State Law Property Rights – What are They?
What are property interests; how do we know them when we think we see them? That’s a fascinating question that’s been animating due process and takings case law for many decades. Board of Regents v. Roth, 408 US 564 (1972), was one of the key cases in the area when I was a young lawyer, and remains important today.
With the definitional questions in mind, it was interesting to read about definitions of state law property rights in a recent California Supreme Court opinion which rejected a fraudulent conveyance claim because the transfer at issue was deemed not to transfer property rights, and so there was no transfer to attack. The opinion arose out of the 9th Circuit certifying a question of law to the court from the Heller Ehrman chapter 11 case; the opinion was issued March 5, 2018. The opinion and backstory is told in general in a March 5, 2018 article at the ABA Journal.
The entire opinion should be read for the discussion of property rights, including its citation to Roth and to the law school maxims that property rights are like of a bundle of sticks. For present, shorter effort purposes, consider the following quotes from the ABA article:
“In its unanimous opinion, the California Supreme Court said the Heller estate was claiming an interest “for work that someone else now must undertake.” Any expectation of compensation for future work is speculative, given the client’s right to terminate representation at any time, according to the opinion by Justice Mariano-Florentino Cuéllar. Those expectations don’t amount to a property interest, he said.
“What we hold is that under California law, a dissolved law firm has no property interest in legal matters handled on an hourly basis, and therefore, no property interest in the profits generated by its former partners’ work on hourly fee matters pending at the time of the firm’s dissolution,” Cuéllar said.
“The partnership has no more than an expectation that it may continue to work on such matters, and that expectation may be dashed at any time by a client’s choice to remove its business. As such, the firm’s expectation—a mere possibility of unearned, prospective fees—cannot constitute a property interest.”