Anthony Kolton, et al v. Michael Frerich
Filed opinion of the court by Judge Easterbrook. The judgment is VACATED, and the case is REMANDED for proceedings consistent with this opinion. Frank H. Easterbrook, Circuit Judge; Michael S. Kanne, Circuit Judge and Ilana Diamond Rovner, Circuit Judge. [6863344-1]  [16-3658]
United States Court of Appeals
For the Seventh Circuit
ANTHONY D. KOLTON and S. DAVID GOLDBERG,
MICHAEL W. FRERICHS, Treasurer of Illinois,
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 16 C 3792 — Charles P. Kocoras, Judge.
ARGUED APRIL 18, 2017 — DECIDED AUGUST 22, 2017
Before EASTERBROOK, KANNE, and ROVNER, Circuit Judges.
EASTERBROOK, Circuit Judge. Anthony Kolton deposited
money into an interest-bearing bank account in Illinois.
Years passed without activity in the account, so the bank
transferred Kolton’s money to the State of Illinois as the Disposition of Unclaimed Property Act requires. 765 ILCS
1025/13. The Act is not an escheat statute—it gives Illinois
custody, not ownership, of “presumed abandoned” property. 765 ILCS 1025/1(l), 2, 14. Yet custody generates a windfall
for the fisc—most such property gets invested, with any income that accrues earmarked for Illinois’s pensioners. 765
ILCS 1025/18. And while owners such as Kolton may file a
claim with the Treasurer of Illinois for return of their property, the Act limits the Treasurer to returning the amount received into custody. 765 ILCS 1025/15. In other words, the
Act denies owners such as Kolton the time value of money.
Rather than file a claim with the Treasurer, Kolton sued
under 42 U.S.C. §1983. Kolton proposes to represent himself
and others similarly situated. (S. David Goldberg, a second
putative class representative, need not be mentioned again.
Nor do we mention the class, which the district court has not
certified.) Kolton contends that 765 ILCS 1025/15—the provision denying owners any interest or other return on their
money—violates the Takings Clause of the Fifth Amendment, as applied to the states through the Fourteenth
Amendment. See Chicago, Burlington & Quincy R.R. v. Chicago, 166 U.S. 226 (1897). Kolton seeks damages as well as declaratory and injunctive relief.
The Supreme Court has held that the Takings Clause protects the time value of money just as much as it does money
itself. Brown v. Legal Foundation of Washington, 538 U.S. 216,
235 (2003); Phillips v. Washington Legal Foundation, 524 U.S.
156, 165–72 (1998); Webb’s Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 162–65 (1980). In Cerajeski v. Zoeller, 735
F.3d 577 (7th Cir. 2013), we applied these precedents to an
Indiana statute like the Illinois statute in this case. We held
that a state may not take custody of property and retain income that the property earns. A state may charge a
bookkeeping fee, which for small accounts may exceed the
property’s time value, but must allow the owner the benefit
of the property’s earnings, however large or small they turn
out to be. Id. at 578–80.
One would have thought this case straightforward after
Cerajeski, but Kolton lost nevertheless. Relying on Williamson
County Regional Planning Commission v. Hamilton Bank, 473
U.S. 172 (1985), the judge dismissed this case for want of
subject-matter jurisdiction. Williamson County holds that a
plaintiff usually must try to obtain compensation under state
law before litigating a takings suit. Id. at 186, 195. Kolton
filed neither a claim with the Treasurer nor a lawsuit in state
court seeking just compensation, and the district court
deemed these omissions dispositive. 2016 U.S. Dist. LEXIS
126178 at *17 (N.D. Ill. Sept. 16, 2016).
An initial problem with the district court’s ruling is that
Williamson County has nothing to do with subject-matter jurisdiction. True, this court has affirmed dismissals for want
of subject-matter jurisdiction based on failure to abide by
Williamson County. See Peters v. Clifton, 498 F.3d 727, 734 (7th
Cir. 2007); Patel v. Chicago, 383 F.3d 569, 570, 573–75 (7th Cir.
2004); Sprint Spectrum LP v. Carmel, 361 F.3d 998, 1001, 1004–
05 (7th Cir. 2004); Greenfield Mills, Inc. v. Macklin, 361 F.3d
934, 945, 957–61 (7th Cir. 2004). These opinions do not discuss the question whether Williamson County is indeed jurisdictional. This court also (in what seems like dictum) once
characterized Williamson County as about jurisdiction. See
Behavioral Institute of Indiana, LLC v. Hobart Common Council,
406 F.3d 926, 930–31 (7th Cir. 2005). This may reflect a bygone practice of using the term “jurisdiction” loosely to refer
to all obstacles to decision on the merits. Arnow v. NRC, 868
F.2d 223, 225 (7th Cir. 1989), overruled by Builders Bank v.
FDIC, 846 F.3d 272, 274–75 (7th Cir. 2017), is one example.
And not just by us, but the Justices too. Reed Elsevier, Inc. v.
Muchnick, 559 U.S. 154, 160–63 (2010), documents those occurrences. The Supreme Court has recently told us that Williamson County “is not, strictly speaking, jurisdictional.”
Horne v. Department of Agriculture, 133 S. Ct. 2053, 2062
(2013). That reflects the Court’s contemporary understanding of the difference between jurisdictional and ordinary
procedural rules. Our decisions cited in this paragraph are
no longer authoritative to the extent they deem Williamson
County jurisdictional. Even before Horne they could have
been dismissed as drive-by jurisdictional rulings. See Steel
Co. v. Citizens for a Better Environment, 523 U.S. 83, 91 (1998).
After Horne we know that Williamson County does not diminish federal courts’ adjudicatory competence.
The distinction between subject-matter jurisdiction and
the merits matters because judges must enforce limits on jurisdiction even when litigants prefer a substantive decision.
If Williamson County curtails jurisdiction, then the court must
decide in every case under the Takings Clause whether the
plaintiff has exhausted procedures for obtaining compensation under state law. The court would have to raise the issue
on its own, combing a state’s statute books and case law for
potential remedies, and decide without the litigants’ aid
whether each of the potential remedies is adequate. Cf.
Builders Bank, 846 F.3d at 274–75. That is a prospect to be
avoided if possible. We see no reason to depart from the Supreme Court’s understanding of Williamson County as leaving open the possibility of waiver or forfeiture. See Stop the
Beach Renourishment, Inc. v. Florida Department of Environmental Protection, 560 U.S. 702, 729 (2010).
Despite treating Williamson County as jurisdictional, the
district court applied a forfeiture doctrine to one aspect of
the case. Williamson County requires a person who complains
about a taking to pursue adequate procedures for obtaining
compensation under state law before litigating a takings
claim in federal court. 473 U.S. at 195. The district court
thought that Kolton had forfeited any argument that the
procedures for obtaining compensation under Illinois law
are inadequate, so the court skirted that issue. See 2016 U.S.
Dist. LEXIS 126178 at *19. We don’t get it. Kolton pointed to
the text of 765 ILCS 1025/15 and argued that it precludes the
Treasurer from turning over interest and other income that
has accrued on property in state custody. Kolton also cited
Cwik v. Giannoulias, 237 Ill. 2d 409 (2010), which held that 765
ILCS 1025/15 is valid even though the state keeps any earnings on the property, and he argued that Cwik forecloses any
possibility of relief in state court. Kolton has not forfeited a
contention that Illinois has demonstrated that no compensation will be forthcoming.
The statute and Cwik show that any claim that might
have been presented to the Treasurer or a state judge for lost
interest and other income would have been pointless, perhaps sanctionably frivolous. Look at 765 ILCS 1025/15:
“When property is paid or delivered to the State Treasurer
under this Act, the owner is not entitled to receive income or
other increments accruing thereafter, except that income accruing on unliquidated stock and mutual funds after July 1,
1993, may be paid to the owner.” In a world of muddled
statutes, this is crystalline. Plaintiffs do not allege that Illinois took custody of unliquidated stock or mutual funds,
and so the statute tells us that plaintiffs are not entitled to
income that has accrued on their property. Cwik provides
judicial reinforcement. There the Supreme Court of Illinois
considered a challenge to 765 ILCS 1025/15, observed that
the statute “clearly divests the property owner of any right
to interest earned on property held by the state” and concluded that this is no problem under the Takings Clause. 237
Ill. 2d at 417.
The Treasurer nonetheless insists that Illinois affords
plenty of opportunities to ask for compensation and that
these opportunities must be used even if plaintiffs are bound
to fail. Anyone may file a claim with the Treasurer, who then
may hold a hearing and receive evidence before making a
decision. 765 ILCS 1025/19–20. A claimant who does not like
the decision can seek administrative review. 765 ILCS
1025/21. Beyond that, state courts are open to hear constitutional arguments. A claimant who thinks there has been a
taking can go to circuit court. A claimant who instead maintains that the value of the property has been damaged can go
to the court of claims. See Patzner v. Baise, 133 Ill. 2d 540, 545
(1990). Whatever one calls the claim, some forum is available. Illinois says this is all Williamson County requires, citing
SGB Financial Services, Inc. v. Indianapolis-Marion County, 235
F.3d 1036 (7th Cir. 2000).
We do not read Williamson County to require resort to
state court when state law unequivocally denies compensation. See Muscarello v. Ogle Board of Commissioners, 510 F.3d
416, 422 (7th Cir. 2012). It may help to think of Williamson
County as a rule based on constitutional text rather than as a
judge-made exhaustion requirement. The Fifth Amendment
does not proscribe takings, but rather takings without just
compensation. A takings claim therefore accrues only when
the government refuses to pay. Williamson County routes
plaintiffs to state proceedings when it is uncertain whether
the state will pay. We made this point rhetorically in SGB
Financial Services: “Instead of asking a federal judge to guess
what a state court is likely to do, why not ask the state
court?” 235 F.3d at 1038. For 765 ILCS 1025/15, someone else
has asked, and the highest state court has answered. Illinois
will not pay. See Cwik, 237 Ill. 2d at 417. This leaves Kolton
with a federal forum and favorable federal precedent in Cerajeski. See 735 F.3d at 578–80.
Yet it is not all good news for Kolton. This litigation is
under §1983, which makes “[e]very person” liable for certain
acts committed under color of state law. It is against Michael
W. Frerichs in his official capacity as Treasurer of Illinois.
But a lawsuit against the Treasurer in his official capacity is
really one against Illinois, and a state is not a “person” suable under §1983. Will v. Michigan Department of State Police,
491 U.S. 58 (1989). Both sides devote attention in the briefing
to whether the Takings Clause stands as an exception to the
Eleventh Amendment, but these arguments miss the mark:
questions of sovereign immunity do not arise because §1983
does not create a claim against a state for damages. See
Lapides v. University System of Georgia, 535 U.S. 613, 617–18
(2002). Plaintiffs are entitled to prospective relief under Ex
parte Young, 209 U.S. 123 (1908). But they cannot parlay success under Ex parte Young into a money judgment in federal
court because that case rests on the proposition that an officer acts independently when enforcing an unconstitutional
law. See id. at 159–60. And after all, Frerichs did not pocket
any earnings on Kolton’s money. Illinois did.
The judgment is vacated, and the case is remanded for
proceedings consistent with this opinion.
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