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St. Bernard Port v. Violet Dock Port, Inc., LLC

Supreme Court of Louisiana

January 30, 2018

ST. BERNARD PORT, HARBOR & TERMINAL DISTRICT
v.
VIOLET DOCK PORT, INC., LLC ST. BERNARD PORT, HARBOR & TERMINAL DISTRICT
v.
VIOLET DOCK PORT, INC., LLC ST. BERNARD PORT, HARBOR & TERMINAL DISTRICT
v.
VIOLET DOCK PORT, INC., LLC

         ON WRIT OF CERTIORARI TO THE COURT OF APPEAL, FOURTH CIRCUIT, PARISH OF ST. BERNARD

          CRICHTON, JUSTICE

         Although the Louisiana Constitution generally restricts the government from expropriating private property, it provides broad exceptions for public port authorities. To Louisiana's maritime industry, public ports are critical. Due to market demands and increasing global competition, public ports must expand in order to compete. The Louisiana Constitution therefore provides that the government can expropriate property for "[p]ublic ports . . . to facilitate the transport of goods or persons in domestic or international commerce." La. Const. art. I, § 4(B)(2)(b)(vi).

         We granted the writ in this matter to determine whether St. Bernard Port, Harbor & Terminal District's (the "Port") expropriation of property owned by Violet Dock Port, Inc., L.L.C. ("Violet") on the Mississippi River satisfies the "public purpose" requirement of art. I, § 4(B)(1) of the Louisiana Constitution and, further, whether it violates the business enterprise clause of art. I, § 4(B)(6) of the Louisiana Constitution. For the reasons that follow, we find that the record demonstrates that goods or persons in domestic or international commerce" and not for the constitutionally prohibited purpose of operating Violet's enterprise or halting competition with a government enterprise. We therefore affirm the court of appeal holding that the expropriation was constitutional. However, we also find the trial court made a legal error in setting the just compensation due to Violet under art. I, § 4(B)(1), and further find that the court of appeal failed to correct that error. We therefore remand this matter to the court of appeal solely for the purpose of fixing the amount of just compensation based on the evidence in the record and in accordance with the principles set forth in this opinion.

         BACKGROUND

         Maritime trade is a primary mode of transport for national and international commerce. In the last century, the maritime industry has expanded and modernized. This includes advancements such as containerization and other improvements that have ushered in super tankers and mega ships. In other words, more and larger ships now transport greater amounts of cargo. Such advancements have made public ports, like the St. Bernard Port, a virtual necessity. To accommodate these changes, ports must expand and adapt.[1]

         The Port, a public cargo facility in St. Bernard Parish, [2] has consistently experienced an increased demand for cargo handling since at least 2001. Through a lease with a Marine Terminal Operator ("MTO"), Associated Terminals, the Port handles several types of cargo, and has remained one of the busiest ports in the country. For example, from 2007-2009, the Port's cargo included 37% of all the ferro alloys imported into the United States, 37% of the barite, 10% of the urea, and 3% of the potash. However, the Port began experiencing a shortage of space, and its customers requested both additional space and a liquid cargo facility. Ultimately, by 2008, the Port was operating at near capacity, and determined that if it could not meet its customers' demands, its operations would suffer. As a result, the Port sought to expand in order to meet these growing needs.

         To support its expansion, the Port identified approximately 75 acres of land along the Mississippi River (the "Property"). The Port began, as early as 1985, the arduous process of locating suitable property. Seven or eight different sites were investigated, and factors such as having a nearby railroad and land for ingress and egress of trucks were paramount. Compared to other sites along the river, the Property had many of these critical attributes. The Port determined that the Property's relatively straight segment and deep water could handle large cargo ships better than other sites. Further, there was enough land between the nearby levee and the existing rail line for the Port to place a cargo facility. At other sites, the levee was too close to the rail line, which would require the Port to relocate the rail line in order to build a cargo facility. According to a representative from Associated Terminals, the Port's MTO, there was no other space in St. Bernard Parish where a bulk terminal facility could be constructed on the river.

         Violet, a limited liability company, owned the Property. At the date of the expropriation, the Property had five berths, which were used for berthing and mooring vessels (i.e., what a Violet representative described as a "parking lot for ships") and topside repairs.[3] Violet also had a contract with the Military Sealift Command, a civilian branch of the United States Navy (the "Navy"), to layberth and service oceangoing ships. In the ten years before the expropriation, Violet's cargo operations were described as "negligible."

         A five-member Board of Commissioners, appointed by the Governor, makes decisions for the Port.[4] In 2007, the Port offered $10 million to purchase the Property, which Violet rejected. In 2008, the parties tentatively agreed to a sale of the property for $14 million. Based on this agreement, in order to purchase and develop the property, the Port applied for funding to the Louisiana Department of Transportation & Development's Port Priority Program. In 2010, the Port was awarded a $15 million grant to acquire the Property.

         The Port then had the Property reappraised and, as a result, informed Violet it would pay the newly appraised fair market value of $16 million. Violet rejected the Port's offer, and instead sought $35 million. After this, negotiations failed, and the Port initiated the expropriation proceedings.

         PROCEDURAL HISTORY

         The Port initiated this expropriation on December 22, 2010, under the quick-take expropriation provisions of La. R.S. 19:141, et seq. and deposited $16 million into the registry of the district court. According to the petition, the expropriation was for the purpose of expanding the Port's current port facilities to handle dry-bulk and liquid-bulk commodities. The petition stated the construction of development of the Property would occur in three phases and take approximately eight to ten years to complete. During that time, the petition stated the Port intended to "enter into a new contract with [the Navy] for its continued use of the Violet Port during Phase I of the acquisition and development of the [Property]." The petition further stated the expropriation would "create jobs and benefits to the citizens of St. Bernard Parish."

          iolet thereafter removed the case to federal court and moved to dismiss the petition for expropriation. Violet's primary basis for alleging federal jurisdiction was under the federal officer removal statute, 28 U.S.C. § 1442(a)(1). See St. Bernard Port, Harbor & Terminal Dist. v. Violet Dock Port, Inc., LLC, 809 F.Supp.2d 524, 529 (E.D. La. 2011) (Vance, C.J.) ("St Bernard Port Federal"). Because of Violet's contract with the Navy, Violet argued the Port's expropriation was for an act under color of federal law.[5] Id. at 531. However, to trigger federal jurisdiction, Violet needed to prove there was a causal nexus between the expropriation and Violet's federal activity with the Navy contract. Id. Chief Judge Sarah Vance rejected this argument, finding that Violet failed to prove this nexus:

Although Violet asserts that [the Port] is, in fact, expropriating the property primarily to take over performance of its contract with the [Navy], that argument does not explain [the Port's] expropriation of the entirety of Violet's property, as Violet's contract with [the Navy] implicates only one of Violet's five berths and only a fraction of the 70 acres [the Port] seeks to expropriate. Nor has Violet submitted anything, other than its own characterization, to suggest that acquisition of the [Navy] property was the primary motivating cause of this 70 acre expropriation.

Id. at 531 (footnote omitted). The federal court remanded the case to state court. Id. at 538.

         Following remand, the trial court held a hearing to consider the public purpose of the expropriation. The trial court heard testimony, reviewed the evidence, and evaluated the credibility of the witnesses. At the hearing, Violet again argued that the Port's true purpose in expropriating the Property was to take over the Navy lease. The Port contended otherwise. According to the Executive Director of the Port: "As far as the lease with the Navy . . . it's an afterthought. . . . [T]hat's certainly not one of our goals." Similarly, a representative from Associated Terminals, the Port's MTO, stated: "[T]he best news for [us] is that the Navy would leave, because we want the use of the berth to handle cargo, and that's the best berth, the one that they're [the Navy] presently tied to." He further stated: "We're not in the ship berthing business. We're in the cargo business." In contrast, Violet's representative stated that in the decade before the expropriation it had handled "probably no cargo . . . . There may have been some negligible cargo."

         After the hearing, the trial court rejected Violet's argument that the expropriation was for the purpose of taking the Navy lease. In granting the Port's petition, the trial court stated that the Port took the Property to "build and operate a terminal to accommodate transport of liquid and solid bulk commodities into national and international commerce to and from St. Bernard." This judgment was based on the trial court's firsthand credibility determinations after hearing testimony from various witnesses. Among these was of the Port's Executive Director, who testified about the Port's need for space. According to his testimony, the Port's cargo tonnage in the previous ten years had grown sevenfold. Consistent with this evidence, the trial court also stated the expropriation was a "logical extension of port services in St. Bernard." From this ruling, Violet applied for writs of certiorari. Both the Fourth Circuit Court of Appeal and this Court denied Violet's writ applications. St. Bernard Port, Harbor & Terminal Dist. v. Violet Dock Port, Inc., LLC, 12-0417 (La.App. 4 Cir. 5/16/12); 12-1122 (La. 5/30/12), 90 So.3d 419.

         The case proceeded to a trial on valuation. The trial court found just compensation to be $16 million.[6] At trial, the Port's experts testified that the highest and best use of the Property was continued layberthing plus limited aggregate operations, valuing the Property at $16 million. Violet's experts maintained that the highest and best use of the Property was as a cargo facility. Violet argued that it should be compensated between $51 million and $67 million.[7] The trial court rejected the highest and best use and valuation opinions of Violet's experts, citing physical limitations that it alleged rendered the Property unsuitable for very large-scale cargo use, including: (a) water depth at the docks; (b) proximity to school and residential areas; (c) limited amount of uplands available for cargo; and (d) configuration of the Property. Consequently, the trial court found just compensation to be $16 million.

         On appeal, a divided court of appeal panel affirmed. As to the Port's petition for expropriation, the majority stated: "Although the authority granted to the ports of Louisiana in the expropriation of private property is exceptionally broad, it is supported by the constitution and statutes of the State." St. Bernard Port, Harbor & Terminal Dist. v. Violet Dock Port, Inc., LLC, 16-96, 16-262, 16-331, p.7 (La.App. 4 Cir. 12/14/16) ("St. Bernard Port I"), 229 So.3d 626. In affirming the trial court's just compensation award, the majority found the record supported the trial court's ruling. Id. at p.10. It further noted that '[w]here there are two permissible views of the evidence, the factfinder's choice between them cannot be manifestly erroneous or clearly wrong." Id. One judge dissented, finding that the expropriation was unconstitutional. Id. at p.15 (Lobrano, J., dissenting). After Violet sought rehearing, the court of appeal denied the request. St. Bernard Port, Harbor & Terminal Dist. v. Violet Dock Port, Inc., LLC, 16-96, 16-262, 16-331, p. 7 (La.App. 4 Cir. 2/8/17), --So. 3d -- ("St. Bernard Port II"), 2017 WL 526160.

         This Court granted Violet's writ application. 17-0434 (La. 5/26/17), 221 So.3d 853.

         DISCUSSION

         Authorization for expropriations by a government body-and important limitations placed upon those authorizations-are found in both the federal and state constitutions. See South Lafourche Levee Dist. v. Jarreau, 16-0788, 16-0904, p.8-9 (La. 3/31/17), 217 So.3d 298, 305, cert. denied, 138 S.Ct. 381, -- U.S. -- (10/31/17). More specifically, the Fifth Amendment of the United States Constitution, made applicable to the states pursuant to the Fourteenth Amendment, provides: "No person shall . . . be deprived of life, liberty or property without due process of law; nor shall private property be taken for public use, without just compensation." Likewise, the Louisiana Constitution provides "[p]roperty shall not be taken or damaged by the state or its political subdivisions except for public purposes and with just compensation . . . ." La. Const. art. I, §4(B)(1). Therefore, under both Constitutions, any expropriation must be for a "public purpose" and provide "just compensation."

         To review these determinations, we start with the constitutional provisions at issue. Arrow Aviation Co., L.L.C. v. St. Martin Parish Sch. Bd. Tax Sales Dept., 16-1132, p.4 (La. 12/6/16), 218 So.3d 1031, 1035 ("When a constitutional provision is plain and unambiguous and its application does not lead to absurd consequences, its language must be given effect."). We then review the record to determine whether the trial court's factual findings were manifestly erroneous. See Exxon Mobil Pipeline Co. v. Union Pac. R. Co., 09-1629, p.12 (La. 3/16/10), 35 So.3d 192, 200 ("Whether the expropriator's purpose is public and necessary is a judicial determination that will not be reversed on appeal absent manifest error.").

         Public Purpose

         In 2005, the United States Supreme Court decided the case Kelo v. City of New London, 545 U.S. 469 (2005) which expressly upheld a taking for economic development purposes.[8] Following Kelo, in 2006, voters of Louisiana approved a constitutional amendment enumerating permissible "public purposes" for a political subdivision to expropriate private property. As amended, art. I, § 4 provides, in pertinent part:

Section 4. (A) Every person has the right to acquire, own, control, use, enjoy, protect, and dispose of private property. This right is subject to reasonable statutory restrictions and the reasonable exercise of the police power.
(B)(1) Property shall not be taken or damaged by the state or its political subdivisions except for public purposes and with just compensation paid to the owner or into court for his benefit. Except as specifically authorized by Article VI, Section 21 of this Constitution property shall not be taken or damaged by the state or its political subdivisions: (a) for predominant use by any private person or entity; or (b) for transfer of ownership to any private person or entity.
(2) As used in Subparagraph (1) of this Paragraph and in Article VI, Section 23 of this Constitution, "public purpose" shall be limited to the following:
* * *
(b) Continuous public ownership of property dedicated to one or more of the following objectives and uses:
* * *
(vi) Public ports and public airports to facilitate the transport of goods or persons in domestic or international commerce.
* * *
(6) No business enterprise or any of its assets shall be taken for the purpose of operating that enterprise or halting competition with a government enterprise. . . .

(Emphasis added.)

         In other words, the Louisiana Constitution expressly includes "public ports" as an enumerated "public purpose." Specifically, a public purpose is defined as "[p]ublic ports . . to facilitate the transport of goods or persons in domestic or international commerce." La. Const. art. I, § 4(B)(2)(b)(vi).[9]

         Consistent with the authority given to public ports to expropriate property, the trial court made a factual determination that the Port's purpose for expropriation was to "build and operate a terminal to accommodate transport of liquid and solid bulk commodities into national and international commerce to and from St. Bernard." This purpose falls squarely within the constitutional definition of "public purpose" for public ports. La. Const. art. I, § 4(B)(2)(b)(vi). Based on the record before us, we cannot say that the trial court's finding was manifestly erroneous, and we therefore affirm the finding that this expropriation was for a public purpose. We also find that this expropriation satisfies the broad definition of public purpose under federal law. See Kelo, 545 U.S. at 479 ("Without exception, our cases have defined that concept broadly, reflecting our longstanding policy of deference to legislative judgments in this field.").

         Business Enterprise Clause

         Violet also argues that, even if there was a "public purpose" here, the expropriation violates La. Const. art. I, § 4(B)(6), known as the "business enterprise clause." The legislature did not change this provision as part of the 2006 amendments. La. Const. art. I, § 4(B)(6) states:

(6) No business enterprise or any of its assets shall be taken for the purpose of operating that enterprise or halting competition with a government enterprise. However, a municipality may ...

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