McIntyre v. Bayer

• Decision Date: 13 August 2003
• Docket Number: No. 01-55169.,01-55169.
• Citation: 339 F.3d 1097
• Parties: Jerry Dempsey McINTYRE, Plaintiff-Appellant, v. Robert BAYER, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1097

339 F.3d 1097

Jerry Dempsey McINTYRE, Plaintiff-Appellant, v. Robert BAYER, Defendant-Appellee.

No. 01-55169.

United States Court of Appeals, Ninth Circuit.

Submitted November 7, 2002.^* — San Francisco, California.

Submission Deferred November 14, 2002.

Resubmitted August 7, 2003.

Filed August 13, 2003.

Jerry Dempsey McIntyre, Carson City, Nevada, filed briefs pro se.

Frankie Sue Del Papa, Attorney General of the State of Nevada, Carson City, Nevada, and Gabriel D. Lither, Deputy Attorney General, filed a brief for the defendant-appellee.

Appeal from the United States District Court for the District of Nevada; Lloyd D. George, District Judge, Presiding. D.C. No. CV-96-00789-LDG.

Before: WALTER K. STAPLETON,^** DIARMUID F. O'SCANNLAIN, and FERDINAND F. FERNANDEZ, Circuit Judges.

OPINION

O'SCANNLAIN, Circuit Judge:

We must decide whether a state statute, requiring interest generated by inmate trust accounts to be retained by prison authorities and expended for the benefit of the prison population as a whole, effects an unconstitutional taking.¹

I

Jerry Dempsey McIntyre is incarcerated at the Warm Springs Correctional Center in Carson City, Nevada. Like all inmates in Nevada prisons, he is required to keep his money, including wages earned during incarceration as well as any money received from outside sources, in a personal property trust fund run by the State of Nevada. See Nev.Rev.Stat. § 209.241(1) (1995).² Inmates are allowed to make withdrawals from their trust accounts "for personal needs," id. § 209.241(2)(b), and also can send checks outside the prison that are drawn on such accounts. While the state is required to "keep ... a full and accurate account of the[inmate's] money," id. § 209.241(2)(a), the inmate trust accounts are pooled together to generate interest. "The interest and income earned on the money in the fund, after deducting any applicable charges, must be credited to the offenders' store fund." Id. § 201.241(3). This "store fund," in turn, "must be expended for the welfare and benefit of all offenders." Id. § 209.221(3).³

Nevada law also provides that the inmate may be required, at the discretion of the director of the Department of Prisons ("NDOP"), to contribute a portion of his wages to a separate "fund for the compensation of victims of crime." Id. § 209.463(a)(1) ("victims fund"). According to the most recent records available at the time he instituted his suit, McIntyre, who held a job in the prison library, had paid a total of $105.23 into the victims' fund.

A

On January 22, 1997, McIntyre filed a pro se civil rights action against defendant Robert Bayer, the director of the NDOP. McIntyre contended, among other things, that the defendant had committed an unconstitutional taking by not returning to McIntyre any of the interest earned on the funds in his inmate trust account.⁴ Both McIntyre and Bayer moved for summary judgement.

In an order entered on February 19, 1998, the district court found that, pursuant to this court's holding in Tellis v. Godinez, 5 F.3d 1314, 1317 (9th Cir.1992), "the language of the Nevada Revised Statute created a protected property interest in interest and income actually earned and deposited in a prisoner's personal property fund." The district court then went on to note, however, that the statute was modified in the aftermath of this court's Tellis decision to state that "the provisions of this chapter do not create a right on behalf of any offender to any interest or income that accrues on the money in the prisoner's personal property fund." Nev.Rev. Stat. § 209.241(5) (1995). In light of the fact that the revised statute — denying McIntyre a right to interest on his account — went into effect on October 1, 1995, and given the two-year statute of limitations for § 1983 actions in Nevada, see Wilson v. Garcia, 471 U.S. 261, 280, 105 S.Ct. 1938, 85 L.Ed.2d 254 (1985), the district court concluded that "the applicable period for McIntyre's[takings] claim is January 22, 1995 [two years prior to the filing of his claim] through September 30, 1995 [the eve of the amended statute's effective date]." Based upon the plaintiff's account records, the court granted McIntyre's motion for summary judgment as to his first claim and found that he was entitled to interest totaling $3.93. The district court then summarily rejected McIntyre's constitutional challenge to Nev.Rev.Stat. § 209.463, concluding that "NRS § 209.241[sic] is constitutional so long as it is not applied retroactively." The court therefore rejected McIntyre's due process claim and granted summary judgment to the defendant.

B

McIntyre timely appealed to this court which, in an unpublished disposition, vacated the district court's 1998 order and remanded for further consideration. See McIntyre v. Bayer, 182 F.3d 926, 1999 WL 274648 (9th Cir.(Nev.1999)) (unpublished disposition). We noted that the district court's reasoning with respect to McIntyre's first claim — i.e., that the statute had been revised to take away any property rights in the interest earned on prisoner accounts — had been called into question, if not completely foreclosed, by Phillips v. Washington Legal Foundation, 524 U.S. 156, 118 S.Ct. 1925, 141 L.Ed.2d 174 (1998), and Schneider v. California Department of Corrections, 151 F.3d 1194 (9th Cir.1998). The panel also pointed out that, although the district court had held that "Nev.Rev.Stat. § 209.241 is constitutional so long as it is not applied retroactively," "the crime victim deduction provisions that McIntyre challenges are codified at Nev.Rev.Stat. § 209.463 — not at Nev. Rev.Stat. § 209.241." McIntyre, 1999 WL 274648 at *1.

C

On remand, the district court ordered the parties to provide supplemental briefing on the takings issue in light of our vacatur and the two cases cited therein. Thereafter, in an order entered January 8, 2001, the district court held that Nev.Rev. Stat. § 209.241 did not effect an unconstitutional taking of McIntyre's property.

McIntyre timely appealed.

II

The Fifth Amendment provides that "private property [shall not] be taken for public use without just compensation." U.S. Const. Amend. V. In order to state a claim under the Takings Clause, a plaintiff must first establish that he possesses a constitutionally protected property interest. See Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1000-01, 104 S.Ct. 2862, 81 L.Ed.2d 815 (1984). When considering prison accounts of the sort at issue here, we have held that the interest income generated by the accounts constitutes a property interest "sufficiently fundamental that states may not appropriate it without implicating the Takings Clause." Schneider, 151 F.3d at 1201.⁵ Nev.Rev.Stat. § 209.241(3) (1995) provides that "[t]he interest and income earned on the money in the [prisoners' personal property] fund, after deducting any applicable charges, must be credited to the offenders' store fund." (emphasis added). It is therefore clear from the plain language of the statute that the state appropriates the interest generated by the personal property fund and spends it for the benefit of the prison population as a whole — that is, for public use.

As the Supreme Court has recently noted, the determination that the state has taken the prisoners' interest "does not end our inquiry," but rather requires us to "determine whether any `just compensation' is due." Brown v. Legal Found. of Wash., ___ U.S. ___, 123 S.Ct. 1406, 1419, 155 L.Ed.2d 376 (2003). In Brown, the Court revisited the issue it first considered in Phillips, namely whether the Fifth Amendment's Takings Clause bars the appropriation of the interest earned on client funds held in trust by attorneys.<sup>6</sup> In Phillips, the Court concluded that the interest earned on such accounts "is the `private property' of the owner of the principal," 524 U.S. at 172, 118 S.Ct. 1925, but did not decide whether the state's transfer of that interest to charitable entities that provide legal services for the poor violated the Fifth Amendment. In Brown, the Court reached the latter issue and concluded that the transfer of interest from IOLTA accounts does not constitute a taking without just compensation. "[J]ust compensation," the Court held, "is measured by the net value of the interest that was actually earned" by the owner of the principal. Brown, 123 S.Ct. at 1420 n. 10 (emphasis added). The Court reasoned that because the laws governing IOLTA required that any funds that could generate interest be maintained in an interest-bearing account, any funds actually deposited in a IOLTA account, by definition, could not generate interest. See id. Thus, "[b]ecause ... compensation is measured by [the] pecuniary loss" suffered by an individual, and because that loss "is zero whenever the [IOLTA] law is obeyed," the Court concluded that "there has been no violation of the Just Compensation Clause of the Fifth Amendment...." Id. at 1421.

As if to emphasize the unique nature of IOLTA laws, the Supreme Court made clear that, although those laws ensured that clients whose funds could generate interest would, in fact, receive that interest, "[a] law that requires that the interest on [an individual's] funds be transferred to a different owner for a legitimate public use ... could be a per se taking requiring the payment of `just compensation'...." Id. As noted above, it is clear that by transferring the interest earned on the pooled resources of prisoner's property fund to the offenders' store fund to be expended "for the welfare and benefit of all offenders," Nev.Rev.Stat. § 209.221 does effect a transfer of the interest earned from the prisoners to the state. It is equally clear, though, that the costs the state incurs in administering the prisoners' property fund far out-strip the gross interest earned by the fund. Indeed, the record reflects that, in the most recent fiscal year for which we have data in the record, the NDOP expended $393,178 to provide the...