New Cert Petition: The Government Can "Take" Money

Your first reaction to this post's title may be "well, duh!"

But wait, there's more.

In Empress Casino Joliet Corp. v. Giannoulias, 896 N.E.2d 277 (Ill., June 5, 2008), the Illinois Supreme Court held that a regulation that imposes a 3% "surcharge" on Illinois casinos with gross receipts over $200 million per year, and then gives the money to horse racing tracks is not a taking of property.  Several casinos challenged the law asserting, among other arguments, that the redistribution of their money to tracks was a taking.  The Illinois Supreme Court rejected the argument; the court's taking analysis begins at page 14 of the slip opinion. The court held that the regulation was a tax, and not subject to takings analysis:

[W]e conclude that the surcharge at issue here is not subject to a takings challenge. The Act does not involve an interest in physical or intellectual property, nor does it operate upon or alter an identifiable property interest. The case at bar does not involve the state’s exercise of its eminent domain powers, but rather involves its exercise of its taxing powers. We conclude that the surcharge is not a taking of private property within the meaning of the constitutional takings clauses. As such, a takings analysis is not applicable to plaintiffs’ claim.

The casinos recently filed a cert petition asking the U.S. Supreme Court to review the case. The petition presents a single Question Presented:

In this case, the Illinois Supreme Court held that a state law transferring the revenues of four Illinois casinos to five Illinois horse-racing tracks is categorically not susceptible to challenge under the Takings Clause of the Fifth Amendment because, in that court’s view, "regulatory actions requiring the payment of money are not takings." The question presented is:

Whether the State's taking of money from private parties is wholly outside the scope of the Takings Clause.

The petition points to a divergence of opinion by the lower courts on the issue of whether money can be the subject of takings analysis.  When the U.S. Supreme Court last addressed the question, it resulted in a fractured case with no majority opinion. See Eastern Ent., Inc. v. Apfel, 524 U.S. 498 (1998). The petition asserts:

Although the approach taken below finds support in the decisions of some courts, it cannot be reconciled with the holdings of others, which have recognized that money is property, the exaction of which is subject to the strictures of the Takings Clause. The confusion about the reach of the Takings Clause is reflected in this Court’s own most recent decision on the subject, Eastern Enterprises; that ruling produced no majority opinion or controlling rule, an outcome that, unsurprisingly, has itself served as a source of significant disagreement and uncertainty in the lower courts. "Cases attempting to decide when a regulation becomes a taking are among the most litigated and perplexing in current law" (Eastern Enterprises, 524 U.S. at 541 (Kennedy, J., concurring in the judgment & dissenting in part)), and clarification by this Court is urgently needed.

Petition at 9-10. Justice Kennedy was a key vote in the outcome in Eastern Enterprises, and is currently a key vote in any closely disputed case before the Court. It looks like the petitioners are rightly pitching the case to him. 

The petition points out the holy grail of cert petitions -- a division in the lower courts (petition at 10-18), then argues that a taking of money implicates the takings clause. Money is property,  despite the Illinois Supreme Court's determination that property means only physical or intellectual property, or an identifiable property interest. The petition points out cases where the Court has held that interest is property, arguing "the Court has regarded it as obvious that the expropriation of particular forms of revenue is not exempt from takings scrutiny..." Petition at 21. The petition concludes with arguments that the takings clause applies to all property, and that characterizing the transfer of money in this case as a "tax" does not resolve the takings issue.

The state has until March 30, 2009 to respond. The Supreme Court's case docket is posted here.