Court Opinion

ID: 4647364
Source: CourtListenerOpinion
Date Created: 2020-12-29 16:00:49.156155+00
Date Added: 2024-06-11T08:01:05.276711
License: Public Domain

Case: 20-1185   Document: 76     Page: 1   Filed: 12/29/2020

        NOTE: This disposition is nonprecedential.

   United States Court of Appeals
       for the Federal Circuit
                 ______________________

   TAYLOR & SONS, INC., CEDRIC THEEL, INC.,
    WHITEY'S, INC., RFJS COMPANY, LLC, JIM
   MARSH AMERICAN CORPORATION, LIVONIA
   CHRYSLER JEEP, INC., BARRY DODGE INC.,
               Plaintiffs-Appellants

       ALLEY'S OF KINGSPORT, INC., ET AL.,
                    Plaintiffs

                            v.

                   UNITED STATES,
                   Defendant-Appellee

 --------------------------------------------

    MIKE FINNIN MOTORS, INC., GUETTERMAN
                MOTORS, INC.,
               Plaintiffs-Appellants

       ALLEY'S OF KINGSPORT, INC., ET AL.,
                    Plaintiffs

                            v.

                   UNITED STATES,
                   Defendant-Appellee
                 ______________________

                  2020-1185, 2020-1205
Case: 20-1185    Document: 76      Page: 2     Filed: 12/29/2020

2                        TAYLOR & SONS, INC.   v. UNITED STATES

                   ______________________

     Appeals from the United States Court of Federal
 Claims in Nos. 1:10-cv-00647-NBF, 1:11-cv-00100-NBF,
 1:12-cv-00900-NBF, Senior Judge Nancy B. Firestone.
                 ______________________

                Decided: December 29, 2020
                  ______________________

     ROGER J. MARZULLA, Marzulla Law, LLC, Washington,
 DC, argued for plaintiffs-appellants Taylor & Sons, Inc.,
 Cedric Theel, Inc., Whitey's, Inc., RFJS Company, LLC,
 Jim Marsh American Corporation, Livonia Chrysler Jeep,
 Inc., Barry Dodge Inc.

     RICHARD D. FAULKNER, Faulkner ADR Law, Richard-
 son, TX, for plaintiffs-appellants Guetterman Motors, Inc.,
 Mike Finnin Motors, Inc. Also represented by HARRY
 ZANVILLE, La Mesa, CA.

     ELIZABETH MARIE HOSFORD, Commercial Litigation
 Branch, Civil Division, United States Department of Jus-
 tice, Washington, DC, argued for defendant-appellee. Also
 represented by CHRISTOPHER JAMES CARNEY, JEFFREY B.
 CLARK, KENNETH DINTZER, ROBERT EDWARD KIRSCHMAN,
 JR., ALISON VICKS.
                  ______________________

     Before DYK, TARANTO, and STOLL, Circuit Judges.
 TARANTO, Circuit Judge.
     Before mid-2009, the plaintiffs in these cases were au-
 tomobile dealers operating as franchisees of Chrysler LLC.
 In that year, Chrysler filed a petition for reorganization in
 bankruptcy, and it rejected the franchise agreements in the
 bankruptcy proceeding under 11 U.S.C. § 365. Plaintiffs
 sued the United States in the Court of Federal Claims,
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 TAYLOR & SONS, INC.   v. UNITED STATES                       3

 alleging that the government played a role in Chrysler’s re-
 jection of the franchise agreements that constituted a tak-
 ing of their property, requiring just compensation under
 the Takings Clause of the Fifth Amendment to the United
 States Constitution. In 2014, agreeing with the Claims
 Court, we allowed the case to proceed beyond the pleading
 stage. A & D Auto Sales, Inc. v. United States, 748 F.3d
 1142 (Fed. Cir. 2014). On remand, the Claims Court, after
 a full trial, rejected the claims on two grounds—first, that
 the government’s actions did not amount to coercion of
 Chrysler’s decision to reject the franchise agreements and,
 second, that plaintiffs did not prove that the franchise
 agreements would have had value but for those actions.
 Colonial Chevrolet Co, Inc. v. United States, 145 Fed. Cl.
 243 (2019) (Trial Opinion). On plaintiffs’ appeal, we now
 affirm on the latter ground and do not address the former.
                                I
                                A
     Taylor & Sons, Inc. (Taylor) and Mike Finnin Motors,
 Inc. (Finnin) are two of the nine plaintiffs-appellants, all of
 whom, like many other dealers, had their franchise agree-
 ments with Chrysler rejected in the 2009 Chrysler bank-
 ruptcy proceeding.        Taylor and six other plaintiffs-
 appellants have been called the “Alley’s dealers,” and Fin-
 nin and one other plaintiff-appellant have been called the
 “Colonial dealers,” reflecting the names of the first-named
 plaintiffs in the actions filed and consolidated in the Claims
 Court.
      In late 2008, Chrysler, which had been experiencing
 significant difficulties that were exacerbated by a general
 market crisis, sought financial assistance from the federal
 government. The Department of the Treasury entered into
 a Loan and Security Agreement (Agreement) with Chrys-
 ler. The Agreement provided for an immediate bridge loan
 (totaling $4 billion) to Chrysler and also provided for fur-
 ther, more wide-ranging negotiations—in which the
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4                        TAYLOR & SONS, INC.   v. UNITED STATES

 Treasury Department’s new Auto Team Task Force (Auto
 Team) was to play a central role—aimed at enabling the
 Chrysler business to continue operating over the long term.
 J.A. 10460 (§ 7.20(b)). The Auto Team and Chrysler ulti-
 mately agreed on a plan under which Chrysler would file
 for reorganization, the government would supply substan-
 tial funding during the bankruptcy process, and a newly
 formed entity (to be owned in part by Italian vehicle man-
 ufacturer Fiat) would take over the business. One issue
 discussed during the negotiations was reducing the num-
 ber of Chrysler’s dealer-franchisees, which Chrysler had
 been doing for many years through its “Project Genesis,”
 though more gradually and with a greater role for fran-
 chisees’ choice than was now discussed. J.A. 10365–66,
 10378–82.
     Chrysler filed for bankruptcy on April 30, 2009. In re
 Chrysler LLC, 405 B.R. 84, 87–88 (Bankr. S.D.N.Y. 2009).
 Two weeks later, on May 14, 2009, Chrysler, as debtor-in-
 possession, invoked its right under 11 U.S.C. § 365 to “as-
 sume or reject any executory contract” by filing a motion to
 approve rejection 789 franchise agreements, including
 those of the Alley’s and Colonial dealers. Id. at 88. The
 bankruptcy court approved the rejection on June 9, 2009,
 effective immediately, with the result that the now-former
 franchisees could no longer exercise franchise-agreement
 rights, such as holding themselves out as authorized
 Chrysler dealers and providing warranty-covered service
 for which Chrysler would pay. Order Rejecting Executory
 Contracts, In re Chrysler LLC, No. 09-50002, ECF No. 3802
 (Bankr. S.D.N.Y. 2009).
                               B
     Following rejection of their franchise agreements,
 plaintiffs filed the present actions, alleging that the federal
 government had committed a taking by its actions that as-
 sertedly coerced Chrysler’s rejection of the franchise agree-
 ments in bankruptcy. When the government moved to
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 TAYLOR & SONS, INC.   v. UNITED STATES                        5

 dismiss the claims for failure to state a claim, the Claims
 Court denied the motion, Colonial Chevrolet Co., Inc. v.
 United States, 103 Fed. Cl. 570 (2012); Alley’s of Kingsport,
 Inc. v. United States, 103 Fed. Cl. 449 (2012), but granted
 the government’s motion for interlocutory appeal, Colonial
 Chevrolet Co., Inc. v. United States, 106 Fed. Cl. 619 (2012);
 Alley’s of Kingsport, Inc. v. United States, 106 Fed. Cl. 762
 (2012).
      On the interlocutory appeal, we affirmed the denial of
 dismissal and remanded the case. A & D Auto Sales, 748
 F.3d at 1147, 1159. We concluded that plaintiffs had al-
 leged sufficient facts for the takings claim to pass muster
 at the motion-to-dismiss stage, save for their failure to al-
 lege a loss of economic value because the complaints “d[id]
 not sufficiently allege that the economic value of the plain-
 tiffs’ franchises was reduced or eliminated as a result of the
 government’s actions.” Id. at 1147. And we remanded with
 instructions to grant plaintiffs leave to amend their com-
 plaints to allege economic loss of “but-for economic use or
 value” in the absence of government financing. Id. at
 1157–58.
     On remand, the complaints were amended, then the
 case proceeded through discovery and a trial, after which
 the Claims Court entered findings of fact and conclusions
 of law that rejected the dealers’ takings claims on two
 grounds, each sufficient for judgment against the dealers.
 The court ruled first that the challenged government ac-
 tions that led to Chrysler’s franchise terminations—fo-
 cused on conditions the government placed on its provision
 of funding—did not constitute a taking because those ac-
 tions did not rise to the level of “coercion” as the trial court
 understood our holding in A & D Auto Sales. Trial Opin-
 ion, 145 Fed. Cl. at 249, 316–22. The Claims Court also
 ruled that, in any event, the taking claim failed on a sepa-
 rate ground: the dealers failed to prove that their franchise
 agreements would have had positive value in a “but for
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6                        TAYLOR & SONS, INC.   v. UNITED STATES

 world” without the government’s challenged actions. Id. at
 249, 322–24.
     The Claims Court entered final judgment against the
 dealers on October 2, 2019. The dealers timely appealed.
 We have jurisdiction under 28 U.S.C. § 1295(a)(3).
                               II
     Whether government action constitutes a compensable
 taking is a question of law based on factual underpinnings.
 See Wyatt v. United States, 271 F.3d 1090, 1096 (Fed. Cir.
 2001). We review the Claims Court’s legal conclusions de
 novo and its factual findings for clear error. Reoforce, Inc.
 v. United States, 853 F.3d 1249, 1265 (Fed. Cir. 2017).
 Findings of fact are “clearly erroneous” when “the review-
 ing court on the entire evidence is left with the definite and
 firm conviction that a mistake has been committed.” Gads-
 den Indus. Park, LLC v. United States, 956 F.3d 1362, 1368
 (Fed. Cir. 2020) (internal quotation marks and citations
 omitted). “‘The fact-finder has broad discretion in deter-
 mining credibility’” of witnesses. J.C. Equip. Corp. v. Eng-
 land, 360 F.3d 1311, 1315 (Fed. Cir. 2004) (quoting Bradley
 v. Sec’y of Health & Human Servs., 991 F.2d 1570, 1575
 (Fed. Cir. 1993)).
      On appeal, plaintiffs challenge both of the Claims
 Court’s rulings. We conclude that the Claims Court com-
 mitted no reversible error in determining that the dealers
 failed to prove a positive value that their franchise agree-
 ments would have had but for the challenged government
 actions. That conclusion suffices for affirmance. We do not
 reach the Claims Court’s no-coercion ruling.
     The Fifth Amendment states: “nor shall private prop-
 erty be taken for public use, without just compensation.”
 U.S. Const. amend. V. There is no compensable taking
 when the alleged economic impact of the government action
 has not resulted in a diminution in value. See A & D Auto
 Sales, 748 F.3d at 1157 (collecting cases); see also Love
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 TAYLOR & SONS, INC.   v. UNITED STATES                     7

 Terminal Partners, L.P. v. United States, 889 F.3d 1331,
 1342 (Fed. Cir. 2018); Cienega Gardens v. United States,
 331 F.3d 1319, 1340 (Fed. Cir. 2003). 1 “It is the property
 owner who bears the burden of proving an actual loss has
 occurred”; the property owner must “show actual damages
 ‘with reasonable certain[t]y,’ which ‘requires more than a
 guess, but less than absolute exactness.’” Gadsden, 956
 F.3d at 1371 (quoting Otay Mesa Prop., L.P. v. United
 States, 779 F.3d 1315, 1323 (Fed. Cir. 2015)) (cleaned up).
     The trial court did not clearly err in finding that the
 dealers failed to meet their burden. The dealers have con-
 ceded that Chrysler would have petitioned for bankruptcy,
 and proceeded to liquidate, in a hypothetical, but-for world
 without government financial assistance. Trial Opinion,
 145 Fed. Cl. at 247; Alley’s Op. Br. 44; Colonial Op. Br. 36.
 The dealers’ but-for-world valuations of the franchise
 agreements—presented by experts Diane Anderson Mur-
 phy and Edward Stockton—rested on premises about how
 Chrysler or a bankruptcy trustee would have treated the
 franchise agreements in such a liquidation. The Claims
 Court rejected those crucial premises about the but-for-
 world franchise treatment as unsupported and unpersua-
 sive. Trial Opinion, 145 Fed. Cl. at 319, 322–24. We see
 no basis for reversing that determination, which leaves
 plaintiffs with no reliable proof of the but-for-world value
 they must establish.

     1   In their opening brief, the Colonial dealers argue
 that the government actions at issue were “a per se direct
 taking, akin to a physical taking,” Colonial Op. Br. 38–39,
 but they present no argument that this characterization,
 even if correct, modifies their burden to prove the loss in
 value of the franchise agreements but for the challenged
 government actions. We therefore apply the loss-in-value
 requirement here without regard to other issues about the
 proper characterization of the claim for takings analysis.
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8                        TAYLOR & SONS, INC.   v. UNITED STATES

      The Claims Court found that “a trustee in bankruptcy
 would have rejected all franchise agreements to protect the
 assets of the bankruptcy estate.” Trial Opinion, 145 Fed.
 Cl. at 323. The evidence supports that finding. Donald
 MacKenzie, one of the government’s expert witnesses, tes-
 tified that “Chrysler could not have paid its dealers for any
 warranty service performed after the [bankruptcy] petition
 date, nor could the company have provided assurance of fu-
 ture performance under the dealer franchise agreements,”
 due to the company’s high debt. Testimony of Donald Mac-
 Kenzie, Tr. 4076:10–14 (May 3, 2019), No. 1:10-cv-00647,
 ECF No. 480; id. at 4045:15–19; see Trial Opinion, 145 Fed.
 Cl. at 319, 323. There was evidence that Chrysler, in an
 unassisted liquidation, would have ceased production and
 other activities. Trial Opinion, 145 Fed. Cl. at 294. With
 context-describing support from former Bankruptcy Judge
 Gerber, Mr. MacKenzie also testified that Chrysler’s obli-
 gation under the franchise agreements to purchase back
 unsold vehicles and parts in the event of termination (trig-
 gered by a discontinuance of production, J.A. 10113) was a
 liability that, consistent with fiduciary and trustee duties,
 would have been avoided in a liquidation by a rejection of
 the franchise agreements. See Trial Opinion, 145 Fed. Cl.
 at 307–09, 319, 323–324. The Claims Court reasonably
 found that, in a liquidation (in a but-for world), the fran-
 chise agreements of plaintiffs would have been rejected.
      That finding amply supports the Claims Court’s refusal
 to credit the valuation opinions of the plaintiffs’ experts.
 The valuation opinion of Ms. Murphy, for the Alley’s deal-
 ers, rested on the contrary assumption—that the franchise
 agreements would not have been rejected in a liquidation,
 so that the dealerships would have continued to operate as
 Chrysler dealerships and sell Chrysler vehicles. See, e.g.,
 id. at 254–255, 284; Testimony of Diane Anderson Murphy,
 Tr. 1749:4–7 (Apr. 15, 2019), No. 1:10-cv-00647, ECF No.
 462 (“Q. Your valuation certainly assumes that the dealers
 will last more than five years, correct? A. The dealership
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 TAYLOR & SONS, INC.   v. UNITED STATES                      9

 would last more than five years, yes.”); id. at 1750:1–6
 (“You write . . . ‘even in the absence of Government funding
 and Chrysler having entered bankruptcy, the franchise
 agreements of the Chrysler franchisees would remain in
 full force and effect.’ Correct? A. Yes.”). The same is true
 of the valuation testimony of the Colonial dealers’ valua-
 tion expert Mr. Stockton. See Trial Opinion, 145 Fed. Cl.
 at 323.
     There also were other unpersuasive assumptions built
 into the opinions of the dealers’ valuation experts. For ex-
 ample, the Claims Court found a number of additional as-
 sumptions by Ms. Murphy unsupported by the evidentiary
 record, Trial Opinion, 145 Fed. Cl. at 323 n.46—a finding
 not challenged on appeal. The Claims Court, relying on
 testimony of Mr. MacKenzie and others, rejected, as well,
 the assumption embedded in Mr. Stockton’s valuation that
 the federal government would have chosen to continue to
 cover Chrysler warranties after Chrysler began to liqui-
 date. Id. at 303 n.41, 319, 323. Further, based on the fact
 that the property at issue here consists of contract rights,
 see Taylor v. United States, 959 F.3d 1081, 1087 (Fed. Cir.
 2020) (noting Takings Clause precedents involving con-
 tract rights)—specifically, the plaintiffs’ rights under their
 franchise agreements—the Claims Court noted that Ms.
 Murphy testified that her calculations included tangible
 property beyond the rights in the franchise agreements, see
 J.A. 21797 (Tr. 1542:2–22), yet her opinion “did not sepa-
 rately analyze how these tangible assets contributed to the
 plaintiff’s income stream profits, separate from the fran-
 chise agreement allegedly taken,” Trial Opinion, 145 Fed.
 Cl. at 322. The same was true of Mr. Stockton’s valuation,
 which he testified included, beyond the terms of the fran-
 chise agreements, “other elements of value associated with
 franchise operations.” Trial Opinion, 145 Fed. Cl. at 286;
 see also J.A. 22611 (Tr. 2356:15–16). “[W]hat was im-
 portant was for the focus to be on awarding just compensa-
 tion for exactly what had been taken in the case.” Otay
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 10                      TAYLOR & SONS, INC.    v. UNITED STATES

 Mesa Prop., L.P., 779 F.3d at 1320. The Claims Court rea-
 sonably found the testimony of the dealers’ experts not ad-
 equately so focused.
     We conclude that the record supports the Claims
 Court’s rejection of crucial assumptions of the plaintiffs’ ex-
 perts and finding that the plaintiffs did not provide a reli-
 able proof that, in the but-for world, the franchise
 agreements would have had a positive value. The Claims
 Court’s finding is not clearly erroneous. And contrary to
 the Colonial dealers’ contention, Colonial Op. Br. 51–52,
 the finding of no proof of but-for-world value of the specific
 property at issue does not rest on any exclusion by the
 Claims Court of a legally legitimate method of proving
 value. The variations in methodology discussed by the Co-
 lonial dealers are immaterial given the Claims Court’s
 well-supported rejection of the plaintiffs’ experts’ assump-
 tion about the treatment of the franchise agreements in the
 liquidation that would concededly have occurred in the but-
 for world.
    We have considered the dealers’ remaining arguments
 and find them unpersuasive.
                               III
     For the foregoing reasons, we affirm the trial court’s
 judgment.
                         AFFIRMED