William Perry Pendley

In 1991, at a cost of $70 million, a group of miners and mining entities known collectively as Seven Up Pete Venture acquired mineral rights on land, near Lincoln, Montana, believed to contain over four million ounces of gold and ten million ounces of silver capable of being recovered by open-pit mining and cyanide heap leaching. During the mid-1990s, Seven Up Pete negotiated with Montana for permits to begin mining operations; however, in November 1998, Montana voters narrowly approved a ballot initiative banning recovery of gold and silver using cyanide heap leaching. Although miners and economic development advocates desired to persuade voters that the ban was ill-advised and unnecessary, an earlier ballot initiative—later declared to be unconstitutional—forbade that effort.

Because the new law barred the only process by which the ore could be recovered profitably and thereby rendered Seven Up Pete’s properties worthless, in April 2000, Seven Up Pete filed a federal lawsuit against Montana for unconstitutionally “taking” their property. At the same time, as a 1985 Supreme Court opinion required, Seven Up Pete sought to exhaust their state remedies with a lawsuit in state court seeking “just compensation.”

In June 2005, the Montana Supreme Court rejected Seven Up Pete’s claims. When Seven Up Pete’s petition for U.S. Supreme Court review was denied and their state remedies thereby “exhausted,” Seven Up Pete returned to the federal forum. There, in April 2006, the district court held that Montana was immune under the Constitution’s Eleventh Amendment and that the court had to defer to the Montana Supreme Court, which, on its own initiative, addressed the federal takings issues, even though Seven Up Pete had reserved that issue for the federal court proceedings. In April 2008, the Ninth Circuit affirmed that ruling on the sole basis that, under the Eleventh Amendment, Montana was immune from federal takings claims.

Although the Eleventh Amendment bars federal lawsuits against state governments or officers for monetary damages, the U.S. Supreme Court held, in 1987, that it does not bar federal Takings Clause cases. Furthermore, because the Fourteenth Amendment, which through its Due Process Clause, applies the Takings Clause to the States, the States, by their ratification of the Civil War Amendments, including the Fourteenth, waived their immunity from federal lawsuits for “just compensation.” Finally, in 1908, the Supreme Court declared that state officials have no immunity if they seek to enforce legislative acts that are void because they conflict with the Constitution.

William Perry Pendley

William Perry Pendley is President and Chief Legal Officer at the Mountain States Legal Foundation.

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