Ruling on the State's Control of Private Foundation Assets
CHICAGO — In a groundbreaking constitutional case concerning state control of the assets of private foundations, McDermott Will & Emery has won a critical victory for the Illinois Clean Energy Community Foundation. On April 29, 2004, U.S. District Judge Amy St. Eve of the Northern District of Illinois held unconstitutional an Illinois statute that would have required the Foundation to "contribute" $125 million to the state general revenue fund.
The case challenged legislation to reduce the Illinois budget deficit by seizing nearly half the endowment of the Foundation, a non-profit corporation established and originally funded by Commonwealth Edison to give grants in support of activities related to clean energy. The Foundation filed suit seeking a declaratory judgment that the statute violated the Takings and Due Process Clauses of the U.S. Constitution. The state contended that the Foundation is in effect a public entity using public funds, because Commonwealth Edison established the Foundation as part of the legislative process in 1999 for approval of a sale of power plants.
The case attracted the involvement of the Donors’ Forum, an association of 180 grant-giving organizations, which filed a friend of the court brief supporting the Foundation, and the support of major environmental groups.
Judge St. Eve rejected the state's arguments and found that the statute is an unconstitutional taking and that its enactment violated both procedural and substantive due process rights under the federal constitution. The ruling on substantive due process is the first time since the 1930's that a federal court has struck down an economic regulation as invalid under substantive due process. The decision is a $125 million victory that also protects the remainder of the Foundation's assets.
The case was handled by Bill Boies of the Chicago Trial Department and M. Miller Baker of the Washington, D.C. Trial Department.
