UNITED STATES OF AMERICA, PETITIONER v. 50 ACRES OF LAND, ETC. AND THE CITY OF DUNCANVILLE, TEXAS No. 83-1170 In the Supreme Court of the United States October Term, 1983 The Solicitor General, on behalf of the United States, petitions for a writ of certiorari to review the judgment of the United States Court of Appeals for the Fifth Circuit in this case. Petition for a Writ of Certiorari to the United States Court of Appeals for the Fifth Circuit TABLE OF CONTENTS Opinions below Jurisdiction Constitutional provision involved Statement Reasons for granting the petition Conclusion Appendix OPINIONS BELOW The opinion of the court of appeals (App. A, infra, 1a-19a) is reported at 706 F.2d 1356. The district court's opinion (App. B, infra, 20a-28a) is reported at 529 F.Supp. 220. JURISDICTION The judgment of the court of appeals (App. C, infra, 29a-30a) was entered on June 13, 1983. Timely petitions for rehearing were denied on September 19, 1983 (see App. D, infra, 31a-32a). On December 8, 1983, Justice White extended the time for filing a petition for a writ of certiorari through January 17, 1984. The jurisdiction of this Court is invoked under 28 U.S.C; 1254(1). CONSTITUTIONAL PROVISION INVOLVED The Fifth Amendment to the United States Constitution provides in pertinent part, (N)or shall private property be taken for public use, without just compensation. QUESTION PRESENTED Whether, when the United States exercises its power of eminent domain to take property owned by a state or local government entity, the Just Compensation Clause requires payment of compensation measured by reference to the cost of acquiring a substitute facility, rather than the usual fair market value standard. STATEMENT 1. The United States commenced this action on October 3, 1978, by filing a complaint in condemnation, coupled with a declaration of taking, pursuant to 40 U.S.C. 258a, in the United States District Court for the Northern District of Texas. The site acquired was a 50-acre sanitary landfill, owned by respondent, the City of Duncanville, Texas, used for the purpose of disposal of regular garbage collections. The site was needed by the United States to accommodate the United States Army Corps of Engineers Lakeview Lake flood control project (subsequently renamed the Joe Pool Lake flood control project). As estimated compensation, the United States paid $199,950 into the registry of the court, which was subsequently paid over to respondent. App., infra, 3a & note 2. The landfill site had been opeated by respondent for that purpose since 1969; since 1977, the City had operated its landfill under a state permit (Tr. 69-71). At the date of taking, approximately 15 acres of respondent's landfill had been filled with waste and approximately five acres of the total area were unusable for landfill because of the presence of a creek (App., infra, 13a & note 8; Tr. 85). Approximately 313,000 cubic yards of the landfill's capacity had been used, and the remaining capacity was 650,000 cubic yards, an amount that gave it an expected lifetime of 12.8 years (App., infra, 14a; Tr. 383-388, 398). Immediately adjacent to respondent's landfill was a privately owned landfill on a 64.28 acre tract, which had also been acquired by the United States (Tr. 211-213, 345, 352.) Following the United States' acquisition of respondent's landfill site, respondent acquired a new landfill facility, consisting of 113.7 acres, at a site approximately the same driving time from Duncanville as the prior facility. According to the uncontradicted testimony of an expert geologist at trial, more favorable soil and water-table conditions at the new site made it a better landfill location than the former site; the new site could be excavated to a depth of 20 feet, twice the usable depth of the former landfill. The usable capacity of respondent's new site was 2,100,000 cubic yards, giving it an expected lifetime of 41.6 years. The residual capacity of the former site thus was only 38.8% of the capacity of the replacement landfill. App., infra, 3a, 13a-14a; Tr. 397-399. 2.a. Prior to trial, a dispute emerged between the parties as to the proper measure of just compensation. The government contended that fair market value was the applicable standard; respondent maintained that it was entitled to recover the cost to the City of acquiring, improving and putting into operation its substitute facility, which it claimed amounted to over $1,276,000 (see App., infra, 16a-17a n.10). In order to resolve this dispute as to the proper measure of compensation, the government filed a motion in limine, requesting that the court limit the evidence to be received at trial to evidence relating to the fair market value of the property, and that all evidence as to the cost of reproducing the property taken or acquiring a substitute facility, be excluded (R. 62-79). This motion was denied (R. 111), the district noting that in United States v. 564.54 Acres of Land, 441 U.S. 506, 509 n.3 (1979) (Lutheran Synod), this Court had reserved the question whether a substitute facilities measure of compensation is appropriate when publicly owned property is taken. The district court reasoned that "a complete factual record should be developed from which an independent determination of the appropriate measure of compensation can be made" (R. 111). b. The issue of just compensation was then tried to a jury. Both parties presented testimony as to the fair market value of the property taken. Appraisers who testified for the government and those testifying for respondent agreed that a distinct market existed for landfill properties in the vicinity of Duncanville, and that the fair market value of the condemned site was readily ascertainable by reference to sales of other, comparable, landfill properties in the area. See App., infra, 7a; id, at 25a. /1/ In addition, over the government's continuing objection (R. 151-152), respondent presented the testimony of Robert B. Lee, Duncanville's Director of Public Works, that the aggregate cost of acquisition and preparation of the substitute landfill site established by the City was $1,276,311.76 (Tr. 78). Lee's testimony indicated that although respondent has the power of eminent domain it did not attempt to acquire a landfill site comparable in size to its former site, and that respondent did not have the new landfill site it purchased appraised prior to making its negotiated purchase and did not bargain with the vendor over the price (Tr. 91-94). The testimony of the government's appraisers indicated that the amount paid by respondent to purchase its substitute site was substantially in excess of the fair market value of that site (Tr. 273, 282, 319-321, 357). The United States moved to strike Lee's testimony, on the ground that it was not probative of the value of a reasonably necessary substitute facility (Tr. 433-434). The court denied the government's motion (Tr. 435). c. At the close of the evidence, the district court submitted the case to the jury, directing the jury to respond to special questions. Through these questions, the jury was asked to determine both the fair market value of respondent's landfill on the date of taking, and the cost to respondent of establishing a substitute sanitary landfill. /2/ The government objected unsuccessfully to submission of the substitute facilities issue to the jury (Tr. 499-500; see also R. 151-152), while respondent objected unsuccessfully to submission of the fair market value question (Tr. 499-500). The jury returned a verdict of $225,000 based upon the fair market value standard, and an alternative verdict of $723,654.01 as the cost of substitute facilities (App., infra, 4a). d. Each party moved for entry of judgment based upon the verdict reflecting the measure of compensation it advocated (R. 203, 223). The district court entered judgment against the United States in the amount of the fair market value of the property taken, as determined by the jury ($225,000) plus interest at the rate of 6% due upon the deficiency in the estimated compensation previously paid by the United States. /3/ The district court held, initially, that respondent "did not meet its burden of establishing what would be a reasonable cost of a substitute facility" (App., infra, 22a). The court noted that respondent's evidence reflected only its actual costs in acquiring and developing its new landfill site, which was much larger than the facility being replaced, and had more unused capacity. The court also suggested that the evidence indicated that the purchase price paid by respondent was excessive. App., infra, 21a-22a. The district court also held that, even if the evidence supported a finding as to the reasonable cost of an equivalent facility, the fair market value standard was the proper measure of just compensation, where, as here, a market for property of the kind taken Exists, and a market value is ascertainable (App., infra, 22a-25a). Noting that fair market value is ordinarily the proper measure of compensation, the court found that neither of the exceptions to that rule recognized by this Court in Lutheran Synod, 441 U.S, at 513, was applicable (App., infra, 23a-25a). The court observed, first, that here, unlike cases involving taking of streets or sewers or other local government property for which no market exists, or for which the market is so thin as to make comparable sale data unreliable, the record established that a fair market value was readily ascertainable for the property taken (ibid.). Second, the court determined that compensation based upon fair market value placed respondent "in as good a position pecuniarily as if its property had not been taken" and that an award based upon fair market value accordingly "does not impermissibly deviate from the indemnity principle" (id. at 25a). The court also noted that the fair market value standard is a desirable one because it provides a relatively objective measure of compensation due (id. at 22a). 3.a. The court of appeals reversed and remanded for further proceedings (App., infra, 1a-19a). The court of appeals recognized that this Court's decision in Lutheran Synod left open the questions whether, and in what circumstances, the usual fair market value measure of compensation may be superseded by a substitute facilities cost measure when publicly owned property is taken (App., infra, 4a). The court also recognized that the substitute facilities doctrine has generally been applied to taking of "streets, alleyways, bridges, sewers, and other public facilities for which fair market value cannot accurately be determined" (id. at 6a). And the court acknowledged (id. at 7a (footnote omitted)): (t)his is a rather different case. Unlike the vast majority of substitute facility cases, here the parties agree that the landfill has a determinable market value, although at trial they disagreed as to what that value was. Nevertheless, the court of appeals concluded that "the reasonable cost of a functionally equivalent facility is the just measure of compensation when a public entity is obligated to replace the condemned property" (App., infra, 7a). Reasoning from the "indemnity principle" underlying the Fifth Amendment Just Compensation Clause, the Court concluded that respondent would not be made whole unless reimbursed for "the amount of money reasonably spent in (its) venture to create a functionally equivalent facility" that it was obliged to establish (id. at 9a). /4/ The court of appeals recognized (App., infra, 11a) that in United States v. South Dakota Game, Fish and Parks Department, 329 F.2d 665 (1964), the Eighth Circuit had "apparently reached a different conclusion," holding that the cost of substitute facilities was an improper measure of compensation for the taking of publicly owned property where the market value of that property was ascertainable. But the court below insisted that its decision "creates no conflict" because it believed that a district court finding in South Dakota Game, Fish and Parks Department that it was necessary to replace the property taken there, was "highly suspect" (App., infra, 12a). In addition, the court below believed that language in an intervening Eighth Circuit decision, United States v. 3,727.91 Acres of Land, 563 F.2d 357, 359 n.2 360 (1977) (Elsberry Drainage District, cast doubt upon the Eighth Circuit's continued adherence to the rule reflected in its earlier decision (App., infra, 12a). b. The court of appeals also rejected the district court's alternative holding that respondent had not met its burden of proving the cost of a functionally equivalent substitute facility. By presenting testimony as to the cost of acquiring and developing its substitute site, and testimony that the entirety of the substitute site had been acquired in order to avoid severance damage claims that respondent believed would be costly, respondent had met its burden of going forward with evidence of the cost of substitute facilities, the court held. App., infra, 12a-13a. Nevertheless, the court of appeals did not direct entry of judgment based upon the jury's alternative verdict. The court observed that the substitute site acquired by respondent was substantially larger in area and usable to a greater depth, and accordingly could be expected to serve resondent for a far longer time, than its former site that had been acquired by the government. The court of appeals held that the district court's instructions defining the substitute facilities measure of compensation (see page 5 note 2, supra) "did not take into account the need to deduct for the benefits which Duncanville gained from the acquisition of the new fill" (App., infra, 14a) and that a remand for retrial accordingly was required. The precise manner in which such a deduction was to be made was left open for determination on remand (id. at 16a). /5/ The court stated that respondent "is entitled to reimbursement for the reasonable cost of an alternative site, along with the reasonable cost of preparing that site for use as a landfill" (id. at 17a). The court cautioned that "(w)hether the price actually paid (by respondent for its new site) is reasonable under the circumstances is for the jury to decide" (ibid.). REASONS FOR GRANTING THE PETITION The court of appeals has decided a significant question arising under the Just Compensation Clause, that this Court expressly reserved in United States v. 564.54 Acres of Land, 441 U.S. 506, 509 n.3, 515 (1979) (Lutheran Synod). The rule adopted in the decision below is contrary to the general principles governing determination of just compensation that have been developed by this Court, and is squarely contrary to the Eighth Circuit's decision in United States v. South Dakota Game, Fish and Parks Department, 329 F.2d 665 (1964) -- which remains the law of that circuit. By imposing the substitute facilities measure in situations where the traditional fair market value standard provides a workable and fair method of determining just compensation, the decision below renders that determination unnecessarily burdensome and speculative. 1.a. In Lutheran Synod, this Court held that the Just Compensation Clause does not require the United States to pay damages measured by the cost of substitute facilities -- instead of the traditional fair market value standard -- when the United States takes property owned by a private nonprofit organization that is operated for a public purpose. Although the Court declined to intimate any view as to whether, or under what circumstances, the cost of substitute facilities might be the constitutionally mandated measure of just compensation when publicly owned property is taken (Luthern Synod, 441 U.S. at 509 n.3, 515), the Court's opinion outlines the fundamental principles that are controlling here (id. at 510-511 (emphasis added, footnote omitted)): In giving content to the just compensation requirement of the Fifth Amendment, this Court has sought to put the owner of condemned property "in as good a position pecuniarily as if his property had not been taken." Olson v. United States, 292 U.S. 246, 255 (1934). However, this principle of indemnity has not been given its full and literal force. Because of serious practical difficulties in assessing the worth an individual places on particular property at a given time, we have recognized the need for a relatively objective working rule. See United States v. Miller, 317 U.S. 369, 374 (1943); United States v. Cors, 337 U.S. 325, 332 (1949). The Court therefore has employed the concept of fair market value to determine the condemnee's loss. Under this standard, the owner is entitled to receive "what a willing buyer would pay in cash to a willing seller" at the time of the taking. United States v. Miller, supra, at 374 (additional citations omitted), Notwithstanding the idealized indemnity principle, the Court has explicitly recognized that the fair market value standard fulfills the constitutional requirement of just compensation even when such an award does not "compensate for all values an owner may derive from his property" and omits the "special value of property to the owner arising from its adaptability to his particular use" (Lutheran Synod, 441 U.S. at 511). Justice Frankfurter, writing for the Court, explained the foundation for the market value standard in Kimball Laundry Co. v. United States, 338 U.S. 1, 5 (1949): The value of property springs from subjective needs and attitudes; its value to the owner may therefore differ widely from its value to the taker. Most things, however, have a genral demand which gives them a value transferable from one owner to another. As opposed to such personal and variant standards as value to the particular owner whose property has been taken, this transferable value has an external validity which makes it a fair measure of public obligation to compensate the loss incurred by an owner as a result of the taking of his property for public use. In sum, the Court has adopted the fair market value standard of compensation because it strikes a necessary and proper "'balance between the public's need and the claimant's loss' upon condemnation of property for a public purpose" (Lutheran Synod, 441 U.S. at 512, quoting United States v. Toronto, Hamilton & Buffalo Navigation Co., 338 U.S. 396, 402 (1949)). The Court has recognized that there are two situations where an alternative measure of just compensation must be fashioned because the fair market value standard would be inappropriate: "when market value has been too difficult to find, or when its application would result in manifest injustice to owner or public" (United States v. Commodities Trading Corp., 339 U.S. 121, 123 (1950)). Thus here, as in Lutheran Synod, the fair market value measure of just compensation must be applied unless "application of the fair-market-value standard * * * would be impracticable or * * * an award of market value would diverge so substantially from the indemnity principle as to violate the Fifth Amendment" (441 at 513). b. The decision below is irreconcilable with this Court's teaching summarized above. Indeed, the linchpin of the court of appeals' analysis is an approach to the case that, in the guise of fidelity to that teaching, actually stands the governing principle on its head (App., infra, 7a-8a (emphasis added)): Although the indemnity principle which animates the just compensation clause of the Fifth Amendment "has not been given its full and literal force," Lutheran Synod, 441 U.S. at 510-11, 99 S.Ct. at 1856-57, 60 L.Ed.2d at 440, it must nevertheless be our aim to place a condemnee "in as good a position pecuniarily as if his property had not been taken. * * * " Olson v. United States, 292 U.S. 246, 255, 54 S.Ct. 704, 708, 78 L.Ed. 1236, 1244 (1934). Compare page 12, supra. And the court of appeals plainly did not find that either of the two situations that justify a departure from the fair market value measure of compensation is presented here. First, there can be no claim here that market value "is too difficult to ascertain" or that the property involved is of a "type so infrequently traded that we cannot predict whether the prices previously paid, assuming there have been prior sales, would be repeated in a sale of the condemned property" (Lutheran Synod, 441 U,S . at 513). The court of appeals frankly conceded that respondent's "landfill has a determinable market value" (App., infra, 7a), a conclusion clearly compelled by the record (see page 4 & note 1, supra). Accordingly, here, as in Lutheran Synod itself (441 U.S. at 513-514), practical considerations pertaining to the determination of a representative market value provide no justification for a departure from the fair market value standard. /6/ Nor did the court of appeals purport to determine that "an award of market value would diverge so substantially from the indemnity principle as to violate the Fifth Amendment" (Lutheran Synod, 441 U,S . at 513). Indeed, the court of appeals did not undertake to give any reason why a properly determined award of just compensation based upon the fair market value standard would be inadequate -- much less so substantial a departure from the indemnity principle as to violate the Fifth Amendment. The district court has determined that the fair market value award embodied in its judgment did place respondent "in as good a position pecuniarily as if its property had not been taken" and that the award accordingly "does not impermissibly deviate from the indemnity principle" (App., infra, 25a). Yet, the court of appeals did not explicitly find any error in the district court's assessment. Rather, the court of appeals assumed to decide by its own lights that use of any measure of compensation other than the cost of substitute facilities "would be to deny just compensation" (App., infra, 9a). In support of its conclusion, the court of appeals observed that, unlike the nonprofit camp operator in Lutheran Synod (see 441 U.S. at 515-516), respondent "presumably was required to spend certain monies to purchase a new landfill site and prepare that site for its purpose," (App., infra, 8a). /7/ But so to state is scarcely to establish the constitutional inadequacy of compensation for the taking measured by the fair market value of the property taken. See Lutheran Synod, 441 U.S. at 518-519 (White, J., concurring). /8/ The court of appeals reasoned that respondent's "loss from the condemnation was the amount of money reasonably spent in (respondent's) venture to create a functionally equivalent facility" (App., infra, 9a). The court of appeals evidently assumed that an award of fair market value compensation would impermissibly leave respondent less than whole. That assumption, however, runs directly afoul of the definition of fair market value: "what a willing buyer would pay in cash to a willing seller" at the time of the taking (United States v. Miller, 317 U.S. 369, 374 (1943); Lutheran Synod, 441 U.S. at 511; Almota Farmers Elevator & Warehouse Co. v. United States, 409 U.S. 470, 474 (1973)). Because the record establishes that a market existed for landfill properties comparable to respondent's former site in the vicinity of Duncanville, and that the fair market value of the condemned property was ascertainable, it is not obvious that the reasonable cost of a functionally equivalent substitute facility would be greater than what a willing buyer would pay to a willing seller for such a facility. See App., infra, 24a; /9/ c. The court of appeals quite correctly recognized, of course, that if respondent were awarded the entire amount it expended in acquiring and developing the substitute facility it actually established, it would, for two separate reasons, stand to receive a substantial windfall. First, the court acknowledged, such a measure would overcompensate respondent because the substitute facility it acquired is substantially larger, more capacious, and has a much longer usable life, than the landfill being replaced (App., infra, 13a-14a). Second, the court indicated respondent would be overcompensated if reimbursed for its actual expenses if those expenses were not "reasonable under the circumstances" (id. at 17a). To limit the windfall potential of the substitute facilities costs measure, the court of appeals devised two correctives: First, the court held that upon remand the jury should be instructed to make an appropriate deduction from the substitute facilities cost to reflect "the benefits which Duncanville gained from the acquisition of the new fill" (id. at 14a; see page 10 & note 5 supra). Second, the court of appeals made clear that the jury should be instructed upon remand to disallow the costs respondent seeks to recover to the extent they exceed what is "reasonable under the circumstances" (App., infra, 17a). The very adjustments that the court of appeals recognized to be necessary confirm that its decision to abandon the fair market value criterion was unjustified. If the adjustments are to achieve the objectives outlined by the court of appeals, they amount to highly inefficient and speculative means of achieving through a substitute facilities cost based computation, a result that approximates the fair market value of the property taken. For instance, while deduction from the cost of substitute facilities of an amount reflecting the enhanced value of the new facility as compared with the old undoubtedly will limit the windfall potential of the substitute facilities measure, the same objective is achieved, more directly, by determining the market value of the property actually taken, through examination of comparable sales. See Lutheran Synod, 441 U.S. at 518 (White, J., concurring). Moreover, although the court of appeals found fault with the district court's instructions in this regard (see page 10, supra), it did not specify how an appropriate deduction reflecting the enhanced value of the replacement facility should be calculated, and suggested that various approaches might be acceptable. (App., infra, 15a & note 9). This amorphous prescription for an inherently subjective adjustment is a poor substitute for the "relatively objective working rule" (Lutheran Synod, 441 U.S. at 511) afforded by fair market valuation. Similarly, the court of appeals' casual suggestion that whether respondent's actual expenditures were "reasonable under the circumstances" is a question for the jury on remand (App., infra, 17a) cloaks a complex matter with a deceptively simple label. The Court did not indicate how the jury was to make this assessment. But unless the jury is to be turned loose to speculate on this matter, it must have both evidence and a legal standard to guide it; the best available benchmark for determining reasonableness in the circumstances, however, is the market value of the property acquired. The combined effect of the two adjustments contemplated by the court of appeals, then, if they are meticulously carried out, will be to attempt to reconstruct the market value of the property actually taken. But the result, at best, will be to superimpose superfluous layers of complexity upon a determination that can more readily and directly be made through the traditional fair market value approach. No warrant exists for this burdensome departure from the ordinary method of determining just compensation. Moreover, it is reasonable to fear that, as a practical matter, the United States will be unfairly prejudiced by the procedure prescribed by the court of appeals. Because that procedure focuses undue attention upon the actual expenditures incurred by a condemnee such as respondent, irrespective of their reasonableness in the circumstances and the substantial disparities between the value of what was taken and that of the substitute facility acquired, the likely result is that the United States not infrequently will be held liable for amounts substantially in excess of the fair market value of the property it has acquired. In sum, here, just as in Lutheran Synod, "(t)o the extent denial of a (substitute facilities cost) award departs from the indemnity principle, it is justified by the necessity for a workable measure of valuation" (441 U.S. at 516-517), and is "consistent with the 'basic equitable principles of fairness,' United States v. Fuller, 409 U.S. 488, 490 (1973), underlying the Just Compensation Clause" (441 U.S. at 517). Because the court of appeals' ruling will place substantial unjustifiable burdens upon the courts in determining just compensation for the taking of publicly owned property in situations where that burden is readily avoidable, and creates a substantial risk that unfair judgments will be entered against the United States in a recurring situation, further review by this Court is warranted. 2. As the court of appeals acknowledged (App., infra, 11a), its decision is contrary to the Eighth Circuit's ruling in United States v. South Dakota Game, Fish and Parks Department, 329 F.2d 665 (1964). The explanations given by the court below for its insistence that its decision nevertheless "creates no conflict" (App., infra, 12a) do not withstand examination. The court below suggested, first, that a district court finding in that case that the condemnee needed to replace the parkland taken by the United States there "was highly suspect" (id. at 12a). But the Eighth Circuit did not hold substitute facilities compensation unavailable for that reason, but because (as the court below itself recognized (id. at 11a)) there was no "need or justification for a departure from the concept of market value as the standard of just compensation in Federal eminent domain cases" and because it was accordingly prejudicial error to submit the compensation issue to the jury on a "substitute site theory" (329 F.2d at 668). /10/ Thus, the observation of the court below cannot gainsay the conflict. /11/ The court of appeals' alternative suggestion (App., infra, 12a) that, in light of certain language in Elsberry Drainage District, the continuing vitality of South Dakota Game, Fish and Parks Department is questionable, is simply incorrect. In Elsberry Drainage District, the United States acquired by eminent domain a strip of land, occupied by levees and ditches, that was owned by the Drainage District, for the purpose of creating a wildlife refuge. Because the Drainage District had presented no evidence that it would need to replace the levees and ditches that had been taken, the district court, applying a substitute facilities cost standard, had awarded the District only nominal damages as compensation for the taking. The court of appeals reversed and remanded for redetermination of compensation pursuant to the fair market value standard (563 F.2d at 361). The court explained that, because the Drainage District owned the property in the fee simple, it was entitled to compensation gauged by the fair market value of the property in any available use, and was not limited to the nominal damages that are yielded by a substitute facilities costs measure in those situations where there is no need to replace the property taken (id. at 359-360). The language quoted by the court of appeals (App., infra, 12a) from Elsberry Drainage District plainly does not call in question the holding of South Dakota Game, Fish and Parks Department. Read in context, the statement that the "substitute facilities doctrine is not an exception to the fair market value test but merely an alternative means of determining what just compensation is when a public facility is involved" (563 F.2d at 360) merely explains that a public condemnee is not to be compensated at less than the fair market value standard simply because a substitute facilities measure yields a lower figure when there is no need to replace the facility at all (see 563 F.2d at 359-360). Any doubt as to the Eighth Circuit's views on the question presented in this case is set at rest by the express reaffirmation of the fundamental rule in Elsberry Drainage District (563 F.2d at 361 (emphasis added)): The basic measure of compensation in a condemnation case is the property's fair market value. Only when fair market value cannot be determined or would provide inadequate compensation are other measures of value appropriate; /12/ Accordingly, the decision below is squarely at odds with South Dakota Game, Fish and Parks Department, and presents a conflict that warrants resolution by this Court. /13/ CONCLUSION The petition for a writ of certiorari should be granted. /14/ Respectfully submitted. REX E. LEE Solicitor General F. HENRY HABICHT, II Assistant Attorney General LOUIS F. CLAIBORNE Deputy Solicitor General JOSHUA I. SCHWARTZ Assistant to the Solicitor General DIRK D. SNEL THOMAS H. PACHECO Attorneys JANUARY 1984 /1/ The government's witnesses all testified that a market for landfills existed in the area, and testified to fair market value appraisals of respondent's landfill site ranging from $160,410 to $190,000, based upon comparable sales data (Tr. 208, 218-229, 249-250, 276, 295-297, 298-310, 345-353, 360). Appraisers Carl Mash and R. Edwin White, who testified for respondent, agreed that a market existed for landfill properties in the area, and, based upon comparable sales, offered valuation appraisals of $370,000 and $367,583, respectively (Tr. 140, 173-178, 182, 189-190). /2/ The jury was instructed (App., infra, 15a), By cost of substitute facilities is meant that compensation due the City of Duncanville for the taking of its public facilities measured by the reasonable cost of supplying substitute facilities reasonably necessary to enable it to serve its constituents in approximately the same way as it would had the condemnation not occurred. It is a method of compensation by substitution. You are to determine the reasonable cost of construction of a functionally equivalent substitute sanitary landfill. Simply stated, the cost of substitute facilities represents that amount of just compensation in money to be awarded which will sufficiently allow the City of Duncanville to provide for the replacement of the property and their public facility taken by the Government. /3/ The district court assumed that, as respondent contended, the 6% interest rate on such deficiencies prescribed by the Declaration of Taking Act must be regarded as a floor, rather than a ceiling, on the interest to be awarded, lest the discrepancy between the statutory rate and market interest rate render the statute unconstitutional (App., infra, 26a-27a). But because respondent had presented no evidence from which an appropriate interest rate could be determined, the court declined to award interest in excess of the statutory rate (id. at 27a) /4/ The court of appeals assumed for the purpose of its analysis that replacement of respondent's landfill facility was either a legal or practical necessity, but left open for consideration on remand the question whether this was, in fact, so (App., infra, 8a-9a & note 6). /5/ The court suggested that one permissible method of making this adjustment would be to deduct from the cost of substitute facilities a fraction of the total equal to "one minus the ratio that the remaining useful life of the condemned (property) bears to the useful life expectancy of the substitute facility" (App., infra, 15a n.9, quoting United States v. Certain Property in the Borough of Manhattan, 403 F.2d 800, 804 n.11 (2d Cir. 1968)). Also remanded for redetermination was the question of the interest rate to be paid upon any deficiency ultimately determined to be due. The court of appeals reasoned that, because a remand was in any event necessary, respondent should be allowed another opportunity to present evidence on the interest issue (App., infra, 18a-19a). Applying its prior decision in United States v. 329.73 Acres of Land, 704 F.2d 800, 812 (1983) (en banc), the panel also ruled that interest was not to be limited to the 6% rate specified in the Declaration of Taking Act (App., infra, 18a). See page 6 note 3, supra. And reasoning that "the proper interest rate is an element of 'just compensation,'" the court of appeals directed that the interest rate issue be submitted to the jury upon remand (App., infra, 19a). /6/ The court of appeals correctly recognized (App., infra, 6a) that the substitute facilities cost measure of compensation has typically been applied when the market value of publicly owned property is not reasonably ascertainable. This case does not present any question as to the availability of compensation measured by substitute facilities costs in such circumstances. /7/ See page 8 & note 4, supra. /8/ Justice White also wrote (441 U.S. at 519 (emphasis added; footnote omitted)): I * * * have substantial doubt that the (Just Compensation) Clause should be * * * construed and applied (to require payment of the cost of a substitute facility) where public property is condemned, whether or not the function conducted on the property must be continued at another location /9/ It is possible, of course, that respondent's former site had some features of purely idiosyncratic value, that would not be reflected in the fair market value of the property. But it is settled that such elements of "value" are outside of the constitutional mandate for just compensation. Kimball Laundry, 338 U.S. at 5-6. Moreover, the very structure of the Fifth Amendment strongly suggests that transferable value, measured by the fair market value standard, satisfies the mandate for just compensation. As the Court observed in Monongahela Navigation Co. v. United States, 148 U.S. 312, 326 (1893): (J)ust compensation, it will be noticed, is for the property, and not to the owner. Every other clause in this Fifth Amendment is personal. "No person shall be held to answer for a capital, or otherwise infamous crime," etc. Instead of continuing that form of statement, and saying that no person shall be deprived of his property without just compensation, the personal element is left out, and the "just compensation" is to be a full equivalent for the property taken. /10/ The Eighth Circuit also held that it was improper to have submitted an interrogatory to the jury that required it to determine whether "there (wa)s an obligation and need" for the state to establish a substitute for the park condemned, noting that the question of obligation was one of law (329 F.2d at 668). But the court below acknowledged that this was an additional holding, and not the sole ground of the decision (App., infra, 11a). /11/ The implication of the court's suggestion is that it might have reached the same result as the Eighth Circuit did, albeit not for the same reason. But that suggestion affords no reason for doubting that the Eighth Circuit would have reached a result contrary to the ruling below, in this case. /12/ Equally unsupportive of the court of appeals' hypothesis that the Eighth Circuit has altered its views is the wholly unremarkable definition of the substitute facilities doctrine found in a footnote in Elsberry Drainage District, 563 F.2d 359 n.2 quoted by the court below (App., infra, 12a); Under the substitute facility doctrine if the structure is reasonably necessary for the public welfare, then the public condemnee is entitled to the cost of constructing a functionally equivalent substitute. This passage simply does not address the availability of substitute facilities costs compensation in excess of fair market value in the situation where a market exists for the property taken and market value is readily ascertainable. For the same reason, the Eighth Circuit's statement (563 F.2d at 359 n.2) that the key to the application of this doctrine is whether the facility need be replaced, does not carry the implication ascribed to it by the court below (App., infra 12a). Nor, contrary to the court of appeals' implication (ibid.) does the Eighth Circuit's citation of the latter proposition to United States v. Certain Property in the Borough of Manhattan, 403 F.2d 800, 803-804 (2d Cir. 1968), suggest a change in the Eighth Circuit's views. To be sure, Borough of Manhattan itself holds that substitute facilities costs compensation is not limited to situations where market value is not ascertainable (id. at 803), but the passage from Borough of Manhattan referenced by the Eighth Circuit does not address that subject, but only the question whether, assuming an award of substitute facilities costs is otherwise appropriate, a showing that acquisition of a substitute is impelled by practical necessity, as opposed to legal obligation, is sufficient to support such an award. Borough of Manhattan, of course, is contrary to South Dakota Game, Fish and Parks Department; but it was decided prior to Lutheran Synod, and because it does not rest upon a determination that fair market value compensation impermissibly deviates from the indemnity principles, is unsound. See pages 12-13, and 14-17, supra. /13/ We note that the court of appeals' ruling that the rate of interest to be awarded upon the deficiency in estimated compensation should be determined by the jury rather than the court (see page 10 note 5, supra) is open to serious question. Cf. United States v. Reynolds, 397 U.S. 14 (1970). In limiting our petition to the substitute facilities issue -- the question we deem most worthy of review by this Court in the setting of this case -- we do not signal endorsement of the court of appeals' ruling on the aforementioned point and assume the issue will remain open for later resolution in an appropriate case. /14/ As we explain in our brief in opposition in City of Duncanville v. United States, No. 83-714 (page 16 n.13) the procedural issue presented by that petition is wholly unrelated to the question that we present for review. APPENDIX APPENDIX MATERIAL IS NOT AVAILABLE ON JURIS.