Rose Acre Farms, Inc. (“Rose Acre”) filed the present action in the United States Court of Federal Claims in 1992, claiming that United States Department of Agriculture (“USDA”) regulations that restricted egg sales from and imposed other requirements on farms that tested positive for the presence of salmonella bacteria effected a taking requiring compensation under the Fifth Amendment. The trial court held that Rose Acre was entitled to compensation for a taking of the eggs affected by the regulations,
Rose Acre Farms, Inc. v. United States,
BACKGROUND
I. Rose Acre’s Operations
Rose Acre is a family-owned business based in Seymour, Indiana. It is primarily *1180 engaged in the production of table eggs, which are. raw poultry eggs sold in their shells. Between 1955 and 1990, Rose Acre grew from a single layer-hen farm with 1,800 hens to a highly integrated table-egg production business consisting of eight layer-hen farms with millions of hens. Three of Rose Acre’s Indiana farms are at issue in this case, namely, Cort Acres (in Cortland), White Acres (in White County), and Jen Acres (in Jennings County).
The production units on each farm are individual layer houses having varying capacities. In 1990, Cort Acres had thirty-six layer houses, each of which contained approximately 70,000 hens, White Acres had twelve layer houses, each containing approximately 125,000 hens, and Jen Acres had twenty-two houses, twenty-one of which were in production with capacities ranging from 67,320 to 112,000 hens.
The details of Rose Acre’s vertically integrated production system are set forth in the trial court’s opinion.
Rose Acre,
To maximize its production and provide a consistent supply of table eggs to the market, Rose Acre must carefully manage its layer house population and depopulation schedules. The trial court found that “[s]cheduling and timing ... are key components of [Rose Acre’s] business. An interruption in [Rose Acre’s] scheduling system affects the entire organization, thus causing [Rose Acre] to be unable to supply eggs to its customers.” Id.
II. USDA’s Salmonella Regulations
A. The Interim Regulations
In the late 1980s, the Centers for Disease Control (“CDC”) determined that the incidence and geographic spread of human illness resulting from exposure to Salmonella enteritidis serotype enteritidis (“SE”) bacteria was increasing. 1 In response to the increase, the Animal Plant Health and Inspection Service (“APHIS”), a USDA division responsible for preventing the spread of communicable diseases, determined that emergency regulations were necessary to control the spread of SE in poultry flocks. On February 16, 1990, USDA published interim regulations that restricted the interstate sale and transportation of eggs and poultry from flocks determined under the regulations to be SE-contaminated. Poultry Affected by Salmonella Enteritidis, 55 Fed.Reg. 5576 et seq. (1990) (codified at 9 C.F.R. §§ 82.30-82.36 (1991)). The interim regulations were effective immediately upon publication, USDA having “determined that there is *1181 good cause for publishing this rule without prior opportunity for public comment,” namely, the need for “[ijmmediate action ... to prevent harm to the egg-type chicken industry and the public.” Id. at 5580.
The interim regulations applied to “flocks,” defined as “[a]ll the poultry on one premises,” 9 C.F.R. § 82.30 (1991), and operated as follows. If “a Federal or State representative determine[d] through epidemiologic investigation that [a] flock [was] the probable source of disease in an outbreak of [SE-caused] disease in humans or poultry,” USDA designated the flock as a “study flock.” Id. § 82.32. A study flock was subsequently designated a “test flock” if either (1) “one or more” environmental test samples, i.e., “manure samples and egg transport machinery samples ... collected and tested in accordance with” procedures set forth in the interim regulations tested positive for SE, or (2) “the person in control of the flock” refused to allow or interfered with the collection of such samples. Id. § 82.32(b). At the time the interim regulations were published, USDA believed that evidence of SE in layer hens’ environment meant that the hens were infected and would, therefore, be more likely to produce SE-contaminated eggs. See 55 Fed.Reg. at 5576 (describing the ‘Vertical” (hen to egg) and “horizontal” (environment to hen) modes of SE transmission).
“Test flock” status triggered restrictions on the interstate movement of eggs. Specifically, eggs from a test flock could be moved interstate only for uses requiring pasteurization, 2 and then only if the shipper obtained a permit and met other conditions. 9 C.F.R. § 82.33(a) (1991). Thus, the interim regulations prohibited the interstate shipment of test flock eggs for sale as table eggs.
Specified numbers of the hens in test flocks were also required to undergo blood and internal-organ testing. Id. § 82.32(c). A test flock was designated an “infected flock” if the organs of one or more hens tested positive for SE. Id. Infected flocks were subject to the same interstate transportation restrictions as test flocks. Id. § 82.33(a). An infected flock retained its “infected” designation until either (1) the flock was retested in accordance with the regulations and no internal organ tested positive for SE or (2) the houses that contained the infected flock were depopulated, subjected to specified wet cleaning and disinfecting procedures, and repopulated with a new flock. Id. § 82.32(c).
B. The Final Regulations
After USDA reviewed comments received from interested parties following the publication of the interim regulations, it published final SE regulations on January 30, 1991. Chickens Affected by Salmonella enteritidis, 56 Fed.Reg. 3730 (1991) (codified at 9 C.F.R. §§ 82.30-82.38 (1992)). The final regulations incorporated all of the above requirements, but authorized the imposition of restrictions on individual layer houses as opposed to whole flocks. 9 C.F.R. § 82.33(a). A provision conditioning release from “infected” status on a successful post-cleaning inspection of a depopulated infected house by a federal or state official was added. Id. § 82.37. Additional testing and retesting requirements were imposed on all houses on the same premises as any infected house. Id. § 82.38.
APHIS administered these SE regulations until mid-1995. A total of thirty- *1182 eight flocks were restricted between 1990 and 1994, resulting in over 1.3 billion eggs being diverted from the United States table egg market to breaker plants.
III. Rose Acre Tracebacks
In 1990, after the interim regulations took effect, SE illness outbreaks were traced to each of Cort Acres, White Acres and Jen Acres. As a result of testing carried out in accordance with the interim regulations, USDA first restricted the interstate transportation of eggs from these three farms on October 5, 1990, November 27, 1990, and January 15, 1991, respectively. In each case, Indiana officials similarly restricted the intrastate transportation of eggs (except for uses requiring pasteurization) shortly after receiving notice of the federal restrictions.
After “test flock” restrictions were imposed as a result of environmental testing at each affected Rose Acre farm, USDA conducted blood and organ testing as set forth in the regulations. For organ testing, USDA employees physically removed 60 hens (whose blood had tested positive) from each house, killed them, and transported their carcasses to a USDA laboratory in Ames, Iowa. As described above, a single positive organ result in a given house resulted in an “infected house” designation.
3
No additional transportation restrictions were imposed as a result of an “infected” designation; obtaining release from restricted status, however, became more difficult. At first, Rose Acre tried to obtain release through continued organ testing of the hens in infected houses. For the most part, however, Rose Acre had to depopulate, clean, and disinfect infected houses, and then have those houses pass USDA inspection. The trial court noted that in some cases, houses were empty for long periods while awaiting inspection.
Rose Acre,
Rose Acre finally succeeded in obtaining release from the restrictions imposed on Cort Acres, White Acres, and Jen Acres on July 16, 1992, May 8,1992, and October 30, 1992, respectively. Thus, for a period of twenty-five months, Rose Acre was unable to sell eggs as table eggs from one or more of the three farms.
IV. Rose Acre’s Legal Challenges
Shortly after its operations became subject to the federal and state restrictions, Rose Acre filed an action in the United States District Court for the Southern District of Indiana seeking a declaration that the interim regulations were invalid. In that action, Rose Acre contended that (1) the interim and final regulations deprived Rose Acre of due process, (2) the interim regulations were not promulgated in accordance with the Administrative Procedure Act, (3) both sets of regulations exceeded USDA’s statutory authority, (4) the final regulations could not be applied retroactively, (5) both sets of regulations unlawfully delegated authority to state officials, (6) the application of certain monitoring provisions was invalid, and (7) it was entitled to compensation for eggs diverted to breaker plants.
Rose Acre Farms, Inc. v. Madigan,
No. NA 90-175-C,
Rose Acre filed the present action in the Court of Federal Claims on October 13, 1992, alleging violations of 21 U.S.C. §§ 114a
4
and 134a
5
(2000) and an uncompensated taking of its eggs and hens. The trial court granted the government’s motion to dismiss Rose Acre’s section 114a claim for failure to state a claim,
Rose Acre,
The government appeals, challenging the trial court’s holding that the government actions at issue here constituted a regulatory taking and a categorical taking and the award of fees and expenses (as based on an erroneous judgment that takings occurred). We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(3).
DISCUSSION
A determination of whether a taking compensable under the Fifth Amendment has occurred is a question of law based on factual underpinnings.
Alves v. United States,
The trial court analyzed Rose Acres claim for compensation for its diverted eggs under regulatory takings law and applied the law of categorical takings to the claim for compensation for the hens.
I. Diverted Eggs: Regulatory Takings Claim
Rose Acre acknowledged and the trial court recognized that the government may regulate private property to some extent
*1184
without subjecting itself to takings liability.
Rose Acre,
The challenge, of course, is determining how far is “too far.” A regulatory takings claim “ ‘arises from some public program adjusting the benefits and burdens of economic life to promote the common good,’ ” as opposed to a government appropriation of private property for its own use.
Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg’l Planning Agency,
The trial court held that each of these factors favored Rose Acre, and, as a result, Rose Acre was entitled to compensation for the revenue it lost as a consequence of the diversion of its eggs to the breaker egg market. As to two of the three factors, however, the trial courts analysis was incorrect. Remand for reconsideration of the evidence under the applicable legal standards, and for a weighing of those factors in accordance with the standards set forth in Penn Central and its progeny to determine whether compensation is required under the Fifth Amendment, is, therefore, necessary.
A. Economic Impact
The government did not dispute that Rose Acre sold over 97% of the eggs it produced at the three farms as table eggs before its sales were restricted. It also does not challenge the trial court’s findings that (1) after the restrictions were lifted, Rose Acre immediately returned to selling over 97% of its eggs as table eggs, (2) both before and during the period of restriction, Rose Acre sold 90% of its eggs in interstate commerce and 10% in intrastate commerce, (3) Rose Acre diverted over 57.5 million dozen eggs (nearly 700 million eggs) to breaker plants during the restricted period, (4) the average price Rose Acre and other sellers received for table eggs during the restricted period was 59 cents per dozen, (5) the average total cost for Rose Acre to produce a dozen eggs during the period of restriction was 54.96 cents, (6) during the restricted period, Rose Acre processed 33,753,843 dozen restricted eggs in breaker plants it owned and sold 24,006,780 dozen restricted eggs to breaker plants owned by others, and (7) Rose Acre received an average of 46.64 cents per dozen for eggs processed in its own breaker plants and an average of 41.46 cents per dozen for eggs sold to *1185 outside breaker plants during the restricted period. The government does, however, challenge the trial court’s finding that “[t]he economic impact of the diversion was ... severe.”
The trial court’s analysis of the economic impact was limited to (1) making the above-noted findings, (2) noting that government witnesses testified that “the restrictions could mean financial ruin for table egg producers,” “ ‘[b]reaker eggs are not rewarding,’ ” and “producers faced considerable revenue losses from the required diversion of eggs,” and that the government’s expert estimated Rose Acre’s loss on breaker eggs to exceed $9.2 million, and (3) favorably comparing Rose Acre’s situation to that of the plaintiff in
Yancey v. United States,
The trial court noted that a large number (57.5 million dozen) of Rose Acre’s eggs were, as a result of the restrictions, diverted for sale at less than Rose Acre’s average total cost of production. However, neither the testimony nor the economic data cited by the trial court appropriately gauge the severity of the economic impact of the regulations on Rose Acre. The cited testimony is not specific to Rose Acre, and the data — divorced from any economic context — represents only the first step in the required analysis. Simply put, it is not possible to determine the economic impact of a regulatory scheme applied to a private actor without casting the appropriate absolute measures of the effect of the regulation against the backdrop of relevant indicators of the economic vitality of the actor. In the present case, some of the eggs on some of Rose Acre’s farms suffered a reduction in value. In addition, while the reduction in value of each affected egg was permanent, the period during which the regulations had an impact on Rose Acre’s operations was relatively brief — approximately two years — after which Rose Acre reverted to its pre-regulation table-egg sales levels. The trial court’s opinion reflects no consideration of these factors. Yet,' an assessment of the severity of the economic impact of the regulations on Rose Acre, in accordance with Penn Central and its progeny, must take them into account.
In regulatory takings cases concerning diminished real estate values, this concept is known as the “parcel as a whole.”
Penn Central,
“Taking” jurisprudence does not divide a single parcel into discrete segments and attempt to determine whether rights in a particular segment have been entirely abrogated. In deciding whether a particular governmental action has effected a taking, this Court focuses rather both on the character of the action and on the nature and extent of the interference with rights in the parcel as a whole— here, the city tax block designated as the “landmark site.”
Id. The Court recently elaborated on this concept, stating:
This requirement that “the aggregate must be viewed in its entirety” explains why, for example, a regulation that prohibited commercial transactions in eagle feathers, but did not bar other uses or impose any physical invasion or restraint upon them, was not a taking. Andrus v. Allard,444 U.S. 51 , 66,100 S.Ct. 318 ,62 L.Ed.2d 210 (1979). It also clarifies why restrictions on the use of only limited portions of the parcel, such as setback ordinances, Gorieb v. Fox,274 U.S. 603 ,47 S.Ct. 675 ,71 L.Ed. 1228 (1927), or a requirement that coal pillars be left in *1186 place to prevent mine subsidence, Keystone Bituminous Coal Assn. v. DeBenedictis, 480 U.S. [470,] 498,107 S.Ct. 1232 ,94 L.Ed.2d 472 [(1987)], were not considered regulatory takings.
Tahoe-Sierra,
The methodologies used to determine how much of an affected owners property constitutes the relevant “parcel” in real estate takings cases are not, of course, directly applicable to a case such as the present. Nonetheless, a determination of the relative economic effect of the regulations is required. See
Penn Central,
Rose Acre recognizes this, and thus defends the trial courts finding that the economic impact was severe by arguing that the relevant “parcel,” or “denominator in the takings fraction,”
Palazzolo v. Rhode Island,
The government, in contrast, argues that the relevant parcel is the total combined production of the three affected farms. It then argues that the 59 cent-per-dozen price found by the district court to be the prevailing price of table eggs during the period of restriction cannot properly be applied to either (1) the total egg production of the three affected farms during the period of restriction (if the governments denominator is used), or (2) the egg production of the affected houses (if Rose Acres “denominator” is used), because Rose Acre argued (and the district court found) that even before the regulations took effect nearly three percent of Rose Acres eggs were sent to breaker plants. The government bases its economic analysis, instead, on a table-egg price of 57.62 cents per dozen, which takes into account Rose Acre’s three percent “baseline” breaker egg rate. Given that 42.6 percent of the eggs produced by the three affected farms were diverted to breaker plants during the period of restriction, it argues that the appropriate diminution-in-value figure for purposes of evaluating the severity of the economic effect on Rose Acre is 10.6. Moreover, argues the government, neither the 10.6 diminution it asserts nor the 26.1 diminution asserted by Rose Acre comes close to the 77.2 diminution in value suffered by the plaintiffs in Yancey, the case the trial court regarded as analogous.
In
Yancey,
USDA imposed an emergency quarantine on poultry in an effort to contain an outbreak of pathogenic Avian Influenza, a highly contagious viral disease.
We recognized in
Yancey
that comparable or even larger diminutions in value had been held insufficient for takings purposes in particular cases.
See id.
at 1541 (citing
Euclid v. Ambler Realty Co.,
Nonetheless, in apparent recognition of the significant disparity between the diminution in value in this case, even under Rose Acre’s view of the appropriate denominator, and that found in Yancey, Rose Acre argues in the alternative that the trial court’s finding as to economic effect should be sustained based upon an analysis of the loss it says it suffered on sales of the restricted eggs. Under this alternative diminution-in-return (profit-based) approach, using the same denominator and table-egg and breaker-egg prices on which it relies in its above-described diminution-in-value calculation, Rose Acre argues that it earned a return of -15.14% on breaker eggs processed by its own breaker plants and a return of -24.56% on eggs sold to outside breaker plants, compared with the + 7.35% return it would have received for those eggs had they been sold as table eggs. These results are based on Rose Acre’s average total cost (fixed plus marginal) of producing an egg destined for the table egg market across all of its farms, which total cost, apparently undisputed by the government, is 54.96 cents per dozen. 6
Rose Acre notes that resulting
diminution
in return (306% and 434%, respectively, for breaker eggs it processed and those sold to outside breaker plants, respectively), is much larger than the 96% diminution we held sufficient to support a takings holding in
Cienega Gardens v. United States,
Even considering the receipt of $21,496 from the Commonwealth of Virginia, plaintiffs incurred a substantial loss on their investment. Although plaintiffs were able to mitigate their loss by slaughtering the flock, there was no other alternative, economically viable use for the flock while the quarantine was in effect.
*1188 Yancey v. United States, No. 413-85C, slip op. at 17 (Cl.Ct. Dec.12, 1988).
Again, however, whether'the alternative (breaker) use here was “economically viable” depends on the variables factored into the analysis. The government, in addition to noting that the 59-eents-per-dozen table-egg price fails to account for the three percent of eggs Rose Acre usually sends to breaker plants and advocating use of a three-affected-farms “parcel,” disputes the propriety of relying on total cost. It argues, instead, that only Rose Acre’s marginal cost — the cost of producing each egg over and above Rose Acre’s fixed, operation-wide costs — is the appropriate basis for determining the return Rose Acre earned on the restricted eggs. The government’s values, it notes, result in a 64.44% return for those eggs versus the 83.91% return Rose Acre would otherwise have enjoyed (i.e., on sales as table eggs). Even using Rose Acre’s “parcel,” application of the marginal cost basis yields a profit of 42.03% — a lower return than that achieved for the three affected farms as a whole, but a positive one, nonetheless— and a diminution in return of 52%. Still another potential measure of the impact of the restrictions on Rose Acre is obtained using the 57.72 cent-per-dozen table-egg price (to take into account the three percent of eggs Rose Acre usually sent to breaker plants), the government’s “denominator” (the three affected farms), and Rose Acre’s total cost figure. These figures result in a -6.3% return on the breaker eggs versus a +4.8% return Rose Acre would have enjoyed but for the restrictions. The difference is a 231% diminution in return.
All of which is to note that there are a number of different ways to méásure the severity of the impact of the restrictions on Rose Acre. As noted above, the trial court’s opinion does not reflect consideration of these various alternatives, or explicitly rest its conclusion that the impact was severe on any appraisal of the effect of the restrictions relative to Rose Acre’s relevant unaffected property interests.
The trial court’s discussion of the economic impact factor is not entirely unre-vealing, however. It suggests that the trial court may have applied a profits-based analysis, as it quotes our reference in
Yancey
to the observation of the trial court there that “ ‘[although plaintiffs were able to mitigate their loss by slaughtering the flock, there was
no other alternative,
economically viable use for the flock while the quarantine was in effect.’ ”
Rose Acre,
We reject the government’s contention that a returns-based analysis is per se less suitable than one based on diminution in value in the present case. If anything, it appears that the latter is less appropriate where, as here, the issue concerns the economic impact, albeit temporary, of government regulations on a going business *1189 concern. We need not choose, however, between these two analytical modes. Several observations regarding their proper use, though, are required.
The government challenges Rose Acre’s returns-based analysis, arguing that the relevant denominator is the combined total egg sales from the three farms during the period of restriction, but that profit should be figured using only the marginal cost to Rose Acre of producing each individual egg in the restricted houses. Rose Acre argues precisely the reverse, asking that we look only at the revenue derived from the sale of (breaker) eggs from the restricted houses, but determine its profit using its total cost, including the (allocated) fixed costs it incurs in producing eggs in all of the houses on all its farms. We believe neither is appropriate, as the inconsistency built into each inaccurately prejudices the result.
Moreover, whether the economic impact is judged by value decline or profitability decrease, an evaluation based on Rose Acre’s asserted “denominator” — the restricted houses — runs afoul of the “parcel as a whole” principle announced in
Penn Central
and illustratively applied in
Keystone Bituminous.
In the latter, a Pennsylvania statute restricted (for subsidence purposes) the amount of coal that could be removed from a given mine.
Keystone Bituminous,
[Petitioners have sought to narrowly define certain segments of their property and assert that, when so defined, the Subsidence Act denies them economically viable use....
Because our test for regulatory taking requires us to compare the value that has been taken from the property with the value that remains in the property, one of the critical questions is determining how to define the unit of property “whose value is to furnish the denominator of the fraction.” ...
The 27 million tons of coal [required to be left in place] do not constitute a separate segment of property for takings law purposes. Many zoning ordinances place limits on the property owner’s right to make profitable use of some segments of his property. A requirement that a building occupy no more than a specified percentage of the lot on which it is located could be characterized as a taking of the vacant area as readily as the requirement that coal pillars be left in place. Similarly, under petitioners’ theory one could always argue that a setback ordinance requiring that no structure be built within a certain distance from the property line constitutes a taking because the footage represents a distinct segment of property for takings law purposes.... There is no basis for treating the less than 2% of petitioners’ coal as a separate parcel of property.
When the coal that must remain beneath the ground is viewed in the context of any reasonable unit of petitioners’ coal mining operations and financial-backed expectations, it is plain that petitioners have not come close to satisfying their burden of proving that they have been denied the economically viable use of that property....
Id.
at 495-99,
Thus it would seem that the “parcel as a whole” rule applies with even greater force here, where no unique attribute inherent in the restricted portion provides a basis for distinguishing it from the unrestricted portion, than might be the case with real property. Rose Acre tries to overcome this fact by arguing that the regulations were applied on a house-by-house basis. It is true that the interstate and intrastate transport restrictions were applied ultimately to individual houses, but the trace-backs that resulted in the “study flock” designation at each of Cort Acres, White Acres, and Jen Acres (triggering the environmental testing that ultimately led to the identification of the restricted “test houses”) were, in accordance with the interim and final regulations, directed to each farm as a whole. 9 C.F.R. § 82.32(a) (1991) (interim regulations); 9 C.F.R. § 82.32(a) (final regulations). Additionally, as long as any one house on any farm was designated as an “infected house,” all other houses on that farm were required to undergo testing for purposes of monitoring. 9 C.F.R. § 82.38. Thus, as a matter of law, because the regulations at issue applied to each farm as a whole, their economic impact cannot be measured by considering the restricted houses alone. Severance of the restricted property for purposes of the economic analysis was held improper in Keystone Bituminous, where the regulation at issue did not include such premise-wide features. Here, then, such severance is even less appropriate.
On remand, then, using the three farms (combined) as the relevant “denominator,” the trial court must determine whether the economic impact in this case is best measured by the value decline (a 10.6% diminution) or profitability decrease (at most, a reduction from a 4.8% profit to a 6.3% loss) caused by the restrictions. Either conclusion marks only the first step in the takings analysis, however, because, as discussed below, the court must weigh the private and public interests reflected in the application of the three Penn Central criteria to the circumstances of this case.
B. Reasonable Investment-Backed Expectations
The government assigns error to the trial court’s conclusion that this factor favored Rose Acre. As the trial court noted, “[t]his factor limitfs] takings recoveries to owners who [can] demonstrate that they bought their property in reliance on a state of affairs that did not include the challenged regulatory regime.”
Rose Acre,
*1191 The trial court noted that, although the poultry industry in general is highly regulated, government experts previously believed that salmonella could contaminate the interior of a shell egg only via a crack or break in the shell. Id. at 659 (citing a government expert’s testimony regarding the 1970s-era belief held by the Food and Drug Administration and the CDC that shell eggs were not associated with food-borne diseases). Accordingly, prior to 1990, eggs were subject only to inspection and restriction for evidence of potential environmental contamination. See id. (citing 21 U.S.C. §§ 1031-1056).
The government seeks to define the field of relevant regulation more broadly, citing to long-standing regulations aimed at preventing the spread of communicable diseases in birds and poultry. See 21 U.S.C. §§ 111-135 (West 1972 & Supp.1994); 9 C.F.R. Part 82. It argues that a new regulation aimed at a specific, recently-recognized disease threat was not unforeseeable in such an environment. But the SE regulations were more than an extension of comparable regulations to a new disease. They were grounded in new scientific understanding (i.e., that salmonella could be transmitted from hen to egg) and were unprecedented in their reliance on environmental and hen testing. Accordingly, even accounting for the history of regulation in the poultry and egg industries, we cannot agree that the trial court erred in concluding that this factor favors Rose Acre.
C. Character of the Government’s Action
The Supreme Court explained the need for inquiry into the character of the government’s action as follows: “[a] ‘taking’ may more readily be found when the interference with property can be characterized as a physical invasion by government, ... than when interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good." Penn Central, 438 U.s. at 124,
As noted above, Keystone Bituminous also sprang from a police power regulation-action on the part of the Commonwealth of Pennsylvania "to protect the public interest in health, the environment, and the fiscal integrity of the area." Keystone Bituminous,
The trial court acknowledged these principles and the government’s reliance thereon.
Rose Acre,
In support of its conclusion that the regulations were “misguided,” the trial court noted (1) the government “never sought to have the eggs tested, despite the fact that they were the alleged sources of the SE outbreaks,” (2) after Rose Acre completed the wet cleaning procedures required in lieu of achieving consecutive negative hen tests, “the government never retested the environment or the hens,” confining its inspection to “a simple walk through of the houses with a flashlight,” (3) SE is ubiquitous in the environment, and is impossible to eradicate, and (4) SE-infected hens “shed” the bacteria intermittently; a hen with SE, therefore, may never lay an infected egg. Id. at 655 & n. 29. It further found that
[The government] was aware in the late 1980’s that SE could exist inside an egg. In addition, the scientific technology for testing the inside of eggs existed at the time the regulations were enacted. Such testing was used in the United *1193 Kingdom and during [the government’s] Pennsylvania Pilot Project. The Project discovered that 99.9725% of eggs were SE-free. It was possible, therefore, for [the government] to test [Rose Acre’s] eggs for the bacterium.
Id.
It is apparent from the foregoing, and from the trial court’s repeated contextual references to Rose Acre’s “healthy eggs,” 11 that the court’s misgivings about the regulations are primarily based on its finding that a less-burdensome, alternative regulatory scheme — egg testing — was feasible. See id. at 662 (“[The government] never actually tested the eggs for SE, despite the fact that [egg] testing was feasible and would have been directed at the alleged source of the SE outbreaks”). The government vigorously disputes this proposition. It cites to the testimony of Dr. John Mason, director of the “SE Task Force” established by USDA in 1990 to respond to the SE-related public health emergency of the late 1980s, who noted that “although some people had already done work to show that SE could be found in eggs” by 1990, “eggs were not considered as a practical basis for testing,” Tr. Trans. at 712, and “there hadn’t been any experience with testing eggs as part of a regulatory effort.” Id. at 759. Dr. Mason outlined the rationale underlying the regulations, as follows:
It was, I think, considered that first testing the environment, to find out if it was an environment, was a pretty good indication that you would find it in the birds. And if you tested in the birds and tested the tissues and it was found in the tissues, which this would [sic] imply there was a good chance it was getting into the ovaries and ovary ducts, and you could be pretty sure that at some point, it was going to get into the eggs.
Id. at 712. He described how USDA continued to investigate how best to discern the extent of SE contamination in eggs after the regulations were instituted, including testing the eggs of “three or four flocks that had been implicated in an outbreak” to determine whether USDA “could ... culture eggs in a practical way and find SE in them.” Id. at 759. In fact, USDA found that “in each case in flocks where the environment was positive and the birds were positive, [it] could also isolate [SE] from the eggs.” Id. As the government observes, Dr. Mason’s de *1194 scription makes clear that USDA learned after the regulations were issued that egg testing was feasible. Rose Acre’s own expert, Dr. Patricia Curtis, Director of the Poultry Products Safety and Quality Peak of Excellence Program at Auburn University, agreed:
Q Back in the 1990s, in the early 1990s, '90, '91, there wasn’t a good test for eggs; is that true?
[Dr. Curtis] Yes.
Q In the early 1990s, it wasn’t feasible to test a large number of eggs; is that true?
[Dr. Curtis] Yes.
Q It only became feasible to test eggs in the mid-1990s; isn’t that correct?
[Dr. Curtis] Somewhere along in there. I don’t know the exact date, yes.
Q Sometime after 1993, it became feasible to test eggs; is that right?
[Dr. Curtis] Yes.
Id. at 550. Finally, the other research to which the trial court cited — testing in the United Kingdom and the government’s “SE Pilot Project” — took place during and after the egg testing experiments Dr. Mason described. 12 Accordingly, the trial court clearly erred in finding that egg testing was feasible at the time the government imposed the restrictions at issue on Rose Acre.
Rose Acre correctly notes that the government does not contend that “some new technology was discovered between the time USDA promulgated the SE Regulations in 1990 and when it actually conducted egg testing for the first time in 1991.” Therefore, it argues, the trial court’s finding that “[i]t was possible ... for [the government] to test [Rose Acre’s] eggs for the bacterium” was not clearly erroneous. But the issue is not whether a less restrictive alternative to the government action existed or was “possible.” It is whether there is a
nexus
between the regulation and its underlying public purpose.
Nollan v. Cal. Coastal Comm’n,
Similarly, the trial court’s finding that Rose Acre “shared a disproportionate amount of the burden of the SE regulations,” even if correct, is not relevant. That the source of the contaminated eggs could not be determined in 70% of the reported SE outbreaks during the relevant period does not undermine the rationality of investigating identifiable sources. As the court noted, Rose Acre is one of the largest egg producers in the United States, Rose Acre, 55 Fed. Cl. at 647, and the three farms determined to have been sources of SE-illness related contamination 13 produced, according to Rose Acre’s own laying rate and hen capacity figures, millions of eggs per day, id. at 647, 650-51 nn. 9, 11, and 12. Thus it is not surprising or significant that more than one-half (700 million) of the total (1.3 billion) eggs restricted pursuant to the regulations were Róse Acre’s.
Rose Acre repeatedly emphasizes the end result of the regulatory scheme at issue — millions of its healthy eggs were *1195 restricted. However, this assertion itself relies on scientific understanding developed after the regulations were imposed (via the SE Pilot Project) 14 and lifted (as reported in the 1998 “SE Risk Assessment”). Nowhere does Rose Acre argue (or did it show) that the regulatory means were inconsistent with knowledge the government possessed at the time they were adopted or applied against Rose Acre. Nor does Rose Acre contend that there was no nexus between those means and the substantial public purpose underlying the regulations-protecting the public against exposure to a potentially serious, even fatal, food-borne illness. Accordingly, the trial court’s conclusion that the “character of the governmental action” factor favors Rose Acre, whether treated as a question of fact subject to review only for clear error or a question of law considered de novo, cannot be sustained. 15
D. Balancing of the Penn Central Factors
The
Penn Central
test was “designed to allow ‘careful examination and weighing of all the relevant circumstances.’ ”
Tahoe-Sierra,
First, as noted above, courts have traditionally rejected takings claims in the absence of severe economic deprivation. This hesitation stems from the very nature of a regulatory takings claim. Such a claim, lacking the "typically obvious and undisputed" predicate of a physical invasion or appropriation of private property by the government, is in essence, a claim that "a taking has occurred because a law or regulation imposes restrictions so severe that they are tantamount to a condemnation or appropriation." Tahoe-Sierra,
Second, as of the time the restrictions were imposed, Rose Acre made 10 of its table egg sales within the state of Indiana, a fact noted but not further considered by the trial court.
Rose Acre,
Only when all of the relevant criteria and circumstances are considered, and considered together, can a conclusion be reached as to whether compensation is required in this case. On remand, then, the court must reevaluate the severity of the economic impact in accordance with the discussion above, and weigh that against the other Penn Central factors, taking into account all of the above-noted considerations.
II. Destroyed Hens: Categorical Takings Claim
The compensation the trial court awarded Rose Acre for the hens taken for necropsy represents a small portion ($15,-671.99) of the total award.
Rose Acre,
What is clear is that had the regulations required Rose Acre itself to kill and test the hens, no per se taking could be found.
See Seiber v. United States,
The question, then, is whether the mere fact that government officials carried out the testing (and the prerequisite seizure and destruction of the hens) is enough to transform what could otherwise qualify for takings compensation only if the
Penn Central
standard were met into a categorical taking. We think not. The Supreme Court has analyzed a takings claim that arose in an analogous context as a regulatory takings claim.
See Ruckelshaus v. Monsanto Co.,
Here then, the same analysis must be employed to determine whether Rose Acre is entitled to compensation under the Fifth Amendment for its hens. The trial court, on remand, must evaluate the severity of the economic impact of the destroyed hens on Rose Acre in accordance with the standards and requirements discussed above in connection with its claim for compensation for the eggs affected by the regulations. Further inquiry into whether the regulations interfered with Rose Acre’s reasonable investment-backed expectations and furthered a substantial public interest need not be undertaken in light of our above conclusions as to those issues, which apply with equal force to the claim for compensation for the hens. However, the court must ultimately weigh all the Penn Central factors, taking into account all the relevant circumstances, as noted above, to determine whether the Fifth Amendment requires compensation for the hens.
CONCLUSION
In accordance with the foregoing, we remand for reconsideration of the severity of the economic impact wrought by the relevant (i.e., federal) restrictions on Rose Acre, and for consideration of the significance of that impact in light of the other relevant factors, namely the regulations’ interference with Rose Acre’s reasonable investment-backed expectations and their furtherance of the substantial government health and safety interest.
VACATED and REMANDED.
COSTS
No costs.
Notes
. According to tire trial court:
Salmonella is a gram negative rod-shaped microscopic bacterium that is ubiquitous. There are more than 2,000 serotypes (strains) of salmonella, and it is most commonly found in the intestinal tract of animals and birds. Persons can be exposed to salmonella in many ways, but the most likely exposure is through the consumption of raw or undercooked foods of animal origin, such as meat, poultry, milk or eggs. When a person becomes sick from consuming salmonella, the condition is referred to as sal-monellosis. Symptoms in humans include nausea, vomiting, abdominal cramps, diarrhea, fever and headache.
Rose Acre,
. According to Rose Acre, such uses include incorporation into products such as cake mixes. The facilities that process and pasteurize eggs for these uses are known as "breaker plants” and the eggs they process are known as "breaker eggs.”
. As noted above, by January 30, 1991, the regulations permitted the imposition of restrictions on a house-by-house basis.
. 21 U.S.C. § 114a has since been repealed. Pub.L. No. 107-171, tit. X, § 10418(a)(8) (May 13, 2002), 116 Stat. 508. It provided, in relevant part:
The Secretary of Agriculture, either independently or in cooperation with States or political subdivisions thereof, farmers’ associations and similar organizations, and individuals, is authorized to control and eradicate any communicable diseases of livestock or poultry ... which in the opinion of the Secretary constitute an emergency and threaten the livestock industry of the country, including the payment of claims growing out of destruction of animals (including poultry), and of materials, affected by or exposed to any such disease, in accordance with such regulations as the Secretary may prescribe.
. 21 U.S.C. § 134a has since been repealed. Pub.L. No. 107-171, tit. X, § 10418(a)(17) (May 13, 2002), 116 Stat. 508. It authorized the seizure, quarantine, and disposal of livestock or poultry to guard against the introduction or dissemination of communicable disease and further provided, in relevant part:
CT]he Secretary shall compensate the owner of any animal, carcass, product, or article destroyed pursuant to the provisions of this section.... Compensation paid any owner under this subsection shall not exceed the difference between any compensation received by such owner from a State or other source and such fair market value of the animal, carcass, product, or article.
. The government objects to consideration of this alternative analytical method on appeal, noting that Rose Acre did not present a profit-based justification to the trial court. The government, however, fails to elaborate on its contention that it "did not have an opportunity to develop the record specifically to address these new arguments”, and as Rose Acre notes, the government does not contest the cost and price findings that underlie Rose Acre’s profits analysis.
. As noted, less than two percent of the owners' coal in
Keystone Bituminous
was restricted,
Keystone Bituminous,
. The government did not assert that the eight Rose Acre egg farms operating in 1990 (taken together), constituted the relevant denominator, and neither party advocated individual consideration of each of the three farms.
. The Court in
Keystone Bituminous
held that the regulation at issue — the Bituminous Mine Subsidence and Land Conservation Act, Pa. Stat. Ann., Tit. 52, § 1406.1 et seq. (Purdon Supp.1986) — "plainly seeks to further” a "substantial” public interest, and that courts . "in many [such] instances” have held that no compensation is required.
Keystone Bituminous,
. The government's Commerce Clause powers are, of course, the source of the regulatory authority in this case.
See Wright v. United States,
.
See, e.g., Rose Acre,
. The trial court noted, earlier in its opinion, that the SE Pilot Project was
established
in April 1992, which was just before the last of the restrictions at issue were lifted at Cort Acres and White Acres, and six months before they were lifted at Jen Acres.
Rose Acre,
. Rose Acre does not contest the validity of the three tracebacks to its farms.
. In addition to the data referenced in note 13,
supra,
the trial court cites to prevalence data developed in the Pilot Project.
See Rose Acre,
. The government contends that the decision of the Seventh Circuit on Rose Acre's challenge to the validity of the regulations precludes further inquiry into the merits of the regulations, citing principles of collateral es-toppel. We disagree. The issues before the Seventh Circuit concerned whether the government had the requisite authority to promulgate the regulations, and whether they were arbitrary and capricious so as to lack validity.
Rose Acre I,
. The regulations defined "[¡Interstate’' as "[f]rom one State into or through any other State.” 55 Fed.Reg. 5582; 56 Fed.Reg. 3739.
. In its opening brief, the government notes that the trial court "rejected the Government's demonstration that no categorical taking could be found in this instance because categorical .takings are limited to the taking of real property.” Government’s Blue Brief, at 51 (citing
Rose Acre,
We agree that a per se approach is more consistent with the reasoning in our ... opinion [in Phillips v. Wash. Legal Found.,524 U.S. 156 ,118 S.Ct. 1925 ,141 L.Ed.2d 174 (1998)] than Penn Centrals ad hoc analysis. As was made clear in Phillips, the interest earned in the IOLTA accounts “is the private property of the owner of the principal.” If this is so, the transfer of the interest to the Foundation here seems more akin to the occupation of a small amount of rooftop space in Loretto.
Brown,