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."
