[00:00:01] Speaker 01:
And we will move to our last case for argument this morning, Peters versus Cohen.

[00:00:59] Speaker 01:
Mr. Massey.

[00:01:04] Speaker 03:
Thank you, Your Honor.

[00:01:05] Speaker 03:
May it please the court, Jonathan Massey for the plaintiff appellant, Jan Peters.

[00:01:09] Speaker 03:
With me at council table is my co-counsel, William Palmer.

[00:01:13] Speaker 03:
With the court's permission, I'll try to reserve four minutes at the end, or maybe three if I don't get to that.

[00:01:19] Speaker 03:
This case is governed by Taylor.

[00:01:21] Speaker 03:
This is the California unclaimed property statute.

[00:01:25] Speaker 03:
where there's been discussion of the Taylor cases in the previous arguments, but here we are, they apply full score, full square.

[00:01:31] Speaker 03:
And you may recall that Chris Taylor was a British national living and working in England who owned 52,000 shares of Intel stock that the California controller seized without notice.

[00:01:43] Speaker 03:
Here Mr. Peters is a German national living and working in Munich, Germany, who learned from his boss after the fact that California had seized the Amazon stock in his retirement account with no notice whatsoever.

[00:01:56] Speaker 03:
There was no publication notice and no mail notice due to the falsification of his mailing address, which was changed from Munich, Germany to Munich, California.

[00:02:05] Speaker 03:
There is no such town or city in California named Munich.

[00:02:10] Speaker 03:
His German postcode was changed to the U.S.

[00:02:13] Speaker 03:
fictional zip code 0000.

[00:02:17] Speaker 03:
He never received any notice at all.

[00:02:20] Speaker 03:
does not dispute that.

[00:02:22] Speaker 03:
Excerpts of record, page 20, note 7, the state acknowledges that he did not receive any pre-deprivation notice.

[00:02:28] Speaker 03:
So this is exactly the kind of unnoticed seizure the court has already held.

[00:02:32] Speaker 03:
And Taylor is clearly unconstitutional and not protected by sovereign immunity.

[00:02:37] Speaker 03:
Let me first start with the standing issue.

[00:02:39] Speaker 03:
Because Mr. Taylor, too, this court held that there was standing to seek prospective injunctive relief.

[00:02:45] Speaker 03:
And Mr. Peters has standing for the very same reasons that Mr. Taylor did.

[00:02:50] Speaker 03:
This court said that Mr. Taylor had established a likelihood of recurrence because California had a policy that did not provide pre-deprivation notice to foreign owners.

[00:02:59] Speaker 03:
And the court also pointed to the plaintiff's cost of constantly monitoring his property or churning it to make sure it wasn't seized by the controller.

[00:03:09] Speaker 03:
That's pages 1199 to 1200 of Taylor II.

[00:03:12] Speaker 03:
The same is true here.

[00:03:14] Speaker 03:
Mr. Peters alleged that he owns other stock that was threatened by the unclaimed property law.

[00:03:22] Speaker 03:
That's excerpts of record 305.

[00:03:24] Speaker 04:
But that other, as I understand it, that other stock, it's not connected to a California holder.

[00:03:32] Speaker 03:
Is that correct?

[00:03:33] Speaker 03:
Well, it's unclear, Your Honor.

[00:03:35] Speaker 04:
Well, it hasn't been alleged.

[00:03:37] Speaker 03:
Well, he responded in an interrogatory that he's concerned that his personal property, this is a supplemental excerpt for Brecker 54.

[00:03:45] Speaker 04:
But being concerned is a different thing than whether the property investments are in an account that is held by a California entity.

[00:03:53] Speaker 03:
Well, he owns Amazon stock in an ING account, and ING has California offices.

[00:03:58] Speaker 04:
There's no retail banking operation here by ING, but it has... But has there been an allegation made that ING is subject to California's unclean property law?

[00:04:07] Speaker 03:
Well, he testifies that he is currently monitoring it because, of course, he doesn't know.

[00:04:12] Speaker 04:
I don't think you're answering my question.

[00:04:14] Speaker 03:
He doesn't know whether ING, he did not testify that he personally knew whether ING had a California domicile.

[00:04:23] Speaker 02:
He's just worried that the same thing could occur later.

[00:04:26] Speaker 03:
The same thing could occur again.

[00:04:27] Speaker 02:
That seems pretty speculative.

[00:04:28] Speaker 03:
Well, he's monitoring his accounts, and I have to say that in the Taylor case, this court did not identify any specific additional stock that Mr. Taylor owned that was subject to California seizure.

[00:04:41] Speaker 03:
This court did not ask the question that Your Honor is asking today.

[00:04:43] Speaker 03:
If you look at the opinion, it just says he

[00:04:46] Speaker 03:
He owned 52,000 shares, or at least he used to until California took it.

[00:04:50] Speaker 03:
That's how this court looked at it in Taylor.

[00:04:52] Speaker 03:
And the language in the Taylor II opinion about churning your stock or constantly monitoring your stock is not tethered to any specific testimony by Mr. Taylor.

[00:05:02] Speaker 03:
There's a citation to it.

[00:05:04] Speaker 03:
He didn't testify to that.

[00:05:05] Speaker 02:
What would be the injunction?

[00:05:07] Speaker 03:
Well, we didn't get to the remedial phase, obviously.

[00:05:10] Speaker 02:
No, but as a practical matter.

[00:05:11] Speaker 03:
Right.

[00:05:11] Speaker 03:
As a practical matter, it could be requiring notice, it could be stopping seizures until a proper notice plan is in place.

[00:05:18] Speaker 03:
He also sought return of his property, restitution, and all of those are on the table.

[00:05:25] Speaker 02:
I mean, I'm really focusing on this forward-looking

[00:05:29] Speaker 02:
potential concern that he has.

[00:05:32] Speaker 02:
What precisely would be the injunction?

[00:05:36] Speaker 03:
In Taylor 2, Your Honors, the court directed the district court to formulate an injunction, and it did include things like stopping seizures until California has proposed a possible notice plan.

[00:05:49] Speaker 03:
The court in Taylor 2 actually suggested the district court supervise that notice process and make sure that the state was complying with it.

[00:05:58] Speaker 03:
I do think that there are

[00:05:59] Speaker 03:
There could be accounting to make sure that the court properly takes account of the state identifies all the other foreign owners.

[00:06:10] Speaker 03:
One thing that's quite amazing is today, if you look on the California Unclaimed Property website, and this is an official government website, so I think you can take judicial notice of it, and you look for property owners in Munich, you will see thousands

[00:06:25] Speaker 03:
of Munich, Germany residents who own property that has been seized and their addresses have been falsified and changed to Munich, California.

[00:06:35] Speaker 03:
This is happening all the time.

[00:06:37] Speaker 03:
It's true for London, Buenos Aires.

[00:06:40] Speaker 03:
The website will say, Hong Kong, California, Shanghai, California, zip code 000.

[00:06:47] Speaker 03:
There's really an urgent need for perspective injunctive relief.

[00:06:51] Speaker 03:
This will not end until there's a court order directing them to change.

[00:06:55] Speaker 03:
And I do think that that is another part of Taylor that the court identified.

[00:06:59] Speaker 03:
It said when there's a policy,

[00:07:01] Speaker 03:
or pattern in practice that will guarantee future constitutional violations, then that was part of the court standing analysis.

[00:07:11] Speaker 03:
And so in finding standing, the court looked to see, is this likely to recur?

[00:07:15] Speaker 01:
And it is recurring.

[00:07:16] Speaker 01:
You're making a persuasive pitch.

[00:07:17] Speaker 01:
The problem is, is this the right plaintiff?

[00:07:20] Speaker 01:
Because as Judge McEwen stated, what you've got in this record seems pretty speculative in terms of forward-looking relief.

[00:07:30] Speaker 03:
Well, it's actually, as I said, I think it's less speculative than Taylor, because if you look at, say... Of course, in Taylor, you had a California resident as one of the plaintiffs, so standing didn't hinge on a foreign actor.

[00:07:44] Speaker 03:
Well, but the court didn't treat it that way.

[00:07:47] Speaker 03:
I mean, I believe the court said Tris Taylor has standing too.

[00:07:50] Speaker 03:
That's how I read Taylor too.

[00:07:51] Speaker 03:
and certainly the state didn't ever try to separate the two.

[00:07:55] Speaker 03:
I don't think the other plaintiffs either testified about churning or supervising.

[00:08:03] Speaker 04:
I'm sorry to interrupt, but part of the problem I think with your argument in my view is that the statute also says

[00:08:09] Speaker 04:
that the holders of this unclean property, one of the criteria is the last known address as shown on the records of the holder of the apparent owner is in a foreign nation and the holder is domiciled in the state.

[00:08:24] Speaker 04:
So even if they had had his accurate Munich address, Munich, Germany, he is domiciled in a foreign nation and the holder is domiciled in California, he would still be subject to California's Unclean Property Act.

[00:08:37] Speaker 03:
Well, he was.

[00:08:37] Speaker 04:
I know, but you're raising a claim that all of this stems from this Munich 0000, which does seem a little bit concerning, but it would seem as if he would be subject to the law anyway, even if there was an accurate address.

[00:08:54] Speaker 03:
Well, but he would have gotten, you know, there was no constitutional notice.

[00:08:58] Speaker 03:
That's the problem.

[00:08:59] Speaker 03:
We do have a jurisdictional argument.

[00:09:00] Speaker 03:
For present purposes, I'm just focusing on notice.

[00:09:02] Speaker 03:
And I don't think there's any dispute that he was denied due process because he got zero notice.

[00:09:07] Speaker 03:
The state doesn't deny that.

[00:09:08] Speaker 02:
The issue is... Let me just cut to another related thing on this, whether it's speculative or non-speculative.

[00:09:15] Speaker 02:
Was that raised in the opening brief as opposed to the reply brief?

[00:09:20] Speaker 02:
Well, we did argue standing in the opening brief, and then— Right, but this variation that you're arguing now, which is this downstream conduct, I only saw that in the reply brief.

[00:09:32] Speaker 03:
Well, I think we did argue that he was—that he checked his—he monitored his accounts.

[00:09:36] Speaker 03:
That's at Excerpts of Record 51, and the state actually concedes that at Excerpts of Record 23.

[00:09:43] Speaker 03:
And another thing I would point out is that in—that

[00:09:48] Speaker 03:
In this case, at excerpts of record 87, Charles Schwab was originally domiciled in Texas.

[00:09:54] Speaker 03:
And at some point, we don't know exactly the sequence here, the International Division got domiciled in California.

[00:10:01] Speaker 03:
And this is why I think Your Honor's standards are a little bit too high with respect, because for property owners, knowing where a holder is domiciled is like asking them to look in a black box and track down where one of Charles Schwab's divisions is going to be today or tomorrow,

[00:10:18] Speaker 03:
two years from now or three years from now, that's an unreasonable burden to expect every property owner around the world to think about where their accounts are and to check which accounts might be held by domiciles in Iowa, California, New York, whatever, and check that all the time.

[00:10:33] Speaker 03:
I mean, that itself is a standing issue there, that if that's the rule,

[00:10:37] Speaker 03:
then I think you've given standing to everybody because you're telling everybody.

[00:10:40] Speaker 04:
Let me ask you to switch to a different issue, which is the request for relief of the difference in the value of the shares that were sold versus what the present value or some future value of it were.

[00:10:52] Speaker 04:
Why isn't that foreclosed by CVER II?

[00:10:54] Speaker 03:
Yes, I understand that CVER II is a very fair question.

[00:10:59] Speaker 03:
I think that CVER II acknowledged that the money in Unclaimed Property Fund is money belonging to other owners.

[00:11:05] Speaker 03:
It's not the state's money.

[00:11:06] Speaker 03:
Siever then said that the claim was barred, but because Mr. Peters' property can be returned to him without spending a penny of public money, this is all private money.

[00:11:17] Speaker 03:
I think also Siever, too, is distinguishable because it paid- Well, can I interrupt?

[00:11:21] Speaker 03:
Yes.

[00:11:22] Speaker 04:
He received the proceeds from the sale of the shares of stock, correct?

[00:11:27] Speaker 04:
That's correct.

[00:11:27] Speaker 04:
So that's off the table.

[00:11:30] Speaker 04:
The claim here is

[00:11:33] Speaker 04:
the difference in value of what was sold at the time by the state versus what it would have accrued down the road.

[00:11:40] Speaker 04:
And Sievert says, it rejects these, it says those sorts of claims are ones for money damages.

[00:11:48] Speaker 04:
for the appreciation of value, and at least that's how the district court saw it.

[00:11:51] Speaker 04:
Why is that wrong?

[00:11:52] Speaker 03:
Well, because it's not damage.

[00:11:54] Speaker 03:
It's not money damages payable by the state.

[00:11:57] Speaker 03:
You could call it restitution, or if you call it damage, it's money coming from private funds.

[00:12:03] Speaker 03:
So the 11th Amendment sovereign immunity doesn't apply.

[00:12:05] Speaker 01:
Is there any allegation that what they were sold for was wrong?

[00:12:09] Speaker 01:
Like, at the time that the stock was sold, that that was an improper price at that time?

[00:12:13] Speaker 03:
No.

[00:12:13] Speaker 03:
It's just that today it's worth $5 million instead of $1.6.

[00:12:15] Speaker 02:
So what you want, who is on the hook for that in your view?

[00:12:20] Speaker 03:
Well, the unclaimed property fund can be used to pay anything.

[00:12:22] Speaker 03:
The unclaimed property, the controller paid Varus, the auditor, out of the unclaimed property fund.

[00:12:27] Speaker 03:
When this court directed Mr. Palmer's attorney's fees,

[00:12:32] Speaker 03:
Those that was a court order and was paid out of the unclean property fund.

[00:12:35] Speaker 03:
It is money that is private money that is not public money.

[00:12:39] Speaker 02:
So whatever, then if you go to the text of the statute, it's what you're asking for now is not really for the return of the property or the proceeds from the sale.

[00:12:49] Speaker 02:
Right.

[00:12:50] Speaker 03:
Well, we're asking for... Answer that first.

[00:12:52] Speaker 02:
Are you asking for a return of the property?

[00:12:54] Speaker 03:
Yes.

[00:12:55] Speaker 02:
And what is the property?

[00:12:56] Speaker 03:
The monetary equivalent of the property.

[00:12:58] Speaker 03:
That's different.

[00:12:59] Speaker 02:
I mean, this property is the Amazon stock.

[00:13:01] Speaker 02:
Can you get that back?

[00:13:02] Speaker 03:
Well, they could buy Amazon stock of 1,029 shares and return it to them, yes, and deduct whatever that... I mean, this is a remedial phase issue in terms of what the offset might be.

[00:13:11] Speaker 02:
Well, it is, but it relates to the 11th Amendment as to whether we're talking money.

[00:13:16] Speaker 03:
But none of it would be public money.

[00:13:18] Speaker 03:
It would all be private money, because none of the money in the Unclaimed Property Fund is public money.

[00:13:23] Speaker 03:
And the other thing I would say about Seaver, and then I'll sit down, is that at page 1058, this court said that the plaintiffs failed to meet their burden to show as a matter of undisputed fact that seizures outside the scope of the Unclaimed Property Law have occurred.

[00:13:37] Speaker 03:
So it didn't find that they were ultra-virus seizures, whereas this case was clearly an ultra-virus seizure.

[00:13:42] Speaker 03:
Thank you very much.

[00:13:49] Speaker 01:
Mr. Yan.

[00:14:05] Speaker 00:
Good morning, Your Honors.

[00:14:06] Speaker 00:
Jerry Yen on behalf of the State Controller's Office.

[00:14:11] Speaker 00:
I think based on the questioning that I've been hearing with my colleague, the issues are standing and whether or not the 11th Amendment bars his request for relief.

[00:14:25] Speaker 00:
We have to keep in mind, this is an as applied challenge.

[00:14:28] Speaker 00:
It's not a facial challenge, so it's as applied.

[00:14:30] Speaker 00:
So we really do have to look at the facts of this particular case and of this particular plaintiff.

[00:14:38] Speaker 00:
In terms of standing, the likelihood of recurrence is very speculative.

[00:14:46] Speaker 00:
As the court has seen in the briefing, he has no property here.

[00:14:51] Speaker 00:
He acknowledges that he has no property here in the United States.

[00:14:54] Speaker 00:
And so any concern that it could get associated to California is really too speculative for that concern.

[00:15:04] Speaker 00:
I would also just like to address the Taylor 2 case.

[00:15:11] Speaker 00:
how they are trying to apply that here with Mr. Taylor and the Intel stock.

[00:15:18] Speaker 00:
I would note that in that particular case, my understanding is that the Intel still held some of his stock.

[00:15:24] Speaker 00:
So some of his stock had been escheted, but Intel still held some of that stock.

[00:15:28] Speaker 00:
So there was a risk and a valid concern that the rest of his Intel stock could get escheted.

[00:15:35] Speaker 00:
In this case, he has no more stock held at Charles Schwab.

[00:15:39] Speaker 00:
It's all at a German bank.

[00:15:41] Speaker 00:
And so, again, the facts in those two cases are distinguishable.

[00:15:46] Speaker 02:
Well, one of the key parts of the argument with your colleague there had to do with subvert two.

[00:15:53] Speaker 02:
Where does that fit into this case in your view?

[00:16:00] Speaker 00:
directly on point, Your Honor, in terms of the restitution, requesting the difference between the sale proceeds that he already received and the current stock price or whatever increase in valuation.

[00:16:16] Speaker 00:
I think that it's right on point, and 11th Amendment just bars that request.

[00:16:21] Speaker 04:
And it bars it because it's no longer the return of property or proceeds, but now something more in the nature of money damages because you're talking about

[00:16:30] Speaker 04:
I lost the opportunity to have an increase in value of the shares by having, you know, had I kept the shares.

[00:16:38] Speaker 00:
Is that your understanding?

[00:16:39] Speaker 00:
That's my understanding, Your Honor.

[00:16:42] Speaker 00:
And I would also point out, they did, my colleague did also discuss some issues related to where the funds come from and the general fund.

[00:16:51] Speaker 00:
And I don't think that the court needs to,

[00:16:54] Speaker 00:
should look at that because we just really do need to look at the stock price, what they're really asking for in terms of relief here.

[00:17:01] Speaker 00:
And I would also, so as we have discussed the

[00:17:11] Speaker 00:
They don't have standing for the prospective relief because it's too speculative.

[00:17:16] Speaker 00:
And as the court has seen, C or two is directly on point and they're not entitled to the difference in their stock price since they've already received the sale proceeds from the stock.

[00:17:27] Speaker 01:
And so... There was... I mean, factually, it does seem like the stock sale happened very quickly in this case and maybe even more quickly than the statute allowed.

[00:17:34] Speaker 01:
Is that right?

[00:17:35] Speaker 00:
No, actually it occurred within the time period of the statute.

[00:17:40] Speaker 00:
So California has a little bit of a different type of reporting requirement for unclaimed property.

[00:17:46] Speaker 00:
There's first a reporting requirement to, again, to the controller's office with a list of properties that could potentially get associated.

[00:17:55] Speaker 00:
And so prior to that report, they are supposed to issue a notice to the holders that the

[00:18:04] Speaker 00:
that their property could be potentially is sheeted.

[00:18:07] Speaker 00:
And I'm not sure exactly what the timeframe is on that, but that's the first reporting.

[00:18:13] Speaker 00:
And then there's a remit report that occurs several months after that where there's been no communication from the notice.

[00:18:21] Speaker 00:
And then with the remit report, that's when all the property gets is sheeted.

[00:18:27] Speaker 00:
And then a few months after that, that's when

[00:18:31] Speaker 00:
the stock would actually get sold.

[00:18:33] Speaker 00:
So it's not exactly, there is a certain time period from notice to when the stock gets sold.

[00:18:39] Speaker 02:
Would you address, I think it was Mr. Massey's point that basically either the computer or somehow all of these entries for these foreign countries get transmuted into Munich, California, Stockholm, California with these 000 zip codes?

[00:18:59] Speaker 02:
And that would appear not to relate at all to the individual who's stuck or property is being cheated.

[00:19:07] Speaker 00:
Yeah, so the controller's office is really relying on the holder to provide that information.

[00:19:16] Speaker 00:
And my understanding is that the way that that's reported to the controller's office is they use a kind of a universal, the holders, the banks, and the financial institutions use a kind of a universal form to report the address and the owner's information.

[00:19:37] Speaker 00:
And that's the same form that's used across the United States.

[00:19:41] Speaker 00:
And so, again, the controller's office is reliant on the holder to put in that information and to properly make sure that that information is inputted accurately.

[00:19:51] Speaker 04:
So the controller's understanding of the address is coming solely from the holder?

[00:19:57] Speaker 04:
Correct, Your Honor.

[00:19:58] Speaker 04:
So then I take it, it's your view that if these addresses get transmuted into Munich 0000, it came from the holder.

[00:20:07] Speaker 04:
It wasn't something that happened within the controller's office.

[00:20:10] Speaker 00:
That's correct, Your Honor.

[00:20:13] Speaker 00:
So unless the court has any other questions, we would respectfully request that the court affirm the district court's decision.

[00:20:21] Speaker 01:
Thank you, sir.

[00:20:23] Speaker 01:
All right, Mr. Massey, you have a little bit of time left.

[00:20:30] Speaker 03:
Thank you.

[00:20:31] Speaker 03:
Two points.

[00:20:32] Speaker 03:
First, on the Stockholm, California, and how it gets in the computer point, you know, the court held in Taylor, too, that it was the controller's duty to provide notice.

[00:20:41] Speaker 03:
And if you're relying on a holder that you know is entering incorrect information, then it's like the postman example in Jones v. Flowers.

[00:20:48] Speaker 03:
You know, you see the letters going down the storm drain.

[00:20:51] Speaker 03:
You can't stand back and do nothing.

[00:20:53] Speaker 03:
And in fact,

[00:20:57] Speaker 03:
Charles, the record shows that actually Charles Schwab had the right address in Munich, Germany.

[00:21:02] Speaker 03:
That's at Excerpts of Records 219, and the Munich, California falsification appears in the Varus report, in the Auditor's report

[00:21:12] Speaker 03:
at the controller's unclaimed property tracking system, which is excerpts of record 62 and 63.

[00:21:18] Speaker 03:
But in any event, this is a system that needs to be fixed.

[00:21:22] Speaker 03:
It's a disaster.

[00:21:23] Speaker 03:
It is threatening thousands upon tens of thousands of people around the world, property owners who are innocent, who have done nothing wrong, and their property's being taken.

[00:21:32] Speaker 03:
On this standing point, there is no, this case comes on summary judgment.

[00:21:37] Speaker 03:
And if there was a disputed fact about whether ING

[00:21:40] Speaker 03:
was a California domicile or subject to the jurisdiction of California.

[00:21:45] Speaker 03:
The state did not put that at issue.

[00:21:47] Speaker 03:
As this case comes to this court, there is at least a disputed fact about whether the ING accounts that Mr. Peters holds

[00:21:57] Speaker 03:
subject to SG or whether he's reasonable in constantly monitoring those accounts to make sure they don't get taken by the controller.

[00:22:05] Speaker 03:
You can't tell somebody who's lost the delta between $1.6 and $5 million that he's being unreasonable for looking like a hawk at his ING accounts to make sure California doesn't take them.

[00:22:16] Speaker 03:
I don't think that's speculative.

[00:22:17] Speaker 03:
I think any of us in that position

[00:22:20] Speaker 03:
be doing exactly the same thing, saying, look, you took my retirement account before.

[00:22:25] Speaker 03:
I'm not letting you take any more of my money.

[00:22:27] Speaker 03:
And to tell him he's being unreasonable or speculative or this is too remote, that is a hard-hearted position to take.

[00:22:33] Speaker 03:
And I would think if there is a summary judgment issue,

[00:22:36] Speaker 03:
send the case back to the district court and say, let's have some fact finding on what is the material risk of this cheat in this case.

[00:22:43] Speaker 03:
If that's really the problem, I think having this system that the state is not willing to acknowledge is highly problematic, is really a serious question.

[00:22:55] Speaker 03:
And also I would say, the notion that every holder in the United States is getting the form wrong,

[00:23:00] Speaker 03:
and we can see thousands of entries, and it's all the holder's fault.

[00:23:04] Speaker 03:
It's not the controller of virus.

[00:23:06] Speaker 03:
That's really implausible.

[00:23:07] Speaker 03:
To me, it seems obvious that the controller is aware of this problem and could fix it, but needs court supervision to do it.

[00:23:14] Speaker 03:
So we urge this court to reverse.

[00:23:17] Speaker 01:
All right, thank you, counsel.

[00:23:19] Speaker 01:
The matter of Peters versus Cohen is submitted for decision, and we are adjourned for the morning.