Gerlach v. Rokita

• Decision Date: 29 March 2023
• Docket Number: 1:22-cv-00072-TWP-MG
• Parties: TINA GERLACH, Plaintiff, v. TODD ROKITA, in his official capacity as Indiana Attorney General and his individual capacity, KELLY MITCHELL, in her official capacity as Indiana Treasurer, CURTIS HILL, in his individual capacity, and AARON NEGANGARD, in his individual capacity, Defendants.
• Court: U.S. District Court — Southern District of Indiana

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TINA GERLACH, Plaintiff, v. TODD ROKITA, in his official capacity as Indiana Attorney General and his individual capacity, KELLY MITCHELL, in her official capacity as Indiana Treasurer, CURTIS HILL, in his individual capacity, and AARON NEGANGARD, in his individual capacity, Defendants.

No. 1:22-cv-00072-TWP-MG

United States District Court, S.D. Indiana, Indianapolis Division

March 29, 2023

ENTRY ON PENDING MOTIONS

Hon Tanya Walton Pratt, United States District Court Chief Judge

This matter is before the Court on a Motion for Judgment on the Pleadings pursuant to Federal Rule of Civil Procedure 12(c), filed by Defendants Todd Rokita ("Rokita"), Kelly Mitchell ("Mitchell"), Curtis Hill ("Hill"), and Aaron Negangard's "(Negangard") (collectively, "Defendants") (Filing No. 32). Also before the Court is Plaintiff Tina Gerlach's ("Gerlach") Motion to Strike, or Alternatively, for Leave to File a Surreply (Filing No. 42), and Motion for Oral Argument (Filing No. 43). Gerlach initiated this lawsuit bringing claims under the Fifth and Fourteenth Amendments and 42 U.S.C. § 1983 for violation of the Takings Clause. The Defendants, after filing their Answer (Filing No. 22), moved for judgment on the pleadings. Gerlach filed a response (Filing No. 36) and, following the filing of the Defendants' reply (Filing No. 41), filed a Motion to Strike (Filing No. 42) and Motion for Oral Argument (Filing No. 43). For the following reasons, the Motion for Judgment on the Pleadings is granted, and the Motions to strike and for oral argument are denied.

I. BACKGROUND

The following facts are not necessarily objectively true, but as required when reviewing a motion for judgment on the pleadings, the Court accepts as true the factual allegations in the Complaint and draws all inferences in favor of Gerlach as the non-moving party. See Emergency Servs. Billing Corp. v. Allstate Ins. Co., 668 F.3d 459, 464 (7th Cir. 2012).

The Defendants are the current Indiana Attorney General Todd Rokita, former acting Attorney General Aaron Negangard, former Attorney General Curtis Hill, and former Indiana State Treasurer Kelly Mitchell.^[1]

The Revised Indiana Unclaimed Property Act, just like its predecessors, is a custodial act: it collects and ostensibly safeguards property belonging to private citizens that has lain dormant for a specified period of time with banks, insurance companies, and other public and private firms. (Filing No. 1 at 4, ¶ 12.) Under the Revised Indiana Unclaimed Property Act, the Attorney General is authorized to take possession of certain unclaimed property. Ind. Code § 32-34-1.5-12; Ind. Code § 32-34-1.5-13. The Attorney General maintains an account "with an amount of funds the attorney general reasonably estimates is sufficient to pay claims" and is required to transfer remaining funds or proceeds from sale of the property to the Indiana State Treasurer who is required to place those funds into the State's abandoned property fund. Ind. Code § 32-34-1.5-42. The Treasurer is further required to transfer the balance of the abandoned property fund in excess of $500,000.00 to the State's general fund at least once per year. Ind. Code § 32-34-1.5-44. The Attorney General administers these statutory provisions through the Attorney General Office's Unclaimed Property Division (Filing No. 1 at 4, ¶ 13).

Gerlach, is a current Kentucky resident and former Indiana resident. Id. at 1. She had two pieces of property valued over $100.00 that were turned over to the Indiana Unclaimed Property Division pursuant to the Act. (Filing No. 1 at 6, ¶ 25). Ms. Gerlach claimed one of these pieces, and the State of Indiana approved the claim and paid $100.93 to Ms. Gerlach on November 8, 2021. Id. at ¶ 26. Ms. Gerlach was not paid interest earned by the property while held by the State. Id. The second piece of property remains in the custody of the Attorney General. Id. To date, no claim has been made by Ms. Gerlach on this property through the Unclaimed Property Division. Id. Neither piece of property was held in an interest-bearing account before the Attorney General took possession of the funds. Id. While Defendants held Gerlach's property, it earned income. Id. at ¶ 28. Gerlach alleges that the Defendants and the State have taken that income and refuse to compensate her for the time value of that property. Id. at ¶ 27.

Gerlach initiated this action on January 12, 2022, asserting the Defendants violated the Fifth and Fourteenth Amendments "by taking earnings on unclaimed property while in state custody and failing to compensate owners" for those earnings. Id. at 1. Gerlach makes requests for injunctive and declaratory relief including a declaration that failure to pay interest on all property claimed under the Revised Indiana Unclaimed Property Act is a violation of the Takings Clause, an order enjoining the Attorney General and Treasurer from further violations, and an order that Indiana must keep separate unclaimed property from the State's general fund. Further, she asks the Court to award just compensation for income earned by her still unclaimed property and damages against the current and former Indiana Attorneys General for violations of the Takings Clause.

The Defendants filed their Answer to the Complaint on April 12, 2022 (Filing No. 22) and their Motion for Judgment on the Pleadings on June 30, 2022 (Filing No. 32). The Defendants attached to their Motion and to their reply in support of their Motion (Filing No. 41) affidavits from Amy Hendrix ("Hendrix"), Director of the Unclaimed Property Division of the Office of the Indiana Attorney General (Filing No. 32-1 and Filing No. 41-1), and Michael Frick, Chief Deputy Treasurer and Portfolio Manager for the Indiana State Treasurer's Office (Filing No. 41-2). These affidavits state that on June 18, 2022, the Unclaimed Property Division began paying interest on claims for funds taken from non-interest-bearing accounts (Filing No. 32-1). The Division pays interest matching the State's "internal rate of return" (Filing No. 32-1 at 2), which is calculated as the "aggregated investment rate" on the State's general fund and other accounts not invested separately (Filing No. 41-2 at 3). The abandoned property fund is not separately invested from the State's general fund (Filing No. 41-2 at 2). Hendrix affirms that the Attorney General Office's Unclaimed Property Division has no intention of ending these interest payments (Filing No. 32-1 at 4).

II. LEGAL STANDARD

Federal Rule of Civil Procedure 12(c) permits a party to move for judgment after the parties have filed a complaint and an answer and the pleadings are closed. Rule 12(c) motions are analyzed under the same standard as a motion to dismiss under Rule 12(b)(6). Pisciotta v. Old Nat'l Bancorp., 499 F.3d 629, 633 (7th Cir. 2007); Frey v. Bank One, 91 F.3d 45, 46 (7th Cir. 1996). The complaint must allege facts that are "enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Although "detailed factual allegations" are not required, mere "labels," "conclusions," or "formulaic recitation[s] of the elements of a cause of action" are insufficient. Id. Stated differently, the complaint must include "enough facts to state a claim to relief that is plausible on its face." Hecker v. Deere & Co., 556 F.3d 575, 580 (7th Cir. 2009) (internal citation and quotation marks omitted). To be facially plausible, the complaint must allow "the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955).

Like a Rule 12(b)(6) motion, the court will grant a Rule 12(c) motion only if "it appears beyond doubt that the plaintiff cannot prove any facts that would support his claim for relief." N. Ind. Gun & Outdoor Shows, Inc. v. City of S. Bend, 163 F.3d 449, 452 (7th Cir. 1998) (quoting Craigs, Inc. v. Gen. Elec. Capital Corp., 12 F.3d 686, 688 (7th Cir. 1993)). The factual allegations in the complaint are viewed in a light most favorable to the non-moving party; however, the court is "not obliged to ignore any facts set forth in the complaint that undermine the plaintiff's claim or to assign any weight to unsupported conclusions of law." Id. (quoting R.J.R. Serv., Inc. v. Aetna Cas. & Sur. Co., 895 F.2d 279, 281 (7th Cir. 1989)). "As the title of the rule implies, Rule 12(c) permits a judgment based on the pleadings alone.... The pleadings include the complaint, the answer, and any written instruments attached as exhibits." Id. (internal citations omitted).

III. DISCUSSION

On January 12, 2022, Gerlach filed the instant Complaint challenging the Defendants' retention of the earnings on her property held as unclaimed property by them under the Indiana Revised Unclaimed Property Act, Ind. Code § 32-34-1.5, et seq., and its predecessors (the “Act”). Count I is a Claim for declaratory and injunctive relief, against Defendants Rokita and Mitchell in their official capacities, on behalf of Plaintiff and the Rule 23(b)(2) Class; Count II is a Claim for just compensation, against Defendants Rokita and Mitchell in their official capacities, on behalf of Plaintiff Gerlach and the Rule 23(b)(3) Class; and Count III is Claim for compensatory relief, against Defendants Rokita, Hill, and Negangard in their individual capacities, on behalf of Gerlach and the Rule 23(b)(3) Class. (Filing No. 1 at 7-14.) Gerlach alleges the Defendants violate the Fifth and Fourteenth Amendments of the United States Constitution by taking earnings on unclaimed property while in state custody and failing to compensate owners, thereby...