Minnesota Supreme Court Requires Payment of Interest to Owner of Unclaimed Property

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On March 7, 2018, the Minnesota Supreme Court issued a decision in Hall v. Minnesota, No. A16-0874, requiring the Minnesota Commissioner of Commerce to pay interest on proceeds from an interest-bearing account while the proceeds were in the custody of the state.

Four owners requested the return of their unclaimed property in custody of the state, and the state complied.  After receiving their property, the owners sued the state claiming that the state’s refusal to pay interest was prohibited under the Takings Clause of the federal Constitution. Minnesota statutes provide that the Commissioner of Commerce will not pay interest on unclaimed property held in the state’s custody.

The Minnesota Supreme Court held that the state’s failure to pay interest to one of the plaintiffs–Mary Wingfield–violated the Takings Clause. In Ms. Wingfield’s case, the state had taken custody of the balance of her interest-bearing bank account. The court held that “[t]he right to earn interest was part of Wingfield’s unclaimed property, and she therefore has the right to receive that interest from the State if she is to be made whole.” Hall, slip. op. at 16.

The court provided no relief for the other three plaintiffs, none of whom recovered property that would have borne interest had it remained in the owner’s custody. To require the state to pay interest in these cases “would reward [the owner’s] inattention and provide an inappropriate windfall.” Id. at 13.

The court also held that the notice requirements in Minnesota’s Uniform Disposition of Unclaimed Property Act, perhaps even the Act itself, provide sufficient notice to owners under the federal Due Process Clause that the state has taken custody of their property.

The decision in Hall is the most recent contribution to an ongoing dispute among owners, holders, and states over whether unclaimed property administrators must pay interest on property in their possession. State appellate courts and federal courts of appeal have come to differing conclusions on this question.