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Is there a Taking When the Government Seizes the Property of Innocent People During a Criminal Investigation?

As a general rule, if the government appropriates your property, it is considered a taking of private property for public use under the Fifth Amendment and the state must pay you "just compensation." This is true even if the government has a very good reason for taking your property (e.g. - it needs it for vital infrastructure or for a military base). As the Supreme Court famously explained in Armstrong v. United States (1960), the Takings Clause is "designed 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."

Unfortunately, the U.S. Court of Appeals for the Federal Circuit has recently ruled that this principle does not apply in a case where the government appropriates the property of innocent people as part of of a criminal investigation. In AmeriSource Corp. v. United States (hat tip: my soon-to-be colleague T.J. Chiang), the Court held that there is no taking and no compensation is required in a case "when the government seizes an innocent third party's property for use in a criminal prosecution but never introduces the property in evidence, and it is rendered worthless over the course of the proceedings." In this case, the government seized some $150,000 of drugs belonging to the AmeriSource Corporation for use as evidence in a criminal case against another firm. By the time the government decided that it no longer needed the drugs (which were never actually introduced into evidence), they had been rendered worthless by the passage of their expiration dates. Although AmeriSource was never even accused of any wrongdoing, it will get no compensation whatsoever for the loss of this valuable property.

I. Public Use and the Police Power.

The Federal Circuit's ruling may ultimately be correct under current Supreme Court precedent. But some of its reasoning is extremely dubious. The Court's main argument is that there is no taking here under the Fifth Amendment because, when the government seizes property for use in a criminal investigation, it is exercising its "police power" (which, includes, among other things, law enforcement) not taking property for a "public use," as the text of the Amendment indicates. However, the Supreme Court has ruled in several cases (most notably Berman v. Parker and Hawaii Housing Authority v. Midkiff) that the scope of public use is "coterminous with the scope of a sovereign's police powers" (Midkiff, 467 U.S. 229, 240-41 (1984)). I think that this is an overly broad interpretation of "public use," but it does clearly indicate that the mere fact that a government action involves the police power doesn't mean that it can't also be a taking for a public use. Thus the Federal Circuit is wrong to draw a sharp dichotomy between "public use" on the one hand and "police power" on the other.

II. Supreme Court Precedent.

That said, the Federal Circuit may be on more solid ground in relying on the Supreme Court's extremely permissive jurisprudence on asset forfeitures. For example, in Bennis v. Michigan (1996), The Supreme Court held that there was no taking in a case where Mr. Bennis' car was confiscated because he had engaged in illegal sex with a prostitute in the vehicle. Although Mrs. Bennis was a co-owner of the car and she had not been convicted of any crime, the Supremes held that she wasn't entitled to any compensation for the loss of her interest in the car. I think that Bennis was wrongly decided. But obviously the Federal Circuit had to obey this Supreme Court precedent.

Whether Bennis does in fact determine the outcome of the present case is a close call. Unlike in Bennis, the property seized in AmeriSource was not connected to any wrongdoer whatsoever. Thus, the two cases might be considered different. The Bennis decision did not rule that the absence of any wrongdoing by any of the owners would lead to a different outcome. But it also didn't preclude that possibility. Indeed, Bennis explicitly relied on "a long and unbroken line of cases holds that an owner's interest in property may be forfeited by reason of the use to which the property is put even though the owner did not know that it was to be put to such use." Unlike in Bennis, there was no such illegal use of property by AmeriSource. On balance, therefore, I think that AmeriSource can be distinguished from Bennis, but I don't blame the Federal Circuit too much for failing to do so.

III. Why Compensation Should be Required.

Much more problematic is the failure of the Supreme Court to properly apply the Takings Clause to innocent property owners who have their property appropriated by the state in the course of criminal investigations. Even if the government has a legitimate need for the items in question (e.g. - because they are important evidence), denying compensation is a classic example of "forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole." Apprehension and punishment of criminals is a general public interest and the costs should be paid by the public as a whole, not arbitrarily imposed on individual property owners who were unlucky enough to get caught up in an investigation. There is also no doubt that the government is "using" the property in question. Therefore, there is every reason for the courts to conclude that private property appropriated during a criminal investigation has indeed been taken for "a public use" and that the Fifth Amendment therefore requires compensation for the owners.

Some might fear that the government will be hamstrung by having to compensate all owners of evidence used in investigations. Perhaps the cost will be too great. In reality, however, there is always a cost when the government takes property away from owners. The only question is whether the owners will be forced to bear that cost or whether it will be borne by the public fisc. If the government is forced to pay compensation, it may have stronger incentives to correctly balance the benefits of appropriating the items in question against the costs imposed on innocent owners. It is actually a good thing if the government is deterred from seizing property that is of great value to owners, but perhaps of only marginal use to the prosecutors' case. Currently, the government can afford to ignore the costs imposed on innocent owners completely, unless the latter happen to have a lot of political clout. That is both unfair to property owners and likely to promote the use of investigative tactics whose costs to the innocent outweigh their benefits in promoting the conviction of the guilty.

UPDATE: It is worth noting that these cases seem to bring out some of the worst instincts of both conservative and liberal judges. The liberals tend to support the government because of their general tendency to devalue constitutional property rights. The conservatives do the same because of their general reluctance to support anything that might impede law enforcement. That said, three liberal justices signed on to Justice Stevens' excellent dissent in Bennis. One conservative (Justice Kennedy) also voted that way. Another (Justice Thomas) wrote a concurrence suggesting that the case should be construed relatively narrowly. Hopefully, the Court will limit or overrule Bennis in a future decision. I suppose I should emphasize that the above points about conservative and liberal jurists don't necessarily apply to conservatives and liberals more broadly. For example, many liberals outside the Court were outraged by the Kelo decision, which was supported by all four liberal justices on the Court itself.

UPDATE #2: Economist David Friedman (son of Milton) makes some good points in his comment on this post.

BU2L:
Is this different than if a police officer commandeers a car during a chase and wrecks it? The car owner (like the company in this case) never did anything wrong yet lost his car during a criminal pursuit/investigation.
5.2.2008 3:08am
Ilya Somin:
Is this different than if a police officer commandeers a car during a chase and wrecks it? The car owner (like the company in this case) never did anything wrong yet lost his car during a criminal pursuit/investigation.

I would argue that the government should compensate the owner in that case too.
5.2.2008 3:12am
Liberals like property:
Plenty of liberals (including me) were upset at Kelo v. New London, so don't label all liberals as hating private property. I also think Bennis and AmeriSource were wrongly decided. The issue isn't about liberals or conservatives - just as you mention Stevens dissented in Bennis, Thomas dissented in Kelo. Rather, the issue, as you focused on for the most part, is fundamental fairness. Excellent post but for that last "UPDATE" paragraph.
5.2.2008 3:15am
Ilya Somin:
Plenty of liberals (including me) were upset at Kelo v. New London, so don't label all liberals as hating private property.

I agree that not all liberals "hate" private property. Indeed , I have written about liberal opposition to Kelo in several articles. What I said in the update referred to liberal judges - most of whom do indeed devalue private property and give it little or no protection. With very few exceptions, the liberal justices have consistently voted against property rights in every major Supreme Court case on the subject over the last 20 years.
5.2.2008 3:25am
David Friedman (mail) (www):
I've long made your general argument, initially inspired by cases where law enforcement seized and held computers, including all the information in them—for examples see The Hacker Crackdown. From an economic point of view, we want government actors to take account of costs in deciding how to pursue their objectives. Keeping people out of my store where someone committed a crime may make solving the crime easier, but the cost imposed by doing so ought to go into the calculation of how best to solve the crime. Paying an extra hundred dollars in wages in order to search the premises now instead of next week ought to be chosen over keeping the store closed at a cost of a thousand dollars a day.

A further point is that the current rules make it possible for law enforcement to impose large costs on people they don't like without ever convicting them of anything. I think the same book provides pretty clear examples.
5.2.2008 4:29am
Rich Rostrom (mail):
Part of the problem is that the vast majority of 'evidentiary' takings are trivial. If the state is required to account for and compensate for all of them, it could be an enormous burden. David Friedman notes the costs imposed by closing off a place of business as a crime scene. If an organization is required to search its files for a subpoenaed document, who pays for that? How?

But when physical property with substantial value is taken, compensation seems in order. Such cases are fairly unusual, I'd think.

BU2L: commandeering a car during a pursuit is a taking for actual use, not evidentiary seizure. I suspect that this issue was addressed long ago, perhaps when a Federal-period sheriff rode off on a commandeered horse.
5.2.2008 5:19am
David Schwartz (mail):
This not only perfectly fits the text of the takings clause but its motive as well. There is simply no reason random innocent third parties should bear the costs of law enforcement.
5.2.2008 5:23am
Ilya Somin:
Part of the problem is that the vast majority of 'evidentiary' takings are trivial. If the state is required to account for and compensate for all of them, it could be an enormous burden.

As a practical matter, victims of "trivial" takings are unlikely to sue for compensation because the cost of litigation for them would outweigh the benefits of any compensation they could get. Thus, it is unlikely that requiring compensation would lead to such an "enormous burden."
5.2.2008 5:27am
Richard Aubrey (mail):
Comp would reduce the likelihood that a law enforcement agency could just take your stuff--civil forfeiture--because they needed it for their budget. Or because they didn't like you.
5.2.2008 8:39am
NI:

As a practical matter, victims of "trivial" takings are unlikely to sue for compensation because the cost of litigation for them would outweigh the benefits of any compensation they could get. Thus, it is unlikely that requiring compensation would lead to such an "enormous burden."


I think it speaks very poorly of our government that such people have to sue in the first place. If there is no real question that they were innocent bystanders whom the state deprived of their property (albeit for a legitimate reason), why wouldn't a government that claims to be interested in justice (i.e., doing the right thing) just compensate them voluntarily? Requiring litigation says, in essence, "we'll do the right thing if a judge gives us no choice."
5.2.2008 9:07am
TruePath (mail) (www):
So why not enact a compensation regime but impose a cost/barrier to initiating the demand for compensation (pay the $50 filing fee). This would ensure trivial takings didn't overburden the system.
5.2.2008 9:58am
Philistine (mail):
Why limit the issue of compensation to "innocent" people?

While surely the most sympathetic--I can forsee problems with that limitation, especially to the extent of burdens of proof, and charging additional people who ordinarily wouldn't as a cost-saving measure.

Paranthetically, one of the more irritating things to me is requing a person whose records have been seized by a search warrant to pay to make copies of those records (both in the case of people who are accused as well as innocent third parties).
5.2.2008 11:34am
Tony Tutins (mail):
But the government got no economic benefit from taking the drugs, so why should it pay? The laws of evidence would seem to need to be changed, to prevent having to keep perishable items past their use-by date. What would happen if I shoplifted a pint of milk? Would the police have to keep it till it curdled?
5.2.2008 2:24pm
Bruce Hayden (mail) (www):
One extension of this is when the state seizes cash, cars, etc. and then puts the burden on the seizee to get them back, assuming that there was no conviction.
5.2.2008 2:39pm
theobromophile (www):
But the government got no economic benefit from taking the drugs, so why should it pay?

The town of New London got little or no economic benefit from seizing the land to be given to Pfizer, but they had to pay. We don't measure what benefit the government got, in order to prevent it from profiting from seizures; we measure the loss to the person whose property was commandeered, in order to make them whole.
5.2.2008 4:06pm
JDM:
Should a person who is found not guilty be entitled to compensation for any property taken during the course of the criminal investigation; after all they are "innocent."
5.2.2008 6:28pm
Steve2:
JDM, I'd say yes to your question, but it seems like it would perversely have the same effect as allowing investigators to fund themselves through the seized assets of the guilty: a financial incentive to make sure everybody gets convicted regardless of factual guilt.
5.2.2008 7:09pm
Tony Tutins (mail):
theo: The recipient of the land got the benefit of the land. Nobody got the benefit of the drugs -- they simply expired. Think of a killer Presa Canario who dies waiting for his owner to be tried. Should the state buy the owner a new pit bull?

This case is more like jailing an accused who can't make bail -- he is never compensated for his loss of liberty. Further, think of the convicted who are released based on DNA evidence after years of incarceration. They receive only an ex gratia payment from the state.
5.2.2008 7:33pm
theobromophile (www):
TT - your second set of examples are totally beside the point. The Constitution does not address those issues.

The fact that the government did not use the drugs as drugs, and therefore sell them for $150,000, does not mean that they were not taken for public use. That is the touchstone - not the monetary value that the government got from the use.

To demonstate, consider the reverse. The government condemns a blighted area, seizes the block for market value, and then, through a development project, turns it into an area that is worth three times as much. Should the former owners get the value of the developed land - i.e. the value to the government? We can see that it would be silly to do that - the harm to the people does not change depending on whether the government makes a good investment or a bad investment.

Likewise, how would you value a highway? If you seize a block of homes and put a street through it, should the owners get paid only a fraction of the market value, since the street is only worth that? If the government, in making a seizure, accidentally devalues the land or property by negligently destroying it, should the owner then not be compensated?

Touchstone: market value of what was seized. Anything else invites anarchy and insanity.
5.2.2008 7:41pm