Opinion ID: 701737
Heading Depth: 2
Heading Rank: 2

Heading: Whether Assessment Constituted a Taking

Text: 17 Appellants also argue that the cross-guarantee assessment constituted a taking of private property for public use without just compensation, in violation of the Fifth Amendment. This argument is without merit. 18 Unconstitutional takings can occur in two ways. First, a property owner may suffer a physical invasion or permanent occupation of property. See, e.g., Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 426, 102 S.Ct. 3164, 3171, 73 L.Ed.2d 868 (1982); Penn Central Transp. Co. v. New York City, 438 U.S. 104, 124, 98 S.Ct. 2646, 2659, 57 L.Ed.2d 631 (1978). Such a physical intrusion is compensable without regard to the public interests that it may serve. Loretto, 458 U.S. at 426, 102 S.Ct. at 3171. Second, a regulatory scheme may result in a compensable taking without a physical invasion where the regulatory scheme goes too far. Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415, 43 S.Ct. 158, 160, 67 L.Ed. 322 (1922); see also Southview Assocs. v. Bongartz, 980 F.2d 84, 93 n. 3 (2d Cir.1992) ([A] regulatory taking--also known as inverse condemnation--occurs when the purpose of government regulation and its economic effect on the property owner render the regulation substantially equivalent to an eminent domain proceeding.). In these circumstances the Court must take into account several factors, on a case-by-case basis, to determine whether a governmental action has gone beyond 'regulation' and effects a 'taking.'  Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1005, 104 S.Ct. 2862, 2874, 81 L.Ed.2d 815 (1984). Such factors include the character of the governmental action, its economic impact, and its interference with reasonable investment-backed expectations. Id. (quoting PruneYard Shopping Center v. Robins, 447 U.S. 74, 83, 100 S.Ct. 2035, 2042, 64 L.Ed.2d 741 (1980)); see also Penn Central, 438 U.S. at 124, 98 S.Ct. at 2659. 19 Appellants argue that the FDIC's cross-guarantee assessment against Meriden Trust constituted an unconstitutional regulatory taking because Cenvest, at the time it acquired Meriden Trust in 1988, had a reasonable investment-backed expectation that the FDIC would not hold Meriden Trust liable if Central Bank failed. Appellants argue that the passage of FIRREA in 1989, which added the cross-guarantee provision to the Federal Deposit Insurance Act, fundamentally altered Cenvest's property rights in Meriden Trust by adding the risk of Central Bank's failure. 20 Appellants of course are correct that the critical time for considering investment-backed expectations is the time a property is acquired, not the time the challenged regulation is enacted. See, e.g., Yancey v. United States, 915 F.2d 1534, 1540 (Fed.Cir.1990). Indeed, a paradigmatic regulatory taking occurs when a change in the law results in the immediate impairment of property rights, leaving the property owner no options to avoid the loss. See, e.g., Lucas v. South Carolina Coastal Council, --- U.S. ----, 112 S.Ct. 2886, 120 L.Ed.2d 798 (1992) (holding regulatory taking occurred where passage of South Carolina Beachfront Management Act ended owner's plan of developing beach properties for single family residences); cf. Connolly v. Pension Benefit Guaranty Corp., 475 U.S. 211, 225-27, 106 S.Ct. 1018, 1026-27, 89 L.Ed.2d 166 (1986) (holding regulatory taking did not occur where retroactive application of law's withdrawal liability provisions advanced a public program that adjusts the benefits and burdens of economic life to promote the common good, did not cause a severe economic impact, and was not out of line with owner's investment-backed expectations). 21 The passage of FIRREA, however, did not subject Meriden Trust automatically to liability. Like all other financial institutions under common ownership, Meriden Trust then was faced with a choice: to continue as an insured depository institution and possibly become subject to cross-guarantee liability in the future, or to renounce its insured status. Meriden Trust chose to maintain its insured status after transferring its commercial banking activities to Central Bank, even in light of the new cross-guarantee provision added by FIRREA, thus voluntarily subjecting itself to a known obligation. Therefore, no unconstitutional taking occurred. See Bowles v. Willingham, 321 U.S. 503, 517-18, 64 S.Ct. 641, 648-49, 88 L.Ed. 892 (1944); Garelick v. Sullivan, 987 F.2d 913, 916 (2d Cir.) ([W]here a service provider voluntarily participates in a price-regulated program or activity, there is no legal compulsion to provide service and thus there can be no taking.), cert. denied, --- U.S. ----, 114 S.Ct. 78, 126 L.Ed.2d 47 (1993); cf. Concrete Pipe & Prods. v. Construction Laborers Pension Trust, --- U.S. ----, ---- - ----, 113 S.Ct. 2264, 2291-92, 124 L.Ed.2d 539 (1993) (emphasizing voluntariness of company's decision to participate in pension plan despite its lack of control over certain regulated aspects); Golden Pacific Bancorp v. United States, 15 F.3d 1066, 1073-74 (Fed.Cir.) (voluntary entry into highly regulated business deprives bank of any expectation that it would be compensated for actions of Comptroller of the Currency in declaring bank insolvent), cert. denied, --- U.S. ----, 115 S.Ct. 420, 130 L.Ed.2d 335 (1994). 2 22 Even were we to find that Meriden Trust was compelled to maintain its insured status, however, we would conclude that no unconstitutional taking occurred under the case-specific analysis set forth by the Supreme Court in Connolly. Although Meriden Trust ultimately became insolvent as a result of Central Bank's debts, Meriden Trust and Central Bank presumably reaped benefits from joint ownership in the first instance. The mere fact that joint ownership here led to liability does not mean the adverse economic impact was caused by the cross-guarantee provision. See Connolly, 475 U.S. at 226, 106 S.Ct. at 1027 (holding an economic impact must be a necessary consequence of the ... regulatory scheme to constitute a taking). Rather, Meriden Trust's losses were at least partly the result of Central Bank's failure, to whom Meriden Trust previously had transferred its liabilities. Second, the cross-guarantee provision did not significantly disrupt any reasonable investment-backed expectations, as those who do business in [a] regulated field cannot object if the legislative scheme is buttressed by subsequent amendments to achieve the legislative end. Id. at 227, 106 S.Ct. at 1027 (quotation omitted). Finally, the character of the governmental action at issue here was in keeping with the economic reality of the relationship between Cenvest and its banks. The interference with Meriden Trust's property rights ar[ose] from a public program that adjusts the benefits and burdens of economic life to promote the common good. Id. at 225, 106 S.Ct. at 1025. Accordingly, appellants have failed to demonstrate any deprivation significant enough to satisfy the heavy burden placed upon one alleging a regulatory taking. Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470, 493, 107 S.Ct. 1232, 1246, 94 L.Ed.2d 472 (1987) (emphasis added).CONCLUSION 23 For the reasons stated above, we find that the FDIC properly assessed cross-guarantee liability against Meriden Trust, and conclude that the assessment did not constitute an unconstitutional taking under the Fifth Amendment. The judgment of the district court accordingly is affirmed.