Choice of Law in Takings Cases After Tyler v. Hennepin County (II)

In yesterday’s post, I recounted what happened in Tyler v. Hennepin County, Minnesota, and I restated questions lawyers might reasonably ask about the case. In Tyler, Chief Justice John Roberts, the author of the Court opinion, held that surplus equity—the proceeds left over after a creditor forecloses and sells real estate to pay off a debt—constitutes “private property” sufficient to support claims under the Takings Clause. To justify that conclusion, Roberts cited Magna Carta, a 17th-century Act of Parliament, Blackstone, a Founding Era act of the U.S. Congress, Founding Era state practice, its own precedents, and several Minnesota statutes about debtor-owners’ rights in foreclosure proceedings. But the Court’s justification will strike many lawyers as strange. Black-letter takings doctrine seems to hold that, “[b]ecause the Constitution protects rather than creates property interests, the existence of a property interest is determined by reference to existing rules or understandings that seem from an independent source such as state law.” Why didn’t the Court determine whether Tyler had property relying solely on the relevant Minnesota statute—which made clear that foreclosed-on owners don’t retain property in surplus equity after foreclosure?

I am going to answer that question in two posts. I do so in large part because I suspect that different readers will bring different expectations to the relevant issues. For example, federal courts specialists might find the question I asked a bit overdrawn, or belaboring the obvious. If any such readers are having reactions like those, I ask them to bear with me today. Many property lawyers are asking the question I asked above, in the tone in which I asked it. Today, then, I’d like to recount choice of law principles that federal courts specialists know well, for the benefit of property lawyers. The property lawyers get their day tomorrow.

The nerve of the answer to my question comes in a passing quote in Tyler. Roberts paid lip service to the standard black letter in takings litigation; he granted that the Court “draws on ‘existing rules or understandings’ about property rights” when it determines whether plaintiffs have private property for constitutional purposes. But Roberts insisted that that black-letter rule has limits, that “state law cannot be the only source” of a claimant’s property. To back that limit up, Roberts quoted a Sixth Circuit opinion in a similar case, by Judge Raymond Kethledge: “the Takings Clause would be a dead letter if a state could simply exclude from its definition of property any interest that the state wished to take.”

The mention of a “dead letter” is the giveaway. Judge Kethledge did not provide, and Chief Justice Roberts did not fill in for him a citation to that phrase. But the most famous quotes from constitutional law do not need cites to be familiar—”[I]t is a Constitution we are expounding,” “I know it when I see it,” or “emanations and penumbras.” Although “dead letter” isn’t quite as famous as any of those phrases, it is familiar, and familiar on legal principles extremely relevant to Tyler. Roberts must have quoted Kethledge because Kethledge’s “dead letter” soundbite captured how Roberts and his colleagues saw the choice of law issue in Tyler.

The phrase “dead letter” comes from the Court’s 1938 opinion in Indiana ex rel. Anderson v. Brand. Anderson had taught as a public school teacher in Indiana for nine years, and for the last of those years she taught on contracts that arguably entitled her to tenure consistent with an Indiana statute. But the Indiana legislature repealed that statute. After that repeal Brand (the trustee of the school where Anderson taught) threatened to terminate Brand, and she then sued and argued that termination would violate her rights under the Contracts Clause. Brand denied that Anderson had tenure after repeal of the tenure statute. Construing Indiana contract law and the relevant tenure statutes, the Indiana Supreme Court concluded that Anderson had never held a contractual right to tenure.

The U.S. Supreme Court rejected the Indiana court’s conclusion and reversed. Under black-letter Contracts Clause doctrine, when the U.S. Supreme Court reviews judgments by state courts, ordinarily it reviews only federal legal questions and leaves state law questions to the state courts. But there are exceptions to that black letter, and Associate Justice Owen Roberts, writing for the Court, thought one applied in Brand. Since the question whether public school teachers could get tenure under Indiana statutes was “one primarily of state law,” Roberts accorded “respectful consideration and great weight to the views of the state’s highest court.” He hastened to add, however, that “in order that the constitutional mandate may not become a dead letter, [the U.S. Supreme Court was] bound to decide for [itself] whether a contract was made … and whether the State has, by later legislation, impaired its obligation.” Roberts (again, the earlier one) conducted for the Court an independent analysis of Indiana judicial decisions and tenure statutes, and he concluded from that review that Anderson had indeed acquired tenure under Indiana law.

Brand—and the phrase “dead letter”—now represent a general framework familiar in federal courts law. Ever since the New Deal, and especially since Erie Railroad v. Tompkins, federal courts are averse to developing federal law and disposed to rely on state law. Federal courts have the same aversion and disposition even when they are filling in the details of federal constitutional rights. In principle, however, it always remains a federal question what a federal constitutional right means and covers. So when federal courts consult state law to determine whether a plaintiff has a federal right, they do so for reasons of convenience. And when state actors are construing or constructing state law to sap the federal right of its substance, federal courts can measure the claimants’ entitlements against a different federal backdrop.

In Tyler, Chief Justice Roberts and his colleagues saw the Takings Clause issue through that framework. In its takings cases, the Court often says that it relies on state law to determine whether claimants have private property. But that practice is a rule of convenience. It always remains a federal question whether claimants have constitutional private property. And when it seems likely that a state practice makes a dead letter of federal takings guarantees in some context, Roberts concluded in Tyler, federal courts can consult a wider range of sources to measure takings claimants’ property rights.

A reader commented on my post from yesterday and asked whether this two-track doctrine “provid[es] the means for judges to reason backwards from the outcome they prefer to the legal reason for that outcome.” Yes and no. Yes, because any two-track doctrine could be used that way. No, though, because most judges don’t decide cases that cynically. And, because judges need to be trusted with some discretion for legal systems to be durable. That discretion matters most of all in constitutional orders (the point of the “it is a Constitution we are expounding” soundbite). A durable constitutional order must anticipate both cynicism by federal judges and opportunism by states. And these problems don’t arise only with “economic” rights like contract or property rights. The same problems arose mid-twentieth-century, in federal criminal procedure. Many federal criminal procedure guarantees involved state law, and federal courts needed to determine whether state courts were applying state law fairly to African-American criminal defendants.

But although Chief Justice Roberts and his colleagues followed Brand‘s “dead letter” approach in Tyler, they did not follow Brand in every little detail. If they had followed Brand completely, they would have consulted only Minnesota sources—Minnesota foreclosure statutes, and Minnesota case law about the treatment of surplus equity—to say whether the real-estate tax foreclosure statute at issue in Tyler took private property. Again, however, the Court consulted a wide range of English and American sources to say whether surplus equity is “private property” for Takings Clause purposes. Yesterday, I said that Tyler applied general choice of law principles with a twist. The twist came in the sources the Court consulted to say whether Tyler had federal constitutional property. I’ll study that twist in tomorrow’s post.

The post Choice of Law in Takings Cases After Tyler v. Hennepin County (II) appeared first on Reason.com.