Palmyra Atoll is a tiny island in an empty portion of the Pacific Ocean. It is approximately 4.6 square miles in area and is located about 1100 miles south of Hawaii and 1400 miles north of Samoa. There is almost nothing else in between. As the Supreme Court aptly put it, “It is hard to conceive of a more isolated piece of land than Palmyra.”
United States v. Fullard-Leo,
During World War II, the United States established a naval base there, where it constructed an airstrip, a base camp, and a pier. After the war the United States sued to quiet title to Palmyra, but the Fullard-Leo family successfully opposed the effort and obtained fee simple title to the island.
Fullard-Leo,
I
Prior to the events at issue in this case, the plaintiffs obtained from the Fullard-Leo family the right to use certain facilities on Palmyra. The rights were conveyed through a series of contracts, beginning -with a contract in which the Fullard-Leo family granted the Palmyra Development Company the right to convey an exclusive license to establish a commercial fishing operation on the atoll. The Palmyra Development Company then entered into a licensing agreement with Palmyra Pacific Enterprises, L.L.C. That agreement granted Palmyra Pacific Enterprises the exclusive right to establish a commercial fishing operation on Palmyra and to use the island’s facilities for that purpose. Subsequently, Palmyra Pacific Enterprises assigned its rights to PPE Limited Partnership, which in turn assigned its rights to Palmyra Pacific Seafoods, L.L.C. (“PPS”).
The pertinent provisions of the contract between Palmyra Development Company and Palmyra Pacific Enterprises conveyed to Palmyra Pacific Enterprises “the exclusive right and license to occupy, use and enjoy” the base camp on the atoll as well as “the exclusive right to use the Small Boat Harbor,” and “the exclusive right to use one-half of the deep water dock.” The contract also granted a “Commercial Fishing License” purporting to give Palmyra Pacific Enterprises an exclusive right to fish in the waters surrounding Palmyra as well as a non-exclusive “Aircraft Runway License” for use of the island’s airstrip.
The plaintiffs assert that the right to establish a commercial fishing operation is valuable because Palmyra is surrounded by a 200-nautical-mile Exclusive Economic Zone (“EEZ”) from which foreign fishing vessels are excluded. Palmyra is the only place within the EEZ where it is practical to locate a commercial fishing operation. According to the plaintiffs, the exclusive use of the island and its airstrip affords a material competitive advantage over any competing fishing enterprises that might operate in the region.
In 2000, The Nature Conservancy, a non-profit entity, purchased much of the emergent land on Palmyra from the Ful-lard-Leo family. Beginning some time prior to July 2000, the Fish and Wildlife Service of the Department of the Interior began working with The Nature Conservancy to establish a nature preserve and eco-tourism camp at Palmyra. The plaintiffs allege that the government and The Nature Conservancy were concerned about the effect that PPS’s commercial fishing
On January 18, 2001, the Secretary of the Interior signed an order designating Palmyra’s tidal lands, submerged lands, and surrounding waters out to 12 nautical miles from the water’s edge as a National Wildlife Refuge. Subsequently, the Department of the Interior published a regulation providing for the management of the refuge. 66 Fed.Reg. 7660-01 (Jan. 24, 2001). The regulation states, in pertinent part:
We will close the refuge to commercial fishing but will permit a low level of compatible recreational fishing for bo-nefishing and deep water sportfishing under programs that we will carefully manage to ensure compatibility with refuge purposes.... Management actions will include protection of the refuge waters and wildlife from commercial fishing activities.
In March 2003, The Nature Conservancy conveyed 416 acres of the emergent land of Palmyra to the United States to be included in the refuge. It subsequently added 28 more acres to the conveyance.
In January 2007 the plaintiffs filed a complaint in the Court of Federal Claims alleging that the Interior Department regulation had “directly confiscated, taken, and rendered wholly and completely worthless” their property interests “embodied and reflected” in their licenses. The government moved to dismiss the complaint for failure to state a claim, and the court granted the motion.
The court noted that the Interior Department regulation was directed only to the “tidal lands, submerged lands, and waters” surrounding Palmyra, and that the Fullard-Leo family lacked authority to grant a license governing activities, including fishing, in those areas.
Palmyra Pac. Seafoods, L.L.C. v. United States,
II
The basic principles governing takings analysis are well settled and are not in dispute here. First, in order to have a cause of action for a Fifth Amendment taking, the plaintiff must point to a protectable property interest that is asserted to be the subject of the taking.
See
The parties disagree about the application of those general principles to the facts of this case. The plaintiffs argue they are entitled to compensation because the government’s regulation was targeted at their commercial fishing operation and “effectively transferred PPS’s property— its rights under the contract—back to PPS’s contractual counterparty, the politically favored and powerful Nature Conservancy.” The government, on the other hand, contends that it did not “take” any contract right of the plaintiffs and that any injury that the plaintiffs suffered as a result of the Interior Department regulation was a consequence of lawful government action and did not reflect the taking of any property right obtained by the plaintiffs through contract.
As a general matter, the government does not “take” contract rights pertaining to a contract between two private parties simply by engaging in lawful action that affects the value of one of the parties’ contract rights. The Supreme Court’s decision in
Omnia Commercial Co. v. United States,
The Court applied that framework the following year when it considered a Presidential order to appropriate a contract to build a ship under the Emergency Shipping Act. In that case,
Brooks-Scanlon Corp. v. United States,
[T]he orders given the builder show that expropriation of claimant’s contract and rights was intended. By its orders it put itself in the shoes of claimant andtook from claimant and appropriated to the use of the United States all the rights and advantages that an assignee of the contract would have had. The credit for, and advantages under the contract resulting from, payment of $419,500, made by claimant to builder were taken. The use of the plans and specifications for the construction of the ship as well as the benefit of inspection prior to the requisition date, August 3, 1917, were also taken over. The contract was not terminated. The direct and immediate result of the requisition orders and acts of the Fleet Corporation was to take from claimant its contract and its rights thereunder.
Id. at 120,
We applied the principles of those cases in our recent decision in Huntleigh USA Corp. v. United States, 525 F.3d 1370 (Fed.Cir.2008). In that case, a private company that had contracts to provide baggage and passenger screening in U.S. airports brought suit for a taking of its contract rights after Congress federalized the screening functions in 2002. The statute creating the Transportation Security Administration had the effect of terminating all of Huntleigh’s screening service contracts at U.S. airports. This court denied Huntleigh’s request for compensation. We held that the government does not “take” a party’s contract rights simply because its regulatory activity renders those contract rights valueless. Huntleigh conceded that the government did not actually assume its contracts, and for that reason we held that no takings claim could be predicated on a taking of the contracts. 525 F.3d at 1379.
In attempting to define the property right that was purportedly taken by the regulation at issue in this case, the plaintiffs have provided little beyond the general assertion that the Interior Department interfered with their “exclusive right to use Palmyra as a commercial fishing base.” They contend that “the contract entitled PPS to the exclusive occupation and use of certain lands of the atoll (e.g., the base camp),” and refer to a “right to use certain facilities on Palmyra as the base for its commercial fishing operation.” The problem with that argument is that the Interior Department’s regulation does not prohibit commercial fishing operations on Palmyra — it merely prohibits commercial fishing activity in the surrounding waters.
1
The fact that the government’s regulation of activities in the waters surrounding Palmyra may have adversely affected the value of their contract rights to engage in activities on shore is not sufficient to constitute a compensable taking. While at this stage of the proceedings we must accept the facts alleged in the complaint and draw all reasonable inferences in favor of the plaintiff,
Gould, Inc. v. United States,
Our decision in
Colvin Cattle Co. v. United States,
The plaintiffs rely on two of this court’s cases, but those cases are distinguishable. In
United Nuclear Corp. v. United States,
The court in
United Nuclear
noted that the economic impact of the Secretary’s action was to cause United to lose not only all of its investment in the mining operation, but also all of its prospects for profit.
The difference between that case and this one is dramatic. The Secretary’s
The second of the two cases on which the plaintiffs place their main reliance is
Cienega Gardens v. United States,
Under those circumstances, this court held that Congress’s actions constituted a taking of the owners’ property for which compensation had to be paid. The “distinct property interest” that was taken in
Cienega Gardens
was the developers’ “real property rights to sole and exclusive possession after twenty years and to convey or encumber their properties after twenty years.”
The plaintiffs’ “targeting” argument runs afoul of well-settled case law, as reflected in several decisions from the Supreme Court and this court. In
Omnia,
for example, the United States requisitioned the steel company’s entire production of steel plate for the year 1918 and “directed that company not to comply with the terms of [Omnia’s] contract.”
Similarly, in
Huntleigh,
III
There are two remaining issues that must be resolved. First, at oral argument, the plaintiffs asserted that the Interior Department regulation would interfere with their right to use the pier on Palmyra. In the trial court, however, the plaintiffs asserted that the government’s regulation did not affect activities on the “emergent lands or fixtures appurtenant thereto.” Because the question of the use of the pier does not appear to have been put into issue in the trial court, we have no reason to consider it here. Certainly there is nothing on the face of the regulation that suggests any restriction on the use of the pier, and if the plaintiffs were concerned about the use of the pier they could have obtained clarification as to the application of the regulation in that respect.
Second, the plaintiffs have raised a question as to whether the regulation affects the right of their fishing vessels to traverse the 12-mile zone surrounding Palmyra that is governed by the Interior Department regulation. In their complaint, the plaintiffs alleged that the Interior Department regulation “restricted public access to Palmyra ... thereby barring Plaintiffs from entering Palmyra.” The plaintiffs have not spelled out the property interest underlying that assertion in any detail. However, it can be interpreted as a claim that the government has denied them an easement of necessity relating to their contract-based interests on Palmyra.
An easement of necessity has been recognized as a compensable property interest. For example, in
Bydlon v. United States,
Our predecessor court applied the doctrine of necessity to another takings claim some years later, this time with respect to access to an island.
See Laney v. United States,
If defendant is correct, the just compensation clause of the fifth amendment has but little effect in protecting island property. Defendant is free to add islands to its system of parks, national seashores, recreational areas, and wildlife preserves, without cost to it. We could enter summary judgment for defendant solely on the admitted fact that the property allegedly taken is an island.
Id. at 148. The court noted the parallel between an island and a city block surrounded by public streets. In the latter case, the court explained, “if his access to his block on all four sides is cut off, that is a taking, and if authorized is compensable under the just compensation clause.” Id. at 149. In light of those precedents, a regulation that prevents a property owner from accessing private property would implicate a cognizable property interest for purposes of the Fifth Amendment.
In this case, the government responded to the plaintiffs’ claim by arguing in the trial court that “[t]he plain language of the notice does not prohibit plaintiffs’ ships from approaching Palmyra, and the plaintiffs have not alleged or provided evidence that even one of their ships was ever turned away from the refuge.” The plaintiffs did not contest that assertion or otherwise offer anything to suggest that the Interior Department had interpreted the regulation to prohibit access by fishing vessels to the plaintiffs’ facilities on Palmyra. There is nothing in the regulation that by its terms restricts the plaintiffs’ right to cross the refuge to reach their base of operation on the island. Absent any reason to believe the government interpreted the regulation to bar the plaintiffs from reaching their facilities, they have failed to make a sufficient allegation that the government has taken that right. We therefore have no occasion to decide whether the plaintiffs’ contract rights with regard to activities on the island carried with them the right of access to the island and whether a restriction on such access would have constituted a compensable taking.
AFFIRMED.
Notes
. Although the government characterizes the plaintiffs' claim as a right to engage in commercial fishing in the waters around Palmyra, the plaintiffs have made clear that their takings claim is not based on any claim of a right to fish in the EEZ or in the waters within 12 miles of Palmyra, but rather on their asserted right to operate a commercial fishing operation on Palmyra. We agree with the government that our decision in
American Pelagic Fishing Co. v. United States,
. In a subsequent appeal addressing the rights of different parties, this court held that the earlier
Cienega Gardens
decision did not have the effect of resolving the takings issue for all other similarly situated plaintiffs.
See Cienega Gardens v. United States,