Court Opinion

ID: 2673397
Source: CourtListenerOpinion
Date Created: 2014-05-10 03:14:37.95945+00
Date Added: 2024-06-11T13:06:48.736551
License: Public Domain

In the United States Court of Federal Claims
                             NOT FOR PUBLICATION
                          Nos. 09-503L, 09-241L, & 09-158L
                               (Filed: February 4, 2014)

                                          )
 WILMA N. ADKINS, et al.,                 )
                                          )
 and,                                     )
                                          )
 STEVEN JENKINS, et al.,                  )
                                          )
 and,                                     )
                                          )
 MARK S. RASMUSON and                     )
 BRENDA S. RASMUSON, husband              )
 and wife, et al.,                        )
                                          )
                      Plaintiffs,         )
                                          )
 v.                                       )
                                          )
 THE UNITED STATES,                       )
                                          )
                      Defendant.          )
                                          )

                 OPINION ON PARTIAL SUMMARY JUDGMENT

        Pending before the court are the plaintiffs’ motions for partial summary judgment

on the appropriate interest rate necessary to provide just compensation for the period of

delay between the date of taking and the final payment. The court determined just

compensation for each of the three cases in a final trial opinion issued on October 25,

2013. Adkins v. United States, No. 09-503, ECF No. 119; Jenkins v. United States, No.

09-241, ECF No. 157; Rasmuson v. United States, No. 09-158, ECF No. 137. The

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parties have not been able to reach agreement on the proper interest rate to be applied to

the court’s awards of just compensation. The plaintiffs seek a ruling that the interest

should be calculated based on the average annual rate using Moody’s Composite Index of

Yields on Aaa Long Term Corporate Bonds (“Moody’s Rate”). 1 The government argues

that the court should apply the rates authorized under the Declaration of Takings Act, 40

U.S.C. § 3116 (2012) (“DTA”), which pegs its rate to the one-year Treasury yield rate set

by the Federal Reserve (“52-week T-bill” or “Treasuries”). In the alternative, the

government argues for a shorter-term corporate bond rate and urges the court to adopt the

rates set for corporate bond maturities ranging from one to three years and maintained by

the Bank of America/Merrill Lynch.

                                         DISCUSSION

       It is well-settled that plaintiffs are entitled to interest as part of their just

compensation under the Fifth Amendment. Kirby Forest Indus., Inc. v. United States,

467 U.S. 1, 10 (1984) (“[T]he owner is entitled to interest thereon sufficient to ensure that

he is placed in as good a position pecuniarily as he would have occupied if the payment

had coincided with the appropriation.”). Plaintiffs argue that this court and others have

consistently held that an interest rate should be set based on the prudent investor rule

(“PIR”), under which the proper interest rate is calculated “based not on an assessment of

how a particular plaintiff would have invested any recovery, but rather on how ‘a

1
  The plaintiffs have submitted an affidavit in support their motion attached to their reply brief.
The defendant argues that this affidavit was not timely filed and should be stricken. The court
finds that it is not necessary to consider the affidavit in order to resolve the pending motions and
thus the Motion to Strike is DENIED as moot.
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reasonably prudent person’ would have invested the funds to ‘produce a reasonable return

while maintaining the safety of principal.’” Tulare Lake Basin Water Storage Dist. v.

United States, 61 Fed. Cl. 624, 627 (2004) (quoting United States v. 429.59 Acres of

Land, 612 F.2d 459, 464-65 (9th Cir. 1980)). Courts have consistently found the

Moody’s Rate to satisfy PIR. See Biery v. United States, 2012 WL 5914521 (Fed. Cl.

2012). For example, in Pitcairn v. United States, 547 F.2d 1106, 1122-24 (Ct. Cl. 1976),

the Court of Claims, in departing from the DTA rate at the time, approved a set of interest

rates adopted by the trial court based on historic and current Moody’s Rates. The Court

of Claims noted that “long-term corporate bond yields are an indicator of broad trends

and relative levels of investment yields or interest rates.” Id. at 1124. See also

Tektronix, Inc. v. United States, 552 F.2d 343, 352-53 (Ct. Cl. 1977); Georgia-Pacific

Corp. v. United States, 640 F.2d 328, 365-66 (Ct. Cl. 1980) (applying the Pitcairn rates in

a takings case); Miller v. United States, 620 F.2d 812, 839-40 (Ct. Cl. 1980). More

recently, this court has used the Moody’s Rate over the DTA rate, reasoning that it

provided the best approximation of actual market conditions from 2007 to 2012, a time

period which also substantially overlaps with the period at issue in the present case.

Biery, 2012 WL 5914521, at *3-4.

       The government argues that the Moody’s Rate is not appropriate and that a lower

rate based on either the DTA rate or a short-term bond rate should be used because the

plaintiffs’ proposed Moody’s Rate improperly enriches plaintiffs. According to the

government, the plaintiffs’ bond yield rate is too high because it presents higher risks

than would be acceptable to a reasonably prudent investor. The government contends

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that a reasonably prudent investor would not put all of his or her money into these higher-

yield bonds. For these reasons, the government proposes that the court use the index of

“AAA to A-rated corporate bonds with maturities ranging from one-to-three years

maintained by the Bank of America/Merrill Lynch.”

         After considering the parties’ arguments, the court concludes that the Moody’s

Rate, as proposed by the plaintiffs, should be applied in this case. This court has

discretion in determining what interest rate should apply. Pitcairn, 547 F.2d at 1122.

The court’s primary goal in determining a correct interest rate is to employ an interest

calculation that does not simply “yiel[d] a higher or lower payment, but rather . . . is the

more accurate measure of the economic harm to property owners.” NRG Co. v. United

States, 31 Fed. Cl. 659, 670 n.8 (1994). In making this determination, the court is to

choose an interest rate that puts the property owner in as good a financial position as if

the compensation were given concurrently with the taking. Kirby Forest Indus., 467 U.S.

at 10.

         With these standards in mind, the court is persuaded that in this instance, as it was

in Biery, an objective “reasonably prudent investor” would have sought yields consistent

with the Moody’s Rate. See Pitcairn, 547 F.2d at 1124 (“[L]ong-term corporate bond

yields are an indicator of broad trends and relative levels of investment yields or interest

rates. They cover the broadest segment of the interest rate spectrum.”).

         In addition, the court finds that it is appropriate to compound interest annually.

Compound interest may be necessary “to accomplish complete justice” under the Just

Compensation Clause. Dynamics Corp. of Am. v. United States, 766 F.2d 518, 519 (Fed.

                                               4
Cir. 1985) (citations and quotation marks omitted). Compound interest is also in accord

with prudent investment practices. Brunswick Corp. v. United States, 36 Fed. Cl. 204,

219 (1996) (“[I]nterest rates shall be compounded annually since no prudent,

commercially reasonable investor would invest at simple interest.”).

       Finally, the court notes that the parties have provided different numbers for the

Moody’s Rates. The court adopts the plaintiffs’ revised rates as set forth in their

December 10, 2013 reply brief, as follows:

               Year                      Moody’s Long Term Aaa Corporate Bond Index
               2003                                        5.69%
               2004                                        5.59%
               2005                                        5.36%
               2006                                        5.59%
               2007                                        5.56%
               2008                                        5.63%
               2009                                        5.31%
               2010                                        4.94%
               2011                                        4.64%
               2012                                        3.67%
               2013                                        4.16%

                                     CONCLUSION

       For the foregoing reasons, the plaintiffs’ motion for partial summary judgment is

GRANTED.

       IT IS SO ORDERED.

                                                          s/Nancy B. Firestone
                                                          NANCY B. FIRESTONE
                                                          Judge

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