Amicus Curiae Brief — Midlantic Nat. Bank v. New Jersey Dept. of Environmental Protection

vitice - Supreme Cou

FIL RD

APR & 1965

Nos. 84-801, 84-805

ALEXANDER , §

IN THE UNITED STATES SUPREME sadlibds aut

October Term, 1984

MIDLANTIC NATIONAL BANK,

Petitioner,

V-

NEW JERSEY DEPARTMENT OF

ENVIRONMENTAL PROTECTION,

Respondent.

THOMAS J. O'NEILL,

Petitioner,

Ve

CITY OF NEW YORK,

Respondent.

dd ed

On Writ of Certiorari to the United States

Court of Appeals for the Third Circuit

BRIEF OF AMICUS CURIAE PACIFIC LEGAL

FOUNDATION IN SUPPORT OF PETITIONERS

RONALD A. ZUMBRUN

ROBERT K. BEST

COUNSEL OF RECORD

TIMOTHY A. BITTLE

OF COUNSEL

Pacific Legal Foundation

555 Capitol Mall, Suite 350

Sacramento, California 95814

Telephone: (916)! 444-0154

Attorneys for Amicus Curiae

3.

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES CITED. «cece eee eeeol

INTEREST OF AMICUS. .ccccccvesesevssessea

OPINION BELOW. ccc cece ceceseseveseseeed

STATEMENT OF THE CASE. .cccccccccsecsseed

SUMMARY OF THE ARGUMENT..eceeeseeveeee sO

ARGUMENT. cccccccccccccccccccscesscccsccel

I. PRELIMINARY STATEMENT:

ISSUE lly See

II. POLICE POWER ACTS THAT

AFFECT PROPERTY MUST

BE ANALYZED TO DETERMINE

WHETHER COMPENSATION IS OWED....9

COMO Me cece cee cee eee eee oceeeoeeeeoeoae

TABLE OF AUTHORITIES CITED

Page

Cases

Andrus v. Allard, 444 U.S. 51 (1979)...9

Armstrong v. United States,

364 U.S. 40 (1960). ccccccccccccecs Ph

Berman v. Parker,

DR i En. «cc eeegececeeeooces 10

Eiger v. Garrity,

246 U.S. 97 (1918)......00e- eecccecces 9

Hawaii Housing Authority v.

Midkiff, U.S. ‘

81 L. Ed. 2d 186 (1984).......... 10-11

Hodel v. Virginia Surface Mining

and Reclamation Association,

452 U.S. 264 (1981)... cee veoes eccoehl

In the Matter of Quanta Resources

Corp., 739 F.2d 912

(3d Cif. Dee heeeeeeeececeeccoeoce Se O

Loretto v. Teleprompter

Manhattan CATV Corp.,

BBe Uses GLO CLSSBZ) co ccccccccccccceceh’

Penn Central Transportation Co.

v. City of New York,

438 UeWe 104 Pees eeeecoeoccococeehS

Ruckelshaus v. Monsanta Co.,

Wee a

ne Mr Mee CRORE). .ccccceccescekhS

eo 44 «

San Diego Gas & Electric Co.,

v. City of San Diego,

450 U.S. 621 (198l)..cccccccveee Terr. |

Sporhase v. Nebraska ex rel.

Douglas, 458 U.S. 941 (1982)......... 7

Thompson v. Consolidated Gas

Utilities Corporation,

300 U.S. $5 (19ST) ccccccccccvcccese ll

United States v. General Moters

Corp., 323 U.S. 373 (1945)....-. sesveke

United States v. Security

Industrial Bank,

459 U.S. 70 TRG iccaceceese eeeee 12-14

Webb's Fabulous Pharmacies, Inc. v.

Beckwith, 449 U.S. 155 (1980)........ 8

United States Constitution

Fifth Amendment..... eevee eees 4,6-7, BGs 18

- iii -

Nos. 84-801, 84-805

IN THE UNITED STATES SUPREME COURT

October Term, 1984

MIDLANTIC NATIONAL BANK,

Petitioner,

Ve

NEW JERSEY DEPARTMENT OF

ENVIRONMENTAL PROTECTION,

Respondent.

THOMAS J. O'NEILL,

Petitioner,

Ve

CITY OF NEW YORK,

Respondent.

i dd el

On Writ of Certiorari to the United States

Court of Appeals for the Third Circuit

BRIEF OF AMICUS CURIAE PACIFIC LEGAL

FOUNDATION IN SUPPORT OF PETITIONERS

INTEREST OF AMICUS

Pursuant to Supreme Court Rule 36,

Pacific Legal Foundation respectfully subrits

this brief amicus curiae in support of

petitioners. Consent to the filing of this

brief has been granted by counsel for all

parties. Copies of the letters of consent

have been lodged with the Clerk of this

Court.

Pacific Legal Foundation is a

nonprofit, tax-exempt corporation,

incorporated under the laws of California for

the purpose of participating in litigation

affecting public policy. An independent

Board of Trustees authorizes participation in

a case only when it concludes that Pacific

Legal Foundation's position has broad public

support. The Board of Trustees has

authorized the filing of this prief.

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Pacific Legal Foundation's public

policy perspective in support of private

property rights will help provide this Court

with a more complete briefing of the

interests at stake in this litigation.

OPINION BELOW

The opinions of the United States

Court of Appeals are reported at 739 F.2d 912

(3d Cir. 1984), and 739 F.2d 927 (3d Cir.

1984).

STATEMENT OF THE CASE

Quanta Resources Corporation, a

company which operated waste oil processing

facilities, went into bankruptcy. A trustee

was appointed to liquidate the company's

assets for distribution to creditors. Among

the company's assets were two storage

facilities; one located in New York, and one

located in New Jersey. Contaminated oil was

discovered at both sites, in violation of

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state environmental protection laws. The

trustee decided that the cost to the estate

of cleaning up these facilities exceeded

their value. He therefore proceeded to

abandon the assets back to Quanta, the party

responsible for the violation. New York and

New Jersey opposed the abandonment, claiming

that the trustee must clean up the

facilities, even if that meant using the

other assets in the estate to pay for it.

The trustee and creditors holding perfected

security interests in other assets argued

that the Just Compensation Clause of the

Fifth Amendment would be violated if the

government extinguished these security

interests to pay for the cleanup. The Court

of Appeals dismissed the "taking" claim ina

footnote, stating:

"CWJe are not persuaded by

the Trustee's argument

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that an unconstitutional

taking could result from

forbidding abandonment

here. ... [TJhe state's

enforcement of its

environmental protection

laws cannot be charac-

terized as a taking;

rather it is a permissible

exercise of the state's

regulatory power to

promote the public good

eeee” Matter of Quanta

Resources Corp., 739 F.2d

at 922 n.1l.

It is this summary dismissal

of a claim to constitutional protections

which amicus curiae wishes to address,

because it “flatly contradicts clear

,

precedents of this Court." San Diego

Gas & Electric Co. v. City of San Diego,

450 U.S. 621, 647 (1981) (Brennan, J.,

dissenting).

SUMMARY OF THE ARGUMENT

The Court of Appeals did not

decide whether Quanta'’s creditors "own

property of the estate to the extent

that, if applied to other obligations of

the bankrupt, they must be

compensated. It never reached this

question because the majority apparently

concluded that the government's power to

regulate for the public good could

preempt the protections of the Fifth

Amendment. This brief will demonstrate

that the authority of government to take

property for public use is a police

power authority. When a valid exercise

of this police power takes a protected

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property interest the Fifth Amendment

requires the government to compensate

the owner or to withdraw the action.

ARGUMENT

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PRELIMINARY STATEMENT: ISSUE PRESENTED

The Court of Appeals held that

if the abandonment were denied, and

other assets in the Quanta estate were

applied under state law to clean up the

New York and New Jersey facilities, it

would be unnecessary to analyze whether

a “taking" had occurred. The court

based this holding on its conclusion

that no "taking" could occur, because a

state's enforcement of its environmental

protection laws is a permissible

exercise of the state's “regulatory

power to promote the public good," or in

other words, its police power. Matter

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of Quanta Resources Corp., 739 F.2d

at 922 n.1l.

Amicus takes no position on

whether these creditors would be

entitled to compensation if the

abandonment were denied. That question

can be answered only by analyzing

whether these creditors have a protected

property interest (Webb's Fabulous

Pharmacies, Inc. v. Beckwith, 449 U.S.

155, 161 (1980)), which will be

sufficiently interfered with so as to

cause them to bear an unfair share of a

public obligation. Armstrong v. United

States, 364 U.S. 40, 49 (1960). Amicus

believes, however, that these creditors

are entitled to have their claims

evaluated by a proper "taking"

analysis. The issue thus presented is

whether a “taking” could occur when a

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state engages in a permissible exercise

of its police power.

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POLICE POWER ACTS THAT

AFFECT PROPERTY MUST

BE ANALYZED TO DETERMINE

WHETHER COMPENSATION IS OWED

The police power is the power

of jovernment to serve the people for

which it exists. Sporhase v. Nebraska

ex rel. Douglas, 458 U.S. 941, 956

(1962). The police power authorizes

government to undertake any measure

deemed necessary, by the people's

elected representatives, to protect the

public health, safety, and welfare.

Andrus v. Allard, 444 U.S. 5l, 59

(1979); Eiger v. Garrity, 246 U.S. 97,

102-03 (1918). The government's

authority to take or damage property for

public use is one of the government's

police power authorities. Hawaii

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Housing Authority v. Midkiff,

U.S. , 81 L. Ed. 2d 186, 196

(1984); Berman v. Parker, 348 U.S. 26,

31-32 (1954). Thus, contrary to the

suggestion by the majority of the Court

of Appeals, there is no distinction

between the government authority to take

ownership of property and the authority

to regulate that property. The ability

to take property is merely a subsidiary

power of the government's overall police

power.

Governmental activities

affecting property, then, are

constrained by the same limitations

placed on all exercises of the police

power; that is, the activity must

reasonably promote the public health,

safety, or welfare. Hawaii Housing

Authority v. Midkiff, 81 L. Ed. 2d

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at 197 ("({tJhe ‘public use' requirement

is thus coterminous with the scope of a

sovereign's police powers").

Governmental activities affecting

property which do not promote public

health, safety, or welfare are therefore

not permissible exercises of the

government's police power. Thompson v.

Consolidated Gas Utilities Corporation,

300 U.S. 55, 80 (1937).

On the other hand, govern-

mental activities which do promote the

public health, safety, and welfare are

valid exercises of the police power

regardless of whether such governmental

activities take or damage property.

Hodel v. Virginia Surface Mining and

Reclamation Association, 452 U.S. 264,

300 (1981). When valid exercises of the

police power so affect property,

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however, the Fifth Amendment requires

the government to compensate the

owner. In Loretto v. Teleprompter

Manhattan CATV Corp., 458 U.S. 419

(1982), this Court recently stated:

"The Court of Appeals

determined that § 828 serves

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purpose[s] ... and thus is

within the State's police

power. We have no reason to

question that determination.

It is a separate question,

however, whether an otherwise

valid regulation so frustrates

property rights that

compensation must be paid.”

Id. at 425.

Again, in United States v.

Security Industria. Bank, 459 U.S. 70

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(1982), a case involving issues similar

to those at bar, this Court repeated the

rule that valid exercises of

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require compensation when property is

affected.

“It may be readily agreed

that § 522(£)(2) is a rational

exercise of Congress’ authority

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however, obviate the additional

difficulty that arises when

that power is ... used to

defeat traditional property

interests. The bankruptcy

power is subject to the Fifth

Amendment's prohibition against

taking private property without

compensation. ... Thus, however

‘rational’ the exercise of the

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bankruptcy power may be, that

inquiry is quite separate from

the question whether the

enactment takes property [so as

to require compensation]."

United States v. Security

Industrial Bank, 459 U.S.

at 74-75.

The distinction between government

action to regulate property and

government action to take ownership in

property is not, as suggested by the

majority of the Court of Appeals, a

distinction in the source or validity of

the authority; rather, the distinction

is in the remedy. An invalid exercise

of the police power will be set aside,

but when property is taken or damaged by

valid regulation, the government is

entitled to keep the property, or

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inflict the damage, so long as it

compensates the owner. Ruckelshaus v.

Monsanto Co., U.S. » CL ke BAe BC

815, 841 (1984). Such compensation must

be available “to bar Government from

forcing some people alone to bear public

burdens which, in all fairness and

justice, should be borne by the public

as a whole." Armstrong v. United

States, 364 U.S. at 49; Penn Central

Transportation Co. v. City of New York,

——

438 U.S. 104, 124 (1978). If government

can "“pre-empt" property rights by merely

exercising its police power, "then the

Taking Clause has lost all vitality."

Ruckelshaus v. Monsanto Co., 8l L. Ed.

2d at 838.

Applying this body of law to

the case at bar, the secured creditors

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of Quanta have claimed a property

interest in the assets of Quanta's

estate which will be “taken” if

abandonment of the New Jersey and New

York facilities is disallowed. This

claim of a "taking" does not arise from

the direct application of the states'

environmental laws. It arises from the

potential transfer of liability from the

culpable party to innocent creditors by

requiring the trustee to accept

responsibility for the cleanup costs.

Therefore, contrary to the suggestion by

the majority of the Court of Appeals,

this case does not present a conflict

between environmental regulation and

protection of private property rights.

The creditors do not argue that the

environmental laws should not be

enforced; their claim is that their

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protected property interests may be

taken. Having raised this claim, they

are entitled to have a court analyze

whether their claim is meritorious. The

Court of Appeals, however, did not

analyze whether the creditors have a

valid "taking" claim. It avoided this

question by finding that the states'

enforcement of environmental protection

laws was a valid exercise of their

police power. The determination of the

"taking" claim, however, should not turn

on an analysis of the regulatory power

employed. The question is whether the

creditors would lose a protected

property interest and be forced to bear

more than their fair share of a public

obligation. If so, compensation to

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those individuals would be owed. United

States v. General Motors Corp., 323 U.S.

373, 378 (1945).

CONCLUSION

For the reasons set forth

above amicus requests this Court to

expressly disapprove the Court of

Appeals‘ conclusion that prohibiting

abandonment cannot raise the question of

an uncompensated taking of a protected

property interest in violation of the

protections of the Fifth Amendment.

DATED: April 5, 1985.

Respectfully submitted,

RONALD A. ZUMBRUN

ROBERT K. BEST

COUNSEL OF RECORD

TIMOTHY A. BITTLE

OF COUNSEL

Pacific Legal Foundation

555 Capitol Mall, Suite 350

Telephone: (916) 444-0154

Attorneys for Amicus Curiae

oe 18 «

DECLARATION OF SERVICE BY MAIL

I, Linda S. Schaupp, declare as

follows:

I am a citizen of the United

States, residing or employed in

Sacramento, California.

My business address is 555

Capitol Mall, Suite 350, Sacramento,

California.

I am over the age of 18 years,

and am not a party to the above-entitled

action.

On April 5, 1985, true copies

of BRIEF OF AMICUS CURIAE PACIFIC LEGAL

FOUNDATION IN SUPPORT OF PETITIONERS

were placed in envelopes addressed to:

Mr. William F. McEnroe

Nolan, O'Neill & Moore

60 Park Place

Newark, NJ 07102

Mr. Robert Abrams

Attorney General of the

State of New York

Mr. Norman Spiegel

Assistant Attorney General

2 World Trade Center

New York, NY 10047

Mr. Irwin I. Kimmelman

Attorney General of the

State of New Jersey

Mr. Richard F. Engel

Deputy Attorney General

Cc. N. 112

Trenton, NJ 08625

Mr. Frederick A. O. Schwarz, Jr.

Corporation Counsel for the

City of New York

Mr. Gary Tarnoff

Assistant Corporate Counsel

100 Church Street

New York, NY 10007

Mr. A. Dennis Terrell

Shanley and Fisher

131 Madison Avenue

Morristown, NJ 07960

which envelopes, with postage thereon fully

prepaid, were then sealed and deposited ina

mailbox regularly maintained by the United

States Postal Service in Sacramento,

California.

I declare under penalty of perjury

that the foregoing is true and correct and

that this declaration was executed this

5th day of April, 1985, at Sacramento,

California.

/s/ LINDA S. SCHAUPP

LINDA S. SCHAUPP