In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 04-2277

ILLINOIS CLEAN ENERGY COMMUNITY FOUNDATION,

Plaintiff-Appellee,

v.

JOHN B. FILAN, Director, Illinois Governor’s

Office of Management and Budget,

Defendant-Appellant.

____________

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 03 C 7596—Amy J. St. Eve, Judge.

____________

ARGUED OCTOBER 25, 2004—DECIDED DECEMBER 22, 2004

____________

Before POSNER, KANNE, and WILLIAMS, Circuit Judges.

POSNER, Circuit Judge. This is a suit to enjoin the State

of Illinois from enforcing a demand that the plaintiff

foundation turn over $125 million of its assets to the state.

This is not a tax, but a taking. Brown v. Legal Foundation of

Washington, 538 U.S. 216, 233-35 (2003). The district court
2 No. 04-2277

granted summary judgment for the plaintiff, ruling that the

demand if enforced would be a taking of private property

for public use without just compensation, and therefore unconstitutional; and the state appeals.

In 1999, the Illinois Commerce Commission authorized

Commonwealth Edison to sell its seven fossil-fuel power

plants for $4.8 billion. The sale turned a “huge” profit

according to Generation Week, Dec. 22, 1999; see also Peter

Kendall, “Push Grows to Alter ComEd Deal,” Chicago Tribune, Mar. 30, 1999, p. DN 6. The state argues, and for

purposes of this appeal we accept, that the commission,

whose permission was required for the sale, 220 ILCS 5/7-

102(c), could have conditioned permission on ComEd’s

agreeing to pass on most or perhaps all of the profit to the

company’s ratepayers in the form of rate reductions; but

that instead, by way of generous “compromise,” the state

legislature “authorized” (realistically meaning—the state

contends and ComEd hardly bothers to deny—“commanded”)

the company to establish the plaintiff foundation and fund

it with $225 million of the proceeds from the sale of the

plants. 220 ILCS 5/16-111.1. The authorizing statute provided that the amount would be $250 million unless ComEd

contributed $25 million to Southern Illinois University for

projects relating to clean coal, but it did so and therefore

had to contribute only $225 million to the foundation.

The foundation’s mission, as prescribed by the statute, is

to make grants to public and private institutions in Illinois

for projects to conserve energy and improve the environment. The statute authorizes the foundation’s trustees to decide what grants to make within these broad limits of subject

matter, except that $25 million of ComEd’s contribution must

be kept available for the funding of projects relating to clean

coal (this is separate from the $25 million mandated contribution to Southern Illinois University) and that up to $1
No. 04-2277 3

million a year for seven years must to be given to the

Citizens Utility Board. The foundation has complied with

these conditions.

The foundation was organized under the state’s charitable-foundation statute, 805 ILCS 105/101.01 et seq., and

none of its employees are public employees. Nor are grants

made by the foundation subject to the state’s rules govrning

the expenditure of public funds. The authorizing statute

requires that there be six voting trustees, each appointed for

a five-year term. One is to be appointed by ComEd, one by

the Governor of Illinois, another by the Speaker of the

Illinois House of Representatives, another by the President

of the Illinois Senate, and the remaining two by the minority

leaders of the two houses. The statute contains no provision

for the removal of trustees against their will (if they quit,

their successors are appointed in the same manner as they

were), but the foundation has adopted a bylaw authorizing

the officials who appoint trustees to remove them.

In June 2003, the Illinois legislature amended the authorizing statute to require the trustees, upon written demand by

the state’s budget director (the defendant, sued in his

official capacity), to turn over to the state’s treasury and

state environmental agencies up to $125 million, which is to

be used for funding the agencies and repaying state general

obligation bonds. A demand for the entire $125 million ($9

million for bond repayment, the rest for the agencies) was

made the next month, and this suit followed.

The state argues that the foundation is the state and

therefore cannot sue the state and, even if it could, may not

complain about a taking of its property because its property

is the state’s property. The state relies on the background of

the statute authorizing the creation of the foundation, a

background which suggests that ComEd would not have

been allowed to keep the $250 million of the proceeds from
4 No. 04-2277

its sale of the power plants had it not agreed to establish

and fund the foundation. The state also relies on the restrictions that the statute places on grants by the foundation

and on the fact that five of the six trustees are appointed by

state officials. And it argues that a state has a right to amend

its statutes.

The last argument is quickly disposed of as a basis for the

state’s action. Of course a state can amend its statutes; and

it can also, whether by amendment or otherwise, regulate

private entities extensively before it goes so far as to be

deemed to have made a regulatory taking, that is, a taking

that, unlike the one here, does not transfer title to property

from the owner to the state but achieves the same end by

unreasonably restricting the use of the property, causing

its value to plummet, perhaps to zero. See Lucas v. South

Carolina Coastal Council, 505 U.S. 1003, 1015 (1992); Penn

Central Transportation Co. v. City of New York, 438 U.S. 104

(1978); Raceway Park, Inc. v. Ohio, 356 F.3d 677, 684-87 (6th

Cir. 2004); cf. Pittman v. Chicago Board of Education, 64 F.3d

1098, 1104-05 (7th Cir. 1995). But obviously the state cannot

lawfully enlarge its regulatory power by deciding to take

someone’s property by the device of amending an existing

statute rather than enacting a new one. Lucas v. South

Carolina Coastal Council, supra, 505 U.S. at 1027-28; Bowen v.

Public Agencies Opposed To Social Security Entrapment, 477

U.S. 41, 54-55 (1986); Great Lakes Higher Education Corp. v.

Cavazos, 911 F.2d 10, 17 (7th Cir. 1990); Cienega Gardens v.

United States, 331 F.3d 1319, 1323-24 (Fed. Cir. 2003). It

cannot lawfully amend its corporation law to confiscate the

assets of all corporations incorporated, or licensed to do

business, in Illinois by virtue of that law. The fact that the

state legislature authorized the creation of the plaintiff

foundation does not make the foundation a state agency; for

the legislature also authorizes the creation of business and
No. 04-2277 5

professional corporations, not to mention religious and

charitable corporations, without thereby acquiring a right to

confiscate such entities’ assets. Trustees of Dartmouth College v.

Woodward, 17 U.S. 518, 638-40 (1819); Northrip v. Federal

National Mortgage Ass’n, 527 F.2d 23, 30-31 (6th Cir. 1975).

What is true is that claims of unconstitutional taking are

matters of expectation, and so a grant that is expressly

provisional would not create a property right and alternatively the acceptance of the grant by the grantee would be

treated as a waiver of any complaint should the grant later

be rescinded in accordance with its terms. This suit would

go nowhere had the statute creating the plaintiff foundation

reserved the right of the state to confiscate the foundation’s

assets. Bowen v. Agencies Opposed to Social Security Entrapment, supra, 477 U.S. at 51-52; Dayton-Goose Creek Ry. v.

United States, 263 U.S. 456, 484 (1924); Great Lakes Higher

Education Corp. v. Cavazos, supra, 911 F.2d at 15-17; Texas

Catastrophe Property Ins. Ass’n v. Morales, 975 F.2d 1178, 1182

(5th Cir. 1992); Education Assistance Corp. v. Cavazos, 902 F.2d

617, 628-29 (8th Cir. 1990); cf. Pittman v. Chicago Board of

Education, supra, 64 F.3d at 1103-04. There is no such

reservation.

The coercive element in the history of the authorizing

statute is irrelevant. Suppose the state didn’t think that

lawyers should be permitted to incorporate, and passed a

law requiring that all professional corporations of lawyers

be converted to partnerships. Would the partnership assets

be public property? Obviously not. Supposing the state

could indeed have forced ComEd to disgorge $125 million

of its profits from the sale of the power plants, or indeed

much more, to the ratepayers, could it then, years later, have

ordered the ratepayers to contribute their rebates to the state

treasury, on the ground that it was really the state’s money?

We cannot see what difference it makes that the disgorge-
6 No. 04-2277

ment was to a foundation rather than to individuals. By

forcing a transfer of private property from one private entity

to another, the state did not destroy the private character of

the property. If the state orders a criminal to make restitution of a sum of money to the victim of his crime, it cannot

snatch the money back from the victim on the ground that

it’s the state’s money. 

All the state is left to argue is that the appointment of fivesixths of the foundation’s trustees by state officials made the

foundation a state agency. Not so. By whomever appointed,

the trustees of a charitable foundation have a fiduciary duty

to conserve the foundation’s assets. 760 ILCS 55/15(a)(2);

see also Schweickart v. Powers, 613 N.E.2d 403, 410 (Ill. App.

1993); In re Wabash Valley Power Ass’n, Inc., 72 F.3d 1305,

1319 (7th Cir. 1995); Blue Cross & Blue Shield Mutual of Ohio

v. Blue Cross & Blue Shield Ass’n, 110 F.3d 318, 324 and n. 1

(6th Cir. 1997); Boston Children’s Heart Foundation, Inc. v.

Nadal-Ginard, 73 F.3d 429, 433-34 (1st Cir. 1996); Louisiana

World Exposition v. Federal Ins. Co., 864 F.2d 1147, 1151-52

(5th Cir. 1989). That no doubt is why the trustees authorized

this suit—biting the hand that appointed them, as it were.

In any event there was more than one hand. Of the five

trustees appointed by officials, no more than three can be

from the same political party, since two of the five have to

be legislative minority leaders. The sixth trustee is ComEd’s

nominee. Even if both houses of the legislature are controlled by the governor’s party, and even if the governor has

firm control over the leaders of the houses by virtue of being

from the same party as they (which is by no means always

the case), he controls at most half the trustees. It would be

a fiction therefore to suggest that because public officials

appoint most of the trustees, the state “controls” the foundation. If it really controlled it, we wouldn’t have this lawsuit.
No. 04-2277 7

Because the removal power is also vested in the individual appointers rather than in the state, and because, in

any event, the trustees, however threatened they are by

removal, or however frequently replaced, owe by law their

entire loyalty to the foundation and not to the officials who

appointed them or to the state, the existence of that power

(which anyway is created not by the statute but by a bylaw

that the trustees could rescind at any time) does not make

the foundation a public agency.

In fact the foundation differs little from one that an electrical utility might “voluntarily” establish in response to

pressure from “greens,” clean-fuel enthusiasts, and persons

concerned with global warming. The property of such a foundation would certainly be private despite the foundation’s

being entangled with the state by virtue of the vesting in the

state attorney general of responsibility for enforcing the

terms of charitable trusts. People ex rel. Smith v. Braucher, 101

N.E. 944, 945-46 (Ill. 1913); Brown v. Ryan, 788 N.E.2d 1183,

1191-92 (Ill. App. 2003) .

The state falls back on Lebron v. National Railroad Passenger

Corp., 513 U.S. 374 (1995), which held that Amtrak is subject

to the First Amendment. Amtrak is a federally chartered,

but formally private, corporation. It is a for-profit corporation (though it has never turned a profit) and therefore has

common stock, which is privately owned; the federal government owns its preferred stock and the President of the

United States appoints two-thirds of its trustees. The

Supreme Court expressed concern that if Amtrak were held

to be a private entity and therefore unregulated by the First

Amendment the government could evade constitutional

restraints by farming out federal government functions to

federally chartered corporations. So for First Amendment

and perhaps some other constitutional purposes Amtrak is

public, but it does not follow that for takings purposes it is
8 No. 04-2277

public. Suppose Congress ordered Amtrak to turn over its

entire assets to the U.S. Treasury. Those assets belong to

Amtrak, which is to say to its common shareholders. The

hypothetical law would be a confiscation of private property

and so fall under the bar of the Fifth Amendment’s justcompensation clause.

And remember Marsh v. Alabama, 326 U.S. 501 (1946),

where the Supreme Court held that a company town was

bound by the First Amendment? Would anyone have argued

that the government could have confiscated the company’s

land and buildings without compensation? The Court

thought unjustified “the State’s permitting a corporation to

govern a community of citizens so as to restrict their fundamental liberties and the enforcement of such restraint

by the application of a State statute” authorizing private

ownership of land. Id. at 509. That concern is not engaged

by a case such as this. The foundation is not accused of

stifling anyone’s First Amendment, or other constitutional,

rights.

We conclude that the State of Illinois would be violating

the Constitution if it confiscated any part of the foundation’s

assets. The judgment in favor of the foundation is therefore

AFFIRMED.
No. 04-2277 9

A true Copy:

Teste:

 _____________________________

Clerk of the United States Court of 

Appeals for the Seventh Circuit 

USCA-02-C-0072—12-22-04