Just when we thought the Taylor case was over after the 9th Circuit affirmed the dismissal, the plaintiffs are now asking the U.S. Supreme Court to take a look. Earlier this month, the Taylor plaintiffs filed a petition for writ of certiorari.
The two-step reporting process is a direct result of the Taylor case which began in 2001. In 2007, the California unclaimed property system was temporarily shut down while the state developed a new owner notification system. Now, in addition to all holders sending out due diligence letters, the state also sends out letters prior to the property being remitted to the state. The change was brought by a 2007 bill, SB 86. The petition says that "although at first blush SB 86 appeared to be an improvement, it has become increasingly clear that it is an artifice by which the States has attempted to disguise its unconstitutional scheme as a permissible system."
The petition calls the unclaimed property law a "recipe for abuse" which interferes with the statutory schemes of other states. The petition says that the State has access to databases, such as DMV records, which it uses to collect taxes and even verify the identify of a claimant, yet it does not use these databases to notify owners prior to the property becoming unclaimed. Coupled with the use of private auditors, the plaintiffs say that the property seizures have grown at an exponential rate (from $2.7 billion in 2001 to $4.1 billion in 2007 to $7.6 billion today).
Legally, the petition says that in light of the June 2015 Supreme Court case Horne v. Department of Agriculture (the raisin reserve case), the 9th Circuit misapplied the takings jurisprudence. Here, the plaintiffs argue, the unclaimed property law "does not effect simply a deprivation of property without due process - it also effects a government appropriation and hence a per se taking of private property." The analogy to the car towed and held at impound does not apply since property, like safe deposit box property and stocks, are sold or monetized for use by the state, including paying auditors.
This development is important to holders, as it could increase the compliance burden and add complexity to the process. As companies that report to California are well aware, the two-step reporting process is more difficult for holders than the one-step process in other jurisdictions. The petition says that the states' unclaimed property laws are intertwined, such that a decision in this case will become the national standard applied by other states.
The case is 15-169. The docket is available from the US Supreme Court website.
Update August 21, 2015: Yesterday, the Supreme Court granted California additional time to respond to the Petition. The State must file a response on or before October 8, 2015, which is an extension from the original due date of September 8, 2015.