Legal Briefs

Piszel v. United States

By David G. Cabrales, W. Scott Hastings, Andrew Buttaro, Ilya Shapiro, & Kimberly S. Hernan
June 8, 2017

The Fifth Amendment bars the taking of private property for public use without just compensation. This case concerns the source of that compensation. Anthony Piszel had certain vested benefits earned under an employment contract he entered into with Freddie Mac. In the wake of the 2008 financial crisis, however, the Federal Housing Finance Agency ordered Freddie Mac to not pay Piszel what he was owed. In response, Piszel sued the federal government to gain compensation for this taking of his private property rights. The U.S. Court of Appeals for Federal Circuit rejected the claim, holding that the government isn’t liable for the intentional acts of its officials as long as the aggrieved party might be able to seek damages from some other private entity (here, Freddie Mac). Piszel now seeks Supreme Court review. The question before the Court is whether an injured party—in a situation where the United States orders a private party to terminate a private contract without cause—must show that the government also eliminated his right to seek relief against the other contracting party before he can assert a claim under the Fifth Amendment’s Takings Clause. Cato has joined with the Southeastern Legal Foundation on an amicus brief supporting Piszel’s petition and arguing that the Constitution’s requirement to pay “just compensation” for a taking is a burden on the government, not on the private entities the government regulates. First, preventing unwarranted government interference with private contract rights has been a significant issue since the Founding. Second, the Federal Circuit ruling allows the government to interfere with contracted-for property rights with impunity. Third, it’s crucial that the Supreme Court correct that ruling because the Federal Circuit has exclusive appellate jurisdiction regarding claims against the United States and because the Federal Circuit’s decision sets a dangerous precedent in forcing a regulated entity to choose between its regulator’s orders or accepting financial responsibility and facing breach-of-contract liability for an abuse of the government’s authority. Fourth, allowing cases such as Piszel to proceed on the merits promotes accountability and discourages public corruption by ensuring that the parties have access to discovery from the government. Fifth, the case is a good vehicle for deciding the issue of government compensation for interference with private contract rights because there are no facts in dispute. In short, the decision Piszel appeals from invites government officials to make an end run around the Takings Clause, so the Supreme Court needs to step in.

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