02: I think the court should look at the other factors too, economic impact. [00:36:42] Speaker 02: Their investment had already failed by this point. [00:36:44] Speaker 02: Their legend had gone bankrupt. [00:36:45] Speaker 02: No airline had paid any rent for their terminal for five years before the Reform Act was passed. [00:36:54] Speaker 02: Turning really quickly back to 5B, it references the Lemon Avenue facility, but it says no federal funds may be used to remove gates there. [00:37:02] Speaker 02: So that's a statement by Congress that we are not doing the removal. [00:37:06] Speaker 02: Don't use our money to do it. [00:37:07] Speaker 02: We're not mandating it. [00:37:09] Speaker 02: Don't bill us for it. [00:37:10] Speaker 02: You, city of Dallas, if you want to do that, that's on you. [00:37:13] Speaker 02: And so I think 5B strongly supports our argument that there is no taking here. [00:37:17] Speaker 03: And finally, did they present any testimony that if the right amendment were continued, that their terminal would have value [00:37:33] Speaker 02: I don't recall if they testified on that. [00:37:39] Speaker 02: I think the record shows they were receiving some monies from renting to a car dealership and to a limousine service. [00:37:47] Speaker 02: There's a chart that we cited in our brief that shows per year. [00:37:52] Speaker 03: So do you present any testimony that if the right amendment continued that running the terminal for commercial aviation was a feasible thing to do? [00:38:02] Speaker 02: I don't recall any testimony on that. [00:38:03] Speaker 02: In any event, their whole taking theory is based on a federal action here that is just the Reform Act. [00:38:12] Speaker 02: So their theory is the Reform Act is what took their property. [00:38:16] Speaker 02: It would diminish their property sufficiently for taking. [00:38:19] Speaker 02: It's what mandated demolition. [00:38:21] Speaker 02: It didn't do any of those things. [00:38:22] Speaker 02: It loosened the restrictions. [00:38:23] Speaker 02: You could fly to more places. [00:38:25] Speaker 02: And after eight years, you could fly anywhere on any size plane. [00:38:30] Speaker 02: Unless the court has any further questions, we ask the judge to be entered for the United States. [00:38:32] Speaker 02: Direct the CFC to enter judgment for the United States in reverse. [00:38:36] Speaker 00: Thank you. [00:38:36] Speaker 00: We thank both parties and the case is submitted.