By Cori Badgley

After losing on its state takings claim in Montana state court, a mining company was then turned away by federal court on constitutional grounds. In federal court, the governor of Montana, who was the named defendant, argued that the governor and the state were immune from suit in federal court under the rarely referenced Eleventh Amendment of the United States Constitution. The Ninth Circuit Court of Appeals agreed with the governor and dismissed the mining company’s suit.

The substantive issues presented in Seven Up Pete Venture (“Seven Up Pete”) v. Schweitzer (Filed April 21, 2008, D.C. No. CV-00-00013-CCL) involved a ballot initiative prohibiting open-pit mining using cyanide heap leaching, which precluded Seven Up Pete from using its property to mine gold and silver. Seven Up Pete claimed that Montana had committed a taking under both state and federal law by passing the initiative. These issues are fairly straight forward. Where things get messy is looking at the procedural history and defenses.

Seven Up Pete divided its claims by bringing the state takings claim before state court and the federal takings claim before federal court. Initially, the federal district court dismissed the case on the grounds that the federal claim would not be ripe until the state claim had been adjudicated. However, the district court stated that Seven Up Pete had properly preserved its right to return to federal court once a decision was issued at the state level. Seven Up Pete’s state case went to the Montana Supreme Court, where the court held that the initiative was not a taking under the state constitution. After losing in state court, Seven Up Pete returned to federal district court as the district court had instructed.

The federal district court dismissed Seven Up Pete’s federal takings claim on two procedural grounds: 1) “the Eleventh Amendment barred [Seven Up Pete’s] takings claim because they [sought] monetary relief against state officials in their official capacity;” and 2) the court was “required to accord issue-preclusive effect to the Montana Supreme Court’s decision." [1] Although Seven Up Pete appealed both grounds for dismissal, the Ninth Circuit Court of Appeals focused only on the Eleventh Amendment defense.

The Eleventh Amendment provides that private parties cannot bring lawsuits in federal court against states or state officials unless the state consents to the lawsuit. This is known as sovereign immunity, and it only applies if the private party requests retrospective relief, such as money damages, instead of prospective relief, such as an injunction or declaratory relief. Additionally, the Eleventh Amendment only applies to state entities and does not cover local jurisdictions, such as counties and cities, which is why it rarely arises in the context of Takings Claims. Generally, plaintiffs bring federal Takings Clause lawsuits against local jurisdictions. (For example, see Yamagiwa v. City of Half Moon Bay (N.D. Cal. 2007) 2007 U.S.Dist.LEXIS 22573, in which a federal district court in California held that the City of Half Moon Bay had violated the federal and state takings clauses and required the City of Half Moon Bay to pay just compensation for the taking.) 

This case provided the first opportunity for the Ninth Circuit to address the issue of whether the Eleventh Amendment applied to claims brought under the Takings Clause. The few federal circuit courts that had faced this issue ruled that sovereign immunity applied and dismissed the cases.

The court began its analysis by first looking at whether the Takings Clause existed outside of the realm of the Eleventh Amendment because the Takings Clause provides constitutional relief that was not meant to be covered by the clause on sovereign immunity.  Seven Up Pete argued that if the Eleventh Amendment applied to claims under the federal Takings Clause, a regulatory takings claim could never be brought. In simplified terms, the plaintiff reasoned that the federal constitution applies to both state governments and the federal government, and therefore, the Eleventh Amendment applies to both state courts and federal courts. If the Eleventh Amendment applies to both state courts and federal courts, a plaintiff, such as Seven Up Pete, would have no avenue to request the constitutional relief granted to plaintiffs under the Takings Clause. Therefore, plaintiffs argued that the Eleventh Amendment must not apply to the constitutionally guaranteed relief provided by the Takings Clause because, otherwise, plaintiffs would forever be barred from seeking relief counter to the United States Constitution.   

The Ninth Circuit disagreed. The court reasoned, based on prior Eleventh Amendment cases, that the Eleventh Amendment only addressed the jurisdiction of federal courts. Although a plaintiff is barred from bringing suit in federal court based on the federal Takings Clause, the same claim could be brought in state court against the state or state officials. Therefore, unless the relief requested was prospective (e.g., injunction or declaratory relief), the case must be dismissed.

Next, the court asked whether “just compensation” under the Takings Clause could be classified as prospective relief. Seven Up Pete argued that just compensation amounted to an injunction that forced the state and its officials to apply the Takings Clause properly. Under the federal Takings Clause, if the government takes the property of a private party by either physically taking the property away from the private party or passing a law that prohibits the private party from using the property in any economical way, the government must give the private party “just compensation” (in other words, fair market value) for the taking. 

The court found that “just compensation” amounted to nothing more than monetary damages, “which are the quintessential form of retrospective relief.” “Just compensation” could in no way be characterized as enjoining the state. Therefore, plaintiffs requested retrospective relief in the form of money damages and the Eleventh Amendment applied.

Because relief requested was money damages and the Eleventh Amendment covers the Takings Clause, the Ninth Circuit Court of Appeals dismissed Seven Up Pete’s case against the governor of Montana. Despite the promises of the district court that Seven Up Pete could come back after its initial dismissal, Seven Up Pete had the door slammed in its face for a second time. 

Cori Badgley is an associate with Abbott & Kindermann, LLP. For questions relating to this article or any other California land use, environmental and planning issues contact Abbott & Kindermann at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, nor the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.



[1]  For another case looking at the issue preclusive effect of state court cases applying a state Takings Clause on federal court cases applying the federal Takings Clause, see San Remo Hotel v. City and County of San Francisco (2005) 125 S.Ct. 2491.)