While we were engaged in doing our usual thing, we missed a significant taking story of which we learned today while perusing the New York Times; Rescued by Bailout, A.I.G. May Follow a “Thank You” with a Suit, Jan. 8, 2013, at p. A1. It turns out that the shareholders of AIG (the big insurance outfit that got bailed out by Uncle Sam) is contemplating joining a pending lawsuit against the government on a taking theory. The bottom line of the lawsuit is that by the time all the bailout machinations were done with, Uncle Sam wound up owning 92% of AIG stock at the expense of the AIG shareholders. True, in later transactions AIG made a profit of $22 billion, but that was AIG, not its shareholders individually.

That may be well and good for AIG which thus has nothing to complain about, but what about those shareholders? They intone the old cry of “we wuz robbed” — their stock was taken and diluted, leaving them worse off. They also complain that AIG paid Uncle Sam excessive interest of 14%. But that isn’t the real point now. Those shareholders want AIG to join them in their lawsuit against Uncle Sam, which creates a dilemma for AIG. On its face, suing the party that rescued it from bankruptcy would be a PR disaster; an act of monumental ingratitude on the part of AIG, amounting to chutzpa. But on the other hand, say the shareholders, AIG’s duty is not to Uncle Sam or to good manners, but to its shareholders, and they have been royally screwed — raptus regaliter, as the Romans used to say. So the board of AIG is pondering what to do. If they decide not to join the shareholders’ lawsuit they may be exposing AIG to a lawsuit for breach of its duty to its shareholders. But they decide to join, they will have a major PR problem on their hands: they would then be suing Uncle Sam who rescued the company and was instrumental in making it possible for it to make that $22 billion.

And a litigational aside. “The Justice Department which assigned about a dozen lawyers to the case and hired outside experts, told the [Claims Court] judge handling the matter that [the plaintiff entity] was seeking 16 million pages in documents from the government,” causing the “startled” judge to respond “How many?”

Stay tuned.

Follow up. Cnn.com/money reports that at it meeting of today (1/9/13) AIG decided not to join the shareholders’ suit against Uncle Sam. Click here.

Afterthought: We should also include a citation to the opinion of the U.S. Court of Federal Claims dealing with this issue: Starr International Co., Inc. v. United States (Fed.Cl. 2012) 106 Fed.Cl. 50. It’s a whopper of an opinion (47 pages and 29 headnotes, dealing with issues of inverse condeemnation and corporate law), so we recommend that before reading it you have a drink and put your feet up. Good luck!

La Jolla (pronounced La Hoya, which means “the jewel” in Spanish), is by all accounts a beautiful and pricy place on the California Riviera, just North of San Diego, and its shore is predictably inhabited by all sorts classy folk so that if your housing budget is below the seven-figure watermark, you may as well forget about living there. We have heard it said that La Jolla is the sort of place where deserving U.S. Navy Admirals go after they die. (Good Marines go to Oceanside). You get the idea.

But there is a snake in paradise. The La Jolla Cove, a beatiful cove on the rocky shore has been favored by roosting seabirds and pupping — not to be confused with pooping — seals that, in the delicate phrasing of the Los Angeles Times, “leave behind what animals leave behind,” namely, goobs of poop which, as is the order of the biologocal universe, decays and stinks to high heaven. See A Solution to La Jolla’s Smell Problem Proves Elusive, L.A. Times, January 5, 2013,  — click here.

In a rational society, the poop would be cleaned up promptly as a matter of sanitary necessity. Right? Wrong. This is California, man, where anything at all is tolerated, as long as finds favor in the eyes of wacko environmentalists. And what makes this one wacko?  you ask. Whereas the simple solution to this problem would be to hook up some high-pressure hoses and wash down the poop-infested rocks at the La Jolla Cove, that cannot be done. Why? Because The Cove, being on the beach, is within the jurisdiction of a clutch of governmental entities, including the California Coastal Commission, a regulatory body that was once decribed as given to confusing the regulatory  state police power with the power of a police state, that is run by the Marx Brothers: Karl and Groucho.

What justifies our acerbic assessment is that any would-be bird poop cleaner-uppers face the fact that apart from the aforementioned Coastal Commission, the Cove falls under the jurisdiction of the San Diego Regional Water Quality Control Board that would have to issue a National Pollutant Discharge Elimination  System permit. Got that? And, since wildlife is involved, the National Oceanic and Atmospheric Administration and the U.S. Fish and Wildlife Service also have authority. Then there is the San Diego City Council that “would need to endorse a specific wash-down proposal,” but that, according to [city] staff, would mean submitting the issue to an application process that could take at least two years . . .” All that over some bird poop.

So the city, evidently in an act of desperation, has been considerang arming of its park rangers with brooms, so they could scrub the rocks clean, and do so in such an ingenious manner as to ensure that no run-off reaches the ocean. But this is California, man, so you don’t just get to do a sensible thing like that. “Talks are planned with regional, state and federal agency staff members to see if such a limited approach could be taken without a full-tilt application process.” No, we are not making it up.

And so it goes in the Golden State.

Macklin Fleming, Associate Justice of the California Court of Appeal, once observed (speaking in the context of redevelopment) that promoters of “public projects” promise that their schemes will bake a bigger economic pie, with larger slices going to all. But in reality, noted Fleming, what many of these schemes produce is pie in the sky. Here is a proverbial Exhibit A for Fleming’s wisdom, and it doesn’t even involve redevelopment, though it does involve uncompensated takings.

You know about IOLTA (Interest on Lawyers Trust Accounts), don’t you? It gave rise to two famous SCOTUS taking cases. See Brown v. Legal Foundation, 538 U.S. 216 (2003). It’s that sneaky, kleptocratic setup whereby interest on clients’ money deposited in lawyers’ trust accounts is diverted from them and  used by do-gooder folks in local bar associations for funding good deeds, such as providing legal services for the poor. The Supreme Court checked it out and concluded that, yes, that money is the property of the clients, and yes, the IOLTA program is its taking, but no, the clients are not entitled to  just compensation like it says in the Constitution, because in the usual case the amounts are small, and they remain in lawyers’ trust accounts for short periods of time. And so, reasoned SCOTUS the cost of administering and handling such small amounts would eat up that interest, so its rightful owners lose nothing when the local bar snatches it away. Then, it’s OK for noble-minded bar associations to pool these many small amounts into large sums and use them to do good for poor folks, including advancing politically correct causes of those who are not noted for suffering from poverty — like doctors, for example, who are plumping for some environmental cause that also appeals to the bar nabobs willing to dispense other people’s money to worthy causes. How large? When first established, California’s IOLTA funds came to a tidy sum of $20.3 million per year. Ah, but that was BC — before the crash. Now, with a recession abroad for past few years and what with microscopic interest rates,  it’s a much more modest $$6.8 million. Ouch! These days, you don’t get to do much litigational good for a lousy $6.8 mil. What to do?

So the California State Bar has gone schnorring, asking the state’s lawyers to chip in — gasp! — their own, not their clients’ money, in order to help out. We now learn from an op-ed in the Los Angeles Times (Charlotte Allen, Legal Larceny by Lawyers, L.A. Times, Jan.2, 2013, at p. A15) that California lawyers who, with a nonchalant wave of the hand, had it that a mere twenty mil per year (of their clients’ money) was so piddly an amout as to not require compensation when it was diverted from the clients’ accounts, are not eager to replace it with funds of their own.

Concludes Allen:

“Margaret Thatcher famously said: ‘The problem with socialism is that eventually you run out of other people’s money.’ IOLTA is an experiment in using other people’s money to buy advocacy that liberal lawyers like — but not enough to pay for it themselves.”

Which can be true of other takings too. Their promoters are always touting the wonders of their proposed projects, but when it comes to providing fair compensation for all economic losses inflicted on people whose property winds up in the path of the bulldozers, they tell us that “it’s  the price of progress.” But they never explain why that price shouldn’t be paid by the the beneficiaries of that “progress” instead of its victims.