A & D Auto Sales, Inc. v. United States
748 F.3d 1142
| Fed. Cir. | 2014Background
- GMs and Chrysler’s 2009 bankruptcies led to terminations of former dealers' franchises, alleged as takings under the Fifth Amendment.
- Government conditioned financial assistance on aggressive dealer terminations and endorsed narrowing dealer networks to improve viability.
- New GM and New Chrysler were formed with government ownership; many terminated dealers’ franchises transferred or left as unsecured claims.
- Complaints allege regulatory takings (not physical) and seek compensation for loss of franchise rights under state and federal law.
- Claims Court denied dismissals; government appealed interlocutorily; court today reviews at preliminary stage with limited factual record.
- Court holds pleading deficiencies exist but remands with leave to amend to plead but-for economic loss and value of franchises.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did plaintiffs plead a compensable taking of franchise rights? | Franchise contracts are property; government coercively induced terminations. | Bankruptcy law allows rejection of contracts; preexisting interests may inhere in title but action here predates and damages may be non-compensable. | Pleading insufficient; leave to amend requested. |
| Can government action directed at a third party give takings liability? | Financing condition coerces dealers’ rights by pressuring terminations. | No per se rule; depends on coercion and agency-like control. | Coercion issue premature; no ruling on takings liability. |
| Is economic impact shown to support a regulatory or categorical taking? | But-for value of franchises diminished by government action. | Bankruptcy-driven losses complicate showing; but-for economic loss not pled. | But-for loss not pled; deficiency but remand for amendment. |
| Should the case be dismissed or amended to cure deficiencies? | Amendment should cure pleading defects. | Dismissal may be appropriate if defects persist. | Leave to amend granted; remand for curative amendments. |
| What about investment-backed expectations under Penn Central? | Expectations in franchise continuance reliance supported a taking. | Reasonableness and context of expectations not fully developed here. | Not decided; to be weighed on remand with fact-specific inquiry. |
Key Cases Cited
- Lucas v. S.C. Coastal Council, 505 U.S. 1003 (1992) (categorical takings framework; all economic use remaining)
- Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104 (1978) (three Penn Central factors for takings analysis)
- Lingle v. Chevron U.S.A. Inc., 544 U.S. 528 (2005) (regulatory takings test and absence of per se rule)
- Rose Acre Farms, Inc. v. United States, 373 F.3d 1177 (Fed. Cir. 2004) (application of takings principles to intangible property)
- Maritrans, Inc. v. United States, 342 F.3d 1344 (Fed. Cir. 2003) (takings analysis for corporate property interests)
- Turney v. United States, 126 Ct.Cl. 202 (1953) (coercive government influence leading to taking in certain contexts)
- Langenegger v. United States, 756 F.2d 1565 (Fed. Cir. 1985) (friendly persuasion vs coercion; limits on government coercion theory)
- Forest Properties, Inc. v. United States, 177 F.3d 1360 (Fed. Cir. 1999) (but-for economic use/value required to prove regulatory taking)
- Dura Pharm., Inc. v. Broudo, 544 U.S. 336 (2005) (pleading standards; economic loss required to be pleaded with proximate causation)