Justices Hint at Property-Seizure Overhaul

WASHINGTON (CN) - A challenge to California's unclaimed-property law may not be ready for primetime, but two Supreme Court justices said Monday another case will fare better.

Lead plaintiff Chris Taylor filed the class action at issue back in 2001, taking aim at California's Unclaimed Property Law, which provides for the conditional transfer to the state of unclaimed property such as savings accounts or shares of stock.

Taylor accused state controller Betty Yee of violating due-process rights by transferring property to the state without providing the potential owners adequate notice.

During the intervening years, the challenge brought several amendments to the law's notice procedures. Chief among them, California now notifies potential owners before the state transfers the unclaimed property, not after.

In addition to mailing notice to potential owners at their homes, the state publishes another notice in a generally circulated newspaper deemed most likely to reach the owners.

Those newspaper notices direct potential owners to a searchable website where they can perform a search to determine whether they may own any unclaimed property.

Though Taylor still claimed that the controller could take additional steps to locate the owners prior to transfer, the trial court shot Taylor down and the Ninth Circuit affirmed in 2015.

The U.S. Supreme Court likewise rejected Taylor's petition for a writ of certiorari Monday, but two justices "the constitutionality of current state escheat laws is a question that may merit review in a future case.

Taylor is out of luck, though, because "the convoluted history of this case makes it a poor vehicle for reviewing the important question it presents," Justice Samuel Alito wrote in a concurring opinion, joined by Justice Clarence Thomas.

The three-pager notes that the challenge comes at a time when states are shortening "the periods during which property must lie dormant before being labeled abandoned and subject to seizure."

New York, Michigan, Indiana, New Jersey and Arizona, specifically, shortened their dormancy periods from as long as 15 years to merely 3, Alito noted, citing a 2013 paper by T. Conrad Bower in the Ohio State Law Journal.

Delaware, meanwhile, still relies only on blanket newspaper notices, a notification Alito condemned as "decidedly old-fashioned ... [and] unlikely to be effective."

"This trend -combining shortened escheat periods with minimal notification procedures - raises important due process concerns," Alito wrote. "As advances in technology make it easier and easier to identify and locate property owners, many states appear to be doing less and less to meet their constitutional obligation to provide adequate notice before escheating private property. Cash-strapped states undoubtedly have a real interest in taking advantage of truly abandoned property to shore up state budgets. But they also have an obligation to return property when its owner can be located. To do that, states must employ notification procedures designed to provide the pre-escheat notice the Constitution requires."

The Ninth Circuit had called California's pretransfer procedures sufficient to locate potential owners.

"Appellants' suggested requirement that the controller utilize additional governmental databases may, of course, lead to more claims being filed, but it exceeds the minimum due process requirements," the court's ruling said.

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