899 F.3d 1112
9th Cir.2018Background
- Washington public-school teachers Fowler and Maurer (the "Teachers") allege DRS withheld daily interest from their Plan 2 retirement accounts when funds were transferred mid-quarter to Plan 3, because DRS credited interest based on quarter-end balances and kept interest when accounts showed a zero at quarter-end.
- State-court litigation (Probst) challenged DRS’s interest calculation; the Washington Court of Appeals held DRS’s policy arbitrary under state law and remanded for rulemaking; the appeals court declined to resolve the federal constitutional takings claim.
- The Teachers filed a federal suit asserting a Fifth/Fourteenth Amendment per se taking for DRS’s direct appropriation of earned daily interest and moved to certify a class of Plan 2→Plan 3 transferees.
- The district court denied the stipulated class-certification motion and granted the Director’s summary judgment, holding the takings claim prudentially unripe pending administrative rulemaking; DRS later adopted a rule retroactively affirming its prior calculation.
- The Ninth Circuit reversed: it held the claim is a per se taking (not subject to Williamson County ripeness), rejected the Director’s defenses (no taking, issue preclusion/Rooker–Feldman, Eleventh Amendment), and vacated the denial of class certification, remanding for reconsideration and further discovery if needed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Ripeness under Williamson County | Takings claim ripe; DRS directly appropriated interest so prudential ripeness inapplicable | Claim is premature until DRS rulemaking concludes and state remedies exhausted | Court: Per se taking; Williamson County inapplicable; dismissal for prudential unripe reversed |
| Existence of a property right to daily interest | Daily interest is a traditional common-law property right; DRS cannot abrogate it by statute | No state-law property right exists because statute does not require daily interest payment | Court: Core property right protects daily interest; takings claim stated (Schneider/Phillips) |
| Preclusion / Rooker–Feldman | Federal claim is independent and not seeking to overturn state judgments | State appellate rulings resolved entitlement and prematurity; federal suit is de facto appeal | Court: Neither issue preclusion nor Rooker–Feldman bars the claim; state courts did not decide the federal takings issue |
| Eleventh Amendment / relief available | Seek injunction to restore interest via formula applied to DRS records (not damages from state treasury) | Monetary relief would implicate state treasury and sovereign immunity | Court: Relief is prospective/injunctive against official and involves custodial funds, so Eleventh Amendment does not bar the suit |
Key Cases Cited
- Williamson County Regional Planning Comm’n v. Hamilton Bank, 473 U.S. 172 (establishes prudential ripeness requirements for regulatory takings)
- Phillips v. Washington Legal Foundation, 524 U.S. 156 (interest income in accounts is private property)
- Brown v. Legal Foundation of Washington, 538 U.S. 216 (transfer of interest to third party can be a per se taking)
- Horne v. Dep’t of Agriculture, 135 S. Ct. 2419 (distinguishes regulatory takings from direct appropriations/per se takings)
- Schneider v. Cal. Dep’t of Corrs., 151 F.3d 1194 (Ninth Circuit recognizing constitutionally protected interest income despite statutory schemes)
- Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280 (limits on Rooker–Feldman doctrine)