Opinion ID: 220720
Heading Depth: 2
Heading Rank: 3

Heading: entry permits

Text: We first consider Plaintiffs' claims concerning their entry permits.
The Takings Clause, which is incorporated against the states through the Fourteenth Amendment, Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 160, 101 S.Ct. 446, 66 L.Ed.2d 358 (1980), prevents a state from taking private property for public use without just compensation. Ward, 623 F.3d at 810. To establish a violation of the Takings Clause here, Plaintiffs first must show that they have a property interest in their entry permits. Id. Only if they have such an interest would we proceed to the second part of the inquirywhether an expropriation of that interest constitutes a taking within the meaning of the Fifth Amendment, for which the state would owe compensation. Id. The first questionwhether a property right exists in the entry permitsis a question of state law. As we explained recently in Ward, [p]roperty interests are not constitutionally created; rather, protected property rights are `created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law.' Id. (quoting Bd. of Regents of State Colls. v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972)). In several earlier cases, too, we expressed the principle that we look to state law to determine what property rights exist and therefore are subject to taking under the Fifth Amendment. See, e.g., Richmond Elks Hall Ass'n v. Richmond Redev. Agency, 561 F.2d 1327, 1330 (9th Cir.1977); United States v. Puget Sound Power & Light Co., 147 F.2d 953, 954-55 (9th Cir.1945). The second questionwhether a property right has been abridged improperly (taken without just compensation) [4] or whether a plaintiff has given up the right to assert such a claimis a question of federal law. As to a question of federal law, including this one, we owe no deference to state courts. See, e.g., Memphis Light, Gas & Water Div. v. Craft, 436 U.S. 1, 9-21, 98 S.Ct. 1554, 56 L.Ed.2d 30 (1978) (examining state law to determine the extent of the relevant property interest, but then independently deciding what process was due before the state could invade that interest). The Supreme Court recognized this distinction, albeit obliquely, in Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 112 S.Ct. 2886, 120 L.Ed.2d 798 (1992). Lucas involved an owner of beachfront real property who wanted to build houses there. Id. at 1008, 112 S.Ct. 2886. After he bought the property, but before he could build on it, the state enacted a statute prohibiting any permanent inhabitable structure on the land in question. Id. The landowner sued in state court; the state supreme court eventually rejected his Takings Clause challenge. Id. at 1009, 1020, 112 S.Ct. 2886. That court held that, in the legitimate exercise of its police power, the state could restrict the owner from using his land to mitigate the harm to the public interest that [such a] use of his land might occasion. Id. at 1020-21, 112 S.Ct. 2886. The Supreme Court disagreed. It held that, when the State seeks to sustain regulation that deprives land of all economically beneficial use, ... it may resist compensation only if the logically antecedent inquiry into the nature of the owner's estate shows that the proscribed use interests were not part of his title to begin with. Id. at 1027, 112 S.Ct. 2886. The Court remanded the case for the state courts to decide whether background principles of ... property law ... prohibit the uses[that the owner] now intends in the circumstances in which the property is presently found. Id. at 1031, 112 S.Ct. 2886. In other words, the Court's quarrel with the state supreme court did not concern the extent of the property interest in the beachfront land, which the Court's remand order firmly suggests is a matter of state law but, rather, concerned the extent to which the state could invade a property interest without providing just compensation, which is a matter of federal law. The Court acknowledged a similar distinction in Craft. In that case, two customers sued their utility company for turning off their utilities without having given them a fair opportunity to prove that they had paid their bills or that the bills were inaccurate. 436 U.S. at 3-4, 98 S.Ct. 1554. As an initial matter, the Court had to decide whether the customers possessed a property interest in their utilities. Id. at 9, 98 S.Ct. 1554. The Court directly examined prior decisions of the state courts for the answer. Id. at 9-10, 98 S.Ct. 1554. In defining a public utility's privilege to terminate for nonpayment of proper charges, [state] decisional law draws a line between utility bills that are the subject of a bona fide dispute and those that are not. Id. at 9, 98 S.Ct. 1554. Having found the customers' property interest definitively established by decisions of the state courts, the Court turned to the remaining question: What process must the utility company provide before turning off the customers' service? Id. at 12, 98 S.Ct. 1554. Again, the Court's two-step method of analysis suggests that state law governs the demarcation of a property right, while federal law governs the manner in which the state must respect a right so defined. Our court has emphasized the primacy of state law in delineating property rights with respect to state-created licenses of the type at issue here. In Schneider v. California Department of Corrections, 151 F.3d 1194, 1195-96 (9th Cir.1998), state prisoners challenged a policy that prevented them from earning interest on money that state law required them to place in a special account while incarcerated. A state statute directed the interest accruing on the funds in that account to an Inmate Welfare Fund, rather than to the prisoners themselves upon their release. Id. at 1196. Following the Supreme Court's direction in Webb's Fabulous Pharmacies, we held that the prisoners had a constitutionally protected property right to keep the interest on their own funds. Schneider, 151 F.3d at 1201. In reaching that conclusion, for the purposes of Takings Clause analysis we distinguished old property rights, such as the right to retain interest on principal funds that one owns, from new property rights. Id. at 1200-01. With respect to new property, certain nontraditional forms of propertysuch as public employment, welfare assistance, state contracts and licenses, and other government largessethe state has the final say on what interests one possesses. Id. at 1200 (emphasis added). [5] We recognize the tension between our analysis in Schneider and the First Circuit's Takings Clause analysis in Hoffman v. City of Warwick, 909 F.2d 608 (1st Cir.1990), but we continue to think that Schneider embodies the better view. In Hoffman, two military veterans sued their employerstwo cities in Rhode Island claiming that the employers had deprived them of property without just compensation when they refused to grant seniority credit for the length of the veterans' military service. A similar suit already had reached the Rhode Island Supreme Court. Id. at 613-14 & n. 5. The state supreme court rejected the Takings Clause challenge, holding that the original statute granting seniority credit had not created vested rights to seniority credit, but merely created `gratuities or floating expectancies,' until the benefits that would flow from enhanced seniority [were] actually received by employees. Id. at 613-14(quoting Brennan v. Kirby, 529 A.2d 633, 641 (R.I.1987)). Relying on that state supreme court decision, the district court in Hoffman dismissed the veterans' complaint for failure to state a viable claim. Id. at 614. On appeal to the First Circuit, the employers argued that, because any property interest in enhanced seniority arises from state law, of which the Rhode Island Supreme Court is the final arbiter, [the] plaintiffs' vested property rights claim [was] foreclosed. Id. at 615. The First Circuit disagreed, explaining: The [employers'] argument misconstrues the role of state law in determining the scope of protection afforded to property rights under the federal Constitution. That the property interest allegedly protected by the federal Due Process and Takings Clauses arises from state law does not mean that the state has the final say as to whether that interest is a property right for federal constitutional purposes. Rather, federal constitutional law determines whether the interest created by the state rises to the level of property, entitled to the various protections of the Fifth and Fourteenth Amendments. Id. The First Circuit therefore conducted its own analysis to determine the extent of the veterans' property interest. Hoffman essentially collapses the two-step process set out in Lucas and Craft into a single step, in which the federal courts, guided by their own precedents, decide both the extent of a person's property interest and the question whether the state sufficiently has invaded that interest such that it owes just compensation. For the reasons already discussed, we find the First Circuit's approach out of step with the Supreme Court's instruction. Rather, we think that our rule in Schneider more faithfully adheres to the Supreme Court's case law, and we also think that our rule makes more sense in the present context. It would be anomalous to conclude that, in the absence of a statutory or contractual provision for compensation, the state must compensate those regulated when the state regulates an interest that the state itself created in the first place and explicitly made subject to future regulation. In any event, Schneider is the law of our circuit and we are bound to follow it. We therefore turn to exploring what interest Alaska law creates in Plaintiffs' entry permits.