Opinion ID: 775593
Heading Depth: 4
Heading Rank: 1

Heading: Per se v. Ad Hoc Analysis

Text: 45 We have generally accepted two methods of analysis in takings cases: the per se analysis used in Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 441 (1982), and the ad hoc analysis used in Penn Central Transportation Co. v. City of New York, 438 U.S. 104, 124 (1978). The per se analysis has not typically been employed outside the context of real property. It is a particularly inapt analysis when the property in question is money. As the Supreme Court has observed, [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 n.9. The Court reaffirmed this view in Eastern Enterprises v. Apfel, 524 U.S. 498, 530 (1998), when it held that although Eastern was required to pay millions of dollars to its employee benefits funds, it is not, of course, a permanent physical occupation of Eastern's property of the kind that we have viewed as a per se taking.  Eastern Enters., 524 U.S. at 530. We have endorsed Sperry's conclusion that money differs from physical property in respects significant to takings analysis. Applying Sperry's rationale, we held that an [o]rdinance [imposing a fee in connection with the issuance of permits for nonresidential development to finance low-income housing] does not, as appellants suggest, constitute a taking per se. Commercial Builders of N. Cal. v. City of Sacramento, 941 F.2d 872, 875 (9th Cir. 1991). Other circuits have similarly approved of this aspect of Sperry. See Meridian Trust and Safe Deposit Co. v. FDIC, 62 F.3d 449, 454 (2d Cir. 1995) (ad hoc analysis employed to determine whether an assessment under the Federal Deposit Insurance Act's cross-guarantee provision that rendered Meridian Trust insolvent constituted a taking); Unity Real Estate Co. v. Hudson, 178 F.3d 649, 674 (3d. Cir.), cert. denied, 528 U.S. 963 (1999) (ad hoc analysis employed to determine whether requiring plaintiffs to pay benefits under the Coal Industry Retiree Health Benefit Act constituted an unconstitutional taking where it would bankrupt the company because the categorical approach [to Takings Clause claims ] has only been used in real property cases and states traditionally have a high degree of control over commercial dealings); Branch v. United States, 69 F.3d 1571, 1576 (Fed. Cir. 1995) (ad hoc analysis employed to determine whether an assessment under the Federal Deposit Insurance Act's cross-guarantee provision constituted a taking because the challenged assessment did not constitute either an invasion or a restriction on the use of real property); Nixon v. United States, 978 F.2d 1269, 1285 (D.C. Cir. 1992) (characterizing Sperry as distinguishing between money, which is not subject to the per se doctrine because it is fungible, and `real or personal property'  (citation omitted)). 46 When similarly faced with the question whether a policy that transferred the interest that accrued on interpleader funds deposited in Florida courts to the clerk of the court was an unconstitutional taking in Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 163-64 (1980), the Supreme Court used the ad hoc analysis of Penn Central Transportation Co. v. New York, 438 U.S. 104 (1978), as opposed to Loretto's per se approach. Although in the past it had been permissive in upholding governmental action that may deny the property owner of some beneficial use of his property or that may restrict the owner's full exploitation of the property, if such public action is justified as promoting the general welfare, the Court concluded that Florida's policy had done more than adjust [ ] the benefits and burdens of economic life to promote the common good. Webb's Fabulous Pharm., Inc., 449 U.S. at 163 (citation and quotation marks omitted). The Court characterized the Florida policy of retaining the interest from interpleader accounts -the interest at issue exceeded $90,000 -as a forced contribution to general governmental revenues for which [n]o police power justification is offered. Id. The Court compared the county's appropriation of interest to that addressed in United States v. Causby, 328 U.S. 256, 262-63 n.7 (1946), in which the Government had appropriated the air space above claimant's land as part of the flight pattern for military aircraft, destroying its use as a chicken farm. The Supreme Court later categorized Causby as an ad hoc case, when it reviewed the factors that had a particular significance on the essentially ad hoc , factual inquiries in the Court's Takings Clause jurisprudence in Penn Central, 438 U.S. at 123-28. 47 Our conclusion that we should take guidance from the Court's analysis in Webb's is bolstered by the Supreme Court's reliance on the Webb's decision in Phillips when it determined that a property right existed in the first place. Both cases applied the same common law rule-any interest . . . follows the principal-in concluding that the interest at issue was the property of the owner of the principal. Phillips, 524 U.S. at 166. 48 Moreover, we are presented with the very circumstances for which the Penn Central analysis was intended. Here, the government's interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good. Penn Central, 438 U.S. at 124. In creating its IOLTA program, Washington State concluded that  `the health, safety, morals, or general welfare' would be promoted, see Penn Central, 438 U.S. at 125 (citation omitted), by using the interest generated on IOLTA funds to help fund legal services for the poor. Although the IOLTA program, like most government regulations, curtails some potential for the use or economic exploitation of private property[,] requir[ing] compensation in all such circumstances would effectively compel the government to regulate by purchase. Andrus v. Allard, 444 U.S. 51, 65 (1979) (emphasis in original) (applying Penn Central's ad hoc analysis to determine if regulations restricting one means of disposing of certain Indian artifacts was an unconstitutional taking). We do not believe that the Fifth Amendment demands such an extreme result. The Takings Clause was never intended to replace the role of the people in determining which social programs are appropriate, and has not been understood to be a substantive or absolute limit on the government's power to act. That Clause operates as a conditional limitation, permitting the government to do what it wants so long as it pays the charge. Eastern Enters., 524 U.S. at 545 (Kennedy, J., concurring in judgment and dissenting in part). 49 That the banking industry is the regulatory backdrop for our decision also counsels against the application of the per se analysis to the regulations of the use of money at issue. Such analysis has almost exclusively been employed in situations involving real property. In creating its IOLTA program, Washington has not encroached upon a domain devoid of governmental regulation. As the Phillips majority recognized, it is the Federal Government's own regulations that make the state IOLTA programs feasible. Specifically, the Federal Government imposes tax reporting costs only on those who attempt to exercise control over the interest their funds generate, see Rev. Rul. 81-209, 1981-2 Cum. Bull. 16[and] prohibits for-profit corporations from holding funds in NOW accounts if the interest is paid to the corporation, but permits corporate funds to be held in NOW accounts if the interest is paid to the [IOLTA fund], see Federal Reserve's IOLTA letter. Phillips, 534 U.S. at 170-71. We agree with the reasoning of the Federal Circuit: 50 Because of the State's traditionally high degree of control of commercial dealings, Lucas, 112 S.Ct. at 2899, the principles of takings law that apply to real property do not apply in the same manner to statutes imposing monetary liability. Thus, even though taxes or special municipal assessments indisputably take money from individuals or businesses, assessments of that kind are not treated as per se takings under the Fifth Amendment. 51 Branch, 69 F.3d at 1576 (citations omitted). Given the highly-regulated nature of the banking industry, individuals should expect that their commercial transactions, including their bank deposits, will be regulated. In contrast, property law has long protected an owner's expectations that he will be relatively undisturbed at least in the possession of his property. Loretto, 458 U.S. at 436. While requiring an apartment owner to allow the direct physical attachment of plates, boxes, wires, bolts, and screws to the building is directly contrary to the history and tradition of property law, regulating what a bank depositor may earn on a particular bank deposit is concordant with the history and tradition of banking practice. Id. at 420. 52 Although we note that the Fifth Circuit recently has decided in a two to one decision to adopt the per se method of analysis in similar (but not identical) circumstances, see Washington Legal Foundation v. Texas Equal Access to Justice Foundation, 270 F.3d 180 (5th Cir.2001), given the monetary nature of the property in question, the public nature of the IOLTA program, and the highly-regulated nature of the banking industry, we believe that the better approach is that of Penn Central . Through the IOLTA program, the State of Washington may properly adjust the rights of individuals for the benefit of the public as long as its actions are reasonably necessary to the effectuation of a substantial public purpose, Penn Central, 438 U.S. at 127, a determination that can be made only by engaging in the fact-specific ad hoc analysis. Following the Supreme Court's lead in Webb's, and the dictates of well-established takings jurisprudence, we not only believe it is entirely appropriate to apply Penn Central's ad hoc takings analysis to the IOLTA program, but that such an analysis is compelled. 53