Plaintiffs’ Dilemma: The Inability to Collect on Judgments Against Louisiana

Usually, winning a money judgment in court is meaningful.  While it might just look like a piece of paper (or a PDF on a screen), it ordinarily is a powerful tool.  If the losing party refuses to pay, you can use that piece of paper to command the sheriff to seize his property to satisfy the judgement.  But that is not true when your judgment is against the State of Louisiana or one of its political subdivisions.  Louisiana and its political subdivisions are sued all the time.  The types of claims people bring against the State or a political subdivision are diverse.  For instance, sometimes people allege that State employees damages their property or that a city unlawfully collected fines.  But even when these claims have merit, almost all of these people run into the same problem: the Louisiana Constitution bars the seizure of public funds or property to satisfy a judgment against the State or one of its political subdivisions.  Instead, judgment holders must wait for the Legislature or political subdivision to appropriate funds to pay their judgments.  And the Louisiana Supreme Court has ruled that no court can force the Legislature to take that action.  So while someone might obtain a money judgment against the State or one of its political subdivisions, enforcement is often elusive.  Many plaintiffs have tried to recast their grievances as “takings” claims under the Fifth Amendment of the United States Constitution, which would potentially allow them to trump Louisiana’s constitution and collect on their judgments.  But in two recent opinions, the U.S. Fifth Circuit has rejected their efforts and (sympathetically) told the plaintiffs that there is nothing to be done.

The first such case, where I happened to represent the defendant, involved New Orleans homeowners who alleged that their homes were damaged as a result of the Sewerage and Water Board’s flood control construction in Uptown New Orleans.  Ariyan, Inc. v. Sewerage & Water Bd. of New Orleans, 29 F.4th 226 (5th Cir. 2022).  The homeowners won judgments in state court amounting to approximately $10.5 million.  But then they had to find a way to collect on these judgments.

The homeowners rushed to federal court and filed claims arguing that the SWB’s failure to promptly pay the judgments amounted to a “secondary taking” prohibited by the Fifth Amendment.  The district court and Fifth Circuit both agreed that this theory did not hold water.  Bound by 19th century U.S. Supreme Court precedent, the court recognized that while a money judgment is considered property, it is merely an “existing liability” conceptually distinct from its collection.  The Fifth Circuit also acknowledged that more recently it had recognized that “the property right created by a judgment against a government entity is not a right to payment at a particular time but merely the recognition of a continuing debt of that government entity.”  With those precedents in mind, the Fifth Circuit “underst[oo]d the Plaintiffs’ frustration,” but held that they had failed to allege takings claims recognized by the Fifth Amendment.

A similar case once again made it to the Fifth Circuit shortly thereafter.  In Lafaye v. City of New Orleans, No. 21-30358 (5th Cir. June 1, 2022), the plaintiffs sought to collect on state court judgments emanating from the City’s controversial Automated Traffic Enforcement System (“ATES”) program.  The program used the mail to collect fines for traffic violations captured by street cameras.  Citizens challenged the legality of the program, and the Louisiana courts ultimately ruled in favor of the citizens and ordered the immediate refund of all fines and fees collected under the program.

But the city never refunded the fines and the plaintiffs sued in federal court, contending that the city violated the Fifth and Fourteenth Amendments by confiscating their property and keeping it without just compensation.  Nevertheless, the Fifth Circuit held that “an exaction of money that is completely unlawful, whether compensated or not, is not a taking.”  Thus, the federal court also rebuffed the plaintiffs’ attempts to collect on their judgments.

While these cases are in line with prior jurisprudence, they further clarify the extremely limited options plaintiffs have to enforce money judgments against the State or any of its political subdivisions.  The Louisiana Constitution prohibits seizure, and federal courts will usually not intervene.  Unpaid judgments of course can affect credit and bond ratings and can also create PR problems for politicians.  But that’s little solace to plaintiffs left with nothing more than a piece of paper.  It will be interesting to see if these rulings affect the number of claims made against the State and the number of attorneys who are willing to gamble on them with such long odds on collection.

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