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Love Terminal Partners, L.P. v. United States

United States Court of Appeals, Federal Circuit

May 7, 2018

LOVE TERMINAL PARTNERS, L.P., VIRGINIA AEROSPACE, LLC, Plaintiffs-Appellees
v.
UNITED STATES, Defendant-Appellant

          Appeal from the United States Court of Federal Claims in No. 1:08-cv-00536-MMS, Judge Margaret M. Sweeney.

          Roger J. Marzulla, Marzulla Law, LLC, Washing­ton, DC, argued for plaintiffs-appellees. Also represented by Nancie Gail Marzulla.

          Robert J. Lundman, Environment and Natural Resources Division, United States Department of Justice, Washington, DC, argued for defendant-appellant. Also represented by John C. Cruden.

          Before Prost, Chief Judge, Clevenger and Dyk, Cir­cuit Judges.

          DYK, Circuit Judge.

         Plaintiffs Love Terminal Partners, L.P. ("LTP") and Virginia Aerospace, LLC ("VA") leased a portion of Love Field airport from the City of Dallas, Texas ("Dallas"), and constructed a six-gate airline terminal on the property. Plaintiffs claim that the Wright Amendment Reform Act of 2006 ("WARA"), Pub. L. No. 109-352, 120 Stat. 2011, effected a regulatory taking of their leases and a physical taking of the terminal because, in their view, the statute codified a private agreement in which Dallas agreed (1) to bar use of plaintiffs' gates for commercial air transit and (2) to acquire and demolish plaintiffs' terminal.

         The Court of Federal Claims ("Claims Court") agreed and found that the enactment of WARA constituted a per se regulatory taking of plaintiffs' leaseholds under Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992), and a regulatory taking of the leaseholds under Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978), as well as a physical taking of the terminal itself.

         We conclude that WARA did not constitute a regula­tory or physical taking. We therefore reverse.

         Background

         This case is about the development of Love Field, an airport located in and owned by Dallas. Since the airport's founding, most air traffic has been accommodated by a main terminal owned and operated by the city. In 2000, plaintiffs constructed a smaller terminal (the "Lemmon Avenue Terminal") on a portion of Love Field that they had leased from the city. This case concerns an alleged taking of the Lemmon Avenue Terminal and plaintiffs' underlying leaseholds.

          I

         The genesis of the present dispute goes back several decades. In 1955, Dallas entered into a long-term lease with Braniff Airways, Inc. (the "Master Lease"), granting Braniff the exclusive use of a 36-acre portion of Love Field (subsequently reduced to 26.8 acres) located northeast of the two runways, near Lemmon Avenue. The Master Lease guaranteed Braniff non-exclusive access to the runways, taxiways, and other aviation-related facilities at Love Field, and stated that the leased premises must be used for "purposes related or incidental to the primary aviation-related business conducted by Lessee." J.A. 2256.

         The use of Love Field for commercial air passenger service has been restricted under federal law since 1980, when Congress passed the Wright Amendment in an effort to promote growth of nearby Dallas/Fort Worth International Airport. The Wright Amendment limited use of Love Field to servicing final destinations within Texas and its four contiguous neighboring states. Pub. L. No. 96-192, § 29, 94 Stat. 35, 48–49 (1980). Its restrictions applied to commercial flights on planes designed to hold over 56 passengers. Id. Over the next 25 years, federal legislation was enacted that added four additional states to the list of permissible destinations, and allowed unre­stricted flights on larger planes that had been retrofitted to hold fewer than 56 passengers. Pub. L. No. 105-66, § 337, 111 Stat. 1425, 1447 (1997); Pub. L. No. 109-115, § 181, 119 Stat. 2396, 2430 (2005). Nonetheless, commer­cial air passenger service from Love Field was significant­ly limited by the Wright Amendment's provisions for most of the airport's modern history.

         In 1999, LTP, one the plaintiffs in this case, was as­signed an existing sublease for a 9.3-acre portion of the Master Leasehold (the "sublease"). LTP's goal was to offer Wright Amendment-compliant air passenger service out of Love Field in cooperation with Legend Airlines ("Leg­end"). LTP would construct a six-gate Lemmon Avenue Terminal and a parking garage on its 9.3-acre parcel, and would license the six gates to Legend.

         LTP completed construction of the Lemmon Avenue Terminal by early 2000, and Legend began offering scheduled passenger service from the terminal later that year. The operations were not profitable. After eight months, in December 2000, Legend stopped flying and entered bankruptcy proceedings. Another airline, Atlantic Southeast Airlines, offered scheduled passenger service from the Lemmon Avenue Terminal between July 2000 and May 2001, but ultimately moved its operations to the 26-gate main terminal owned and operated by Dallas. LTP attempted to market its gates to other potential users, but no commercial airline was interested in leasing the gates.

         In 2003, plaintiff VA, an entity having common own­ership with LTP, invested $6.5 million to acquire the entire 26.8-acre Master Lease. LTP and VA continued their efforts to attract another airline to use the Lemmon Avenue Terminal. They were able to earn some income (though not enough to cover the monthly payments on the Master Lease) through rentals of the parking garage and other portions of their property to an aviation freight company, a limousine company, two automobile dealer­ships, an aviation reservation service, and several wire­less telecommunications companies. But, as before, no airline was willing to lease the gates at the Lemmon Avenue Terminal.

         Throughout this period, Southwest Airlines and other airlines offered Wright Amendment-compliant passenger service out of the main terminal. Love Field had been a Southwest hub since the airline's founding, and South­west had long lobbied Congress to loosen restrictions on Love Field-ideally by repealing the Wright Amendment. In 2004, Southwest resumed its efforts with a campaign entitled "Wright is Wrong." In 2005, Congress responded by adding Missouri to the list of permitted destinations, but otherwise left the restrictions on Love Field in place.

         In March 2006, members of Congress, recognizing "decades of litigation and contentious debate among local communities, airports and airlines over the establishment and development of [Dallas/Fort Worth International Airport], the subsequent use of Love Field, and proposed legislative changes to the Wright Amendment," recom­mended that Dallas and Fort Worth jointly propose a solution. H.R. Rep. No. 109-600, pt. 1, at 3. On July 11, 2006, Dallas and Fort Worth, along with Southwest Airlines, American Airlines (an airline with a hub at Dallas/Fort Worth International Airport), and the Dallas-Fort Worth Airport Authority, responded by entering into an agreement (the "Five-Party Agreement" or "Agree­ment") setting out their "local solution."

         The Five-Party Agreement stated that the parties would petition Congress for immediate allowance of through-ticketing from Love Field (i.e., permitting airlines to sell tickets from Love Field to any other destination, so long as the flight first stopped at a destination authorized by the Wright Amendment) and for total repeal of the Wright Amendment after eight years. It also stated that the parties would redevelop Love Field consistent with a revised "Love Field Master Plan," which would, among other things, reduce the total number of gates to 20 from the current total of 32 (26 in the main terminal and six in the Lemmon Avenue Terminal), and required that Love Field "thereafter be limited permanently to a maximum of 20 gates." J.A. 3091. The parties also agreed to an alloca­tion of those 20 gates among the three airlines currently flying out of Love Field (all based out of the main termi­nal). Id. And the City of Dallas agreed to acquire and demolish the Lemmon Avenue Terminal, so as to consoli­date the 20 gates in the main terminal, as shown in the revised Master Plan. The Agreement provided that:

[T]he City agrees that it will acquire all or a por­tion of the lease on the Lemmon Avenue facility, up to and including condemnation, necessary to fulfill its obligations under this Contract. The City of Dallas further agrees to the demolition of the gates at the Lemmon Avenue facility immediately upon acquisition of the current lease to ensure that that facility can never again be used for pas­senger service.

J.A. 3092. The Agreement made clear that the costs for the acquisition and demolition of the Lemmon Avenue gates were to be recovered from "airport users." Id. Final­ly, it stated that "[i]f the U.S. Congress does not enact legislation by December 31, 2006, that would allow the Parties to implement the terms and spirit of this Con­tract, including, but not limited to, the 20 gate restriction at Love Field, then this Contract is null and void unless all parties agree to extend this Contract." J.A. 3095.

         In October 2006, Congress enacted WARA, which im­mediately allowed through-ticketing to and from Love Field and provided for the total repeal of the Wright Amendment in eight years. WARA § 2. WARA also in­structed Dallas to reduce the total number of gates avail­able for passenger air service at Love Field to no more than 20. Id. § 5(a). It further stated that no federal funds could be used to remove gates at the Lemmon Avenue Terminal. Id. § 5(b). The legislation provided that:

(a) IN GENERAL. – The city of Dallas, Texas, shall reduce as soon as practicable, the number of gates available for passenger air service at Love Field to no more than 20 gates. Thereafter, the number of gates available for such service shall not exceed a maximum of 20 gates. The city of Dallas . . . shall determine the allocation of leased gates and manage Love Field in accordance with contractual rights and obligations existing as of the effective date of this Act for certificated air carriers providing scheduled passenger service at Love Field on July 11, 2006. To accommodate new entrant air carriers, the city of Dallas shall honor the scarce resource provision of the existing Love Field leases.
(b) REMOVAL OF GATES AT LOVE FIELD. – No Federal funds or passenger facility charges may be used to remove gates at the Lemmon Avenue facility, Love Field, in reducing the ...

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