Chris Taylor v. John Chiang , 780 F.3d 928 ( 2015 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CHRIS LUSBY TAYLOR; NANCY A. No. 12-17828
PEPPLE-GONSALVES; SUSAN
SWINTON; WILLIAM J. PALMER,
D.C. No.
deceased; DON H. PERRI; JENNIFER
WALSH; MARK MACAULEY; MARY A. 2:01-cv-02407-
STEELE, on behalf of themselves and JAM-GGH
other persons similarly situated,
Plaintiffs-Appellants,
OPINION
v.
BETTY YEE, * individually and in her
official capacity as State Controller of
the State of California; RICHARD
CHIVARO,
Defendants-Appellees.
Appeal from the United States District Court
for the Eastern District of California
John A. Mendez, District Judge, Presiding
*
Betty Yee, is substituted for her predecessor, John Chiang, as
Controller of the State of California, Fed. R. App. P. 43(c)(2).
2 TAYLOR V. YEE
Argued and Submitted
February 11, 2015─San Francisco California
Filed March 11, 2015
Before: Mary M. Schroeder and Barry G. Silverman,
Circuit Judges and Paul C. Huck, ** Senior District Judge.
Opinion by Judge Huck
SUMMARY ***
Civil Rights
The panel affirmed the district court’s dismissal, for
failure to state a claim, of a putative class action
challenging the California State Controller’s application of
California’s Unclaimed Property Law.
Appellants alleged that the procedures used both before
unclaimed property is transferred to the Controller (“pre-
escheat”) and after it is transferred (“post-escheat’) violate
appellants’ due process rights. Specifically, appellants
asserted that the pre-escheat notice provided by the
**
The Honorable Paul C. Huck, Senior District Judge for the U.S.
District Court for Southern Florida, sitting by designation.
***
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
TAYLOR V. YEE 3
Controller was constitutionally inadequate because the
Controller does not attempt to locate property owners using
the data sources required by Sections 1531 of the
Unclaimed Property Law. The panel held that appellants’
argument was based on a misinterpretation of the statute,
which relates only to post-escheatment procedures, and that
appellants’ suggested requirement that the Controller use
additional databases exceeded due process requirements.
The panel further rejected appellants’ argument that the
Controller’s pre-escheat notice process was inadequate
because it is carried out by companies that receive a portion
of the escheated value and therefore have a conflict of
interest. The panel held that this argument was not
supported by law or the alleged facts. The panel further
held that appellants’ challenge to the post-escheat
procedure was not ripe for review.
COUNSEL
William W. Palmer, The Law Offices of William W.
Palmer, Sacramento, California; C. Brooks Cutter and John
R. Parker, Jr., Kershaw, Cutter & Ratinoff, LLP,
Sacramento, California; Robert A. Buccola, Steven M.
Campora, and James J. Ison, Dreyer Babich Buccola Wood
Campora, LLP, Sacramento, California, for Plaintiffs-
Appellants.
Robin B. Johansen and Margaret R. Prinzing, Remcho,
Johansen & Purcell, LLP, San Leandro, California, for
Defendants-Appellees.
4 TAYLOR V. YEE
OPINION
HUCK, Senior District Judge:
I. INTRODUCTION
This putative class action has a long and tortuous
history in this Court. Presumably this opinion will be
known as Taylor V. 1 Appellants challenge the
constitutionality of California’s Unclaimed Property Law
(“UPL”), which provides for the conditional transfer of
unclaimed property to the State of California. 2 While this
Court has previously held the UPL facially constitutional,
see Taylor III, 525 F.3d at 1289, the instant suit challenges
1
This Court’s prior decisions in this matter are: Taylor v. Westly
(Taylor I), 402 F.3d 924 (9th Cir. 2005); Taylor v. Westly (Taylor II),
488 F.3d 1197 (9th Cir. 2007) (per curiam); Taylor v. Westly (Taylor
III), 525 F.3d 1288 (9th Cir. 2008) (per curiam); and Taylor v. Chiang
(Taylor IV), 405 F. App’x 167 (9th Cir. 2010). In addition, this Court
has decided four appeals in a related case brought by Appellants’
counsel: Suever v. Connell (Suever I), 439 F.3d 1142 (9th Cir. 2006);
Suever v. Connell (Suever II), 579 F.3d 1047 (9th Cir. 2009); Suever v.
Connell (Suever III), 484 F. App’x 187 (9th Cir. 2012); and Suever v.
Connell (Suever IV), 133 S. Ct. 1243 (2013).
2
The UPL is California’s escheatment statute. “Escheat is . . . a means
of dealing with . . . money and property [that] are unclaimed and the
person entitled to it is dead or . . . cannot be found and there is no other
individual with a good claim.” Taylor I, 402 F.3d at 926. Essentially,
property that is unclaimed, as defined by the UPL, is transferred
(escheats) to California. However, an owner may reclaim property
escheated pursuant to the UPL at any time; thus the property “does not
permanently escheat to the state.” Cal. Civ. Proc. Code § 1501.5(a). If
California sells the property, the owner may recover the proceeds. The
State may destroy property that has no commercial value.
TAYLOR V. YEE 5
the California State Controller Betty Yee’s (“the
Controller”) application of the statute. 3 Appellants claim
that the procedures used both before unclaimed property is
transferred to the Controller (“pre-escheat”) and after it is
transferred (“post-escheat”) violate Appellants’ due process
rights. The district court dismissed Appellants’ suit with
prejudice for failure to state a claim. We AFFIRM.
Appellants’ first and primary argument is that the pre-
escheat notice provided by the Controller is constitutionally
inadequate because the Controller does not attempt to
locate property owners using the data sources required by
Section 1531.5 of the UPL. Appellants further argue that
the Controller’s pre-escheat notice process is inadequate
because it is carried out by companies that have an alleged
conflict of interest because they receive a portion of the
escheated property’s value. Finally, Appellants argue that
the Controller’s post-escheat procedures violate the Due
Process and Takings Clauses because they do not provide
an adequate remedy when the Controller denies an
individual’s claim to escheated property.
II. BACKGROUND
As explained below in more detail, under the UPL,
property that appears to be lost or abandoned by the owner
is conditionally transferred to the State if it remains
unclaimed after notice is provided to the owner. Examples
of such lost or abandoned property are savings accounts at
a bank or shares of stock held in a brokerage account. In
3
Appellee Betty Yee is the California State Controller and Appellee
Richard Chivaro is the Chief Counsel to the State Controller.
6 TAYLOR V. YEE
August of 2007, in response to Taylor II, which found the
UPL’s notice requirements insufficient, the California
Legislature amended the UPL to provide additional notice
to owners of unclaimed property. In Taylor III, this Court
determined that the amended UPL is facially constitutional.
Appellants now bring this as-applied challenge to the law.
California’s Unclaimed Property Law
According to the Controller, the purpose of the UPL is
to locate owners of apparently lost or abandoned property
and restore their property to them; but if these efforts are
unsuccessful, to give the benefit of any unclaimed property
to California, rather than to financial institutions or other
private entities holding the property (“holders”). As the
Controller explains, the UPL thus ensures that unless and
until the owner reclaims it, unclaimed property will be used
for the public good rather than for the benefit of private
banks and financial institutions.
Pursuant to the UPL, holders must transfer property to
the State once the property meets the UPL’s definition of
unclaimed property. See Cal. Civ. Proc. Code § 1511 et
seq. However, prior to escheatment to California, the UPL
requires that multiple forms of notice be given to the
apparent owners of unclaimed property, including two
notice letters.
As an initial step, the UPL provides that the holder
“shall make reasonable efforts to notify any owner by mail
or, if the owner has consented to electronic notice,
electronically, that the owner’s” property will escheat to the
State. Id. §§ 1513.5(d), 1514(b), 1516(d). The same
general notice requirements apply to all types of property
under the UPL, although the specifics vary by property
type. Compare id. § 1514 (safe deposit boxes), with § 1516
TAYLOR V. YEE 7
(business dividends and distributions). This notice is sent
to the apparent owner’s address, as reflected in the holder’s
records. The notice contains a form that the owner is to
complete, sign, and return, in which case, “it shall be
deemed that the [holder] knows the location of the owner,”
who claims the property. E.g., id § 1531.5(d). The holder
may also provide telephonic or electronic methods by
which the owner can claim the property. Id.
If the owner does not respond to the holder’s notice, the
property is deemed unclaimed and the holder must report to
the Controller “the name, if known, and last known
address, if any, of each person appearing from the records
of the holder to be the owner of any property of value of at
least fifty dollars ($50) escheated under this chapter.” Id.
§ 1530(b)(1). The statute mandates specific dates,
depending on the property’s classification, by which a
holder must report the unclaimed property to the
Controller. Id. § 1530(d). The holder’s notice to the owner
is to be given “[n]ot less than 6 nor more than 12 months
before the time the account, deposit, shares, or other
interest becomes reportable to the Controller in accordance
with this chapter.” Id. § 1513.5.
After the holder has reported the unclaimed property to
the Controller, but before it is transferred, that is, pre-
escheat, “the Controller shall mail a notice to each person
having an address listed in the report who appears to be
entitled to property of the value of fifty dollars ($50) or
more escheated under this chapter.” Id. § 1531(d). 4 The
4
By design of the statute, the Controller’s notice occurs prior to
escheatment because it must be sent “[w]ithin 165 days after the final
8 TAYLOR V. YEE
Controller’s notice must state that property is being held,
name the addressee who may be entitled to it, and give the
name and address of the holder. Id. § 1531(e). Further, the
notice must provide:
[a] statement that, if satisfactory proof of
claim is not presented by the owner to the
holder by the date specified in the notice, the
property will be placed in the custody of the
Controller and may be sold or destroyed
pursuant to this chapter, and all further
claims concerning the property or, if sold,
the net proceeds of its sale, must be directed
to the Controller.
Id. § 1531(e)(3). Usually, the Controller’s notice is mailed
to the owner’s address provided by the holder.
The Controller takes an additional step to determine the
current address of the owner. Under the UPL, if the
holder’s report includes the owner’s Social Security
number, “the Controller shall request the Franchise Tax
Board to provide a current address for the apparent owner
on the basis of that number.” Id. § 1531(d). If the
Franchise Tax Board provides an address different from the
one provided by the holder, the Controller sends notice to
that address. Id. Otherwise, if the Franchise Tax Board
does not provide any address, or provides the same address
date” on which the holder submits its report to the Controller, whereas
the holder is to deliver the unclaimed property “no sooner than seven
months [i.e., 210 days] and no later than seven months and 15 days
after the final date for filing the report.” See id. §§ 1531(d), 1532.
TAYLOR V. YEE 9
as the holder, the Controller mails notice to the address
provided by the holder. Id.
If the owner fails to timely “establish[] his or her right
to receive any property specified in the report to the
satisfaction of the holder before that property has been
delivered to the Controller” then the property must be
transferred (that is, escheated) to the Controller in the time
specified by the statute. Id. § 1532(a)–(b). However, the
property transferred to the Controller does not
“permanently escheat to the state.” Id. § 1501.5(a).
Rather, the Controller holds the unclaimed property in trust
for the owner who may claim it at any time. Those who
“claim[] to have been the owner . . . of property paid or
delivered to the Controller under this chapter may file a
claim to the property or to the net proceeds from its sale.”
Id. § 1540(a).
Beyond the notice mailed by the Controller, the UPL
requires additional forms of notice. The Controller must
also provide notice via publication “in a newspaper of
general circulation which the Controller determines is most
likely to give notice to the apparent owner of the property.”
Id. § 1531(a). The newspaper notice does not state which
property was taken or from whom, but instead explains
generally that the Controller takes custody of unclaimed
property. The advertisement states that “California may
have received Property belonging to You” and explains that
property is deemed unclaimed if there has been no owner
contact with the property holder or account activity for
three years.
The newspaper notice also informs potential owners of
the Controller’s website where they may perform a search
to determine whether they may be the owner of unclaimed
property. If there is property in that person’s name, the
10 TAYLOR V. YEE
website further describes what the property is, what it is
worth, which holder reported it, and the owner’s name and
address as reported by the holder. The website provides
instructions for filling out a claim form, which can be done
online.
In Taylor III, this Court explained that the UPL, as
amended in 2007, passes constitutional muster because the
State, in addition to the holder, “is required to provide pre-
escheat ‘notice reasonably calculated, under all the
circumstances, to apprise interested parties of the pendency
of the action and afford them an opportunity to present their
objections.’” 525 F.3d at 1289 (quoting Jones v. Flowers,
547 U.S. 220, 226 (2006)). The UPL declares, “[i]t is the
intent of the Legislature that property owners be reunited
with their property” and that in amending the law,
California intended to provide “[n]otification by the state to
all owners of unclaimed property prior to escheatment.”
Cal. Civ. Proc. Code § 1501.5(c)(1) (emphasis added). The
amended UPL came about as a result of this Court’s
decision in Taylor II.
Taylor I, II, and III
In Taylor I, two individuals 5 sued after the Controller
escheated purportedly unclaimed shares of stock that the
individuals owned. Taylor I, 402 F.3d at 926. The issue
then was whether the notice provided to plaintiffs was
constitutionally adequate. The district court dismissed the
complaint under the Eleventh Amendment for lack of
5
The suit “was filed as a class action, but never reached the point of
class certification vel non.” Taylor I, 402 F.3d at 925.
TAYLOR V. YEE 11
jurisdiction. This Court reversed. Id. at 936. We ruled that
the suit was not barred by the Eleventh Amendment
because plaintiffs’ action was for return of their own
properties. See id.
After remand, plaintiffs, challenging the adequacy of
the notice provided prior to escheat of the unclaimed
property to the Controller, moved for a preliminary
injunction. In response, the Controller argued the UPL
provided constitutionally adequate notice by requiring that:
1) the Controller place advertisements in the newspaper
explaining that owners could check an unclaimed property
website to see if their names or property were listed as
escheated to the State; 2) the Controller “mails written
notice to some, but not all, individuals whose property has
been escheated”; and 3) the holders of the property subject
to escheat “provide notice to individuals” prior to the
property being escheated. Taylor II, 488 F.3d at 1201.
The district court denied plaintiffs’ request for a
preliminary injunction and this Court again reversed, noting
that California needed to take action to “remedy the
constitutional problem with its escheat statute,”
specifically, the lack of adequate notice. Id. at 1202. We
explained, “[b]efore the government may disturb a person’s
ownership of his property, ‘due process requires the
government to provide notice reasonably calculated, under
all the circumstances, to apprise the interested party of the
pendency of the action and afford him an opportunity to
present his objections.’” Id. at 1201 (quoting Jones,
547 U.S. at 226).
In reversing the district court’s denial of the injunction,
this Court ruled that the plaintiffs had a strong likelihood of
success in proving that the notice provisions of the UPL did
not provide due process. Id. First, we held that the website
12 TAYLOR V. YEE
and the Controller’s mailings (which only went to some
individuals) “[did] not respond to the requirement that
notice be given before an individual’s control of his
property is disturbed,” (i.e. escheated). Id. Further, “mere
publication is not constitutionally adequate.” Id. Finally,
the holder’s obligation to provide notice did not satisfy the
obligation of the State itself to give notice. Id. As a result,
this Court ruled that a preliminary injunction should have
been granted. Id. at 1202.
On remand, the district court issued the preliminary
injunction. Taylor v. Chiang, No. CIV. S-01-2407 WBS
GGH, 2007 WL 1628050 (E.D. Cal. June 1, 2007). The
injunction enjoined the Controller from receiving, taking
title to, possessing, selling, or destroying any property
pursuant to the UPL “until the Controller has first
promulgated regulations providing for fair notice to the
owner and public, satisfactory to and approved by this
court.” Id. at *5.
As a result of Taylor II, in 2007 the California
Legislature “eliminated the statutory and administrative
procedure that [this Court] had determined to be
unconstitutional” and “promulgated an entirely new
statutory procedure addressing escheat.” Taylor III,
525 F.3d at 1289. In light of the revised UPL, the district
court dissolved the injunction. Taylor v. Chiang, No. Civ.
S-01-2407 WBS GGH, 2007 WL 3049645 (E.D. Cal. Oct.
18, 2007). The district court ruled that the notice provision
of the amended UPL remedied the constitutional problems
identified by Taylor II because it required the Controller to
send notice before an individual’s property is transferred to
the State and maintain a searchable unclaimed property
website. Id. at *3.
 TAYLOR V. YEE 13
Appellants appealed the dissolution of the injunction,
which resulted in Taylor III. There, this Court ruled that
“[o]n its face, the new procedure complies with the due
process standard established by the Supreme Court in
Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306,
70 S. Ct. 652, 94 L. Ed. 865 (1950), and Jones v. Flowers,
547 U.S. 220, 126 S. Ct. 1708, 164 L. Ed. 2d 415 (2006).”
Taylor III, 525 F.3d at 1289. Appellants could not prevail
on a facial challenge because “[u]nder the new law, the
Controller is required to provide pre-escheatment notice
reasonably calculated, under all the circumstances, to
apprise interested parties of the pendency of the action and
afford them an opportunity to present their objections.” Id.
(citations and quotation marks omitted). Therefore, it is
clear that this Court has held that the UPL, on its face,
provides for constitutionally adequate notice. This Court
reiterated the facial constitutionality of the UPL in Suever
II, 579 F.3d at 1054 n.4, stating:
In Taylor v. Westly (Taylor III), 525 F.3d
1288 (9th Cir. 2008) (per curiam), we held
that the “entirely new statutory procedure
addressing escheat” promulgated by the
State following the issuance of the
preliminary injunction in Taylor II is facially
constitutional, and that, as a result, the
district court did not abuse its discretion in
dissolving the injunction. Id. at 1289–90.
As a result of Taylor III, Appellants’ ostensibly last
hope is to craft an as-applied challenge to the UPL, which
they have done in their Second Amended Class Action
Complaint.
14 TAYLOR V. YEE
Appellants’ Second Amended Class Action
Complaint
Appellants’ Second Amended Class Action Complaint
alleges that the Controller is administering the UPL in a
manner that violates Appellants’ due process rights
guaranteed by the Fifth and Fourteenth Amendments to the
United States Constitution and 42 U.S.C. § 1983. The
district court dismissed all counts for failure to state a
claim.
Here, the primary issue to be resolved is whether
Appellants have sufficiently stated an as-applied claim that
the Controller is not providing constitutionally adequate
notice because she is not taking additional steps to locate
and notify property owners.
III. STANDARD OF REVIEW
We review de novo the district court’s order granting
Appellees’ motion to dismiss under Federal Rule of Civil
Procedure 12(b)(6). Zadrozny v. Bank of N.Y. Mellon,
720 F.3d 1163, 1167 (9th Cir. 2013). “Dismissal is proper
only where there is no cognizable legal theory or an
absence of sufficient facts alleged to support a cognizable
legal theory.” Navarro v. Block, 250 F.3d 729, 732 (9th
Cir. 2001). To survive a motion to dismiss, the complaint
must allege “enough facts to state a claim to relief that is
plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007). The Court must “accept all factual
allegations in the complaint as true and construe the
pleadings in the light most favorable to the nonmoving
party.” Rowe v. Educ. Credit Mgmt. Corp., 559 F.3d 1028,
1029–30 (9th Cir. 2009) (citation and quotation omitted).
The Court “can affirm a 12(b)(6) dismissal on any ground
TAYLOR V. YEE 15
supported by the record, even if the district court did not
rely on the ground.” Davis v. HSBC Bank Nevada, N.A.,
691 F.3d 1152, 1159 (9th Cir. 2012) (citation and quotation
omitted).
IV. ANALYSIS
A. Appellants’ Claim of Inadequate Notice
Since Taylor I, Appellants have continuously argued
that under the UPL the Controller is not providing notice in
compliance with the Due Process Clause.
The Supreme Court announced that where persons may
be deprived of their property, the Due Process Clause
requires “notice reasonably calculated, under all the
circumstances, to apprise interested parties of the pendency
of the action and afford them an opportunity to present their
objections.” Mullane, 339 U.S. at 314.
A second, more recent, Supreme Court opinion further
defined the law regarding adequate notice, explaining that
“[b]efore a State may take property and sell it for unpaid
taxes, the Due Process Clause of the Fourteenth
Amendment requires the government to provide the owner
‘notice and opportunity for hearing appropriate to the
nature of the case.’” Jones, 547 U.S. at 223 (quoting
Mullane, 339 U.S. at 313).
In Jones, the petitioner purchased a house and lived
there with his wife for more than twenty-five years before
they separated. Id. After the separation, the petitioner
moved out, but continued to pay the mortgage each month,
and the mortgage company paid the property taxes. Id.
However, once the mortgage was paid, the property taxes
were unpaid and delinquent. Id. Arkansas’ Commissioner
16 TAYLOR V. YEE
of State Lands notified the petitioner of the tax delinquency
by mailing a certified letter to the petitioner at the
property’s address. Id. This letter “stated that unless [the
petitioner] redeemed the property, it would be subject to
public sale two years later.” Id. However, nobody was
home to sign for the letter and nobody appeared at the post
office to claim the letter. Id. at 224. Therefore, the letter
was returned to the Commissioner as unclaimed. Id.
Just weeks before the public sale of the property, the
Commissioner published a notice of the sale in a local
newspaper. Id. After the sale of the property was
negotiated with a third party, the Commissioner sent
another certified letter to the petitioner in an attempt to
notify the petitioner that his home was going to be sold if
he did not pay the delinquent taxes. Id. Just as the first
notice, this second letter was returned to the Commissioner
as unclaimed. Id.
Ultimately, the property was sold and the buyer “had an
unlawful detainer notice delivered to the property. The
notice was served on [the petitioner’s] daughter, who
contacted [the petitioner] and notified him of the tax sale.”
Id. The petitioner filed suit, arguing that the Commissioner
failed to provide constitutionally adequate notice of the tax
sale. Id.
Jones required the Court to determine “whether due
process entails further responsibility when the government
becomes aware prior to the taking that its attempt at notice
has failed.” Id. at 226. This is because the Court had
previously “explained that the ‘notice required will vary
with circumstances and conditions.’” Id. at 227 (quoting
Walker v. City of Hutchinson, 352 U.S. 112, 115 (1956)).
Stated another way, the issue was whether the
government’s knowledge that the notice had not been
TAYLOR V. YEE 17
received was a “circumstance and condition that varies the
notice required.” Id. (quotation omitted).
The Supreme Court held “that when mailed notice of a
tax sale is returned unclaimed, the State must take
additional reasonable steps to attempt to provide notice to
the property owner before selling his property, if it is
practicable to do so.” Id. at 225.
The Court found there were “several reasonable steps
the State could have taken,” and that “[w]hat steps are
reasonable in response to new information depends upon
what the new information reveals.” Id. The certified mail
was marked as unclaimed, which could have meant that the
petitioner still lived at the address, but was not home or that
the petitioner no longer lived at the address. Id. One
reasonable step would have been for the State to “resend
notice by regular mail, so that a signature was not
required.” Id. This would “increase the chances of actual
notice to [the petitioner] if—as it turned out—he had
moved.” Id. at 235. Relevant to Appellants’ case, the
petitioner in Jones argued “that the Commissioner should
have searched for his new address in the Little Rock
phonebook and other government records such as income
tax rolls.” Id. at 235–36. However, the Court declared
that it “[did] not believe the government was required to go
this far.” Id. 6
6
It is important to note that in Jones the Court was concerned with the
“important and irreversible prospect” of “the loss of a house.” Id. at
230. Indeed the Court cited to a number of federal appellate and state
supreme court cases addressing notice in the context of selling real
property to a third party at a tax sale. Id. at 227. In stark contrast, the
property conditionally transferred to the Controller pursuant to the UPL
18 TAYLOR V. YEE
Appellants rely on Jones for their proposition that the
Controller must also “consult ‘all’ publicly available
databases” to locate the owners of unclaimed property.
Specifically, Appellants claim that the Controller is
violating the Due Process Clause because he is failing to
utilize Section 1531.5 of the UPL. Section 1531.5 provides
that “[t]he Controller shall establish and conduct a
notification program designed to inform owners about the
possible existence of unclaimed property received pursuant
to” the UPL. Cal. Civ. Proc. Code § 1531.5(a) (emphasis
added). It permits California’s state and local
governmental agencies, “upon the request of the
Controller,” to provide the Controller with information
from their databases that could be used post-escheat to
locate owners of unclaimed property. Id. § 1531.5(c)(1).
Appellants maintain that the Controller’s failure to utilize
the additional data available through Section 1531.5
violates Appellants’ due process rights. This interpretation
is incorrect.
does not permanently escheat to the State and may be claimed at any
time. Cal. Civ. Proc. Code § 1501.5(a). That said, owners that
belatedly step forward to reclaim their property may be able to obtain
only the sale proceeds. In such a case, the Controller then holds the
proceeds in trust until the owner steps forward to claim the property.
Further, if the property “has no apparent commercial value” the
Controller must retain the property “for a period of not less than seven
years from the date the property is delivered to the Controller . . . [and]
may at any time thereafter destroy or otherwise dispose of the property
. . . .” Id. § 1565.
 TAYLOR V. YEE 19
B. Appellants Incorrectly Interpret Section
1531.5
This Court has already ruled that the UPL passes
muster under the Mullane–Jones standard. However,
Appellants contend that in ruling the UPL constitutional,
this Court relied upon Section 1531.5. Under Appellants’
interpretation of the law, when generating the pre-escheat
notices, the Controller is required to utilize Section 1531.5
and search additional databases in an attempt to locate
property owners.
Contrary to Appellants’ position, it appears this Court
did not rely on Section 1531.5, which applies post-escheat,
in determining the facial constitutionality of the revised
UPL. Indeed, the only reference to Section 1531.5 found in
Taylor III was in a citation where the Court mentioned
California had overhauled its escheat law. 7 Taylor III,
7
In Taylor III, this Court provided a brief history of the case stating,
After the plaintiff had won these two victories on
appeal, the district court issued a preliminary
injunction pursuant to our mandate. The State then
eliminated the statutory and administrative procedure
that we had determined to be unconstitutional. The
State promulgated an entirely new statutory
procedure addressing escheat. See Cal. Civ. Proc.
Code § 1501.5(c) (West 2008); see also id. at
§§ 1531, 1531.5, 1532, 1563, 1565. Concluding that
the amendments remedied the constitutional defects
we identified in Taylor II, the district court granted
the Controller’s motion to dissolve the injunction.
Taylor III, 525 F.3d at 1289. This is the only mention of Section
1531.5 in the opinion.
20 TAYLOR V. YEE
525 F.3d at 1289. Rather, it was the requirement that the
Controller provide reasonable pre-escheat notice that
brought the UPL into constitutional compliance, as this
Court stated:
On its face, the new procedure complies
with the due process standard established by
the Supreme Court in Mullane v. Cent.
Hanover Bank & Trust Co., 339 U.S. 306,
70 S. Ct. 652, 94 L. Ed. 865 (1950), and
Jones v. Flowers, 547 U.S. 220, 126 S. Ct.
1708, 164 L. Ed. 2d 415 (2006). Under the
new law, the Controller is required to
provide pre-escheat “‘notice reasonably
calculated, under all the circumstances, to
apprise interested parties of the pendency of
the action and afford them an opportunity to
present their objections,’” Flowers, 547 U.S.
at 226, 126 S. Ct. 1708 (quoting Mullane,
339 U.S. at 314, 70 S. Ct. 652). Thus, the
plaintiffs’ challenge, to the extent that it is a
facial challenge against the new law, fails.
Id. (emphasis added). That Section 1531.5 relates only to
post-escheatment procedures is clear from the language of
that section, titled “Notification program for possible
owners of escheated property,” which states “[t]he
Controller shall establish and conduct a notification
program designed to inform owners about the possible
existence of unclaimed property received pursuant to this
chapter.” Cal. Civ. Proc. Code § 1531.5(a) (emphasis
TAYLOR V. YEE 21
added). 8 Therefore, Section 1531.5 does not mandate that
the Controller seek access to additional databases to locate
property owners to provide pre-escheat notice.
Tellingly, when appealing the dissolution of the
injunction, Appellants argued that the amended provisions
of the UPL did not satisfy the Mullane–Jones standard
because the additional information available under Section
1531.5 was not available until after the property is received
by the Controller. Appellees correctly note that this
Court’s focus in Taylor II and Taylor III was on notice
being provided by the Controller before the property was
transferred to the State, that is, escheated, and therefore
Section 1531.5 could not have been a deciding factor for
the Court in Taylor III, as Appellants argue.
Furthermore, Section 1531.5 is permissive in that it
allows state and local agencies to furnish records “upon the
request of the Controller,” but it does not mandate that the
Controller request such records. Cal. Civ. Proc. Code
§ 1531.5(c)(1). It seems clear that the purpose of this
provision is to permit the agencies to disclose personal
information that would be non-disclosable in the absence of
this statutory waiver. Rather than a mandate that the
Controller use the agencies’ databases, Section 1531.5
provides legal cover for the agencies’ disclosure of such
personal information should the Controller opt to request it.
Therefore, Appellants’ argument that the Controller
does not meet the Mullane-Jones standard because she fails
8
Moreover, at oral argument Appellants’ counsel conceded that
Section 1531.5 does not apply pre-escheat.
22 TAYLOR V. YEE
to utilize data made available by Section 1531.5 is without
merit as it is based upon a misinterpretation of the statute.
Moreover, in trying to provide pre-escheat notice to owners
of unclaimed property, the Controller does take “additional
reasonable steps to notify [the owners], if practicable to do
so.” Jones, 547 U.S. at 234. If provided with a Social
Security number, the Controller utilizes the Franchise Tax
Board’s database to determine if there is a more current
address. The Controller also provides notice in the
newspaper to explain to the public generally that it is
holding properties that may belong to the readers. Finally,
the Controller maintains a searchable website where
individuals can determine whether they are the owners of
unclaimed property, and if so, can submit a claim form.
Appellants’ suggested requirement that the Controller
utilize additional governmental databases may, of course,
lead to more claims being filed, but it exceeds the
minimum due process requirements. Indeed, as indicated
above, the property owner in Jones argued that Arkansas’
Commissioner of State Lands “should have searched for
[his] new address in the Little Rock phonebook and other
government records such as income tax rolls.” Id. at 235–
36. However, the Supreme Court “[did] not believe the
government was required to go this far.” Id. at 236.
Likewise here, the Controller is not required, either by the
Due Process Clause or Section 1531.5, to go as far as
Appellants suggest. 9
9
Appellants take issue with the Controller’s use of the Franchise Tax
Board database, arguing that
TAYLOR V. YEE 23
C. Appellants’ Additional Arguments
The Court also rejects Appellants’ additional argument
related to the Controller’s use of related companies to
administer the UPL. This argument is not supported by law
or the alleged facts. The cases cited by Appellants are
inapposite because here, the allegedly biased companies are
not decision-makers and instead merely perform ministerial
duties. Furthermore, Appellants do not sufficiently allege
that the companies have failed to carry out the UPL’s
notice procedures.
[b]y using only the FTB database to notify owners of
unclaimed property before their property is seized,
the Controller purposely and by design fails to find
current addresses of millions of Californians and
other citizens who moved, permanently reside out-of-
state, and may never even have set foot in California,
but have deposited their earnings in bank accounts,
bought securities, opened safety deposit boxes and
otherwise invested and safeguarded their properties
by depositing said assets with banks, corporations,
and financial institutions that [have] offices in
California.
(Sec. Am. Compl. ¶ 70). Yet, when ruling the law constitutional, this
Court was obviously aware that in sending pre-escheat notices, the
Controller would utilize the last known address provided by the holders
or alternative addresses from the FTB database. Moreover, Appellants’
argument undercuts their other argument that the Controller should be
utilizing other databases, such as California’s Department of Motor
Vehicles, to locate property owners. Those who simply maintained
their assets in California banks and permanently reside out-of-state,
such as Plaintiff Chris Lusby Taylor, likely do not have California
driver’s licenses and would therefore likely not appear in a California
DMV database.
24 TAYLOR V. YEE
Appellants’ challenge to the Controller’s post-escheat
procedure is not ripe because the Appellants failed to
challenge the Controller’s action—or inaction—in superior
court as required by Section 1541 and Appellants do not
appeal the district court’s determination that the post-
escheat procedure provided by the UPL is reasonable. See
Suitum v. Tahoe Reg’l Planning Agency, 520 U.S. 725, 734
(1997) (citing Williamson Cnty. Reg’l Planning Comm’n v.
Hamilton Bank of Johnson City, 473 U.S. 172, 195 (1985);
Carson Harbor Village, Ltd. v. City of Carson, 353 F.3d
824, 826 (9th Cir. 2004) (citing Williamson, 483 U.S. at
186)). 10
V. CONCLUSION
For these reasons, this Court AFFIRMS the district
court’s ruling.
10
Even if adequately raised, Appellants’ argument regarding the
Controller’s post-escheat procedure is without merit. The UPL
provides that within ninety days after the Controller’s denial of a claim,
an individual aggrieved by the Controller’s decision may seek review
in state court. See Cal. Civ. Proc. Code § 1541. The ninety day
limitation is not inherently unreasonable. Indeed, ninety days is the
same period in which a plaintiff must bring suit for discrimination
under Title VII after the EEOC has issued its right to sue letter. See
42 U.S.C. § 2000e-5(f)(1). Moreover, any claim that the limitation
period is unconstitutional is foreclosed by our prior decision holding
the UPL facially constitutional. See Taylor III, 525 F.3d at 1289.