“Claim-and-Denial” Ripeness Rule for Takings Challenges to Pennsylvania’s Unclaimed Property Custody

Case: Brian Dillow v. Treasurer of the Commonwealth of Pennsylvania

Court: United States Court of Appeals for the Third Circuit

Date: October 3, 2025

Panel: Judges Shwartz (author), Matey, Fisher

Disposition: District court’s dismissal affirmed, modified to be without prejudice for lack of ripeness; merits not reached

Note: The opinion is designated “not precedential,” but its reasoning offers persuasive guidance.

Introduction

This appeal tests when a Takings Clause challenge to Pennsylvania’s Disposition of Abandoned and Unclaimed Property Act (DAUPA) becomes ripe for federal adjudication. Brian Dillow, a Pennsylvania resident, alleged that the Commonwealth’s use of his unclaimed monetary instruments—once delivered to the State Treasurer under DAUPA—effects a taking without just compensation because the Treasurer does not pay interest, dividends, or other earnings realized during custodial possession. Importantly, Dillow had not yet filed a claim with the Treasurer to retrieve his funds or to seek any interest.

The District Court dismissed on the merits under Rule 12(b)(6), holding that no compensable taking occurred because the property was abandoned and the Commonwealth need not compensate for consequences of the owner’s neglect. The Third Circuit affirmed the dismissal on a different ground—Article III ripeness—modifying the judgment to be without prejudice. The court concluded that, absent an actual claim and a denial, the alleged injury remained contingent and hypothetical. The panel also clarified that this is not an exhaustion requirement; rather, without a claim and denial, there is no injury-in-fact.

Summary of the Opinion

The Third Circuit held that Dillow’s Takings Clause and Pennsylvania constitutional takings claims are not ripe because he has not yet suffered an actual injury. He has never asked the Treasurer to return his property or to pay interest, and thus has not been denied anything to which he claims entitlement.

Article III Ripeness: The court emphasized that federal courts cannot adjudicate claims that depend on “contingent future events that may not occur as anticipated, or indeed may not occur at all.” Dillow’s anticipated denial of interest is just that—anticipated.
Not Exhaustion: Requiring Dillow to make an actual claim is not an exhaustion prerequisite; it is a recognition that a takings claim is not complete until the plaintiff has been injured by government action. Without a denial, there is no present injury.
Outcome: The Third Circuit affirmed the dismissal but modified it to be without prejudice, consistent with the rule that dismissals for lack of Article III jurisdiction should not be with prejudice.

Analysis

Precedents Cited and Their Roles

American Express Travel Related Services v. Sidamon-Eristoff (3d Cir. 2012): Cited to situate DAUPA within the broader framework of state unclaimed property (“escheat”) laws. These statutes govern how holders transfer unclaimed property to the state and how owners may later recover it.
Smolow v. Hafer (Pa. 2008): Describes Pennsylvania’s custodial model under DAUPA—upon delivery, the Commonwealth takes “perpetual temporary custody,” not title. This matters because the owner’s property interest continues, supporting the premise that an owner can later seek return of property and potentially challenge what is or is not paid upon return.
In re Escheatment of Matured, Unredeemed, & Unclaimed U.S. Savings Bonds (Pa. Commw. Ct. 2018): Reinforces that the Commonwealth does not acquire title and the owner can reclaim at any time, a key feature that frames any alleged deprivation as arising, if at all, when the state refuses to pay something allegedly due.
Doe v. Princeton University (3d Cir. 2022): Recites the Rule 12(b)(6) standard (accept allegations as true). The panel underscores that even taking Dillow’s allegations as true, his injury is speculative because he has not yet asked for and been denied what he seeks.
Trump v. New York (U.S. 2020) and Texas v. United States (U.S. 1998): Provide the governing ripeness principle: courts avoid adjudicating claims resting on contingent future events that may never occur. Applied here, Dillow’s harm depends on a future claim and future denial.
Free Speech Coalition v. Attorney General (3d Cir. 2016): Notes ripeness as part of Article III case-or-controversy constraints.
Pakdel v. City & County of San Francisco (U.S. 2021): Clarifies modern takings ripeness after Knick: while state-litigation exhaustion is gone, a plaintiff must still show an actual injury inflicted by government action. The Third Circuit analogizes: Dillow cannot sue over hypothetical harm.
Tyler v. Hennepin County (U.S. 2023): Cited for the proposition that governments may presume property abandoned when the owner fails to make use of it for a lengthy period. The citation supports DAUPA’s presumption of abandonment and underscores the factual context in which the Commonwealth receives property.
Texaco, Inc. v. Short (U.S. 1982): Relied on by the District Court to say the Commonwealth need not compensate for consequences of an owner’s neglect. The Third Circuit did not reach this merits rationale, leaving its applicability open for a later, ripe case.
Chicago, B. & Q.R. Co. v. City of Chicago (U.S. 1897): Recognizes incorporation of the Takings Clause against the States.
Public Interest Legal Foundation v. Secretary, Commonwealth of Pennsylvania (3d Cir. 2025): Confirms appellate authority to review both its own and the district court’s jurisdiction.
Cottrell v. Alcon Laboratories, Inc. (3d Cir. 2017): Establishes that dismissals for lack of Article III standing (and, by parity, ripeness) should be without prejudice, guiding the modification here.

Legal Reasoning

The panel’s reasoning is straightforward and rooted in first principles of Article III:

Injury-in-Fact is Missing: Dillow alleges he expects the Treasurer will not pay “interest, dividends, accruals, earnings, investment returns, and other benefits” if he claims his property. But he has not filed a claim, has not requested interest, and has not been denied anything. Without an actual denial, there is no injury to redress.
Ripeness, Not Exhaustion: The court is careful to avoid recasting its requirement as exhaustion (which would improperly add a pre-suit hurdle). Instead, it emphasizes that a takings claim is not complete until the government action injures the plaintiff. Filing a claim and being denied is simply how injury would materialize in this context.
Contingent Future Events: Because DAUPA allows an owner to reclaim at any time and because the Treasurer’s response to any future claim is unknown, the alleged harm remains contingent. The dispute could resolve if the Treasurer, for example, paid more than Dillow anticipates. Ripeness doctrine counsels waiting for events to crystallize.
Jurisdictional Posture: The District Court proceeded to the merits under statutory jurisdiction; the Third Circuit first confirmed Article III jurisdiction and resolved the case on ripeness grounds. The court then modified the judgment to be without prejudice, honoring the jurisdictional nature of the defect.

How This Fits with Modern Takings Doctrine (After Knick and Pakdel)

The Supreme Court’s decisions have reshaped takings ripeness:

Knick v. Township of Scott (not cited in the opinion but relevant context) eliminated the requirement that a takings plaintiff first seek compensation in state court before suing in federal court.
Pakdel clarified that, although the state-litigation requirement is gone, plaintiffs must still demonstrate actual injury from a final government action affecting their property interests.

The Third Circuit’s analysis in Dillow aligns with this trajectory: the problem is not failure to exhaust remedies; it is absence of a completed injury. In the DAUPA setting, the injury would occur—if at all—when the Treasurer refuses to pay what the owner is allegedly owed, such as interest or earnings on the property.

The Unclaimed Property Context Under DAUPA

DAUPA deems certain property “abandoned and unclaimed” after statutorily defined dormancy periods. Holders of such property must attempt to notify the owner and ultimately deliver unclaimed property to the State Treasurer for safekeeping. The Commonwealth:

Holds the property in perpetual temporary custody (not title).
May use or sell the property and deposit proceeds into the General Fund.
Must pay the owner the amount realized upon sale if the owner later claims the property.

Dillow argues that by using or investing custodial property without remitting the associated time value (interest, dividends, accruals) to the owner upon claim, the Commonwealth effects a taking. The panel did not reach whether DAUPA’s scheme is constitutional in that respect because the case was not ripe. That question remains for another day if and when an owner first seeks—and is denied—those alleged entitlements.

Merits Questions Reserved

The District Court held there was no taking, reasoning that Dillow’s abandonment and neglect foreclose a claim to interest. The Third Circuit expressly declined to endorse or reject that view. The following merits questions are unresolved:

Does “interest follow principal” in the DAUPA context such that the owner is constitutionally entitled to interest or earnings realized by the state during custody?
Does DAUPA’s provision limiting post-sale recovery to “the amount actually received” raise a takings issue if the state has used or invested the proceeds?
How do abandonment and the Commonwealth’s custodial (not titular) status interact with federal takings principles after decisions such as Tyler?

These issues may be litigated after an actual claim-and-denial event creates a concrete controversy.

Impact

Immediate Consequences

For owners: Before bringing a takings suit over interest or earnings on unclaimed property held by Pennsylvania, the owner should file a claim with the Treasurer that expressly requests the payment of such amounts. If the Treasurer denies the request (in whole or part), a ripe federal claim may then exist.
For the Treasurer: The agency may see an uptick in claims that explicitly request interest or earnings. Clear, reasoned responses to such requests will frame any subsequent litigation and may help avoid or narrow disputes.
For district courts: When unclaimed property takings suits are filed without a prior claim and denial, dismissal without prejudice for lack of ripeness is the appropriate path. Courts should avoid merits rulings when Article III jurisdiction is absent.

Broader Legal Significance

Persuasive Blueprint: Although not precedential, the opinion provides a practical blueprint for ripeness in unclaimed property takings cases: owners must present a concrete dispute by first invoking the state process and obtaining a definitive response.
Harmonization with Federal Doctrine: The decision is consistent with Pakdel’s emphasis on an actual injury and with general ripeness principles that prohibit adjudication of hypothetical harms.
Future Merits Battles: Across jurisdictions, courts have wrestled with whether states may retain interest earned on custodial property. By reserving the merits, the Third Circuit leaves room for those debates to proceed in cases that are properly postured.

Complex Concepts Simplified

Ripeness: A doctrine that bars courts from deciding cases that depend on hypothetical or contingent future events. A claim is ripe when the facts have developed such that a concrete injury has occurred or is imminent.
Standing vs. Ripeness: Both are part of Article III’s case-or-controversy requirement. Standing asks whether the plaintiff has suffered a concrete injury; ripeness asks whether the dispute is fit for adjudication now or is still contingent.
Escheat vs. Custody: “Escheat” traditionally involves the state taking title to ownerless property. Under DAUPA, Pennsylvania generally takes custody, not title, holding property in “perpetual temporary custody” for the benefit of the true owner.
Abandoned Property: Property may be deemed “abandoned and unclaimed” after a statutorily defined period of inactivity. The designation allows the state to take custody for safekeeping, while preserving the owner’s right to reclaim.
“Interest Follows Principal”: A property law maxim often invoked in takings cases to argue that interest earned on money is itself the owner’s property—an issue the Third Circuit left undecided here because the case was not ripe.
Dismissal Without Prejudice: When a court lacks Article III jurisdiction (e.g., for ripeness), the appropriate disposition is dismissal without prejudice, allowing the plaintiff to refile once jurisdictional obstacles are removed.

Conclusion

The Third Circuit’s decision in Dillow clarifies a practical and important rule for litigants challenging Pennsylvania’s unclaimed property regime under the Takings Clause: file a claim first and obtain a denial. Until then, the alleged injury remains speculative and the case unripe.

The court’s approach carefully distinguishes ripeness from exhaustion, respects Article III’s limits, and preserves the parties’ ability to litigate the constitutional merits at the appropriate time. While the panel declined to decide whether DAUPA’s retention of interest or earnings amounts to a taking, it provided a clear procedural roadmap—one that will shape how future unclaimed property takings challenges are framed and when they can be heard in federal court.

Key takeaways:

A Takings Clause challenge to DAUPA’s handling of interest or earnings is unripe absent a filed claim and a denial.
This requirement is not “exhaustion”; it is the injury-trigger in this statutory context.
Dismissals on ripeness grounds should be without prejudice, preserving the ability to refile once the dispute is concrete.