Free Status Report - District Court of Federal Claims - federal

Case 1:91-cv-01470-LAS

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Filed 07/31/2008

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS

E. WAYNE HAGE AND THE ESTATE OF JEAN N. HAGE,
Plaintiff,
v.

No. 91-1470 L

Senior Judge Loren Smith

UNITED STATES OF AMERICA,

Defendants.
PLAINTIFF'S STATUS REPORT
Pursuant to the Court's direction at the status conference held on June 16, 2008,

Plaintiffs Estate of E. Wayne Hage and Estate of Jean Hage hereby submit their status
report with regard to preparation of the final judgment in this case.

As the Court is aware, much time has elapsed since the date of the taking in this

case. In fact, we are approaching the seventeenth anniversary of the taking as was found by the Court. Moreover, it has been over four years since the date of the trial on

the liability and damages issues. Because so much time has elapsed, plaintiffs are
concerned that the valuation method used by the court to determine the value of .

plaintiffs' water rights may not provide the just compensation that is required under the

Constitution. Plaintiffs argued in their closing argument in October 2004 that using the
date of taking valuation after so much time had lapsed would not provide just
compensation to plaintiffs and would provide a huge windfall to the United States.

At the time of the damages phase trial in May 2004, plaintiffs' experts testified

that the value of the water rights in 1991, the date of the taking, was somewhere
between $162.50 and $500.00 per acre foot. Since 2004, it appears that the value of

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water rights in central Nevada have risen dramatically. Plaintiffs are informed and
believe that water rights in central and eastern Nevada are now sellng for substantially

mor,e than $2000.00 per acre foot for use as agricultural water rights. Given the
significant elapse of time, plaintiffs believe that an evaluation of the fair market value of the water rights based upon the date of taking proven at trial does not satisfy the
principles of just compensation the Fifth Amendment requires.
In Kirby Forest Industries, Inc. v. United States, 467 U.S. 1 (1984), the Supreme

Court addressed the issue of valuation of the fair market value of property when a

considerable amount of time had passed. Kirby dealt with timber lands that the United

States sought to appropriate. Three years elapsed between the time the United States

appropriated the land and the time that it tendered payment. In that time the
landowners in Kirby asserted that the fair market value of the land had appreciated

substantially. The Supreme Court held:
However reasonable it may be to designate the date of the trial as the date of valuation, if the result ofthat approach is to provide the owner substantially less than the fair market value of his property on the date the United States tenders payment, it violates the Fifth Amendment.

Id. at 17. Where, as here, the date of the taking preceded the trial date by some
thirteen years, and the date of the Court's opinion is more than sixteen years after the
complaint was filed, it becomes even more paramount that the Court conduct a careful

analysis of the fair market value of the propert at the time that payment is made by the
United States to ensure that the Fifth Amendment is not violated.

The United States argued in Kirby that a mandated award of interest, "at least from the date of the valuation to the date of the taking would be a "rough proxy" for the

increase in the value of the land during that period." Id. However, the Supreme Court

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declined the invitation, finding that "(c)hange in market value of particular tracts of land

over time bears only a tenuous relationship to the market rate of interest." Id. The
Supreme Court went on to fashion its proposed remedy for the gap in just
compensation, by stating:

Solution of the problem highlighted by petitioner requires, not a rule compelling payment of interest by the Government, but rather a procedure for modifying a condemnation award when there is a . substantial delay between the date of valuation and the date the judgment is paid, during which time the value of the land changes

materially. In the case before us, such a procedure is readily
available. In view of the inadequacy of the commission's explanation for its valuation of petitioner's land, the Court of Appeals remanded for reconsideration of the value of the property. On remand, the District court can easily adduce evidence pertaining to alteration in the value of petitioner's tract between 26, 1982. In our view, such a March 6, 1979 and March reassessment is both necessary and sufficient to provide petitioner

just compensation.
Id. at 17-18. With the Supreme Court finding that just compensation may not be met
with a three year gap between a taking and payment, surely an almost seventeen year
gap requires a reconsideration of the value of plaintiffs' water rights.
Plaintiffs are analyzing the use of alternative interest rates to help make up the

gap between the market value on the date of taking and the date of the final judgment.

The United States has proposed to use the Declaration of Takings Act interest

calculation in 40 U.S.C. § 3116. However, it does not appear that any interest
calculation that plaintiffs can find will make up the difference between the disparity of

values from 1991 to 2008. The value of water rights in 2008 may have risen over
twelve times the value in

1991. As the Court is aware, the value water rights in the

west, and in particular in Nevada has increased dramatically. As the Supreme Court
observed in Kirby, an interest award does not even provide a "rough proxy" for the

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disparity in market value. Id. at 17. Plaintiffs believe that the only solution to the issue
is for the Court to reconsider its valuation. Plaintiffs intend to fie a formal motion for
reconsideration of the value of the water rights within 45 days to seek a remedy for the

issue.
As for interest calculation for the range improvements, the Court found were

taken and for which compensation is due under 43 U.S.C. § 1752(g), plaintiffs believe
that an alternative interest rate to the rate used in the Declaration of Takings Act should

be used. This is true for a number of reasons. First, the value of range improvements
has not risen in the same dramatic fashion that the water rights have, and an

appropriate interest award may provide plaintiffs just compensation for the loss of these

improvements. Second, the plaintiffs should be awarded an interest rate that should at
least match the rate plaintiffs would have earned if they had made a prudent investment

with the preservation of capital in mind. United States v. 429.59 Acres of Land, 612
F.2d 459, 464-65 (9th Cir. 1980).

Plaintiffs propose to file with the court a calculation of the interest rate based
upon a rate that would satisfy the "prudent investor" rule within 45 days.

Plaintiffs may also seek clarification of certain issues in the June 6, 2008 opinion,

and seek leave to file that request at the same time as the Motion of Reconsideration.
III
11

III III III

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Plaintiffs agree with Defendant that under these circumstances the issue of
attorneys' fees and costs should be deferred until after the final judgment is issued by
the Court.

Dated:July 31,2008

By:

Lyman D. Bedford, Ba
HANSON BRIDGETT

Wood Island
80 E. Sir Francis Drake Blvd., Suite 3E

Larkspur, CA 94939
Telephone: (415) 925-8400

Facsimile: (415) 925-8409
Michael J. Van Zandt Of Counsel

Attorneys for Plaintiff E. WAYNE HAGE AND THE ESTATE OF JEAN H. HAGE

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CERTIFICATE OF SERVICE
At the direction of the Attorney of Record or his designee, on the date designated

below, I served the within Status Report on the interested parties in this action by first
class mail as follows:

Michael Wolz Nevada Attorney General's Office 100 North Carson Street Carson City, NV 89701-4717

Dated: July 31, 2008

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