TALLAHASSEE — With plaintiffs arguing the system leads to a “taking” of property, a federal appeals court has revived a constitutional challenge to part of a law that directs the state’s handling of unclaimed property.
A three-judge panel of the 11th U.S. Circuit Court of Appeals on Friday overturned a 2023 decision by U.S. District Judge Robert Hinkle that dismissed the potential class-action lawsuit. It sent the case back to district court.
The lawsuit, filed in 2022 in Tallahassee, alleges that the state does not provide “just compensation,” such as interest, to owners who ultimately claim property. It contends that the system results in an unconstitutional taking of property.
The issue involves people’s property that has been held by such entities as banks and insurance companies. When the property is believed to be unclaimed, it is turned over to the state. Examples are money, unclaimed insurance proceeds and items in safe-deposit boxes.
Unclaimed money is deposited into what is known as the State School Trust Fund, which helps support public schools. The state also periodically holds auctions of unclaimed items. If owners or their heirs find out about the unclaimed property, they can recover money from the state. The program is administered by the state Department of Financial Services.
“But — and most relevant here — the act (state law) does not entitle the owner to earnings that accrue on the property after its sale or conversion into money, or to any earnings that accrue on in-custody property that is already money when received by the department,” Friday’s 23-page opinion said. “In other words, if the department liquidated an owner’s unclaimed property and generated interest by investing the resulting money in Florida’s interest-bearing State School (Trust) Fund, the owner would be unable to recover that interest when filing a claim with the department.”
The case started after plaintiff Alieda Maron learned that she had a $26.24 insurance-premium refund that was in the unclaimed-property system, according to court documents. Her husband, Lawrence Maron, was added as a plaintiff, and her attorneys have sought class-action status.
“The Marons have argued that the state took their property without just compensation because, although the state is willing to return the value of their property, it will not compensate them for the time the property is in state custody,” Friday’s opinion, written by Judge Andrew Brasher and joined by Judges Ed Carnes and Charles Wilson, said.
But Hinkle, siding with then-state Chief Financial Officer Jimmy Patronis, rejected the allegations that the program violates constitutional rights.
“The Florida Disposition of Unclaimed Property Act requires the holder of property that is unclaimed for a specified period — property that appears to be abandoned — to turn the property over to the state,” Hinkle wrote in the 2023 decision. “The act gives the owner unlimited time to recover the property or the proceeds of the property’s sale or other conversion to money. But the act does not require the state to pay interest or other compensation for the period when the property was abandoned. This does not violate the United States Constitution Fifth Amendment Taking Clause.”
The Atlanta-based appeals court, however, said unclaimed property is not considered abandoned under the state law.
Brasher wrote that the law “provides that after an owner fails to claim property for a set number of years, the property is ‘presumed unclaimed.’ It does not say that property unclaimed for several years becomes abandoned or ‘presumed abandoned.’ And, after the unclaimed property is placed in the state’s custody, the act does not provide for a transfer of title, but merely gives the state ‘custody and responsibility for the safekeeping of the property.’”
Originally Published:
