Shanghai Power Co. v. United States

4 Cl. Ct. 237
CourtUnited States Court of Claims
DecidedDecember 30, 1983
DocketNo. 674-81C
StatusPublished
Cited by58 cases

This text of 4 Cl. Ct. 237 (Shanghai Power Co. v. United States) is published on Counsel Stack Legal Research, covering United States Court of Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Shanghai Power Co. v. United States, 4 Cl. Ct. 237 (cc 1983).

Opinion

OPINION

KOZINSKI, Chief Judge.

The President settled plaintiff’s claim against the People’s Republic of China (PRC) without plaintiff’s consent. The question presented is whether plaintiff can state a claim under the just compensation clause of the fifth amendment for the difference between what it received under the terms of the settlement and what it believes the claim was worth.

Facts

Starting in 1929, plaintiff Shanghai Power Company, a Delaware corporation, owned and operated a power plant in Shanghai, China. A franchise agreement between plaintiff and the Shanghai Municipal Council allowed plaintiff to generate and distribute electricity in the Shanghai area.

In 1950, the People’s Republic of China confiscated all property within its borders belonging to U.S. nationals, including plaintiff’s power plant. From that time until 1979, when the United States normalized relations with the PRC, plaintiff received no compensation for the loss of its property.

In 1966, Congress authorized the Foreign Claims Settlement Commission (FCSC) to evaluate the claims of U.S. nationals against the PRC. On the basis of the evidence presented by the claimants, the Commission in 1972 determined the value of the property seized by the PRC to have been about $197 million. Plaintiff’s share of this amount was almost $54 million. The Commission also found that the claimants were entitled to 6% simple interest from the date of taking; with interest, plaintiff’s claim came to more than $144 million.

In 1979, President Carter established diplomatic relations with the PRC. As part of the normalization process, the two nations settled the outstanding claims of U.S. nationals against the PRC. The claims were settled for $80.5 million to be paid to the United States over a period of six years. The United States, in turn, has been paying each of the claimants a pro rata share of the amounts received from the PRC, minus a small administrative fee. Under the terms of the settlement, plaintiff is due to receive approximately $20 million, or $124 million less than under the FCSC formula. Plaintiff is suing to recover that difference from the United States.

Plaintiff argues that President Carter settled its claim against the PRC for a mere fraction of its value in order to achieve broader foreign policy objectives. It cites various White House and State Department pronouncements indicating that normalization of relations with the PRC was considered a highly desirable objective. Plaintiff suggests that the President and the State Department considered the outstanding claims of the U.S. nationals a hindrance to normalization of relations and decided to remove the obstacle by sacrificing those claims. This enabled the President to achieve a public purpose — the normalization of relations with the PRC— at its expense. This, plaintiff argues, is a taking for which it must be compensated. Defendant disagrees. The parties have cross-moved for summary judgment.

Discussion

In order to state a claim for a taking under the fifth amendment’s just com[240]*240pensation clause, the plaintiff must establish that it was the owner of property and that such property was taken by the United States for a public purpose. Public Water Supply District No. 3 v. United States, 135 F.Supp. 887, 133 Ct.Cl. 348, 352 (1955). Because plaintiffs claim raises novel issues, each component of this test must be examined in turn.

A. Did plaintiff have property?

1. The concept of property for purposes of the fifth amendment has been interpreted broadly and can include “every sort of interest the citizen may possess.” United States v. General Motors Corp., 323 U.S. 373, 378, 65 S.Ct. 357, 359, 89 L.Ed. 311 (1945) (leaseholds are property). See also Armstrong v. United States, 364 U.S. 40, 44, 80 S.Ct. 1563, 1566, 4 L.Ed.2d 1554 (1960) (lien is property); Lynch v. United States, 292 U.S. 571, 579, 54 S.Ct. 840, 843, 78 L.Ed. 1434 (1934) (contract rights are property); In re Air Crash in Bali, Indonesia, 684 F.2d 1301, 1312 (9th Cir.1982) (claims for compensation are property).

On the other hand, not all interests or expectancies amount to property for purposes of the fifth amendment. As the Supreme Court has noted, only those rights “which have the law back of them” are property. Kaiser Aetna v. United States, 444 U.S. 164, 178, 100 S.Ct. 383, 392, 62 L.Ed.2d 332 (1979) (quoting United States v. Willow River Power Co., 324 U.S. 499, 502, 65 S.Ct. 761, 764, 89 L.Ed. 1101 (1945)). Cf. Deltona Corp. v. United States, 657 F.2d 1184, 228 Ct.Cl. 476, 491 (1981) (mere expectancy is not property). For example, no property interest can be acquired in the high water level of a river. Willow River Power Co., 324 U.S. at 511, 65 S.Ct. at 768. Similarly, a private party cannot generally acquire rights in the navigable waters of the United States. See, e.g., United States v. Chandler-Dunbar Water Power Co., 229 U.S. 53, 62, 33 S.Ct. 667, 671, 57 L.Ed. 1063 (1913). See generally Morreale, Federal Power in Western Waters: The Navigation Power and the Rule of No Compensation, 3 Nat. Resources J. 1 (1963). But see Kaiser Aetna, 444 U.S. at 178, 100 S.Ct. at 392. A person also acquires no property interest in contraband, see Ziffrin, Inc. v. Reeves, 308 U.S. 132, 140, 60 S.Ct. 163, 167, 84 L.Ed. 128 (1939), or by virtue of an expectancy unsupported by a contractual or other obligation. See United States v. Petty Motor Co., 327 U.S. 372, 380 n. 9, 66 S.Ct. 596, 601 n. 9, 90 L.Ed. 72 (1946) (expectation that lease would be renewed is not property); Restatement (Second) of the Foreign Relations Law of the United States § 191 illustration 2 (1965) (beneficiary of will has no property interest during life of testator) [hereinafter cited as Restatement].

From these authorities it appears that a plaintiffs interest will be recognized as property for purposes of the fifth amendment unless that interest is devoid of a legally enforceable right or recognition of a property interest would contravene public policy. Under this standard, plaintiffs claim against the PRC amounts to property. The United States has consistently taken the view that foreign governments are entitled to confiscate property belonging to U.S. nationals. See, e.g., Note from U.S. Secretary of State Hull to Mexican Ambassador in Washington (Apr. 3, 1940), quoted in 3 G. Hackworth, Digest of International Law 662 (1942). However, the United States has also consistently maintained that such a taking must be accompanied by “adequate, effective and prompt compensation.” Id.1 Accord Restatement §§ 185-190. The right to such compensation for an expropriation is, moreover, a principle recognized in international law, Domke, Foreign Nationalizations, 55 Am.J. Int’l L.

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4 Cl. Ct. 237, Counsel Stack Legal Research, https://law.counselstack.com/opinion/shanghai-power-co-v-united-states-cc-1983.