Smolow v. Hafer

• Decision Date: 24 January 2005
• Docket Number: Civil Action No. 04-941.
• Parties: Ronald J. SMOLOW, Individually and on behalf of all persons and entities similarly situated, Plaintiff, v. Barbara HAFER, Treasurer of the Commonwealth of Pennsylvania, Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

353 F.Supp.2d 561

Ronald J. SMOLOW, Individually and on behalf of all persons and entities similarly situated, Plaintiff, v. Barbara HAFER, Treasurer of the Commonwealth of Pennsylvania, Defendant.

Civil Action No. 04-941.

United States District Court, E.D. Pennsylvania.

January 24, 2005.

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Ann M. Caldwell, Caldwell Law Office LLC, Philadelphia, PA, for Plaintiff.

MEMORANDUM AND ORDER MEMORANDUM

DUBOIS, District Judge.

I. BACKGROUND

Plaintiff filed this class action against Barbara Hafer, Treasurer of the Commonwealth of Pennsylvania, for failing to pay him interest allegedly earned upon his mistakenly confiscated property. In his Amended Class Action Complaint, plaintiff alleges state statutory, common law and constitutional claims, and federal constitutional claims.

Presently before the Court is Defendant's Motion to Dismiss the Amended Complaint. For the reasons set forth below, the Court grants defendant's Motion to Dismiss with respect to plaintiff's state law claims and request for restitution, without prejudice to plaintiff's right to proceed in state court on such state claims and the claim for restitution based on state law. The Court denies defendant's Motion with respect to plaintiff's federal claims and request for prospective relief on the basis of federal law. However, the Court abstains from adjudicating these surviving federal claims pursuant to the doctrine announced in R.R. Comm'n of Texas v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941).

II. FACTS

Plaintiff, owner of 300 shares of common stock in Parker Drilling Company ("Parker Stock"), alleges that Parker's agent mistakenly cancelled his stock and delivered it to the Treasury Department of Pennsylvania (the "Treasury") pursuant to the Disposition of Abandoned and Unclaimed Property Act ("DAUPA"), 72 Pa C.S. § 1301.1 et seq. (Am.Compl.¶¶ 7-9). Defendant Hafer, as Treasurer of the Commonwealth, converted this stock into cash. (Id. at ¶ 9). Plaintiff avers that defendant used this sum and interest earned upon it for public purposes. (Id. at ¶ 10). Upon plaintiff's request, defendant returned the amount the Treasury received from the stock sale, $586.47, but refused to pay plaintiff interest earned on the proceeds of the sale, estimated by plaintiff to be approximately $30.00, pursuant to the DAUPA, 72 Pa.C.S. § 1301.15.¹ (Id. at ¶¶ 12-16).

Plaintiff filed this class action on March 3, 2004. In an Amended Class Action Complaint against defendant in her official capacity filed on May 11, 2004, plaintiff alleged: (1) violation of the DAUPA, and unlawful taking without just compensation under the Fifth and Fourteenth Amendments of the U.S. Constitution pursuant to 42 U.S.C. § 1983 (Count I); (2) to the extent the DAUPA does not require payment of interest, the statute and defendant's enforcement of the statute violated plaintiff's substantive and procedural due process rights under the Fifth and Fourteenth Amendments of the U.S. Constitution pursuant to 42 U.S.C. § 1983 (Count II); (3) denial of substantive and procedural due process, and taking without just compensation, under the Constitution of Pennsylvania (Count III); (4) unjust enrichment (Count IV); and (5) breach of fiduciary duty (Count V). Plaintiff claims supplemental jurisdiction over his state law claims under 28 U.S.C. § 1367. (Am.Compl.¶ 5).

In Count VI, plaintiff requests various forms of relief. He asks the Court to declare the relevant provisions of the DAUPA unconstitutional to the extent they do not require payment of interest, enjoin the defendant from continuing to enforce the Act in this manner, and award him restitution for the unpaid interest. (Id. at ¶ 51). In the alternative to restitution, plaintiff requests that defendant provide an accounting to all class members of unpaid interest and benefits derived therefrom, and implement a procedure for reimbursement. (Id.). Plaintiff also seeks attorneys' fees. (Id.).

On March 8, 2004, five days after filing the federal action, plaintiff filed a class action against defendant in the Commonwealth Court of Pennsylvania on virtually identical federal and state grounds. See Smolow v. Hafer (Pa. Commw. Ct., Docket No. 208 MD 2004). On May 20, 2004, the Treasury offered to pay plaintiff $30.00 to compensate for the lost interest. Plaintiff has not accepted that offer. (Motion to Dismiss at 3).

In the Motion to Dismiss, defendant argues that: (1) defendant mooted plaintiff's claims and the putative class' claims by offering to pay plaintiff the claimed interest, requiring dismissal under Federal Rule of Civil Procedure 12(b)(1); (2) the Eleventh Amendment limits plaintiff's federal claims to those for prospective relief and bars his state claims entirely; (3) plaintiff failed to state a claim upon which relief can be granted under the Takings or Due Process Clauses of the U.S. Constitution because he did not specifically plead that he suffered a net loss; and (4) the Court should abstain from adjudicating plaintiff's claims under Younger v. Harris, 401 U.S. 37 (1980), on the ground that plaintiff filed a similar class action which is pending in state court. The Court addresses these issues in the order in which they were raised by defendant.

III. STANDARDS OF REVIEW

A. Rule 12(b)(1)

Defendant argues that plaintiff's claims should be dismissed as moot pursuant to Federal Rule of Civil Procedure 12(b)(1). The Court will also treat defendant's Eleventh Amendment defenses as made pursuant to Rule 12(b)(1).² See Blanciak v. Allegheny Ludlum Corp., 77 F.3d 690, 694 n. 2 (3d 1996) ("[T]he Eleventh Amendment is a jurisdictional bar which deprives federal courts of subject matter jurisdiction ... Accordingly, the motion may properly be considered a motion to dismiss the complaint for lack of subject matter jurisdiction under Fed.R.Civ.P. 12(b)(1)."). See also Douris v. Office of Pennsylvania Atty. Gen., 2004 WL 287112, *1 (E.D.Pa. Jan. 22, 2004).

Challenges to subject matter jurisdiction can be either "facial" or "factual." See Mortensen v. First Fed. Sav. and Loan Assoc., 549 F.2d 884, 891 (3d Cir.1977). In a facial attack, a defendant argues that the plaintiff did not properly plead jurisdiction, and the Court must consider the allegations in the complaint as true. Id. However, a "factual" attack asserts that jurisdiction is lacking on the basis of facts outside of the pleadings, and it invokes the Court's authority to consider any affidavits and other evidence submitted. Id. For both categories of attack, a plaintiff has the burden of proving jurisdiction. Id.

In this case, defendant's Eleventh Amendment defenses constitute a facial challenge to the sufficiency plaintiff's jurisdictional allegations in the Amended Complaint. Defendant's mootness argument relies upon facts not included in the Amended Complaint (i.e., defendant's offer to pay plaintiff his claimed interest) and is therefore a factual challenge to jurisdiction.

B. Rule 12(b)(6)

Defendant argues that in failing to plead net loss as part of his Takings and Due Process Clause claims under the U.S. Constitution, plaintiff "fail[ed] to state a claim upon which relief can be granted" pursuant to Federal Rule of Civil Procedure 12(b)(6). "A court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984). Moreover, "[f]or the purposes of a motion to dismiss, the material allegations of the complaint are taken as admitted." Jenkins v. McKeithen, 395 U.S. 411, 421, 89 S.Ct. 1843, 23 L.Ed.2d 404 (1969).

IV. DISCUSSION

A. Mootness

Defendant first argues that plaintiff's claims are mooted by defendant's offer to pay him his estimated interest of $30.00. (Motion to Dismiss at 3-5). Further, it argues that plaintiff's class claims are mooted along with his individual claims because he has not yet moved for class certification. (Def. Reply at 3).

Regardless of whether defendant's offer mooted plaintiff's individual action, the Third Circuit has recently held that, following the filing of a class complaint and prior to moving for certification, a defendant cannot render class claims moot by offering the named plaintiff the full amount of his individual claim. Weiss v. Regal Collections, 385 F.3d 337 (3d Cir.2004). In Weiss, the plaintiff consumer filed a class action under the Fair Debt Collection Practices Act ("FDCPA") against the defendants on behalf of a putative class. Id. at 339-40. Before plaintiff moved for certification, defendants made a Rule 68 offer of judgment to the named plaintiff for the maximum statutory damages an individual could recover under the FDCPA, which the plaintiff refused. Id. Defendants did not make a Rule 68 offer of judgment to other members of plaintiff's putative class. Id. at 342. Because defendants' Rule 68 offer of judgment provided no relief to plaintiff's putative class, the court only addressed the mootness issue with respect to the class claims, and did not rule on this issue with respect to plaintiff's individual claims. Id.See also id. at 347 ("The mootness exception recognizes that ... it is necessary to conceive of the named plaintiff as a part of an indivisible class and not merely a single adverse party even before the class certification question has been decided.").

In the context of plaintiff's class claims, the court in Weiss held that, although defendants' offer provided the named plaintiff with all of the relief to which he was entitled (given that it equaled the statutory maximum and the FDCPA did not permit the plaintiff to seek prospective relief), it did not moot his class action. Id. at 347-49. The court held it would permit the class to proceed and "relate the certification motion back to the filing of the class complaint." Id. at 347-49. It found that,

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