Albert v. Franchot

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MARYLAND

STEVEN ALBERT and BARRY DIAMOND, *

individually and on behalf of all others similarly

situated, *

*

Plaintiffs,

* Case No. 1-22-cv-01558-JRR

v.

*

PETER FRANCHOT, in his official capacity

as the Comptroller of the State of Maryland, *

Defendant. *

* * * * * * * * * * * * *

MEMORANDUM OPINION

This matter comes before the court on Defendant’s Motion to Dismiss. (ECF No. 5; the

“Motion.”) The parties’ submissions have been reviewed and no hearing is necessary. Local Rule

105.6 (D. Md. 2021). For the reasons that follow, by accompanying order, the Motion will be

denied.

BACKGROUND1

Plaintiffs Steven Albert and Barry Diamond bring this action challenging provisions of the

Maryland statute concerning abandoned and unclaimed property, MD. CODE ANN., COM. LAW §§

17-101 et seq., (the “Act”). (ECF No. 1, ¶ 1.) Plaintiffs are citizens and residents of Maryland.

As defined by section 17-101 of the Act, they are also “owners” of property currently in

Defendant’s custody. Id. ¶ 12. Plaintiffs bring this class action on behalf of “all current owners

of unclaimed property held by the Comptroller in the form of money.” Id. ¶ 1. Defendant is the

1 For purposes of resolving the Motion, the court accepts as true all well-pleaded facts set forth in the Complaint.

Comptroller for the State of Maryland, and, in that position, is in charge of supervising and

administering the Act. Id. ¶ 13. Plaintiffs sue Defendant in his official capacity.2 Id.

I. Statutory Framework

The relevant defined terms of the Act are as follows:

“Abandoned property” means personal property that is considered

abandoned under this title.

“Administrator” means the Comptroller.

“Holder” means any means any person who is: (1) In possession of

property subject to this title belonging to another; (2) A trustee, in

the case of a trust; or (3) Indebted to another on an obligation subject

to this title.

“Owner” means (1) In the case of a deposit, a depositor or a person

entitled to receive the funds as reflected on the records of the bank

or financial organization; (2) In the case of a trust, a beneficiary; (3)

In the case of other choses in action, a creditor, claimant, or payee;

(4) In the case of abandoned property in federal custody, the person

who is defined as the owner by any applicable federal law; or (5)

Any person who has a legal or equitable interest in property subject

to this title, or the legal representative of that person.

MD. CODE ANN., COM. LAW § 17-101(b)(1), (c), (i), (k).

The Act governs the State’s disposition of abandoned property. Under the Act, a holder is

required to attempt to notify the owner of presumed abandoned property; if the owner does not

respond to such notice within 30 days, the property is considered abandoned. Id. § 17-308.2. If

an owner does not respond to a holder’s notice, the holder is required to file a report with the

Administrator providing details about the abandoned property. Concurrently with the report, the

holder is required to pay or deliver the abandoned property to the Administrator. Id. §§ 17-310,

17-312. On delivery of the abandoned property to the Administrator, the State assumes custody

2 By election held November 8, 2022, Brooke E. Lierman was elected Comptroller of the State of Maryland. This

action was filed in June 2022, when Peter Franchot served as Comptroller. For purposes of this opinion, this correction

is substantively immaterial.

of same and is responsible for its safe keeping. Id. §17-313. Under section 17-311 of the Act,

following receipt of a holder’s report and the abandoned property, the Administrator is required to

publish notice in a newspaper within 365 days from the date the report is filed setting forth: the

names and last known addresses of persons listed in the report; a description of, and, information

related to, the property; and a statement that a proof of claim may be filed by the owner to the

Administrator. Id. § 17-311(a) and (b). In addition to the published notice, within 120 days of

receipt of the report, the Administrator is required to mail notice to each person with an address

listed on the report. Id. § 17-311(d). The notice must contain: a statement that the addressee

appears to be entitled to property held by the Administrator; the name and address of the former

holder of the property; and a statement that a proof of claim may be submitted to the Administrator.

Id. § 17-311(e).

Section 17-3163 provides is relevant part:

(a) Except as provided in this subsection, all abandoned property

under this title, other than money delivered to the Administrator

under this title, shall be offered for sale by the Administrator within

1 year of delivery. The sale shall be to the highest bidder at public

sale in whatever place in the State affords the most favorable market

for the property involved. The Administrator may decline the

highest bid and reoffer the property for sale if the price bid is

insufficient. The Administrator need not offer any property for sale

if the probable cost of sale exceeds the Administrator’s estimation

of the value of the property.

(b) Any sale held under this section shall be preceded by a single

publication of notice at least three weeks in advance of the sale in a

newspaper of general circulation in the county where the property is

to be sold.

3 This section of the Act has more than one version with various effective dates. The portion of the section cited to

is effective until October 1, 2023.

Section 17-3174 governs the disposition of funds received under the Act; it provides in

relevant part:

All funds received under this title, including the proceeds of the sale

of abandoned property under § 17-316 of this subtitle, shall be

credited by the Administrator to a special fund.

The Administrator shall retain in the special fund at the end of each

fiscal year, from the proceeds received, an amount not to exceed

$50,000, from which sum the Administrator shall pay any claim

allowed under this title.

§ 17-317(a)(1)(i)-(ii).

After deducting all costs incurred in administering this title from the

remaining net funds the Administrator shall distribute $8,000,000 to

the Maryland Legal Services Corporation Fund established under §

11-402 of the Human Services Article.

§ 17-317(a)(2).

Subject to subparagraph (ii) of this paragraph, the Administrator

shall distribute all unclaimed money from judgments of restitution

under Title 11, Subtitle 6 of the Criminal Procedure Article to the

State Victims of Crime Fund established under § 11-916 of the

Criminal Procedure Article to assist victims of crimes and

delinquent acts to protect the victims’ rights as provided by law.

If a victim entitled to restitution that has been treated as abandoned

property under § 11-614 of the Criminal Procedure Article is

located after the money has been distributed under this paragraph,

the Administrator shall reduce the next distribution to the State

Victims of Crime Fund by the amount recovered by the victim.

§ 17-317(a)(3)(i)-(ii).

For fiscal year 2024, after making the distributions required under

paragraphs (2) and (3) of this subsection, the Administrator shall

distribute $14,000,000 from the remaining net funds to the Access

to Counsel in Evictions Special Fund under § 8–909 of the Real

Property Article.

§ 17-317(a)(4).

4 This section of the Act has more than one version with varying effective dates. The portion of the section cited to

is effective until January 1, 2024.

After making the distributions required under paragraphs (2), (3),

and (4) of this subsection, the Administrator shall distribute the

remaining net funds not retained under paragraph (1) of this

subsection to the General Fund of the State.

§ 17-317(a)(5).

Any person who claims a legal interest in any property delivered to the State under the Act

must file a claim to the property or the proceeds from its sale on the form prescribed by the

Administrator. Id. § 17-318. The Administrator must consider any claim filed under the Act and,

if the claim is “allowed,” the Administrator is required to make immediate payment to the claimant.

Id. § 17-319. “In satisfying a claim the Administrator shall pay the claimant an amount equal to

the sales price obtained at the public sale.” Id. § 17-319(c). In its current form, the Act is silent

as to accrued interest on property held by the State. Section 17-314, which previously allowed for

“Interest on property delivered to Administrator,” was repealed in 2004.

II. Procedural Background

Plaintiffs assert that the Act allows for a taking in violation of the Fifth and Fourteenth

Amendments of the United States Constitution and Article III, Section 40 of the Maryland

Constitution. (ECF No. 1, ¶ 1.) According to Plaintiffs, the Act deprives owners just compensation

because it does not provide recovery of “interest or dividends or other increments that accrue on

the property after delivery to the State . . . .” Id. ¶ 5.

On June 24, 2022, Plaintiffs filed the Class Action Complaint5 (the “Complaint”) for

declaratory and injunctive relief. The Complaint sets forth two counts: Claim for Declaratory and

Prospective Injunctive Relief of Under the Fifth Amendment (Count I); and Claim for Declaratory

5 Plaintiffs seek class certification under Federal Rules of Civil Procedure 23(a) and 23(b)(2).

and Prospective Injunctive Relief Under Article III, Section 40 of the Maryland Constitution

(Count II). (ECF No. 1.) The prayer for relief seeks a declaration by this court:

• that the State’s confiscation of interest, dividends, earnings, or other fruits of the property

delivered to the State under the Act and the State’s use of unclaimed private property for

public purposes while in the State’s custody are takings of property within the meaning of

the Fifth Amendment and Article III, Section 40, for which the State is required to pay just

compensation;

• that the proper measure of just compensation is the value of the property taken and returned

to the owner, taking into account the benefit to the State by its use of the unclaimed property

in its custody;

• setting forth the appropriate standard for measuring just compensation owed to an owner

of unclaimed property that is used by the State while in its custody;

• that Defendant must pay just compensation according to the standard determined by this

court.

(ECF No. 1 at 14-15.) Additionally, Plaintiffs seek an injunction requiring the State to comply

with any just compensation standard determined by the court, as well as attorney’s fees and costs.

Id. at 15.

Defendants move to dismiss the Complaint pursuant to Federal Rules of Civil Procedure

12(b)(1) and 12(b)(6) arguing that, to the extent Plaintiffs seek retroactive relief, those claims are

barred by the Eleventh Amendment; Plaintiffs lack standing to bring this action; Plaintiffs claims

are not ripe for adjudication; and the Complaint fails to state a facial challenge to the

constitutionality of the Act. (ECF No. 5-2 at 2-3.)

LEGAL STANDARDS

I. Federal Rule of Civil Procedure 12(b)(1)

“Rule 12(b)(1) of the Federal Rules of Civil Procedure authorizes dismissal for lack of

subject matter jurisdiction.” Barnett v. United States, 193 F. Supp. 3d 515, 518 (D. Md. 2016).

“The plaintiff bears the burden of proving, by a preponderance of evidence, the existence of subject

matter jurisdiction.” Mayor & City Council of Balt. v. Trump, 416 F. Supp. 3d 452, 479 (D. Md.

2019). Subject matter jurisdiction challenges may proceed in two ways: a facial challenge or a

factual challenge. Id. A facial challenge asserts “that the allegations pleaded in the complaint are

insufficient to establish subject matter jurisdiction.” Id. A factual challenge asserts “that the

jurisdictional allegations of the complaint [are] not true.” Id. (quoting Kerns v. United States, 585

F.3d 187, 192 (4th Cir. 2009)). “In a facial challenge, ‘the facts alleged in the complaint are taken

as true, and the motion must be denied if the complaint alleges sufficient facts to invoke subject

matter jurisdiction.’” Trump, 416 F. Supp. 3d at 479 (quoting Kerns, 585 F.3d at 192 (instructing

that in a facial challenge to subject matter jurisdiction the plaintiff enjoys “the same procedural

protection as . . . under a Rule 12(b)(6) consideration.”)). “[I]n a factual challenge, ‘the district

court is entitled to decide disputed issues of fact with respect to subject matter jurisdiction.’” Id.

Defendant states that he “is attacking both the complaint on its face, asserting that the

complaint ‘simply fails to allege facts upon which subject matter jurisdiction can be based,’ as

well as attacking the existence of subject matter jurisdiction in fact, quite apart from any

pleadings.” (ECF No. 5-1 at 8.) That notwithstanding, Defendant’s 12(b)(1) arguments attack

Plaintiffs’ pleading, and do not present a factual challenge to subject matter jurisdiction. Indeed,

Defendant argues that the court lacks subject matter jurisdiction over Plaintiffs’ claims because

the Complaint fails to allege facts that, if true, demonstrate Plaintiffs have standing or that their

claims are ripe for adjudication. Accordingly, Defendant’s 12(b)(1) challenge will be evaluated

in accordance with the procedural protections afforded under Rule 12(b)(6), which is to say that

the facts alleged in the Complaint will be taken as true per Trump and Kerns.

II. Federal Rule of Civil Procedure 12(b)(6)

A Rule 12(b)(6) motion “tests the legal sufficiency of a complaint.” It does not “resolve

contests surrounding the facts, the merits of a claim, or the applicability of defenses.” Presley v.

Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006) (quoting Edwards v. Goldsboro, 178 F.3d 231,

243 (4th Cir. 1999)). Accordingly, a “Rule 12(b)(6) motion should only be granted if, after

accepting all well-pleaded allegations in the plaintiff’s complaint as true and drawing all

reasonable factual inferences from those facts in the plaintiff’s favor, it appears certain that the

plaintiff cannot prove any set of facts in support of his claim entitling him to relief.” Edwards,

178 F.3d at 244 (citing Republican Party v. Martin, 980 F.2d 943, 952 (4th Cir. 1992)). The court,

however, is “not required to accept as true the legal conclusions set forth in a plaintiff’s complaint.”

Edwards, 178 F.3d at 244 (citing District 26, United Mine Workers of Am., Inc. v. Wellmore Coal

Corp., 609 F.2d 1083, 1085 (4th Cir. 1979)).

ANALYSIS6

I. Subject Matter Jurisdiction

A. Sovereign Immunity

Defendant allows that he construes the Complaint to seek only prospective and injunctive

relief, but argues that were the court to construe the Complaint to seek damages or retroactive

relief, those claims would be barred by the Eleventh Amendment.

6 Plaintiffs bring claims under both the Fifth Amendment of the United States Constitution and Article III, Section 40

of the Maryland Constitution. “The Fifth and Fourteenth Amendments to the United States Constitution and Article

III, § 40, of the Maryland Constitution have the same meaning and effect, and ‘it is well established that the decisions

of the Supreme Court are practically direct authorities’ for both provisions.” Neifert v. Dep’t of the Ev’t, 395 Md.

486, 516 n.33 (2006) (quoting Md. Green Party v. Md. Bd. of Elections, 377 Md. 127, 166 (2003)) (citations omitted).

Accordingly, the court’s analysis regarding Plaintiffs’ claims under the United States Constitution applies to Plaintiffs’

claims under the Maryland Constitution.

Under the Eleventh Amendment, states generally enjoy immunity from suit unless a state

waives its immunity, or the immunity is abrogated by Congress. Bd. of Tres. v. Garrett, 531 U.S.

356, 363-64 (2001). “[F]or purposes of the Eleventh Amendment, a state official acting in his

official capacity is protected from a damages action by the same immunity.” Ballenger v. Owens,

352 F.3d 842, 844-45 (4th Cir.2003) (citations omitted). “The Eleventh Amendment does not

preclude private individuals from bringing suit against State officials for prospective injunctive or

declaratory relief designed to remedy ongoing violations of federal law.” Bragg v. W. Va. Coal

Ass’n, 248 F.3d 275, 292 (4th Cir. 2001). Id.

The Ex parte Young doctrine provides that “a federal court has jurisdiction over a suit

against a state officer to enjoin official actions that violate federal law, even if the State itself is

immune from suit under the Eleventh Amendment.” Idaho v. Coeur D’Alene Tribe, 521 U.S. 261,

288 (1997). Even though “the State itself will have a continuing interest in the litigation

whenever State policies or procedures are at stake,” Coeur D’Alene Tribe, 521 U.S. at 269, “a

court decree enjoining a State officer from committing future violations of federal law generally

will not upset the careful federal balance established by the Constitution and confirmed by

the Eleventh Amendment.” Bragg, 248 F.3d at 292. “To preserve this balance, however, this

court “must ensure that the doctrine of sovereign immunity remains meaningful, while also giving

recognition to the need to prevent violations of federal law.” Id. (quoting 521 U.S. at 269). “Just

because a private citizen’s federal suit seeks declaratory injunctive relief against State officials

does not mean that it must automatically be allowed to proceed under an exception to the Eleventh

Amendment protection.” Bell Atl. Md., Inc. v. MCI Worldcom, Inc., 240 F.3d 279, 294 (4th Cir.

2001). “Such empty formalism would improperly sacrifice the real interests served by

the Eleventh Amendment.” Id. (internal quotations and citation omitted). Rather, just as the Court

did in Coeur D’Alene Tribe, this court must evaluate the degree to which the State of Maryland’s

sovereign interest would be adversely affected by Plaintiffs’ federal suit seeking prospective

declaratory and injunctive relief against the Comptroller. Additionally, this court must consider

the extent to which federal, rather than state, law must be enforced to vindicate Plaintiffs’ federal

interest. Bragg, 248 F.3d at 293.

In Ford Motor Co. v. Department of Treasury of Ind., the Supreme Court held that “when

the action is in essence one for the recovery of money from the state, the state is the real, substantial

party in interest and is entitled to invoke its sovereign immunity from suit even though individual

officials are nominal defendants.” 323 U.S. 459, 464 (1945). That notwithstanding, “[t]he

Supreme Court has [] repeatedly recognized that “relief that serves directly to bring an end to a

present violation of federal law is not barred by the Eleventh Amendment even though

accompanied by a substantial ancillary effect on the state treasury.” Virginia Hosp. Ass’n v.

Baliles, 868 F.2d 653, 662 (1989)

The court agrees with Defendant that the Complaint seeks prospective injunctive and

declaratory relief as allowed under the Ex parte Young doctrine. Plaintiffs’ requested relief seeks,

to their way of seeing it, to bring the Act into compliance with the Takings Clauses of the United

States Constitution and the Maryland Constitution. That Defendant may have to spend state funds

to effect compliance with federal law does not remove Plaintiffs’ claims from the Ex parte Young

exception.

B. Article III Standing

Standing is an essential component of the case-or-controversy requirement of Article III.

Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). “A justiciable case or controversy

requires a ‘plaintiff [who] has alleged such a personal stake in the outcome of the controversy as

to warrant his invocation of federal court jurisdiction and to justify exercise of the court’s remedial

powers on his behalf.’” Planned Parenthood of South Carolina v. Rose, 361 F.3d 786, 789 (4th

Cir. 2004) (alteration in original) (quoting Simon v. Eastern Kentucky Welfare Rights Org., 426

U.S. 26, 38 (1976)). “To satisfy the constitutional standing requirement, a plaintiff must provide

evidence to support the conclusion that: (1) ‘the plaintiff . . . suffered an injury in fact--an invasion

of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent,

not conjectural or hypothetical’; (2) ‘there [is] a causal connection between the injury and the

conduct complained of’; and (3) ‘it [is] likely, as opposed to merely speculative, that the injury

will be redressed by a favorable decision.’” White Tail Park, Inc. v. Stroube, 413 F.3d 451, 458

(4th Cir. 2005) (quoting Lujan, 504 U.S. at 560-61 (citations and internal quotation marks

omitted)).

“[T]he procedural posture of the case dictates the plaintiff’s burden as to standing.” Beck

v. McDonald, 848 F.3d 262, 270 (4th Cir. 2017); see also Lujan, 504 U.S. at 561 (holding that

“each element [of standing] must be supported in the same way as any other matter on which the

plaintiff bears the burden of proof, i.e., with the manner and degree of evidence required at the

successive stages of the litigation”). “Thus, when a defendant challenges a plaintiff’s standing, we

analyze the challenge differently depending on the stage of litigation at which the challenge is

brought and the substance of the defendant’s arguments.” Overbey v. Mayor of Balt., 930 F.3d

215, 227 (4th Cir. 2019). Accordingly, “[a]t the pleading stage, general factual allegations of

injury resulting from the defendant’s conduct may suffice, but at the summary judgment stage,

plaintiffs must set forth by affidavit or other evidence specific facts supporting standing.” In re

Marriott Int’l, Inc., 341 F.R.D. 128, 140-41 (D. Md. 2022) (quoting Lujan, 504 U.S. at 561).

1. Injury in Fact

Defendant asserts Plaintiffs fail to allege facts showing that they have suffered an injury.

(ECF No. 5-2 at 11.) Specifically, Defendant argues that Plaintiffs do not allege that they have

been denied interest or other compensation regarding their property, nor do they allege specific

details about any particular property in State custody under the Act. Id. Further, Defendant argues

that Plaintiffs fail to allege that they filed a claim under the Act for return of property in State

custody. Plaintiffs counter that they have suffered an injury in fact in the form of the State’s use

of their private property without the availability of just compensation. (ECF No. 8 at 2.)

“To establish injury in fact, a plaintiff must show that he or she suffered ‘an invasion of a

legally protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not

conjectural or hypothetical.’” Spokeo, Inc. v. Robins, 578 U.S. 330, 339 (2016) (quoting Lujan,

504 U.S. at 560)). “For an injury to be ‘particularized,’ it ‘must affect the plaintiff in a personal

and individual way.’” Id. (quoting Lujan, 504 U.S. at 560). “A ‘concrete’ injury must be ‘de

facto’; that is, it must actually exist.” Id. at 340. “At the pleading stage, general factual allegations

of injury resulting from the defendant’s conduct may suffice . . .” In re Marriott Int’l, Inc., 341

F.R.D. at 140-41.

The crux of Plaintiffs’ Complaint is that the Act mandates State use of unclaimed property

for public benefit without providing any means for interest or other fruits of the property to be paid

to rightful owners who reclaim their property, thereby resulting in an unjust taking in violation of

the federal and state constitutions.

Plaintiffs allege:

The Act applies to personal property that is held by a third party (the

“holder”), for example, a bank, insurance company, corporation, or

public utility. Under the Act such property is “presumed abandoned”

if the owner, as defined in the Act, has not communicated in writing

with the holder concerning the property or has not otherwise given

an indication of interest in the property within certain time limits

provided in the Act. Property that is “presumed abandoned” must be

delivered to Defendant’s custody.

The Takings Clause of the Fifth Amendment to the United States

Constitution (the “Fifth Amendment”) prohibits the government

from using private property for public purposes without

compensation to the property owner: “nor shall private property be

taken for public use, without just compensation.”

The Takings Clause of Article III, Section 40 of the Maryland

Constitution (“Article III, Section 40”) contains a similar

proscription: “The General Assembly shall enact no Law

authorizing private property to be taken for public use without just

compensation, as agreed upon between the parties, or awarded by a

jury, being first paid or tendered to the party entitled to such

compensation.”

Nevertheless, under the Act “presumed abandoned” property,

proceeds from any sale of any such property that was not in cash

form when it was taken into state custody, and earnings on any such

property and all cash delivered as presumed abandoned to the

Defendant, are all used to fund state programs or operations until

claimed by an “owner” of the property. An owner may reclaim

property from the State; however, the Act provides that an owner

who files a valid claim is entitled only to the property turned over to

the State by the holder (or the proceeds from the sale of that

property) and not to any interest or dividends or other increments

that accrue on the property after delivery to the State or to the

payment of just compensation to an owner of presumed abandoned

property held in the form of cash.

The Act does not provide for compensation to any owner for the

State’s taking of these fruits of the property and the use of that

property to fund State obligations during the period it is in the

State’s custody.

Accordingly, the Act effectively provides the State with an interest-

free loan of unclaimed private property funds that the Act directs to

be co-mingled with the State’s General Fund and certain of the

State’s special-purpose funds while in the Comptroller’s custody,

without providing any just compensation to claiming property

owners for the State’s use of those private property funds while in

the Comptroller’s custody.

***

Plaintiffs are and have been at all relevant times citizens and

residents of Maryland. Plaintiffs are each an “owner” of property, as

defined in Section 17-101 of the Act, that is currently held in custody

pursuant to the Act by Defendant.

(ECF No. 1, ¶¶ 2-7, 12.)

With respect to Defendant’s contention that Plaintiffs fail to allege that they were not paid

interest or justly compensated, the Supreme Court’s analysis in Knick v. Twp. of Scott is

instructive:

The Fifth Amendment right to full compensation arises at the time

of the taking, regardless of post-taking remedies that may be

available to the property owner. That principle was confirmed in

Jacobs v. United States, 290 U.S. 13, 54 S. Ct. 26, 78 L. Ed. 142

(1933), where we held that a property owner found to have a valid

takings claim is entitled to compensation as if it had been “paid

contemporaneously with the taking”—that is, the compensation

must generally consist of the total value of the property when taken,

plus interest from that time. Id., at 17, 54 S. Ct. 26, 78 L. Ed. 142

(quoting Seaboard Air Line R. Co. v. United States, 261 U.S. 299,

306, 43 S. Ct. 354, 67 L. Ed. 664 (1923)).

***

Jacobs made clear that, no matter what sort of procedures the

government puts in place to remedy a taking, a property owner has

a Fifth Amendment entitlement to compensation as soon as the

government takes his property without paying for it.

Knick v. Twp. of Scott, 139 S. Ct. 2162, 2170 (2019).

With respect to Defendant’s argument that Plaintiffs have not pled an injury in fact because

they do not allege that they submitted claims to the Comptroller for abandoned property in State

custody, Knick provides further guidance. The Knick Court overruled its holding in Williamson

Cty. Reg’l. Planning Comm’n v. Hamilton Bank of Johnson City, 473 U.S. 172 (1985), that “a

property owner whose property has been taken by a local government has not suffered a violation

of his Fifth Amendment rights—and thus cannot bring a federal takings claim in federal court—

until a state court has denied his claim for just compensation under state law.” Knick, 139 S. Ct.

at 2167.

In overruling Williamson, the Supreme Court explained in Knick:

We now conclude that the state-litigation requirement imposes an

unjustifiable burden on takings plaintiffs, conflicts with the rest of

our takings jurisprudence, and must be overruled. A property owner

has an actionable Fifth Amendment takings claim when the

government takes his property without paying for it. That does not

mean that the government must provide compensation in advance of

a taking or risk having its action invalidated: So long as the property

owner has some way to obtain compensation after the fact,

governments need not fear that courts will enjoin their activities. But

it does mean that the property owner has suffered a violation of his

Fifth Amendment rights when the government takes his property

without just compensation, and therefore may bring his claim in

federal court under §1983 at that time.

***

Although Jacobs concerned a taking by the Federal Government,

the same reasoning applies to takings by the States. The availability

of any particular compensation remedy, such as an inverse

condemnation claim under state law, cannot infringe or restrict the

property owner’s federal constitutional claim—just as the existence

of a state action for battery does not bar a Fourth Amendment claim

of excessive force. The fact that the State has provided a property

owner with a procedure that may subsequently result in just

compensation cannot deprive the owner of his Fifth Amendment

right to compensation under the Constitution, leaving only the state

law right. And that is key because it is the existence of the Fifth

Amendment right that allows the owner to proceed directly to

federal court under §1983.

Williamson County had a different view of how the Takings Clause

works. According to Williamson County, a taking does not give rise

to a federal constitutional right to just compensation at that time, but

instead gives a right to a state law procedure that will eventually

result in just compensation. As the Court put it, “if a State provides

an adequate procedure for seeking just compensation, the property

owner cannot claim a violation of the [Takings] Clause until it has

used the procedure and been denied just compensation.” 473 U. S.,

at 195, 105 S. Ct. 3108, 87 L. Ed. 2d 126. In the absence of a state

remedy, the Fifth Amendment right to compensation would attach

immediately. But, under Williamson County, the presence of a state

remedy qualifies the right, preventing it from vesting until

exhaustion of the state procedure. That is what Jacobs confirmed

could not be done.

***

A later payment of compensation may remedy the constitutional

violation that occurred at the time of the taking, but that does not

mean the violation never took place. The violation is the only reason

compensation was owed in the first place. A bank robber might give

the loot back, but he still robbed the bank. The availability of a

subsequent compensation remedy for a taking without

compensation no more means there never was a constitutional

violation in the first place than the availability of a damages action

renders negligent conduct compliant with the duty of care.

In sum, because a taking without compensation violates the self-

executing Fifth Amendment at the time of the taking, the property

owner can bring a federal suit at that time.

Id. at 2167-68, 2171-72.

The court is satisfied that Plaintiffs have pled a taking – which is the injury in fact. The

failure to allege that they were not compensated, or did not seek compensation from the State, is

not required for Plaintiffs to have standing under the Takings Clauses of the United States and

Maryland Constitutions. It is the State’s custody of unclaimed property, and use of it for public

benefit without compensating the owner, that qualifies as a taking. Under the Act, compensation

is made subsequent to the State taking possession and making use of private property. Knicks

unequivocally holds that a constitutional taking and attendant injury arise at the moment the State

exerts custody over the property. 139 S. Ct. at 2172. Plaintiffs’ Article III injury is the taking

itself, notwithstanding the Act’s procedure through which an owner may seek recompense. The

court is satisfied that Plaintiffs have adequately alleged an injury in fact for Article III standing.

2. Traceability

Defendant argues that absent an actual injury, no chain of causation is traceable to anyone

– including Defendant. (ECF No. 5-2 at 13.) Building upon their argument that the exertion of

custody (the taking) alone is the Article III injury in fact, Plaintiffs counter that the Complaint

adequately alleges a chain of causation as the State’s failure “to provide for the payment of just

compensation for property it takes into its custody and uses for public benefit pursuant to the Act.”

(ECF No. 8 at 18.) Plaintiffs are correct. “The ‘fairly traceable’ requirement does not strictly

demand proximate causation, but there must be a ‘sufficient connection between the plaintiff’s

injury and the conduct of the defendant, such that a court ought to assert jurisdiction over the

dispute.’” Alvarez v. Azar, 2021 U.S. Dist. LEXIS 182921, at *10 (D. Md. Sept. 23, 2021) (quoting

Libertarian Party of Va. v. Judd, 718 F.3d 308, 315-16 (4th Cir. 2013). “This requirement is

designed in part to ensure that an injury is ‘not the result of the independent action of some third

party not before the court.’” Id. at *10-11 (quoting Lujan, 504 U.S. at 560).

Plaintiffs allege that, pursuant to the Act, Defendant exerts custody and control over private

property for public use and fails to pay the owner its proper value. The alleged injury – the taking

– occurs pursuant to the Act, which Defendant enforces as Comptroller of the State. The

traceability factor of standing is met.

3. Redressability

Defendant argues that because Plaintiffs have not suffered an injury in fact, there is nothing

to be redressed. (ECF No. 5-2 at 13.)

“An injury is redressable if it is ‘likely, as opposed to merely speculative, that the injury

will be redressed by a favorable decision.’” Doe v. Virginia Dep’t of State Police, 713 F.3d 745,

755 (4th Cir. 2013) (quoting Friends of the Earth, Inc. v. Laidlaw Env’t Servs. (TOC), Inc., 528

U.S, 167, 181 (2000)). It is sufficient “that the court’s decision would ‘significantly affect’

plaintiff’s injuries.” Equity in Athletics, Inc. v. Dep’t of Educ., 639 F.3d 91, 100 (4th Cir. 2011)

(quoting National Parks Conservation Ass’n v. Manson, 414 F.3d 1, 6 (D.C. Cir. 2005)).

As set forth above, the court finds Plaintiffs have ably pled an injury in fact that is traceable to

Defendant. The relief sought by Plaintiffs, if granted, would at the very least require Defendant to

“pay just compensation” as determined by the court. (ECF No. 1 at 15.) Plaintiffs’ alleged injury

satisfies the redressability element of standing.

C. Ripeness

Defendant next argues that because Plaintiffs have not suffered an injury in fact, their

demand for declaratory and injunctive relief is, in essence, a demand for a disallowed advisory

opinion on a hypothetical circumstance. As such, Defendant argues, the Complaint must be

dismissed for violation of the ripeness doctrine. (ECF No. 5-2 at 15.)

“An Article III justiciability gateway, the ripeness doctrine prevents federal courts from

weighing in on a controversy until it is presented in ‘clean-cut and concrete form.’” Johnston v.

Lamone, 401 F. Supp. 3d 598, 607 (D. Md. 2019) (quoting Lansdowne on the Potomac

Homeowners Ass’n, Inc. v. OpenBand and Lansdowne, LLC, 713 F.3d 187, 198 (4th Cir. 2013))

(citations omitted). “To determine if a case is ripe,” a federal court must “balance the fitness of

the issues for judicial decision with the hardship to the parties of withholding court consideration.”

Lansdowne, 713 F.3d at 198. “A case is fit for judicial decision when the issues are purely legal

and when the action in controversy is final and not dependent on future uncertainties.” Miller v.

Brown, 462 F.3d 312, 319 (4th Cir. 2006). “The hardship prong is measured by the immediacy of

the threat and the burden imposed on the plaintiffs who would be compelled to act under threat of

enforcement of the challenged law.” Id. (quoting Charter Fed. Sav. Bank v. Office of Thrift

Supervision, 976 F.2d 203, 208 (4th Cir. 1992)).

As explained above, Plaintiffs adequately allege an injury in fact that is traceable to

Defendant and redressable by court action. Plaintiffs’ claims arose at the time of the taking;

therefore, their claims are ripe for this court to determine whether the Act complies with the

requirements of the Takings Clauses of the Fifth Amendment and Article III, Section 40.

II. 12(b)(6) Motion

A. Facial Challenge to the Constitutionality of the Act

Defendants argue that the Complaint does not adequately plead a facial challenge to the

Act because although Plaintiffs allege they would be prohibited from receiving interest (by

operation of the Act) if they filed a claim, they have not filed any such claim. (ECF No. 5-2 at

17.) Defendant further asserts that the Act is silent regarding interest and does not prohibit the

Comptroller from paying interest on property used by the State upon receipt of an owner’s claim.

Id. at 18.

“The essential elements of a takings claim are (1) a taking of private property (2) for public

use (3) without just compensation.” Kim v. Dome Entm’t Ctr., Inc., 2009 U.S. Dist. LEXIS 132842

*8 (N.D. Tex., Sept. 2, 2009) (quoting Phillips v. Washington Legal Foundation, 524 U.S. 156,

118 S. Ct. 1925, 141 L. Ed. 2d 174 (1998)).

The Complaint alleges:

Once a holder determines property in its possession is “presumed

abandoned” within the meaning of the Act, the holder is required to

attempt to notify the owner and, if the property is not claimed by the

owner, to deliver the property into the custody of the office of the

Comptroller. Id., §§ 17-310, 17-312. Upon delivery to the

Comptroller, “the State shall assume custody and shall be

responsible for its safekeeping.” Id., § 17-313. If the property is not

cash, securities or negotiable instruments, Defendant is required to

offer to sell the property within one year to the highest bidder at a

public sale “in whatever place in the State affords the most favorable

market for the property involved.” Id., § 17-316. The unclaimed

property and proceeds from the sale of unclaimed property are to be

held in custody for the owner, who can reclaim the property from

the State at any time, but without payment of any compensation for

the state’s use of that property for the property’s time in the

Comptroller’s custody. Id., § 17-319.

Indeed, when the State last amended Section 17-319, in 2004, the

amendment deleted language requiring the Comptroller to pay

claims for unclaimed property “plus interest at a rate equal to that

earned by the State Treasurer each year on invested state funds.”

2004 Md. Laws Ch. 110 (2004). The 2004 amendment to the Act

also deleted language requiring claims of unclaimed property in the

form of interest-bearing securities upon delivery to the State to be

paid out with interest accrued on the security while in State custody.

Id. (repealing Section 17-314). The 2004 amendment recites in

preamble that it was enacted for “the purpose of repealing certain

provisions that require the administrator of abandoned property to

pay interest to certain claimants; and generally relating to the

payment of interest on abandoned property.” Id.

The Act directs the Comptroller to deposit all funds received

pursuant to the Act, including funds from the liquidation of property,

into the State treasury for State use. The Act allocates certain dollar

amounts, sometimes limited to certain fiscal years, for various State

projects, including the Maryland Legal Services Corporation

($8,000,000), the State Victims of Crime Fund (all unclaimed

criminal restitution awards), tax clinics for low income residents

($250,000 for 2022-2023 only), and the Access to Counsel in

Evictions Special Fund ($14,000,000 for 2024 only), with all

remaining amounts received by the Comptroller flowing to the

State’s General Fund. Md. Code, Com. Law § 17-317. Before those

allocations, the Comptroller is required (a) to deposit in a “special

fund” a sum “not exceeding $50,000” from which the Comptroller

shall pay owner claims and (b) deduct “all costs incurred in

administering this title from the remaining net funds.” Id.

***

In recent years, the General Fund has been allocated the significant

majority of unclaimed property received under the Act. By law, the

State’s General Fund and its special-purpose funds are invested by

the State treasury, with investment proceeds allocated to the specific

funds or to the General Fund. See, e.g., Md. Code, Hum. Svcs. § 11-

402(d)(1) (Maryland Legal Services Corporation Fund retains all

returns on investments of fund assets); Md. Code, Tax Gen. § 1-

207(i)(2) (Investment earnings on the Tax Clinics for Low-Income

Marylanders Fund “shall be credited to the General Fund of the

State”). Thus, no return on the State’s investment of unclaimed

property held in State custody is allocated toward the owners of the

unclaimed property. Indeed, the statutory provision establishing the

“special fund” annually allocated $50,000 of unclaimed property

proceeds, for payment of unclaimed property owner claims, does not

appear to permit investment of such funds for the benefit of owner

claimants. Md. Code, Com. Law § 17-317. 22.

Under the Act, accordingly, unclaimed property transferred to the

custody of Defendant and the State pursuant to the Act is invested

alongside the State’s General Fund and certain of the state’s other

special-purpose funds, and thus earns interest, dividends or other

accruals and/or is held in interest-bearing accounts or other

investment instruments. By law, such interest, dividends, accruals,

and other investment returns must inure to the sole benefit of the

State’s General Fund and special-purpose funds, including those

identified in the Act, and not to any fund dedicated to the payment

of unclaimed property claims.

***

Moreover, the Act does not allow owners of unclaimed property to

receive interest, dividends or other income or increments on any

property that is liquidated or is a cash account while it is being used

by the State as custodian, regardless of the nature of the property.

See 2004 Md. Laws Ch. 110 (2004) (repealing statutory language

from the Act that had required payment of interest on unpaid

property claims “at a rate equal to that earned by the State Treasurer

each year on invested state funds”).

***

According to the Defendant’s online records, Defendant holds

Plaintiffs’ property in custody. Plaintiffs are each the owner under

the Act with respect to their respective items of property. Defendant

has at all times since delivery held Plaintiffs’ property in custody

subject to its being claimed by or on behalf of each of the Plaintiffs.

While the Defendant held Plaintiffs’ property in custody, pursuant

to the Act, the State has converted any of Plaintiffs’ non-cash

unclaimed property into cash and has used Plaintiffs’ property for

public purposes, including by investing Plaintiffs’ property and

earning interest or other accruals, and otherwise using it to fund the

State’s operations and programs.

Under the Act, should each of the Plaintiffs claim his property,

Defendant will pay each Plaintiff a cash payment equal to the total

sum of the amounts stated in State records as the cash amount of the

unclaimed property, but will not pay any just compensation to either

Plaintiff for the State’s use of that property during the period of

custody.

(ECF No. 1 ¶¶ 17-19, 21-22, 25, and 28-30; emphasis added.)

Plaintiffs allege an interest in unclaimed property held by the State pursuant to the Act.

Plaintiffs further allege that the Act requires public benefit use of unclaimed private property held

by the State per the Act. Finally, Plaintiffs allege that the Act effectively disallows a demand for,

and reimbursement of, interest, thereby denying Plaintiffs just compensation for the State’s use of

their private property while in its custody. Therefore, at the pleading stage of the litigation,

Plaintiffs have sufficiently alleged a constitutional challenge to the Act.

B. Relief Sought

Defendant argues that “where a plaintiff fails to allege facts plausibly stating a cognizable

claim, declaratory and injunctive relief cannot stand alone and should be dismissed.” (ECF No.

5-2 at 18.) Because the court declines to dismiss Plaintiffs’ claims at this stage of the litigation,

Defendant’s argument that Plaintiffs are not entitled to declaratory or injunctive relief because

such relief cannot stand as an independent cause of action is without merit.

CONCLUSION

For the reasons set forth herein, by separate order, the Motion will be denied.

/S/

__________________

Julie R. Rubin

United States District Judge

June 16, 2023