A federal judge allowed some claims to proceed last week against Colorado’s treasurer, based upon alleged constitutional violations flowing from the state’s process for reuniting people with their unclaimed property.

Previously, U.S. District Court Judge Charlotte N. Sweeney dismissed the lawsuit by plaintiffs David Knellinger and Robert Storey, reasoning that they failed to sufficiently allege they were the owners of property listed in the state’s database. But last year, the U.S. Court of Appeals for the 10th Circuit reinstated the lawsuit.

Soon afterward, the state moved once again to dismiss the lawsuit for a different reason: Colorado is immune from being sued.

In a Feb. 13 order, Sweeney acknowledged the 10th Circuit did not address the immunity issue, and had only ruled that the plaintiffs alleged a viable legal claim for property taken without compensation. This time, she determined immunity applied for most claims, but that Knellinger and Storey could proceed on the allegations that officials did not follow the notification process in state law prior to taking their property.

The unclaimed property program, nicknamed the “Great Colorado Payback,” originated in the state’s treasury department in 1987. The overall goal is to reunite people with lost or forgotten-about property, which is held in state custody.

Colorado requires property holders and the state to provide certain notice to the suspected property owner, which can now take place over email. The treasurer’s office also maintains a website where people can search for and claim their property.

According to their complaint, Knellinger typed his name into the unclaimed property database and saw he had an unknown item, held by Verizon, with an estimated worth between $50 and $249. Storey also discovered he had unclaimed property worth less than $50.

Instead of filing a claim through Treasurer Dave Young’s office, the plaintiffs initiated a lawsuit, on behalf of themselves and 1.6 million people, alleging Colorado violated the U.S. Constitution’s “takings clause” by taking custody of their property without compensation. They also alleged a due process violation through the taking of property without notice.

In January 2023, Sweeney dismissed the lawsuit. It is the plaintiffs’ responsibility, she wrote, to ensure they have a “sufficient personal stake” in the dispute. All they had done to date was allege their names appear in the unclaimed property database, without following through to show ownership or describe what property belonged to them.

But a three-judge panel of the 10th Circuit agreed Knellinger and Storey had alleged the state took custody of their property without compensation and used it for public purposes, meaning their constitutional claims could proceed.

“It is reasonable to infer that the property listed on Colorado’s unclaimed property website belongs to Plaintiffs,” wrote Judge Allison H. Eid. “A property owner’s compliance with state-imposed procedures is immaterial to the determination of whether a taking occurred.”

Back before Sweeney, Young and unclaimed property director Bianca Gardelli argued they remained entitled to various types of immunity, notwithstanding the 10th Circuit’s reversal. Sweeney agreed in her order that immunity was still on the table.

“Indeed, the Tenth Circuit’s opinion, in which the word ‘immunity’ never appears, was limited in its scope and did not address the issue of any immunity or whether it barred Plaintiffs’ claims,” she wrote.

The 11th Amendment generally bars lawsuits against states themselves, and Sweeney determined the plaintiffs’ claims of an unconstitutional taking did not fall within the exceptions to the 11th Amendment. Consequently, she dismissed that portion of the lawsuit.

She also concluded the plaintiffs could not sue Young and Gardelli individually for money damages. Although it is a constitutional takings violation for the government to unlawfully take property, there is no clearly established prohibition on individual government employees doing so, she reasoned.

Further, Sweeney dismissed the plaintiffs’ due process claims against Young and Gardelli based upon allegedly deficient procedures in the state’s Revised Uniform Unclaimed Property Act.

“Defendants here acted in accordance with RUUPA — which applies to all property owners in Colorado and does not single out Plaintiffs specifically,” Sweeney wrote. “Plaintiffs cannot maintain a due process claim based on Defendants’ compliance with RUUPA’s notice provisions.”

However, Sweeney allowed the plaintiffs’ due process claims to proceed on two fronts: Against the state and against the defendants individually based upon their alleged deviations from the notice procedures to property owners under Colorado law.

The case is Knellinger et al. v. Young et al.