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Kolton v. Frerichs

United States District Court, N.D. Illinois, Eastern Division

March 28, 2018

ANTHONY D. KOLTON, S. DAVID GOLDBERG, and JEFFREY S. SCULLEY, individually and on behalf of a class of all others similarly situated, Plaintiffs,
MICHAEL W. FRERICHS, Treasurer of the State of Illinois, Defendant.


          Charles P. Kocoras, United States District Judge

         Plaintiffs Anthony D. Kolton, S. David Goldberg, and Jeffrey S. Sculley (collectively, “Plaintiffs”) bring this class action against Defendant Michael W. Frerichs (“Frerichs”), challenging the constitutionality of a provision of the Illinois Uniform Disposition of Unclaimed Property Act, 765 ILCS § 1025/1, et seq. (“UPA” or the “Act”). Before the Court is Plaintiffs' Motion for Class Certification (“Motion”) pursuant to Federal Rule of Civil Procedure 23. For the following reasons, Plaintiffs' Motion is denied.


         Plaintiffs' Amended Complaint (“Complaint”) challenges the constitutionality of the UPA, claiming that the Act authorizes the State to take certain private property for public use without just compensation. Plaintiffs sue the Treasurer of the State Illinois, Frerichs, in his official capacity. The Act applies to personal property that is held by a third party (the “holder”), such as a bank, corporation, or public utility. Under the Act, personal property is “presumed abandoned” if its owner has not communicated with the holder regarding the property or has not otherwise indicated interest in the property for a period of time. The holder of “presumed abandoned” property must attempt to notify the owner, and, if the owner does not claim the property, the holder is required to deliver the property to the Treasurer.

         Once in his custody, Frerichs places the funds (or in the case of tangible property, the proceeds from the sale thereof) into the Unclaimed Property Trust Fund. According to Plaintiffs, property that is submitted to Frerichs in accordance with the Act “earns interest, dividends or other accruals, ” and is sometimes “held in interest-bearing accounts or instruments.” The interest earned on unclaimed property is deposited into the General Revenue Fund pursuant to the State Finance Act, 30 ILCS 105/4.1(a).

         The Act is not an escheat statute; it is purely custodial in nature. While Frerichs retains custody of the property, title to the property remains with the owner. The owner may reclaim his or her property from the State at any time. An owner who makes a claim on such property, however, is entitled only to the property that the holder submitted to the State (or the proceeds from the sale thereof)-“the owner is not entitled to receive income or other increments accruing thereafter.”[1] 765 ILCS § 1025/15. In essence, Plaintiffs allege, the Act prohibits owners from receiving interest, dividends, or other income or increments earned on their property while in the State's custody.

         Plaintiffs allege that the Act, by allowing the State to retain interest and other income on unclaimed property, as well as beneficially use the property without paying the owner, constitutes a taking without just compensation. The named Plaintiffs are all owners of property that is currently in Frerichs' custody. They allege that their property has been used for “public purposes, including by investing the property and earning interest, and otherwise using it to fund the state's operations and programs.” Plaintiffs assert that under Sections 1025/15 and 1025/20 of the Act, if Plaintiffs claim their property, Frerichs will return it, but he will not compensate Plaintiffs for the interest accrued and seized by the State, nor for the State's use of the property while in its custody.

         Plaintiffs bring this action on their own behalf and as a class action seeking declaratory and injunctive relief. They request the Court to (1) declare that the State is required to pay just compensation for its taking of property while in its custody and determine the proper measure of just compensation, and (2) issue an injunction to ensure that Frerichs complies with the Court's declaration.[2] Plaintiffs now seek class certification.


         Class certification is governed by Federal Rule of Civil Procedure 23, under which the party seeking certification must demonstrate that: (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class. Fed.R.Civ.P. 23(a)(1)-(4). The proposed class must also satisfy at least one of the three requirements listed in Rule 23(b). Plaintiffs rely on Rule 23(b)(2), which applies when “the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” Finally, the class must be “sufficiently definite that its members are ascertainable.” Jamie S. v. Milwaukee Public Schools, 668 F.3d 481, 493 (7th Cir. 2012).

         Plaintiffs bear the burden “to demonstrate, by a preponderance of the evidence, that they have met each requirement of Rule 23.” Bell v. PNC Bank, Nat. Ass'n, 800 F.3d 360, 376 (7th Cir. 2015). “A class may only be certified if the trial court is satisfied, after a rigorous analysis, that the prerequisites for class certification have been met.” Id. at 373 (internal quotations and citations omitted). “Frequently that ‘rigorous analysis' will entail some overlap with the merits of the plaintiff's underlying claim. That cannot be helped.” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 351 (7th Cir. 2011). The Court may consider the merits “only to the extent…that they are relevant to determining whether the Rule 23 prerequisites for class certification are satisfied.” Amgen Inc. v. Conn. Retirement Plans & Trust Funds, 568 U.S. 455, 466 (2013).


         Plaintiffs seek certification for the following class: “All persons who are owners of property in the Illinois unclaimed property program that is in the form of money.” Plaintiffs contend that the proposed class satisfies all of the requirements of Rule 23(a) and 23(b)(2).

         The parties agree that the proposed class meets two of the four requirements under Rule 23(a). Plaintiffs allege, and Frerichs does not dispute, that the number of putative class members is in the hundreds of thousands of persons or entities who own money property presumed abandoned and held in custody by Frerichs. Plaintiffs have satisfied the numerosity requirement of Rule 23(a)(1). Additionally, Frerichs concedes that ...

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