Amicus Curiae Brief — Brown v. Legal Foundation of Wash.

No. 01-1325 | Ss “one Us

Jn The OLi 18 2

Supreme Court of the Gnit b States

+ SO THE CLERE

WASHINGTON LEGAL FOUNDATION, et ai.,

Petitioners,

v.

LEGAL FOUNDATION OF WASHINGTON, et al.,

Respondents.

¢

On Writ Of Certiorari To The United States

Court Of Appeals For The Ninth Circuit

¢

BRIEF OF THE STATES OF CALIFORNIA,

MASSACHUSETTS, ARIZONA, COLORADO,

CONNECTICUT, FLORIDA, HAWAII, ILLINOIS, INDIANA,

IOWA, KANSAS, LOUISIANA, MAINE, MARYLAND,

MICHIGAN, MINNESOTA, MISSISSIPPI, MONTANA,

NEVADA, NEW HAMPSHIRE, NEW JERSEY, NEW MEXICO,

NEW YORK, NORTH CAROLINA, NORTH DAKOTA,

OHIO, OKLAHOMA, OREGON, PENNSYLVANIA,

RHODE ISLAND, SOUTH CAROLINA, SOUTH DAKOTA,

TENNESSEE, UTAH, VERMONT, WEST VIRGINIA

AND COMMONWEALTH OF PUERTO RICO,

AS AMICI CURIAE SUPPORTING RESPONDENTS

= °

BILL LOCKYER THOMAS F. REILLY

Attorney General of California Attorney General

RICHARD M. FRANK of Massachusetts

Chief Assistant Attorney General WILLIAM W. PORTER

J. MATTHEW RODRIQUEZ AMY SPECTOR

Senior Assistant Attorney Assistant Attorneys

General General

*DANIEL L. SIEGEL One Ashburton Place

Supervising Deputy Attorney Boston, MA 02108

General Telephone: (617) 727-2200

CHRISTIANA TIEDEMANN

Deputy Attorney General

1300 I Street

Sacramento, CA 95814

Telephone: (916) 323-9259

*Counsel of Record

[Additional Counsel Listed On Inside Cover]

JANET NAPOLITANO

Arizona Attorney General

KEN SALAZAR

Colorado Attorney General

RICHARD BLUMENTHAL

Connecticut Attorney

General

ROBERT A. BUTTERWORTH

Florida Attorney General

EARL I. ANZAI

Hawaii Attorney General

JAMES E. RYAN

Illinois Attorney General

STEVE CARTER

Indiana Attorney General

THOMAS J. MILLER

Iowa Attorney General

CARLA J. STOVALL

Kansas Attorney General

RICHARD P. IEYOUB

Louisiana Attorney General

G. STEVEN ROWE

Maine Attorney General

J. JOSEPH CURRAN, JR.

Maryland Attorney General

JENNIFER M. GRANHOLM

Michigan Attorney General

MIKE HATCH

Minnesota Attorney

General

MIKE MOORE

Mississippi Attorney

General

MIKE MCGRATH

Montana Attorney General

FRANKIE SUE DEL PAPA

Nevada Attorney General

PHILIP T. MCLAUGHLIN

New Hampshire Attorney

General

Davip SAMSON

New Jersey Attorney

General

PATRICIA A. MADRID

New Mexico Attorney

General

ELIOT SPITZER

New York Attorney General

Roy COOPER

North Carolina Attorney

General

WAYNE STENEHJEM

North Dakota Attorney

General

BETTY D. MONTGOMERY

Ohio Attorney General

W.A. DREW EDMONSON

Oklahoma Attorney

General

HARDY MYERS

Oregon Attorney General

D. MICHAEL FISHER

Pennsylvania Attorney

General

SHELDON WHITEHOUSE

Rhode Island Attorney

General

CHARLIE CONDON

South Carolina Attorney

General

MARK BARNETT

South Dakota Attorney

General

PauL G. SUMMERS

Tennessee Attorney General

MARK L. SHURTLEFF

Utah Attorney General

WILLIAM H. SORRELL

Vermont Attorney General

DARRELL V. MCGRAW, JR.

West Virginia Attorney

General

ANABELLE RODRIGUEZ

Attorney General

Commonweath of

Puerto Rico

QUESTIONS PRESENTED

1. Whether Washington’s Interest on Lawyers Trust

Accounts (IOLTA) rule effects a taking under the Fifth

Amendment's Takings Clause even though it has no

economic impact on the property owner?

2. Whether injunctive relief is available under the

Fifth Amendment’s Takings Clause where there is no

economic loss to the property owner?

ii

TABLE OF CONTENTS

TABLE OF AUTHORITIES .................cccccsseseeeeeeeseees

INTEREST OF THE AMICI STATES .......................

A. The States’ Substantial Interest in Regulat-

ing the Practice of Law Would Be Severely

Undermined by the Extension of Per Se Tak-

ings Rules to the Regulation of Client Trust

I cannencidemstnsnaninsccsenesntatimniniinnsnspasesencens

B. IOLTA Programs Serve the States’ Vital

Interests in Providing Equal Access to the

Courts and in Improving the Administration

ED ccninctessinntttinnsntnttairenmnmendavesttensiniamtamees

I. THE PER SE TAKINGS RULES SHOULD

NOT BE EXTENDED TO A REGULATION

GOVERNING FUNDS THAT CANNOT PRO-

DUCE NET INTEREST FOR THE

A. Application of a Per Se Test to IOLTA

Funds Would Be an Unwarranted Exten-

sion of the Present Categorical Tests,

Which Derive From the Unique Nature

of Property Interests in Land..................

B. A Per Se Taking Should Never Be Found

Where, as Here, Application of the Tradi-

tional Ad Hoc Balancing Test Would Pro-

duce a Different Result..........................+.

C. Petitioners’ Per Se Rule Would Disregard

a Consensus Among the States and In-

vite Judicial Oversight of State Policy

GEeI IIT iccsstarnditnnnimedentidédeminessnedsinmnnniiiiadesdan

11

TABLE OF CONTENTS - Continued

Page

D. If a Per Se Test Is Extended to Rules,

Like IOLTA, That Affect Only the Use of

Intangible Personal Property But Have

No Economic Impact, Virtually Any Po-

lice Power Regulation Could Be Subject

to Challenge Under the Takings Clause ..

Il. THERE IS NO CONSTITUTIONAL VIOLA-

TION TO BE REMEDIED THROUGH IN-

JUNCTIVE RELIEF. ............---::ccccceeeeereeeeeeeees

A. The Takings Clause Is a Compensatory

Constitutional Provision Rather Than a

Substantive Limit on Government Power ..

B. There Is No Unconstitutional Taking

Within the Meaning of the Takings

Clause Unless the Property Owner Is

Entitled to Just Compensation................

C. Injunctive Relief Is Unavailable Because

the Washington State Courts Can, and

Should, Decide Any Question of Just

Compensation. ...........---::0eccseeerereeeeeeeenees

CONCLUSION .........00000:eccecseeeneeeenneenenes sssseeeennennnsecccs

15

18

18

20

iv

TABLE OF AUTHORITIES

Page

CASES

Albright v. Oliver, 510 U.S. 266 (1994) .......0...cccccccccceesseeeee 25

Agins v. City of Tiburon, 447 U.S. 255 (1980) ................... 19

Armstrong v. United States, 364 U.S. 40 (1960)................ 12

Babbitt v. Youpee, 519 U.S. 234 (1997) .......ccccccccecceccesceeeees 24

Boston Chamber of Commerce v. City of Boston, 217

ee enacted iit tiaras 21 -

Bowen v. Massachusetts, 487 U.S. 879 (1988)..........c.cc000-. 9

Bowles v. Willingham, 321 U.S. 503 (1944)...........ccccccesee.. 17

Branch v. United States, 69 F.3d 1571 (Fed. Cir.

Siar nccciecnasininiasintinanctuaciibiineiinuitaaiitiidaittlisaatanaiatiaiiinsianees 16

City of Monterey +—Del Monte Dunes, Ltd., 526 U.S.

Se a tenereitiinpericeeadtiiintihticrareiiiahina iia aah 18

City of Pittsburgh v. Alco Parking Corp., 417 U.S

Pe cccicivierntiisssenieisnant ienaatinadis kanes i

Eastern Enterprises v. Apfel, 524 U.S. 498 (1998)...9, 20, 24

Federal Maritime Commission v. South Carolina

State Ports Authority, 122 S.Ct. 1864 (2002)................. 14

First English Evangelical Lutheran Church v.

County of Los Angeles, 482 U.S. 304 (1987) ..........c00000. 18

Gideon v. Wainwright, 372 U.S. 335 (19638)........cccccccecceeoee. 5

Gilmore v. State, 143 N.Y.S.2d 873 (Ct. Cl. 1955)............. 22

Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975).......... 3

Griswold v. Connecticut, 381 U.S. 479 (1965) ........ceccec0e0- 15

Hudson v. Palmer, 468 U.S. 517 (1984) ........cccsssesssesseesseee 25

Vv

TABLE OF AUTHORITIES - Continued

Page

In re Petition of Minn. State Bar Ass'n, 332 N.W.2d

BBE CBee, BBGBD ccccccccccecececcccescscsecssssccssnosscosossossoscoossoeees 3

Keller v. State Bar of California, 496 U.S. 1 (1990)........... 4

Lake County Estates, Inc. v. Tahoe Regional Plan-

ning Agency, 440 U.S. 391 (1979) ........ccccceeseercerreereneeeees 26

Lassiter v. Dept. of Social Services, 452 US. 18

CRITI... cnsesccssssesssccencnsentsanntnnosenneqesesnnanenesesstessssnscaooasesene 5

Lathrop v. Donohue, 367 U.S. 820 (1961)..........:cceeeeeeeeee 4

Legal Services Corp. v. Velazquez, 531 U.S. 533

CRIB D......nccoccccscccnnsesnenssecssosesssssnsnssscesseossnssssssosssososonoooooooeece 5

_ Leis v. Flynt, 439 U.S. 438 (1979).........:cccccereeeeeerrenerees 3,17

Loretto v. Group W. Cable, 522 N.Y.S.2d 543 (Sup.

Ul, a 23

Loretto v. Teleprompter Manhattan CATV Corp.,

458 U.S. 419 (1982)...........cccececeeeereereseeseeseeneeesesseees passim

Lucas v. South Carolina Coastal Council, 505 U.S.

BIB CII ccccccccccccccsesscseseccscssesosessosssscssasoesees 7, 10, 11, 13

Marion & R.V.R. Co. v. United States, 270 U.S. 280

| —-- e 21

Matter of Interest on Lawyers’ Trust Acc., 672 P.2d

4B CUtahs 196B)..000000ccccccccccccccccccccccsccccccscccsscsssessecc00ee8 ——

Matter of Interest on Trust Accounts, 538 So.2d 448

CBee, BBGDD cccccccccccccsccccsssccsccccssscsscceccsnsessssesssccssocssoosseeeeees 3

Olson v. United States, 292 U.S. 246 (1934)............cccceees 21

Palazzolo v. Rhode Island, 533 U.S. 606 (2001)............ 7,11

Parratt v. Taylor, 451 U.S. 527 (1981) ...........cccecereeereeeerees 25

vi

TABLE OF AUTHORITIES — Continued

Page

Penn Central Transp. Co. v. New York City, 438 U S.

See Gey ee vciaincsicccecctccigimesensinantunitpendiiiininipianiadstiong’ passim

Pennzoil Co. v. Texaco, Inc., 481 U.S. 1 (1987) ..............0..- 24

Permian Basin Area Rate Cases, 390 U.S. 747

Se ceainiieinstecbeensaisiiaaiiintinaianinia tnintieadintaaaiiaaiaeiiti i iaaiaiee 16

Petition by Massachusetts Bar Ass’n, 478 N.E.2d

ee eta ceiitibitlidintadintahiat lt aia lacunae 3

Petition of New Hampshire Bar Ass’n, 453 A.2d

UI tear ela aa i tie 3

Phillips v. Washington Legal Foundation, 524 U.S.

Se iccscericiindceehcaniicentebececentiianaibanaaiataions atndusiiaieaieteadintaisieai 2,13

Powell v. Alabama, 287 U.S. 45 (1932).........cccccccccccccceseeeees 5

Preseault v. ICC, 494 U.S. 1 (1990) ........cecsessesseseeseeeeeseesees 24

Redevelopment Agency v. Tobriner, 215 Cal.App.3d

Ey ate iccinsendaipniciniaissidanatcidainasisibiiiibiiphitaiatiantanaiinaiteaiaastnepaescal 22

Rizzo v. Goode, 423 U.S. 362 (1976) ..........:cccccessseeeeeeseeeeees 25

Ruckelshaus v. Monsanto, 467 U.S. 986 (1984)................. 23

SGB Financial Services, Inc. v. City of Indianapo-

lis, 235 F.3d 1036 (7th Cir. 2000)..............cccccccceeeeeee 25, 26

Sintra v. City of Seattle, 829 P.2d 765 (Wash. 1992)......... 24

Stefanelli v. Minard, 342 U.S. 117 (1951) .........ccccccceceeeee 25

Supreme Court of Virginia v. Consumers Union, 446

ERIE RT can ere oan 13

Tahoe-Sierra Preservation Council v. Tahoe

Regional Planning Agency, 122 S.Ct. 1465

eee iacitiicnnnccintinsintandiniiaiainnadiiaiiiesiinl viaiatiieasidiai dicate 7,8, 11,17

United States v. Sperry Corp., 494 U.S. 52 (1989) ........ 8, 16

Vii

TABLE OF AUTHORITIES -— Continued

Page

United States v. Virginia Electric Co., 365 U.S. 624

ine ceersineieennieimenuniieineaniones 20

Webb’s Fabulous Pharmacies, Inc. v. Beckwith, 449

I ia ecaaliianonenaionte q

Williamson v. Lee Optical of Oklahoma, 348 U.S.

a alae ar rrrenannnel 15

Williamson Planning Commn. v. Hamilton Bank,

I i ais aiathianianenionte 19, 24, 25

Yee v. City of Escondido, 503 U.S. 519 (1992)............0ee000 8

Zinermon v. Burch, 494 U.S. 113 (1990).............ccceeeeeeeeees 25

OTHER AUTHORITIES

2A Scott on Trusts (1987 and 2002 Supp.)

OD BD BD ccccccnscccassvecascccccccccccsnscsccnnsessscccsssnssssnsveocsooncses 14

ABA Model Code of Professional Responsibility

a esieebiiineusanadannnnpninnasent 2

ABA Committee on Ethics and Professional Re-

sponsibility, Formal Opinion 348 (1982) .................000 3

Florida Bar Rule 5-1.1(g) (2002) ...........:cccccesseeeeeereeeerenenees 2

Indiana Professional Conduct Rule 1.15(d) (2000) ............ 2

IOLTA Handbook (2001) ........:.cscccesssssseessseseeeesenseeneennes 2,5

Restatement (First) of Property

© BBB, ae. @ TIBUR. B cccccccccccecccccccscccccveccccoccccesesscscosccssoes 22

1

INTEREST OF THE AMICI STATES

Petitioners seek an expansion of the Takings Clause

that would have serious, far-reaching consequences for the

amici States. First, although petitioners have suffered no

economic loss under the Washington IOLTA rule, nor

forfeited any pre-existing right to control nominal amounts

of interest earned on their funds, they ask the Court to

adopt a new per se test under which the IOLTA rule is

adjudged a taking based purely on judicial assessment of

its “character.” Second, although the sole province of the

Takings Clause is to provide just compensation, petition-

ers — who suffered no loss — seek federal injunctive relief

against the operation of the state IOLTA program, offend-

ing both the textual limits of the Clause and core princi-

ples of federalism.

Such a dramatic expansion of the Takings Clause

would seriously disrupt the States’ ability to regulate the

practice of law and, more broadly, could undermine well-

settled exercises of the police power affecting the use or

disposition of personal property. Petitioners’ proposed per

se rule, divorced as it is from an assessment of economic

impact and a property owner’s reasonable expectations, is

a broad invitation to judicial second-guessing of the

reasonable choices made by the States in adopting IOLTA

programs. The amici States urge the Court to reject

petitioners’ effort to reshape so fundamentally the Takings

Clause.

2

A. The States’ Substantial Interest in Regulating

the Practice of Law Would Be Severely Un-

dermined by the Extension of Per Se Takings

Rules to the Regulation of Client Trust Ac-

counts.

Interest on Lawyers Trust Accounts (IOLTA) rules

have been established in each State as a function of the

States’ traditional role in regulating the legal profession.’

State codes governing lawyers’ professional conduct have

long required that lawyers place clients’ funds in bank

accounts separate from the lawyers’ funds, primarily to

safeguard client property and to avoid commingling. See

ABA Model Code of Professional Responsibility, DR 9-

102(A) (1970). By their terms, the States’ IOLTA rules

apply only to client funds that are so small in amount or

held so br.efly that they cannot produce net interest for an

individual client, after consideration of the various costs

related to establishing and maintaining the account. See,

e.g., Fla. Bar Rule 5-1.1(g) (2002). Historically, lawyers

held these same nominal or short-term client funds in a

pooled, non-interest bearing checking account such that

“the depository institutions have had the use of the funds

without payment of any interest.” ABA Comm. on Ethics

' Florida established the first IOLTA program in 1981. At the time

of this Court’s decision in Phillips v. Washington Legai Foundation, 524

U.S. 156 (1998), forty-nine of the States had adopted IOLTA programs.

Id. at 159-161 and n.1. Indiana, the last State to do so, adopted an

IOLTA program in 2000. Ind. Prof. Conduct R. 1.15(d) (2000). IOLTA

programs also exist in the District of Columbia and the United States

Virgin Islands. American Bar Association Commission on Intere.t on

Lawyers’ Trust Accounts, IOLTA Handbook (2001) (“IOLTA Handbook”)

at 1.

3

and Prof. Resp., Formal Op. 348 (1982). Under IOLTA

rules, lawyers are required or permitted to place such

funds in a pooled, interest-bearing account, with the

aggregate net interest paid to bar foundations or similar

entities for distribution to programs that support the

administration of justice.

State courts adopting IOLTA rules have invariably

determined that they cause no economic harm to clients

and cont-avene no ethical or fiduciary obligation of attor-

ney to client. See, e.g., Matter of Interest on Trust Accounts,

538 So.2d 448, 452-53 (Fla. 1989); Petition by Massachu-

setts Bar Ass’n, 478 N.E.2d 715, 718-19 (Mass. 1985);

Matter of Interest on Lawyers’ Trust Acc., 672 P.2d 406, 407

(Utah 1983); In re Petition of Minn. State Bar Ass’n, 332

N.W.2d 151, 157-58 (Minn. 1982); Petition of New Hamp-

shire Bar Ass’n, 453 A.2d 1258, 1260 (N.H. 1982). Thus,

petitioners’ proposed per se rule would seriously under-

mine the States’ sovereign interests in an area particularly

reserved for their control — the practice of law. “Since the

founding of the Republic, the licensing and regulation of

lawyers has been left exclusively to the States and the

District of Columbia within their respective jurisdictions.”

Leis v. Flynt, 439 U.S. 438, 442 (1979). See also Goldfarb v.

Virginia State Bar, 421 U.S. 773, 792 (1975) (“[AJs part of

their power to protect the public health, safety, and other

valid interests [the States] have broad power to establish

standards for . . . regulating the practice of professions.”).

* Ethical considerations prohibit lawyers from keeping for them-

selves interest earned on any client funds. ABA Formal Op. 348.

4

Moreover, by placing nominal and short-term client

funds in interest-bearing accounts, IOLTA rules benefit

clients by decreasing the possibility that attorneys would

keep potentially productive client funds in a non-interest

bearing account to gain favorable treatment from the bank

for the attorney or firm. According to petitioners, that

incentive to act in conflict with a client existed in the

instant case, until it was diminished by the extension of

the Washington IOLTA rule to Limited Practice Officers

(LPOs) at escrow companies.

B. IOLTA Programs Serve the States’ Vital Inter-

ests in Providing Equal Access to the Courts

and in Improving the Administration of Jus-

tice.

By providing for interest on pooled accounts contain-

ing nominal and short-term funds — funds that historically

earned no interest - IOLTA programs further the States’

vital interest in improving the quality and availability of

legal services to the public. See Lathrop v. Donohue, 367

U.S. 820, 843 (1961) (plurality) (“improving the quality of

legal service available to the people of the State ... is a

legitimate end of state policy”). See also Keller v. State Bar

of California, 496 U.S. 1, 13-14 (1990).

The ends served by IOLTA rules — providing equal

access to the courts and improving the administration of

justice — are so universally embraced that each of the fifty

States has implemented the program in some fashion. See

supra n.1. Through IOLTA programs, the States advance

their substantial interest in the provision of legal services

5

to persons who cannot afford to hire a lawyer, thereby

giving tangible meaning to the principle of equal justice

under law.’ In addition to funding legal services programs,

IOLTA funds support other programs aimed at improving

the administration of justice, including alternative dispute

resolution programs, victim services programs, and legal

education programs. IOLTA Handbook at 1-2.

The Court has emphasized the importance of provid-

ing legal representation to the poor. See Gideon v. Wain-

ane 372 U.S. 335, 344-45 (1963) (“The right to be heard

would be, in many cases, of little avail if it did not com-

prehend the right to be heard by counsel.”) quoting Powell

v. Alabama, 287 U.S. 45, 68-69 (1932). The States have

important interests in ensuring representation for the

poor even in circumstances in which it is not constitution-

ally required. See Lassiter v. Dept. of Social Services, 452

U.S. 18, 33 (1980) (appointment of counsel for indigent

parents is not constitutionally required in every parental

status proceeding, although “[a] wise public policy . . . may

require that higher standards be adopted than those

minimally tolerable under the Constitution”). The impar-

tial administration of justice by our Nation’s courts is best

served when litigants have access to counsel. See Legal

Services Corp. v. Velazquez, 531 U.S. 533, 545 (2001) (“An

informed, independent judiciary presumes an informed,

* IOLTA programs are critical to the States in ensuring equal

access to the courts through the provision of legal services to indigent

persons. IOLTA programs generated over $148 million nationwide in

the year 2000 through interest on nominal or short-term client funds —

funds that would otherwise have remained em in non-

interest-bearing accounts. IOLTA Handbook at 95.

independent bar.”). These are the ends that amici States

seek to further under their respective IOLTA programs.

—

SUMMARY OF ARGUMENT

Since the Takings Clause, at its core, concerns fair-

ness and justice, this Court has been very reluctant to

adopt new per se rules that jettison the weighing of factors

articulated in Penn Central Transp. Co. v. New York City,

438 U.S. 104 (1978). That reluctance is particularly

justified in this case, where petitioners are attempting to

use the Takings Clause not to obtain “just compensation,”

but to override the decisions of each and every state in the

Union. Petitioners’ attempt to expand Loretto v. Tele-

prompter Manhattan CATV Corp., 458 U.S. 419 (1982) -

which held that a regulation imposing a physical occupa-

tion of real property was a per se taking — to the Washing-

ton IOLTA rule — which involves only intangible personal

property and imposes absolutely no financial burden on

petitioners — simply goes too far.

Moreover, in seeking injunctive relief where they have

suffered no damage or loss, petitioners seek to transform

the compensatory Takings Clause into a new, substantive

limit on government power. This transformation is not

authorized by the plain language of the Fifth Amendment

or by decisional law. Petitioners’ remedy for an alleged

taking of their property is a state court action for determi-

nation of just compensation. That just compensation might

be nothing, because petitioners have suffered no loss, does

not allow petitioners to invoke federal power to enjoin the

IOLTA program.

7

ARGUMENT

I. THE PER SE TAKINGS RULES SHOULD NOT

BE EXTENDED TO A REGULATION GOV-

ERNING FUNDS THAT CANNOT PRODUCE

NET INTEREST FOR THE PROPERTY

OWNER.

A. Application of a Per Se Test to IOLTA

Funds Would Be an Unwarranted Exten-

sion of the Present Categorical Tests,

Which Derive From the Unique Nature of

Property Interests in Land.

The “polestar” for determining whether a governmen-

tal regulation constitutes a taking is the ad hoc factual

inquiry outlined in Penn Central Transp. Co., 438 U.S. at

104, 123-24. See Tahoe-Sierra Preservation Council v.

Tahoe Regional Planning Agency, 122 S.Ct. 1465, 1486

(2002), quoting Palazzolo v. Rhode Island, 533 U.S. 606,

636 (2001) (O’Connor, J., concurring). This Court has

carved out only two narrow exceptions to the fact-specific

review set forth in Penn Central. First, regulations that

result in a “permanent physical occupation” of property

will be deemed to result in a taking “without regard to

other factors that a court might ordinarily examine.”

Loretto, 458 U.S. at 419, 432. Second, such “categorical

treatment” is also appropriate “where regulation denies all

economically beneficial or productive use of land.” Lucas v.

South Carolina Coastal Council, 505 U.S. 1003, 1015

(1992). Both exceptions derive from recognition of the

unique value of laud and, consequently, provide no justifi-

cation for extending per se treatment to the regulation of

client trust accounts.

Loretto reviewed a regulation that mandated the

permanent, physical occupation of real property — the

placement of cable television eq1ipment in private apart-

ment buildings. The Court explained that the complex

weighing of Penn Central factors was unnecessary because

“[wJhen faced with a constitutional challenge to a perma-

nent physical occupation of real property, this Court has

invariably found a taking.” 458 U.S. at 426-27. Loretto

described a permanent physical occupation of property as

“qualitatively more intrusive than perhaps any other

category of property regulation,” id. at 346, and noted that

“{eJarly commentators viewed a physical occupation of real

property as the quintessential deprivation of property.” Id.

at 430 n.7. The Court stressed that its exception to the

generally applicable analysis set forth in Penn Central was

“very narrow,” id. at 441, and should not raise significant

evidentiary problems because “[tJhe placement of a fixed

structure on land or real property is an obvious fact that

will rarely be subject to dispute.” Jd. at 437. See also

Tahoe-Sierra Preservation Council, 122 S.Ct. at 1479

(noting that “physical appropriations are relatively rare

{and] easily identified”).

The Court has steadfastly refused to apply the per se

rule articulated in Loretto beyond the required, perma-

nent, physical occupation of real property. See, e.g., Yee v.

City of Escondido, 503 U.S. 519, 530 (1992). In particular,

the Court has declined to extend the rule to laws that

create monetary liability or allegedly “take” money, finding

the rule’s rationale — that the physical invasion of one’s

land is particularly grievous — plainly inapplicable. In

United States v. Sperry Corp., 494 U.S. 52 (1989), the

Court held that the deduction of a percentage fee by the

United States from monetary awards was not a taking,

where the deduction was designed to offset the govern-

ment’s administrative costs. Citing Loretto, the claimant

9

argued that “[tJhe deduction was akin to a ‘permanent

physical occupation’ of its property and therefore was a per

se taking requiring just compensation, regardless of the

extent of the occupation or its economic impact.” Jd. at 62

n.9. The Court unanimously rejected the claimant's at-

tempt to equate the occupation of real property with a fee.

requirement, finding it “artificial to view deductions of a

percentage of a monetary award as physical appropria-

tions of property. Unlike real or personal property, money is

fungible.” Id. (emphasis added). See also Eastern Enter-

prises v. Apfel, 524 U.S. 498, 530 (1998) (plurality) (retro-

active monetary liability “is not, of course, a permanent

physical occupation of Eastern’s property of the kind that

we have viewed as a per se taking”).

The effect of IOLTA rules is neither similar nor

analogous to the permanent physical occupation of real

property discussed in Loretto, 458 U.S. at 434. There, a per

se rule dispensed with the normal review of investment-

backed expectations because “property law has long

protected an owner’s expectation that he will be relatively

undisturbed at least in the possession of his property.” Jd.

at 436. Petitioners, however, have never had an expecta-

tion of undisturbed possession of the potential interest

generated by the IOLTA accounts.* Petitioners identify no

* Cf. Bowen v. Massachusetts, 487 U.S. 879, 919 n.3 (1988) (Scalia,

J., dissenting) (“Suit for a sum of money is to be distinguished from suit

particular notes in the United States Treasury.”) (emphasis added).

* In Webb’s Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155,

161 (1980), upon which petitioners rely, the fact that “Webb's creditors

... had more than a unilateral expectation” of receiving interest —

(Continued on following page)

10

scenario — because there is none —-under which their

short-term or nominal funds on deposit with counsel could

have earned net interest for them. And prior to the adop-

tion of IOLTA rules, the potential interest simply re-

dounded to the benefit of the bank. Thus, in sharp contrast

to the owners of real property, IOLTA clients never had

any expectation that they would have “undisturbed ...

possession” of pooled account interest.

M>reover, Loretto justified applying a per se rule to

physical occupations, regardless of the extent of economic

impact, because economic impact would be addressed later

on remand when the state court determined just compen-

sation. Loretto, 458 U.S. at 437-38. In our case, however,

petitioners’ per se rule would do much more than “deter-

min{e) whether there is a taking in the first instance.” Jd.

at 438. Petitioners seek to use a per se rule to avoid con-

sideration of whether compensation is due because their

economic loss is zero. (Pet. App. 41a). But that very com-

pensation determination is what makes the application of

a per se rule, as opposed to the usual Penn Central analy-

sis, acceptable in certain limited circumstances. Loretto,

458 U.S. at 437-38.

This Court’s decision in Lucas also emphasized the

unique role of land — and the very different treatment of

personal property — under the Takings Clause. The Court

explained that, in contrast to land, “in the case of personal

property, by reason of the State’s traditionally high degree

of control over commercial dealing, [the owner) ought to be

indeed over $100,000 in interest - from an interpleader eccount

critical to the Court's finding a taking. a

11

aware of the possibility that new regulation might even

render his property economically worthless (at least if the

property's only economically productive use is sale or

manufacture for sale).” 505 U.S. at 1027-28. Petitioners’

per se rule would ignore the carefully crafted limitation on

the categorical rule for land articulated in Lucas.

B. A Per Se Taking Should Never Be Found

Where, as Here, Application of the Tradi-

tional Ad Hoc Balancing Test Would Pro-

duce a Different Result.

In cases within the narrow rules outlined in Loretto

and Lucas, the weighing of factors called for by Penn

Central is unnecessary because the existence of a taking is

obvious. As petitioners themselves concede, “the per se test

truncates the fuller Penn Central analysis of all surround-

ing factors only where those factors cannot possibly alter

the conclusion that a taking has occurred.” Pet. Br. 16.

Due to the danger that categorical approaches will

lead to unjust results, this Court very recently reiterated

its concerns about creating or expanding per se takings

rules. In Tuhoe-Sierra Preservation Council, the Court

emphasized that “(t]he ‘temptation to adopt what amount

to per se rules in either direction must be resisted.’” 122

S.Ct. at 1489, quoting Palazzolo, 533 U.S. at 636 (O’Con-

nor, J., concurring). The Court rejected a request that it

adopt a per se rule for reviewing planning moratoria as

“simply ‘too blunt an instrument’” for identifying cases in

which a taking has occurred. Jd. at 1489, quoting Palaz-

zolo, 533 U.S. at 628.

Application of the Penn Central factors to the Wash-

ington State IOLTA rule demonstrates that there is no

12

taking in this case. As discussed in respondents’ briefs,

those factors — especially the absence of any economic

impact on the client and the lack of any “reasonable

investment-backed expectation” that interest on small or

very short-term accounts would be both unregulated and

would inure to the client - demonstrate that no taking has

occurred under Penn Central. It would, therefore, be

unjust to find a taking under a truncated per se test.

Moreover, a per se rule in this case would clash with

the guiding principle for evaluating takings claims, i.e.,

that “some people alone” should not be singled out “to bear

public burdens” which in fairness should be borne by the

general public. Armstrong v. United States, 364 U.S. 40, 49

(1960). Petitioners turn Armstrong on its head. Petitioners

themselves point out that any alleged burdens resulting

from IOLTA programs are so small that they “may go

unnoticed and unopposed,” (Pet. Br. 32); and indeed there

is no economic burden. IOLTA programs are effective

because they apply to large numbers of people and rely on

pooling of minuscule amounts of money obtained from

each individual deposit.’ Petitioners therefore contort

Armstrong when they assert that IOLTA programs are not

only takings, but per se takings.

* The Washington program, for example, generates roughl

saps per year (Pet. oe. 7a) by accumulating the gross satevent

from a very large aumber of deposits, such as petitioner Brown’s alleged

$5 in interest (Pet. App. 34a). 2 . .

13

C. Petitioners’ Per Se Rule Would Disregard

a Consensus Among the States and Invite

Judicial Oversight of State Policy

Choices.

In a remarkable display of consensus, each of the fifty

States has enacted a statute or rule that requires or

permits attorneys to establish IOLTA accounts from which

interest is distributed to support programs that advance

the administration of justice. Against this background,

petitioners’ argument that there is a confiscatory “charac-

ter” in this governmental action that “alone” demonstrates

“the Washington IOLTA program to be a per se taking,” is

incongruous and unsupportable. See Pet. Br. 15. The Court

should firmly reject petitioners’ invitation to announce a

categorical rule so at odds with the reasonable determina-

tions of the fifty States.’

To date, per se takings rules have been reserved for

circumstances in which the government destroys a funda-

mental, well-established property right. See Loretto, 458

U.S. at 435 (permanent physical occupation of property is

“perhaps the most serious form of invasion of an owner's

property interests”); Lucas, 505 U.S. at 1028 (elimination

of “all economically valuable use” of land “is inconsistent

" The great majority of the States established their IOLTA pro-

grams through a rule adopted by the State’s highest court. Phillips, 524

U.S. at 159-60 n.1. When a State’s highest court promulgates rules

regulating the practice of law, the court rules constitute “state” policy in

the same manner as legislatively-enacted programs. See Supreme Court

of Virginia v. Consumers Union, 446 U.S. 719, 734 (1980) (finding that

Virginia Supreme Court exercised “the State’s entire legislative power

with respect to regulating the Bar”).

14

with the historical compact recorded in the Just Compen-

sation Clause that has become part of our constitutional

culture”). That IOLTA rules upset no similarly settled

expectations is reflected in the considered judgments of

the courts and legislatures of the fifty States that have

implemented the rule. See, supra, at 2-3.° Because a

national consensus has developed affirming the propriety

of attorneys’ maintaining IOLTA accounts, petitioners

cannot credibly maintain that the “character” of the

programs is so repugnant to existing property rights and

expectations that a per se taking must be found.

~ Moreover, petitioners’ per se rule would override the

will of a State based exclusively on judicial evaluation of

the “character” of an IOLTA rule, bypassing evaluation of

more objective factors such as the rule’s economic impact

and whether it upsets clients’ reasonable investment-

backed expectations. So enlarging the reach of the Takings

Clause would seriously undermine the “[dJual sovereignty”

that “is a defining feature of our Nation’s constitutional

blueprint.” Federal Maritime Commission v. South Caro-

lina State Ports Authority, 122 S. Ct. 1864, 1870 (2002).

Indeed, because petitioners are patently unable to demon-

strate any economic loss under the Washington IOLTA

rule, their challenge to the “character” of the IOLTA

program reduces to nothing more than their personal

disagreement with the important public purposes it

serves. Petitioners now ask the Court to ershrine this

* These determinations accord with settled common law under

which a trustee has no obligation to pay interest to a beneficiary unless

the principal in the trust earns interest that exceeds the costs of trust

administration. 2A Scott on Trusts, §§ 181, 182 (1987 and 2002 Supp.).

15

disagreement in a per se rule under the Takings Clause.

But the Court has long recognized that it does not “sit as a

super-legislature to determine the wisdom, need, and

propriety of laws that touch economic problems, business

affairs, or social conditions.” Griswold v. Connecticut 381

U.S. 479, 481-82 (1965). Cf. Williamson v. Lee Optical of

Oklahoma, Inc. 348 U.S. 483, 488 (1955) (“The day is gone

when this Court uses the Due Process Clause of the

Fourteenth Amendment to strike down state laws, regula-

tory of business and industrial conditions, because they

may be unwise, improvident, or out of harmony with a

particular school of thought. . . . ”). The Court should reject

petitioners’ proposed per se rule-as a direct invitation to

improper judicial review of the reasonable policy choices of

the States in enacting IOLTA programs.

D. If a Per Se Test Is Extended to Rules, Like

IOLTA, That Affect Only the Use of Intan-

gible Personal Property But Have No

Economic Impact, Virtually Any Police

Power Regulation Could Be Subject to

Challenge Under the Takings Clause.

The application of a per se taking rule to the Washing-

ton IOLTA program — which imposes no financial burden

on clients — would disrupt established government practice

to an extraordinary degree. Indeed, the Court has “recog-

nized, in a wide variety of contexts, that government may

execute laws or programs that adversely affect recognized

economic values” without effecting a taking. Penn Central

Transportation Co., 438 U.S. at 124. Petitioners’ proposed

rule contravenes this precedent.

Petitioners’ attempt to limit their per se rule to alleged

appropriations of money is wholly unhelpful. In Sperry

16

Corp., the Court observed that a categorical takings rule

for monetary exactions may have untoward results,

stating: “If the deduction in this case was [construed to be]

a physical occupation, so would be any fee for services. . . .”

493 U.S. at 62. Petitioners’ expansive rule could implicate

any direct or indirect financial assessment by the govern-

ment — a long list that could extend from general taxes

and user fees to mandatory bar dues, public library fines

and parking tickets — even though the Court has rejected

claims asserting an uncompensated taking in many such

circumstances. See, e.g., City of Pittsburgh v. Alco Parking

Corp., 417 U.S. 369, 376 (1974) (rejecting claim that 20%

gross receipts tax on commercial parking lots was a

taking, even if the tax was “so high as to threaten the

existence of an occupation or business”).’ Petitioners’

proposed rule would also call into question settled modes

of business regulation, such as laws restricting rates

companies charge to consumers or rents landlords charge

tenants, even though these laws have routinely been

upheld against constitutional challenges. See, e.g., Per-

mian Basin Area Rate Cases, 390 U.S. 747, 768-70 (1968)

* Branch v. United States, 69 F.3d 1571 (Fed. Cir. 1995), illustrates

one of many takings claims that would spring from petitioners’ per se

rule. There, a bank asserted that the government’s seizure of assets to

offset losses of another bank owned by the same bank holding company

constituted a per se taking. The court rejected the claim, explaining

that the taking of money through taxes or assessments has never been

subject to a per se analysis by this Court: “[E]ven though taxes or

special municipal assessments indisputably ‘take’ money from individu-

als or businesses, assessments of that kind are not treated as per se

takings under the Fifth Amendment.” Jd. at 1576-77 (collecting

mo Court cases rejecting takings challenges to taxes and assess-

17

(upholding natural gas rate setting); Bowles v. Willing-

ham, 321 U.S. 503, 516-19 (1944) (rejecting takings

challenge to rent control).

Petitioners urge that the State effects a per se taking

even when its regulation of client trust accounts affects

only non-economic interests — namely, the right “to control

the uses to which their property is put.” Pet. Br. 33, 35.

Virtually any regulation of client trust accounts under a

State’s code of professional responsibility — indeed, even

the simple requirement that such funds be maintained in

a bank, as opposed to the office safe — affects such a right

to control uses. Petitioner’s proposed per se rule would

thus significantly disrupt amici States’ traditional author-

ity to regulate the practice of law. See Leis, 439 U.S. at

442.

Petitioners’ proposed per se rule would frustrate even

well-settled uses of the police power to protect public

health, safety and welfare, and would leave the States

entirely unable to gauge the limits of their regulatory

authority. If, as petitioners argue, a per se taking can be

found based purely on the “character” of a governmental

action, federal courts will be asked to sit in review of the

“character” of virtually any regulation that affects an

owner’s use of property, but does not diminish the prop-

erty’s value or the owner’s actual (or even potential) return

on investment. Such an expansion of the per se takings

doctrine “would undoubtedly require changes in numerous

practices that have long been considered permissible

exercises of the police power.” Tahoe-Sierra Preservation

Counsel, 122 S.Ct. at 1485. Petitioners’ proposed rule is

utterly out of place in the Court’s settled takings jurispru-

dence, and should be rejected. >

18

II. THERE IS NO CONSTITUTIONAL VIOLA-

TION TO BE REMEDIED THROUGH IN-

JUNCTIVE RELIEF.

A. The Takings Clause Is a Compensatory

Constitutional Provision Rather Than a

Substantive Limit on Government Power.

The Fifth Amendment’s Takings Clause does not ban

government from taking private property for public use.

Rather, the Fifth Amendment conditions the right to take

private property for public use on payment of “just com-

pensation” for the property taken.” “This basic under-

standing of the Amendment makes clear that it is

designed not to limit the governmental interference with

property rights per se, but rather to secure compensation

in the event of otherwise proper interference amounting to

a taking.” First English Evangelical Lutheran Church v.

County of Los Angeles, 482 U.S. 304, 315 (1987) (emphasis

in original).

The compensatory nature of the Takings Clause was

recently emphasized by the Court in City of Monterey v.

Del Monte Dunes, Ltd., 526 U.S. 687 (1999). There, the

Court recognized that so long as a compensatory remedy

exists, the Fifth Amendment is not violated:

The constitutional injury alleged, therefore, is

not that property was taken but that it was

” This does not mean that there are no limits on the government's

right to take property. The Fifth Amendment requires that private

property be taken only for a “public use.” The Due Process Clauses of

the Fifth and Fourteenth Amendments provide additional limitations

on government’s power to take and use private property. These other

substantive limitations are not, however, before the Court in this case.

19

taken without just compensation. Had the city

paid for the property or had an adequate post-

deprivation remedy been available, Del Monte

Dunes would have suffered no constitutional in-

jury from the taking alone.

Id. at 709. The Court observed this same principle in

Williamson Planning Comman. v. Hamilton Bank, 473 U.S.

172 (1985), in considering the ripeness of a takings claim

for adjudication: “Because the Fifth Amendment pro-

scribes takings without just compensation, no constitu-

tional violation occurs until just compensation has been

denied.” Jd. at 194.

Nevertlieless, petitioners focus on injunctive relief

rather than compensation, thereby revealing their real

agenda: using the Takings Clause to challenge governmen-

tal policy with which they disagree. As pointed out by

Justice Kennedy, however, the judiciary should invoke the

Takings Clause only to ensure that property owners are

compensated for the taking of their property, but not to

review the validity of governmental policy:

The imprecision of our regulatory takings doc-

trine does open the door to normative considera-

tions about the wisdom of government decisions.

See, e.g., Agins v. City of Tiburon, 447 U.S. 255

(1980) (zoning constitutes a taking if it does not

substantially advance legitimate state interests).

This sort of analysis is in uneasy tension with

our basic understanding of the Takings Clause,

which has not been understood to be a substan-

tive or absolute limit on the Government's power

to act. The Clause operates as a conditional limi-

tation, permitting the Government to do what it

wants so long as it pays the charge. The Clause

20

presupposes what the Government intends to do

is otherwise constitutional. . . .

Eastern Enterprises v. Apfel, 524 U.S. at 545 (Kennedy, J.,

concurring in the judgment and dissenting in part) (em-

phasis added). Thus, petitioners’ request for injunctive

relief against the Washington IOLTA Program is entirely

misplaced, given that the Takings Clause is not intended

to limit government’s ability to act, but is instead intended

only to ensure that government pay for the impacts of

certain actions.

B. There Is No Unconstitutional Taking

Within the Meaning of the Takings Clause

Unless the Property Owner Is Entitled to

Just Compensation.

In urging that injunctive relief is an appropriate

remedy in this case, petitioners seek to edit the twelve-

word Takings Clause to nine by excising the requirement

that prohibited takings be “without just compensation.”

This edit allows petitioners to interpose injunctive relief as

a “remedy” for their novel constitutional claim. But it is

not enough that petitioners assert that there has been a

deprivation of a property interest; to establish a constitu-

tional injury they must also show that the deprivation has

been “without just compensation.” Where just compensa-

tion is zero, there is no Takings Clause injury, and no

ground for providing injunctive relief under that clause.

This conclusion is compelled by “the guiding principle

of just compensation,” which is to put the property owner

“‘in as good 4 position pecuniarily as if his property had

not been taken.’” United States v. Virginia Electric Co.,

21

365 U.S. 624, 633 (1961), quoting Olson v. United States,

292 U.S 246, 255 (1934). The Takings Clause thus requires

a financial loss. And it is solely concerned with the owner’s

loss. See Boston Chamber of Commerce v. City of Boston,

217 U.S. 189, 195 (1910) (“[The question is] What has the

owner lost? not, What has the taker gained?”). A necessary

corollary is that there is no constitutional guarantee that

the owner of property taken by the government is entitled

to a remedy under the Takings Clause; the owner must

show that she suffered a pecuniary loss to invoke that

clause.

Although in most instances when government takes

private property for public use the owner loses a property

interest of some value, this is not always the case. This

Court recognized the possibility of a government taking of

property where no compensation is due, and thus no

Takings Clause violation occurs, in Marion & R.V.R. Co. v.

United States, 270 U.S. 280 (1926). In Marion, the Court

considered whether a federal order authorizing govern-

ment use of railroads during World War I constituted a

taking of the Marion Railroad’s property. Justice Brandeis,

writing for a unanimous Court, found it unnecessary to

consider whether a taking had occurred because, even if

the government did take the railroad’s property, no com-

pensation was due for the taking. “Nothing was recover-

able as just compensation because nothing of value was

taken from the company; and it was not subjected by the

Government to pecuniary loss.” Jd. at 282. Underscoring

the fact that the Takings Clause is a compensation clause,

Marion went on to stress that there was “[n]Jo evidence . ..

that the alleged taking had subjected the company to any

pecuniary loss or had deprived it of anything of pecuniary

value.” Id. at 286.

22

A common circumstance where government takes

property but owes nothing as just compensation is the

taking of easements appurtenant to a dominant estate.

Where the easement taken is not needed by the dominant

estate, such as where the easement grants a right to

ingress and egress and other methods of ingress and

egress are available, the value of what is taker from the

owner of the easement will be small or non-existent, even

if the gain to the government in obtaining the easement is

great. In these cases, the owner of the easement cannot

enjoin the government project. The owner instead essen-

tially receives nothing as just compensation. See, e.g.,

Gilmore v. State, 143 N.Y.S.2d 873 (Ct. Cl. 1955) (nominal

compensation of $1.00 for condemnation of easements and

rights of way of no benefit to landowners); Redevelopment

Agency v. Tobriner, 215 Cal.App.3d 1087 (1989) (court

ordered nothing as just compensation for condemnation of

valueless nonexclusive easements); Restatement (First) of

Property, § 508, com. c, illus. 2 (market value of dominant

estate not affected by taking of easement since public way

established by condemnation is fully as serviceable as

easement right of way; owner of dominant estate entitled

to no award for taking of easement).

The principle that the remedy for a taking of property

is compensation that represents the pecuniary loss, if any,

suffered by the owner is also illustrated in Loretto. The

Court’s remand in Loretto for a determination of just

compensation, without discussion of equitable relief to bar

enforcement of the statute, points to an understanding

that a taking by itself warrants no “remedy” other than a

23

determination of just compensation.” The mere fact that

the property owner’s loss as a result of a taking is small or

non-existent does not change the basic stricture of the

Fifth Amendment that only those takings that are without

“just compensation” are prohibited.

C. Injunctive Relief Is Unavailable Because

the Washington State Courts Can, and

Should, Decide Any Question of Just

Compensation.

Petitioners have suffered no loss as a result of the

IOLTA program and thus are due no compensation. If

there is any question that this is the case, however, peti-

tioners’ remedy is not injunctive relief. Rather, their

remedy is a state court action for determination of the

amount, if any, of compensation due.

The general rule regarding the unavailability of

injunctive relief in takings cases was established in

Ruckelshaus v. Monsanto, 467 U.S. 986, 1016 (1984):

“Equitable relief is not available to enjoin an alleged

taking of private property for public use, duly authorized

by law, when a suit for compensation can be brought

against the sovereign subsequent to the taking.”

There is only one circumstance where this Court has

indicated that injunctive relief might be available to

" The subsequent history of Loretto reveals that the statutory

nominal compensation of $1.00 was more than enough to compensate

Loretto for the minor physical invasion of her property. See Loretto v.

Group W. Cable, 522 N.Y.S.2d 543, 546 (Sup. Ct. 1987).

24

address an otherwise legitimate taking: where no mecha-

nism exists to obtain just compensation. See, e.g., Pre-

seault v. ICC, 494 U.S. 1, 13 (1990) (“All that is required is

the existence of a reasonable, certain and adequate provi-

sion for obtaining just compensation at the time of the

taking”); cf. Eastern Enterprises, 424 U.S. at 521 (plural-

ity) (injunction permitted where “monetary relief against

the government [was] not an available remedy”).” Al-

though petitioners base their request for injunctive relief

in part on the asserted lack of an adequate provision in

Washington's IOLTA program for obtaining just compensa-

tion, it is simply not true that petitioners lack a mecha-

nism for determination of just compensation. Property

owners can seek just comper ation in state court. See, e.g.,

Sintra v. City of Seattle, 829 P.2d 765 (Wash. 1992). More-

over, it is petitioners’ burden to demonstrate that the state

inverse condemnation procedure is “unavailable or inade-

quate”; until they have “utilized that procedure,” petition-

ers have no right to relief. Williamson Planning Commn.,

473 U.S. at 196-97; cf. Pennzoil Co. v. Texaco Inc., 481 U.S.

1, 14-15 (1987) (federal plaintiff challenging state court

post-judgment procedures has burden to show that state

law barred presentation of its claim).

° The Court did not establish a general rule that injunctive relief

is appropriate to address a taking in Babbitt v. Youpee, 519 U.S. 234

(1997). Although the Court affirmed the lower court’s entry of declara-

tory and injunctive relief in Youpee, the parties did not raise and the

opinion does not address, explain or discuss the propriety of injunctive

relief to address a taking. The affirmance regarding remedy is therefore

best viewed as dicta rather than a new rule that property owners may

choose either injunctive relief or just compensation in response to a

government taking.

25

As the Court recognized in Williamson, 473 U.S. at

194-95 and n.14, the channeling to state court of suits

alleging injury to property is analogous to the Parratt-

Hudson doctrine in the procedural due process context.

See Parratt v. Taylor, 451 U.S. 527 (1981) and Hudson v.

Palmer, 468 U.S. 517 (1984). Under that doctrine, as here,

/ state courts are the proper venue where parties allege

| state-caused injuries to property and “there is no federal

wrong unless the state judicial system is unavailable.”

SGB Financial Services, Inc. v. City of Indianapolis, 235

F.3d 1036, 1038 (7th Cir. 2000) (Easterbrook, J.). Federal

involvement is reserved for situations where no adequate

state process is available to address the injury. See Al-

bright v. Oliver, 510 U.S. 266, 284-85 (1994) (Kennedy, J.,

joined by Thomas J., concurring in judgment); Zinermon v.

Burch, 494 U.S. 113, 139-151 (1990) (O’Connor, J., dissent-

ing).

It would particularly disturb sovereign state interests

to permit petitioners to bypass the stete court in favor of

federal injunctive relief. Although petitioners do not

specify the form of equitable relief they seek, the likely

possibilities are problematic. A federal court order that

limits or restructures the IOLTA program — especially by a

claim under the Takings Clause — would offend core

principles of comity and federalism. See Rizzo v. Goode,

- 423 U.S. 362, 378 (1976) (“Where, as here, the exercise of

authority by state officials is attacked, federal courts must

be constantly mindful of the ‘special delicacy of the ad-

justment to be preserved between federal equitable power

and State administration of its own law.’”), quoting Ste-

fanelli v. Minard, 342 U.S. 117, 120 (1951). Any effort to

obtain a compensation determination in federal court,

either directly, or indirectly through an injunction, would

26

be barred by the Eleventh Amendment. See Lake County

Estates, Inc. v. Tahoe Regional Planning Agency, 440 U.S.

- 391, 400 (1979). See also Pet. Br. 45 n.23 (noting Eleventh

Amendment bar to federal court suit against a State for

compensatory relief).

Petitioners cannot show that Washington lacks a state

court mechanism for determination of just compensation.

Nor can petitioners show that Washington state courts will

not follow this Court’s Takings Clause jurisprudence such

that federal intervention enjoining the IOLTA program is

warranted. Rather, it appears that petitioners’ real con-

cern is not that they lack a mechanism for determination

of just compensation, but that just compensation in their

case will be nothing. That fact does not, however, allow

them to bypass a state court determination of this issue

and invoke federal equitable power to limit the State’s

IOLTA program. Cf. SGB Financial Services, Inc., 235 F.3d

at 1038. As long as a state procedure is available, as it is

here, petitioners are not entitled to federal injunctive

relief.

27

CONCLUSION

The judgment of the court of appeals should be af-

firmed.

Respectfully submitted,

BILL LOCKYER THOMAS F. REILLY

Attorney General of California Attorney General

RICHARD M. FRANK of Massachusetts

Chief Assistant Attorney WILLIAM W. PORTER

General Amy SPECTOR

J. MATTHEW RODRIQUEZ Assistant Attorneys

Senior Assistant Attorney General

General One Ashburton Place

*DANIEL L. SIEGEL Boston, MA 02108

Supervising Deputy Attorney Telephone: (617) 727-2200

General

CHRISTIANA TIEDEMANN

Deputy Attorney General

1300 I Street

Sacramento, CA 95814

Telephone: (916) 323-9259

Counsel of Record

[Additional counsel listed on inside front cover]