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Indiana officials did not violate a woman’s right to just compensation under the Fifth Amendment, the 7th Circuit Court of Appeals ruled Wednesday in affirming a district court’s dismissal of claims against Indiana Attorney General Todd Rokita and state officials for not paying interest on funds obtained by the state.
Rokita took custody of two dormant funds owned by Tina Gerlach through the Revised Indiana Unclaimed Property Act.
In 2022, Gerlach sued Rokita and several other current and former state officials, claiming they violated the Fifth Amendment clause by not paying her interest in Tina Gerlach v. Todd Rokita, et.al., 23-1792.
In response, Rokita, Indiana Treasurer Kelly Mitchell, former acting Attorney General Aaron Negangard and former Attorney General Curtis Hill argued Gerlach’s claim for prospective relief was moot due to policy changes in the Fifth Amendment and her claims for relief were blocked by the 11th Amendment.
The U.S. District Court for the Southern District of Indiana ultimately dismissed Gerlach’s claims for prospective relief because of that recent policy change in how the Indiana attorney general handles interest on unclaimed property.
When the state satisfied property claims in the past, it did not pay property owners for interest the property earned while in its custody.
A previous lawsuit challenged that rule, and the state began paying interest on reclaimed funds as long as the property earned interest before the state took custody of it.
In their response to Gerlach, state officials used this policy change to prove Gerlach’s claim for prospective relief was moot, since the change happened during the case.
“When a plaintiff’s complaint is focused on a particular statute, regulation, or rule and seeks only prospective relief, the case becomes moot when the government repeals, revises, or replaces the challenged law and thereby removes the complained-of defect,” the 7th Circuit’s opinion stated, citing Ozinga v. Price, 855 F.3d 730 734 (7th Circuit 2017).
Gerlach sought compensation from Rokita and Mitchell in their official capacities, and from Rokita, Negangard and Hill in their individual capacities.
In dismissing Gerlach’s argument for compensation from Rokita and Mitchell in their official capacities, Judge Amy St. Eve ruled the 11th Amendment prevents claims for compensation against state employees.
“The Eleventh Amendment prohibits suits against a state in federal court, whether by its own citizens or citizens of another state. U.S. Const. amend. XI; Edelman v. Jordan, 415 U.S. 651, 662–63 (1974). That protection extends to state employees sued in their official capacities,” she said.
St. Eve dismissed Gerlach’s claims for compensation in individual capacities, ruling that an individual can’t be held responsible for a violation of the Takings Clause and Gerlach’s lawsuit was ultimately against the state because Indiana, not state employees, benefit from the unpaid interest on property.
“Any compensation Gerlach seeks correlates directly to the interest her property earned while in state custody—interest that flowed to the state, not individual state employees,” St. Eve wrote. “The money Gerlach seeks is in the state coffers, not the personal bank accounts of Indiana’s current and former attorneys general. Targeting individual state employees for those funds does not change the fact that the amount she claims she is owed should have been paid by the state.”
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