Opinion ID: 202647
Heading Depth: 3
Heading Rank: 5

Heading: The Interest

Text: 93 Our determination that the JUA alleges a property right to the Earned Premiums, the Overstated Reserve Funds and the Out-of-Pocket Funds compels a similar conclusion with respect to the interest lost as a result of the withholding of those monies. In Phillips, the Supreme Court held that interest income generated by client funds in IOLTA accounts was the private property of the client under the common law rule that interest follows principal. 524 U.S. at 165-72, 118 S.Ct. 1925; see also Webb's, 449 U.S. at 162, 101 S.Ct. 446 (The usual and general rule is that any interest ... follows the principal and is to be allocated to those who are ultimately to be the owners of that principal.). The fact that the Secretary is authorized to hold the Earned Premiums for some time before turning them over to the JUA is of no consequence. See Webb's, 449 U.S. at 162, 101 S.Ct. 446 (That lack of immediate right ... does not automatically bar a claimant ultimately determined to be entitled to all or a share of the fund from claiming a proper share of the interest, the fruit of the fund's use, that is realized in the interim.). By alleging a property right in the Earned Premiums, the Overstated Reserve Funds and the Out-of-Pocket Funds, the JUA also has alleged a property right in the resulting lost interest. 31 94 Turning to the second step of the takings analysis with respect to interest, the JUA alleges that by temporarily withholding the Earned Premiums, Flores Galarza physically took $14.2 million in interest generated by them. See Parella, 173 F.3d at 59 n. 10 (stating that in order to demonstrate a taking of interest, plaintiffs have the burden of proving that they had a constitutional right both to the principal (i.e., withheld benefits) and to the interest on that principal). The JUA's assertion of a property right in the interest generated by the Earned Premiums, together with its allegation of a physical taking of that interest, is sufficient to allege the unconstitutional taking of that interest under the first prong of the qualified immunity analysis. See Brown, 538 U.S. at 235, 123 S.Ct. 1406; Webb's, 449 U.S. at 164-65, 101 S.Ct. 446. 32 95