Friday, September 6, 2019
Court of Appeal:
Decision Reinstates Putative Class Action Claiming Controller’s Office Doesn’t Do Enough to Reunite Owners of Unclaimed Funds Where Value Is Less Than $50
By a MetNews Staff Writer
The First District Court of Appeal has reinstated a federal civil rights action under 42 U.S.C. §1983 that asserts the Office of State Controller is derelict in failing to notify persons whose unclaimed property is valued at less than $50 that the property will escheat to the state if they don’t file a claim.
Justice Tracie L. Brown of Div. Four wrote the opinion, which was filed Wednesday and not certified for publication. It declares that San Francisco Superior Court Judge Marla J. Miller erred in striking Aaron Hashim’s and Paul Hashim’s third amended complaint on the ground that it did not comport with an order authorizing a further pleading, following the sustaining of demurrers to the second amended complaint, but it had to be against the state, rather than the controller.
Miller had held that the controller, Betty Yee, enjoys qualified immunity.
In her motion to strike, Yee argued:
“Hashim’s failure to abide by this Court’s previous order sustaining the Controller’s demurrer to the second amended complaint is a continuing reflection of the action’s lack of merit, and warrants its dismissal….Hashim chose not to comply with the Court’s order and did not file a third amended complaint due process causes of action against the State of California. Instead, Hashim filed a third amended complaint that stated the same causes of action, and again named the Controller, notwithstanding that the Court has determined that the due process claims against the Controller lack merit. The third amended complaint thus violates the Court’s order and is unauthorized. This motion to strike should be granted without leave to amend and this action terminated.”
Miller agreed. The appeals court didn’t.
The putative class action, though naming Yee as the defendant (initially designating her predecessor, John Chiang), does constitute an action against the state, Brown said, explaining:
“Under 42 United States Code section 1983, suits for damages against state officers acting in their official capacity are treated as suits against the state.”
She said that actions against a state or its officials that seek damages are barred, but actions—such as the one filed by Aaron and Paul Hashim—for injunctive relief and disgorgement are allowed.
“Although the third amended complaint is not a model of succinctness and clarity, when read liberally as it must be…, it seeks injunctive relief and return of plaintiffs’ wrongfully taken property. The court thus abused its discretion in striking plaintiffs’ 42 United States Code section 1983 claim in its entirety for failure to comply with the amendment order.”
Under the Unclaimed Property Law, holders of funds or other property, such as banks, are obliged to turn over to the state unclaimed property. A fund—now valued at $6.9 billion—is administered by the Controller’s Office, which maintains a webpage which can be checked to ascertain if an individual’s property is being held, and through which claims may be made.
The opinion observes:
“[T]he website becomes ‘inoperable’ when the owner’s name and property is not included in the database.”
According to the Third Amended Complaint, “[b]y arbitrarily deciding not to catalogue, collect, and post the claimant’s readily available names to the State website” where the property is valued at less than $50 “and by aggregating amounts into meaningless names, such as ‘State Farm policyholders,’ the Controller wrongfully insures that it will be extraordinarily more difficult, if not impossible, for claimants to ever recover their unclaimed property.”
Although the $50 figure is used throughout the opinion, a footnote points out that as of July 1, 2014, the name and address of the owner of unclaimed property may, by statute, be omitted when the holder hands the property over to the state if property is valued at less than $25. The Third Amended Complaint, filed Dec. 15, 2014, did not reflect the statutory change.
It seeks certification of a class comprised of “[a]ll citizens who seek the return of their private property from the Controller and whose property was taken by the Controller on behalf of the State of California…pursuant to the ‘Under $50 Rule.’ ”
The opinion orders reinstatement of a cause of action for declaratory relief. Miller explained:
“The declaratory relief claim in plaintiffs’ third amended complaint tracks their 42 United States Code section 1983 claim in that it seeks a declaration against the Controller in his official capacity stating that the Controller violates the constitutional due process rights of owners of unclaimed property by seizing this property without requesting any identifying information from holders, thus depriving owners of their ability to seek return of their property. Because this declaratory relief claim is consistent with the permissible amendment to the claim under 42 United States Code section 1983, the court abused its discretion in striking the declaratory relief claim as well.”
Miller said in a footnote that whether sufficient facts are stated to constitute causes of action may be tested by demurrers.
The case is Hashim v. Yee, A147670.
Paul Hashim, 69, is president of U.S. Claims Services, Inc. in Bakersfield and Aaron Hashim, 42, is vice president. The company contacts persons whose property is held by the state and advises that it will reunite the owner with the property for a fee.
If the San Francisco action succeeds, U.S. claims will have access to information as to additional unclaimed property.
In a June 30, 2014 Los Angeles Times column, David Lazarus took aim at U.S. Claims and at Aaron Hashim, whom he interviewed.
Lazarus told of a letter a woman received from U.S. Claims saying that “private investigators” had located $398 of her money held by an insurance company.
“For a fee of $38.95, the official-sounding U.S. Claims Services said, it would obtain the money from a mysterious ‘third-party escrow account’ that apparently only its financial detectives could locate,” the journalist wrote, noting that the fund overseen by the Controller’s Office was the escrow account—and it turned over funds at no cost.
“[Y]ou have to admire the chutzpah of U.S. Claims Services in attempting to pass off the controller’s easily accessed, free-of-charge online database as a ‘third-party escrow account’—as if tracking down the money required the financial savvy of a forensic accountant.”
He went on to say that while the outfit does reunite people with their property, “it doesn’t excuse false or misleading marketing tactics,” remarking that Hashim’s “business model rests almost entirely on giving clients the false impression that they can’t get the money without his help.”
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