Background

Most states take custody of certain securities after a period of time¹ from when the owner has last communicated, received mail, or taken action regarding their securities.² States must hold the property on behalf of the owner, who may claim the funds.³ However, such claimants are routinely left with far less than the appreciated value of securities they had expected.⁴

In a landmark decision on the rights of owners of securities post escheat and liquidation, the U.S. District Court for the District of Delaware is permitting a plaintiff to proceed in an action for damages against the State of Delaware. The court has denied Delaware’s motion to dismiss claims brought by Plaintiff Jaime Vial, a Chilean national, for value lost related to stock over which Delaware asserted custody. Vial v. Mayrack et al, 24-cv-01313 (Dist. Del., 2024) (hereinafter “Vial”). The ruling has the potential to impact when and how the Delaware Department of Finance may seize securities pursuant to the Delaware Unclaimed Property Law  as well as the scope of Delaware’s liability to owners of seized securities.

Plaintiff brought the suit on the grounds that certain shares he owned or to which he is entitled as legal representative, escheated to Delaware without individualized notice, and that after pursuing a claim, he received approximately $2.6 million—roughly $11 million less than the property's actual value. Defendants moved to dismiss on four grounds: lack of standing, improper conflation of escheat with a taking, statute of limitations, and Eleventh Amendment immunity. The court rejected each argument and directed the case to proceed.

The Court’s Analysis:

1.  Standing
   
   The court ruled that when a state seizes securities and liquidates them, the difference between the liquidation value and the present value is a sufficiently concrete injury to establish standing. It found Plaintiff's allegation of an $11 million injury "readily qualif[ies] as [a] concrete injur[y] under Article III…."⁵  It also recognized Plaintiff's allegation that shares he purchased under a buy-and-hold strategy would inevitably be escheated, such that there was a "realistic danger of sustaining a direct injury" in the future. The court rejected Defendants’ position that because other contingencies needed to occur prior to escheatment, Plaintiff’s injury was insufficient, stating that “[p]laintiff need only allege a ‘realistic danger of sustaining a direct injury as a result of the statute’s operation.’”⁶

2.  Takings Claim
   
   Defendants argued that Plaintiff improperly conflated escheat with a taking, relying on case law holding the government need not compensate an owner for the consequences of his own neglect.  The court rejected that position.  It found that Plaintiff properly alleged (1) his property was not taken due to his own neglect, and (2) his property was seized, liquidated, and the proceeds used for the public good without just compensation—the kind of "pocketbook injury" that invokes a right to just compensation under Tyler v. Hennepin County.⁷  The court also found the complaint sufficiently alleged that Delaware had seized the shares without any payment, which, it held, independently stated a takings claim.

3.  Statute of Limitations
   
   Defendants argued that Plaintiff's claims were time-barred under Delaware's two-year statute of limitations for actions pursuant to Title 42, Section 1983 of the United States Code. Specifically, the state argued that Plaintiff knew the property had been escheated years before filing suit. The court rejected this argument on two grounds.
   
   First, Plaintiff alleged that the State issued its "final determination" on its claim, refusing full compensation, in "early 2023," and a takings claim accrues only when the government "takes property without compensation."⁸  Plaintiff plausibly alleged he did not know that the State would deny compensation until the point when it failed to provide him full compensation for his shares.
   
   Second, Plaintiff had alleged that he had discovered, as late as January 20, 2023 (within the limitations period), that some additional (but apparently up to then unknown) shares had been transferred to the State. These allegations highlighted concerns surrounding whether Plaintiff had adequate notice, an issue that has caught the attention of Justices of the Supreme Court of the United States. In concurring with the denial of certiorari in a 2016 unclaimed property case,  Justices Alito and Thomas nonetheless recognized that state legislative trends, “combining shortened escheat periods with minimal notification procedures . . . may merit review in a future case,” explaining that:

[a]s advances in technology make it easier and easier to identify and locate property owners, many States appear to be doing less and less to meet their constitutional obligation to provide adequate notice before escheating private property. . . States must employ notification procedures designed to provide the pre-escheat notice the Constitution requires.⁹

4.  Eleventh Amendment Immunity
   
   Delaware argued that the Eleventh Amendment bars Plaintiff's claims because his suit effectively seeks money damages from the state treasury.  The court acknowledged that the Eleventh Amendment generally precludes retroactive monetary awards from a state treasury, but noted a caveat: in escheat cases, if a plaintiff seeks recovery from a specially earmarked custodial fund, the Eleventh Amendment may not apply.¹⁰
   
   The Amended Complaint seeks payment from Delaware's "Escheat Special Fund," which Plaintiff alleges is composed of set-aside reserve funds from unclaimed property, not drawn from the general fund.  In response, Delaware argued that the Escheat Special Fund is, “despite its name, not actually a special fund at all.”¹¹  The court found that the fund's operation was "decidedly unclear," but also recognized that resolution of this threshold question “can be resolved in relatively short order.”¹²  Accordingly, the court denied the state’s motion to dismiss, but ordered expedited discovery concerning whether damages would come directly from state coffers.

Conclusion:

In short, the United States District Court for the District of Delaware found that:

• Plaintiff’s complaint sufficiently alleged that the State refused compensation for the stock over which it had exercised custody, stating a takings claim;
• A shareholder has standing to bring a claim for the lost value of such stock, particularly where the State has taken custody of the stock for no fee;
• The limitations period on a shareholder’s claim commences when he discovers that the State denies “just” compensation; and
• The Eleventh Amendment may not bar such a claim to the extent it is made against a segregated reserve fund comprising unclaimed property to which the State does not take title.

As is always the case, companies and individuals alike should consider filing claims for securities-related property with states holding such property in their name. If the state denies the appreciation value of the stock, the shareholder may have grounds to bring an action for that value.

1. Plaintiffs sued the State Escheator (Brenda Mayrack), the Assistant Director of Enforcement of the Office of Unclaimed Property (Brian Wishnow), and the Secretary of Finance (Michael R. Smith)—under 42 U.S.C. § 1983. For ease of reference, we refer to Defendants as “Delaware” or “the State”.

2. See Unif. Unclaimed Prop. Act §§ 204, 702 (Unif. L. Comm'n 2016) (establishing dormancy triggers and authorizing the administrator to sell or liquidate unclaimed securities).

3. See O'Connor v. Eubanks, 83 F.4th 1018, 1021 (6th Cir. 2023) (noting Michigan's Uniform Unclaimed Property Act allows the state to take custody—not ownership—of unclaimed property "in trust for the benefit of the rightful owner," after which the state sells or liquidates the property and the owner may recover the "net proceeds" from its sale); Peters v. Cohen, No. 24-1040 at *4, 2025 WL 733237 (9th Cir. 2025) (holding that when property is transferred to the state under an unclaimed property law, the property or its proceeds is "held in trust" by the state controller).

4. See Taylor v. Yee, 780 F.3d 928 (9th Cir. 2015), cert. denied, 136 S. Ct. 929 (2016) (Alito, J., concurring in denial of certiorari) (acknowledging the importance of the question whether liquidation of securities without adequate notice and compensation violates the Due Process and Takings Clauses); see also Inv. Co. Inst., Unclaimed Property: The Need for Federal Action 2 (Jan. 2025) ("when securities owners . . . attempt to claim their property from a state, they typically are able to receive only the value of their securities at the time of escheatment, having lost out on any appreciation and income that would have occurred had the securities been left intact"); Kyle Rowland, Escheating the System: States' Increased Securities Escheatment at Investors' Expense, 8 Geo. Wash. Bus. & Fin. L. Rev. 40 (2025) (describing the financial harm to investors from escheatment without "make whole" provisions).

5. Vial at *4, citing TransUnion LLC v. Ramirez, 594 U.S. 413, 425 (2021).

6. Vial at *5, quoting Pennell v. City of San Jose, 485 U.S. 1, 8 (1988).

7. 598 U.S. 631, 636 – 37 (2023).

8. Vial at *7, citing Knick v. Township of Scott, 588 U.S. 180, 202 (2019).

9. Taylor v. Yee, 577 U.S. 1178, 1178 (2016), Alito, J., concurring.

10. Vial, citing Salvato v. Harris, .No. 21-12706 (FLW), 2022 WL 1224962 at *6 (D. N.J April 26, 2022) (citing Arnett v. Strayhorn, 515 F. Supp. 2d 690, 696 (W.D. Tex. 2006)).

11. Id. at 9.

12. Id.

Client Alert 2026-082