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Thursday, October 31, 2013

Ind. Decisions - 7th Circuit decides one Indiana case today, a reversal

In KATHERINE CERAJESKI, Guardian for Walter Cerajeski v. GREG ZOELLER, Attorney General of the State of Indiana, et al (SD Ind., Magnus-Stinson), a 12-page opinion, Judge Posner writes:

The plaintiff appeals from the dismissal of her suit challenging the constitutionality of part of the Indiana Unclaimed Property Act, Ind. Code §§ 32‐34‐1‐1 et seq. (Indiana’s version of the Uniform Unclaimed Property Act), on the ground that it authorizes the state to confiscate private property without any compensation—let alone just compensation—to the owner.

The Act states that “property” is “presumed abandoned if the owner or apparent owner has not communicated in writing with the holder concerning the property or has not otherwise given an indication of interest in the property” within a specified period that varies according to the type of property. § 32‐34‐1‐20(c). * * * The owner, by filing a valid claim to his property (which he can do on the website), can reclaim the property from the state at any time up to 25 years after it was delivered to the attorney general. § 32‐34‐1‐36. At that point if still unclaimed it escheats to—that is, becomes owned by—the state.

But here’s the rub that has given rise to this lawsuit: the owner who files a valid claim to property is entitled only to his principal, and not to any interest earned on it. The plaintiff contends that the state’s retention of the interest is a taking that violates the takings (just‐compensation) clause in the Constitution because the owner is paid nothing for his lost interest. [ILB emphasis] * * *

Correctly believing that the state wouldn’t pay interest if she filed a claim, she filed this lawsuit instead, seeking a declaration that she is entitled (on behalf of her ward) to the interest; if she obtains the declaration, the claim will follow. * * *

The state is certainly entitled to charge a fee for its services in taking custody of unclaimed property and trying to locate the owner. The statute, however, authorizes it to deduct from the value of the property only a very limited set of costs, see § 32‐34‐1‐36(g), none of which appears to be relevant to Cerajeski’s bank account. The uniform act on which the Indiana law is modeled allows for reasonable service charges and other fees for custodianship, Uniform Unclaimed Property Act of 1995 § 13(b), but for unexplained reasons Indiana has not enacted that section of the uniform act. And the state has made no effort to show that the amount of interest in Cerajeski’s bank account bears any relation to the cost of the services that the state has performed in relation to the account.

The confiscation of the interest on Cerajeski’s principal was therefore a taking of a part of his property (remember that the Indiana statute makes a bank account “property” under Indiana law). * * *

Even if by some magic the cost to the state of its custodianship of Cerajeski’s bank account and related services equaled the confiscated interest, the confiscation would be a taking within the meaning of the takings clause. * * *

The judgment is reversed and the case remanded for further proceedings consistent with this opinion. The plaintiff is entitled to just compensation from the state when she files her claim to Cerajeski’s account, but the amount of that just compensation has yet to be determined. The plaintiff has also sought an injunction—why we don’t know; and injunctive relief may well be unavailable in this case. “Equitable relief is not available to enjoin an alleged taking of private property for a public use.” Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1016 (1984). The availability and propriety of injunctive relief are other issues to be resolved by the district judge in the first instance.

Posted by Marcia Oddi on October 31, 2013 11:47 AM
Posted to Ind. (7th Cir.) Decisions