Thеse appeals arise from two takings suits related to the 2009 bankruptcies of General Motors Corporation (“GM”) and Chrysler LLC (“Chrysler”). The plaintiffs are former dealers of those companies whose franchises were terminated in the bankruptcies. The plaintiffs allege that these terminations constituted a taking because the government required them as a condition of its providing financial assistance to GM and Chrysler and/or to the companies that succeeded them in the bankruptcies. The government moved to dismiss the suits for failure to state a claim. The United States Court of Federal Claims (“Claims Court”) denied dismissal, and the government brought these interlocutory appeals.
Because we lack the benefit of a fully developed factual record, we do not at this stage address evеry issue the government raises. As to the issues we do address, we reject the government’s arguments for dismissal. While we hold that the complaints are deficient because they do not sufficiently allege that the economic value of the plaintiffs’ franchises was reduced or eliminated as a result of the government’s actions, we nonetheless affirm the Claims Court’s decision to deny dismissal at this point in the proceedings. The proper remedy is to grant the plaintiffs leave to amend their complaints to include the necessary allegations, and on remand the Claims Court shall do so.
BacKground
At this stage in the proceedings, we accept the dealers’ well-pleaded factual allegations as true. Ashcroft v. Iqbal,
I
The bankruptcies of GM and Chrysler took place in the historic recession and credit crisis of 2008-09. GM and Chrysler were in serious financial difficulty, as loans to automobile dealers and consumers had come to an “abrupt halt” and sales “plummeted.” A & D J.A. 78.
The government’s first assistance to the automakers consisted of stopgap loans ($13.4 billion to GM, $4 billion to Chrysler) intended to keep the companies from having to cease operations pending talks over more comprehensive assistance. In connection with these loans, the government and the automakers entered formal agreements setting forth the conditions of the government’s assistance. One condition was that the companies would submit viability plans demonstrating that they could achieve financial stability with the help of the government funds. GM and Chrysler submitted their viability plans in February 2009 as required.
The government rejected GM and Chrysler’s initial viability plans and called for the submission of revised proposals. Executive branch officials in charge of overseeing thе financial assistance suggested that the companies adopt various changes to improve their long-term viability, such as focusing on lighter, more fuel-efficient vehicles and (in GM’s case) more quickly reducing the number of brands. The government specifically suggested that the automakers should significantly reduce the number of dealers within their franchise networks to improve their viability. Although the automakers were already reducing their dealer ranks over time and GM’s initial viability plan had included additional dealer terminations, the government determined that the current and proposed pace of terminations was too slow, and that the companies’ large dealer networks were an obstacle to viability. The government advised the companies they should expand their terminations and that they might accomplish the terminations expeditiously by opting to reject the franchise agreements in bankruptcy proceedings.
The companies eventually adopted the government’s suggestions for a bankruptcy filing, reduction of their deаler networks, and other changes. Each filed for Chapter 11 reorganization, and the government made available an additional $38 billion in financing ($30 billion in loans and equity investments to GM, $8 billion in loans to Chrysler) for restructuring the companies. After approval by the bankruptcy court under 11 U.S.C. § 363, the old GM and Chrysler entities sold most of their operating assets to newly created entities commonly called “New GM” and “New Chrysler” — in which the federal government, and other entities, acquired specified own
II
The first of these two suits was filed in September 2010 by several terminated GM and Chrysler dealers. Suing on behalf of themselves and a putative class of others similаrly situated, the plaintiffs alleged that the government had effected a taking of their dealer franchises (including rights conferred by state law) by “coerci[ng]” the automakers — that is, by requiring dealer terminations as a condition of financial assistance. Colonial J.A. 29; see also A & D J.A. 20. The plaintiffs alleged that this constituted a regulatory taking. They did not allege a physical taking.
In February 2011, a separate group of former Chrysler dealers brought a second suit in the Claims Court. The two complaints were largely identical in substance.
Both cases were assigned to the same judge of the Claims Court. Shortly after amended complaints were filed, the government moved pursuant to Claims Court Rule 12(b)(6) to dismiss each complaint for failure to state a claim.
After the Claims Court denied dismissal, the government moved the court to certify an interlocutory appeal under 28 U.S.C. § 1292(d)(2). The government asked the Claims Court to certify two questions: whether the complaints failed to state a claim upon which relief could be granted, and whether bankruptcy court findings precluded the suit. The Claims Court certified the first question only. The government then filed petitions for interlocutory appeal with this court. We granted the petitions, agreeing “that the criteria for interlocutory appeal ... are met and that these petitions should be granted and heard on the merits by this court.” Order Granting Petitions for Interlocutory Appeal 6, November 30, 2012, ECF No. 2-3. We review the denial of the government’s motions to dismiss de novo. See, e.g., First Med. Health Plan, Inc. v. Vega-Ramos,
Discussion
I
We address initially the scope of our review in this case. Our appellate jurisdiction is ordinarily limited to the Claims Court’s final decisions. See 28 U.S.C. § 1295(a)(3). But our jurisdiction extends to certain interlocutory orders as well pursuant to § 1292(d)(2). In interlocutory appeals, the scope of the issues is “limited to the order appealed from, but not to the specific stated question” articulated by the Claims Court. 16 Charles Alan Wright, Arthur R. Miller, & Edward H. Cooper, Federal Practice and Procedure § 3929, at 454 (3d ed.2012). We may consider “any question reasonably bound up with the certified order, whether it is antecedent to, broader or narrower than, or different from the question specified by the [Claims Court].” Id. at 457; see Sky Techs. LLC v. SAP AG,
The facts of this case are uniquе and raise issues that have not been decided before, and the record at this stage consists of little more than the plaintiffs’ allegations. As discussed below, we decline to address some questions asked at this preliminary stage without the benefit of a full factual record. But we conclude that other issues are ripe for decision.
II
The Takings Clause of the Fifth Amendment guarantees just compensation whenever private property is “taken” for public use. U.S. Const, amend. V. The plaintiffs do not allege, and their complaints do not assert facts supporting an allegation of, a “direct government appropriation or physical invasion of [their] private property.” Lingle v. Chevron U.S.A. Inc.,
Government action that does not directly appropriate or invade, physically destroy, or oust an owner from property but is overly burdensome may be a regulatory taking. “The general rule at least is that while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.” Penn. Coal Co. v. Mahon,
The Supreme Court has treated certain regulatory actions as “categorical” takings. A categorical taking occurs where regulations “compel the property ownеr to suffer a physical invasion of his property” or “prohibit all economically beneficial or productive use.” Lucas v. S.C. Coastal Council,
The Supreme Court has mainly applied the categoricаl test to regulatory takings of real property. See Lucas,
A
We begin our analysis in this case with the alleged property interest, an issue equally relevant to alleged categorical takings and to takings governed by the Penn Central analysis. There is no dispute that the plaintiffs’ franchise agreements are property for purposes of the Takings Clause. In general, “[v]alid contracts are property, whether the obligor be a private individual, a municipality, a state, or the United States.” Lynch v. United States,
The government argues that the plaintiffs nonetheless lack a compensable property interest. As the government points out, during the lifetime of the аgreements, the law of bankruptcy has always allowed a trustee or debtor-in-possession to reject executory contracts as GM and Chrysler did here. See generally 11 U.S.C. § 365(a). The government argues that this principle of bankruptcy law “inhere[d]” in the franchise agreements, and that termination of the agreements therefore did not concern a compensable property interest of the plaintiffs. Gov’t’s Colonial Br. 13; Gov’t’s A & D Br. 13.
We reject this argument. It is true that “background principles” of law may “inhere” in a plaintiffs title to his property and thereby limit his ability to recover for a taking. Lucas,
If a challenged restriction was enacted before the property interest was acquired, the restriction may be said to inhere in the title.
Here, the plaintiffs do not dispute that the bankruptcy law allowing trustees or debtors-in-possession to reject executo-ry contracts predated the creation of their franchise agreements. Thus the plaintiffs could have no compensable property interest if the government action were limited to the bankruptcy court’s approval of the terminations. The government’s problem is the alleged government action hеre is not the bankruptcy court’s approval of the franchise terminations (a theory that the plaintiffs have abandoned). The plaintiffs allege that the government action was requiring dealer terminations as a condition of financial assistance to the automakers. The challenged government action did not predate the acquisition of the plaintiffs’ interests. The plaintiffs’ franchise agreements are valid and compensable property interests.
B
We turn next to whether there has been government action sufficient to invoke a takings analysis either under Lucas or Penn Central. The question here is whether the government is liable for a taking where it offers financing to a third party as a way of inducing or requiring action that affects or eliminates the property rights of the plaintiff. We conclude that such actions may give rise to takings liability depending on the circumstances. There is no per se rule either precluding or imposing liability when the government instigates action by a third party. But two broad principles drawn from the cases may guide the analysis.
First, in some circumstances, government action directed to a third party does not give rise to a taking if its effects on the plaintiff are merely unintended or collateral. See generally Omnia Comm. Co. v. United States,
In summary, in the eases relied on by the government, the effect of the government action upon the plaintiff was merely collateral or unintended or the action affected a general class. Here, the complaints allege that the effect of the government action on the plaintiffs’ property was neither collateral nor unintended and the action affected only Chrysler and GM dealers. The complaints allege that dealer terminations were the direct and intended result of the government’s actions directed to Chrysler and GM dealers because the financing was expressly conditioned on the terminations. This case is therefore different from the cases on which the government relies.
A second principle applies where the government’s action was direct and intended. In such circumstances, the government may be liable if the third party is acting as the government’s agent or the government’s influence over the third party was coercive rather than merely persuasive. See Tex. State Bank v. United States,
The question of coercion is more complex. While the complaints here allege that the governmеnt coerced GM and Chrysler into terminating the franchise agreements, they do not allege that the government either by statute, regulation, or direct order required the terminations.
Our predecessor court found coercion in Turney v. United States, where the government induced the Philippines to forbid exportation of certain military equipment within its borders that the United States
In Langenegger v. United States, by contrast, this court concluded that the government’s influence over an expropriation by the El Salvadoran government was not coercion but “friendly persuasion.”
the United States cannot be held responsible merely because its activity is that of “friendly” persuasion regarding general policy, common among allies, or when the sole benefit to the United States is the political stability of its neighbors. Diplomatic persuasion among allies is a common occurrence, and as a matter of law, cannot be deemed sufficiently irresistible to warrant a finding of [coercion], however difficult refusal may be as a practical matter.
Id. at 1572.
The plaintiffs have not alleged coercion flowing from an existing relationship between the government and a third party that gave the government the ability to exercise general control over the third party’s action. Rather they allege monetary inducement designed to compel specific actions. The only appellate takings precedent cited to us involving monetary inducement of third pаrty action is B & G Enterprises v. United States,
The question here is whether the automakers were coerced by the government’s offer of financial assistance.
In declining to decide the coercion issue on the present record, we can and do reject two arguments made by the government related to the issue of coercion.
First, the bankruptcy court’s findings do not estop the plaintiffs from arguing that the government coerced the automakers into action. Collateral estoppel only applies if “the issue [in the instant action] is identical to one decided in the first action.” In re Freeman,
Second, the government action in this case was not undertaken in a simply proprietary role. Proprietary government action typically involves bargaining with private actors for the provision or procurement of goods and services; the action is deemed proprietary even though the government may enter into the contractual relationship in pursuit of a larger governmental objective. See, e.g., St. Christopher Assocs., L.P. v. United States,
Yet the government’s purpose in requiring the dealer terminations may still be relevant to both the categorical takings and Penn Central analyses, as bearing on whether the government’s actions were regulatory in nature or were designed to protect the government’s financial interest in repayment. The government argues that in requiring a viability plan that included dealer terminations, it acted like a commercial lender, which would have ensured likely repayment of the assistance. See Gov’t’s Colonial Br. 25 (asserting that the government’s conditions were “the sort of arrangement that a private party might demand in similar circumstances”); Gov’t’s A & D Br. 23 (same). Concerns about securing repayment of government loans exist even in loan programs having a predominantly public purpose. See, e.g., United States v. Kimbell Foods, Inc.,
C
We turn next to the alleged economic impact of the government action. In order to establish а regulatory taking, a plaintiff must show that his property suffered a diminution in value or a deprivation of economically beneficial use. This is equally true under the categorical test of Lucas v. South Carolina Coastal Council and the Penn Central test. Lucas,
Thus, by necessity, proving economiс loss requires a plaintiff to show what use or value its property would have but for the government action. We have often rejected takings claims where plaintiffs failed to make such a showing. In Forest Properties, for example, we rejected a takings claim because the plaintiff “failed to introduce convincing evidence to show the amount, if any, by which the value of the relevant property ... was reduced.”
Since there can be no regulatory taking without a showing of but-for decline in value, a takings plaintiff must also allege sufficient facts in its complaint to show what use or value its property would have had. The Claims Court rules require “a short and plain statement of the claim showing that the pleader is entitled to relief.” R. Ct. Fed. Cl. 8(a)(2). This means the complaint must contain “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Iqbal,
In an analogous case, the Supreme Court found a securities fraud complaint deficient because it only alleged that the plaintiffs paid “artificially inflated purchase prices” for the defendant’s stock. See Dura Pharm., Inc. v. Broudo,
In this case, the government argues that the plaintiffs have failed to sufficiently plead economic loss, and that in reality the franchise agreements were worthless absent the government’s financial assistance to the automakers. We agree that the plaintiffs allegations are insufficient. The complaints contain no allegations regarding the but-for economic loss of value of the plaintiffs’ franchises from which to еstablish an economic loss. Absent an allegation that GM and Chrysler would have avoided bankruptcy but for the government’s intervention and that the franchises would have had value in that scenario, or that such bankruptcies would have preserved some value for the plaintiffs’ franchises, the terminations actually had no net negative economic impact on the plaintiffs because their franchises would have lost all value regardless of the government action. Having failed to include such allegations, the dealers fail to satisfy the pleading standards necessary to survive a motion to dismiss.
However, we must disagree with the government that the proper remedy is to dismiss the complaints. The proper remedy is rather to grant the plaintiffs leave to amend their complaints. The Claims Court rules liberally provide for amendments of the complaint after the filing of the defendant’s answer. See R. Ct. Fed. Cl. 15(a)(2) (“[A] party may amend its pleadings [before trial] only with the opposing party’s written consent or the court’s leave. The court should freely grant leave when justice so requires.”). Interpreting an analogous provision of the Federal Rules of Civil Procedure, the Supreme Court explained that this mechanism should be liberally allowed:
In the absence of any apparent or declared reason — such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc. — the leave sought shоuld, as the rules require, be “freely given.”
Foman v. Davis,
We think those principles support a grant of leave to amend in this case. The plaintiffs have failed to properly allege economic loss, but at oral argument in this court they disputed the government’s assertion that the franchises were valueless
D
Finally, the “distinct investment-backed expectations” of the plaintiffs are а factor of the Penn Central analysis that the parties have not addressed. See
While the parties do not address this factor in this appeal, it will necessarily be a feature of the Claims Court’s analysis under Penn Central. The Claims Court should engage in “an objective, but fact-specific inquiry,” id. at 1346, into the reasonableness of the plaintiffs’ expectation that their franchise agreements would be continued absent government action. We express no opinion on the proper analysis of this factor. It will be up to the Claims Court to weigh the reasonableness of the plaintiffs’ expectations in the first instance.
CONCLUSION
We conclude that the Claims Court properly declined to dismiss the plaintiffs’ complaints at this preliminary stage. While the plaintiffs’ allegations of economic loss are deficient in their present form, the deficiencies may be cured, and the Claims Court is instructed to grant the plaintiffs leave to make such curative amendments as may be necessary. Further proceedings must be consistent with this opinion.
REMANDED.
Costs
No costs.
Notes
. This opinion refers to the joint appendix in Nо. 2013-5019, A & D Auto Sales, Inc. v. United States, as the “A & D J.A.” The joint appendix in No.2013-5020, Colonial Chevrolet Co. v. United States, is referred to as the "Colonial J.A.” The government's briefs are referred to as "Gov’t’s A & D Br.” and "Gov’t’s Colonial Br.”
. Two provisions of the Bankruptcy Code are central to the bankruptcies at issue. 11 U.S.C. § 363 authorizes certain sales of a debtor’s assets. And 11 U.S.C. § 365 provides that a bankruptcy trustee "may assume or reject any executory contract or unexpired lease of the debtor.” Debtors-in-possession in chapter 11 bankruptcies, like GM and Chrysler, generally have a trustee’s powers. 11 U.S.C. § 1107.
. In addition to the plaintiffs’ franchise agreements, the Colonial complaint identified a handful of “distinct investment-backed expectation assets” including “real property,” “enhancements to real property,” "buildings,” “fixtures,” "specialized tools,” “signage,” and inventory of parts and vehicles. Colonial J.A. 32. It also identified intangible assets suсh as "debt collateralization and/or other specialized floor plan financing,” "blue sky,” and "good will.” Colonial J.A. 32. The complaint did not allege a taking of those assets, however. It simply identified them as evidence of the plaintiffs' “distinct investment-backed expectation[s]” in their dealership franchises. Colonial J.A. 32.
The complaint also identified two government actions (aside from the alleged requirement of dealer terminations in exchange for financing) that were alleged to be takings: (1) the actions of the bankruptcy court that approved the terminations, and (2) a federal law that allowed terminated dealers to seek reinstatement through arbitration. Each government action was alleged to be a taking independent of the others. However, the plaintiffs later dismissеd these claims.
. The government also moved to dismiss for lack of subject matter jurisdiction. It is not clear that the government presses that issue on appeal. In any event, we see no lack of subject matter jurisdiction in the Claims Court.
. In that sense, this case is distinguishable from Armstrong v. United States,
. This is not always true with respect to land use restrictions. See Palazzolo v. Rhode Island,
. To the extent the A & D plaintiffs suggest in their brief that the government "command[ed]” the terminations apart from the financing arrangement, A & D Br. 33 (internal quotations marks omitted), that suggestion is unsupported by the complaint and identifies no mechanism of such "command.'' For example, the plaintiffs have not made allegations based on the government's ownership interests in New GM and New Chrysler, which chose the particular franchise agreements to include in their acquisitions under 11 U.S.C. § 363, leaving the rest with Old GM and Old Chrysler.
. For present purposes we do not distinguish the Old and New companies. If that distinc-lion is significant, it may be explored on remand.