CHRIS LUSBY TAYLOR; NANCY A. PEPPLE-GONSALVES; SUSAN SWINTON; WILLIAM J. PALMER, deceased; DON H. PERRI; JENNIFER WALSH; MARK MACAULEY; MARY A. STEELE, on behalf of themselves and other persons similarly situated, Plaintiffs-Appellants,
BETTY YEE, [*] individually and in her official capacity as State Controller of the State of California; RICHARD CHIVARO, Defendants-Appellees
Argued and Submitted, San Francisco, California
February 11, 2015
Appeal from the United States District Court for the Eastern District of California. D.C. No. 2:01-cv-02407-JAM-GGH. John A. Mendez, District Judge, Presiding.
The panel affirmed the district court's dismissal, for failure to state a claim, of a putative class action challenging the California State Controller's application of California's Unclaimed Property Law.
Appellants alleged that the procedures used both before unclaimed property is transferred to the Controller (" pre-escheat" ) and after it is transferred (" post-escheat') violate appellants' due process rights. Specifically, appellants asserted that the pre-escheat notice provided by the Controller was constitutionally inadequate because the Controller does not attempt to locate property owners using the data sources required by Sections 1531 of the Unclaimed Property Law. The panel held that appellants' argument was based on a misinterpretation of the statute, which relates only to post-escheatment procedures, and that appellants' suggested requirement that the Controller use additional databases exceeded due process requirements.
The panel further rejected appellants' argument that the Controller's pre-escheat notice process was inadequate because it is carried out by companies that receive a portion of the escheated value and therefore have a conflict of interest. The panel held that this argument was not supported by law or the alleged facts. The panel further held that appellants' challenge to the post-escheat procedure was not ripe for review.
William W. Palmer, The Law Offices of William W. Palmer, Sacramento, California; C. Brooks Cutter and John R. Parker, Jr., Kershaw, Cutter & Ratinoff, LLP, Sacramento, California; Robert A. Buccola, Steven M. Campora, and James J. Ison, Dreyer Babich Buccola Wood Campora, LLP, Sacramento, California, for Plaintiffs-Appellants.
Robin B. Johansen and Margaret R. Prinzing, Remcho, Johansen & Purcell, LLP, San Leandro, California, for Defendants-Appellees.
Before: Mary M. Schroeder and Barry G. Silverman, Circuit Judges and Paul C. Huck,[**] Senior District Judge. Opinion by Judge Huck.
HUCK, Senior District
This putative class action has a long and tortuous history in this Court. Presumably this opinion will be known as Taylor V. Appellants challenge the constitutionality of California's Unclaimed Property Law (" UPL" ), which provides for the conditional transfer of unclaimed property to the State of California. While this Court has previously held the UPL facially constitutional, see Taylor III, 525 F.3d at 1289, the instant suit challenges the California State Controller Betty Yee's (" the
Controller" ) application of the statute. Appellants claim that the procedures used both before unclaimed property is transferred to the Controller (" pre-escheat" ) and after it is transferred (" post-escheat" ) violate Appellants' due process rights. The district court dismissed Appellants' suit with prejudice for failure to state a claim. We AFFIRM.
Appellants' first and primary argument is that the pre-escheat notice provided by the Controller is constitutionally inadequate because the Controller does not attempt to locate property owners using the data sources required by Section 1531.5 of the UPL. Appellants further argue that the Controller's pre-escheat notice process is inadequate because it is carried out by companies that have an alleged conflict of interest because they receive a portion of the escheated property's value. Finally, Appellants argue that the Controller's post-escheat procedures violate the Due Process and Takings Clauses because they do not provide an adequate remedy when the Controller denies an individual's claim to escheated property.
As explained below in more detail, under the UPL, property that appears to be lost or abandoned by the owner is conditionally transferred to the State if it remains unclaimed after notice is provided to the owner. Examples of such lost or abandoned property are savings accounts at a bank or shares of stock held in a brokerage account. In August of 2007, in response to Taylor II, which found the UPL's notice requirements insufficient, the California Legislature amended the UPL to provide additional notice to owners of unclaimed property. In Taylor III, this Court determined that the amended UPL is facially constitutional. Appellants now bring this as-applied challenge to the law.
California's Unclaimed Property Law
According to the Controller, the purpose of the UPL is to locate owners of apparently lost or abandoned property and restore their property to them; but if these efforts are unsuccessful, to give the benefit of any unclaimed property to California, rather than to financial institutions or other private entities holding the property (" holders" ). As the Controller explains, the UPL thus ensures that unless and until the owner reclaims it, unclaimed property will be used for the public good rather than for the benefit of private banks and financial institutions.
Pursuant to the UPL, holders must transfer property to the State once the property meets the UPL's definition of unclaimed property. See Cal. Civ. Proc. Code § 1511 et seq. However, prior to escheatment to California, the UPL requires that multiple forms of notice be given to the apparent owners of unclaimed property, including two notice letters.
As an initial step, the UPL provides that the holder " shall make reasonable efforts to notify any owner by mail or, if the owner has consented to electronic notice, electronically, that the owner's" property will escheat to the State. Id. § § 1513.5(d), 1514(b), 1516(d). The same general notice requirements apply to all types of property under the UPL, although the specifics vary by property type. Compare id. § 1514 (safe deposit boxes), with § 1516 (business dividends and distributions). This notice is sent to the apparent owner's address, as reflected in the holder's records. The notice contains a form that the owner is to
complete, sign, and return, in which case, " it shall be deemed that the [holder] knows the location of the owner," who claims the property. E.g., id § 1531.5(d). The holder may also provide telephonic or electronic ...