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Johnson v. United States

Citation: 33 ELR 20121
No. No. 01-5143, 52 Fed. Appx. 507/(Fed. Cir., 12/03/2002)

The court holds that an individual lacks standing to bring a Fifth Amendment takings claim against the government on behalf of a corporation because he failed to maintain his shareholder status throughout the litigation. The individual was the sole shareholder and vice president of a corporation that owned a number of sewage and water treatment plants in Louisiana and several other states. In 1998, the U.S. Environmental Protection Agency (EPA) sued the corporation for Clean Water Act violations. The parties entered into a consent decree, but an inspection subsequently revealed a total of 661 violations of the consent decree. EPA and the state of Louisiana petitioned a district court for appointment of a receiver to ensure the corporation's compliance with the consent decree. Meanwhile, the corporation filed for bankruptcy under Chapter 11, and a trustee was appointed to oversee the reorganization by the bankruptcy court. The district court then ordered the appointment of a receiver to ensure compliance with the consent decree. The receiver was the same person as the trustee in bankruptcy, and was granted "expansive discretionary" powers. The individual, on behalf of the corporation, filed a complaint before the U.S. Court of Federal Claims arguing that the appointment of a receiver with such broad powers constituted a taking under the Fifth Amendment. The court found in favor of the government, and the individual appealed. The court holds that the individual lacks standing. A plaintiff bringing a derivative action in the Court of Federal Claims must be a shareholder at the time a suit is brought. Moreover, when a plaintiff bringing an action on behalf of the corporation is the legal owner of the stock at the time of filing but does not maintain shareholder status throughout the course of the litigation, the plaintiff no longer has standing to bring the action. Here, the individual was a shareholder when he filed in the Court of Federal Claims in spring 2000. However, his shares were cancelled under the plan of reorganization in bankruptcy, approved on September 15, 2000. The individual therefore did not maintain his shareholder status throughout the litigation and as such his standing to bring the takings claim terminated. Because the court decided this case on standing grounds, it did not reach the issue of whether the bankruptcy trustee abandoned the takings claim such that the individual was free to bring it on behalf of the corporation. Nor did the court address the Court of Federal Claims' analysis regarding whether the individual, on the merits, presented a valid takings claim.

Counsel for Plaintiff
Joseph A. Prokop Jr.
Law Offices of Joseph A. Prokop Jr.
830 Main St., Baton Rouge LA 70802
(225) 387-2277

Counsel for Defendant
Kathryn E. Kovacs
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000