Florida CFO Seeks To Scuttle Unclaimed Property Fight

Florida Chief Financial Officer Jimmy Patronis asked a federal judge Thursday to toss out a potential class-action lawsuit challenging the consti

Florida Chief Financial Officer Jimmy Patronis asked a federal judge Thursday to toss out a potential class-action lawsuit challenging the constitutionality of a law that directs the state’s handling of unclaimed property.

The lawsuit, filed in July in Tallahassee, alleges that the state does not provide “just compensation,” such as interest, to owners who ultimately claim property. It contends that the system results in an unconstitutional “taking” of property.

But attorneys for Patronis filed a motion and a lengthy legal memorandum Thursday urging U.S. District Judge Robert Hinkle to dismiss the case. Patronis oversees the unclaimed-property program, which involves people’s property that has been held by such things as banks and insurance companies.

When the property is believed to be unclaimed, it is turned over to the state. Examples are money, unclaimed insurance proceeds and items in safe-deposit boxes.

Unclaimed money is deposited into what is known as the State School Trust Fund, which helps support public schools. The state also periodically holds auctions of unclaimed items. If owners or their heirs find out about the unclaimed property, they can recover money from the state.

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The legal memorandum Thursday said while the state “holds unclaimed property in safekeeping for the owner, it also gains beneficial use of the property (a collateral benefit) until it is reclaimed. This bears no resemblance to a traditional ‘taking.’”

“Florida law does not require the Department (of Financial Services) or the state to take title to unclaimed property; rather, the department acts as a custodian of such property until the time a claim is filed, processed, and the property or proceeds are returned to the owner,” said the memorandum, filed by attorneys with the firm Dean, Mead & Dunbar. “Thus, although unclaimed property laws often lead to a public benefit, they are also designed to protect the rights of property owners.”

But the lawsuit said the unclaimed-property law “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 school fund while in the state’s custody. The state otherwise pays market rates to borrow money.”

“The state does not compensate an owner of unclaimed property for lost interest, dividends, or other earnings or accruals on the property after deposit with the state or the loss of the beneficial use of the property or its time value while it is in state custody,” the lawsuit said. “So, the state does not pay just compensation to any owner for the state’s use of their private unclaimed property while it is in state custody.”

The named plaintiff in the lawsuit, St. Petersburg resident Alieda Maron, has a $26.24 insurance-premium refund that is in the unclaimed-property system, according to court documents. Her attorneys contend the lawsuit should be handled as a class action.

“Given that most of the property amounts held are small, the number of persons or entities who own property presumed abandoned and held in custody by the state under the act necessarily must be in the hundreds of thousands,” said the lawsuit, filed by attorneys from five firms.

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But in addition to disputing that the law leads to taking of property, Patronis’ attorneys contend Maron does not have legal standing to pursue the case.

“Plaintiff’s only allegations of an actual injury are that someday in the future at some undetermined time, plaintiff may submit a claim, which the department may approve, and she will not receive interest on the $26.24 of insurance premium refunds held by the department,” Thursday’s memorandum said. “These allegations are not imminent and amount to nothing more than the mere possibility of harm in the indeterminate future.”

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