Knellinger v. Young.
No. 23-1018. 4/11/2025. D.Colo. Judge Eid. Colorado Revised Uniform Unclaimed Property Act—42 USC § 1983—Standing—Fed. R. Civ. P. 12(b)(6)—Fifth Amendment—Fourteenth Amendment.
April 11, 2025
Knellinger and Storey (plaintiffs) visited Colorado’s unclaimed property website where they found property listed in their names valued at $50–$249 and under $50, respectively. The website did not list the type of property abandoned, and they had not received notice of the property taking nor compensation for it. Knellinger and Storey did not file administrative claims, nor did they file a suit in Denver County Court as authorized by Colorado’s Revised Uniform Unclaimed Property Act (RUUPA). Instead, Knellinger and Storey sued Young, in his individual and official capacities as Colorado State Treasurer, and Gardelli, in her individual and official capacities as Director of Colorado Department of Treasury, under 42 USC § 1983, alleging that Colorado’s unclaimed property scheme violated the US Constitution’s Fifth Amendment Takings Clause, and seeking monetary and equitable relief. Plaintiffs also asserted that, because Colorado uses the unclaimed property trust fund for other purposes, its Department of Treasury “unlawfully converts the property owner to the State,” rather than holding abandoned property in trust for the life of the property owner. They also sued on behalf of a putative class, asserting the same rights and seeking the same remedies for the class as for their individual claims. Defendants moved to dismiss under Fed. R. Civ. P. 12(b)(1) and (6). The district court dismissed the claims for lack of standing based on Knellinger and Storey’s failure to sufficiently allege ownership of the property, partly because they did not file an administrative claim to establish ownership as required by RUUPA. The court’s analysis of standing was coextensive with its merits analysis of the Takings Clause claims. The district court also determined that Knellinger and Storey failed to allege facts sufficient to give rise to claims for equitable relief. And because a class representative must have individual standing for a class to be certified, the district court also dismissed the claims on behalf of the putative class.
On appeal, the Tenth Circuit needed only to decide whether the complaint plausibly alleged that defendants, acting on behalf of the state, took plaintiffs’ property for public use and without just compensation, and thus alleged a violation of their Fifth and Fourteenth Amendment rights. The parties disputed the standard of review applicable to the district court’s order dismissing the complaint, with Knellinger and Storey arguing for acceptance of all allegations in the complaint as true and defendants arguing that any facts found by the district court are reviewable only for clear error. The Tenth Circuit determined that the standing analysis in this case is inextricably intertwined with the merits, so it deemed the district court’s order to have dismissed the complaint for failure to state a claim under Rule 12(b)(6). Accordingly, the Tenth Circuit reviewed the dismissal de novo, accepting all allegations in the complaint as true. The Tenth Circuit noted that whether a property owner has complied with state-imposed procedures is immaterial to determining whether a taking occurred. It concluded that Knellinger and Storey pleaded facts sufficient to state a plausible claim that Colorado took their property for public use without compensating them for it, in violation of the Fifth and Fourteenth Amendments. Therefore, Knellinger and Storey’s allegations allow them to maintain their claim for monetary relief under § 1983, and the alleged violation gives them standing to sue. The district court thus erred in dismissing the Takings Clause claims.
As to the claim for equitable relief, § 1983 provides an adequate basis for Knellinger and Storey to obtain just compensation for any taking. Accordingly, they have an adequate remedy at law, and equitable relief is unavailable.
The dismissal of Knellinger and Storey’s equitable claims was affirmed. The dismissal of their damages claims was reversed and the case was remanded for further proceedings.