Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_05-cv-01137/USCOURTS-casd-3_05-cv-01137-2/pdf.json

Nature of Suit Code: 210
Nature of Suit: Land Condemnation
Cause of Action: 40:258(a) Public Buildings &amp; Property: Land Condemnation

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

UNITED STATES OF AMERICA,

Plaintiff,

CASE NO. 05cv1137 DMS (RBB)

ORDER RE: INTEREST

vs. CALCULATION

32.42 ACRES OF LAND, et. al.

Defendants.

On April 20, 2010, a jury fixed the amount of just compensation in this matter at $2,910,000.

Pending before the Court is the parties’ dispute as to the proper interest calculation on the difference

between the jury award and the amount the Government deposited as estimated just compensation.

The Government argues the appropriate rate is that set forth in the Declaration of Taking Act (“DT

Act”), 40 U.S.C. § 3114 et seq. The Port District argues the DT Act rate is insufficient due to the

length of time between the taking, May 31, 2005, and the verdict.

The DT Act provides, in pertinent part:

The district court shall calculate interest required to be paid under this subchapter as

follows:

(1) Period of not more than one year.–Where the period for which interest is

owed is not more than one year, interest shall be calculated from the date of taking at

an annual rate equal to the weekly average one-year constant maturity Treasury yield,

as published by the Board of Governors of the Federal Reserve System, for the

calendar week preceding the date of taking.

Case 3:05-cv-01137-DMS-WMC Document 118 Filed 08/05/10 Page 1 of 3
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(2) Period of more than one year.–Where the period for which interest is owed

is more than one year, interest for the first year shall be calculated in accordance with

paragraph (1) and interest for each additional year shall be calculated on the amount

by which the award of compensation is more than the deposit referred to in section

3114 of this title, plus accrued interest, at an annual rate equal to the weekly average

one-year constant maturity Treasury yield, as published by the Board of Governors of

the Federal Reserve System, for the calendar week preceding the beginning of each

additional year. 

40 U.S.C. § 3116(a). A court is not bound by the statutory interest rate if it determines “the statutory

formula is constitutionally inadequate given the factual circumstances of the case.” United States v.

50.50 Acres of Land, 931 F.2d 1349, 1355 (9th Cir. 1991). In that instance, the court must determine

an “appropriate rate to be used,” which is measured by what a reasonably prudent investor would

receive when “investing funds so as to produce a reasonable return while maintaining safety of

principal.” Id. (quoting United States v. 429.59 Acres of Land, 612 F.2d 459 (9th Cir. 1980). An

appropriate rate would include “a diverse group of securities, including Treasury bills.” Id.

The Port argues the DT Act rate does not apply when a significant amount of time has lapsed

between the time of taking and the payment of just compensation. The cases cited by the Port,

however, are inverse condemnation cases rather than direct taking cases, and do not require deviation

from the DT Act rate simply because of the lapse of time. See Tulare Lake Basin Water Storage Dist.

v. United States, 61 Fed. Cl. 624 (2004); Ark. Game & Fish Comm’n v. United States, 87 Fed. Cl. 594

(2009). 

The Port further argues that a reasonably prudent investor would not, over five years, invest

in the manner contemplated by the DT Act rate. In other words, a reasonably prudent investor would

not purchase a 1-yearTreasuryBill and, upon expiration of that note, purchase another 1-year Treasury

Bill and continue in that manner for five years. (See Browne Decl. ¶ 11.) Rather, a reasonably prudent

investor would invest in a variety of securities having varying maturity dates in order to obtain higher

interest rates. (Id. at ¶¶ 11-12.) The Port seeks to use either the Barclays U.S. Government:

Intermediate Index or the Barclays Intermediate Government/Credit Index as the appropriate

benchmark for a prudent investor standard.

The two indices proposed by the Port would result in a higher interest payment to the Port than

would the DT Act rate. Nevertheless, the DT Act rate is not constitutionally inadequate under the

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circumstances of this case. The DT Act provides for variable interest rates, which reflect the differing

economic conditions over the last several years. While the Port’s proposed indices outpace the DT

Act rate as a whole, there are times throughout the period in which the DT Act rate produced higher

returns than the proposed indices. (See U.S. Opp’n Br. at 5.) Accordingly, the Court does not find the

DT Act rate unreasonable or constitutionally inadequate. The parties shall submit a proposed Final

Judgment, in accordance with this Order, on or before August 20, 2010.

IT IS SO ORDERED.

DATED: August 5, 2010

HON. DANA M. SABRAW

United States District Judge

Case 3:05-cv-01137-DMS-WMC Document 118 Filed 08/05/10 Page 3 of 3