Estate of Hage v. United States

Estate of Hage v. United States, 687 F.3d 1281 (Fed. Cir. 2011) (holding that a rancher’s claim for a regulatory taking of water rights was not ripe for review since the mere existence of a requirement for a special use permit does not constitute a regulatory taking; and, in the absence of evidence that the government took water the ranchers could have put to beneficial use, the construction of fences near a water ditch did not amount to a physical taking).

In 1978, E. Wayne Hage and Jean Hage acquired a cattle-ranching operation in Nevada covering approximately 7,000 acres of private land where they used nearly 752,000 acres of adjoining federal lands under grazing permits from the Forest Service and BLM (collectively “the government”).  The acquisition included water rights obtained under Nevada state law to streams and ditches now located on federal lands.  The government required the Hages to obtain special use permits before performing any ditch maintenance on the federal lands.  The Hages complied, until 1986, when they stopped applying for the permits because they believed that they were not necessary, yet they continued to perform ditch-maintenance operations on the federal lands, including the clearing of trees along the ditch right of way.  Mr. Hage was subsequently charged and convicted of damaging and removing government property; however, the conviction was eventually overturned on the ground of inadequate proof of the value of the property affected.  In 1991, the Hages filed suit against the United States in the United States Court of Federal Claims (“claims court”) alleging a Fifth Amendment taking of private property, a right to compensation for range improvements, and breach of contract (discussion of range improvements compensation intentionally omitted here).  Nearly twenty years later, including two trials and multiple opinions by the claims court, the court awarded the Hages compensation for a regulatory and physical taking of their water rights with pre-judgment interest.  The Government appealed to the United States Court of Appeals for the Federal Circuit (“court of appeals”).  The government argued that: (1) the regulatory takings claim was not ripe because the Hages failed to obtain a permit to maintain the ditches; and (2) a physical taking had not occurred because: (a) the claims relating to the construction of fences surrounding water sources on federal lands in which they held grazing permits were time-barred; (b) Mr. Hage already testified that fences erected in 1988 and 1990 did not exclude cattle from the water sources; (c) a “water right has no ‘access’ component” and there is no “appurtenant right to use and occupy federal rangelands for access to the water;” and, (d) the Hages failed to prove that they could have put the water to beneficial use.

First, the court of appeals found the Hages claim for a regulatory taking of their water rights was not ripe.  There was no proof that the Hages would have been denied a permit had they applied for one.  The court of appeals rejected the Hages argument that the mere existence of a requirement for a permit constituted a regulatory taking.  Accordingly, the court of appeals concluded that the claims court had erred in finding a regulatory taking of the Hages’ water rights.  The Hages did not have to apply for a permit because it would be “futile” based on the history of the parties involved and the permit requirement itself would amount to a prohibition of their use, and thus a taking of their water rights.

Next, the court of appeals agreed with the government’s claim that any physical takings claim based upon fences built in 1981 and 1982 were time-barred pursuant to the six-year statute of limitations period prescribed in 28 U.S.C. § 2501.  The Hages, in fact, filed the suit in 1991; nearly a decade after the BLM built fences on the property.  The court of appeals sided with the Hages assertion that the government could not prevent them from accessing the water without just compensation, and entirely fencing off a water source could amount to a physical taking.  However, the court of appeals held that in the absence of any evidence that the government actually took water that the Hages could have put to beneficial use, the Hages did not satisfy a Fifth Amendment takings claim.  Therefore, the court of appeals held that the claims court erred in ruling that construction of fences amounted to a physical taking because there was no evidence that the government’s actions actually resulted in taking the Hages water rights.

Accordingly, the court of appeals affirmed the claims court’s ruling that the erection of fences in 1981 and 1982 were time-barred, reversed the claims court’s ruling that there had been a regulatory and physical taking of the Hages’ water rights, vacated any damages awards, and remanded the case without costs.