Here are the final briefs in the cert process in a case we've been following.
In In Guerin v. Fowler, 899 F.3d 1112 (9th Cir. 2018), a three-judge panel of the Ninth Circuit held that Washington state officials' failure to return daily interest that was allegedly skimmed from the plaintiffs' state-managed retirement accounts could be a taking. (En banc review denied, by the way.)
The panel rejected the State's argument that because the Washington Court of Appeals held that Washington's retirement statute didn't require the payment of daily interest at all, the plaintiffs didn't have "property" the state officials took when they kept the interest. If it isn't "property" under state law, the State asserted, it isn't "property" for purposes of the Takings Clause.
Not quite, the court concluded. Daily interest on principal is one of those "core" and "traditional" property rights that a state simply cannot disavow. In short, while state law usually defines property, there are certain sticks that transcend a state's ability to redefine them out of existence. If there a quotable page in the slip opinion, it is pages 10-11. (We've made that same point in several briefs over the years, including this one.) Check out how the panel handled it"
We rejected a similar argument in Schneider v. California Department of Corrections, 151 F.3d 1194 (9th Cir. 1998). There we observed that “constitutionally protected property rights can—and often do—exist despite statutes . . . that appear to deny their existence.” Id. at 1199. Citing the Supreme Court’s opinion in Phillips, we noted that “a State may not sidestep the Takings Clause by disavowing traditional property interests long recognized under state law.” Id. at 1200 (quoting 524 U.S. at 167). We then held that there is “a ‘core’ notion of constitutionally protected property into which state regulation simply may not intrude without prompting Takings Clause scrutiny.” Id. This “core” is “defined by reference to traditional ‘background principles’ of property law.” Id. at 1201. In that case, we concluded that interest income earned on an interest-bearing account falls within this class of fundamental property rights. Id.We now clarify that the core property right recognized in Schneider covers interest earned daily, even if payable less frequently. The rule that interest accrues de die in diem—“from day to day”—has an impressive common law pedigree, see, e.g., Wilson v. Harman, 2 Ves. Sen. 672, 672, 27 Eng. Rep. 189, 189, and has been widely adopted by American courts, see, e.g., Mann v. Anderson, 32 S.E. 870, 871 (Ga. 1899); Owens v. Graetzel, 126 A. 224, 227 (Md. 1924); Clapp v. Astor, 2 Edw. Ch. 379, 384 (N.Y. Ch. 1834); In re Flickwir’s Estate, 20 A. 518 (Penn. 1890). Indeed, in the state-court proceedings, DRS did not dispute that “at common law, interest was deemed to accrue daily, regardless of when it was payable.” Probst, 271 P.3d at 970 n.6 (citing 32 Halsbury’s Laws of England § 127, p. 78 (4th ed. 2005)). Because the right to daily interest is deeply ingrained in our common law tradition, this property interest is protected by the Takings Clause regardless of whether a state legislature purports to authorize a state officer to abrogate the common law. See Schneider, 151 F.3d at 1201.
We hold that the Teachers state a takings claim for daily interest withheld by DRS.
Slip op. at 10-11.
The State of Washington filed a cert petition raising two Questions Presented. The first is substantive: whether daily interest is a property right that the State cannot redefine out of existence. The second, is more of a federalism argument: can the State be sued in federal court for what looks like money damages, or can the takings plaintiffs structure the relief sought in such a way (an injunction compelling the State to return interest unconstitutionally withheld) to allow them to bring the case in a U.S. District Court?
Here are the briefs:
When the Reply is filed, we'll post it here also. Stay tuned.
