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CA Prisoners Win Appeal in Failure-To-Pay Interest Case

The U.S. Court of Appeals for the Ninth Circuit has remanded a case filed by several California state prisoners challenging a California Department of Corrections and Rehabilitation (CDCR) practice of refusing to credit the prisoners with interest earned on their accounts.

Paul Schneider and nine other CDCR prisoners filed this "takings clause" action against prison officials when they were not credited with the interest earned on their Inmate Trust Accounts (ITAs). While the prison received interest on the pooled money, that interest was deposited into the Inmate Welfare Fund (IWF), which is used to support several prisoner-related programs. The prisoners wanted the Interest applied to their individual accounts.

The case bounced back and forth between the District Court for the Northern District of California and the Ninth Circuit. In this, the fourth round of the litigation, the inmates were appealing the granting of summary judgment in favor of prison officials. The district court held that the prisoners failed to demonstrate any facts or evidence to contradict prison officials' testimony that the costs of administering prisoner accounts far outweighed any interest earned on those accounts.

On appeal, however, the prisoners pointed out that CDCR official based those calculations on the aggregate of the ITAs as a whole, instead of on an individual case-by-case basis. In other words, the prisoners argued that the district court erred because there may have been individual inmate accounts where the interest earned outweighed the administration costs of that specific account.

Citing to Brown v. Legal Found, of Wash. 538 U.S. 216, the Ninth Circuit agreed, stating that “the district court failed to engage in the individualized analysis that is required in light of the Supreme Court's holding in Brown."

While agreeing that the ITA funds as a whole do not generate any net interest, the relevant inquiry for takings purposes, the Ninth Circuit held, is whether any individual prisoner has been deprived of their accrued net interest.

The court remanded the case (again) for "further factual development" to determine if and Takings Clause violations have occurred in relation to an Individual prisoner's ITA funds. See: Schneider v. Cal. Dept. of Corr., et al., U.S.C.A. (9th Cir.) No. 00-15795 (Sept. 29, 2003).

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Related legal case

Schneider v. Cal. Dept. of Corr., et al.,