Cole-Kelly v. Yee

Summary

The United States District Court for the Northern District of California granted defendants’ motions to dismiss three related putative class actions challenging the constitutionality of California’s Unclaimed Property Law. The court held that claims seeking interest accrued on unclaimed property were barred by sovereign immunity and that the constitutional claims were foreclosed by controlling Ninth Circuit precedent. The court denied a request for a three-judge panel, dismissed the cases without leave to amend, terminated the pending class-certification and related motions as moot, and directed entry of judgment for defendants.

Holdings

1. The action did not require a three-judge district court because it did not concern apportionment of congressional districts or a statewide legislative body, and the former statutory requirement for a three-judge court in constitutional challenges to state statutes had been repealed.
2. Claims against California and its agencies seeking payment of interest or other additional compensation earned on unclaimed property while held by the State were barred by the Eleventh Amendment.
3. The plaintiffs failed to state a viable Fifth Amendment Takings Clause claim because Ninth Circuit precedent squarely rejected a compensable right to interest earned on unclaimed property that escheats to California and held the current version of the Unclaimed Property Law facially constitutional.
4. The plaintiffs' due process and equal protection claims failed because they were derivative of the rejected Takings Clause theory and therefore failed for the same reason.
5. Dismissal without leave to amend was proper because the pleading could not possibly be cured by alleging additional facts.

Questions Presented

1. Whether the actions required a three-judge district court under 28 U.S.C. § 2284.
2. Whether the Eleventh Amendment barred claims seeking payment of interest or other additional compensation for unclaimed property held by California.
3. Whether California's Unclaimed Property Law violates the Fifth Amendment Takings Clause by failing to pay owners interest earned on unclaimed property.
4. Whether the derivative due process and equal protection claims stated viable claims.
5. Whether the complaints could be cured by amendment.

Disposition

dismissed