Chalmers v. Winston

• Decision Date: 04 May 2000
• Docket Number: No. C.A. 98-1714-AM.,C.A. 98-1714-AM.
• Citation: 95 F.Supp.2d 536
• Court: U.S. District Court — Eastern District of Virginia
• Parties: Carl R. CHALMERS, # 116461, Plaintiff, v. Andrew J. WINSTON, et al., Defendant.

95 F.Supp.2d 536

Carl R. CHALMERS, # 116461, Plaintiff, v. Andrew J. WINSTON, et al., Defendant.

No. C.A. 98-1714-AM.

United States District Court, E.D. Virginia, Alexandria Division.

May 4, 2000.

Carl R. Chalmers, State Farm, VA, for plaintiff.

Mark R. Davis, Senior Assistant Attorney General, Office of the Attorney General, Criminal Law Division, Richmond, VA, for defendant.

MEMORANDUM OPINION

ELLIS, District Judge.

Plaintiff, a prisoner in the custody of the Virginia Department of Corrections ("VDOC"), claims that VDOC's policy of retaining interest generated on the money he and other inmates earn while incarcerated violates the Takings Clause of the United States Constitution. Cross-motions for summary judgment are at bar.

I

Plaintiff Carl R. Chalmers, a VDOC prisoner since February 23, 1979, complains that VDOC unconstitutionally retains interest generated on its prisoners' funds.¹ At all times relevant to this case, plaintiff has been incarcerated in the Powhatan Correctional Center ("PCC"). The first of two named defendants, Andrew J. Winston, is the Chairman of the Board of Corrections ("BOC"), the nine citizen entity that establishes VDOC prison policies, including the policies in issue here regarding prisoner accounts and the use of interest earned on those accounts. The second defendant, Ronald Angelone, is the Director of VDOC, and as such, administers Virginia's prison system. Plaintiff seeks both monetary and injunctive relief as to each defendant. Accordingly, plaintiff's complaint is construed as brought against defendants in both their official and their individual capacities.²

Prisoners in VDOC custody may earn money while incarcerated, but they may not retain currency. Thus, prisoners must keep their money in an account, either an outside bank account or one of the accounts provided by VDOC. According to policy set by the BOC, each prisoner must maintain at least $25.00 in an Inmate Trust Fund Account ("ITFA"), which money is disbursed to the prisoner at the time of his or her release. Toward that end, 10% of a prisoner's prison pay check is automatically placed into a so-called "hold account" within the ITFA until the value of that account reaches $25.00. Under the BOC's policy in effect prior to February 28, 1999, a prisoner's earnings over the $25.00 retained in the hold account, as well as any funds the prisoner receives from outside sources, were deposited exclusively in a "spend account" within ITFA, and the prisoner was free to use that money to purchase goods from the prison commissary or from approved outside sources. This BOC policy was amended on February 28, 1999. Under the amended policy, prisoners have an additional option; they may deposit funds in excess of the required $25.00 for the hold account in an outside bank account, provided that the outside account is managed by a third party.³ And, like the former policy, the new policy also permits prisoners to maintain funds in excess of $25.00 in the ITFA spend account. Both the pre- and post-February 1999 policies limit prisoner spending to funds held in the ITFA spend account.

The Virginia Code authorizes the Director of VDOC to invest ITFA funds in state and federal bonds, or in federally-insured investments. See Va.Code § 53.1-44. Significantly, the interest or income generated from such investment does not accrue to each individual prisoner's spend or hold accounts. Instead, the statute provides that "[a]ny income or increment of increase received from the bonds or investments may be used by the Director for the benefit of the prisoners under his care." Va.Code § 53.1-44 (emphasis added). Pursuant to this statutory authorization, each prison deposits a portion of its ITFA funds in an interest-bearing checking account ("prison checking account") to provide funds for daily purchases from the prison commissary, and for disbursement of the hold account funds to prisoners being released. The remaining ITFA funds from each prison are pooled with ITFA funds from other VDOC prisons into a Local Government Investment Pool ("LGIP"). The funds in the LGIP are invested in approved bonds or federally-insured debt instruments, and the proceeds of this investment are then distributed to the various prisons in amounts proportional to the amounts the prisons contributed to the LGIP. The interest or income is distributed semiannually, and is currently distributed directly to each prison's commissary account, where the funds are used to purchase goods for the prisoners' benefit, such as magazine subscriptions and exercise equipment.

VDOC does not charge its prisoners a service fee for maintenance of the ITFA hold and spend accounts, and in any event, the costs of managing and maintaining the ITFA accounts at the various prisons exceeds the interest earned on the pooled ITFA funds in the LGIP and the prison checking accounts. For example, from the record, it appears that at PCC alone four employees are required to manage prisoner accounting, yet PCC received only $5,479.45 in interest income from the LGIP in 1998, and the prison checking account generates an average of $59.86 every month. This total interest income falls far short of the full costs incurred at PCC in administering the accounts. Given the administrative costs involved, VDOC does not currently trace the amount of interest generated by the ITFA funds in the LGIP or in the prison checking account that is attributable to each prisoner based on the prisoner's contributions. Indeed, were plaintiff to prevail in this matter, VDOC asserts it would simply refuse to invest ITFA funds to avoid the substantial unreimbursed costs of administering and disbursing the interest earned by the LGIP and prison checking account funds. According to VDOC, it lacks the resources and expertise to determine, in a cost-effective way, the interest to which each prisoner would be entitled.

Nonetheless, plaintiff contends that any interest generated on his money in the ITFA spend and hold accounts should be attributed to him, and that the VDOC's policy of retaining the interest, and spending it for the benefit of the prison population, violates the so-called Takings Clause of the Fifth Amendment. The parties have filed cross-motions for summary judgment as to the merits of plaintiff's constitutional claim, and defendants also raise the defenses of qualified immunity and Eleventh Amendment immunity from an award of damages. The material facts are essentially undisputed and the matter is ripe for disposition.

II

As to both plaintiff's takings claim and defendants' qualified immunity defense,⁴ the threshold question is "whether the plaintiff has alleged a deprivation of a constitutional right at all." County of Sacramento v. Lewis, 523 U.S. 833, 842 n. 5, 118 S.Ct. 1708, 140 L.Ed.2d 1043 (1998); see Suarez Corp. Indus. v. McGraw, 202 F.3d 676, 685 (4th Cir.2000). And in this case, the question presented is whether defendants' failure to apportion to plaintiff his share of interest and other income generated by the ITFA funds constitutes an unconstitutional taking of private property without just compensation in violation of the Fifth Amendment.⁵ The starting point in the analysis of this question is the text of the Fifth Amendment's Taking Clause.⁶ This text makes clear that any takings analysis includes three primary inquiries, namely (i) whether the res claimed to be taken is actually "private property," (ii) whether that property was "taken for public use," and (iii), if so, whether the government provided "just compensation" for the property. See, e.g., Phillips v. Washington Legal Foundation, 524 U.S. 156, 118 S.Ct. 1925, 141 L.Ed.2d 174 (1998) (noting the three inquiries in a takings analysis, though resolving only the first). In this case, analysis need go no further than the second inquiry, as it is dispositive here.

The first inquiry in the context of this case, is whether plaintiff has a property right in the interest earned on the funds in his ITFA spend and hold accounts, which funds are pooled with the funds of other inmates in the prison checking account and in the LGIP. While the Constitution protects property rights, it does not create them, and the question whether a particular interest represents a property right must therefore be made "by reference `to existing rules or understandings that stem from an independent source such as state law.'" Phillips, 524 U.S. at 164, 118 S.Ct. 1925 (quoting Board of Regents of State Colleges v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972)). Certain property rights are created by statute, and the extent of those property rights is determined by reference to the statute creating the right.⁷ Other property rights exist independently of any statute, and derive from fundamental principles of a state's property law.⁸ And, although states may regulate property rights, they may not declare, by legislative fiat, that a fundamental principle of property law does not apply in a certain circumstance, without triggering Takings Clause scrutiny.⁹ Put another way, "a State, by ipse dixit, may not transform private property into public property without compensation." Webb's Fabulous Pharmacies, Inc., v. Beckwith, 449 U.S. 155, 164, 101 S.Ct. 446, 66 L.Ed.2d 358 (1980).

Thus, the common law principles of Virginia property law, as well as any relevant sections of the Virginia Code, determine whether the interest generated on a prisoner's ITFA accounts is the prisoner's private property. See Phillips, 524 U.S. at 164, 118 S.Ct. 1925. In that regard, the Supreme Court in Phillips found that, at common law, any interest generated on a fund was the private property of the owner of that fund. See Phillips, 524 U.S. at 165, 118 S.Ct. 1925 (acknowledging the common law principle that "interest shall follow the principal as the shadow the body.") (quoting Beckford v. Tobin, 1 Ves. Sen. 308, 310, 27 Eng.Rep. 1049, 1051 (Ch.1749)).¹⁰ Similarly,...