Opinion ID: 900919
Heading Depth: 1
Heading Rank: 6

Heading: The Nemmers Model

Text: [¶ 35.] As a preliminary point, we note that the Eighth Circuit created the Nemmers measure of damages with reference only to Iowa law, not to federal law. We hold that the defendants' actions violated Nemmers' rights under the Iowa constitution and reverse. Nemmers I, 716 F.2d at 1195. In our view, the Iowa Supreme Court would find that Nemmers had a vested right to L-1 zoning under state law. Id. at 1197. Accordingly, the Nemmers model has less persuasive force than it would have if it had been decided under federal law. Additionally, as we have shown in the discussion of our hypothetical condition, the Nemmers model is more properly suited to a situation in which a plaintiff is prevented for the foreseeable future from exercising a constitutionally recognized right. SDDS was not so prevented. In any event, SDDS had a right to no more than a five-year permit. [¶ 36.] There is no dispute that fair market value is the proper measure of just compensation where land is taken permanently by the government. Yuba, 904 F.2d at 1580. However, temporary takings valuation is not a derivative of permanent takings value. Bass IV, 48 Fed.Cl. at 623. The Supreme Court has held that fair compensation for a temporary possession of a business enterprise is the reasonable value of the property's use.  United States v. Pewee Coal Co., 341 U.S. 114, 117, 71 S.Ct. 670, 672, 95 L.Ed. 809, 813 (1951) (citing Kimball Laundry Co. v. United States, 338 U.S. 1, 69 S.Ct. 1434, 93 L.Ed. 1765 (1949)) (emphasis added). But, [i]nterest on the fair market value of the property does not provide a method that accurately reflects the reasonable value of the property's use.  Bass IV, 48 Fed.Cl. at 623 (emphasis added). The insistence on use, both by the Supreme Court and by the U.S. Court of Federal Claims in the recent Bass IV decision (2001) is crucial. In a market economy, risk is a key factor in any investment decision: investors have the option of safely putting their money away into a bank at a relatively modest rate of interest or of trying to beat the bank rate by putting their money into ventures more or less risky. The use of the Bass drilling rights and the use of SDDS's dumping rights could be expected to produce income different from (perhaps greater than, perhaps less than) mere interest on the market value of the property in either case. [¶ 37.] The Nemmers model suffers from two additional problems. The market rate of return on the difference in value of the Lonetree site with and without the permit bears no clearly discernible relationship to the rental value of the property. More significant for us is the practically inordinate degree of speculativeness in its application to our facts. As noted earlier, the estimates proposed by SDDS ranged from $17 million to $51 million. Furthermore, one of the methods on which those estimates were based predicted an astronomical amount of nearly $435 million if the taking had lasted three times as long as it in fact did. [10] Such uncertainty in the estimates of damages gives us concern. Taken together, the foregoing reasons persuade us that the Nemmers model cannot be used to calculate damages for the forty-three month temporary taking.