A very interesting (pun intended) read today from the Minnesota Supreme Court.
In Hall v. Minnesota, No. A16-0874 (Mar. 7, 2018), the court held that Minnesota's Unclaimed Property Act, under which unclaimed property is presumed abandoned and then held by the State, works a taking when the State takes possession of an interest-bearing bank account, but does not pay interest to the owner when the property is eventually reclaimed.
That conclusion should not be all that surprising, and what makes the opinion well worth your time to read is the contrast between abandoned accounts which were interest-bearing, and those which were not. The State took possession of money and accounts of several of the plaintiffs, ranging from an unclaimed final paycheck under $100, to an interest-bearing bank account of more than $100,000.
The Act sets out the process for reclaiming abandoned property, and the plaintiffs did so. But when the State turned back over their money, it did not include the time value of that money, also known as interest. So they filed a class action lawsuit, asserting a takings claim for the failure to pay interest, and a due process claim based on the lack of sufficient notice of the remittance of their property to the State.
Appellants allege, individually and on behalf of a class of all owners of property that has been remitted to the State under the Act, that they did not receive sufficient notice—either from the original holder of their property or from the State—that their property had been remitted to the State. The complaint further alleges that the notice deficiency violates appellants’ and the class members’ procedural due process rights. Finally, the complaint asserts that the Act effects an unconstitutional taking because claimants do not receive earnings or constructive interest on the unclaimed property after it is delivered to the State.
Slip op. at 5. The trial court rejected the State's motion to dismiss, but certified the legal questions to the Court of Appeals, which concluded that the Act was neither a taking or a due process violation. Up they went.
After walking through the procedures under the Act, the Supreme Court noted that the State does not take ownership of unclaimed property and merely holds it, and that all of the unclaimed property either had been returned to the plaintiffs or was in the process of being returned. The main takings issue was whether the time value of money is property. Slip op. at 10 ("The specific question we must answer is whether the appellants have a protected property right in the interest earned on the unclaimed property during the time period when the State holds the unclaimed property.").
The court concluded that it wasn't a taking for the the property and money which the State held which were not already receiving interest to be returned without interest. Yes, the money is the property of the plaintiffs and always was so: the State merely had custody of it, not ownership. But there's no property right to the time value of money where it was the owners' failure to perform their duties to keep up under the rationale of Texaco, Inc. v. Short, 454 U.S. 516 (1982):
Because it was not interest bearing before the State came into custody of it, these appellants had no property right to receive the payment of interest. And because no statute authorizes the payment of interest—indeed, the Act specifically states that no interest need be paid—Hall, Undlin, and Herron must search elsewhere for a right to interest on their property. As other states have recognized in somewhat similar circumstances, to require that the State pay interest to these owners of unclaimed property would reward their inattention and provide an inappropriate windfall.
Slip op. at 12. In other words, these plaintiffs were in no worse position because of the Act than they would have been without it. Slip op. at 13-14 ("In this case, by contrast, the property at issue for Hall, Undlin, and Herron was not earning interest before it was transferred to the State, and the complaint is devoid of any allegations that the property earned interest after it was transferred to the State."). Yes, interest follows principal, but here, no interest. No harm, no foul.
But not so with the $100,000 account which was an interest-bearing account. In that case, the same principle (again, pun intended) applies: since this money was already earning interest, the State was obligated to keep on paying when it came into custody of the account. Thus, "the right to earn interest was part of Wingfield's unclaimed property, and she therefore has the right to receive that interest from the State if she is to be made whole." Slip op. at 16. She, unlike the other plaintiffs, had suffered an actual loss.
Finally, the court rejected the due process challenges of most of the plaintiffs because the Act didn't vest title to their money or accounts in the State, but merely gave it custody. No deprivation of property, no due process violation. But what about the $100,000 account owner, who, as noted above, did have "property?" She was entitled to due process, but the court concluded the Act's publication notice provisions -- where using the website MissingMoney.com (click to see if you have anything you can claim!), were enough:
We conclude that the numerous types of notice provided by statute including publication, mailed notice by the holder, the ability to inspect public records, and the general notice provided by the statute itself, combine to provide sufficient notice to satisfy the requirements of due process.
Slip op. at 25.
Hall v. Minnesota, No. A16-0874 (Minn. Mar. 7, 2018)
