United States v. New River Collieries Co.

Background

Between September 1919 and February 1921, the United States, acting through the Navy, requisitioned more than 60,000 tons of bituminous coal from a coal company at Hampton Roads, Virginia under the Lever Act. The Navy fixed prices and paid 75% of that amount; the coal company sued to recover the remainder it said it was owed. The company regularly sold most of its production in the export market, and evidence showed a busy export spot market with many buyers and fluctuating prices.

Reasoning

The central question was how to measure the money the owner should get ("just compensation" — the money needed to put the owner in the same position as before the taking). The Court held that when a free market existed at the time and place of the taking, the prevailing spot prices in that market measure the owner’s loss. The Court excluded the government’s evidence about the owner’s production costs, profit, or domestic contract prices because those did not show the market price the owner could have obtained for export coal.

Real world impact

The ruling means the government must pay the export spot market rate when it takes goods that would have been sold in a functioning export market. Coal owners cannot be limited to lower domestic contract rates or to their production cost figures when market prices were available. The Court affirmed the lower courts’ judgments awarding the owner the difference to reach market compensation.