Vargo v. Barca
| Docket Number | 20-cv-1109-jdp |
| Decision Date | 18 September 2023 |
| Parties | VICTOR VARGO, and CARIJEAN BUHK, individually and on behalf of a class of all others similarly situated, Plaintiffs, v. PETER W. BARCA, Wisconsin Secretary of Revenue, Defendant. |
| Court | U.S. District Court — Western District of Wisconsin |
Plaintiffs Victor Vargo and Carijean Buhk bring this class action for declaratory and injunctive relief, challenging the constitutionality of certain provisions of Wisconsin's Revised Uniform Unclaimed Property Act, 2021 Wis. Act 87. Before the court is Buhk's motion under Rule 23 of the Federal Rules of Civil Procedure to certify a class under Rule 23(b)(2), designate her as class representative, and appoint Dennis Grzezinski, Charles Watkins, Garrett Blanchfield, and Roberta Yard as class counsel for plaintiffs. Dkt. 48.
The court will grant the motion, but only with respect to a class comprised of people who, like Buhk, have unclaimed non-interest-bearing property in state custody that is $100 or more. The claims of these class members satisfy Rule 23(a)'s requirements of numerosity, commonality typicality, and adequacy, and the court is persuaded that their claims can be resolved collectively. But class members whose property is less than $100 must be excluded from the class because their claims arise from a separate statutory provision that doesn't apply to Buhk or the other class members.
The court reviewed the factual and legal backdrop for plaintiffs' claims in a previous order. Dkt. 41. To recap briefly, since 1970, Wisconsin has had an unclaimed property law that regulates what businesses are to do with unclaimed or abandoned financial assets, such as savings accounts checking accounts, stocks and mutual funds, securities, and mature life insurance policies. In general, after one to five years of inactivity by the property owner, Wisconsin businesses must turn over all unclaimed property to the Department of Revenue. The Department takes custody of the property indefinitely, invests it, and returns it to the owner if the owner claims it and can prove ownership or legal rights to the funds. If the property delivered to the Department is not in the form of money, such as tangible contents of safe deposit boxes or securities, the Department may first convert it to money by selling it.
Wisconsin's unclaimed property law is not an escheat statute; it is purely custodial in nature. While the state retains custody of the property, title to the property remains with the owner. But in its capacity as custodian, the state invests unclaimed property funds in either the “school fund” or the “general fund.” Wis.Stat § 177.0801(1), (2). Amounts held in both of these funds are managed through the State Investment Fund (SIF), which is overseen by the State of Wisconsin Investment Board (SWIB). According to plaintiffs, their unclaimed property, as well as the interest earned by the property while in the state's custody, is used to fund state programs or operations. Dkt. 46, ¶ 25.
The Department of Revenue maintains an online searchable database by which owners can attempt to locate unclaimed property.[1] The owner may reclaim his or her property from the state at any time by filing a claim for the property with the Department. Wis.Stat. § 177.0903(1). The Department has 90 days in which to allow or deny the claim. Wis.Stat. § 177.0904(2). If the Department allows the claim, then it “shall pay or deliver the property to the owner or pay to the owner the net proceeds of a sale of the property, together with interest, income or gain to which the owner is entitled under s. 177.0607.” The statute's scheme for paying “interest, income or gain” is the target of this suit.
At the time plaintiffs filed this action, Wisconsin's unclaimed property law did not require the Department to pay any interest to a property holder who successfully reclaimed property that had been non-interest bearing when the Department took custody.[2] Plaintiffs alleged that the state's retention of interest was an unlawful taking under three recent decisions by the Court of Appeals for the Seventh Circuit: Cerajeski v. Zoeller, 735 F.3d 577 (7th Cir. 2013), Kolton v. Frerichs, 869 F.3d 532 (7th Cir. 2017), and Goldberg v. Frerichs, 912 F.3d 1009 (7th Cir. 2019). In Cerajeski and Kolton, the court held that Indiana and Illinois statutory provisions that withheld interest on interest-bearing property in state custody were unconstitutional under the federal Takings Clause. In Goldberg, the court extended these rulings to unclaimed property statutes that denied interest to owners of non-interest-bearing property. In all three cases, the court relied on the well-settled principle that the owner of an account owns both the principal and interest. See Brown v. Legal Found. of Washington, 538 U.S. 216, 235 (2003). The cases stand for the rule that “a state may not take custody of property and retain income that the property earns.” Kolton, 869 F.3d at 533; see also Goldberg, 912 F.3d at 1011-12 (when the state earns interest on property in its custody, the property owner is entitled to that interest); Cerajeski, 735 F.3d at 578 ().
Wisconsin revised the law in 2021 Wis.Act. 87. Under the revised law, called the “Revised Uniform Unclaimed Property Act” (or “UPA”), the Department of Revenue generally pays simple interest for the period that the money or proceeds was in state custody. This rate is determined by applying “the annual federal long-term rate determined under section 1274(d) of the Internal Revenue Code in effect on December 31 of the year prior to the year in which the claim is paid.” Wis.Stat. § 177.0607(2).
Plaintiffs Victor Vargo and Carijean Buhk allege in the third amended complaint[3] that they are owners of non-interest-bearing unclaimed property that is in custody of the Department of Revenue, whose current secretary is defendant Peter Barca. Buhk, the sole proposed class representative, alleges that the monetary value of her property is between $100 and $1,000. It was delivered to the Department in 2006. Dkt. 50, ¶ 6. Vargo hasn't specified a dollar amount or how long his property has been in defendant's custody.[4]
Plaintiffs allege that even as amended, the UPA violates the Takings Clause by denying them the state-earned interest on their property in three ways:
Plaintiffs bring their facial challenge to the statute's interest-payment provisions on their own behalf and as a class action seeking declaratory and injunctive relief. They request that the court: (1) declare that the state is required to pay “at least the earnings on their property while in State custody”; and (2) issue an injunction requiring the state to make such payments in the future. Dkt. 61, at 3.
Buhk seeks to certify and represent the following class:
All persons or entities (including their heirs, assignees, legal representatives, guardians, administrators, and successors in interest) whose non-interest bearing property is being held in the custody of the Defendant under the Wisconsin [Unclaimed Property Act], except for (1) other states and governmental units or subdivisions of states (2) persons whose only property so held by the Defendant was interest bearing to the owner on the date of surrender by the holder and who were paid interest equal to or greater than Defendant's earnings or interest.
The requirements for class certification under Rule 23 are well established: (1) the scope of the class as to both its members and the asserted claims must be “defined clearly” using “objective criteria,” Mullins v. Direct Digital, LLC, 795 F.3d 654, 657 (7th Cir. 2015); (2) the class must be sufficiently numerous, include common questions of law or fact, and be adequately represented by plaintiffs (and counsel) who have claims typical of the class, Fed.R.Civ.P. 23(a); and (3) the class must meet the requirements of at least one of the types of class actions listed in Rule 23(b). In this case, Buhk asks for certification under 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.” The question at this stage is not whether Buhk is likely to prevail, but rather whether “plaintiffs' claims and the proposed class members' claims rise and fall together.” King v. Landreman, 19-cv-338-jdp, 2020 WL 6146542, *3 (W.D. Wis. Oct. 20, 2020); see also Schleicher v. Wendt, 618 F.3d 679, 686 (7th Cir. 2010) (“Rule 23 allows certification of classes that are fated to lose as well as classes that are sure to win.”).
Defendant contends that Buhk cannot satisfy any of the requirements of Rule 23(a) or Rule 23(b)(2). H...
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