Opinion ID: 795813
Heading Depth: 3
Heading Rank: 4

Heading: Present Case Distinguishable From Surrogates and Condell

Text: 31 We pause here to discuss why, contrary to the plaintiffs' assertions, this case is distinguishable from Association of Surrogates & Supreme Court Reporters v. New York and Condell v. Bress. In Surrogates, New York State had allegedly impaired the labor contracts of certain judicial employees by instituting a payroll lag in which payment of their salaries would be delayed. Surrogates, 940 F.2d at 769. Condell involved a similar payroll lag that affected employees of the state executive branch. Condell, 983 F.2d at 417. Applying heightened Contracts Clause scrutiny, we held both payroll lag provisions unreasonable and unnecessary. See Condell, 983 F.2d at 418, 419-20; Surrogates, 940 F.2d 773-74. 32 The facts and circumstances of those cases nonetheless are dissimilar to those present here. In those cases we found the legislature's justifications of reasonableness and necessity to be dubious at best. That there was an emergency or dire need justifying the impairment was in doubt in those cases. See, e.g., Surrogates, 940 F.2d at 773 (assuming for argument sake only that expansion of the judiciary is an important public purpose but holding payroll lag not to be necessary to achieving that goal); Condell, 983 F.2d at 420 (implying that a fiscal crisis could be grave enough where a state might constitutionally impose a payroll lag but finding that the case before the court did not present such an emergency). For example, in Surrogates the state wanted to hire more judicial employees to help reduce the courts' back-log of cases. Surrogates, 940 F.2d 768-69. To fund this endeavor it instituted the payroll lag, rather than raise taxes to fund the additional service. Id. at 773. We determined that the lawmakers had impaired the state employees' contracts improperly, in part, on the basis of this political expediency. See id.; Condell, 983 F.2d at 420. 33 Here, no one questions the existence of a very real fiscal emergency in Buffalo. Additionally, as noted, there is no evidence in the record of an ill-motive of political expediency or unjustified welching. Contracts Clause cases involve individual inquiries, for no two cases are necessarily alike. See Blaisdell, 290 U.S. at 430, 54 S.Ct. 231 (Every case must be determined upon its own circumstances.). In the present case, we are comfortable that the wage freeze is reasonable and necessary to remedy the fiscal instability of Buffalo. 34 We point out that while the facts of Surrogates and Condell are inapposite, we find the New York state case, In re Subway-Surface Supervisors Association v. New York City Transit Authority, to be persuasive and relevant. In Subway-Surface, the New York Court of Appeals upheld the constitutionality of the New York State Financial Emergency Act for the City of New York, a state law which, like the wage freeze here, suspended wage increases of municipal workers. 44 N.Y.2d at 107-08, 404 N.Y.S.2d 323, 375 N.E.2d 384. At the time, New York City was in the midst of a financial emergency, and to address the emergency, the state froze New York City municipal wages. Id. We find the instant case similar, especially because the fact of an emergency is not contested. Our holding can be summarized simply: An emergency exists in Buffalo that furnishes a proper occasion for the state and BFSA to impose a wage freeze to protect the vital interests of the community, and the existence of the emergency cannot be regarded as a subterfuge or as lacking in adequate basis. Blaisdell, 290 U.S. at 444, 54 S.Ct. 231. Nor can the wage freeze be regarded as unreasonable or unnecessary to achieve the important public purpose of stabilizing Buffalo's fiscal position. III Takings Clause 35 Plaintiffs appeal also the district court's denial of their Takings Clause claim. While we hold that no takings violation has occurred, we do so on different grounds than those relied on by the district court. A. Physical Taking or Regulatory Taking 36 The Takings Clause of the Fifth Amendment provides that no private property shall be taken for public use, without just compensation. U.S. Const. amend. V. The clause applies to the states through the Fourteenth Amendment. See Kelo v. New London, 545 U.S. 469, 125 S.Ct. 2655, 2658 n. 1, 162 L.Ed.2d 439 (2005). 37 The law recognizes two species of takings: physical takings and regulatory takings. See Meriden Trust & Safe Deposit Co. v. FDIC, 62 F.3d 449, 454 (2d Cir. 1995). Physical takings (or physical invasion or appropriation cases) occur when the government physically takes possession of an interest in property for some public purpose. Tahoe-Sierra Pres. Council v. Tahoe Reg'l Planning Agency, 535 U.S. 302, 321, 122 S.Ct. 1465, 152 L.Ed.2d 517 (2002). The fact of a taking is fairly obvious in physical takings cases: for example, the government might occupy or take over a leasehold interest for its own purposes, see United States v. Gen. Motors Corp., 323 U.S. 373, 375, 380, 65 S.Ct. 357, 89 L.Ed. 311 (1945), or the government might take over a part of a rooftop of an apartment building so that cable access may be brought to residences within, see Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 421, 102 S.Ct. 3164, 73 L.Ed.2d 868 (1982). But when the government acts in a regulatory capacity, such as when it bans certain uses of private property, see Village of Euclid v. Ambler Realty Co., 272 U.S. 365, 384-85, 47 S.Ct. 114, 71 L.Ed. 303 (1926), or limits the rent a landlord may charge tenants, see Fed. Home Loan Mortgage Corp. v. New York State Div. of Hous. & Cmty. Renewal, 83 F.3d 45, 47-48 (2d Cir.1996), or prohibits landlords from evicting tenants for refusing to pay higher rents, see Block v. Hirsh, 256 U.S. 135, 154, 41 S.Ct. 458, 65 L.Ed. 865 (1921), the question of whether a taking has occurred is more complex, Tahoe-Sierra Pres. Council, 535 U.S. at 323, 122 S.Ct. 1465. Such cases are considered regulatory takings because they do not involve a categorical assumption of property. See id. The gravamen of a regulatory taking claim is that the state regulation goes too far and in essence effects a taking. Meriden Trust & Safe Deposit Co., 62 F.3d at 454. 38 The district court analyzed the wage freeze as a physical taking. We believe this was in error. The wage freeze does not present the `classic taking' in which the government directly appropriates private property for its own use. Eastern Enters. v. Apfel, 524 U.S. 498, 522, 118 S.Ct. 2131, 141 L.Ed.2d 451 (1998). Rather, the interference with appellants' contractual right to a wage increase arises from [a] public program adjusting the benefits and burdens of economic life to promote the common good. Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 124, 98 S.Ct. 2646, 57 L.Ed.2d 631 (1978). The freeze therefore falls into the category of a regulatory, not physical, taking, and should have been analyzed as such. See Connolly v. Pension Benefit Guar. Corp., 475 U.S. 211, 224-25, 106 S.Ct. 1018, 89 L.Ed.2d 166 (1986) (analyzing Takings Clause case involving taking of contracts rights under regulatory takings jurisprudence); see also Tahoe-Sierra Pres. Council, 535 U.S. at 323-24, 122 S.Ct. 1465 (noting that physical invasion line of cases is inapplicable to regulatory takings analysis). B. Protectable Property 39 In adjudging whether the Act constituted an unconstitutional taking, we take a moment here to ask the threshold question of whether a protectable property interest is even at stake. Although the Supreme Court has held that valid contracts constitute property under the Takings Clause, Lynch v. United States, 292 U.S. 571, 579, 54 S.Ct. 840, 78 L.Ed. 1434 (1934), this is neither a blanket nor absolute rule, see Connolly, 475 U.S. at 224, 106 S.Ct. 1018 ([T]he fact that legislation disregards or destroys existing contractual rights does not always transform the regulation into an illegal taking [but][t]his is not to say that contractual rights are never property rights ....), and further it is a rule that has been called into question, Pro-Eco, Inc. v. Bd. of Comm'rs, 57 F.3d 505, 510 n. 2 (7th Cir.1995) (We read Connolly . . . as effectively overruling, if it had not already been overruled, Lynch v. United States, 292 U.S. 571, 54 S.Ct. 840, 78 L.Ed. 1434 [(1934)].); see also Ohio Student Loan Comm'n v. Cavazos, 900 F.2d 894, 900-02 (6th Cir.1990) (distinguishing Lynch and holding that contract rights are not property); Peick, 724 F.2d 1247, 1274-76 (noting distinction between property rights which are protected under Takings Clause and contract rights which are not necessarily protected). Our misgivings, however, need not detain us. We will assume for purposes of this appeal that the wage increase provisions of appellants' contracts constitute property under the Takings Clause.