Summary and Analysis o…

It makes no sense to talk about enjoining a taking. The only appropriate takings-clause remedy is the substitutionary remedy of money damages, after the government has already validly taken property. But when the thing taken is itself money, the taking-clause remedy makes no sense, and is no different than a specific remedy of getting my property back. Assuming a “public use” is established, then I can’t, under the Takings Clause, enjoin the taking of my property or get an injunction compelling the return of my property. That’s the wrong remedy under the Takings Clause. I don’t believe it can be any different when the property supposedly taken is money.

If I am right, then all so-called “takings” of money should be constitutionally analyzed as a fee or a tax, possibly subject to invalidation under “substantive due process.” Kennedy has made that point in both Lingle and Eastern Airlines. If the plaintiff seeks to invalidate the monetary exaction, the plaintiff may not use the Takings Clause. That’s my two cents, as someone who once tied his brain up in knots trying to figure out a takings-clause challenge to a governmental monetary exaction. Hatfield v. Scott, 306 F.3d 223, 230 (5th Cir. 2002).

Certainly you’re right that taxes or user fees are not Takings. But that does not mean that money and monetary obligations cannot be property. The Court has held quite clearly that they are. Take a look at Lynch v. United States and Perry v. United States, both Depression-era cases in which the United States tried to abrogate its own monetary debts. The Court held that that would be a per se Taking. Every single member of the Court cited those precedents with approval in Winstar. Also take a look at US v. Larionoff, where the Court invoked constitutional doubt to avoid deciding whether the federal government could retroactively reduce the statutory pay owing to military personnel. All of these were simple financial obligations. Furthermore the property “taken” in Webb’s and Phillips was nothing but an ordinary obligation to pay money. The bank account in Phillips was, after all, nothing more than an ordinary monetary debt from the bank to its depositor. Same with the interpleader fund in Webb’s—just a “fungible” monetary debt owed by the court to whoever ended up winning a lawsuit. Nonetheless the Court had no difficulty finding a per se Taking.

So it’s wrong, I think, to take that dicta from Justice Breyer and Justice Kennedy in Eastern Enterprises (suggesting that Webb’s and Phillips involved a “specific, separately identifiable fund of money”) to suggest a serious holding that there is a difference between ordinary monetary obligations and discrete “funds of money.” There is no workable or coherent distinction there, so it can’t become the basis for a stable jurisprudence. I think the Federal Circuit’s recent case law illustrates what a blind alley that is — after reading Commonwealth Edison and Adams one wonders whether the Federal Circuit understands that banks do not hoard deposits in individual vaults, like the wizards’ bank in Harry Potter!

Here is, I think, a better reading of Eastern Enterprises. What Justice Breyer and Justice Kennedy were really saying in Eastern Enterprises is that, on the facts of that case, there was no reason to talk about the Takings Clause at all. The law in question (the Coal Act) imposed an obligation on one private party to pay money to another private party, because of some relationship between the two of them. Such laws are constitutional under the Due Process Clause only if the party who is ordered to pay can be fairly said to be responsible for some harm that has befallen the recipient. If not, the law will fail Due Process review. If so, the law could not possibly have the “character” of a regulatory Taking under the Penn Central test because its “character” is more like ordinary tort law than a Taking. It’s not a Taking to make someone pay for harm they have caused. So the Takings Clause is simply redundant in such cases. Justices Breyer and Kennedy explain that at length in their opinions. The “specific, separately identifiable fund of money” language is an unfortunate aside that in my view makes no sense and just can’t be elaborated into a “test” of some kind. And extending the Breyer/Kennedy reasoning to cover laws imposing obligations to pay money to the government (as the Federal Circuit did in Commonwealth Edison) or laws abrogating the government’s own monetary obligations (as the Federal Circuit did in Adams) is, I think, wrong—and flatly inconsistent with Lynch and Perry. Both Justices Kennedy and Breyer stressed in Eastern Enterprises that the government was not keeping anything for itself.

Anyway, I agree that Nollan and Dolan shouldn’t apply when the state could legitimately impose what it wants as a tax or user fee. They are unconstitutional conditions cases, and the whole point is preventing the state from doing indirectly what it cannot do directly. But there are limits on those powers. Of course you’re right that taxes don’t have to be rigidly justified by value received, for example, but they cannot be targeted on specific individuals. A law specifically requiring Bob Smith to pay $10,000 to the state of California would probably violate Due Process, and perhaps the Takings Clause and maybe even the Bill of Attainder Clause too depending on the circumstances. And of course remember that the plaintiffs won in Eastern Enterprises itself. Certainly you could have called the obligations imposed by the Coal Act a “tax,” but the Court held that it was unconstitutional even though five Justices could not agree on any single rationale.

Where we appear to diverge is in your assumption that the state effects a “per se” taking whenever it demands a property owner to transfer a tax or fee or amount of money to the state or to another private party—except, you suggest, where the tax or fee “is reasonably related to services rendered by the government.” That position—most often associated with Richard Epstein—would effectively call into question most of the redistributive welfare state, at least since the enactment of the Sixteenth Amendment (which confirmed the constitutionality of progressive income taxes).

Not surprisingly, then, the Court has never come close to holding any such thing. Although “[n]othing is more familiar in taxation than the imposition of a tax upon a class or upon individuals who enjoy no direct benefit from its expenditure, and who are not responsible for the condition to be remedied,” Carmichael, 301 U.S. at 521-22, the Court has consistently indicated that taxation is not a taking, even where a discrete group bears a disproportionate tax burden for the public good (such as with an earmarked tax), and even where the tax is assessed on real property. See, e.g., City of Pittsburgh v. ALCO Parking Corp., 417 U.S. 369 (1974); French v. Barber Asphalt Paving Co., 181 U.S. 324, 343-44 (1901); see also Legal Tender Cases, 79 U.S. (12 Wall.) at 551; see generally Eduardo Penalver, Regulatory Taxings, 104 Colum. L. Rev. 2182 (2004). As the Court noted in Keystone, 480 U.S. at 491 n.21, “[n]ot every individual gets a full dollar return in benefits for the taxes he or she pays; yet, no one suggests that an individual has a right to compensation for the difference between taxes paid and the dollar value of benefits received.” Similarly with respect to user fees: The Court has rejected the notion that such fees are “per se” takings because “[I]t is artificial to view deductions of a percentage of a monetary award as physical appropriations of property. Unlike real or personal property, money is fungible.” Sperry Corp., 493 U.S. at 62.

In light of all these precedents, even Justice Scalia concedes, without qualification, that taxes and user fees “are not takings,” let alone per se takings. Brown, 538 U.S. at 243 n.3. (Webb’s and Brown itself are distinguishable in that they involved a requirement to disgorge discrete financial assets—what Justice Breyer has called a “specific, separately identifiable fund of money,” Phillips, 524 U.S. at 555—rather than a simple financial obligation. Whether or not one thinks the “per se takings” holdings in cases such as Brown are correct (I don’t), they certainly do not apply whenever the state assesses a fee, tax or “exaction.”)

The same is true for obligations to transfer money to another private party. In cases such as Concrete Pipe and Connolly, the Court has not applied a “per se” test. No Justice in Eastern Enterprises suggested such a test; and a majority of the Justices in that case (Justice Kennedy and the dissenters) actually held that a financial liability is not “property” for purposes of the Just Compensation Clause at all. See also Commonwealth Edison Co. v. United States, 271 F.3d 1327, 1340 (Fed. Cir. 2001) (the “mere imposition of an obligation to pay money . . . does not give rise to a claim under the Takings Clause of the Fifth Amendment”).

So, if a monetary exaction could simply be assessed outright—as in a property tax—without triggering a right to compensation (let alone a “per se” right), then the Nollan/Dolan tests should not apply when the state takes the lesser step of simply making the monetary fee a condition of property development.

Today the Court delivered Lingle v. Chevron, No. 04-163 (U.S. May 23, 2005).

My prediction of a 9-0 vote in Lingle held; and I’m sticking to my prediction that the plaintiff in Kelo will secure at most three votes. In any event, we won’t know until, at the earliest, a week from tomorrow (and probably not until June).