Immediate §1983 Takings Claims for State Unclaimed Property Schemes

Introduction

In Knellinger v. Young (10th Cir. Apr. 11, 2025), the Tenth Circuit addressed whether owners of property taken under Colorado’s Revised Uniform Unclaimed Property Act (“RUUPA”) must first exhaust state administrative remedies before pursuing a federal takings claim under 42 U.S.C. § 1983. Plaintiffs David Knellinger and Robert Storey, Colorado residents, discovered unclaimed‐property listings under their names on the State’s public website and alleged that the State Treasurer and the Director of the Unclaimed Property Division had taken custody of their assets and diverted them into the State’s general funds without notice or just compensation. The district court dismissed their complaint for lack of standing, reasoning that they had neither filed RUUPA administrative claims nor established ownership with sufficient specificity. On appeal, the Tenth Circuit reversed in part and held that a taking under color of state law is actionable the moment it occurs—no administrative exhaustion is required.

Summary of the Judgment

The Tenth Circuit affirmed the dismissal of Plaintiffs’ equitable claims but reversed the dismissal of their monetary takings claims under § 1983. It held:

A property owner whose assets are transferred into Colorado’s unclaimed‐property trust fund and reappropriated for public use suffers a taking under the Fifth Amendment, applied to the States via the Fourteenth Amendment.
Under Knick v. Township of Scott (588 U.S. 180 (2019)), the right to just compensation vests at the moment of the uncompensated taking. No state administrative or judicial remedy must be exhausted before invoking federal jurisdiction.
Plaintiffs adequately pleaded ownership and injury in fact by alleging that (1) Colorado’s website lists property under their names, (2) they have lived in Colorado for years, and (3) they received neither notice nor compensation.
Because § 1983 provides an adequate legal remedy for just compensation, injunctive relief to prevent future takings is unavailable.

The court remanded the case for further proceedings on the monetary takings claims.

Analysis

Precedents Cited

Knick v. Township of Scott, 588 U.S. 180 (2019): Held that a Fifth Amendment takings claim accrues—and is immediately actionable under § 1983—at the moment of an uncompensated taking, without requiring exhaustion of state-law remedies.
Tyler v. Hennepin County, 598 U.S. 631 (2023): Confirmed that financial loss from a taking (here, diversion of unclaimed funds) establishes injury in fact for Article III standing.
Phillips v. Washington Legal Foundation, 524 U.S. 156 (1998): Clarified that property interests are defined by “traditional property law principles” and state-created entitlements.
Pringle v. United States, 208 F.3d 1220 (10th Cir. 2000): Explored when a jurisdictional challenge in federal court is “inextricably intertwined” with the merits, mandating de novo review under Rule 12(b)(6).

Legal Reasoning

The court’s reasoning unfolded in three principal steps:

Taking and Public Use: RUUPA authorizes Colorado to presume certain assets abandoned after statutory dormancy periods, compel holders to deliver them to the State Treasurer, and ultimately reallocate the funds to the general fund or specific public programs. That appropriation of privately held funds for state purposes satisfies the “public use” requirement of the Takings Clause.
Vesting of the Right to Compensation: Citing Knick, the court emphasized that “the moment a state takes private property for public use without just compensation, a property owner has an actionable claim” under § 1983. Post-taking administrative or state-court remedies neither extend nor delay the constitutional right to compensation.
Standing and Pleading Sufficiency: Plaintiffs alleged that Colorado’s unclaimed property website lists assets under their exact names, that they reside in Colorado, and that they have never been notified or reimbursed. Those allegations allow the inference that the State took their property, not someone else’s, and that they suffered a concrete, tangible financial injury.

Impact

Knellinger v. Young clarifies the interplay between state unclaimed‐property laws and federal takings jurisprudence in several ways:

No Administrative Exhaustion: Property owners need not file state administrative claims or litigate in state courts before suing in federal court under § 1983 to vindicate Fifth Amendment takings claims.
Heightened Pleading Standard but Permissive Inference: Complaint allegations that the State lists a plaintiff’s name on its unclaimed property website, paired with long-term residency, suffice to infer ownership at the pleading stage.
Limitation on Equitable Relief: Once § 1983 provides a post-taking remedy, injunctions against future takings become unavailable, insulating state procedures from federal equitable interference.
Broader Application: Other states with unclaimed property statutes will likely face similar § 1983 takings suits without exhaustion requirements, potentially streamlining federal challenges to unclaimed property schemes nationwide.

Complex Concepts Simplified

Revised Uniform Unclaimed Property Act (RUUPA): A state law framework that presumes certain intangible assets (wages, refunds, dividends) abandoned if unclaimed within statutory timeframes. Holders must report and remit such assets to the state treasurer, who holds them in trust for the rightful owner.
Takings Clause (Fifth Amendment): Prohibits government from taking private property for public use without just compensation. Through the Fourteenth Amendment, it applies equally to state governments.
42 U.S.C. § 1983: A federal statute allowing individuals to sue state actors for violations of constitutional rights, including uncompensated takings.
Administrative Exhaustion: The doctrine requiring plaintiffs to pursue and complete available administrative procedures before seeking judicial relief. Knick rejects its application to compensable takings claims under § 1983.
Standing (Injury in Fact): To bring a federal suit, a plaintiff must show a concrete, particularized injury that is fairly traceable to the defendant’s conduct and redressable by a favorable decision. Financial deprivation from an uncompensated taking is a “classic pocketbook injury.”

Conclusion

Knellinger v. Young establishes a new and important precedent: when a state seizes private property under an unclaimed property law and converts it for public use, the property owner’s Fifth Amendment right to just compensation arises immediately and can be vindicated under § 1983 in federal court—no state-law remedies need be exhausted first. This decision strengthens the constitutional guarantee against uncompensated takings, ensures timely access to federal courts for redress, and delineates the limits of equitable relief once a legal remedy for compensation is available. States with unclaimed property regimes should anticipate § 1983 takings claims based solely on public‐facing unclaimed‐property listings and consider legislative or administrative adjustments if they wish to minimize litigation risk.