What Does the Government Owe These Airport Investors?

(Bloomberg Opinion) -- When the government takes your property, the Constitution entitles you to “just compensation.” But should the value of your property be computed based on market value, which would normally incorporate predictions about future government action? Or should the value of your property be determined without any reference to what the government might do — including take your property?

As you can imagine, this question is pretty important to anyone who invests in assets that fluctuate in value based on potential government regulation. And it’s the question posed in a case, Love Terminal Partners LP  and Virginia Aerospace LLC v. U.S., that the U.S. Supreme Court will soon decide whether to hear.

The case arises from an investment made in 1999 by a private equity group in a six-gate airline terminal at Love Field, the historic “other” airport in Dallas. The background is a bit complicated, but to simplify, since 1980, Love Field has been subject to various federal statutory regulations — a degree of special attention enabled by the fact that Texas Representative Jim Wright was House majority leader and then speaker of the House.

From 1980 until 2006, federal law restricted planes at Love Field from having more than 56 seats and from flying directly anywhere but several adjoining states. Southwest Airlines Co., which used the airport as a hub, never stopped trying to lobby Congress to lift the regulation. The likelihood of its success affected the value of the partners’ 1999 investment.

In 2006, Congress passed a new law, which essentially incorporated a five-way agreement among the cities of Dallas and Fort Worth, Southwest, American Airlines Group Inc., and the Dallas-Fort Worth Airport. Notably, the investors weren’t part of the deal.

The 2006 legislation repealed the 1980 law, albeit gradually. It also instructed the city of Dallas to reduce the number of gates at Love Field. The parties to the agreement seem to have understood that this would mean that the city would seize and condemn the gates owned by the investors. In 2009, the city demolished the gates.

The investors sued, of course. In 2016, a federal claims court — the only venue where you can bring a case against the federal government for taking your property — awarded them $133.5 million. But the government appealed.

In 2018, the Court of Appeals for Federal Claims — another special court – reversed the decision and awarded the partners a grand total of $0. The essence of the court’s holding was that the partners had failed to show what the value of their gates would have been if Congress had never passed the 2006 law, and Love Field had remained restricted to small planes and flights to neighboring states.

At the trial, the investors had introduced experts to describe the market value of their property. Those experts testified to a valuation based on the expected repeal of the 1980 law.

That made some sense, considering that in principle you’re supposed to be compensated with the market value of your holdings when the government takes your property. Market value ordinarily incorporates some computation of likely future events — including the possibility of future regulation. The key words in the legal doctrine are “reasonable, investment-backed expectation.”

But the appeals court said that “this expectations analysis is not designed to protect private predictions of regulatory change.” It explained that “a showing that property is valueless after a government action only suggests that a taking has occurred if there is evidence showing that the property would have had value absent the government action.”

You can see the logic of this view, too. It seems counterintuitive that investors could acquire property at a price that incorporates the danger of a government taking and then sue the government when the taking occurred. In essence, that would mean the initial bet on the taking would’ve had no downside.

The Supreme Court may well decline to take up this issue, or the others raised in the case. The investors, for their part, are doing everything they can to get the justices’ attention. They hired Paul Clement, the former George W. Bush administration solicitor general, to represent them and write their brief seeking Supreme Court review. They got eight outside actors to file friend of the court briefs. One was written by the libertarian stalwart law professor Richard Epstein.

In an intersection of conservative influencers, columnist George Will gave a lecture to the Federalist Society that was loosely connected to the case and included dire warnings against the rise of democratic socialism.

This effort can be understood as a version of what two law professors have recently called “virtual briefing” — the wily use of social media by potential Supreme Court litigants to try to affect the clerks and the justices outside the ordinary briefing process. That article is already starting to elicit debate.

And I myself may not be immune. I heard about the case from one of the investors, whom I met 20 years ago and with whom I exchange Christmas cards. I wrote about it because I think it’s an intriguing case — but from the standpoint of anyone trying to get the court to consider this case, all publicity is good publicity.

The Supreme Court hears between 70 and 80 cases a year these days. It gets close to 8,000 petitions. The job of a law clerk is mostly to explain to the justices why a given case doesn’t deserve consideration. How interesting the case is conceptually is only one very tiny factor. This one is interesting. That doesn’t mean the court will take it. But someday, the court should consider this issue in a sophisticated way — one that takes into account economic realities and the nature of regulatory prediction in determining just compensation.

To contact the editor responsible for this story: Stacey Shick at

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Noah Feldman is a Bloomberg Opinion columnist. He is a professor of law at Harvard University and was a clerk to U.S. Supreme Court Justice David Souter. His books include “The Three Lives of James Madison: Genius, Partisan, President.”

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