# United States **Court of Appeals**  **for the Federal Circuit**

______________________ ANAHEIM GARDENS, L.P ., THETFORD PROPERTIES III, L.P. , THETFORD PROPERTIE S IV, L.P., B

- L ASSOCI ATES, L.P., C

- W ASSO CIATES, L.P., GLENVIEW GARDE NS L.P., INDIAN HEAD

MANOR, L.P. I, METRO WEST LIMITED, L.P., MILLWOOD ASSOCIATES L.P., NAPA PARK APARTMENTS L.P., ONTARIO TOWNHOUSES,

L.P., PALOMAR APARTM ENTS, L.P., SIERRA VISTA ONE, L.P., 825 SAN TOMAS APARTMENT S, L.P., 5324 FOOTHILL APARTMENTS, G.P., ALGONQUIN HEIGHTS AS SOCIATES, L.P., BRANDY HILL COMPANY, BROOKSIDE MANOR

ASSOCIATES, L.P., BR IAR CREST, G.P., BRI AR CREST APARTMENTS II, L.P., BRIAR HILLS, L.P., CLARENCE W. GOSNELL, JR., JOHN G. GOSNEL L,

MURRAY HABER, RICHAR D S. BRIGHT, PHILIP BERMAN, ALFRED S. BR IGHT, SAMUEL EISENSTAT, MELVIN S. HELLER, MILTON S. LIDER, MARTIN MYERS, MALCOMB MEISTER, HAROLD D. PRICE, HERBERT W. SAVIT, W ALTER WEITZNER, ESTATE OF JACK N. BLINKOFF, HAROLD D. FRAZEE, TR USTEE U/A DTD 4/2/89 FOR E.D. FRAZEE, CAM BRIDGE SQUARE NORTH ASSOCIATES, LP, CAMB RIDGE SQUARE OF FORT WAYNE ASSOCIATES I, LP, CAMBRIDGE SQUARE OF GRAND RAPIDS ASSO CIATES I, LP, CAMBRIDGE SQUARE OF GRAND RAPIDS ASSOCIATES II, LP, C ARRIAGE HOUSE NORTH ASSOCIATES LP, CARRI AGE HOUSE OF MISHAWAKA ASSOCIATES II LP, CARRIAGE HOUSE WEST IV ASSOCI ATES, LP, CROMWELL COURT COMPANY, FIRST LANDMARK Case: 19-1277 Document: 49 Page: 1 Filed: 03/25/2020ANAHEIM GARDENS , L

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ASSOCIATES, L.P., FO REST GLEN LIMITED D IVIDEND HOUSING ASSO CIATION, FORT HEATH ASSOCIATES, GA RRISON FOREST ASSOCIATES, JODANI A SSOCIATES, L.P., KIMBERLY ASSOCIATES L.P., KING'S GRANT COMPANY, LEADER HOUS E ASSOCIATES, LEADER HOUSING CO., INC., NEW AMSTERDAM ASSOCIATES, NEW AMST ERDAM HOUSES, INC. ,

PINE CREST COMPANY, RIVERSIDE VILLAGE COMPANY, SUBURBIA AS SOCIATES, L.P., STEPHEN G. DAKES, HA RVEY E. JOHNSON, JR. , W. DEWEY RASNAKE, MA RTIN E. BROWN, WARREN W. TAYLOR, JR ., WARREN W. TAYLOR, JR., TRUSTEE, LUDLOW KING, JAMES L. BREHONY, SUEHAR ASSO CIATES LP, TOWER WEST ASSOCIATES LP, TOWER WEST INC., TOW N & COUNTRY APARTMENTS & TOWNHOUSES, Plaintiffs

CEDAR GARDENS ASSOCI ATES, ROCK CREEK TERRACE L.P., 620 SU CASA POR CORTEZ, BUCKMAN GARDENS, L.P ., 3740 SILVERLAKE VILLAGE, L.P., CHAUN CY HOUSE COMPANY, Plai ntiffs

- Appellants

v.

UNITED STATES, Defendant

- Appellee

______________________

2019

- 1277, 2019

- 1278, 2019

- 1279, 2019

- 1280, 2019

- 1281, 2019

- 1282

______________________ Appeals from the United States Court of Federal Claims in No s . 1:93

- cv

- 00655

- PEC, 1:93

- cv

- 06568

- PEC, 1:93

- cv

- 06578

- PEC, 1:93

- cv

- 06580

- PEC, 1:93

- cv

- 06582

- Case: 19-1277 Document: 49 Page: 2 Filed: 03/25/2020ANAHEIM GARDENS , L

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. v. UNITED STATES 3

PEC, 1:97

- cv

- 05837

- PEC, 1:97

- cv

- 05845

- PEC, Judge Patricia E. Campbell

- Smith.

______________________
Decided: March 25, 2020

______________________
H ARRY J AMES K ELLY , III, Nixon Peabody L LP, Washington, DC, argued for plaintiffs

- appellants. Also represented by J OHN C. H AYES , J R ., B RIAN J. W HITTAKER

.

S HARI A. R OSE , Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defen dant

- appellee. Also represented by J OSEPH H. H UNT , A NNA B ONDURANT E LEY , R OBERT E DWARD K IRSCHMAN , J R ., F RANKLIN E. W HITE , J R

.

______________________
Before L OURIE , C HEN , and S TOLL , Circuit Judges.

L OURIE , Circuit Judge. These cases involve takings claims resulting from theenactment of the Emergency Low Income Housing Preservation Act of 1987, Pub. L. No. 100

- 242, § 202, 101 Stat. 1877 (1988) (“ELIHPA”) and the Low

- Income Housing Preservation and Resident Homeownership Ac t of 1990, Pub. L. No. 101

- 625, 104 Stat. 4249 (1990) (“LIHPRHA”) (collectively, the “Preservation Statutes”). Currently, a pproximately fifty plaintiffs are asserting takings claims in consolidated cases in the United States Court of Federal Claims (“Clai ms Court”). The appellants here are Buckman Gardens L.P. (“Buckman”), Chauncy House Company (“Chauncy”), Cedar Gardens Associates (“Cedar”), Rock Creek Terrace L.P. (“Rock Creek”), 620 Su Casa Por Cortez (“Su Casa”), and 3740 Silverlake Village, L.P. (“Si lverlake”). The six appellants have been designated the First Wave Plaintiffs (“FWPs”) in the Claims Court litigation. Case: 19-1277 Document: 49 Page: 3 Filed: 03/25/2020ANAHEIM GARDENS , L

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The Claims Court granted summary judgment in favor of the government on all six FWPs’ takings claims. Anaheim Gardens v. United State s , 140 Fed. Cl. 72 (2018) (“ Decision ”). For the reasons below, we affirm the Claims Court’s judgment with respect to Su Casa but we vacate and remand with respect to the other five FWPs.

B ACKGROUND

I The history of the statutes involved in ELIHPA and LIHP RHA takings cases has previously been summarized by this court. See, e.g.

, CCA Assocs. v. United States , 667 F.3d 1239, 1242

– 43 (Fed. Cir. 2011); Cienega Gardens v. United States , 503 F.3d 1266 , 1270

– 74 (Fed. Cir. 2007) (“ Cienega X ”)

. For completeness, w e provide the following brief summary of the relevant portions

. In 1961, Congress amended the National Housing Act to provide financial incentives to private developers to build low

- income housing. Cienega X , 503 F.3d at 1270. The financial incentives included below

- market mortgagesinsured by the Department of Housing and Urban Development (“HUD”). Id

. To participate in this development
program, each developer was required to sign a regulatory agreement with HUD that limited its ability to increase
rent. Id. T h e restrictions in the regulatory agreement would be in effect as long as HUD insured the mortgage; for practical purposes, this meant a developer was subject to HUD regulation until its mortgage was paid off. Id. Imp ortantly, while the term of the mortgages was 40 years, the contracts allowed developers to prepay the ir mortgage s after 20 years. Id. This prepayment option gave each developer “ an opportunity to cas t off the regulatory burden and convert [its] developm ent to market rate housing.” CCA , 667 F.3d at 1242.

M any developers were induced by the development program to purchase properties and develop low

- income Case: 19-1277 Document: 49 Page: 4 Filed: 03/25/2020ANAHEIM GARDENS , L

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housing. Id. But Congress later grew concerned that too many developers would exercise the prepayme nt option and exit the program, which would cause a shortage of low

income housing. Id. at 1242

– 43. To address that concern, between 1988 and 1990, Congress enacted the Preservation Statutes, which effectively eliminated the prepayment option and preven ted the developers from converting their properties to market rate housing. Id. ; see 12 U.S.C. § 4101. In 1996, however, Congress enacted the Housing Opportunity Program Extension Act of 1996, Pub. L. No. 104

- 120, 110 Stat. 834 (1996) (“HOPE Act”), which restored prepayment rights to the developers that had remained in the program.
II
The six FWPs are developers who own ed properties that were developed subject to the development program under the 1961 amendments to the National Housing Act. The six FWPs can be broken down into three categories based on the timing of the ir purchases and their later decisions with respect to the Preservation Statutes prior to the enactment of the HOPE Act

. The first category consists of f our FWPs

— Buckman, Chauncy, Ceda r, and Silverlake

— that fit two criteria: (1) they owned their properties before the enactment of the Preservation Statutes ; and (2) they sold their properties after the enactment of the Preservation Statutes in conformance with the sale requirements of LIH PRHA. See 12 U.S.C. §§ 4102, 4103, 4110. Th e LIHPRHA sale requirements included a requirement that the owners sell the property at the “highest and best use of the property” toorganizations that would agree to preserve the rent restrictions. See Cieneg a X , 503 F.3d at 1272 (quoting §§ 4103(b)(2), 4110 )

. T he statute and regulations established a procedure to determine the sale price based on a third

party appraisal of the property’s value. Cienega X , 503 F.3d at 1273 n.3; 24 C.F.R. §§ 248.111( j ), 248. 131(b). Case: 19-1277 Document: 49 Page: 5 Filed: 03/25/2020ANAHEIM GARDENS , L

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T he second category consists of Rock Creek , wh ichowned its property prior to the enactment of the Preservation Statutes but chose not to sell its property after the enactment of the Preservation Statutes . Instead, Rock Creek elected to remain in the low

- income housing program by entering into a “use agreement” with HUD. Decision , 140 Fed. Cl. at 80

– 81. The use agreement provided Rock Creek with financial incentives in exchange for Rock Creek’s agreement to abide b y the low

- income housing restrictions “for the remaining useful life” of the property. Id

. ; Cienega X , 503 F.3d at 1273 (quoting 12 U.S.C. § 4112 ) (footnote omitted)

. The third category consists of Su Casa, wh ich is different fr o m the other five FWPs in one important respect: Su Casa did not own its property prior to the enactment of the Preservation Statutes. Rather, Su Casa purchased its property from the original owner in July 1991, which was after the enactment of LIHPRHA but before HUD promulgated its regulations for implementing the Preservation Statutes. Su Casa subsequently sold its property pursuant to the LIHPRHA sale requirements.

IIIEach of the FWPs filed suit in the Claims Court alleging a regulatory taking under the Fifth Amendment’s “j ustcompensation” clause. After the close of discovery, the government moved for summary judgment. The Claims Court evaluated the government’s motion under the three

- factor test set forth in Penn Central Transp ortation Co. v. City of New York , 438 U.S. 1 04 (1978). The Penn Central test considers: (1) the economic impact of the regulation on theclaimant; (2) the extent to which the regulation has interfered with reasonable distinct investment

- backed expectations; and (3) the character of the governmental action. Id

. at 124.

The Claims Court first considered Su Casa’s evidence of investment

- backed expectations. Su Casa presented a Case: 19-1277 Document: 49 Page: 6 Filed: 03/25/2020ANAHEIM GARDENS , L

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declaration and deposition testimony from one of its general partners regarding its expectations based on its contract rights that it would be able to prepay the mortgage at or after the prepayment date. See J.A. 386

– 96, 3298

– 301. The Claims Court determ ined, however, that because the Preservation Statutes eliminated the prepayment option prior to Su Casa’s purchase of the property, Su Casa “could not possess reasonable investment

- backed expectations in a mortgage prepayment right.” Decision , 140 Fed. Cl . at 77. The court then granted summary judgment against Su Casa because the complete lack of evidence of reasonable investment

- backed expectations was sufficient to dispose of Su Casa’s takings claim. Id. at 79. For the remaining FWPs, the court cons idered their evidence with respect to each of the three factors in the Penn Central test. The court concluded that both the character of the governmental action and the investment

- backed expectations weighed against disposing of the FWPs’ takings claims o n summary judgment

. Id. at 8 7 , 88. Regarding the economic impact factor, however, the court found that the FWPs “have not pointed to evidence sufficient to prevail on the economic impact prong of the Penn Central analysis.” Id. at 89. Thus, the court g ranted summary judgment in favor of the government. The Claims Court entered separate final judgments in favor of the government with respect to each of the FWPs’ individual cases. The FWPs timely appealed. We have jurisdiction under 28 U.S.C. § 1295(a)( 3).

D ISCUSSION
We review de novo the Claims Court’s summary judgment decision that the FWPs did not suffer a taking. Biafora v. United States , 773 F.3d 1326 , 1330 (Fed. Cir. 2014) (citing McGuire v. United States , 707 F.3d 1351, 1357 (Fed. Cir. 2013) ) . Summary judgment is appropriate when there is no genuine issue of material fact and the moving party Case: 19-1277 Document: 49 Page: 7 Filed: 03/25/2020ANAHEIM GARDENS , L

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is entitled to judgment as a matter of law. R. Ct. Fed. Cl. 56 (a)

. I

We begin , as the Claims Court did, with Su Casa. Su Casa argue s that the court erred as a matter of law by finding , as a per se rule, that Su Casa lacked reasonable investment

- backed expectations because it purchased its property after the enactment of the Preser vation Statutes. Su Casa further argue s that there are genuine issue s of material fact regarding Su Casa ’s underst anding of its contract rights in view of the alleged uncertainty about how the Preservation Statutes would later apply at the prepayment date

. The government responds that the Claims Court did
not create a per se rule, but rather determined that Su Casa could not meet its difficult burden to establish reasonable investment

- backed expectations

. T he government argues that the Claims Court properly relied on the undisputed fact that Su Casa was a sophisticated investor that bought its property knowing that the Preservation Statutes had already eliminated the prepayment option

. We agree with the government. The governmental action in this case is the enactment of the Preservation Statutes

. Su Casa purchased its property in an arms

- length transaction after it already knew that the Preservation Statutes had eliminated the prepayment option that previously existed under the 1961 amendments to the National Housing Act. While the HUD regulations had not yet gone into effect at the time of the transaction, the Preservation Statutes themselves were sufficiently detailed to remove any reasonable expectation that Su Cas a could have had that it would have the option to prepay its mortgage and
convert its propert y from low

- income housing to a market

rate rental propert y

. See 12 U.S.C. § 4101 et seq. Case: 19-1277 Document: 49 Page: 8 Filed: 03/25/2020ANAHEIM GARDENS , L

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Su Casa’s reliance on Palazzolo v. Rhode Island , 533 U.S. 606 (2001), is inapposite. In Palazzolo , the Supreme Court held that “[a] blanket rule that purchasers with notice have no compensation right when a claim becomes ripeis too blunt an instrument to accord with the duty to compensate for what is taken.” Id. at 62 8

. But the Court acknowledged in Palazzolo that it had “no occasion to consider the precise circumstances when a legislative enactment can be deemed a background principle of state law or whether those circumstances are present here.” Id

. at 629. Thus, beca use the petitioner’s Penn Central claim was not barred per se , the Supreme Court remanded for the state court to consider whether the claimant

— to whom title had transferred by operation of law rather than by purchase

— could prove that he had reasonable inve stment

- backed expectations regarding his development rights. Id

. Here, unlike in Palazzo lo , the Claims Court did have occasion toconsider whether Su Casa could prove reasonable investment

- backed expectations in view of the timing of its purchase and its knowledge about the Preservation Statutes. The Claims Court determined, not as a per se rule but rather as an evidentiary failure, that Su Casa lacked sufficient evidence to prevail at trial. The Supreme Court’s decision in Murr v. Wisconsin

, 137 S. C t. 1933 (2017), is more instructive. There, theCourt confirmed that “[a] reasonable restriction that predates a landowner’s acquisition

. . . can be one of the objective factors that most landowners would reasonably consider in forming fair expectations about their property.” Id

. at 1945 (citing Palazzolo , 533 U.S. at 627)

. T he Courtheld that the prior passage of the relevant state law “inform[ed] the reasonable expectation” that the property owners had with respect to their property

. Id

. at 1948. Li kewise, here, the prior passage of the Preservation Statutes informs the question whether Su Casa could have expected when it invested in its property that it would later be able to prepay the mortgage. Case: 19-1277 Document: 49 Page: 9 Filed: 03/25/2020ANAHEIM GARDENS , L

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What emerges from the case law is a flexible princip le that, while “[a] valid takings claim will not evaporate just because a purchaser took title after the law was enacted,” Murr , 137 S. Ct. at 1945 (citing Palazzolo , 533 U.S. at 627)

, the timing of the purchase and knowledge of the purchaser are relevant considerations in determining whether a purchaser had reasonable investment

- backed expectations with which the government’s regulatory action interfered. See Norman v. United States

, 429 F.3d 1081, 109 2

– 9 3 (Fed. Cir. 2005) ( holding that “it is particularly difficult to establish a reasonable investment

- backed expectation” if theproperty was acquired after the alleged regulatory restriction); Loveladies Harbor v. United States , 28 F.3d 1171, 1177
, (Fed. Cir. 1994)

, (collecting cases) (noting that
t he investment

- backed expectations factor of the Penn Central test is “a way of limiting takings recoveries to owners who could demonstrate that they bought their property inreliance on a state of affairs that did not include the challenged r egulatory regime” )

, abrogated on other grounds by Bass Enterprises Prod. Co. v. United States , 381 F.3d 1360, 1369

– 70 (Fed. Cir. 2004)

. T he Claims Court in this case abided by that principle when it consider ed the evidentiary support for Su Casa’s claim d espite the undisputed material fact that Su Casa was a sophisticated investor that purchased its property with knowledge about the effects of the Preservation Statutes. J.A. 3298

– 301 (testimony of one of Su Casa’s general partners). We agree with the Cla ims Court that there i s no genuine dispute regarding Su Casa ’s inability to prove that it purchased the property with an expectation that it would later be able to prepay the mortgage

. In the context of the Penn Central balancing test, t he complete absence of reasonable distinct investment

- backed expectations can weigh sufficiently heavily to be dispositive of a takings claim

. See Ruckelshaus v. Monsanto Co.

, 467 U.S. 986, 1005 (1984); Good v . United States , 189 F.3d 1355, 1363 (Fed. Cir . 1999); Golden Pac. Bancorp v. United Case: 19-1277 Document: 49 Page: 10 Filed: 03/25/2020ANAHEIM GARDENS , L

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States , 15 F.3d 1066, 1074 (Fed. Cir. 1994). Here

, because a sophisticated investor voluntarily purchased its property with knowledge that it had no prepayment option

, the complete lack of investment

- backed expectati ons overwhelmingly outweighs the other Penn Central factors. Wetherefore agree that summary judgment in favor of the government on Su Casa’s takings claim is appropriate.

I I

We next turn to the Claims Court’s determination that the remaining FWPs have no t provided evidence sufficient to prevail on the economic impact factor in the Penn Central analysis. The Claims Court noted that the FWPs’ only evidence of economic injury wa s founded on the methodology of their expert witness

, Dr. William W. Wade. Decision

, 140 Fed. Cl. at 89. T he court granted summary judgment after finding Dr. Wade’s entire analysis to be nonprobative of the Preservations Statutes’ economic impact on the FWPs

. Dr. Wade’s expert report contains more than 2 00 pages of opinions regarding the severe economic impact of the Preservation Statutes on the FWPs. In the executive summary of his report

, Dr. Wade gave a general explanation of his analysis , and specifically why it focused on the lost rental income that the FWPs suffered due to the Preservation Statutes :From an economic point of view, denial of the owners’ opportunity to increase their rents to marketlevels is the issue in this litigation. The restrictions imposed upon the use of the properties limite d the owners’ intangible property right: renting apartments on their properties at market rents.Where income losses are the issue, standard economic practice begins with measuring the cash flows with and without the loss

- causing disruption within a disco unted cash flow model (DCF). Just compensation and the Penn Central economic Case: 19-1277 Document: 49 Page: 11 Filed: 03/25/2020ANAHEIM GARDENS , L

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prongs are evaluated by the change in income from the rental businesses . . . . The reported financial cash flows of the property owners are discounted to the present value

amou nts at the prepayment dates. Losses are determined as the difference in the [net present value

or ] NPV of the projected lost opportunity to prepay and convert the properties to market rentals less the actual outcome imposed by LIHPRHA. In other words, lo sses are calculated as the difference between what the owners received as a result of their LIHPRHA process and what they would have earned, if they had been allowed to prepay. Whether the losses frustrate Penn Central’s [distinct investment

- backed expect ations] is evaluated by comparison of the Net Present Value (NPV) of cash flows for each property benchmarked to [transfer preservation equity or ] TPE

. J.A. 3810

– 11 . Consistent with that explanation, Dr. Wade provided the following equation to determine t he economic loss suffered by the FWPs as a result of the Preservation Statutes:

J.A. 3811. To calculate the percentage reduction in netpresent value, Dr. Wade divided the calculated economic loss by the net present value of the lost market conversion op portunity. See J.A. 3812

– 22. Case: 19-1277 Document: 49 Page: 12 Filed: 03/25/2020ANAHEIM GARDENS , L

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D espite Dr. Wade’s opinions, the Claims Court foundthat Dr. Wade’s analysis was nonprobative of economic impact under Penn Central . First, the court found that Dr. Wade’s lost income analysis was nonprobative because he

was required to analyze and compare fair market values. Decision , 140 Fed. Cl. at 89 ( “ [FWPs] have not established the fair market value (FMV) of the FWPs’ properties at thetime of the taking, for either the scenario where the mortgage prepayment right was unrestricted, or the scenario where the mortgage prepayment right was restricted by LIHPRHA

. ” ). And second, t he court found that “Dr. Wade’s methodology is unsound because it is inconsistent with binding precedent,” in particular relating to “the parcel as a whole concept” and “economic loss severity measures.” Id

. at 89

– 91. We address the Claims Court’s findings in turn, as well as the government’s proposed alternative ground for affirmance based on Dr. Wade’s use of data that post

- dated the alleged taking.

A
The Claims Court concluded, as a matter of law, that a comparison of fair market values was the only permissible methodology for measuring economic impact in this case. From the start of its analysis, t he Cla ims Court strictly adhered to the following asserted proposition of law:When a real estate parcel has been permanently affected by a regulatory taking, the measure of economic injury is the difference between the fair market value of the property, without the restriction imposed by the government action, andthe fair market value of the property, with the restriction imposed by the government action, both measured at the time of the taking.

Decision , 140 Fed. Cl. at 80 (citing Forest Props., Inc. v. United States , 177 F.3d 1360, 1367 (Fed. Cir. 1999) ; Fla. Rock Indus., Inc. v. United States , 18 F.3d 1560, 1567 (Fed. Cir. 1994) ) The Claims Court repeatedly confirmed its Case: 19-1277 Document: 49 Page: 13 Filed: 03/25/2020ANAHEIM GARDENS , L

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reliance on that proposition. See, e.g.

, id. at 82 (“First, the court determines the diff erence in the fair market value ofthe property, without and with the restriction, both measured at the time of the taking.” (citing Colony Cove Props. LLC v. City of Carson , 888 F.3d 445, 451 (9th Cir. 2018) ); id. at 83 (“[I]ts evidence of economic injury must allow the court to first determine the difference in fair market value caused by the Preservation Statutes

. . . . ”); id

. at 86 (“ To determine the economic injury, if any, suffered by these plaintiffs, the first step is to determine the difference in fair market value caused by the Preservation Statutes. ”).
For that proposition of law , the Claims Court cited this court’s decision in Forest Prop ertie s , 177 F.3d at 1367
, which in turn cited our earlier decisions in Loveladies

, 28 F.3d at 1178
, and Florida Rock , 18 F.3d at 1567. In each of those cases, this court did in fact determine that the appropriate measure of economic impact , under the factual circumstances, was the “ change

. . . in the fair market value caused by the regula tory imp osition.” See Fla. Rock

, 18 F.3d at 1567. W e do not , however, interpret those cases
to mean that change in fair market value is the only permissible way to measure economic impact in every case

. Indeed, the government concede d during oral argument that such a sweeping rule is not legally supported : [Court:] Where is the holding that only fair market value is probative evidence?
[Government:] I don’t think that what the court has held is that only fair market value is probative evidence. Oral Arg. at 19:44
, http://oralarguments.cafc.uscourts.gov/ default.aspx?fl=2019

- 1277.mp3

. We are guided by the Supreme Court’s cautions against rigidity in this area of the law

. See Ark

. Game & Fish Comm’n v. United States , 568 U.S. 2 3, 31

– 32 (2012) ( “[N]o magic formula enables a court to judge, in every case, Case: 19-1277 Document: 49 Page: 14 Filed: 03/25/2020ANAHEIM GARDENS , L

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whether a given government interference with property is a taking.

. . . [M]ost takings claims turn on situation

- specific factual inquiries. ” ). To that end, it is clear that cou rt s must have flexibility to determine in each individual case how to most accurately measure the economic value of what a takings claimant actually lost due to the governmental action

. See Hodel v. Va. Surface Mining & Reclamation Ass ’ n , 452 U.S. 264, 295 (1981) (“These ‘ad hoc, factual inquiries’ must be conducted with respect to specific property, and the particular estimates of economic impactand ultimate valuation relevant in the unique circumstances.” (quoting Kaiser Aetna v. United States , 4 44 U.S. 164, 175 (1979) ).

In the context of the very Preservation Statutes that

are at issue in this case

, this court has previously outlined two possible approaches to measur ing the economic impact suffered by property owners who were deprived of the ir

pr epayment option s

. Cienega X , 503 F.3d at 1282. (1) In the first approach, “a comparison could be made between the market value of the property with andwithout the restrictions on the date that the restriction began (the change in value approach). ” Id. (2) T he second approach is to “ compare the lost net income due to the restriction (discounted to the present value at the date the restriction was imposed) with the total net income without the restrictionover the entire useful life of the property (again disc ounted to present value). ” Id.

The court in Cienega X emphasized that “[n] either approach appears to be inherently better than the other .” Id. Yet, in this case, t he Claims Court concluded that only the first of Cienega X ’s two approaches

— i.e. , the change in value approach

— was permissible for the FWPs

. Decision

, 140 Fed. Cl. at 80. We conclude that the Claims Court erred in th at respect. Case: 19-1277 Document: 49 Page: 15 Filed: 03/25/2020ANAHEIM GARDENS , L

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The Claims Court placed significant emphasis on its finding that the takings in this case are in the nature of “permanent” takings rather than “temporary” takings. See id. at 7 9

– 86

. And , to be clear, Cienega X did begin its endorsement of its two possible approaches by noting that it

was “ in a temporary taking situation.” Cienega X , 503 F.3d at 1282 (citing Ros e Acre Farms Inc. v. United States , 373 F.3d 1177, 1188 (Fed. Cir. 2004)). But Cienega X also concluded that “in a temporary regulatory takings analysis context the impact on the value of the property as a whole is an important consideration, just as it i s in the context of a permanent regulatory taking. ” Id. at 1281. We recognize that the distinction between temporary and permanent takings can affect the economic impact analysis

. See, e.g.

, CCA , 667 F.3d at 1246 (considering the temporary takings claims of developers who retained their properties and had their prepayment options restored by the HOPE Act) ; Cienega X , 503 F.3d at 1287

– 88 (discussing need to consider duration of regulation’s effect on plaintiffs when assessing takings claims a nd noting differences in effective duration of LIHPRHA legislation between HOPE Act and LIHPRHA use agreement plaintiffs)

. But we see no meaningful reason why th e distinction between temporary and permanent takings should affect which method is appropriat e to measure economic impact in any given

case

— i.e., the choice of which equation to use in the first place. R egardless whether a taking is permanent or temporary in nature, there is no one

- size

- fits

- all method for measuring the economic impact of a gover nment al action. See Hodel , 452 U.S. at 295.
In this case, the properties at issue we re income

- producing properties. T he value of each propert y to its respective owner derived, not from any inherent objective “fair market value” of the land or the fixture s on the property, but rather from the property’s ability to generate a future stream of rental income as of the prepayment date. See J.A. 3810 (Dr. Wade’s qualitative description of what the Case: 19-1277 Document: 49 Page: 16 Filed: 03/25/2020ANAHEIM GARDENS , L

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FWPs lost due to the Preservation Statutes). T he FWPs have con sistently argued that lost future rental income, rather than fair market value, is the appropriate measure ofeconomic impact because that is what the government actually took from them. T he FWPs ’ position is that a change in fair market value approach wo uld not accurately account for the fact that the governmental action targeted their “going business concern s .” See Appellant s Br. 226. We agree with the FWPs that , consistent with the second approach in Cienega X , they may attempt to prove the economic impact of the Preservation Statutes on their property interests by demonstrating their lost opportunity to earn market

- rate rental income after prepaying their mortgages. That is what Dr. Wade did in his expert report. Dr. Wade first determi ned FWPs’ “lost net income due to the restriction

, ” Cienega X , 503 F.3d at 1282 , by taking the
net present value of the FWPs’ future rental income without the Preservation Statutes and subtract ing it by the actual income that each FWP earned from the sale of its property (or, in the case of Rock Creek, the low

- income housing rental income earned under its LIHPR H A use agreement). J.A. 3810

– 22. Dr. Wade then “compare[d] the lost net income due to the restriction . . . with the total net income without the r estriction ,” Cienega X , 503 F.3d at 1282 , by dividing the lost net income by the net present value of the future rental income. J.A. 3810

– 22. Thus, Dr. Wade’s approach was in accordance , at least broad ly speaking

, with a method for measuring economic imp act that this court has expressly endorsed.

The Claims Court never wavered from its initial conclusion that the one , and only one, way that Dr. Wade was allowed to measure economic loss in this case was by comparing fair market values. That initial conclusion resulted in

, what the FWPs’ counsel accurately termed, “a series of cascading errors” that led to the court’s finding that Dr. Wade’s entire expert report was nonprobative. Oral Arg. Case: 19-1277 Document: 49 Page: 17 Filed: 03/25/2020ANAHEIM GARDENS , L

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at 38:20. Th at erroneous finding cannot support the court’s grant of summary judgment.

B
Next, we turn to the Claims Court ’s conclusion that Dr. Wade’s analysis contained two additional flaws that were contrary to binding precedent and thus rendered his opinions nonprobative

. Decision , 140 Fed. Cl. at 92 (“Dr. Wade’s methodology is not probative as to economic injury, or the severity of economic injury.”). The Claims Court characterized the two flaws as (1) the “parcel as a whole” concept and (2) economic loss severity measures. See id. at 90

– 91. We add ress each of those alleged flaws in turn.

1 The Claims Court concluded that “Dr. Wade’s approach is inconsistent with the parcel as a whole teaching of Cienega X .” Id. at 91 ; Cienega X , 503 F.3d at 1280 (“ [T]he correct approach is to consider the ‘parcel as a whole

. ’”) (citing Concrete Pipe & Prod. of Cal

. , Inc. v. Constr. Laborers Pension Tr. for S. Cal

. , 508 U.S. 602, 643

– 44 (1993) ). T he
court took issue , in particular, with Dr. Wade’s statement that the economic impact was “benchmarked . . . to the owners’ equity at stake.” Decision , at 91 (quoting Plaintiffs’ Appendix at 253, Anaheim Gardens v. United States , 140 Fed. Cl. 72 (2018) (No. 1:93

- cv

- 00655), ECF No. 441

- 4)

. The
court raised two concerns with th at benchmarking approach.

The Claims Court’s first concern with Dr. Wade’s benchmarking was that he supposedly “substitute [d] the owner’s equity portion of the entire property for the parcel as a whole.” Decision , 140 Fed. Cl. at 91. The government, in its brief, similarly accuses Dr. Wade of using the equity

as the denominator of his equation. See Appellee Br. 16. But the Claims Court and the government appear to have misunderstood Dr. Wade ’s analysis . Dr. Wade used a net present value as the denominator of his equation, with “net Case: 19-1277 Document: 49 Page: 18 Filed: 03/25/2020ANAHEIM GARDENS , L

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present value” representing “ present value ” of future cash flows subtracted by “ equity. ” Thus, not only did Dr. Wade
not substitute the equity for the parcel as a whole in the denominator, he actually s ubtracted the equity out of the denominator. Dr. Wade ’s report expla ins that he used net present value because it “ provides absolute measures of the dollar amounts at stake in the litigation.” J.A. 3811. W hile we are not in position to decide whether Dr . Wade’s decision to us e net present value s was sound under principles of economics, we do not agree with the Claims Court that his approach failed to consider the parcel as a whole

. The Claims Court’s second concern with Dr. Wade’s benchmarking was that h e reduce d the denominator in his equation and thus inflate d the economic impact. Decision

, 140 Fed. Cl. at 91

. But every choice by an expert to use one input over another will necessarily increas e or decrease the final number. T he mere fact that Dr. Wade used a lower denominator and thus calculated a higher loss percentage does not, in itself, mean that his calculations were incorrect or improper. Again, questions remain as to whether Dr. Wade’s methodology was consistent with principles of economics and whether his explanation for using that approach is credible. But t hose are not questions that we can resolve on appeal, nor are they questions that the Claims Court should resolve on summary judgment. R ather

, the Claims Court should consider the adm issibility of Dr. Wade’s expert analysis under the Federal Rules of Evidence a nd , at trial, evaluat e his credibility and persuasiveness when he explains why he used net present values.
Finally , even if the Claims Court were to conclude that Dr. Wade’s dec ision to subtract equity was problematic

— a conclusion that the court cannot have yet reached

— we note that Dr. Wade’s expert report is likely still probative of economic impact

. To illustrate, Dr. Wade presented an economic loss equation and used net present values as inputs to that equation. The economic loss equation itself appears to be unchallenged, but the Claims Court has suggested Case: 19-1277 Document: 49 Page: 19 Filed: 03/25/2020ANAHEIM GARDENS , L

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that perhaps Dr. Wade should have used present values as inputs. Either way

, Dr. Wade’s report includes both sets ofpossible inputs because before he calculated the net present values, he had to first determine the present values of the future income streams at the prepayment date for each of the properties

. See, e.g. , J.A. 389 7 (calculating the present value for Cedar Gardens at the prepayment date to be $6,810,385)

. Thus, Dr. Wade’s expert report provides the relevant equation and all possible inputs for that equation. Ultimately, the Claims Court’s concerns about Dr. Wade’s benchmarking do not support a grant of summary judgment. T here are evidentiary issues that the Claims Court has not yet considered as well as genuine issues offact regarding Dr. Wade’s decision to use net present values in his calculation s . O n the recor d presented, we do not agree with the Claims Court that Dr. Wade’s benchmarking approach renders his opinions entirely nonprobative of economic impact

. 2

The Claims Court also concluded that Dr. Wade’s opinions about economic severity were illogical and unhelpful, mostly because they resulted in calculated losses that were larger than the appraisal values that determined the sale price under LIHPRHA

. See Decision , 140 Fed. Cl. at 91

– 92

. For that conclusion, the court cited Cienega X , where this court took issue with a damages award that was higher than the appraised value of the property. Cienega X , 503 F.3d at 1282 n. 13 (“A determination that damages exceed the value of the property should be indicative that the method of computing damages is flawed.”).

A s this court stated i n Cienega X , “[l]ogically speaking, the government cannot take more than what the plaintiffs actually possess.” Id. But that footnoted statement wa s in the context of a post

- trial damages award that exceeded the amount of an unchallenged appraisal. Id . Here, in contrast, the FWPs do not concede that the appraisal values Case: 19-1277 Document: 49 Page: 20 Filed: 03/25/2020ANAHEIM GARDENS , L

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accurately represent the value of the properties they actually possess ed

. Thus

, our dictum in Cienega X does not preclude a finding in this case that the actual economic loss suffered by the FWPs could have been larger than the apprais al values of their properties

. T he Claims Court explicitly acknowledged that Dr. Wade disputed the accuracy of the appraisals. Decision 140 Fed. Cl. at 90 n.12 (citing Dr. Wade’s expert report). And the court recognized that Dr. Wade’s methodology could be justified “if he persuasively explained why the LIHPRHA FMV appraisal[s] grossly undervalue[ ] [ the properties].” Id . at 92. The court simply did not find his explanation “persuasive.” See id . But the persuasiveness of an expert’s explanation is not an issue to be weighed by the court on summary judgment. See Jay v. Sec’y of Dep’t of Health & Human Servs.

, 998 F.2d 979, 982 (Fed. Cir. 1993) (citing Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 255 (1986)).
The government argues that Dr. Wade has not presented an alternative fair market value and has only argued that the process canno t yield a fair market value at all

. Oral Arg. at 32:15. R egardless, Dr. Wade’s expert report sets forth his opinion that the apprais al values did not accurately reflect the full values of the properties. See Decision

, 140 Fed. Cl. at 90 n.12

. Moreover, the FWPs have clearly asserted their position that the appraisals are poor
prox ies for the actual loss es that they suffered in this case. See, e.g. , Oral Arg. at 39:05. A t the very least, because there is no dispute that “ the fair market value of income

producing property reflects and includes the value of income that might be realized from the property

, ” Decision

, 140 Fed. Cl. at 80 (citing First Fed. Lincoln Bank v. United States , 518 F.3d 1308, 1317 (Fed. Cir. 2008) ) , Dr. Wade’s opinions regarding lost income inherently reflect his view that the appraisals did not accurately account for the value of the income

- producing properties in this case. Case: 19-1277 Document: 49 Page: 21 Filed: 03/25/2020ANAHEIM GARDENS , L

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For the foregoing reasons, we do not agree with the Claims Court that Dr . Wade’s calculation of losses greaterthan the appraisal values is necessarily illogical and unhelpful. Because there are unresolved fact questions regarding the accuracy of the appraisals and the proper measure of the FWPs ’ losses, the economic severity issue does not support the Claims Court’s grant of summary judgment.

CLastly, we address the government’s proposed alternative ground for affirmance on the basis that Dr. Wade used data that post

- dated the alleged taking. The government argues that Dr. Wade should have restricted his analysis to the data that w ere available to the parties ( i.e. , the developers and the government) at the date of the taking, which in this case is the prepayment date for each of the properties. The government cites the “s ettled principle in takings law that the proper date for valuing the property allegedly taken

. . . is the date on which the taking allegedly occurred.” Appellee Br. 20 (citing Supreme Court and Federal Circuit precedent)

. The FWPs respond that the law re quires that the future value s of their losses be discounted to the relevant prepayment date for each property , w hich is what Dr. Wade did. Reply Br. 15

– 16. They argue that, not only are ex post data allowed to be used in measur ing economic impact, they a re in fact the best measure to ensure that FWPs receive compensation for the full extent of the takings. Id. at 16

– 17

. We agree with the FWPs

. We do not find a basis in the law to categorically favor the use of outdated ex ante forecasts or projections over verifiable real

- world ex post data. While ex ante data may be preferable in some cases for policy reasons ( e.g. , to avoid “ post hoc fluctuations,” see Appellee Br. 22), t he Claims Court must decide based on the facts and circumstances at issue whether this is such a case. As Case: 19-1277 Document: 49 Page: 22 Filed: 03/25/2020ANAHEIM GARDENS , L

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t he Claims Court did not reach that issue and we cannot decide it in the first instance on appeal , w e reject the government’s proposed alternative ground for affirmance based on Dr. Wade’s use of ex post data.

C ONC LUSION For the foregoing reasons, we affirm the Claims Court’s grant of summary judgment with respect to Su Casa. With respect to the remaining FWPs, we vacate the ClaimsCourt’s grant of summary judgment and remand for further proceedings.

AFFIRMED

- IN

- PA RT, VACATED

- IN

- PART, AND REMANDED Case: 19-1277 Document: 49 Page: 23 Filed: 03/25/2020