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An airport security company’s suit against the federal government for cutting into its business promises to test the limits of the Constitution’s takings clause. Huntleigh USA Corp.’s mainstay business-screening airline passengers and baggage-evaporated when Congress entrusted airport security to a new federal agency, the Transportation Security Administration (TSA). Now the Dutch-owned company wants the government to compensate it for the decline in its fortunes. In a Nov. 14 complaint filed in the U.S. Court of Federal Claims, Huntleigh argues that the TSA reneged on a statutory promise that compensation would be paid. More importantly, the company asserts that the takings clause mandates compensation. “This will be a very uphill battle,” said Georgetown University Law Professor Richard J. Lazarus, a view that was echoed by other takings clause experts. A major stumbling block is the fact that Huntleigh’s expectation that it would continue in a business it had pursued for well over a decade was not buttressed by long-term contracts. Huntleigh’s attorney, Jonathan J. Lerner of New York’s Skadden, Arps, Slate, Meagher & Flom, acknowledged that the airlines had the right to terminate their contracts with the company on short notice-a right they exercised soon after President George W. Bush signed the Aviation and Transportation Security Act in November 2001. Even so, Lerner insisted, the fact that the airlines had renewed Huntleigh’s contracts time and again meant that the company had a reasonable expectation that it would continue in that line of business, until the federal government abruptly intervened. Such expectations have a quantifiable monetary value in the business world, he said. Lerner drew an analogy with a restaurant being sold to a new owner as a going concern. The sale price will reflect the restaurant’s past patronage, even though the old owner can provide no guarantee that customers will continue their patronage in the future. TSA spokesman Darren Kayser said the agency had no comment on the suit. According to Lazarus, the U.S. Supreme Court has held that a reasonable expectation that one will come into real property gives rise to a takings clause claim. And, in recent years, the court has become more receptive to claims that the frustration of contract rights demands compensation. But the court has never said the same of the frustration of an expectation of a contract right. University of California, Berkeley School of Law Professor Joseph L. Sax is doubtful that Huntleigh would prevail even if its contract rights were more secure. “It’s not uncommon for laws to change in ways that put someone out of business,” he said, particularly when the government discovers that a product or way of doing business endangers the public’s health or safety. Supreme Court cases going back more than a century have said no compensation is required in such cases, he added. University of Chicago Law School Professor Richard J. Epstein is the leading exponent of the view that the takings clause should be read as requiring the government to pay for the consequences of regulatory changes. While agreeing that the current legal climate does not favor Huntleigh, he said that expectations do have a monetary value that should be recognized by the courts. He also dismissed the view that safety or national security reasons should override the takings clause: “If the Air Force took land to build an air base, the Constitution would require it to pay compensation.” There are hints in Huntleigh’s complaint that one motive in filing suit may be to clear its name of the charge that its negligence led to loss of life on Sept. 11. The complaint goes out of its way to mention that the TSA has had its lapses. Young’s e-mail address is [email protected].

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