trial of right of property

In 1984, the Supreme Court of Washington adopted rules requiring lawyers to deposit client funds nominal in amount or expected to be held for a short period of time into IOLTA accounts. The interest earned is paid to the Legal Foundation of Washington for use in providing legal services to the indigent. Petitioner Allen Brown is a lawyer who maintains an IOLTA account, and petitioner Greg Hayes is one of his clients. In 1990, Hayes recovered a judgment in an action for nonpayment of overtime wages entitling him to a payment of $4,000 in attorney's fees that could not be paid immediately, so the funds were placed in an IOLTA account. In August 1996, Hayes made an earnest money deposit of $2,000 and a further payment of $12,793.32 in connection with a real estate purchase closed on August 30, 1996, with the money going into an IOLTA account. In May 1997, Brown made a payment of $90,521.29 that remained in escrow for two days, generating an estimated $4.96 in interest ultimately paid to the Foundation. In 1994, Brown and Hayes filed this action in the United States District Court for the Western District of Washington seeking a declaration that the IOLTA program violated the Fifth Amendment and an injunction against its continued operation. The District Court granted summary judgment to respondents after finding that petitioners could not make any net return on the interest accrued in the accounts. The Court of Appeals for the Ninth Circuit affirmed, and the Supreme Court granted certiorari.

In 1961 Steve and Robert Szukhent, father and son farmers residing in Michigan, obtained two incubators from National Equipment Rental, Ltd. under a lease. National Equipment Rental is a Delaware corporation whose principal place of business is in New York. The lease was a standard printed form less than a page and a half long that contained eighteen numbered paragraphs. The final numbered paragraph, printed in the same type as the rest of the document and appearing immediately above the Szukhents' signatures, stated that the lessees designated Florence Weinberg, 47-21 Forty-first Street, Long Island City, New York, as agent for the purpose of accepting service of any process within the State of New York. The Szukhents had never met, seen, or heard of Florence Weinberg before the lawsuit. In 1962 National Equipment Rental filed a complaint in the United States District Court for the Eastern District of New York alleging that the Szukhents had failed to make any of the periodic payments required by the lease. The marshal delivered two copies of the summons and complaint to Florence Weinberg. On the same day she mailed the summons and complaint to the Szukhents by certified mail together with a letter stating that the documents had been served upon her as their agent pursuant to the lease. National Equipment Rental also notified the Szukhents of the service by certified mail. The Szukhents moved to quash service. The District Court granted the motion. The Court of Appeals for the Second Circuit affirmed. The Supreme Court granted certiorari.

In 1976 the United States brought an antitrust action against petitioners, owners of various department stores, alleging that they had violated § 1 of the Sherman Act by agreeing to fix the retail price of women's clothing sold in northern California. Seven parallel civil actions were subsequently filed by private plaintiffs seeking treble damages on behalf of proposed classes of retail purchasers. These included the action of respondent Moitie in state court (Moitie I) and respondent Brown (Brown I) in the United States District Court for the Northern District of California. Each of these complaints tracked almost verbatim the allegations of the Government's complaint, though the Moitie I complaint referred solely to state law. The District Court dismissed all of the actions in their entirety on the ground that plaintiffs had not alleged an injury to their business or property within the meaning of § 4 of the Clayton Act. Plaintiffs in five of the suits appealed that judgment to the Court of Appeals for the Ninth Circuit. The single counsel representing Moitie and Brown chose not to appeal and instead refiled the two actions in state court. Although the complaints purported to raise only state-law claims, they made allegations similar to those made in the prior complaints, including that of the Government. Petitioners removed these new actions to the District Court for the Northern District of California and moved to have them dismissed on the ground of res judicata. The District Court denied respondents' motion to remand, holding that the complaints were properly removed because they raised essentially federal law claims. The court then concluded that because Moitie II and Brown II involved the same parties, the same alleged offenses, and the same time periods as Moitie I and Brown I, the doctrine of res judicata required that they be dismissed. Pending the appeal of the dismissals of the refiled actions, the Supreme Court decided Reiter v. Sonotone Corp., holding that retail purchasers can suffer an injury to their business or property as those terms are used in § 4 of the Clayton Act. The Court of Appeals for the Ninth Circuit reversed and remanded the five cases which had been appealed for further proceedings in light of Reiter. When the refiled actions came before the Court of Appeals, the court reversed the District Court's dismissals on res judicata grounds. It asserted that non-appealing parties may benefit from a reversal when their position is closely interwoven with that of appealing parties. The court concluded that the doctrine must give way to public policy and simple justice. Moitie II was voluntarily dismissed, leaving Brown II as the subject of the petition. The Supreme Court granted certiorari to consider the validity of the Court of Appeals' novel exception to the doctrine of res judicata.

On February 12, 1976, appellant Eckerd’s of College Park, Inc., entered into an agreement to purchase for $1,812,145.77 substantially all the assets of Webb’s Fabulous Pharmacies, Inc. Both Eckerd’s and Webb’s are Florida corporations. At the closing, Webb’s debts appeared to be greater than the purchase price. Eckerd’s filed a complaint of interpleader in the Circuit Court of Seminole County, Fla., interpleading as defendants both Webb’s and Webb’s creditors (almost 200 in number) and tendering the purchase price to the court. Pursuant to the court order, the amount tendered was paid to the court’s clerk and the clerk deposited it in an assignable interest-bearing account at the highest interest. Eckerd’s tendered the sum to the clerk on July 13, 1976, and that official proceeded to make the required investment. The clerk deducted from the interpleader fund the sum of $9,228.74 as his fee for services rendered for receiving money into the registry of court. The fee was calculated upon the amount placed in the registry, that is, 1% of the first $500, and ½% of the remainder. On July 5, 1977, almost a year after the tender and payment, the Circuit Court upon its own motion appointed a receiver for Webb’s. Among the receiver’s stated duties were the determination of the number and amount of claims filed against the interpleader fund and the preparation and filing with the court of a list of those claims. The principal of the fund, reduced by the $9,228.74 statutory fee and by $40,200 that had been paid out pursuant to court order, was paid to the receiver on July 21. The interest earned on the interpleader fund while it was held by the clerk, but which was not turned over to the receiver, then exceeded $90,000. Interest earned thereafter on the amount so retained brought the total to more than $100,000. The receiver moved that the court direct the clerk to pay the accumulated interest to the receiver. The Circuit Court ruled favorably to the receiver. It held that the clerk is not entitled to any interest earned on monies deposited in the registry of this Court pursuant to the Court’s order. The creditors herein are the rightful parties entitled to all such interest. Seminole County and the clerk appealed to the Florida District Court of Appeal. That court transferred the cause to the Supreme Court of Florida. The Supreme Court, in a per curiam opinion with one justice dissenting in part, ruled that the statute was constitutional and reversed the judgment of the Circuit Court. Because it had been held elsewhere that a county’s appropriation of the interest earned on private funds deposited in court in an interpleader action is an unconstitutional taking, the Supreme Court noted probable jurisdiction.