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Federal Circuit Dismisses Takings Claim Relating to Environmental Contamination for Being Out of Time

In Frazer/Exton Development, L.P. v. United States, the United States Court of Appeals for the Federal Circuit affirmed the dismissal of a takings claim against the federal government relating to environmental contamination because the appellants, current and former landowners of the site at issue, filed their lawsuit more than 6 years after environmental remediation was complete. Frazer/Exton Development, L.P. v. United States, No. 2019-2143 (Fed. Cir. Apr. 7, 2020).

The case related to the Foot Mineral Superfund Site located in Chester County, Pennsylvania (the “Site”). During WWII and for some time after, the federal government used the Site for various industrial processes which contaminated on-site soils and groundwater. In 1998, appellant Frazer/Exton acquired the Site with full knowledge of the contamination and assumed responsibility for a consent order that required it to complete a remedial investigation and feasibility study. EPA eventually selected a permanent remedy for the Site, and in 2011, the remediation of the Site was completed. Another appellant, Whiteland, acquired the Site in 2016. A year later, in 2017, Whiteland executed an environmental covenant which effectuated land restrictions that were previously approved by EPA.

Frazer/Exton and Whiteland filed suit in the Claims Court in 2018, alleging that the federal government’s operations and disposal methods at the Site resulted in environmental contamination, which effected a physical taking without just compensation in violation of the Fifth Amendment in the United States Constitution. The Claims Court dismissed the case for lack of jurisdiction, holding that Frazer/Exton and Whiteland’s takings claims accrued in 2011 and the six-year statute of limitations had expired before the suit was filed. On appeal, the Federal Circuit affirmed.

The Federal Circuit explained that when a taking is caused by a gradual physical process (such as environmental contamination), the takings claim does not accrue until the situation has “stabilized,” meaning “when the environmental damage has made such substantial inroads into the property that the permanent nature of the taking is evident and the extent of the damage is foreseeable.” In other words, damages need not be complete nor fully calculable for the limitations period to run. The Federal Circuit affirmed the lower court’s decision that the taking “stabilized” no later than 2011 when remediation activities at the Site were complete.

Appellants argued that the claim accrued in 2017 when EPA imposed land use restrictions because, in Appellants’ view, there was no predictability or permanence as to how Appellants’ property rights would be affected until the restriction were in place. But the Court rejected this argument because the land use restrictions were regulatory, rather than physical takings, and therefore were irrelevant as to the physical takings claims that Appellants had pled. The decision is a valuable reminder of the importance of conservatively calculating any limitations period for a cost recovery lawsuit.