03 Plainfiff-Appellant

IN THE SUPREME COURT OF OHIO

WILTON S. SOGG, individually and on behalf of a class of all others similarly situated, Case No. -03 Plainfiff-Appellant,

V. On Appeal from the Franklin County DAVID GOODMAN, Director of the Ohio Court of Appeals, Tenth Appellate District Department of Commerce,

Defendant-Appellee. Court of Appeals Case No. 10AP-358

MEMORANDUM IN SUPPORT OF JURISDICTION OF APPELLANT WILTON S. SOGG

MIKE DEWINE FRANK R. DESANTIS (0030954) Attorney General of Ohio THOMAS W. PALMER (0072816) Thompson Hine LLP WILLIAM J. COLE (0067778) 41 South High Street, Suite 1700 Assistant Attorney General Columbus, Ohio 43215-3435 Executive Agencies Section (614) 469-3200; Fax (614) 469-3361 30 East Broad Street, 26th Floor [email protected] Columbus, Ohio 43215 [email protected] (614) 466-2980; Fax (866) 354-4086 [email protected] JOI-IN R. WYLIE (Of Counsel) CHARLES R. WATKINS (Of Counsel) Attorneys for Defendant-Appellee Donaldson Guin LLC 300 South Wacker Drive, Suite 1700 Chicago, Illinois 60606 (312) 878-8391, Fax (312) 663-0303 [email protected] [email protected]

ARTHUR T. SUSMAN ( Of Counsel) GLENN L. HARA (Of Counsel) Susman Heffner & Hurst LLP Two First National Plaza, Suite 600 Chicago, Illinois 60603 (312) 346-3466; Fax (312) 346-2829 [email protected] [email protected] Attorneys for Plaintiff-Appellant TABLE OF CONTENTS ... TABLE OF AUTHORITIES ......

THIS CASE RAISES SUBSTANTIAL CONSTITUTIONAL ISSUES AND IS OF GREAT PUBLIC AND GENERAL INTEREST ...... 1

SUMMARY OF ARGUMENT ...... 2

STATEMENT OF THE CASE AND FACTS ...... 3

A. This Court Held that the 1991 Amendment to R.C. 169.08(D) is Unconstitutional ...... 3

B. On Remand, the Trial Court Followed this Court's Prior Decisions To Rule that Class Members are Entitled to Recover Interest Under R.C 169.08(D) as it Existed Prior to the Unconstitutional 1991 Amendment, Plus Post-Taking Interest ...... 4

C. Unlike the Trial Court, the Court of Appeals Disregarded this Court's Prior Decisions, Refusing to Apply R.C. 169.08(D) as it is Remains in Effect and Refusing to Allow Post-Taking Interest ...... 8

ARGUMENTS IN FAVOR OF PROPOSITIONS OF LAW :...... 11

Proposition of Law No. 1: The Unconstitutional 1991 Amendment to R.C. 169.08(D) is a "Nullity," Leaving the Pre-Amendment Statute in Effect ...... 11

Proposition of Law No. 2: The State Must Pay Post-Taking Interest on the Amounts it Unlawfully Withheld When it Returned the Class Members' Funds Without Interest ....:...... 12

Proposition of Law No. 3: This Case Presents Issues of Great Interest Concerning the Operation of the Unclaimed Funds Program, a Major State Program Affecting Hundreds of Thousands of Citizens and Millions of Dollars, Further Warranting the Court's Review..14

CONCLUSION ...... 15

Exhibits Tab

Opinion of the Franklin County Court of Common Pleas (Aug. 18, 2009) ...... A

...... Opinion of the Tenth District Court of Appeals (Jan. 13, 2011) ...... B

ii TABLE OF AUTHORITIES

Cases

Cincinnati v. Dale (1969), 20 Ohio St. 2d 32 ...... 12

Cincinnati, Wilmington & Zanesville, R.R. Co. v. Comm'rs of Clinton Cty. (1852), 1 Ohio St. 77 ...... 5,11

City ofNorwood v. Cannava (1989), 45 Ohio St.3d 238, 543 N.E.2d 802 ...... 7, 13, 14

Feasel v. State (1907), 18 Ohio Dec. 478, 481 ...... 11

Frost v. Corp. Comms. of Okla. (1929), 278 U.S. 515 ...... 11

Groch v. Gen. Motors Corp. (2008), 117 Ohio St.3d 192, 2008-Ohio-546 ...... 10

In re Lane, No. 94APE03-312, 1994 WL 472092 (10th Dist. Aug. 30, 1994) ...... 6

Kirby Forest Indus. Inc. v. United States (1984), 467 U.S. 1 ...... 8

Kiser v. Logan Cry. Bd of Comm'rs (1911), 85 Ohio St. 129, 97 N.E. 52 ...... 14

Morton v. State (1922), 105 Ohio St. 366, 138 N.E. 45 ...... 11

Sogg v. Zurz (Aug. 18, 2009), Franklin County Common Pleas Case No. 04-8028 ...... passim

Sogg v. Zurz, No. 10AP-358, 2011 WL 199121, 2011-Ohio-81 ...... passim

Sogg v. Zurz, 121 Ohio St. 3d 449, 2009-Ohio-1526, 905 N.E. 2d, 187 ...... passim

State ex rel. Walton v. Edmonson (1914), 89 Ohio St. 351, 106 N.E. 41 ...... 11

State ex rel. Wilmot v. Buckley (1899), 60 Ohio St. 273, 54 N.E. 272 ...... 11

State v. Bodyke, 126 Ohio St. 3d 266, 2010-Ohio-2424 ...... 12

State v. Cunningham (2007), 113 Ohio St. 3d 108, 2007-Ohio-1245 ...... 6

State v. Parker (1948), 150 Ohio St. 22, 80 N.E. 490 ...... 11

State v. Sullivan (2001), 90 Ohio St.3d 502, 2001-Ohio-6 ...... 5, 11, 12

Thomas v. Thomas (1st Dist.), 171 Ohio App. 3d 272, 2007-Ohio-2016 ...... 8

ui Statutes

R.C. 169.08(D) (1981) ...... passim

R.C. 199.08(D) (1991) ...... passim

R.C. 1343.03 (A) ...... 8

Ohio Civil Rule 25(d)(1) ...... 1

iv THIS CASE RAISES SUBSTANTIAL CONSTITUTIONAL ISSUES AND IS OF GREAT PUBLIC AND GENERAL INTEREST

In its decision below, the Court of Appeals stated that "the Supreme Court of Ohio may choose to review our ruling today." Sogg v. Zurz, No. 10AP-358, 2011 WL 199121, 201 I-Ohio-

81, at ¶ 20.1 This Court should accept that invitation for at least three reasons:

(1) The Court of Appeals ignored the fundamental principle of Ohio constitutional jurisprudence, articulated in many decisions from this Court, that an unconstitutional statutory amendment is a "nullity," with the effect that the pre-amendment statute remains in full force and effect as the last valid expression of legislative intent. This Court should accept jurisdiction to reaffirm this long-settled constitutional rule.

(2) The Court of Appeals mistakenly ruled, without further explanation, that the state

is no longer obligated under the Takings Clause to pay interest running from the date it takes

private property until it pays just compensation because the state is "treated differently than the

average citizen." This Court should accept jurisdiction to reaffirm the "post-taking interest" rule,

(3) This case is of great public interest because it will affect the private-property

rights of hundreds of thousands of Ohio citizens and the operation of a major multi-million-

dollar state program. The Court of Appeals' decision would require the state to remit the exact

amount of interest it "actually earns" on class members' unclaimed funds, but the state has

already demonstrated-and the trial court found as a matter of fact-that it does not accurately

track such earnings, leaving the class members subject to the state's "peculiar" bookkeeping.

I Plaintiffs have changed the caption to reflect David Goodman's appointment as Director of Commerce, replacing Kimberly Zurz as Defendant "automatically" under Ohio Civ. R. 25(d)(1).

1 SUMMARY OF ARGUMENT

This is the second time this case has come before the Court. In the first appeal, the Court unanimously struck down the 1991 amendment to the Ohio Unclaimed Funds Act ("UFA") providing that "[i]nterest is not payable to claimants of unclaimed funds held by the state." The

Court held that the amendment violated the Takings Clause of the Ohio Constitution. Sogg v.

Zurz, 121 Ohio St.3d 449, 2009-Ohio-1526, 905 N.E.2d 187, at ¶ 1. The Court remanded to the trial court to "determine the method to be used to determine how much interest is owed to each claimant" denied interest under the unconstitutional amendment. Id. ¶ 16.

In determining that "method" on remand, two fundamental principles of Ohio constitutional law guided the trial court: ( 1) an unconstitutional statutory amendment is a

"nullity," leaving the pre-amendment statute in full force and effect as the last valid expression of legislative intent; and (2) when the state takes private property without paying for it until later, the Takings Clause requires the state to pay interest running from the date of the taking to the

date of payment to compensate for the delay.

Applying the first principle, the trial court ordered the state to pay interest as it had done

for a decade prior to the unconstitutional 1991 amendment, when R.C. 169.08(D) required the

state to pay 6% interest on claims of $25 or more, with interest accruing for the entire period the

owner's funds were held in custody. Applying the second principle, the trial court ordered the

state to pay "post-taking interest"-i. e., interest on the interest unconstitutionally withheld by the

state, running from the date each claim was paid without interest until the class members are paid

pursuant to this lawsuit.

The Court of Appeals rejected both prongs of the trial court's ruling and the

constitutional principles on which it was based, substituting its own wayward interpretation of

2 this Court's decision. In doing so, it violated this Court's controlling precedent regarding the nullity rule and the post-taking interest rule. This Court's review is therefore proper as a matter of right under Sup. Ct. R. 2.1(A)(2) because the case raises "substantial constitutional questions."

This case also raises issues of great public interest, justifying discretionary review under

Sup. Ct. R. 2.1(A)(3). This case will affect the rights of hundreds of thousands of Ohio citizens

(and citizens of other states and countries) who have recovered, or will in the future recover, unclaimed funds belonging to them under the Unclaimed Funds program. According to

Defendant's latest annual report, the state paid "41,992 claims worth more than $55.3 million" in fiscal year 2010 alone, a fairly typical year. The state did not pay interest accruing after July 26,

1991 on any of those 41,992 claims (or any other claims) and, to this day, it has continued to follow the unconstitutional first sentence of R.C. 169.08(D) disallowing interest.

This case is also of great public interest because it will determine how the state administers the multi-million-dollar Unclaimed Funds program. Under the Court of Appeals' decision, the state will be required to undertake expensive, time-consuming determinations and allocations of "actual interest." But, as the trial court explicitly found, the state is unable to reliably make those calculations. Before the state attempts to comply with a directive it has

already demonstrated it cannot satisfy, this Court should review the case to determine whether

the Court of Appeals found the proper method of computing interest here.

STATEMENT OF THE CASE AND FACTS

A. This Court Held That the 1991 Amendment to R.C. 169.08(D) is Unconstitutional.

In the first appeal of this case, the Court considered the constitutionality of the 1991

amendment to R.C. 169.08(D) providing that "[i]nterest is not payable to claimants of unclaimed

funds held by the state" under the Unclaimed Funds program. Soggv. Zurz, 121 Ohio St.3d 449,

3 2009-Ohio-1526, 905 N.E.2d 187, at ¶ 1. Prior to the 1991 amendment, the state was required to pay interest at "six percent per annum" on unclaimed funds claims of "twenty-five dollars or more," with interest accruing "from the date of payment" to the state-i. e., the date the state received the funds-until the claim was paid under R.C. 169.08(D) (1981).

This Court held that the 1991 amendment cutting off the payment of interest was

"breathtakingly bold," striking "at the core of the concept of private property" by "sever[ing] the link between the owner of an asset and the income produced by that asset." Id. ¶ 6. The Court ruled that "nothing in the UFA indicates an intent to change the ownership of the unclaimed funds, whether due to the passage of time or any other reason." Id. ¶ 9. Finding that the state had no "police power" justification for cutting off the payment of interest, the Court concluded that

"the first sentence of R.C. 169.08(D) violates Section 19, Article I, Ohio Constitution"-the

Takings Clause. Id. ¶ 12.

In its conclusion, the Court reiterated that "[t]he first sentence of R.C. 169.08(D) is unconstitutional," and it remanded to the trial court "to determine the method to be used to determine how much interest is owed to each claimant." Id. ¶ 16.

On remand, in an exhaustive 22-page opinion, the trial court carried out its mandate to

"determine the method" that should be used to determine how much interest is owed to each

class member. Sogg v. Zurz (Aug. 18, 2009), No. 04-8028 ("Trial Ct. Op.") ¶ 2. The trial court

carefully reviewed and analyzed the parties' evidence and submissions, including what it

described as a "mind-numbing assortment" of possible methods. Id. ¶ 3, 12-25.

4 Ultimately, however, the trial court rejected all these methods except one, holding that

"the proper approach is to resurrect the former statute ostensibly repealed in 1991 when the unconstitutional law was enacted." Id. ¶ 3. The court grounded its holding in decisions of this

Court-discussed in detail in Proposition of Law No. 1, below-"spanning more than a century,"

(1852), 1 Ohio from Cincinnati, Wilmington & Zanesville, R.R. Co. v. Comm'rs of Clinton Cnty. (2001), St. 77, 81 (courts treat unconstitutional legislative act "as a nullity"), to State v. Sullivan

90 Ohio St.3d 502, 509, 2001-Ohio-6 (typically, "[w]hen a court strikes down a statute as unconstitutional, and the offending statute replaced an existing law ... the repeal is also invalid"). Trial Ct. Op. ¶ 3, 32-37.

Applying this century and a half of precedent, the trial court held that the unconstitutional 1991 amendment was a "nullity" and that, therefore, the state should simply pay the class members "as if the offending statute never had been passed."Id. ¶ 32. Thus, it required the state to follow the pre-amendment statute and pay interest of "six percent per annum" on

claims of "twenty-five dollars or more," with interest accruing "from the date of payment" to the

state under R.C. 169.08(D) (1981). Id. ¶ 36. Apart from being the correct legal conclusion, the

trial court noted several major practical benefits of applying the nullity rule.

First, the nullity rule answers the question of what interest rate to apply without requiring

a burdensome and ultimately inconclusive inquiry into the pros and cons of the parties' varying

proposed computational methods. The trial court also noted that the legislative history of R.C.

169.08(D)2 demonstrated that the 6% rate was a sensible one, designed to provide "a realistic

2 The court carefully traced the evolution of R.C. 169.08(D) from its inception in 1967, when it provided for interest at "the rate earned by such funds" in state custody, to the 1972 amendment pegging the interest rate to the "estimated average rate earned on the total mortgage funds," to the 1981 amendment imposing a flat 6% interest rate. Id. ¶¶ 27-30.

5 average over the long run." 31d ¶¶ 34-35. The court was careful to note that the General

Assembly remains free to "adjust the statutory rate" in the future, provided it "act fairly" and not seek to undermine this Court's decision through "legalistic construction," such as pegging the interest rate at 0.001% or imposing a draconian administrative fee. Id. ¶ 37.

Second, the nullity rule resolves the issue of de minimus recoveries, ignored by the Court of Appeals, where the interest due a class member might be so small as to be outweighed by the administrative costs of paying it (for example, if the class member is owed less than the cost of a stamp). Id. ¶ 34. The trial court held that the pre-amendment statute handily resolves this issue by imposing a "$25 floor" for compensable claims. Id.

Third, applying the nullity rule removes any confusion regarding the time during which interest accrues. The pre-amendment version of R.C. 169.08(D) unambiguously provides that interest accrues "from the date of payment" of unclaimed funds to the state until the funds are returned to the owner. Id. ¶ 30. Because that statute remains in effect under the nullity rule, the

Court of Appeals does not have the authority to rewrite it by limiting interest to only that which

accrued between August 2000 and August 2004, regardless of when each class member's

property was deposited with the state or returned. See, e.g., State v. Cunningham (2007), 113

Ohio St. 3d 108, 113, 2007-Ohio-1245 (courts' role is "to interpret the law, and not to make it").

The trial court also rejected the state's proposal to base the interest rate on Defendant's

"actual `earnings"'-which, according to the state, were as low as 0.52% during the relevant

period. Id. ¶ 16. After affording the state a full opportunity to develop the record, the court made

factual findings the state did not appeal that (1) the state's "peculiar" bookkeeping methods make

3 The state continues to pay 6% interest on unclaimed funds today, but only for the time they were held in state custody prior to the effective date of the 1991 amendment. See In re Lane, No. 94APE03-312, 1994 WL 472092 (10th Dist. Aug. 30, 1994).

6 those rates "opaque if not meaningless," (2) that the only "evidence" the state provided for those rates was a one-page "cryptic spreadsheet" that was unsupported by explanation or data and thus inadmissible, and (3) that the "actual earnings" approach was unworkable because it cannot be used to determine the interest rate payable on a "going forward" basis. Id. ¶¶ 15-17.

The court also held that the state's claimed "actual earnings" rates, could they be determined, would not in any event provide just compensation here because just compensation focuses on "what the owner has lost, not what the public has gained." Id. ¶ 13. It also noted that the state does not even invest much of the unclaimed funds, but instead uses them as "a veritable cash cow feeding an array of other public programs," generating such abysmally low rates of return that it would be unjust to make the class members "unwilling investors.s4 Id. ¶ 14-15.

Finally, the trial court held that the state must pay "post-taking interest" because

"[c]ompensation for many class members has long been delayed." Id. ¶ 57. Noting that the class

representative, Mr. Sogg, had already waited "over five years" for the interest that should have

been paid on his unclaimed funds claim in April 2004 and that class members at the front-end of

the class, whose claims were paid in August 2000, had already waited a decade, the court

recognized that "[j]ust compensation is not achieved through delay" and analogized the state's

withholding of interest to situations where it takes real property without simultaneously paying

compensation. Id. ¶ 52 (citing City ofNorwood v. Cannava (1989), 45 Ohio St.3d 238, 543

N.E.2d 802). Thus, it held the state must pay post-taking interest to insure that owners are

"placed in as good a position pecuniarily as [they] would have occupied if the payment had

4 In light of these rulings, even if this Court rejects the application of the nullity rule in this case, it should nevertheless accept jurisdiction as a matter of right to determine whether the state's claimed "actual earnings" provide constitutionally adequate just compensation here.

7 coincided with the appropriation." Id. ¶ 52 (quoting Kirby Forest Indus. Inc. v. United States

(1984), 467 U.S. 1, 10).

Applying these principles, the trial court held that the class members are entitled to post- taking interest "over and above" the 6% interest in order to compensate for the delay, running from the date of taking-the date the owner's unclaimed funds claim was paid without interest- through the date the state pays interest pursuant to this lawsuit. Id. at ¶ 58. This does not represent "double interest"; rather, owners will receive 6% interest up to the time of payment on the principal amount of their claims and post-taking interest on the unpaid interest thereafter.

Regarding the appropriate rate for post-taking interest, the trial court looked to R.C.

1343.03(A), Ohio's general pre-judgment interest statute. Id. ¶ 58. The court reasoned that,

"[e]ven where it does not technically apply, Ohio courts use it as a`guideline."' Id. (quoting

Thomas v. Thomas (1st Dist.), 171 Ohio App. 3d 272, 2007-Ohio-2016, at ¶ 20). Although the

pre-judgment interest rate was 10% from 2000 to 2004, it was reset to a "floating" rate in 2004,

which has varied from 4% in 2004 to 8% in 2007-08 and back down to 4% in 2010-11. See

http://tax.ohio.gov/divisions/ohio_individual/individual/interest rates.stm (last visited Feb. 28,

2011).

C. Unlike the Trial Court, the Court of Appeals Disregarded this Court's Prior Decisions, Refusing to Apply R.C. 169.08(D) as it is Remains in Effect and Refusing to Allow Post-Taking Interest.

The Court of Appeals reversed the trial court on January 13, 2011. Sogg v. Zurz, No.

I OAF-358, 2011 WL 199121, 2011-Ohio-81, at ¶¶ 26-27. Its opinion does not mention the trial

court's holding that the 1991 amendment was a "nullity," leaving the pre-amendment statute in

effect, or the 150-year-long line of cases supporting that proposition that were discussed

extensively in the parties' briefs and the trial court's opinion.7d ¶¶ 1-27. Nor does it mention

8 that applying the nullity rule simultaneously resolves the issues of (1) the interest rate, (2) de minimus recoveries, and (3) the application of the statute of limitations. Id.

Rather than address the substance of the trial court's opinion, the Court of Appeals surmised-despite this Court's remand to the trial court to "determine the method" for computing interest-that this Court had already ruled that class members are limited to recovering "the interest actually earned by the [S]tate of Ohio, no more and no less." Id. ¶ 11

(emphasis added). The court did not address any of the parties' submissions to the trial court concerning this topic or its factual conclusions that it was neither reasonable nor even feasible to attempt to use "actual earnings" as the measure of just compensation. Id. Instead, it viewed the trial court's application of the nullity rule as a deviation from this Court's mandate and an

(apparently well-disguised) attempt by the trial court to impose its own subjective judgments about what "a fair return on [unclaimed] funds would be."5 Id. ¶ 12. It therefore remanded to the trial court to "determine the amount of interest actually earned on the funds owned by the

members of the class," id. ¶ 13, something the state had already tried to do without success.

The Court of Appeals' failure to follow the nullity rule also caused it to misapply the

statute of limitations as a damages limitation and bar class members from recovering interest due

for any period prior to "the four-year period which preceded the filing of Sogg's lawsuit." Id. ¶

17.6 Under this ruling, a class member whose funds were held by the state from 1996-2001, for

5 This is precisely what the trial court did not do. It expressly refused to use a "subjective" method-such as a "reasonable prudent investor" approach-reasoning that it would reflect nothing more than "the personal investment philosophies of individual trial judges," Trial Ct. Op. ¶ 22, in comparison to the objective legislative intent behind the 1981 statute. Id. at ¶ 35. 6 The Court of Appeals based this ruling on an isolated sentence in this Court's opinion stating, "Sogg may recover interest earned on his property in the four years preceding the date of his claim." App. Ct. Op. ¶ 16. As the trial court recognized, this is at most an "inartful sentence," Trial Ct. Op. ¶ 40, and interpreting it as the Court of Appeals did would be a "radical and 9 example, would recover only one year of interest (for the 2000-2001 period), even though interest is due for the entire five years under R.C. 169.08(D) as it remains in effect. But that is not what a statute of limitations does. A statute of limitations dictates "the time in which a plaintiff may bring suit," not the amount of damages recoverable in a timely-filed suit. Groch v.

Gen. Motors Corp. (2008), 117 Ohio St.3d 192, 211, 2008-Ohio-546. This misapplication of the statute of limitations is a dangerous precedent, independently justifying this Court's review.

The Court of Appeals also rejected the trial court's holding that class members must be compensated for the state's delay in paying the interest that should have been included when the state returned their unclaimed funds. Id. ¶ 24-25. Instead, it confused the post-taking interest required by the Takings Clause with ordinary statutory pre-judgment interest and concluded that,

because "the [S]tate of Ohio is treated differently than the average citizen in court-related

matters," it cannot be liable for any kind of interest that applies before judgment, even though

constitutionally mandated. Id. ¶ 24. Instead, the court concluded that the state need only pay

interest to compensate class members for a delay in payment after "judgment has actually been

rendered against the state." Id. ¶ 25.

As explained below, in light of the Court of Appeals' outright rejection of two venerable

principles of Ohio constitutional law and the great public importance of this case, this Court

should accept the Court of Appeals' invitation to "review our ruling today." Id. ¶ 20.

unprecedented step" in takings and statute-of-limitations jurisprudence that "must be rejected as a misunderstanding" of this Court's opinion. Id. ¶ 48.

10 ARGUMENTS IN FAVOR OF PROPOSITIONS OF LAW

Proposition of Law No. 1: The Unconstitutional 1991 Amendment to R.C. 169.08(D) is a "Nullity," Leaving the Pre-Amendment Statute in Effect.

The rule that an unconstitutional amendment is a "nullity," leaving the pre-amendment statute in effect, is a bedrock principle of Ohio constitutional law dating at least as far back as

(1852), 1 1852.7 See Cincinnati, Wilmington & Zanesville, R.R. Co. v. Comm'rs of Clinton Cty.

Ohio St. 77, 81. It is a critical aspect of the doctrine of "judicial review." Id.

In Clinton Cty., this Court traced the history of the doctrine of judicial review-a "great principle, vital to all constitutional government"-and concluded that it is the "the duty of the judicial tribunals" to review legislation and, if it is unconstitutional, "to treat it as a nullity." Id.

(emphasis added). The Court reaffirmed the nullity rule repeatedly throughout the late 19th and

272; Feasel 20th Centuries. See State ex rel. Wilmot v. Buckley (1899), 60 Ohio St. 273, 54 N.E.

v. State (1907), 18 Ohio Dec. 478, 481 ("[A]n amending act which is unconstitutional and void

does not, being a nullity, in any way affect the validity of the act amended."); State ex rel.

(1922), 105 Ohio St. Walton v. Edmonson (1914), 89 Ohio St. 351, 106 N.E. 41; Morton v. State

366, 138 N.E. 45; State v. Parker (1948), 150 Ohio St. 22, 24, 80 N.E. 490.

The nullity rule remains as vital today as it was in 1852. For example, this Court applied

it in 2001 in State v. Sullivan, 90 Ohio St. 3d 502, 509, 2001-Ohio-6, summarizing it as follows:

When a court strikes down a statute as unconstitutional, and the offending statute replaced an existing law that had been repealed in the same bill that enacted the offending statute, the repeal is also invalid unless it clearly appears that the General Assembly meant the repeal to have effect even if the offending statute had never been passed.

7 The rule is not unique to Ohio. The federal courts follow it as well. See, e.g., Frost v. Corp. Comms. of Okla. (1929), 278 U.S. 515, 526-27 (unconstitutional amendment is "a nullity" and "powerless to work any change in the existing statute," so pre-amendment statute "must stand as the only valid expression of the legislative intent").

11 In Sullivan, the Court struck down an amendment to a criminal statute on due process g ounds. Id. But striking down the statute as amended raised the question of what law to apply to criminal defendants in state custody. Id. at 508-09. Rather than act as a legislature would (as the Court of Appeals did in this case) and craft a policy of its own, this Court relied on the nullity rule and held that the pre-amendment statute remained in effect as the last valid expression of legislative intent. Id. In this sense, the nullity rule reflects judicial deference to the legislature, as required by the separation of powers doctrine. See Section I, art. 2, Ohio Const. ("The legislative power of the State shall be vested in a general assembly consisting of a senate and house of representatives."); State v. Bodyke, 126 Ohio St. 3d 266, 275, 2010-Ohio-2424, at ¶ 39 ("The

first, and defining, principle of a free constitutional government is the separation of powers.").

After carefully considering this long line of authorities, the trial court held that, because

the 1991 amendment was never effective, the state must follow the 1981 version of R.C.

169.08(D) and pay class members 6% interest on claims of $25 or more, with interest accruing

for the entire period that each claimant's funds are held in state custody. Trial Ct. Op. ¶ 36. The

Court of Appeals, in contrast-despite the fact that the parties extensively briefed the issue-

disregarded the nullity rule entirely. Sogg v. Zurz, 2011 WL 199121, 201 1-Ohio-81 at ¶¶ 1-27.

This Court should correct the Court of Appeals' rejection of binding precedent in favor of its

own judicial legislation and reaffirm the rule that an unconstitutional amendment is a nullity.

Proposition of Law No. 2: The State Must Pay Post-Taking Interest on the Amounts it Unlawfully Withheld When it Returned the Class Members' Funds Without Interest.

This Court has held unequivocally that just compensation under the Takings Clause of

the Ohio Constitution includes interest running from the date of the taking until the owner is

paid. Cincinnati v. Dale (1969), 20 Ohio St. 2d 32, 34. The common-sense rationale for this rule

is that, "where the property owner is not compensated simultaneously with the taking of 12 possession, the compensation must include an amount (interest) ... for the delay in making payment." City ofNorwood v. Cannava (1989), 45 Ohio St. 3d 238, 240. This post-taking interest is a constitutional, not statutory or common-law, imperative and is completely unrelated to pre-judgment or post-judgment interest.

The necessity of requiring the state to pay post-taking interest can be illustrated by a simple hypothetical. Assume the state occupies a piece of real property without paying compensation at the time of the taking. The landowner and the state then litigate for the next

five years over the amount of compensation due, and the court ultimately values the state's use

of the property at $100,000. In this hypothetical, the Takings Clause would require the state to

pay, not only the $100,000, but also interest on that $100,000 to compensate for the five-year

delay in payment. This is not because the state acted in bad faith, or to punish the state, but

because without interest the owner has not received just compensation for his or her loss.

The trial court recognized and applied this constitutional principle, ordering the state to

pay post-taking interest on the amounts it would have paid to each class member had it not

withheld interest pursuant to the unconstitutional 1991 amendment. Trial Ct. Op. ¶¶ 49-58.

Confusing the concept of constitutional post-taking interest with ordinary statutory pre-judgment

interest, the Court of Appeals reversed, holding without further explanation that, because the

state is "treated differently than the average citizen in court-related matters," it cannot be liable

for any kind of "pre-judgment" interest. App. Ct. Op. ¶ 24.

The state is treated differently from the average citizen. But those differences do not lead

to the conclusion that the state should not pay post-taking interest, but to the conclusion that it

should. The state, unlike an average citizen, is bound by the Takings Clause of the Ohio

Constitution, which allows it to take private property but requires it to pay just compensation

13 when it does so. That just compensation includes post-taking interest where there is a delay in payment. City ofNorwood, 45 Ohio St. 3d at 240. As this Court held in its earlier opinion, the

Constitution exists "to protect the weak from the strong," not the other way around. Sup. Ct. Op.

¶ 13 (quoting Kiser v. Logan Cty. Bd. of Comm'rs (1911), 85 Ohio St. 129, 132-33, 97 N.E. 52).

The Court of Appeals' decision departs from the long-standing constitutional principle that post-taking interest is an essential element of just compensation. This Court should accept jurisdiction to correct that unwarranted departure.

The outcome of this case will affect the constitutional rights of hundreds of thousands of persons whose private property has been or will become subject to the UFA. That alone makes this case one of great public interest, warranting the Court's review.

The outcome here will also have a profound effect on the state. The Court of Appeals' decision will require the state to determine the amount of interest earned in the great variety of

programs and investments in which the state places unclaimed funds, then allocate that interest

on a pro-rata basis among all unclaimed funds claimants. Because unclaimed funds move in and

out of state custody daily, the state will, presumably, have to make these calculations for each

day for the past 11 years and every day going forward. The time and expense required of such

an endeavor, and the potential for error, will be enormous. In light of the trial court's

uncontested rulings that the state's "peculiar" bookkeeping is "materially inconsistent with ...

sensible accounting standards" and that the state does not "accurately track income derived from

unclaimed funds"-conclusions based upon an "extensive factual record submitted by stipulation

14 in this case," Trial Ct. Op. ¶ 15 & n.5-this approach will be impossible to execute and severely disadvantage class members.

In sum, this case strongly implicates the interests of the public and the State of Ohio, and the Court should therefore accept discretionary review.

CONCLUSION

This case warrants review by this Court as a matter of right under Sup. Ct. R. 2.1(A)(2), because it raises substantial constitutional questions regarding: (1) the rule that an unconstitutional amendment is a nullity, leaving the pre-amendment version of the statute in effect; and (2) the rule that the Takings Clause requires post-taking interest when the state takes private property without simultaneously compensating the owner. It also warrants discretionary review under Sup. Ct. R. 2.1(A)(3) because it will affect the rights of hundreds of thousands of

class members who have claimed, or will in the future claim, unclaimed funds and the

administration of a multi-million-dollar state program.

RespectfuLIX submi

w JOHN R. WYLIE (Of Counsel) FRANK R. DESANTIS (0030954) CHARLES R. WATKINS (Of Counsel) THOMAS W. PALMER (0072816) Donaldson Guin LLC Thompson Hine LLP 300 South Wacker Drive, Suite 1700 41 South High Street, Suite 1700 Chicago, Illinois 60606 Columbus, Ohio 43215-3435 (312) 878-8391, Fax (312) 663-0303 (614) 469-3200; Fax (614) 469-3361 [email protected] [email protected] [email protected] [email protected]

ARTHUR T. SUSMAN (Of Counsel) GLENN L. HARA (Of Counsel) Susman Heffner & Hurst LLP Two First National Plaza, Suite 600 Chicago, Illinois 60603 (312) 346-3466; Fax (312) 346-2829 [email protected] [email protected]

15 PROOF OF SERVICE

The undersigned hereby certifies that a true copy of the foregoing Memorandum In

Support Of Jurisdiction Of Appellant Wilton S. Sogg was served by ordinary U. S. Mail, postage prepaid, on the 28th day of February, 2011, upon Mike DeWine, Attorney General of the State of

Ohio, and William J. Cole, Assistant Attorneys General, Executive Agencies Section, 30 East

Broad Street, 26th Floor, Columbus, Ohio 43215, attorneys for Appellee Mike DeWine, Director of the Ohio Department of Commerce.

z / Av for Appellant

16 IN THE COURT OF COMMON PLEAS, FRANKLIN COUNTY, OHIO

C) WILTON S. SOGG, Exr. r of the Estate of Julia Sogg Individually, and on behalf of a Class of others similarly situated,

Plaintiffs, n c vs. Case No. o4-CVG-o8-8o28^

KIMBERLY ZURZ, Director of Commerce,

Defendant.

OPINION

William C. Wilkinson, Thomas W. Palmer, Thompson Hine LLP; Arthur Susman, Glenn L. Hara, Susman Heffner & Hurst LLP; John R. Wylie, Charles R. Watkins, Futterman Iioward Watkins Wylie & Ashley, Chtd., for Plaintiffs.

Richard Cordray, Attorney General, William J. Cole, John T. Williams, Assistant Attorneys General, for Defendant.

Frye, Judge.

1. Introduction

{¶i} Consistent with this court's merit ruling in 20o61 the Ohio Supreme Court held earlier this year that R.C. 169.o8(D) (as amended in July i99i) is unconstitutional and takes private property in violation.of Art. I, Section i9 of the Ohio Constitution.2 Prior to 1991 that statute required that "[i]nterest on claims [of unclaimed funds] of twenty-five dollars or more shall be computed from the date of payment under division (A) of section 169.05 of the Revised Code at the

21 139 (herein Ohio Misc.2d 58, 2006-Ohio-42223, the "2006 86o N.E.2d 163, Opinion.") 121 Ohio St.3d 449, 2oo9-Ohio-1526, 905 N.E.2d 187.

1 rate of six per cent per annum" and paid to owners when they recovered their property. In 1991, however, R.C. 169.o8(D) was unconstitutionally amended to read: "[i]nterest is not payable to claimants of unclaimed funds held by the state." {q2} Following the Supreme Court's decision that a taking occurred and that a four-year statute of limitations applied to this case, it was "remand[ed] to the trial court to determine the method to be used to determine how much interest is owed to each claimant." 121 Ohio St.3d 449, 1116. Although the state must still perform calculations to determine exact compensation due individual owners, some background facts already are known. Previous proceedings in this case determined that roughly 40,000 people each year recover unclaimed funds from the state, and that the total returned is in the $50 million range every year. {¶3} In undertaking to set "just compensation," the court has considered a mind-numbing assortment of alternatives approaches suggested by the parties. Remarkably, over sixty separate interest-rate statutes are on the books in Ohio. Defendant argues this court should ignore those statutory rates altogether and instead award interest to the class based upon bank rates, or should mirror actual earnings obtained using unclaimed funds while in state custody. The court has instead concluded, based upon Ohio Supreme Court rulings spanning more than a century, that the proper approach is to resurrect the former statute ostensibly repealed in i99i when the unconstitutional law was enacted. It provides a 6% rate. That rate is to be applied to all accounts that exceeded the minimum amount of $25 for the entire time funds were held by the state. {¶4} The class of plaintiffs in this case includes all those whose money was returned without interest since August 2ooo. By definition, some members of the plaintiff class have waited years for interest due on their unclaimed funds. To provide full compensation for that delay, prejudgment interest calculated using R.C. 1343•03(A) is also due. Under unclaimed funds rules, the state is entitled to deduct a 5% administrative fee from the recovery (compensation plus prejudgment interest) being provided each class member. That recovery will also be affected by the attorney fees yet to be awarded to lawyers who successfully represented the prevailing plaintiffs.

2 2. Constitutionally Mandated Just Compensation {¶5} Before examining the alternative approaches that might be employed to select an interest rate, it is important to recognize that the Ohio Supreme Court grounded this "takings" decision squarely in Section 19, Article I of the Ohio Constitution. That provision and its counterpart in the United States Constitution promise those whose property is taken by government "compensation"3 Both clauses are regarded as essentially interchangeable. In 1934 the Supreme Court of Ohio remarked that although the federal provision uses two words (just compensation) while the Ohio counterpart employs only the single word compensation, "the intendment of the two is manifestly identical." State ex rel. Steubenville Ice Co. v. Merrell (1934), 127 Ohio St. 453, 454, 189 N.E. 116, 116. More recently it was again recognized that "[t]he word `compensation' is the equivalent of the term 'just compensation' in the Fifth Amendment of the Constitution of the United States." In re Appropriation of Easements for Highway Purposes (3rd Dist. 1963), ii8 Ohio App. 285, 287,194 I N.E.2d 151, Y53• {¶6} "[C]laims for just compensation are grounded in the Constitution itself' such that "in the event of a taking, the compensation remedy is required by the Constitution." First English Evangelical Lutheran Church v. County of Los Angeles (1987), 482 U.S. 304, 315-316, 107 S.Ct. 2378, 2386, 96 L.Ed.2d 250, 264. "As its name suggests, then, just compensation is, like ordinary money damages, a compensatory remedy." City of Monterey v. Del Monte Dunes, Ltd. (1999), 526 U.S. 687, 710, i19 S.Ct. 1624, 1639, 143 L.Ed.2d 882, 905. Just compensation seeks "a fair `balance between the public's need and the claimant's

loss.' [citation omitted]." United States v. 5o Acres of Land (1984), 469 U.S. 24, 33,105 S.Ct. 451,457> 83 L.Ed.2d 376, 385. While ordinarily compensation for a taking is tied to the fair market value of the property involved, "[p]erhaps no warning has been more repeated than that `the determination of value cannot be

Unlike Ohio, constitutional provisions in some other states speak to both taking or damaging private property for public use without just compensation. For instance, the Supreme Court of New Mexico recently held that lost profits arising from mere delay in opening a hotel could be awarded for a temporary taking. Primetime Hospitality, Inc. v. City of Albuquerque (2009), 2oo9 NMSC 11, 2o6 P.3d 112.

3 reduced to inexorable rules." United States v. Toronto, Hamilton & Buffalo Navigation Co. (1949), 338 U.S. 396,402,70 S.Ct. 217, 221, 94 L.Ed. 195, 201. {¶7} In seeking a fair balance between the public's need and the claimant's loss, one undisputed fact has significance here: Ohio imposes a 5% administrative fee to offset operating expense for its unclaimed funds program. Between 1991 and June 30, 2005, that fee yielded $15.6 million to the state. (Amended Stipulation ¶21 filed May 8, 20o6, and Exhibit "E" filed March 2, 2oo6.) Consistent with the reasoning behind Webb's Fabulous Pharmacies, Inc. v. Beckwith (1980), 449 U.S. 155, 101 S.Ct. 446, 66 L.Ed.2d 358, recognition of that administrative fee dispels pragmatic concern over potential impairment of the unclaimed funds program when setting just compensation. Constitutionally-required just compensation must be the court's sole focus.

3. The Purpose of Compensation {18} Just compensation is not a self-defining term. Indeed, it is recognized to engender difficult litigation precisely because courts and academics disagree over the goals thataw should serve in takings cases. Seeking to make sense of the law in this area, several academic observers recently concluded "it is time to look behind its text to its purposes, and go anew from there," because takings decisions at the federal level since 1922 "turned the words of the Takings Clause into a cryptogram that only the Justices in a given case are able to decipher (and seldom do all of them agree.)" Heller & Krier, Commentary: Deterrence and Distribution in the Law of Takings (1999), 112 Harv. L. Rev. 997, 1024; see also, Fegan, Note & Comment: Just Compensation Standards and Eminent Domain Injustices: An Underexamined Connection and Opportunity for Reform (2oo7), 6 Conn. Pub. Int. L.J. 269; Serkin, Valuing Interest: Net Harm and Fair Market Value in Brown v. Legal Foundation of Washington (2004), 37 Ind. L. Rev. 417, 419 ("There is, unfortunately, little agreement about how much the Constitution should protect private property because the Takings Clause's central normative goals are deeply contested.") {¶g} Heller and Krier view judicial opinions and scholarly work yielding a "virtual consensus that the purposes of just compensation are essentially two,"

4 namely economic "efficiency" in government decision-making (or "deterrence" of ill-considered decisions regarding property); and "justice" or "distribution" to those impacted by government action. 112 Harv. L. Rev., at 998. For them, a key aim of takings decisions is encouraging sensible, efficient government decision- making (or deterring bad decisions) so that takings law imposes reasonable financial limits on government. However, another recent article argues that the "efficiency" model is mistaken in assuming some correlation between the financial effect of a taking and the government officials directly involved in making decisions. Wyman, The Measure of Just Compensation (2007), 41 U.C. Davis L. Rev. 239, 247 (2007). It is "taxpayers, not government decision makers, [who] pay the monetary costs," and often local decision makers are spending state or federal funding with little of their "own" money at risk. Furthermore, government takings decisions are sometimes distorted by attitudes toward risk. For instance, a municipality that is risk averse because it has a small tax base may "forgo an efficient taking because [of] its aversion to risk." Id. {¶1:o} The second goal of takings adjudication identified; in the literature is more commonly accepted: as with most court cases, takings decisions seek justice through fair remedial distribution to aggrieved parties. Professor Wyman's article, like Heller and Krier, accepts "[t]akings compensation *** as a form of corrective justice." Id. at 249. {¶ii} This case demands a fair remedy for a constitutional injury. As such it must be just to the plaintiffs, even if its intangible impact on future "efficienc}" of government decision-making under the Ohio Constitution proves to be nil. Ohio's Constitution is intended to "reinforce[] the sacrosanct nature of the individual's `inalienable' property rights *** which are to be held forever `inviolate'." Norwood v. Horney, 11o Ohio St.3d 353, 2oo6-Ohio-3799, at ¶37. Property rights are "strongly protected in the Ohio Constitution." Id. at 138.4

4 In assinp gNorwood compensation'mentioned that the standard measure of "'just is that compensation that places the individual in `as good a position pecuniarily as if his property had not been taken,' to be `made who]e,' but no more. [citation omitted] Such compensation typically is measured by the fair market value of the physical property at the time of the taldng, [citation omitted] and does not reflect the more elusive, metaphysical value that the property may have to its owner. [citation omitted]." Id. at footnote 9.

5 Such understandings of the Ohio takings clause have, of course, been reconfirmed by the Supreme Court's unanimous decision in this very case. The fact that this is a constitutional case emphasizes not only the importance of the financial outcome for owners of unclaimed funds and the general public, but frankly undermines several superficial arguments of defendant that would leave class members little meaningful recovery.

4. State Earnittgs as the measure of Compensation owed {¶12} Due to the nature of this particular case, interest is accepted by everyone as the proper way to measure just compensation. By definition, "[i]nterest is a compensation paid for the use of money. It may be compensation allowed by law or fixed by the parties." Fulton v. B.R. Baker-Toledo Co. (1934), 128 Ohio St. 226, 228, 19o N.E. 459, 46o-61. Defendant argues that the Division of Unclaimed Funds' actual "earnings" ought to measure what is owed for use of private money. Both factual and legal difficulties undermine this argument. 013} Legally, as this court recognized in the 20o6 Opinion at ¶35, the well- established rule articulated by Justice Oliver Wendell Holmes remains the law today: takings cases concern what the owner has lost, not what the public has gained. See also, First English Euangelical Lutheran Church, supra, 482 U.S., 319, 107 S.Ct., 2388, 96 L.Ed.2d, 267, quoting United States v. Causby (1946), 328 U.S. 256, 261, 66 S.Ct.1o62,1o65-1o66, 9o L.Ed.12o6, 1210. The suggestion state earnings measure just compensation violates that venerated principle. 014} Practically speaking, the argument ignores situations in which public use of private property yields disappointing results. For example, government- sponsored economic development projects sometimes fail and those losses - like the glittery Columbus City Center mall erected for urban redevelopment in the late 198o's but already scheduled for demolition - should not diminish compensation due private owners. Otherwise, they in effect become unwilling investors. Results obtained by government do not guarantee just compensation.

6 {¶ig} Defendant's argument is undermined by the extensive factual record submitted by stipulation in this case.5 Based upon the record, this court concluded in 20o6 that the state used "its own peculiar form of bookkeeping" for unclaimed funds which "is materially inconsistent with generally accepted accounting principles ('GAAP') or any other sensible accounting standards." The state simply did not accurately track income derived from unclaimed funds. 2oo6 Opinion, ¶112 - 13. So, while the record shows that "[f]unds held by the division are not permitted to sit idle" and are "a veritable cash cow feeding an array of other public programs," the manner in which real or imputed earnings on unclaimed funds has been tracked is opaque if not meaningless. 20o6 Opinion, ¶¶n, 15, 36. {¶16} Defendant's suggestion it can retroactively reconstruct actual earnings on unclaimed funds includes a cryptic spreadsheet entitled "Interest Calculation Scenarios." (Exhibit "A" to Memorandum filed July 13, 2009.) It purports to show that across a period of twelve years when the "statutory rate" varied between 4% and 9%, unclaimed funds earned only .52% to 2.22%. The source of the data is unexplained. Absent sensible records verified with new, expert accounting work, accurately determining what the state earned would be a daunting task, and the effort could prove very misleading. Moreover, in the end finger-pointing at state officials about why a higher rate of return was not achieved seems likely if actual earnings really fell as low as .52%. An observation of the Supreme Court of Ohio nearly a century ago in a case contending that rates on natural gas set by a local municipality violated Section i9, Article I of the Ohio Constitution is apt here: "[t]he court should not' be asked to indulge in mere speculation and arrive at a conclusion based only upon various and varying opinions of experts, which opinions are apparently based upon conditions which

5 The Su remep p(premised Court opinion on a statement by the Tenth District Court of Appeals) misunderstood the procedural posture of this case, saying it arose on summary judgment. 121 Ohio St.3d 449, at ¶ 5. In fact, this case was resolved in 2006 on the merits using a stipulated record that left open only legal questions. See 2006 Opinion, footnote 2. Perhaps the absence of a transcript of witness testimony or other indication of an ordinary "trial" inadvertently led to a misunderstanding that this case was decided using Civ. R. 56. The procedural difference is irrelevant where the court draws legal conclusions, but is important when factual findings are considered. All inferences about the factual record need not be drawn in favor of the state, as would be required under Civ. R. 56.

7 are themselves admittedly varying and uncertain." Newark Natural Gas & Fuel ( Co. u. City ofNewark 1915), 92 Ohio St. 393, 402, lll N.E. 150, 152, aff d (i917), 242 U.S. 405,37S. Ct.156, 61 L.Ed 393• {¶17} One other practical difficulty is apparent with tying compensation to actual earnings. After this case ends the Division of Unclaimed Funds remains obligated to pay interest going forward whenever it returns property to private owners. How is that rate to be computed? No statute ties interest on unclaimed funds to state earnings using the money, but aside from that it seems nonsensical to ask the Division to operate in that manner administratively. Determining annual interest rates only in hindsight, once calendar or fiscal year-end. performance figures were audited, would either delay payment of compensation until that retrospective look-back was complete, or else would ignore the most recent time period by tying interest to earlier performance figures. Neither would be just. For all these reasons, this suggested method for computing compensation is neither sensible nor legally appropriate.

5. Judicially determining actual market interest rates {¶18} Defendant suggests that "[a] better alternative to determine interest is to apply the interest rate that would be payable on a bank depository account as of the date the unclaimed funds were received by the State." (Defendant's Memorandum filed July 13, 2009, P. 9.) {¶lg} Practical difficulties also abound with this idea. Why should interest rates paid "on an individual savings account as determined by the largest banks in Ohio" be the measure? Id. Passbook savings accounts are notoriously low- performing, as opposed to money market funds or certificates of deposit. Certificates of deposit rates vary - often substantially - depending upon their duration, and on other less-obvious factors like an individual bank's cash needs at the time it accepts a long term deposit. Sorting-through choices that this approach entails, ranging f-romwhich banks' rates to select, to variables about what types of depository relationships or duration to select, would require difficult fact-finding.

8 {¶2o} Although not cited by the parties, the court nevertheless reviewed decisions from other jurisdictions in which judges determine rates of interest in takings cases. In the Ninth Circuit, 42 U.S. Code, Section 1983 actions predicated upon an unconstitutional taking require a trial court to "examine what `a reasonably prudent person investing funds so as to produce a reasonable return while maintaining safety of principal' would receive." Schneider v. County of San Diego (C.A.9, 2002), 285 F.3d 784, 793-94. The Appellate Division in New York recently took the same approach. Noghrey v. Town of Brookhaven (N.Y. App. Div. 2d Dep't, 2008), 48 A.D.3d 529, 533, 852 N.Y.S.2d 220, 223. Some years ago one commentator identified six states (including California) that employed such a "reasonably prudent investor" standard. Case Notes: Compound Pre- Judgment Interest as an Element of Just Compensation: Wilson v. City of Fayetteville, 47 Ark. L. Rev. 937, 949 (1994)• Practical consideration of defendant's argument is aided by two recent decisions in Connecticut. Both trial courts undertook to determine interest rates for a hypothetical reasonable investor. West Haven Housing Auth. v. CB Alexander Real Estate, LLC, 7District of New Haven Case No. CV 04 0489io65, 46 Conn. L. Rptr. 583, 20o8 Conn. Super. LEXIS 2830; City of Shelton v. Wiacek Farms, LLC, District of Ansonia- Milford Case No. 4001956, 2009 Conn. Super. LEXIS 562. {¶21} The trial judge in the West Haven case - involving interest due on property worth nearly $2 million - held "a reasonable rate of interest posits an actor striving to achieve it which would be a reasonably prudent investor." 20o8 Conn. Super. LEXIS at *5. Yet, that court was left with vexing questions such as whether it should "assume the injured party would only have invested in securities, bonds, mutual funds that would have returned the highest rate of return" or instead been satisfied with more conservative investments. The landowner sought 18% interest and presented expert testimony derived from "a listing of well recognized equity investments where returns ranged from 15% to t3ver- 4$%:" Id: *7 --*-8: In t-he end; however; the court r-ejected- stieh high rates- and settled on io% - which also happened to be the statutory rate in Connecticut for civil actions generally. A few months later, the Ansonia-Milford Superior Court addressed a similar dispute involving appropriation of land worth $3.4

9 million. The appropriating city had only deposited $2.5 million with the court, so interest was due on the balance. That judge disagreed with his colleague in New Haven about applying the 10% statutory rate, and instead settled upon rates varying by year from 6% in 2005, to io% in 2oo6, to 7.5% in 2007, and dropping to 2% in 2008. 2009 Conn. Super. LEXIS 562, at *47 - *48. As to the logic of focusing upon federal rates, the decisions disagreed. West Haven concluded that "[i]n times of protracted low or negative growth *** a reasonable and just annual rate of interest for a condemnee whose funds are being involuntarily withheld by the government *** is at least equal to the weekly average one-year constant

maturity yield of United States Treasury securities." Id. *46. City of Shelton appears to have paid little attention to Treasury rates. {¶22} The "reasonably prudent investor" approach has little to commend it. Apparently no Ohio court has undertaken such a mini-trial. The Connecticut decisions illustrate practical pitfalls and subjectivity inherent in it. Added complexity could not, in the end, avoid concern that findings about rates obtained by hypothetical "prudent investors" are tethered more to the personal investment philosophies of individual trial judges than to anything else. So, setting aside the two novel valuation approaches recommended by the state, the court turns to statutory interest rates.

6. Ohio interest rate statutes {¶23} Remarkably, the Ohio Revised Code contains over 6o separate provisions addressing interest rates.6 Some, including most notably R.C. 5703.47, index rates so that they "float" with Treasury securities and market forces. Most are traditional, stating a particular number with little apparent consistency between and among the rates. {124} Obvious similarity exists between this case and a traditional eminent domain case. Interest for delay in paying just compensation is, in fact, addressed b-yan_D!hiastatute.- .R.C._L63a.7;.see-also,Cincinnati v.Dale-(i9.69), 2a-Ohio-S.t.2d - 32, 252 N.E.2d 287, Syllabus paragraph i. R.C. 163.17 ties the rate of interest

6 The statutes are collected in the appendix to this Opinion.

10 due a landowner to the general interest-rate provision in R.C. 1343•03 unless property is taken by the Ohio Department of Transportation. In ODOT cases, the interest rate is defined by R.C. 5703.47(B) or is ten per cent, whichever is less. Defendant objects to using those interest rate statues. Memorandum at p. 2. Plaintiffs urge they be considered. Memorandum at p. 11. {¶25} Determining just compensation in a takings case is a judicial function. However, while an "owner's right to just compensation cannot be made to depend upon state statutory provisions," in ordinary condemnation cases an interest rate enacted by the legislative branch "is a good measure" and may be accepted so long as it is "`palpably fair and reasonable'." Seaboard Air Line Railway Co. v. United States (1923), 261 U.S. 299, 3o6, 43 S.Ct. 354, 356, 67 L.Ed 664, 670 (citation omitted). One commentator has concluded that statutory rates are presumed reasonable subject to a condemnee's proof that prevailing market rates exceed the statutory rate by so much that the statute does not provide just compensation. "Case Notes: Compound Pre-Judgment Interest as an Element of Just Compensation: Wilson v. City of Fayetteville," 47 Ark. L. Rev. 937, 947-48. Nevertheless, although relevant to the separate issue of prejudgment interest discussed in section 9 of this Opinion, as a matter of law neither R.C.1343•03 nor 5703•47(B) apply here in determining just compensation. The eminent domain interest rate statutes were never intended to measure compensation, but instead serve a substantially different purpose. Accordingly, the court turns to R.C. 169.o8(D) as it was in force before the unconstitutional act passed in 1991.

7. Reversion to the i99i statutory rate of 6% A. The Evolution in Statutory Languaee

{¶26} From the time unclaimed funds statutes first were enacted in Ohio in 1967 until mid-July 1991 the state compensated private owners who successfully recovered their property. The evolution in those statutes - how they measured compensation due private owners - provides a Iogi^metfibd to reso ve--Fiis t key dispute. Moreover, as explained below, it is also the answer demanded by a

11 number of Ohio decisions addressed to filling the vacuum left when a statute is declared unconstitutional. {¶27} As originally enacted, the pertinent provision in R.C. 169.o8(D) stated that: "*** Interest shall be computed at the rate earned by such funds during the period the director of commerce held the funds or at the rate agreed to between the holder and the owner, whichever is higher. ***" Several years later in September 1970, Amended Substitute Senate Bill No. 386 was approved by Governor Rhodes to amend R.C. 169.o8. Looking specifically at the language of the above sentence, the words "of commerce" were stricken, but the interest rate provision remained unchanged. {128} R.C. 169.o8 next was amended in October 1972 by Amended Senate Bill No. 215, signed by Governor Gilligan. The sentence was changed to read: "*** Interest on claims of twenty-five dollars or more shall be computed from the date of payment under division (A) of section 169.05 of the Revised Code at the estimated average rate earned on the total mortgage funds during the period the director held the funds or at the rate paid by the holder, whichever is higher. ***" The reference to "total mortgage funds" is to housing loans made by the state using unclaimed funds. {q29} The next amendment to R.C. 169.o8 occurred in November 1977 with the passage of Amended Substitute Senate Bill No. 221. The relevant sentence was not altered. {13o} Language directly relevant to this case was altered again four years later, in November 1981, by Amended Substitute House Bill No. 694, approved by Governor Rhodes during his second set of consecutive terms. Amend. Sub. H.B. 694 significantly altered the pertinent language contained in R.C. 169.o8(D), as follows, establishing a fixed 6% interest rate: "*** Interest on claims of twenty- five dollars or more shall be computed from the date of payment under division (A) of section 16g.05 of the Revised Code at the rate of six per cent per annum.

***"-Th6'^Pnteace61f^i'ng-6'^o-^]tP,r'gSt-9n-'prA'ato spg ^.rnrthmnrathan._ r_"r-__^nrnnarFv __-_ $25 remained unchanged with passage of Substitute House Bill No. 201, approved by Governor Celeste, effective on July 1, 1985•

12 {1I31) In the amendment that directly resulted in this litigation, the statute was substantially altered by Amended Substitute House Bill No. 298, approved by Governor Voinovich effective July 26, 1991. References to a $25 floor to earn interest and to a rate of 6% were entirely eliminated. Consistent with those changes, R.C. 169.o8(D) was rewritten to read: "Interest is not payable to claimants of unclaimed funds held by the state. ***" Amended Substitute House Bill No. 215 (effective June 30, 1997), Amended Substitute House Bill No. 352 (effective August 28, 1997), and House Bill No. 471, (effective July 1, 2000 signed by Governor Taft) did not alter this provision.

B. Reversion to a Prior Statute

032} Although essentially disregarded by defendant, Ohio recognizes a well- settled rule that when an unconstitutional statute replaced a prior version of the same law, the repeal of the earlier statute generally is deemed invalid. Ordinarily, the law is as if the offending statute never had been passed. State v. Sullivan, 9o Ohio St.3d 502, 2oo1-Ohio-6, 739 N.E.2d 788, syllabus paragraph two, held: "When a court strikes down a statute as unconstitutional, and the offending statute replaced an existing law that had been repealed in the same bill that enacted the offending statute, the repeal is also invalid unless it clearly appears that the General Assembly meant the repeal to have effect even if the offending statute had never been passed. (State ex rel. Pogue v. Groom [1914], 91 Ohio St. 1, 1oo N.E. 477, paragraph three of the syllabus, approved and followed.)" Sullivan is among a number of decisions recognizing this rule. State v. Parker (1948), 15o Ohio St. 22, 24, 8o N.E.2d 490, 491; Morton v. State (1922), 105 Ohio St. 366, 138 N.E. 45, syllabus paragraph 2 and cases cited; State ex rel. Walton v. Edmondson (1914), 89 Ohio St. 351, 1o6 N.E. 41, syllabus paragraph three; State ex rel. Wilmot v. Buckley (1899), 6o Ohio St. 273, 54 N.E. 272, a&r'aEn 033} To determine whether a repealing clause is inoperative in this context, court decisions focus upon whether it "clearly" would have been the "expressed intention" of the legislature to change prior law even if the substitute, new law

13 were invalid. That is a demanding test. When such clarity does not exist, the default rule is that repealing-language is deemed inoperative so that the law simply reverts to the old version of the statute. 034} No clear legislative intent is evident here relative to elimination of the 6% interest rate, or the $25 floor beneath which interest is not earned. Instead, it is sensible that Ohio law continues to address how the state should handle de minimus recoveries (earned on funds under $25), and it is equally sensible to designate one specific rate as preferable to sorting through innumerable alternative ways to compute interest on unclaimed funds. Clarity on these points assists in practical operation of an unclaimed funds program. Logically it follows that one cannot say the General Assembly "clearly" would have omitted either feature from the law had it known the i99i amendment to R.C. i69.o8(D) was invalid. 035} A 6% interest rate seems high in the present economy. No doubt it was well-off market rates from time to time in the past. Yet, that specific rate was selected by the General Assembly for this precise purpose, and used for ten years before R.C. 169.o8(D) was amended. Because the 6% rate.was chosen in 1981 during historically high inflation and double-digit interest rates7 it seems reasonable to infer that that rate never was intended to closely mirror market conditions. Instead, the rate was probably seen as a realistic average over the long run. Settling upon one rate no doubt was also easier to use in administering the unclaimed funds program than a floating rate tied to state earnings. 036} By operation of law, the version of R.C. 169.o8(D) in force prior to July i99i remains in effect today. Accordingly, the court finds and declares that the Division of Unclaimed Funds must pay successful claims of class members (and others making new claims going forward) 6% interest on all amounts refunded over $25, less a 5% administrative'fee. As the statute itself provides, interest earnings started to accrue as soon as private property came into state custody.

7 Cayuga Indian Nation of New York v. Pataki (N.D.N.Y. 2001), 165 F.Supp.2d 266, 361, rev'd on other grounds 413 F-3d 266 (C.A.2, 2oo5) thoroughly canvassed testimony by economists about interest rates over the past several hundred years, and found they ranged "from a low in 1940 of o.oi% to a high of 14.03% in i98x."

14 Interest at 6% continued to accrue until all unclaimed funds were returned to private owners. R.C. 169.o8(D) applies simple (not compound) interest; just compensation to property owners does not demand compound interest here. (However, due to the factual circumstances presented for members of the plaintiff class, the separate issue of prejudgment interest to account for lengthy delay in payment is addressed in the section 9 of this Opinion.) 037} In the future the General Assembly may adjust the statutory rate (or the 5% administrative fee) in R.C. 169.o8(D). Constitutionally-speaking, however, to alter the rate (or the fee) the state is obligated to act fairly. It may not surreptitiously seek to undermine the Ohio Supreme Court's holding in this case. The takings clause is intended to prevent the words 'just compensation *** from being whittled down by legalistic construction into means for practical

confiscation." United States v. Petty Motor Co. (1946), 327 U.S. 372, 383, 66 S.Ct. 596, 6o2, go L.Ed 729, 737 (emphasis in original). Interest on unclaimed funds pegged at o.ooi%, or imposition of a new 25% administrative fee would, for instance, be constitutionally suspect.

8. The Period for Calculation of Compensation {1138} Decisions of the Ohio Supreme Court teaching that a prior version of an unconstitutional statute are regarded as never truly repealed answer a second, challenging question. Not only is interest due at a 6% rate (subject to the $25 floor and the administrative fee) but such compensation is owed for the entire time private funds were held in state custody. That result follows from the simple fact that the i99i amendment taking away all interest was invalid, so the Division of Unclaimed Funds has remained continuously obligated to pay interest at 6% ever since. Defendant must honor that statutory rule. The state may not interject some arbitrary cut-off date or shorter time period. No other result would be consistent with R.C. 169.o8(D) as it existed prior to.July i99i, and as it has, by

{¶39} Defendant seizes upon one sentence in the Ohio Supreme Court opinion to strenuously argue that a four-year limit should be imposed upon just compensation due class members. Defendant claims the Supreme Court limited

15 recovery of compensation to four years, as opposed to confirming that the applicable statute of limitations to commence a suit like this one is four years. {14o} The sentence is found in the separate section of the opinion subtitled "Statute of Limitations." Although the Supreme Court only addressed two issues (whether there had been a taking, and the statute of limitations) it concluded that portion of the opinion by stating: "Accordingly, Sogg may recover interest earned on his property in the four years preceding the date of his claim." Defendant reads this as a class-wide limit on compensation due, irrespective of how long the state held owners' funds. (Defendant's Memorandum, at pp. 1, 3; Reply Memorandum filed August 3, 2oo9, at pp. 3 - 6.) This court disagrees. While obviously bound by the law of the case doctrine to implement both the letter and the spirit of the Ohio Supreme Court's decision, this court concludes that defendant makes far too much of an inartful sentence. It does not represent the Supreme Court's holding, and to act as if it did would unjustly limit the relief due Mr. Sogg (whose funds had been held between 1989 and 2004) and the class. 041} As is apparent from this court's prior judgment that was subject to the appeal, no determination of just compensation had been attempted by this court before the Supreme Court heard this case. It would be peculiar to think that Court would reach-out to limit compensation while expressly remanding the case so this court could determine interest owed each class member. {1142} Defendant likewise disregards the prior decisions in this case which were not reversed or limited by the Supreme Court. Among them was a discrete "Decision on the Applicable Statute of Limitations" filed well prior to the appeal. (Feb. 24, 2oo6.) Consistent with this court's view in that Decision, the Supreme Court concluded that R.C. 2305.09 applies to this takings case because it sets a 4- year period for suits for "the recovery of personal property, or for taking or detaining it." The Supreme Court included the summary sentence quoted above in that very short section of its opinion, but did not suggest even in passing that

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16 043} Had this court misconstrued the difference between how a statute of limitations controlled the time for filing suit, as opposed to limiting the measure of just compensation due, that would have been mentioned directly. This court's statute of limitations decision explicitly differentiated between the time when suit had to be filed, and the period over which compensation would be due from the state if a taking existed. This court recognized that although no interest was "paid" since July i99i, no constitutional "injury" to individual property owners occurred until each of them realized the state held their money and made a claim to recover their funds. That claim was the triggering event. It served to alert the state to its obligation to return unclaimed funds and to make a decision either to pay or not pay interest for the entire period those funds were held. 044} In further explaining in a 2oo6 decision this court's view of how the statute of limitations impacted class members, the court also wrote: "any restitution for unpaid interest which is arguably due the owners of unclaimed funds can flow only to those who either claimed their money within the [class action period of] four years prior to August 4, 2004, or did so since this suit was filed. *** Because no legal challenge was brought earlier during the i99o's, practically speaking the state will be entitled to retain the interest earned between July i99i and August 2ooo, and which was not paid to people who recovered the principal amount of unclaimed funds more than four years before the case began." (Decision of Feb. 24, 2oo6, at pp 4-5.) {1145} The interplay between the period for which compensation is due and the accrual date for the statute of limitations was also mentioned in this court's "Class Certification Order" filed Feb. 24, 2oo6. Initially the class was certified as broadly as possible to include all persons who filed claims and recovered unclaimed funds "but had not been paid interest on such funds for any period after July 26, i99i." (Class Certification Order, p. 6.) In the separate Statute of Limitations Decision reaching the merits, however, the court specifically repaid by August 4, 2000 without being paid any interest for the time after July 26, i99i" because their "legal `injury' thereby manifested itself prior to August 4, 20oo" and as such their suit was "untimely." (Decision, p. 8.)

17 {¶46} The difference between a claim and the accrual date for timely filing a claim is fundamental. Recently it was recognized in Nestle R & D Center, Inc. v. Levin, 122 Ohio St.3d 22, 2oo9-Ohio-1929, at ¶21. The Supreme Court held that a job-creation tax refund claim relating to 2ooi accrued only after the Ohio Department of Development issued a certificate verifying the tax credit in late l 2004. Once that certificate was issued in 2004 (for tax year 2001) the taxpayer and the state could ascertain entitlement to a refund. In passing, the Nestle opinion reviewed several prior decisions recognizing that a "cause of action for negligence does not arise until damage ensues" and that "[n]ormally, a cause of action does not accrue until such time as the infringement of a right arises." Id. at ¶21. Nestle is consistent with this court's understanding of the interplay between a statute of limitations on one hand, and full compensation due on a timely claim on the other. {¶47} Although neither anchored in statutory language nor prior administrative practice followed prior to 1991 in paying interest on unclaimed funds, defendant argues the sentence relied upon here reflects case law applying the "continuing violation" doctrine. That doctrine arose in employment discrimination cases. A statute of limitations may be tolled for an extended period when a plaintiff is continuously damaged by ongoing or long-standing discrimination; but, a delayed suit results in damages limited to those accruing in the statute of limitations period immediately before suit was commenced. For instance, a long-term employee suffering continuing discrimination may be able to sue after many years of injury, but find back pay owed by the employer is limited to the shorter period of the applicable statute of limitations. That line of decisions is inapposite here. Neither this court nor the Ohio Supreme Court viewed this as a continuing violation case. Instead, this case was seen as presenting accrual dates when individual "takings" occurred as property owners' unclaimed funds were returned without interest. Had the Supreme Court seen time-bar on those whose claims accrued more than four-years before August 2004.

18 048} The reader will recall that the state always paid interest for the entire time it held unclaimed funds prior to the statutory amendment in July i99i. (Amended Stipulation filed March 2, 20o6, ¶17.) No statute or administrative scheme ever artificially limited the duration of interest payments to four years, or any other arbitrary period, either before or after the i99i amendment. Transposing the statute of limitations period as an additional barrier to full recovery would be a radical and unprecedented step in takings law. It would yield a windfall to the state, and must be rejected as a misunderstanding of the Ohio Supreme Court's holding.

9. The State's Obligationfor Post-claim Interest 049} Two related issues remain to be decided at this juncture. Is post-claim interest owed, since individual property owners may have waited a substantial time for just compensation? If so, what interest rate should be applied for that purpose? {1f5o} Consider the named-plaintiffs situation. Some of his funds were held by the state between November 1989 and April 2004. The balance was held between September 1998 and April 2004. (Amended Stipulation ¶¶25 - 28.) On April i, 2004 Mr. Sogg's claim (filed nearly three months earlier) was allowed. Consistent with the prior version of R.C. 169.o8(D), 6% interest was paid on the portion of Sogg's funds in state hands between 1989 and July 1991. No compensation (interest) was paid between July i99i and April 2004 on any of this money. So, to recap, Mr. Sogg recovered principal, a small amount of interest (prior to July i9gi), less a 5% administrative fee, in April 2004. As a result of this suit, Sogg will now receive another check calculated at 6% simple interest as compensation for the entire duration of state custody on all his money, except for interest already paid, btit ending in April 2004. More than five years have elapsed, yet defendant argues Mr. Sogg is due nothing for delay since April

{115i} Defendant relies primarily upon a general rule that "in the absence of a statute requiring it *** interest cannot be adjudged against the state for delay in the payment of money." State ex rel. Reyna u. Drabik, ioth Dist. Case No. 98AP-

19 44, 1999 Ohio App. LEXIS 1612 at *12, and cases cited, aff'd on other grounds sub nom. State ex rel. Reyna v. Natalucci-Persichetti (1998), 83 Ohio St.3d 194, 1998-Ohio-129, 699 N.E.2d 76. Defendant overlooks R.C. 169.08 as it existed until July i99i, and which by operation of law has remained in effect ever since. As section 7 of this Opinion explained, that statute did require payment of money by the state. Accordingly, the Reyna decision supports Mr. Sogg's claim to interest since April 2004, with comparable treatment of other members of the class. 052} Just compensation is not achieved through delay. In land appropriation situations a ptoperty owner's right to receive their compensation starts on the date of the taking - normally the date the government takes possession of private property - and ordinarily continues until the award is paid in fall. City of Norwood v. Cannava (1989), 45 Ohio St.3d 238, 543 N.E.2d 802; Hilliard v. First Indus., L.P. (ioth Dist.), 165 Ohio App.3d 335, 2005-Ohio-6469, 846 N.E.2d 559. Defendant's argument here that compensation adjudged to be owed class members can be delayed for extended periods of time runs contrary to that line of decisions. Similarly, the United States Supreme Court has held that in takings cases where an owner does not receive compensation at the time of the taking, "the owner is entitled to interest thereon sufficient to insure that he is placed in as good a position pecuniarily as he would have occupied if the payment had coincided with the appropriation." Kirby Forest Indus. Inc. v. United States (1984), 467 U.S. 1, 10, 104 S.Ct. 2187, 81 L.Ed. 2d i. {¶53} In various other contexts, Ohio courts recognize prejudgment interest is part of "compensation." Cugini and Capoccia Builders, Inc. v. Ciminello's Inc., 1o+s Dist. Case No. o6AP-21o, 20o6-Ohio-5787, 2oo6 Ohio App. LEXIS 4762, at ¶128-29, collects decisions that "have long recognized that the common law provides that interest in actions based upon the tortious conversion of personal property may run from the time of the conversion." See also, Wozniak v.

96 Y^ llL:.. AD ._.] ttoo . (interest owed from the time assets were concealed and embezzled from an estate). "A conversion is any exercise of dominion or control wrongfully exerted over the personal property of another in denial of, or under a claim inconsistent

20 with, his rights." Id. "A `seizure' of property occurs when `there is some meaningful interference with an individual's possessory interest in that property'." Dever v. Lucas (5^h Dist.), 174 Ohio APP.3d 725, 2oo8-Ohio-332, 884 N.E.2d 641, ¶28 (citation omitted). 054} Beyond those analogous situations, the modern, enlightened policy regarding prejudgment interest in ordinary contract cases is embraced in Ohio. E.g., Royal Elec. Constr. Corp. v. Ohio State Univ., 73 Ohio St.3d 11o, 1995-Ohio- 131, 652 N.E.2d 687. Royal Electric recognized interest is not a penalty, but instead "it acts as compensation and serves ultimately to make the aggrieved party whole." Id. at 117; see also, Keisser v. Keisser (6th Dist.), 174 Ohio ApP.3d 720, 2oo8-Ohio-250, 884 N.E.2d 637, ¶112, 15 (prejudgment interest due where partner violated statute by taking fee for management of partnership's business); Jem Real Estate v. Heyden, Heyden & Hindinger (Summit Co. C.P.), 134 Ohio Misc.2d, 2005-Ohio-5935, 838 N.E.2d 891. 055} Federal courts similarly recognize "the compensatory nature of prejudgment interest in a number of cases." City of Milwaukee v. Cement Div., National Gypsum Co. (1995), 515 U.S. 189, 195, 115 S. Ct. 2091, 2095, 132 L.Ed.2d 148, 156, footnote 7(prejudgment interest appropriate in admiralty determination); Loeffler v. Frank (1988), 486 U.S. 549, 1o8 S.Ct. 1965, 100 L.Ed.2d 549 (prejudgment interest may be awarded against Postal Service in a Title VII suit); West Virginia v. United States (1987), 479 U.S. 305, 310, 107 S. Ct. 702, 7o6, 93 L. Ed.2d 639, 646 ("Prejudgment interest is an element of complete compensation."); General Motors Corp. v. Devex Corp. (1983), 461 U.S. 648, 655, 103 S. Ct. 2o58, 2o62, 78 L. Ed 2d 211, 217, note lo and cases cited. ("A rule denying prejudgment interest not only undercompensates the patent owner but also may grant a windfall to the infringer ***."); Wickham Contracting Co., Inc. v. Local No. 3, IBEW (C.A.2, 1992), 955 F.2d 831, 836; Cayuga Indian Nation of New York, supra, (tribe due prejudgment interest for breach of treaties d 38 oe 056} To be sure, just compensation does not always avoid modest delays in payment. In standard appropriation cases R.C. 163.17 allows an appropriating agency 21 days to deposit the amount of a jury verdict at court before any interest

21 accrues. Similarly, once an appropriating agency pays the compensation owed into court the accrual of interest stops. That rule applies even if the landowner is never alerted to go down to the courthouse and pick up their funds. Ohio Dept. of Natural Resources v. Hughes (6th Dist.), 145 Ohio App.3d 202, 211, 762 N.E.2d 422, 429• {¶57} Compensation for many class members has long been delayed. Mr. Sogg will have waited over five years for interest on his funds; persons on the front-end of the Rule 23 class who recovered principal (without interest since July 1991) in August 2000 will have waited nearly a decade. Concepts of full compensation set forth in constitutional takings cases, conversion cases, and other contexts demand that prejudgment interest be paid here. {158} The statute used for prejudgment interest purposes is R.C. 1343•03(A). Even when it does not technically apply, Ohio courts use it as a "guideline." Thomas v. Thomas (ist Dist.), 171 Ohio App.3d 272, 2007-Ohio-2o16, 87o N.E.2d 263, ¶20. It is undisputed that from the summer of 2000 (when the earliest class members' property was returned by defendant without interest) until 2004, that statute used a fixed-rate of io% per year. In June 2004 it was amended to use a floating rate set by the Tax Commissioner. Calendar year 2004 yielded a 4% rate and 2005 a 5% interest rate. Jem Real Estate, supra, ¶112 - 14. The parties can readily determine annual rates set by the Tax Commissioner for 2oo6 - 2009. Simple interest using those rates is due each class member over and above their recovery of 6% interest on unclaimed funds. That is just compensation here. IT IS SO ORDERED.

• ^ RIC A. FRYE, JUDG

22 Copies to:

William C. Wilkinson, Esq. Thompson Hine LLP 1o West Broad Street, 7th Floor Columbus, OH 43215-3435 and John R. Wylie, Esq. Charles R. Watkins Futterman, Howard, Watkins, Wylie & Ashley, Chartered 122 South Michigan Ave, Suite 1850 Chicago, IL 6o603 and . Glenn L. Hara, Esq. Arthur T. Susman, Esq. Susman, Heffner, & Hurst, LLP Two First National Plaza, Suite 6oo Chicago, IL 6o603

Counselfor Plaintiffs

William J. Cole, Assistant Attorney General John T. Williams, Assistant Attorney General Executive Agencies Section 3o East Broad Street, 26th Floor Columbus, OH 43215-3400

Counsel for Defendant

23 APPENDIX

As mentioned in ¶23 of the Opinion, over sixty (6o) sections or sub- sections of the Revised Code set interest rates, or floors or ceilings on rates of interest, over a wide-range of subject matter. See, R.C. §§ 9.95 (entitled "Maximum or maximum average annual interest rate on public securities"),, i26.3o (entitled "Interest on late payments for goods and services"), 129.18 (ceiling on interest rates for certificates of the bonded debt of the state), 133•30 (ceiling as determined by the taxing authority of the sale of securities), 135•94 (interest rate on the loan of funds to eligible individuals with disabilities listed in the assistive technology device linked deposit loan package), 145•473 (rate of interest credited to individual accounts of PERS contributors), 146.o8 (interest rates for unpaid premiums of the volunteer fire fighters' dependents fund), 163.17 (setting the interest rate where a state agency, other than the department of transportation, appropriates private property), 166.25 (interest rates for loans from the logistics and distribution infrastructure fund), 166.30 (setting interest rates for loans from the advanced energy research and development fund), 184•25 (interest rates for repayments of assistance under the Ohio bioproducts development program), 184.26 (rates for repayments of assistance under the Ohio biomedical development program), 307.676 and 307.677 (establishing the rate for penalties, interest, or both for late payments on taxes on the retail sale of food and beverages on a county convention center premises), 321.17 (interest rate for unpaid warrants presented to the county treasurer), 323•32 (interest rate on funds distributed from the "undivided bankruptcy claims fund"), 718.12 (rate of interest for the overpayment by a taxpayer of any municipal income tax obligation), 1109.20 (ceiling for interest rates on loans from a bank), 1317.o6i (establishing a maximum interest rate for retail installment contracts or revolving budget agreements), 1343•01 (ceiling for interest owed on a bond, bill, promissory note, or other instrument of writing for the forbearance or payment of money at any future time), 1343•03 (setting an interest rate, unless a written contract provides a different rate of interest in which the creditor is entitled, when money becomes due and payable upon any bond, fill, note or other

24 instrument of writing, upon any book account, upon any settlement between the parties, upon all verbal contracts entered into, and upon all judgments, decrees, and orders of any judicial tribunal for the payment of money arising out of tortuous conduct or a contract or other transaction), 1343.031 (maximum interest rate for an obligation of a person, or a spouse of a person, who is deployed on active military duty), 1321.13 and 1321.131 (capping the rate of interest for the prepayment of insurance), 1321.57 and 1321.58 (limiting the interest rate for second mortgage loans), t52i.o63 (assessing a penalty plus interest at a set rate until an owner of a dam pays any delinquent annual inspection fees to the dam safety fund), 1703.28 (requiring unlicensed foreign corporations transacting business in Ohio to forfeit monies plus interest at a specific rate of interest), 1707.02 (interest rate for outstanding securities that are to be sold), 1726.o6 (floor for interest rates on loans to a development corporation by members), 1727.02 (prohibiting a farm laborers' association from taking a loan at a rate of interest above a certain per cent payable semiannually), 1729.25 (interest owed for certain loans that directors of an association are jointly and severally liable for), 1743.02 (limit on the interest rate for money borrowed by a common carrier company operating a steam railroad), 2329.33 (interest rate for redemption of land on execution or order of sale), 2743.18 (rate of interest owed on judgments with the Court of Claims), 3309.01 (rates credited for contributions to the Public School Employees Retirement System), 3315•34 (setting the interest rate for promissory notes on scholarships from the Ohio scholarship fund), 3903.72 (setting interest rates on industrial life insurance policies, excluding disability and accidental death benefits, issued on the standard basis), 3915•051 (maximum rate of interest for policy loans), 3915.07 (capping interest rates in calculations for policies of ordinary insurance and policies of industrial insurance), 3915.071 (nonforfeiture interest rate for a life insurance policy), 3915.073 (ceiling for interest rates used in determining

(capping the interest rate in policy loan of a group life insurance policy), 4123•32 (interest rate for premium past due under the state insurance fund), 4123.35 (interest rate for overdue assessments owed by self-insuring employers to the

25 state insurance fund), 4141.23 (interest rate for overdue contributions to the unemployment compensation fund), 4727.03 (interest rate on pledged articles held as security for loans if a pawnbroker surrenders or chooses not renew his or her license), 4933.17 (rate for deposit interest paid to the consumer of gas, natural gas, water, or electricity), 4971.04 (maximum interest rate for bonds or a reorganized railroad company), 5119.10 (interest recoverable for unfulfilled employment requirements associated with educational grants or tuition reimbursements by the department of mental health), 5126.59 (capping the interest rate for residential facility linked deposit agreements), 5721.30 (setting the interest rate for the sale of tax certificates), 5721.38 (setting interest rates relating to the redemption of real estate on foreclosures due to delinquent tax liens), 5721.39 (setting interest rates associated with judgments on foreclosures), 5721.41 (limiting the interest under sections 5721.30 to 5721.43 to be simple interest) 5721.42 (interest rate on the issuance of an additional tax certificate upon satisfaction of subsequent delinquency), 5731.25 (fixing an interest,rate for estate taxes owed under a reversionary or remainder interest in property), 5735•03 (interest rate that a surety of a motor fuel dealer must pay on unpaid taxes), 5739.09 (interest rate for penalties associated with failure to pay lodging tax), 5747.11 (interest rates owed on refunds for the overpayment of taxes, or erroneous assessment of taxes), 5919•34 (interest recoverable against persons who fail to meet terms of enlistment under the Ohio National Guard scholarship program), 6115.47 (interest rate at which board of directors of a sanitary district may borrow money to facilitate preliminary work.)

26 v I'A 44 - B30 do

IN THE COURT OF APPEALS OF OHIO

TENTH APPELLATE DISTRICT 3 FF 12: t; 5

V, l.l.L'!, 71 J Wilton S. Sogg, as executor for the estate of Julia Sogg, individually and on behalf of a class of all others similarly situated,

Plaintiffs-Appellees, v No. 10AP-358 (C P C No 04CVG08-8028) Kimberly Zurz, Director, Ohio Department of Commerce, (REGULAR CALENDAR)

Defendant-Appellant.

D E C i S I O N

Rendered on January 13, 2011

Thompson Hine LLP, William C Wilkinson and Thomas W. Palmer, Donaldson Guin LLC, John R Wylie and Cha►les R. Watkins, Susman, Heffner & Hurst LLP, Arthur T. Susman and Glenn L. Hara, for appellees.

Richard Cordray, Attorney General, William J. Cole and John T. Williams, for appellant.

APPEAL from the Franklin County Court of Common Pleas

TYACK, J.

{11) This is the second round of appeals of litigation between a class

represented by Wifton S Sogg and the Ohio Department of Commerce In the first round

of appeals, the Supreme Court of Ohio determined that the Ohio Department of

Commerce was to pay interest on unclaimed funds being held by the department The

EXHIBIT ^ 's 20744 - B31 No. 10AP-358 2

Supreme Court remanded the case to the trial court to make a computation of the amount

of that interest. See Sogg v Zurz, 121 Ohio St 3d 449, 2009-Ohio-1526.

{112} Based on documents filed with the trial court, the trial judge assigned to the

case issued a 26 page opinion in which he made a computation of the interest owed. The

Ohio Department of Commerce has again appealed, assigning two errors for our

consideration•

[I.] THE TRIAL COURT ERRONEOUSLY DETERMINED THE INTEREST PAYABLE ON SUCCESSFUL CLAIMS FOR UNCLAIMED FUNDS

[II.] THE TRIAL COURT ERRONEOUSLY ASSESSED POST-CLAIM INTEREST AGAINST THE STATE

{113} Because the two assignments of error are heavily intertwined, we will

address them jointly.

{T4} We must first address the issue of what the Supreme Court of Ohio has

already decided and attempt to determine the meaning of certain portions of ds opinion.

{¶s} The Supreme Court of Ohio began its opinion by staUng:

The issue before this court is whether the first sentence of R.C. 169.08(D) which provides that "[i]nterest is not payable to claimants of unclaimed funds held by the state," is constitutional. We conclude that it is not.

Id at ¶1.

{¶G} Taken on its face, the issue resolved by the Supreme Court was merely a

decision about whether or not the state of Ohio could refuse to pay interest on the

unclaimed funds being held by the Ohio Department of Commerce.

{97} The Supreme Court of Ohio then stated- 20744 - B32 No 10AP-358 3

Sogg moved for summary judgment, which the trial court granted, ruling that when the state retains interest eamed on unclaimed funds, R engages in a taking.

Id at ¶4, citing Sogg v. INhite, 139 Ohio Misc 2d 58, 2006-Ohio4223.

{9} Critical to the Supreme Court's ruling are findings that unclaimed funds are

not abandoned, but remain the property of the party or parties who owned the funds

before their transfer to the Ohio Department of Commerce and that the funds never

become the property of the state of Ohio Sogg v. Zurz at ¶9-10 These findings led the

Supreme Court of Ohio to refine the question before it to read•

Does the first sentence of R.C. 169 08(D) enable the state to assume ownership of interest eamed on unclaimed funds that the state holds for the owner without violating Section 19, Article I of the Ohio Constitution?

Id, at ¶12. {¶9} Section 19, Article I of the Ohio Constitution, reads•

Private property shall ever be held inviolate, but subservient to the public welfare. When taken in time of war or other public exigency, imperatively requiring its immediate seizure or for the purpose of making or repairing roads, which shall be open to the public, vAthout charge, a compensation shall be made to the owner, in money, and in all other cases, where private property shall be taken for public use, a compensation therefor shall first be made in money, or first secured by a deposit of money, and such compensation shall be assessed by a jury, without deduction for benefits to any property of the owner

{T10} The Supreme Court of Ohio answered this refined question by finding a

constitutional bar to the taking of the interest earned on the unclaimed funds Id at ¶12.

{111} Reviewing all these portions of the Supreme Court's opinion, we conclude

that the Supreme Courts ruling required the Ohio Department of Commerce to disgorge

the interest actually eamed by the state of Ohio, no more and no less. The Supreme 20744 - B33 No 10AP-358 4

Court of Ohio did not express an opinion as to whether or not the Ohio Department of

Commerce could charge members of the class an administrative fee for processing the

paperworK for members of the class Such an administrative fee, assessed at five

percent of the funds retumed, was charged when funds were returned to Sogg as

administrator of his mother's estate.

{1;12} On remand, the trial court did not really attempt to compute the amount of

interest earned by the state of Ohio on the unclaimed funds owned by the members of the

class Instead, the trial court attempted to determine what a fair return on such funds

would be The tnal court also consulted statutes regarding payment of interest on funds

eventually reduced to judgment, such as R.C. 1343.03(A) regarding prejudgment interest.

{113} Our interpretation of the Supreme Court's opinion presents the trial court

wdh a potentially difficult but not insurmountable task The trial court must determine the

amount of interest actually eamed on the funds owned by the members of the class but

held by the state of Ohio. The trial court must then allocate that interest among the class

members Once the allocation has taken place, a judgment entry can be journalized

which itemizes the dollar amount to be received by each class member as a portion of the

interest actually owned by the state of Ohio on the unclaimed funds.

{1114} Once the dollar amount owed to each class member has been determined,

the journalized entry sum will draw statutory interest We do not express an opinion on

whether the state of Ohio can assess an administrative fee as to each owner of

unclaimed funds. We also do not address the issue of attorney fees. Those issues have

not been fully developed in this litigation and were not part of the Supreme Court's

express mandate 20744 - B34 No 10AP-358 5

111151 We sustain the first assignment of error in part with respect to these issues

111161 The issues before the Supreme Court of Ohio were pnmarily liability and the

identity of the dass members. As a result, the Supreme Court of Ohio also addressed the

issue of pertinent statute of bmitations. The Supreme Court noted:

R C 169.08(B) states, "No statute of limitations shall bar the allowance of a claim." This sentence is dispositive as to a claim for underlying property, but R does not speak to a claim for interest Sogg argues that R.C 169 08(B) should apply and that there should be no statute of limitations even as to interest. We disagree, R C 169.08(B) cannot apply to a claim for interest because the UFA does not allow claims for interest. Zurz argues that the two-year general statute of limitations for unspecified personal-injury actions should apply, R.C 2305.10(A) We disagree because this case does not involve a personal injury R.C. 2305.09 states that a claim "[fjor the recovery of personal property, or for taking or detaining it" must "be brought within four years after the cause thereof accrued " We consider this the appropriate statute of limitations because this case and the UFA are concemed with the recovery of personal property. Accordingly, Sogg may recover interest earned on his property in the four years preceding the date of his daim.

Id. at¶75.

{1117} The trial court struggled with this portion of the Supreme Court's opinion

and basically did not apply it Sogg v. Zurz, Franklin C P No. 04CVG08-8028, ¶40. We

do not feel at liberty to do the same. We interpret this portion of the Supreme Court's

opinion to mean that Sogg and the other members of the class may recover the interest

earned on their property during the four-year penod which preceded the filing of Sogg's

lawsuit; but no further back Just as a person who is injured in an automobile collision

can lose the abdity to recover damages if the person fails to file a lawsuit within twc years,

persons who are owed money can lose the ability to recover those funds if they do not file

a lawsuit wdhin the time allowed by the applicable statute of limitations. Compare, R.C. 20744 - B35 No 10AP-358 8

2305.10(A), 2305.09 The Supreme Court of Ohio has ruled that R.C. 2305 09 is the

pertinent statute of limitations and that interest earned on Sogg's funds more than four

years before the lawsuit was commenced is not payable. We are bound by that ruling

and the class is bound by that ruling. The interest actually eamed for the four years

preceding the filing of this lawsuit must be disgorged, but interest earned by the state of

Ohio prior to the beginning of that four-year period remains the property of the state of

Ohio.

{1118} The first assignment of error is sustained to this extent also

(¶19} We have now addressed the amount due for interest earned by the state of

Ohio prior to the commencement of Iitigation We have also addressed the issue of

statutory interest to be paid once the dollars owed are reduced to judgment. The pnmary

remaining issue is whether or not the state of Ohio owes funds to members of the class

over and above that portion of the interest due them for the four-year period preceding the

lawsuit.

{T20} This issue is not easily resolved The state of Ohio cannot be faulted for

failing to pay over prior to now the interest funds to be allocated based on our ruling

today. The Ohio Department of Commerce did not know prior to the April 8, 2009 release

of Sogg v. Zurz that the state of Ohio owed any money to the members of the class at all

The trial court made a computation of the amount owed and we have disagreed with that

computation, so the state may still not be clear as to how much to pay to whom This is

especially so since the Supreme Court of Ohio may choose to review our ruling issued

today. 20744 - B36 No 10AP-358 7

1121) On the other hand, the clear finding of the Supreme Court of Ohio indicates

that from the date of the filing of this lawsud onwards, the interest on unclaimed funds in

the possession of the Ohio Department of Commerce belongs to the owners of the funds.

Therefore, the state of Ohio should disgorge those funds also, including all interest

eamed up to the date a final judgment entry is journalized in this Idigation

{1122} The t(al court looked to the abstract concept of fairness and to statutes

enacted by the Ohio Legislature to embody faimess in financial transactions. The trial

court's approach was reasonable, but not the correct resolution of the issues, given the

Supreme Court of Ohio's ruling.

{1123} Again, we resolve the issue of the moneys owed to persons who are

members of the class represented by Sogg for the penod of time between the filing of this

lawsuit and the present as again being the forced disgorgement of the funds earned by

the Ohio Department of Commerce for that intervening period Stated differently, to the

extent that the Ohio Department of Commerce has received financial benefit from funds

owned by members of the class and still in possession of the Ohio Department of

Commerce, those funds shall be paid to the members of the class. What has been taken

from class members in violation of the Ohio Constdution shall be given or given back to

the members of the class. The only interest payable pre-judgment is the sums the state

of Ohio received by investing the money owned by members of the class

{T24} We note that in general, the state of Ohio is treated differently than the

average citizen in court-related matters. Thus, for instance, the state of Ohio cannot be

estopped from asserting certain arguments. See Recording Devices, Inc. v. Bowers

(1963), 174 Ohio St. 518, paragraph one of the syllabus (equitable estoppel does not 20744 - B37 x No. 10AP-358 8

apply against the state of Ohio as a taxing statute) and Gnffitf► v. J.C Penney Co., Inc. (1986), 24 Ohio St.3d 112 ("[tjhis court has previously refused to apply princaples of

estoppel against the state, its agencaes or its agents, under circumstances involving an

exercise of governmental functions "). The state of Ohio is always entitled to a stay of

judgment without bond while pursuing a direct appeal of a trial court's judgment. See

State ex rel. Ocasek v Riley (1978), 54 Ohio St 2d 488

(1125} We do not view R.C 1343.03 as autho(zing the payment of prejudgment

interest where the funds owed are in the possession of the state of Ohio, when a statute

passed by the Ohio Legislature expressly authorized the state of Ohio to possess the

funds, and where a court ultimately finds the authorizing statute to be unconstdutional.

Stated perhaps more concisely, we do not view the Ohio Revised Code as mandating the

payment of interest by the state of Ohio until judgment has actually been rendered

against the state

(126) The balance of the first assignment of error Is sustained The second

assignment of error is sustained in part and overruled in part, due to the fact that some

money is owed for the period between the filing of this lawsuit and the final judgment to

be entered We note again that the trial court has not yet addressed the issue of how

counsel for the class is to be compensated

11127) The judgment of the Franklin County Court of Common Pleas is reversed in

part and the case is remanded for further proceedings consistent with our decision

Judgment reversed in part and remanded for further proceedings.

BRYANT, P J. and KLATT, J, concur.