ACCEPTANCE INSURANCE COMPANIES INC., v. USA

Filing 94

PUBLISHED OPINION and ORDER Granting 86 Motion to Dismiss - Rule 12(b)(6); and directing the Clerk to dismiss the complaint with prejudice. Signed by Judge Thomas C. Wheeler. (wjg)

A C C E P T A N C E INSURANCE COMPANIES INC., v. USA

D o c . 94

In the United States Court of Federal Claims
N o . 03-2794 (F ile d : September 25, 2008) ********************************** * * A C C E P T A N C E INSURANCE C O M P A N IE S INC., Plaintiff, v. T H E UNITED STATES, Defendant. * * * * * * * * * * * ********************************** * L e w is S. Wiener, with whom were Ronald R. Massumi and G. Brendan Ballard, Sutherland, A s b ill & Brennan LLP, Washington, D.C., Patrick Griffin, Kutak Rock, LLP, Omaha, N e b ra sk a , Of Counsel, for Plaintiff. M ich a e l N. O'Connell, with whom were Gregory G. Katsas, Assistant Attorney General, J e a n n e E. Davidson, Director, and Mark A. Melnick, Assistant Director, United States D e p a rtm e n t of Justice, Commercial Litigation Branch, Civil Division, Washington, D.C., K im b e rle y E. Arrigo, U.S. Department of Agriculture, Of Counsel, for Defendant. O P I N I O N AND ORDER W H E E L E R , Judge. In this Fifth Amendment takings case, Plaintiff Acceptance Insurance Companies, Inc. ( " A c c e p t a n c e " ) seeks just compensation for damages resulting from the actions of the Risk M a n a g em e n t Agency ("RMA") in blocking the proposed sale of certain crop insurance p o licies and other tangible and intangible insurance assets to a private third party purchaser. T h is case is before the Court on Defendant's motion under Rule 12(b)(6) of the Court of F if th Amendment; Regulatory Taking C la im ; Proposed Sale of Crop Insurance P o l ic ie s From One Private Party to A n o th e r; No Legally Cognizable Property In ter e st; Omnia Line of Cases; Rule 1 2 (b)(6 ).

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F e d e ra l Claims ("RCFC") to dismiss for failure to state a claim upon which relief may be g ra n te d . For the reasons stated below, the Court finds that Plaintiff has failed to state an a c tio n a b le claim, and accordingly, Defendant's motion to dismiss is GRANTED. B a c k g ro u n d 1 A c c ep ta n c e, a publicly-traded insurance holding company based in Nebraska, alleges t h a t the United States, through the regulatory actions of the RMA,2 effected a taking of P la in ti f f ' s property by blocking the proposed sale of certain of its crop insurance assets to a private third party purchaser. Am. Compl. at ¶ 24. During the time relevant to this dispute, Acceptance held a wholly-owned subsidiary, A m e ric a n Growers Insurance Company ("American Growers"), through which Acceptance e n g a g e d in the crop insurance and property and casualty insurance businesses. See id. at ¶ 7 . American Growers was in the business of underwriting a substantial number of insurance p o lic ie s within the federal crop insurance program, as well as crop insurance policies p u rs u a n t to state insurance laws that are not a part of the federal crop insurance program. Id. A s a private insurance company reinsured by the FCIC, American Growers was regulated by th e FCIC and was required to, among other things, use the coverage levels, prices, premium ra te s , and transitional yields determined by the FCIC. Id. at ¶ 8. In November 2002, American Growers announced that it had suffered a $130 million lo s s in the third quarter. Pl.'s Resp. at 3, June 20, 2008. As a result, American Growers' p o lic yh o ld e r surplus fell far below the minimum amount required by the state insurance re g u lato r, the Nebraska Department of Insurance ("NDOI"). Id. In order to remedy this situ a tio n , Acceptance, on November 18, 2002, entered into a non-binding letter of intent with R a in and Hail, LLC ("Rain and Hail") detailing the terms of a proposed sale of most of A c c e p tan c e 's "crop insurance assets." Am. Compl. at ¶ 10. Although structured as a sale

The facts recited herein are taken from the parties' briefs on Defendant's April 30, 2008 supplemental motion to dismiss and Plaintiff's amended complaint, filed on April 11, 2005. The Court is satisfied that the material facts necessary to decide the issue presented are not in dispute. Congress created the RMA within the U.S. Department of Agriculture ("USDA") in 1996 to supervise the already existing Federal Crop Insurance Corporation ("FCIC"). See 7 U.S.C. § 6933 (2006). Congress created the FCIC in 1938 through the Federal Crop Insurance Act ("FCIA"), 7 U.S.C. §§ 1501 et seq., to regulate and re-insure the nation's crop insurance industry, by providing reinsurance to private insurers offering crop insurance to farmers. See 7 U.S.C. § 1503 (2006); Compl. at ¶¶ 4, 6. The reinsurance relationship between the FCIC and private crop insurance companies is governed by a contract referred to as the Standard Reinsurance Agreement ("SRA"). Compl. at ¶ 6. The FCIC is a wholly-owned government corporation that, like the RMA, exists within the USDA. See Tex. Peanut Farmers v. United States, 409 F.3d 1370, 1372 (Fed. Cir. 2005). -22

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o f assets, the proposed transaction was in fact a sale by Acceptance of American Growers. Id . at ¶ 11. Generally, Rain and Hail agreed to purchase this property from Acceptance for a fair market value determined to be not less than $21.5 million. Id. at ¶¶ 10, 12. After Acceptance and Rain and Hail executed the letter of intent, on or about N o v e m b e r 20, 2002, Rain and Hail's president and other representatives met with RMA o ff icials to discuss the terms of the proposed sale. Id. at ¶ 14. Shortly thereafter, however, th e deal began to fall apart. Plaintiff alleges that on November 22, 2002, RMA administrator R o s s Davidson advised Acceptance and Rain and Hail that the RMA would not approve the p ro p o s e d transaction. Id. at ¶ 15. Plaintiff asserts that Mr. Davidson rejected the transaction b e c a u s e it would be detrimental to the interests of farmers and taxpayers. Id. at ¶ 16. After the RMA's rejection of the sale on the terms proposed, Rain and Hail ultimately d e te rm in e d not to purchase American Growers' policies. Plaintiff alleges that absent the e x e rc is e of Mr. Davidson's regulatory authority to reject the proposed sale, the transaction w o u ld have taken place and Acceptance would have received fair market value for its p ro p e rty. Id. at ¶ 17. Thus, according to Plaintiff, the RMA essentially rendered A c c ep ta n c e's property worthless through its action in rejecting the proposed sale. Id. at ¶ 19. M o re o v e r, on the same day as the collapse of the Rain and Hail deal, and in view of A m e ric a n Growers' already precarious financial position, the NDOI placed American G r o w e rs under supervision, freezing the business and prohibiting transfer of any crop in s u ra n c e policies. Pl.'s Resp. at 4, June 20, 2008. The RMA continued to control the d is p o s itio n of American Growers' crop insurance portfolio through its ultimate liquidation, s u b s e q u e n tly transferring the crop insurance policies to other approved crop insurance p ro v id e rs , including Rain and Hail. Id. Acceptance received no compensation from the d is trib u tio n of these policies. Id. Acceptance filed its Fifth Amendment takings claim in this Court on December 12, 2 0 0 3 . The transfer of Acceptance's assets, accomplished by the RMA without compensation to Acceptance, as well as the RMA's exercise of control over the crop insurance polices, and its redistribution of the policies to other private crop insurers, forms the basis of Plaintiff's re g u la to ry takings claim. Id. D e f en d a n t filed a motion to dismiss pursuant to RCFC 12(b)(1) or, in the alternative f o r summary judgment, which Senior Judge Robert H. Hodges denied on August 13, 2004. O n February 10, 2006, Defendant filed a renewed motion to dismiss pursuant to RCFC 1 2 (b )(1 ) or, in the alternative for summary judgment. Among other things, Defendant argued th a t Congress granted the United States district courts exclusive jurisdiction over suits c h a lle n g in g the RMA's actions concerning the FCIC. Def.'s Mot. To Dismiss at 11, Feb. 10, 2 0 0 6 . Following oral argument, this Court granted Defendant's motion and concluded that, b e c au s e Congress withdrew this Court's Tucker Act jurisdiction over claims against the -3-

F C IC , the case should be transferred to a United States district court under 28 U.S.C. § 1631. A cc ep tanc e Ins. Cos., Inc. v. United States, 72 Fed. Cl. 299, 305 (2006). This Court t r a n s f e rre d the case to the United States District Court for the District of Nebraska, which d e n ie d Plaintiff's motion to transfer the case back to this Court. Acceptance Ins. Cos., Inc. v . United States, No. 8:06CV609, 2006 WL 3538946, at *4 (D. Neb. Dec. 7, 2006). Plaintiff a p p e a led and on October 2, 2007, the United States Court of Appeals for the Federal Circuit h e ld that because Plaintiff's suit did not involve the FCIC, but rather was a suit against the U n ite d States, 7 U.S.C. § 1506(d) did not divest this Court of jurisdiction to hear the case. A c c ep ta n c e Ins. Cos., Inc. v. United States, 503 F.3d 1328, 1338 (Fed. Cir. 2007). The F e d e ral Circuit thus reversed the district court's denial of Plaintiff's motion for retransfer and in s tru c te d the district court to transfer the suit back to this Court. Id. at 1338-39. Defendant th e n filed the present motion to dismiss on April 30, 2008. Briefing on Defendant's motion w a s completed on July 7, 2008, and the Court heard oral argument on July 17, 2008. D is c u ss io n A . RCFC 12(b)(6) Standard of Review It is well-settled that a complaint should be dismissed under RCFC 12(b)(6) "when th e facts asserted by the claimant do not entitle him to a legal remedy." Lindsay v. United S ta te s, 295 F.3d 1252, 1257 (Fed. Cir. 2002). When considering a motion to dismiss for f a ilu re to state a claim upon which relief may be granted, the Court "must accept as true all th e factual allegations in the complaint, and [the Court] must indulge all reasonable in f e re n c es in favor of the non-movant." Sommers Oil Co. v. United States, 241 F.3d 1375, 1 3 7 8 (Fed. Cir. 2001) (citations omitted); see also Huntleigh USA Corp. v. United States, 63 F e d . Cl. 440, 443 (2005). While detailed factual allegations in the complaint are not n e c es s a ry, "a plaintiff's obligation to provide the `grounds' of his `entitle[ment] to relief' re q u ire s more than labels and conclusions, and a formulaic recitation of the elements of a c a u s e of action will not do . . . ." Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1964-65 (20 0 7 ) (citations omitted). U n d e r the Tucker Act, the Court of Federal Claims has exclusive jurisdiction to render ju d g m e n t upon any claim against the United States for money damages in excess of $10,000 th a t is "founded either upon the Constitution, or any Act of Congress or any regulation of an e x e cu tiv e department, or upon any express or implied contract with the United States, or for liq u id a te d or unliquidated damages in cases not sounding in tort." 28 U.S.C. 1491(a)(1) (2 0 0 6 ). Thus, "a claim for just compensation under the Takings Clause must be brought to th e Court of Federal Claims in the first instance, unless Congress had withdrawn the Tucker A c t grant of jurisdiction in the relevant statute." E. Enters. v. Apfel, 524 U.S. 498, 520 (1 9 9 8 ); Acceptance, 503 F.3d at 1336. "If there is a taking, the claim is `founded upon the C o n s titu tio n ' and within the jurisdiction of the [Court of Federal Claims]." Preseault v. In te rs ta te Commerce Comm'n, 494 U.S. 1, 12 (1990) (quoting United States v. Causby, 328 -4-

U .S . 256, 267 (1946)). A takings claim against the United States may be based on the acts o f agents of the United States, if the authority to carry out those acts was validly conferred b y Congress to the agents and if those acts are within the constitutional power of Congress. S e e Acceptance, 503 F.3d at 1337. B. Takings Analysis T h e Takings Clause of the Fifth Amendment provides that "private property [shall n o t] be taken for public use, without just compensation." U.S. Const. amend. V, cl. 4. "The p u rp o se of the takings clause is to prevent `Government from forcing some people alone to b e a r public burdens which, in all fairness and justice, should be borne by the public as a w h o le .'" Air Pegasus of D.C., Inc. v. United States, 424 F.3d 1206, 1212 (Fed. Cir. 2005) (q u o tin g Penn Cent. Transp. Co. v. City of N.Y., 438 U.S. 104, 123 (1978)). The Supreme Court has recognized two kinds of compensable takings: (1) actual ta k in g s , through the Government's physical invasion or appropriation of private property, or (2 ) regulatory takings, through government regulations that unduly burden private property interests. See Huntleigh USA Corp. v. United States, 525 F.3d 1370, 1378 (Fed. Cir. 2008). In the present case, Plaintiff has alleged a regulatory taking. Pl.'s Resp. at 6-7, June 20, 2008 (" W h e n the RMA prevented Acceptance from selling the book of business to Rain and Hail, th e re b y preventing Acceptance from realizing the value of the business, that act constituted a regulatory taking of a cognizable property interest."). The Federal Circuit has "developed a two-part test for determining whether `fairness a n d justice' require compensation for burdens imposed by a particular governmental action." H u n tle ig h , 525 F.3d at 1377. As the first step, the court must determine whether the claimant h a s established a legally cognizable property interest, for purposes of the Fifth Amendment. Id. (citing Am. Pelagic Fishing Co. v. United States, 379 F.3d 1363, 1372 (Fed. Cir. 2004)). " [ O ]n ly persons with a valid property interest at the time of the taking are entitled to co m p en satio n ." Id. (citing Wyatt v. United States, 271 F.3d 1090, 1096 (Fed. Cir. 2001)); s e e also Air Pegasus, 424 F.3d at 1215 ("[A] claimant seeking compensation from the g o v e rn m e n t for an alleged taking of private party must, at a minimum, assert that its property i n t e r e s t was actually taken by the government action."); Yuba Natural Res., Inc. v. United S tate s, 904 F.2d 1577, 1581 (Fed. Cir. 1990) ("It is a well settled principle of Fifth A m e n d m e n t Taking law, however, that the measure of just compensation is the fair value of w h a t was taken, and not the consequential damages the owner suffers as a result of the ta k in g ." ). The Supreme Court has found the Takings Clause to encompass governmental e n c ro a c h m e n ts on real property, personal property, and intangible property interests. See, e .g ., Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1020 (1992) (government regulation re stric tin g use of beachfront property); Andrus v. Allard, 444 U.S. 51, 65 (1979) (g o v e rn m e n t regulation prohibiting sale of Indian artifacts containing the feathers of e n d a n g ere d birds); Ruckelshaus v. Monsanto Co., 467 U.S. 986,1003-04 (1984) (government -5-

re g u la tio n requiring public disclosure of trade secrets by applicants for pesticide re g is tr a tio n s ). Once the court has identified a valid property interest, it must determine whether the g o v e rn m e n t action at issue amounted to a compensable taking of that property interest. H u n tle ig h , 525 F.3d at 1378; Am. Pelagic Fishing, 379 F.3d at 1372. However, if the claim an t fails to demonstrate the existence of a legally cognizable property interest, the court d o e s not proceed with this second step. Air Pegasus, 424 F.3d at 1213. 1 . Plaintiff Has Not Established a Legally Cognizable Property Interest. W ith regard to the first inquiry, "the Constitution does not itself create or define the s c o p e of `property' interests protected by the Fifth Amendment." Air Pegasus, 424 F.3d at 1 2 1 3 . "Instead, `existing rules and understandings' and `background principles' derived f ro m an independent source, such as state, federal, or common law, define the dimensions o f the requisite property rights for purposes of establishing a cognizable taking." Id. (quoting M a r itr a n s Inc. v. United States, 342 F.3d 1344, 1352 (Fed. Cir. 2003)). Although contracts, l e a s e s , and other agreements may be considered property within the meaning of the Fifth A m e n d m e n t, the Government's appropriation of which may trigger the resulting obligation to pay just compensation, "not every exercise of governmental power that interferes with, or f ru s tra te s, performance of a contract constitutes a compensable taking." Kearney & Trecker C o rp . v. United States, 688 F.2d 780, 783 (Cl. Ct. 1982) (citing Lynch v. United States, 292 U .S . 571, 579 (1934) and Omnia Corp. v. United States, 261 U.S. 502, 510-11 (1923)). To explain what constitutes a cognizable Fifth Amendment property interest, courts h a v e distinguished between a plaintiff's actual property and its "collateral interest." See, e .g ., Air Pegasus, 424 F.3d at 1215; Mitchell Arms, Inc. v. United States, 7 F.3d 212, 217 (F e d . Cir. 1993); Schooner Harbor Ventures, Inc. v. United States, 81 Fed. Cl. 404, 412-13 (20 0 8 ). "The Fifth Amendment concerns itself solely with the `property,' i.e. with the o w n e r's relation as such to the physical thing and not with the other collateral interests which m a y be incident to his ownership." Mitchell Arms, 7 F.3d at 217 (quoting United States v. G e n e ra l Motors Corp., 323 U.S. 373, 378 (1945)). In Mitchell Arms, the plaintiff asserted that the Government took its property when it revoked a permit which would allow the plaintiff to import semi-automatic rifles into the U n ited States after plaintiff's purchase of the firearms. 7 F.3d at 213. Rejecting plaintiff's ta k in g s claim, the Federal Circuit declined to hold that plaintiff's investment-backed reliance o n the issued import permits constituted "property" within the meaning of the Fifth A m e n d m e n t. Id. at 215. Although the Government "took" from plaintiff the ability to realize a n expectation in the ultimate market disposition of the rifles, this was a "collateral interest" in c id e n t to plaintiff's ownership of the rifles. Id. at 217. Such property, the court held, is not p ro te c te d by the Fifth Amendment, since plaintiff retained complete control over its property. -6-

Id . ("[Plaintiff] could have done anything it wished with the rifles, except import them into the United States in their original configuration."). I n Air Pegasus, the plaintiff alleged a regulatory taking of its heliport business f o llo w in g the Federal Aviation Administration's post-September 11 decision to ban all c o m m e rc ia l air travel within 25 nautical miles of Washington, D.C., except at a few select lo c a tio n s . See 424 F.3d at 1209-10. The Federal Circuit rejected the plaintiff's takings c la im , finding that the plaintiff did not have a cognizable property interest because it did not ac tually own any helicopters. Id. at 1215. The Federal Circuit added that the plaintiff's " e co n o m ic injury [was] not the result of the government taking [its] property, but [was] the m o re attenuated result of the government's purported taking of other people's property." Id. T h is derivative injury, the Federal Circuit held, could "not form the basis for a viable takings c la im ." Id. In Schooner, the plaintiff's claimed property interest consisted of its interest to sell its property to the Navy for the development of a housing project without conditions or a d d itio n a l financial burden. 81 Fed. Cl. at 412. Relying on the holdings in Mitchell Arms a n d Air Pegasus, the Court of Federal Claims found the plaintiff's interest to be collateral to i t s physical ownership in the property. Id. at 413. "Whereas, the right to alienate the p ro p e rty is a cognizable property interest, the right to sell the property to the government at a particular price and without conditions is not a cognizable property interest which is p ro te c te d by the Fifth Amendment." Id. at 414. Here, Plaintiff has not demonstrated that it has a protected property right in its crop in su ra n c e business, as required for the Government's actions to constitute a compensable ta k in g . Plaintiff asserts a present property interest in the insurance portfolio and associated a s s e ts that constituted Acceptance's crop insurance business, i.e. its book of crop insurance. P l.'s Resp. at 3, 6, June 20, 2008. Plaintiff claims that its crop insurance business was the s u b je c t of government regulation when the RMA allegedly prevented Acceptance from s e llin g the book of business to Rain and Hail, thereby preventing Acceptance from realizing th e value of the business. Id. at 3, 6-7. This action, Acceptance argues, constituted a re g u la to ry taking of a cognizable property interest. Id. at 6-7. However, following the RMA's rejection of the Rain and Hail transaction, Plaintiff re ta in e d possession of the insurance portfolios at issue. In fact, the actions of the RMA, at b e st, interfered with Plaintiff's interest in selling its property to Rain and Hail under the ter m s of the proposed, non-binding agreement. The RMA did not interfere with the property itse lf . Despite the fact that Plaintiff was interested in selling its property to Rain and Hail, an d certainly had the right to do so, this interest is not a compensable property right. Further, a lth o u g h Rain and Hail did sign a letter of intent to purchase Plaintiff's crop insurance assets, th is letter was non-binding, and certainly does not equate to an actual contract between the p a rtie s. Thus, Acceptance's interest in completing its transaction with Rain and Hail without a n y involvement from the Government must be characterized as a collateral interest that is -7-

n o t protected by the Fifth Amendment. Mitchell Arms, 7 F.3d at 217; Air Pegasus, 424 F.3d a t 1215; Schooner, 81 Fed. Cl. at 413-14. M o re o v e r , when a plaintiff voluntarily enters into an area which, from the start, is s u b je c t to pervasive government control, its enforceable rights sufficient to support a takings c laim against the United States are extinguished. See Mitchell Arms, 7 F.3d at 216; Air P e g a su s of D.C., Inc. v. United States, 60 Fed. Cl. 448, 453-54 (2004) ("If a party voluntarily e n te rs into an area that is subject to pervasive government control, then a property right that w o u ld justify compensation under the Takings Clause may not exist.") aff'd 424 F.3d 1206 ( F e d . Cir. 2005). As the Federal Circuit has explained, "[t]he chief and one of the most v a lu a b le characteristics of the bundle of rights commonly called `property' is `the right to s o le and exclusive possession ­ the right to exclude strangers, or for that matter friends, but e sp e c ia lly the Government.'" Mitchell Arms, 7 F.3d at 215 (quoting Hendler v. United S tate s, 952 F.2d 1364, 1374 (Fed. Cir. 1991)). Thus, "[t]he reason enforceable rights s u f f ic ie n t to support a taking[s] claim" cannot arise in such an area is that when a citizen v o lu n ta rily enters such an area, the citizen cannot be said to possess `the right to exclude' b e c a u se it is impossible for a citizen in an area subject to government control to possess this rig h t." Id. (quoting Hendler, 952 F.2d at 1374). Although mere participation in a heavily regulated environment does not bar a p lain tiff from showing that it has a property interest compensable under the Fifth A m e n d m e n t, "courts must consider whether the affected `right of use' is dependent upon the re g u la to ry scheme or whether `an independent or preexisting right of use under common law a p p lie s.'" Page v. United States, 51 Fed. Cl. 328, 339 (2001) (quoting Maritrans Inc. v. U n ited States, 40 Fed. Cl. 790, 798 (1998)). If the interest was independent of the regulatory s c h e m e , courts have found that a compensable taking has occurred. See, e.g., Cienega G a rd e n s v. United States, 331 F.3d 1319, 1334 (Fed. Cir. 2003) (finding that federal statutes p re v e n tin g the prepaying of federally subsidized mortgages were a taking of property despite h e a v y regulation of the federal housing program). In contrast, courts have found property in te re sts to be dependent on a regulatory scheme when pervasive regulation exists in the area. S e e , e.g., Bowen v. Pub. Agencies Opposed to Soc. Sec. Entrapment, 477 U.S. 41, 55 (1986) ( h o ld i n g no property interest existed where State of California voluntarily entered into n a tio n a l social security program for its employees and then was prevented from terminating its participation due to an act of Congress); Conti v. United States, 48 Fed. Cl. 532, 540 (2 0 0 1 ), aff'd, 291 F.3d 1334 (Fed. Cir. 2002) (finding no property interest for fisherman w h o se permit was altered by a new regulation permitted under existing statutory scheme). A ccep tan ce acquired American Growers not long before the proposed transaction with R a in and Hail. By doing so, Acceptance voluntarily entered a regulatory scheme knowing th a t the FCIC retained its statutory authority to regulate private crop insurance companies, p u rs u a n t to 7 U.S.C. § 1501. Plaintiff cannot dispute that its claimed property interest, the b o o k of crop insurance assets, is subject to the existing regulatory scheme for the crop re in s u ra n c e industry, as administered by the RMA. Thus, Plaintiff's property interest cannot -8-

b e said to be a property right protected under the Fifth Amendment takings clause. Mitchell A rm s , 7 F.3d at 216; Air Pegasus, 60 Fed. Cl. at 455-57. P la in ti f f has failed to establish a legally cognizable property interest, precluding rec o v ery under the Fifth Amendment. Huntleigh, 525 F.3d at 1377. Accordingly, the Court n e e d not proceed with the second step in the takings analysis. Air Pegasus, 424 F.3d at 1213. 2 . The Omnia Line of Cases Precludes Plaintiff's Claim. E v e n assuming Plaintiff could establish a property interest in its crop insurance p o rtf o lio , the line of precedent commencing with Omnia Commercial Co., Inc. v. United S tate s, 261 U.S. 502 (1923), also precludes Plaintiff's takings claim. As Defendant asserts in its motion, the Supreme Court, beginning with Omnia, has held that a compensable taking c a n never occur in cases where government actions caused the loss of a commercial sale from o n e private party to another, but did not actually take the contract in question. Def.'s Mot. a t 5, Apr. 30, 2008. In Omnia, the plaintiff possessed a contractual right to purchase a large q u a n tity of steel from the seller at a low fixed price. However, before the seller could deliver a n y steel to the plaintiff, the Government requisitioned the seller's entire production of steel p late for the year 1918, because of need for the war effort, and directed the seller not to fulfill i t s contract with the plaintiff. Omnia, 261 U.S. at 507. The Supreme Court affirmed the d e c is io n of the Court of Claims rejecting the plaintiff's claim that the Government's action o f requisitioning the seller's steel had effected a taking for public use of its property in the c o n tra c t. Id. at 508, 514. While acknowledging the plaintiff's property interest in its c o n tra c t, within the meaning of the Fifth Amendment, the Supreme Court nonetheless held th a t the plaintiff's loss was merely "consequential" and one for which takings law afforded n o remedy. Id. at 510-11. Although the plaintiff had suffered an undeniable loss, the S u p re m e Court declared that "destruction of, or injury to, property is frequently ac co m p lish ed without a `taking' in the constitutional sense." Id. at 508. The Supreme Court a d d e d that there are many laws and governmental regulations that injuriously affect the value o f private property but for which no remedy is afforded. Id. at 508 ("If, under any power a contract or other property is taken for public use, the government is liable; but, if injured o r destroyed by lawful action, without a taking, the government is not liable.") In rejecting O m n ia' s takings claim, the Court noted that "[f]rustration and appropriation are essentially d if f e re n t things." Id. at 513. This principle has remain unchanged, and has been affirmed in a wide variety of ta k in g s claims where the Government, acting in either a regulatory or commercial capacity, h a s caused the loss of the benefits of a contract or frustrated business expectations. In each o f these cases, the plaintiff failed to receive its expected compensation from private a g re e m e n ts as a results of the Government's actions. See Air Pegasus, 424 F.3d 1209-10; N L Indus. v. United States, 839 F.2d 1578, 1579 (Fed. Cir. 1988); Kearney & Trecker, 688 F .2 d 780 (Ct. Cl. 1982).

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In Air Pegasus, the Federal Circuit characterized the Omnia court's view on takings a s finding a "significant difference between an injury to one's property interest and a taking o f one's property interest." 424 F.3d at 1216. Similarly, in NL Indus., the Federal Circuit re jec ted the takings claim of a spent nuclear fuel processor whose significant investment in d e v e lo p in g spent nuclear fuel rod transport vehicles for a reprocessing facility was rendered v a lu e le ss after the Government banned the operation of the facility. 839 F.2d at 1579. The F e d e ra l Circuit agreed with the trial court that Omnia by itself was authority enough to s u p p o rt its holding that frustration of a business by loss of a customer was not a taking. Id. a t 1579. Again, in Kearney & Trecker, the Court of Claims relied on Omnia to find that the G o v e rn m e n t did not appropriate the plaintiff seller's contract with the third party buyer for a made-to-order aerodefense machine by issuing a directive that required the plaintiff to ex p ed ite delivery for the Air Force's order of the same machine. 688 F.2d at 783. The court re je c te d the plaintiff's argument that "[w]hat was appropriated was not just the [machine], but (th e plaintiff's) investment backed expectation to produce and deliver a [machine] to [the b u ye r ] at a date certain." Id. at 782. The court held that the frustration of the plaintiff's " e x p e c ta tio n s " was not compensable, because the Government had not appropriated any of th e rights the plaintiff had under its contract, but only made it impossible for the plaintiff to p e rf o rm it. Id. at 782-83. "Omnia makes it clear that the mere frustration of a contract re su ltin g from the government's exercise of its power of eminent domain is not a `taking' for w h ic h just compensation must be awarded." Id. at 783. More recently, in Palmyra Pac. Seafoods, L.L.C. v. United States, the Court of Federal C la im s held that government regulations designating an area as a National Wildlife Refuge a n d prohibiting commercial fishing within did not constitute a taking of the plaintiffs' c o m m e rc ial fishing licenses. 80 Fed. Cl. 228, 233 (2008). At most, the plaintiffs' claim a m o u n te d to a frustration of purpose, which the court found not to be compensable under the p rin c ip le s laid out in Omnia. Id. A s Acceptance and Rain and Hail only had a letter of intent to enter into an agreement a n d not an actual contract, Plaintiff's takings claim is less compelling than those of the p lain tiff s in Omnia, Air Pegasus, and Kearney & Trecker, all of whose existing contracts were d i re c tly impacted by the government's actions. Under the same reasoning as those cases, h o w e v e r, Plaintiff's claim must also be rejected because RMA's alleged action in rejecting o r failing to approve the sale, did not effectuate an immediate taking of the crop insurance a s s e ts in question. Rather, at most, the government's actions frustrated Plaintiff's business e x p e c ta tio n s , which does not amount to a compensable taking under the Omnia line of cases. O m n ia , 261 U.S. at 513; Kearney & Trecker, 688 F.2d at 783; Palmyra, 80 Fed. Cl. at 233. P la in tif f makes several unsuccessful attempts to distinguish Omnia and its progeny. F irs t, Plaintiff argues that the Omnia cases are distinguishable on the basis that the plaintiffs in those cases possessed a mere contract expectancy rather than a present property interest. - 10 -

P l.'s Resp. at 8, June 20, 2008. However, the Supreme Court in Omnia made no distinction b e tw e e n a mere contractual expectancy and a present property interest and, in fact, found that th e plaintiff did have a property interest. 261 U.S. at 508 ("The contract in question was p ro p e rty within the meaning of the Fifth Amendment."). Further, as Defendant notes in its r e p ly brief, Acceptance is in a weaker position than the plaintiffs in the Omnia line of cases. S e e Def.'s Reply at 2, July 7, 2008. Specifically, the plaintiffs in the Omnia line of cases had b in d in g contracts or leases interfered with by governmental regulation or action while A c c ep ta n c e only had a non-binding letter of intent with Rain and Hail. Id. Even in the few c a se s Plaintiff relies on for support, including Tulare Lake Basin Water Storage Dist. v. U n ite d States, 49 Fed. Cl. 313 (2001), and Cienaga Gardens, 331 F.3d 1319, the plaintiffs had c o n tr a c tu a l ly- c o n f e r re d rights sufficient to meet the Fifth Amendment property interest r e q u ir e m e n t and, as a result, the plaintiffs in both cases succeeded in their takings claims. C ie n a g a Gardens, 331 F.3d at 1335 (holding that the legislation was "aimed at the contract rig h ts themselves in order to nullify them"); Tulare Lake, 49 Fed. Cl. at 324 (holding that w ater use restrictions imposed by the Government effected a taking of property of water users w h o had contract rights entitling them to the use of a specified quantity of water). Moreover, P la in tif f has not shown that the Government appropriated the benefits of Acceptance's crop in su ra n c e assets for itself, in contrast to Cienega Gardens and Tulare Lake, where the courts u p h e l d the plaintiffs' takings claims. Cienaga Gardens, 331 F.3d at 1335 ("Where Congress' a c tio n s have the effect of `keep[ing] [the contract] alive for the use of the government' rather th a n `bring[ing] the contract to an end,' a court should conclude that there has been a taking.") (c o m p a r in g Omnia, 261 U.S. at 213); Tulare Lake, 49 Fed. Cl. at 317-18 ("[T]he contract h o ld e r can recover only if the government has actually appropriated the contract itself, i.e., s te p p e d into the shoes of the contracting party and assumed the rights and responsibilities u n d e r the contract."). Second, Plaintiff asserts that Omnia precludes takings claims where the injury to co n trac tual expectations is only consequential or derivative of an action taken against third p a rtie s or of general applicability. Pl.'s Resp. at 11, June 20, 2008. Therefore, Plaintiff c o n te n d s, if the action is specifically directed at a plaintiff, rather than at a third party, then O m n ia does not preclude the plaintiff from alleging a cognizable takings claim even if that c la im is premised solely on a contractual expectancy. Id. As such, Plaintiff argues that even if Acceptance's takings claim was not premised on its present property interests in its crop in s u ra n c e business, it still has a potential takings claim based on the RMA's action directed s p e c if ic a lly against Acceptance by preventing the sale to Rain and Hail. Id. The Court is not p e rs u a d e d by Plaintiff's attempts to distinguish Omnia and the related cases where the p la in tif f s suffered a loss of business as a result of the government's regulation of a third party. A s Defendant notes in its Reply, the Federal Circuit recently rejected a similar attempt to d isting u ish Omnia in Huntleigh, 525 F.3d at 1381. Def.'s Reply at 7-8, July 7, 2008. In H u n tle ig h , the Federal Circuit held that, because the plaintiff in Omnia had an existing c o n tra c tu a l relationship at which the Government squarely directed its actions, the facts in O m n ia were more favorable to the plaintiff than the facts in that case. Huntleigh, 525 F.3d a t 1381. The Federal Circuit added that, in Omnia, although the Government requisitioned - 11 -

th e steel plate that was meant for Omnia and directed the seller not to comply with its c o n tra c t, there was no taking because this lawful government action did not appropriate the c o n tra c t but only rendered performance of the contract impossible. Id. (citing 261 U.S. at 507, 5 1 1 ). In this case, no contract existed between Acceptance and Rain and Hail at the time of th e RMA's actions. Moreover, the Government's actions at most resulted in the frustration o f Acceptance's business interest in trying to revive its failing business, but did not a p p ro p ria te any of Acceptance's crop insurance assets, and thus, did not constitute a taking o f Plaintiff's property. C . RMA's Authority to Approve or Reject Transactions. D e f en d a n t also argues that the RMA has no authority to approve or reject the sale of a ss e ts from one insurer to another. Def.'s Mot. Dismiss at 8, Apr. 30, 2008. Thus, Defendant sta tes the Court need not resolve the factual dispute regarding whether RMA rejected the Rain a n d Hail transaction because to the extent that it did, the RMA acted outside its authority and s u c h action cannot amount to a taking. Id. at 9-10. Given that Plaintiff's property interest c a n n o t be said to be a property right protected under the Fifth Amendment takings clause, the C o u rt need not consider this position. Conclusion B a se d upon the foregoing, Defendant's motion to dismiss under RCFC 12(b)(6) is G R A N T E D . The Clerk is directed to dismiss Plaintiff's complaint with prejudice. IT IS SO ORDERED. s / T h o m a s C. Wheeler THOMAS C. WHEELER Judge

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