You’ll want to check out the U.S. Court of Appeals’ opinion in Gerlach v. Rokita, No. 23-1792 (Mar. 6, 2024), even though it mostly retraces grounds already tread by other courts.

The takings claim was based on the actions of Indiana government officials who didn’t give the interest earned on unclaimed funds to the owner of those funds. The court got the property owner coming and going: it held the claim for declaratory and injunctive relief was moot, and also that the claim for just compensation could not be pursued in federal court (Eleventh Amendment). In short, no claim at all.

First, some background. After a specified period of inaction, Indiana takes custody of things like unclaimed wages, unclaimed insurance proceeds, and uncashed public entity checks. These funds go into a special account, and owners may make claims to recover their property. Any excess in this account over what is returned to claiming owners goes into an abandoned property fund. From time to time, the state Treasurer transfers those funds to the state general fund. But after a successful lawsuit challenging this practice, the state began paying interest on property held in the fund, as long as the property was collecting interest prior to the state taking custody. Later, the courts held that all reclaimed property is entitled to interest, whether or not it was interest-bearing before the state got it.

Back to our case. Gerlach reclaimed dormant property valued at $100.93 and Indiana dutifully gave it back to her. But it did not also include interest. Federal court takings lawsuit followed, which asserted a right to declaratory and injunctive relief against the state Treasurer and a right to just compensation.  

The officials sought dismissal. The declaratory and injunctive relief was moot because the state adopted a policy at or after the time the plaintiff filed the lawsuit under which the state would provide interest on all held property. Affirmed: by the time the case reached the Seventh Circuit, the Indiana Legislature had adopted a statute to the same effect.

The claim for just compensation crashed on familiar shoals, the Eleventh Amendment. The Seventh Circuit first noted that her claim was based directly on the Takings Clause, and that she asserted she could do so because the requirement to provide compensation is self-executing. The court sidestepped this issue, noting that the Devillier case, argued but not yet decided by the Supreme Court, will likely resolve this question.

That question didn’t really matter, because the Eleventh Amendment “disposes of Gerlach’s claim.”

Indiana enjoys “the privilege of the sovereign not to be sued without its consent.” Driftless Area Land Conservancy v. Valcq, 16 F.4th 508, 520 (7th Cir. 2021) (quoting Va. Off. for Prot. & Advoc. v. Stewart, 563 U.S. 247, 253 (2011)). The Eleventh Amendment prohibits suits against a state in federal court, whether by its own citizens or citizens of another state. U.S. Const. amend. XI; Edelman v. Jordan, 415 U.S. 651, 662–63 (1974). That protection extends to state employees sued in their official capacities. See Lewis v. Clarke, 581 U.S. 155, 162 (2017) (“In an official-capacity claim, the relief sought is only nominally against the official and in fact is against the official’s office and thus the sovereign itself.”).

Slip op. at 7.

What about that exception to the immunity, when state courts are not available? “We are not persuaded,” held the Seventh Circuit, because “Indiana courts are open to hear Gerlach’s claim for compensation.” Slip op. at 8.

This one joins other courts which have gone the same way. It also adds to our sense that after Knick when we predicted that the Supreme Court’s opening back up the federal courthouse doors wasn’t the end of the procedural gamesmanship, but merely the opening of a new chapter? And that it was time to dust off your old Federal Courts hornbook, because things like the Eleventh Amendment, Rooker/Feldman, abstention, and similar, were going to spring up as the way to avoid the merits of takings claims? That’s we’re going to be experiencing Williamson County, Phase 2? Here you go.

Stay tuned.

Gerlach v. Rokita, No 23-1792 (7th Cir. Mar. 6, 2024)