## United States Court of Appeals for the Federal Circuit

2007-5049 ROSS L. BAIR, LYLE K. BAIR, BAIR BROTHERS, BAIR FARMS, INC., BERGESON FARMS, INC., CEEKAYDEE FARMS GENERAL PARTNERSHIP, KEITH B. CHILD, CORBETT DRAW FARMS GENERAL PARTNERSHIP, D & D GILBERT FARMS, INC., TOM DOWNS, J. LAMAR GILBERT, DAVID HAMMOND, JERRY HODGES, CHRIS HYER, JOHN HYER, MARK IVERSON, L. SHEFFELS & SONS, INC., LEON R. BAKER FARMS, LLC, JERRY C. MILBRANDT, R & J FAMILY FARMS, INC., ALLAN ROBEL, RONALD ROYLANCE FARMS, INC ., ROYLANCE COULEE PARTNERSHIP, RANDY ROYLANCE, SBS FARMS, LLC, TRAVIS STEFFLER, PAUL STOKER, STOKROSE FARM AND FEEDLOT, TIM T AYLOR, TRACY LYBBERT FARMS, INC., DUANE MARCUSEN, LUIS A. MARTINEZ, FR ANK MARTINEZ, LEGACY FARMS, INC., SHANE CHRISTENSEN, J. LYN WOOD, PIERCY FARMS, INC., AG CAPITAL COMPANY, KEVIN JENKS, ROGER ROYLANCE FARMS, INC., LARRY SC HAAPMAN, DAVID EDLER, CIRCLE D, INC., DIAMOND M, INC., D. GLEN BAIR, and WASHINGTON STATE DEPARTMENT OF NATURAL RESOURCES, Plaintiffs-Appellants,

v.

UNITED STATES, Defendant-Appellee.

. Bryce J. Wilcox , Lukins & Annis, P.S., of Spokane, Washington, argued for plaintiffsappellants. Steven M. Mager , Attorney, Commercial Litigatio n Branch, Civil Division, United States Department of Justice, of Washington, DC, arg ued for defendant-appellee. With him on the brief were Peter D. Keisler , Assistant Attorney General, Jeanne E. Davidson , Director, and Mark A. Melnick , Assistant Director. Of counsel was Gregory T. Jaeger , Attorney. Appealed from: United States Court of Federal Claims Judge Lawrence M. Baskir

## United States Court of Appeals for the Federal Circuit

2007-5049 ROSS L. BAIR, LYLE K. BAIR, BAIR BROTHERS, BAIR FARMS, INC., BERGESON FARMS, INC., CEEKAYDEE FARMS GENERA L PARTNERSHIP, KEITH B. CHILD, CORBETT DRAW FARMS GENERAL PARTNER SHIP, D&D GILBERT FARMS, INC.,

TOM DOWNS, J. LAMAR GILBERT, D AVID HAMMOND, JERRY HODGES, CHRIS HYER, JOHN HYER, MARK IVERSON, L. SH EFFELS & SONS, INC., LEON R. BAKER

FARMS, LLC, JERRY C. MILBRANDT, R & J FAMILY FARMS, INC., ALLAN ROBEL, RONALD ROYLANCE FARMS, INC., RO YLANCE COULEE PARTNERSHIP, RANDY

ROYLANCE, SBS FARMS, LLC, TRAVIS STEFFLER, PAUL STOKER, STOKROSE

FARM AND FEEDLOT, TIM TAYLOR, TRACY LYBBERT FARMS, INC., DUANE MARCUSEN, LUIS A. MARTINEZ, FRANK MARTINEZ, LEGACY FARMS, INC., SHANE CHRISTENSEN, J. LYN WOOD, PI ERCY FARMS, INC., AG CAPITAL COMPANY, KEVIN JENKS, ROGER RO YLANCE FARMS, INC., LARRY SCHAAPMAN, DAVID EDLER, CIRCLE D, INC ., DIAMOND M, INC., D. GLEN BAIR, and WASHINGTON STATE DEPARTMENT OF NATURAL RESOURCES, Plaintiffs-Appellants,

v. UNITED STATES, Defendant-Appellee. Appeal from the United States Court of Federal Claims in consolidated case 04-CV1689, with 04-CV-1846, 04-CV -1847, 04-CV-1848, 04-CV- 1849, 04-CV-1850, 04-CV1851, 04-CV-1852, 04-CV-1853, 04-CV-1854, 04-CV-1855, 04-CV-1856, 04-CV-1857, 04-CV-1858, 04-CV-1859, 04- CV-1860, 04-CV-1861, 04-CV -1862, 04-CV-1863, 04-CV1864, 04-CV-1865, 04-CV-1866, 04-CV-1867, 04-CV-1868, 04-CV-1869, 04-CV-1870, 04-CV-1871, 04-CV-1872, 04- CV-1873, 04-CV-1874, 04-CV -1875, 04-CV-1876, 04-CV1877, 04-CV-1878, 04-CV-1879, 04-CV-1880, 04-CV-1881, 04-CV-1882, 04-CV-1883, 04-CV-1884, 04-CV-1885, 04- CV-1886, 04-CV-1887, 04- CV-1888, 04-CV-1889, and 04-CV-1891, Judge Lawrence M. Baskir.

___________________________ DECIDED: February 5, 2008

___________________________Before LINN, DYK, and MOORE, Circuit Judges

. DYK, Circuit Judge

. This case involves a takings claim. The alleged taking resulted from the Commodity Credit Corporation’s (“CCC”) enforcement of its supe r-priority lien interest in sugar produced from sugar beets under 7 U.S.C. § 7284(d) ( 2000). Appellants Ross L. Bair, et al. (“appellants”) are sugar beet gr owers whose state-law liens on the sugar were rendered valueless by the enforcement of CCC’s super-priority lien. They appeal from the decision of the Un ited States Court of Federal Claims granting summary judgment in favor of the government. Becaus e we conclude that t he Court of Federal Claims correctly determined that there was no taking, we affirm. BACKGROUND Appellants are producers of sugar beets in Washington state. They contracted with processor Pacific Northwest Sugar Com pany (“PNSC”) to process their 2000 sugar beet crop into refined beet sugar. The beets were delivered for processing. Payment for the beets was to occur over the course of several months, but PNSC only made the first 55% of those payments. Under Wash ington law, upon delivery of an agricultural product to a processor, “the producer has a firs t priority statutory li en, referred to as a ‘processor lien.’” Wash. Rev. Code. § 60. 13.020 (2007). This lien “attaches to the agricultural products . . . deliver ed, to the processor’s or c onditioner’s inventory, and to the processor’s or conditioner ’s accounts receivable.” Id. Appellants delivered their beets to PNSC on or before December 1, 2000, and therefore ha d state statutory processor liens that attached by that date. Both parties agree that the liens gave appellants a lien on the sugar beets, the sugar refined fr om those beets, and any

2007-5049 2proceeds from the sale of that sugar. If PNSC failed to make a payment under the contract, appellants were entitled to foreclos e and enforce the lien by a civil action in
state court. See id. § 60.13.070 (“The processor . . . liens may be foreclosed and enforced by civil action in superior court.”). The CCC, an agency of the Un ited States within the Depar tment of Agriculture, makes loans to sugar beet processors in order to provide price support to the domestic sugar market. Between October 10, 2000, and February 12, 2001, the CCC issued twenty-one nonrecourse loans to PNSC. U pon making these loans, the CCC acquired a security interest in the refined sugar pr oduced by PNSC from appellants’ beets. Appellants’ state processor liens, which attached upon delivery of the beets and later attached to the sugar produc ed from the beets, necessar ily predated the later CCC loans, which were secured by the sugar re fined from those beets. Nonetheless, the CCC’s loans received super-priority over appe llants’ loans under 7 U.S.C. § 7284(d), which provides: A security interest obtained by the Commodity Credit Corporation as a result of the executi on of a security agreement by the processor of sugarcane or sugar beets shall be super ior to all statutory and common law liens on raw cane sugar and refi ned beet sugar in favor of the producers of sugarcane and sugar beets and all prior recorded and unrecorded liens on the crops of s ugarcane and sugar beets from which the sugar was derived. On March 5, 2001, after paying about half of what it owed to appellants, PNSC defaulted on its agreement with t hem. After this default by PNSC, appellants timely filed statements evidencing their proc essor liens on March 22, 2001. See Wash. Rev. Code. § 60.13.050 (requiring producers to file liens wit hin twenty days of payment due date in order to maintain priority over earlier-filed liens and perfected security interests). On

2007-5049 3September 19, 2001, appellants brought suit in Washington state court, against both PNSC and CCC, seeking foreclosure of t hose liens and recovery of $8,714,690. The government removed this action to t he United States District Court for the Eastern District of Washington. The district court granted summary judgment in favor of the CCC because it concluded t hat the plain language of 7 U.S.C. § 7284(d) afforded super priority to the CCC’s liens. Bair v. Pac. Nw. Sugar Co. , No. CS-01-0310, slip op. at 24 (E.D. Wash. Feb. 21, 2002) (unpublished), aff’d , 85 F. App’x 555 (9th Cir. 2004) (not selected for publication in the Federal Reporter). As a result of these rulings, the CCC was able to recover $4,540, 803 of its outstanding loans, through a combination of the remaining processed sugar and the pr oceeds from its sale, and wrote off $10,411,089 of PNSC’s debt. No sugar or proceeds remai ned to pay PNSC’s debt to appellants, and their liens were rendered worthless. On November 19, 2004, appell ants filed a complaint in t he United States Court of Federal Claims, alleging that the application of 7 U.S.C. § 7284(d) constituted a taking under the Fifth Amendment. The Court of Federal Claims det ermined that “[t]he Federal statute created a pre-ex isting limitation on the property rights that the Growers could acquire under state law.” Bair v. United States , No. 04-CV-1689, slip op. at 10 (Fed. Cl. Jan. 11, 2007). The court ther efore held that the applicati on of that statute did not constitute a taking, and granted summary j udgment in favor of the government. Id. at
12. Appellants timely appealed. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(3).

2007-5049 4DISCUSSION We review the Court of Federal Claim s’s decision to grant summary judgment without deference. Old Stone Corp. v. United States , 450 F.3d 1360, 1367 (Fed. Cir. 2006). The Supreme Court has recognized two types of regulatory takings—categorical regulatory takings and partial regulatory takings. If a partial regulatory taking is alleged, we must undertake the fact-based inquiry set out by the Supreme Court in Penn Central Transportation Co. v. New York City , 438 U.S. 104 (1978). The Supreme Court has identified several relevant fact ors that have particular significance, including: (i) “the character of the governmental action”; (ii) “[t]he economic im pact of the [action] on the claimant”; and (iii) “the extent to which the [action] has interfered with distinct investment-backed expectations.” Id. at 124. If a categorical regulatory taking is alleged, we ask only whether the regulat ory imposition is one that “denies all economically beneficial or produc tive use of [the property].” Lucas v. South Carolina Coastal Council , 505 U.S. 1003, 1015 (1992); see also Maritrans Inc. v. United States , 342 F.3d 1344, 1353 (Fed. Cir. 2003) . Appellants contend that such a categorical taking occurred here because their liens were rendered valueless by the government’s foreclosure on the CCC liens and consequent enfor cement of its statutory super-priority right, which left no collateral or proceeds fr om which the appellants’ liens could be satisfied. We assume without deciding that the correct date from which to judge whether a taking occurred is, as appellants contend, t he date on which the government asserted its super-priority interest against the appe llants and that this action rendered their

2007-5049 5property valueless. However, under either type of alleged regulator y taking (categorical or partial), before we undertake a Penn Central or Lucas analysis, we must determine as a threshold matter whether the claimant has established a property interest for purposes of the Fifth Amendment. See Members of the Peanut Q uota Holders Ass’n v. United States , 421 F.3d 1323, 1330 (Fed. Cir. 2005); Am. Pelagic Fishing Co. v. United States , 379 F.3d 1363, 1372 (Fed. Cir. 2004); Maritrans Inc. , 342 F.3d at 1351. In other words, we ask “whether the claimant po ssessed a ‘stick in the bundle of property rights.’” Adams v. United States , 391 F.3d 1212, 1218 (Fed. Cir. 2004) (citation omitted). “It is axiomatic t hat only persons with a valid proper ty interest at the time of the taking are entitled to compensation.” Wyatt v. United States , 271 F.3d 1090, 1096 (Fed. Cir. 2001). Once the clai mant has identified a valid property interest, we must determine whether the cha llenged governmental action constituted a compensable taking of that property interest. See Am. Pelagic , 379 F.3d at 1372. The central dispute in this case is whether appellants possessed a compensable property interest in their right to lien prio rity over the CCC’s liens on PNSC’s refined sugar. The Supreme Court in Lucas made clear that property interests are acquired subject to “background principles” of law, and that limitations on property rights that otherwise would effect a categorical taking ar e permissible if they “inhere in the title itself.” 505 U.S. at 1029. The parties do not dispute that, under Washington law, appellants’ interests were created in 2000, with the last date of creation being December 1, 2000. At that time both state law and federal law existed purporting to define the priority of the appellants’ liens.

2007-5049 6Appellants argue, however, that only the states, and not the federal government, have the power to create and define property rights, and t hat the federal statute therefore cannot constitute a “background prin ciple” of law in derogation of appellants’ state-created right to lien priority. 1 We reject appellants’ argument. We first note that the Supreme Court has held that federal law determines what constitutes “property” for purposes of applying f ederal statutes. In particular, the Court has made clear that “the priori ty of liens stemming from federal lending programs must be determined with referenc e to federal law.” United States v. Kimbell Foods, Inc. , 440 U.S. 715, 726 (1979); see also United States v. Craft , 535 U.S. 274, 278-79 (2002) (“State law determines only which sticks are in a person’s bundle. Whether those sticks qualify as ‘property’ for purposes of the federal tax lien stat ute is a question of federal law.”). Despite the statements in a number of Supreme Court cases referring to the creation of property interests by state law, the Court has recognized that state-created property interests may be limited by federal laws, even in the area of real property. In Lucas itself, the Supreme Court recognized that federal law can constitute a “background principle” for purposes of categorical takings. For example, the Lucas majority approvingly cited Scranton v. Wheeler , 179 U.S. 141 (1900), 505 U.S. at 1029. There the Court held that the construction of a pier by the federal government, which destroyed a riparian owner’s access to navigable waters, did not effect a taking because

1 Appellants “maintain that property rights are created and defined by state law, and such rights cannot be abr idged by federal legislation, for if this was the case, Congress could effectively legislate around the Takings Clause. This point of disagreement is the sole issue on appeal.” Br. of Plaintiffs-Appellants at 23.

2007-5049 7the riparian owner’s title “was acquired subjec t to the rights which the public have in the navigation of such waters.” Scranton , 179 U.S. at 163. In cases of personal property, the backgr ound principles are defined by the law existing at the time that the property came into existence. Any lawful regulation defining the scope of the property interest that predates the creation of that interest will “inhere in the title” to the property. 2 For example, in the bankruptcy cont ext, the Supreme Court has strongly suggested that 11 U.S.C. § 522( f)(2), which permits debtor s in bankruptcy proceedings to avoid liens on certain property , can limit the extent of a lienholder’s interest in such property after the enactment of the statute. See United States v. Sec. Indus. Bank , 459 U.S. 70 (1982). In the absenc e of clear congressional intent, the Court refused to construe the statute to apply retroactively bec ause such an interpretation would require the Court to face “difficult and sensitive ques tions” arising out of the Takings Clause. Id. at 82. The Court found no such difficulty with prospective application of the statute, despite its effect on lien intere sts that might later be created under state law. Our sister circuits have specifically hel d that prospective application of section 522(f) does not create takings liability. See In re Weinstein , 164 F.3d 677, 686 (1st Cir. 1999) (“[A]t its inception, the lien was subject to and limit ed by the debtor’s power to avoid the lien

2 We also have made clear that, in the second step of t he takings analysis, the “distinct investment-back ed expectations” factor of the Penn Central test is to be judged at the time the personal property was acquired. See Commonwealth Edison Co. v. United States , 271 F.3d 1327, 1350 & n.22 (Fed. Cir. 2001) (citing Palazzolo v. Rhode Island , 533 U.S. 606, 633-34 (2001) (O ’Connor, J., concurring)); see also Ruckelshaus v. Monsanto Co. , 467 U.S. 986, 1006 (1984). The question whether the Penn Central test has been satisfied, however, is separate from the question of whether a property interest exists in the first place.

2007-5049 8under § 522(f).”); In re Thompson , 867 F.2d 416, 422 (7th Cir . 1989) (lien avoidance under federal bankruptcy st atute “is not a taking when it is authorized before the creditor makes the secured loan in question”); In re Leicht , 222 B.R. 670, 682-83 (B.A.P. 1st Cir. 1998). The Armstrong case, heavily relied on by the appellants here and discussed below, reached a similar conclusion. Armstrong v. United States , 364 U.S. 40 (1960). There the petitioners provided materials to a private contractor for use in the construction of a Navy ship, and obtained liens on those materials under state law. Pursuant to 34 U.S.C. § 582, 3 the government later m ade progress payments and was entitled to a “paramount” lien on the work done on account of each payment. The Court made clear that the enforcem ent of the government lien fo r progress payments did not result in a taking, because the petitioners’ property interest was limited to “whatever proceeds the property might bring over and above the Government’s claim to the amount of its progress payments.” Id. at 45. The federal statute thus limited the petitioners’ later-arising, st ate-created property interests, even though the state liens arose before the progre ss payments were made 4 and the enforcemen t of the federal statute reduced the val ue of the state liens.

3 This statute, later codified at 10 U.S.C. § 7521 and subs equently repealed in 1994, Federal Acquisition Streamlining Ac t of 1994, Pub. L. No. 103-355, § 2001(j), 108 Stat. 3243, 3303, provided authorization to the Secretary of the Navy “to make partial payments from time to time during the progress of the work under all contracts made under the Navy Department for public purposes, but not in exce ss of the value of work already done,” and stated that such contracts “shall provide for a lien in favor of the Government, which lien is made paramount to all other liens, upon the articles or thing contracted for on account of all pay ments so made.” 34 U.S.C. § 582 (1952).

4 See Br. for the Pet’rs at 10, Armstrong , 364 U.S. 40.

2007-5049 9In other contexts our own cases have recognized that a federal statute or authority can constitute a “background principl e” that inheres in the title to property interests arising after its enactment, theref ore precluding a takings claim based on the application of the statute to those property interests. See, e.g. , Air Pegasus of D.C., Inc. v. United States , 424 F.3d 1206, 1218 (Fed. Cir. 2005) (federal government’s longstanding exercise of “dom inant control over the navi gable airspace” limited property rights in use of that airspace); Am. Pelagic , 379 F.3d at 1379 (Magnuson Act was a background principle that inhered in after-acqui red title to vessel and thus limited rights to uses of vessel contrary to the Act); M & J Coal Co. v. United States , 47 F.3d 1148, 1154 (Fed. Cir. 1995) (Surface Mining Cont rol and Reclamation Act of 1977 limited company’s right to mine under state permit i ssued after enactment of federal statute). 5 Here there can be no question of the authorit y of the federal gov ernment to make loans to sugar processors. The loans pr ovided by the CCC to processors like PNSC are part of a federal program designed to stabilize and support the domestic sugar market. Loans from the CCC to processors of domestic sugar beets are a major component of this program. Federal regulations guarantee that the loan proceeds will be used to make certain minimum payments to sugar beet producer s, like appellants, who provide beets for processing. 7 C. F.R. § 1435.104(c). The loan proceeds therefore benefit both processors and growers, and support the national sugar industry in general. There is also no doubt as to t he federal government’s authority to obtain

5 See also Ruckelshaus , 467 U.S. at 1003-04; Colvin Cattle Co. v. United States , 468 F.3d 803, 807 (Fed. Cir. 2006); Maritrans , 342 F.3d at 1352 (noting that “’background principles’ derived from an independent source, such as state, federal , or common law, define the dimensions of the requisite property rights for purposes of establishing a cognizable taking” (emphasis added)).

2007-5049 10and enforce security of the federal loans. See Kimbell Foods , 440 U.S. at 726. As the Supreme Court has explained, “state law is naturally preempted to the extent of any conflict with a federal statute.” Crosby v. Nat’l Foreign Trade Council , 530 U.S. 363, 372 (2000). The federal stat ute, guaranteeing super-priority for the CCC loans to PNSC, and the state statute, guaranteeing first priority for the appellants’ processor liens in the sugar refined by PNSC, clearly ar e in direct conflict. Because the federal statute legitimately altered the priority of liens arising afte r the statute was enacted, it preempted state law to the contrary. To be sure, takings questions may ar ise where the federal statute has a retroactive effect. For example, as noted above, in Security Industrial Bank the Court stated that if it construed section 522(f), permitting debtors to avoid liens on certain property, to apply retroactively, it would “c all upon the Court to resolve difficult and sensitive questions arising out of the guarantees of the Takings Clause.” 459 U.S. at 82 (internal quotation marks om itted). Similarly, in Preseault v. United States , 100 F.3d 1525 (Fed. Cir. 1996), we rejected the gover nment’s argument t hat the property interests could be defined “by the evolving enactment and implementation of federal railroad law ” after the creation of the property rights in question. Id. at 1537 (emphasis added). “[B]road general legisl ation authorizing a federal agency to engage in future regulatory activity,” id. at 1538, did not effectivel y limit the property right. 6

6 In Lucas , the Supreme Court indicated tha t, as to personal property, even retroactive application of a statute might permissibly alte r a state-created property interest. See 505 U.S. at 1027-28 (“[I]n the case of personal property, by reason of the State’s traditionally high degree of control over commercial dealings, [the owner] ought to be aware of the possibility that new regulation might even render his property economically worthless . . . .”).

2007-5049 11However, this is not a situation in which a federal statute rest ricting the state lien was enacted after the state proper ty interest came into existence. Beginning in 1977, Congress amended the Agricultur al Act of 1949, Pub. L. No. 81-439, 63 Stat. 1051, to provide price support to the sugar industry th rough loans made to processors of sugar beets in certain crop years. See Food and Agriculture Act of 1977, Pub. L. No. 95-113, § 902, 91 Stat. 913, 949 (providing loans for 1977 and 1978 crop years). In 1991, Congress added a provision ensuring the s uper-priority of CCC loans to sugar processors over statutory and common law producer liens. See Food, Agriculture, Conservation, and Trade Act Amendments of 1991, Pub. L. No. 102-237, § 111(b), 105 Stat. 1818, 1830. In 1996, the Agricultural Market Transition Act reauthorized sugar beet processor loans, and again provided for the super-priority of the federal loans over statutory and common law liens in favor of sugar beet producers. See Pub. L. No. 104- 127, tit. 1, §§ 156(b), 164(d) , 110 Stat. 896, 931, 935-36. 7 This act was in effect in December 2000, when appellants’ state liens attached. Contrary to appellants’ argument, the fact that the stat ute only had an effect in this case after the state lien was created is irrelevant. The federal statutor y limit existed long bef ore that time, and its later application does not create a retroactivity problem. Appellants finally argue that other case s support their argument that a federal statute may not alter property interests created by state law. These cases are all

7 The 1996 Act also suspended, for t he 1996 through 2002 crop years, 7 U.S.C. § 1421(e)(2)(a), a provision that had guaranteed payment by the government to sugar beet producers whose liens were not paid in full because of the insolvency of the processor. Agricultural Market Transit ion Act § 171(b)(1)(J), 110 Stat. at 937. Appellants allege that, prior to 1996, section 1421(e)(2)(a) had provided “just compensation” for what they claim w ould otherwise have been an unconstitutional taking.

2007-5049 12distinguishable. In each case, the st ate-created property interest was rendered unenforceable not by operation of a preexisting federal stat ute but as a consequence of sovereign immunity. In Armstrong , materials on which the plaint iffs held state-law liens were transferred to the United States by operat ion of a contract to which the plaintiffs were not a party. 364 U.S. at 46-47. As a result, “the liens were still valid, but they could not be enforced because of the sovere ign immunity of the Government and its property from suit.” Id. at 46 (internal citati on omitted). In both Shelden v. United States , 7 F.3d 1022 (Fed. Cir. 1993) and United States v. Me tmor Financial, Inc. ( In re Metmor Financial, Inc. ), 819 F.2d 446 (4th Cir. 1987), titl e to property on which the plaintiffs held mortgage lien interests was trans ferred to the government under forfeiture provisions of federal criminal statutes. In these cases, sovereign immunity prevented the mortgage holders from enfor cing their interests against the United States. See Shelden , 7 F.3d at 1030; Metmor , 819 F.2d at 450. Thus “transfer . . . altered, not the lien itself, but it s enforceability.” Metmor , 819 F.2d at 450. Similarly, in Murray v. United States , 817 F.2d 1580 (Fed. Cir. 1987), the United States acquired property through a tax lien foreclosure, and refused to allo w mortgage holders to redeem the property. Id. at 1582. The mortgage holders were unable to bring suit against the government based on this refusal because of sovereign immunity. Id. In each of these cases the assertion of the defense of sovereign immunity was held to create a taking; none of the cases held that a federal statute limiting property interests created under state law and enacted before the property came into existence constituted a taking of those interests. To the contrary, as noted above, in Armstrong the Supreme Court specifically recognized that the enforcem ent of a superior government lien for progress payments,

2007-5049 132007-5049 14 arising under a preexisting feder al statute, and the consequent reduction in value of the plaintiffs’ liens, did not result in a taking. 364 U.S. at 45. The Court held only that plaintiffs were entitled to recover the value of their state-law liens remaining after the enforcement of the government liens. Id. In summary, the background principles of law at the time appellants’ liens were created therefore provided for s uper-priority of CCC’s security interest over “all statutory and common law liens on . . . refined beet sugar in favor of the produce rs.” 7 U.S.C. § 7284(d). State law provisions to the contrary were preempted to t he extent that they could not and did not grant appe llants any compensable property interest at the time of lien enforcement above the gover nment’s super-priority lien interest based on federal law. Because we hold t hat appellants had no compensable property interest in the priority of their state-created liens, we need not address the second step of the takings analysis—namely, whether the gov ernment action in fact resu lted in any categorical or partial taking of a property interest. CONCLUSION For the foregoing reasons, the judgment of the Court of Federal Claims is
AFFIRMED. COSTS No costs.