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.