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A federal judge in Philadelphia has dismissed a class action lawsuit against Pennsylvania Treasurer Stacy Garrity that claimed the state’s unclaimed property law violates the Constitution because it does not require the treasury to pay interest to owners who reclaim their property.
U.S. District Judge R. Barclay Surrick granted Garrity’s motion to dismiss the lawsuit, which was filed last year on behalf of Chester County resident Brian Dillow as the lead plaintiff.
Surrick wrote that courts around the country have found Pennsylvania Disposition of Abandoned and Unclaimed Property Act and similar laws do not violate the Takings Clause of the Fifth Amendment.
Surrick cited a series of cases drawing on a 1982 U.S. Supreme Court case that held an owner’s failure to make use of property does not constitute a “taking” by the government.
In that case, the Supreme Court said the Fifth Amendment requires the government to pay a landowner for the use of land taken by the government until it is returned or purchased.
“However, where there is no owner to whom the government is able to grant compensation, as is the case with abandoned property, it does not make sense to require the government to be financially liable for this intervening period before an owner comes forward to claim his property,” Surrick wrote. “The government need not ‘compensate the owner for the consequences of his own neglect.’”
The Pennsylvania Treasury holds $4.5 billion in unclaimed property while actively searching for its owners, a Treasury spokesperson told the Capital-Star in February.
“This decision is exactly right,” Garrity said in a statement. “I’m pleased that the court correctly applied the law and dismissed this case. Pennsylvania has been returning unclaimed property to its rightful owners at a record pace, and I will continue to focus on getting this money back where it belongs.”
Each year hundreds of millions dollars are handed over to the Treasury by financial institutions, insurance companies and other entities required by law to give property to the state if they have no contact with the owner for a given amount of time.
In 2022-23, the Treasury returned $274 million, the most ever in a single fiscal year. But some of that money cannot be claimed by anyone, spokesperson Erik Arneson said, and a portion of that remainder each year goes into Pennsylvania’s general fund to pay for government programs.
The suit was filed shortly before the U.S. Supreme Court ruled in another case in which Pennsylvania and Wisconsin separately sued Delaware, arguing it had improperly kept hundreds of millions of dollars paid to Delaware-based international payments provider MoneyGram.
A court-appointed special master in 2021 found that Delaware improperly required MoneyGram to turn over unclaimed funds that should have been returned to the states where the unclaimed MoneyGram checks were purchased.
Arneson said this week that the states and MoneyGram remain in negotiations with the special master to work out the intricacies of a settlement, including how much Delaware should pay, how much MoneyGram should pay and what portion of the money owed should be repaid with interest. Garrity estimated after the 2023 decision that Pennsylvania could receive nearly $19 million. Delaware’s total liability could top $400 million.
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