IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 18-10423

LADONNA DEGAN; RIC TERRONES; JOHN MCGUIRE; REED HIGGINS; 

MIKE GURLEY; LARRY EDDINGTON; STEVEN MCBRIDE, 

 Plaintiffs - Appellants

v.

THE BOARD OF TRUSTEES OF THE DALLAS POLICE AND FIRE 

PENSION SYSTEM, 

 Defendant - Appellee

Appeal from the United States District Court

for the Northern District of Texas

USDC. No. 3:17-CV-1596

Before BARKSDALE, SOUTHWICK, and HAYNES, Circuit Judges.

HAYNES, Circuit Judge:

Several retired City of Dallas police officers and firefighters 

(collectively, “Plaintiffs”) sued the Board of Trustees of Dallas Police and Fire 

Pension System (the “Board”) over changes to their pension fund they 

contend violate the United States and Texas Constitutions. Plaintiffs alleged 

that limiting their ability to withdraw from their Deferred Retirement Option 

Plan (“DROP”) funds constituted an unlawful taking under the Fifth 

Amendment of the United States Constitution and violated article XVI, 

United States Court of Appeals

Fifth Circuit

FILED

April 27, 2020

Lyle W. Cayce

Clerk

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No. 18-10423

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section 66, of the Texas Constitution (“Section 66”), which prohibits reducing 

or otherwise impairing a person’s accrued service retirement benefits. 

Concluding that this case involved important and determinative 

questions of Texas law, we certified two questions to the Supreme Court of 

Texas regarding Plaintiffs’ Texas constitutional claim. Degan v. Bd. of Trs. of 

Dall. Police & Fire Pension Sys., 766 F. App’x 16, 17 (5th Cir. 2019) (per 

curiam). Specifically, we asked (1) whether the method of withdrawing 

DROP funds is a service retirement benefit protected under Section 66, and 

(2) whether the Board’s decision to change the withdrawal method for

Plaintiffs’ DROP funds violates Section 66. Id. at 20. We stayed Plaintiffs’ 

federal claim, concluding that their takings claim depended on how the 

Supreme Court of Texas answered the certified questions. Id. at 17, 20.

The Supreme Court of Texas accepted our certification and recently 

issued an opinion answering the questions. Degan v. Bd. of Trs. of Dall. 

Police & Fire Pension Sys., 594 S.W.3d 309 (Tex. 2020). It held that 

(1) although Plaintiffs’ DROP funds are service retirement benefits protected 

by Section 66, the method of withdrawing DROP funds is not, and (2) the 

Board’s decision to change the withdrawal method of Plaintiffs’ DROP 

accounts did not violate Section 66. Id. at 312, 317. We ordered 

supplemental briefing by the parties on whether any further issues remain to 

be resolved by this court. The parties agree that these answers dispose of 

Plaintiffs’ state law claim, but they disagree as to the resolution of the 

remaining federal constitutional claim. Plaintiffs argue that they still have a 

valid claim, arguing both a per se taking and a regulatory taking. 

We hold that Plaintiffs failed to state a takings claim because they do 

not have a property interest in the method of withdrawing DROP funds, and 

thus we affirm the district court’s dismissal of their takings claim. “The Fifth 

Amendment . . . provides that ‘private property’ shall not ‘be taken for public 

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use, without just compensation.’” Phillips v. Wash. Legal Found., 524 U.S. 

156, 163–64 (1998) (quoting U.S. CONST. amend. V). Thus, to allege a takings

claim, Plaintiffs must have a property interest in their method of 

withdrawing DROP funds. “[T]he existence of a property interest is 

determined by reference to existing rules or understandings that stem from 

an independent source such as state law.” Id. at 164 (internal quotation 

marks and citation omitted); see also Van Houten v. City of Fort Worth, 827 

F.3d 530, 540 (5th Cir. 2016) (holding that “the right to public pension 

benefits in Texas is subject to legislative power” and “[l]egislative reduction of 

such benefits therefore cannot be the basis of a . . . takings clause challenge”). 

Here, Texas law determines whether Plaintiffs have a protected right 

to their method of withdrawal, and the Supreme Court of Texas has held that 

Plaintiffs have no such protected right. Degan, 594 S.W.3d at 312, 317.

Because Plaintiffs have no property interest in the method of withdrawing 

DROP funds, they failed to state a takings claim.1 Degan makes clear that 

the situation here is not like that of a government occupying a property 

without compensation. See, e.g., Tahoe-Sierra Pres. Council, Inc. v. Tahoe 

Reg’l Planning Agency, 535 U.S. 302, 322 (2002) (citing United States v. Gen.

1 Plaintiffs contend that because they have a property interest in their accrued 

DROP funds, this property interest extends to having the right to withdraw from them. 

But Plaintiffs cite no authority for support; to the contrary, merely limiting an individual’s 

access to a property interest does not constitute a taking. See Andrus v. Allard, 444 U.S. 

51, 65–66 (1979) (holding that the government’s restriction on an individual’s ability to 

dispose of his or her private property did not amount to a taking because the individual 

retained other rights associated with his or her property); Matagorda Cty. v. Russell Law, 

19 F.3d 215, 224 (5th Cir. 1994) (holding that the “mere delay in exercising a property 

right” did not constitute a taking).

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Motors Corp., 323 U.S. 373 (1945), and United States v. Petty Motor Co., 327 

U.S. 372 (1946)).2 Thus, there is no per se taking.

Having concluded that this withdrawal is not a per se taking, we briefly 

address the regulatory taking arguments Plaintiffs make. “A regulatory 

restriction on use that does not entirely deprive an owner of property rights 

may not be a taking under Penn Central [Transportation Co. v. City of New 

York, 438 U.S. 104 (1978)].” Horne v. Dep’t of Agric., 135 S. Ct. 2419, 2429

(2015). Penn Central provided three factors: “(1) the economic impact of the 

regulation on the claimant; (2) the extent to which the regulation has 

interfered with distinct investment-backed expectations; and (3) the 

character of the governmental action.” Murr v. Wisconsin, 137 S. Ct. 1933, 

1937 (2017). All factors weigh against the Plaintiffs.

Plaintiffs will continue to receive payments to compensate them for the 

DROP accounts. Further, at the time the Plaintiffs chose their method of 

withdrawal from their DROP accounts, they had only three options: they 

could withdraw the funds as (A) a single-sum distribution; (B) a monthly 

annuity based on the member’s life; or (C) substantially equal monthly or 

annual payments designated by the member. See TEX. REV. CIV. STAT. ANN.

art. 6243a-1, § 6.14(d)(1)–(3) (2011). They are now subject to option B, but 

that does not support the conclusion that their investment-backed 

expectations were “taken.” 

 As far as governmental action, this is not a traditional takings claim; 

there is no invasion of real estate or appropriation of physical property. See 

Penn Cent., 438 U.S. at 124 (concluding that “[a] ‘taking’ may more readily be 

found when the interference with property can be characterized as a physical 

2 By contrast, temporary restrictions on what an individual may do with their 

property—but where the government does not appropriate it—are not subject to the same 

rule. See Tahoe-Sierra Pres. Council, 535 U.S. at 323–24. 

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invasion”). Texas and the Board are working to save a pension fund by 

modifying its mechanics. The goal is to protect the pension fund, including 

the Plaintiffs’ funds. Thus, this factor also weighs against the Plaintiffs. All 

told, they have not pleaded a regulatory taking.

We AFFIRM the district court’s dismissal for failure to state a claim.

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