Check out the U.S. Court of Appeals for the Tenth Circuit’s recent opinion in Knellinger v. Young, No. 23-1018 (Apr. 11, 2025). 

It’s worth reading because the court doesn’t fall into the common trap of concluding that although an owner need not exhaust administrative remedies before asserting a takings claim, he nonetheless doesn’t have “private property” because … he hasn’t exhausted administrative remedies to get his property returned. As the court summed it up:

[The owners] … argu[e] that they alleged facts sufficient to state a claim that Colorado took their property for public use without just compensation. We agree. Property owners who plausibly allege that Colorado has taken custody of their property under RUUPA, and used it for public purposes, need not file administrative claims with Colorado before they may sue for just compensation. The moment a state takes private property for public use without just compensation, a property owner has an actionable claim under the Takings Clause.

Slip op. at 2.

This is a challenge to Colorado’s version of the Uniform Unclaimed Property Act. That’s the statute which the government presumes that “certain property has been abandoned after a period of time defined by statute.” Slip op. at 3. Once property is abandoned, whoever holds the property reports and delivers it to the government. The state Treasurer holds the property for the benefit of the owner, and the owner may recover the property by filing an administrative claim, and if that is unsatisfactory, may sue in a Colorado court. 

The Treasurer must take steps to notify the owner by email (how modern) if the Treasurer has the owner’s address. But if none, all that is required is posting on the state’s unclaimed property website (check it out, maybe you could be a class member).

The plaintiffs here checked the website and noted that Colorado was holding what are fairly small amounts of money (less than $250). Next stop, federal court:

Knellinger and Storey did not file administrative claims, nor did they file a suit in Denver County Court as authorized by RUUPA. Instead, Plaintiffs sued in federal district court. As relevant here, Knellinger and Storey brought a claim under 42 U.S.C. § 1983, alleging that Colorado’s unclaimed property scheme violated the Takings Clause of the Fifth Amendment, as applied to the States through the Fourteenth Amendment. They filed suit against the officials in charge of administering RUUPA: David Young (the Colorado State Treasurer) and Bianca Gardelli (the Director of the Unclaimed Property Division of the Treasury) in their individual and official capacities (collectively, “Defendants”). Knellinger and Storey alleged that Defendants had “taken control of and liquidated” their property and “converted [it] to public use” without “just compensation.” App’x at 34. They sought a monetary remedy of “restitution of the proper value of their property . . . according to the applicable principles of law for reimbursement purposes”—that is, “just compensation.” Id. at 34–35. They also sought to enjoin Defendants from violating the Takings Clause in the future.

Slip op. at 5-6. The complaint also alleged that instead of keeping these funds for the benefits of the owners and segregating the monies, the state put some of the funds to public uses (funding the Colorado State Fair, surely a public use), and commingled some of the funds with the state’s general fund. 

The federal district court dismissed for lack of standing. It concluded that the plaintiffs lack standing because they do not own “private property.” Hang on…didn’t the state’s website say that the Treasurer was holding on to the plaintiffs’ property? Yes, but the plaintiffs had not filed an administrative claim to the money, which is necessary in order to establish their ownership. Slip op. at 7. No private property, means no injury, means no jurisdiction.

The Tenth Circuit reversed. It first noted that the jurisdictional facts are “intertwined with the merits of the case[.]” Slip op. at 9. Here, “the merits question and the jurisdictional question entirely overlap[.]” Slip op. at 10. Thus, the court opted to treat the 12(b)(1) motion as a 12(b)(6) motion to dismiss for failure to state a claim.

On that, the complaint pleaded a plausible takings claim. Write this down:

In short, to make out a Takings Clause claim, a plaintiff must plead that: (1) something was “taken” by the government; (2) it was “property”; (3) it was the plaintiff’s property; and (4) it was taken “for public use, without just compensation.” Plaintiffs pleaded facts sufficient to make plausible each of these elements. Therefore, they sufficiently stated a Takings Clause claim.

Slip op. at 13.

We advise writing this down even though the court’s approach should be obvious (it tracks the text of the Fifth Amendment) because many courts don’t get this. You have to plead one of the takings theories (e.g., Lucas, Penn Central) in detail to state a takings claim, not just the elements above. We also are keeping this one because it recognizes that the state cannot 100% define or put major limits on the term “private property” (the essential holding of Tyler v. Hennepin County, 598 U.S. 631 (2023)). 

The Tenth Circuit rejected the district court’s backdoor exhaustion requirement (the plaintiffs don’t have property until Colorado’s admin process confirms they have property).

Second, the district court imposed a de facto requirement that a plaintiff must file an administrative claim with Colorado prior to proceeding in federal court. See id. However, under Knick, it is clear that a property owner has no obligation to seek a remedy through state administrative proceedings or through litigation in state court. 588 U.S. at 185. A property owner’s “right to full compensation” is not contingent on “post-taking remedies that may be available.” Id. at 190. Rather, that right vests “when the government takes his property without just compensation.” Id. at 185. That is true even if an administrative proceeding—or state court discovery—could yield additional facts helpful to a federal Takings Clause suit

Slip op. at 15. (footnote omitted).

Not so, held the Ninth Circuit. All reasonable inferences cut in the plaintiffs’ favor, and it is reasonable to infer that the names on the website refer to the plaintiffs. Same with the lack of a claim of value: “[n]or is it necessary for Plaintiffs to plead the precise value of the property taken in order to avoid a motion to dismiss. That is a question of precise damages for a much later stage.” Slip op. at 16.

We think the Tenth Circuit got it very very right here. The pleadings are not the place to resolve what essentially are factual disputes. Plausibility and Twiqbal and all that, but we still operate under Rule 8’s notice pleading standards, and takings plaintiffs do not have to plead their claims or the facts supporting them with particularity. Nor are they reliant on the very process they are challenging to define their “private property” interests.

One remedy note: the Tenth Circuit affirmed the dismissal of the prospective injunctive relief sought because “[i]n this instance, § 1983 provides an adequate basis for [plaintiffs] to obtain just compensation for a taking.” Slip op. at 17.

Finally, the court noted an important point:

Of course, if Colorado wishes to avoid defending against § 1983 suits for unclaimed property, it may always decide voluntarily to revise its laws or practices with respect to unclaimed property. For instance, Colorado may implement administrative procedures designed to make just compensation more convenient or timely compared to inverse-condemnation litigation. But the Fifth Amendment describes a right to just compensation, not a right to particular procedures to secure such compensation, so Knellinger and Storey have no ability to force Colorado to compensate property owners through their procedure of choice. In other words, it is the role of our Court to ensure just compensation, not to rewrite a state’s procedures for obtaining it.

Slip op. at 17.

Knellinger v. Young, No. 23-1018 (10th Cir. Apr. 11, 2025)