Class Action Lawsuit Alleges New Jersey’s Unclaimed Property Law Is Unconstitutional

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A proposed class action lawsuit out of New Jersey alleges the state’s unclaimed property law is unconstitutional.

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According to the 27-page complaint, the New Jersey Uniform Unclaimed Property Act (NJUPA) fails to provide constitutionally required notice to owners before and after supposedly “abandoned” property is seized by the state. The NJUPA lawsuit argues that the statute altogether flies in the face of the stated purpose of unclaimed property laws, which is to return property to its rightful owner.

Under the NJUPA, property is deemed “abandoned” if it is dormant for one to five years with no activity by the owner, the suit says. This may include stock and bond accounts, savings accounts, uncashed payroll checks, unused gift cards, retirement accounts, the contents of safe deposit boxes and more, the case explains.

Supposedly “abandoned” property is appropriated by the New Jersey Unclaimed Property Administration without adequate notice—if any at all—to the owner before it is auctioned off, sold or destroyed, the filing claims. Per the lawsuit, the proceeds are then retained by the state.

The suit alleges that the defendants—State Treasurer Elizabeth Maher Muoio, unclaimed property administration head Steven Harris and private state auditor Kelmar Associates, LLC—have come to view the NJUPA and property seizure process as a way to fill New Jersey’s coffers.

“The NJUPA, along with unclaimed property laws in other states, has been trending in the wrong direction for over thirty years because such laws have been greatly expanded in unconstitutional ways to generate revenue for states, at the expense of both owners and putative holders of unclaimed property,” the case charges.

The complaint was filed by the legal representative of the estate of Hernan Correa Borquez, a Chilean lawyer who owned various stocks in U.S. accounts and died in Chile in 2006. The plaintiff claims to have received no notice at all before Borquez’s securities were unlawfully seized by the unclaimed property administration under the NJUPA.

Pursuant to the state law, securities accounts are given a three-year period before they can be presumed dormant and, therefore, “abandoned,” the filing shares.

“Thus, if an account is inactive for three years—for example, if a customer is using a buy-and-hold approach to investment, makes no deposits or withdrawals, receives no dividends (which is not uncommon for many ‘blue chip’ stocks) for three years—the account can be listed as ‘abandoned,’” the lawsuit relays.

Although the NJUPA provides varying degrees of notice to owners, depending on their location and their property’s commercial value, the law contains “no provision for direct mail notice or individualized notice whatsoever” to those outside the United States, such as the plaintiff, to inform them that their property has been deemed “abandoned” and is subject to seizure, the suit contends. Likewise, the law provides for no form of notice to owners whose purportedly “abandoned” property is valued at less than $50, the case says.

What’s more, the NJUPA fails to provide any meaningful notice to the rightful owner even after their property has been seized by the unclaimed property administration, the complaint alleges.

Per the filing, after a seizure, the state will list the owner’s name and last known address on UnclaimedFunds.NJ.gov—a website that many consumers are unaware exists, the lawsuit asserts. The site shows only limited information about seized properties and omits crucial identifying data, making it nigh impossible for owners to determine the nature or value of a listing or when it was seized, the suit argues.

In any case, the property is often auctioned, sold or destroyed before this information is posted on the website, the complaint charges.

The plaintiff contends that after contacting the unclaimed property administration to recover Borquez’s seized securities, the estate representative was ultimately provided an unjust and “grossly inadequate” sum that failed to reflect the market value of the lost stock.

“Currently, [the plaintiff] and the Borquez family members own other stocks and property, such as bank accounts, that they do not wish to be subject to [the defendants’] unnoticed property seizure process,” the filing says. “Yet [the plaintiffs] and Class Members have no way to protect themselves from the NJUPA as it currently operates to cause irreparable harm to the public.”

According to the lawsuit, the NJUPA is regarded as one of the “most aggressive” unclaimed property statutes nationwide. Per the case, the unclaimed property administration is estimated to hold more than $6 billion in ostensibly “abandoned” property owned by high-profile names such as Taylor Swift, Meryl Streep and Governor Phil Murphy and by businesses associated with President Donald Trump.

“The State of New Jersey deems all such persons ‘unknown’ and purports to be unable to reunite these persons with the ‘unclaimed’ property it has appropriated from them,” the complaint states.

The lawsuit looks to represent any entities owning purportedly “abandoned” property transferred to the unclaimed property administration under color of the NJUPA within the applicable statute of limitations period, which were denied constitutionally adequate notice under the state law because they did not reside in the United States, the value of the property at issue was less than $50 or for any other reason prescribed in the NJUPA as construed by the defendants.

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