Vargo, Victor et al v. Barca, Peter

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
VICTOR VARGO and CARIJEAN BUHK,
individually and on behalf of a class of all others
similarly situated,
Plaintiffs,
v.
DAVID CASEY, Wisconsin Secretary
of Revenue,
Defendant.
OPINION and ORDER
20-cv-1109-jdp
Plaintiffs Victor Vargo and Carijean Buhk own financial assets that were turned over to
the state of Wisconsin in accordance with the state’s unclaimed property law because plaintiffs
failed to claim those assets. The funds are in the custody of defendant David Casey, Wisconsin
Secretary of Revenue.
The parties agree that plaintiffs are entitled to the return of their property. But plaintiffs
contend that the state’s method for determining how much interest must be paid violates the
Takings Clause of the Fifth Amendment. The court previously certified a class of people whose
property was being held by the state under the unclaimed property law, Dkt. 63, and later
granted plaintiffs’ motion for summary judgment in part, concluding that the unclaimed
property law violates the Takings Clause because “it fails to guarantee that a property owner
will receive at least the state-earned interest when she reclaims her property,” Dkt. 93, at 3.
The issue before the court now is what relief plaintiffs are entitled to. Plaintiffs have
submitted a proposed declaration and injunction. Dkt. 96-1. The secretary objects to the
proposal, contending that neither declaratory nor injunctive relief are warranted and that
plaintiffs’ proposed language is objectionable on multiple grounds. As explained in this opinion,
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the court concludes that plaintiffs are entitled to declaratory relief, but the injunction they
request is too vague to comply with the Federal Rules of Civil Procedure, and issuing the
injunction could lead to numerous disputes down the road about what the injunction means.
Plaintiffs have not identified a way to address that problem, so disputes about particular
applications of the unclaimed property law will have to be raised outside this case.
ANALYSIS
Plaintiffs’ claims in this case arise out of Wisconsin’s unclaimed property law,
Wisconsin Statute chapter 177, which sets forth the process for the state to take custody of
unclaimed property and then to return it to owners if and when they claim it. The question in
this case is about the amount of interest the state must pay when property is reclaimed. The
main provision being challenged is Wis. Stat. § 177.0607(2), which states in part:
[W]hen the administrator pays to a claimant property in the form
of money, . . . the administrator shall pay simple interest on that
money 	for 	the 	period 	that 	it 	was 	in 	the 	custody 	of 	the
administrator or this state at an annual rate equal to the
applicable annual federal long-term rate.
Plaintiffs also challenge § 177.0607(3), under which the state will not pay any interest that
accrued before January 2, 2019. In the summary judgment decision, the court held that both
provisions violate the Takings Clause:
Under the Takings Clause, Wisconsin must allow plaintiffs the
benefit of the property’s earnings, however large or small they
turn out to be. On its face, Wisconsin’s [unclaimed property law]
doesn’t do this. The state doesn’t allow the owner the benefit of
any earnings on their property before January 2, 2019. And when
it does pay interest, it does so at a rate not tied to any actual state
earnings, but at a long-term federal rate that may be less than the
state’s return on the invested . . . funds.
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Dkt. 93, at 25 (citations and internal quotation marks omitted).1 As the court acknowledged
elsewhere in the opinion, this conclusion does not apply when the principal is less than $100
because plaintiffs dropped that part of their claim. Dkt. 93, at 7; see also Goldberg v. Frerichs,
912 F.3d 1009, 1011 (7th Cir. 2019) (“Amounts as slight as $100 probably cannot earn net
interest.”).
The court previously dismissed plaintiffs’ claims for damages on sovereign immunity
grounds, Dkt. 4, at 15–17, so plaintiffs are no longer seeking just compensation for any taking
of their property. Rather, plaintiffs are seeking a declaration and injunction that requires the
secretary to change its method going forward when he calculates interest for property being
returned under the unclaimed property law. The court will first consider plaintiffs’ request for
declaratory relief and then their request for a permanent injunction.
A. Declaratory relief
The court has already concluded that §§ 177.0607(2) and (3)(c) violate the Takings
Clause, so it follows that it is appropriate to issue declaratory relief to that effect. The secretary
objects to a declaration on the grounds that it would violate sovereign immunity and that
plaintiffs should be required to go to state court for a remedy. But the court already rejected
those arguments in the summary judgment opinion, Dkt. 93, at 14–19, so it is not necessary
to revisit those issues.
The court will address one issue raised by the secretary, which is that Gerlach v. Rokita,
95 F.4th 493 (7th Cir. 2024), stands for the proposition that plaintiffs are not entitled to relief
1 Citations to documents filed on the docket reflect the page numbers as they appear on the
headers in the court’s electronic case file, not the page numbers on the documents themselves.
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if a state remedy is available. The secretary’s reliance on Gerlach is misplaced because the
plaintiff in that case was not seeking declaratory relief, only damages. Id. at 497–99. In arguing
that sovereign immunity should not bar her claim, the plaintiff argued that “she must have
recourse 	in 	federal 	court” 	because 	Indiana 	state 	courts 	“are 	closed 	to 	her 	claim 	for
compensation.” Id. 	The court rejected this argument, reasoning, “[e]ven if there is a viable
exception to a state’s sovereign immunity where its courts are not open to Takings Clause
compensation claims—an exception this court has never recognized—Indiana courts are open
to hear Gerlach’s claim for just compensation.” Id. The court did not hold or imply that a
federal court cannot grant any relief on a takings claim if relief is possible in state court. Such
a ruling would be inconsistent with Knick v. Township of Scott, Pennsylvania, in which the
Supreme Court held that “pursuit of a remedy in federal court [for a violation of the Takings
Clause] need not await any subsequent state action.” 588 U.S. 180, 202 (2019).
As for what the declaration should say, plaintiffs propose three paragraphs of largely
redundant information. See Dkt. 96-1. But the court concludes that the declaration should be
short and to the point. The court will enter the following declaration:
It is DECLARED that Wisconsin Statute §§ 177.0607(2) and
(3)(c) violate the Takings Clause of the Fifth Amendment of the
United States Constitution because they do not guarantee that
property owners who are entitled under 	Wisconsin Statute
§ 177.0904 to the return of unclaimed property with a principal
value of more than $100 will be paid no less interest on their
unclaimed property than what the state earned on such property
while held in its custody, less reasonable administrative expenses.
This declaration includes the key information proposed by plaintiffs. It establishes that the
state’s 	current 	method 	for 	calculating 	interest 	under 	the 	unclaimed 	property 	law 	is
unconstitutional and provides the basic principle for correcting it: interest paid to the property
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owner must be no less than the interest the state earned on the property, minus reasonable
expenses.
The court agrees with the secretary that the declaration should not include any language
about compliance with the requirement in § 177.0607 to provide the property owner with at
least the “federal long-term rate.” As both sides acknowledge, that rate may be higher than the
interest the state earned in some circumstances. Whether the secretary provides property
owners with the federal rate when it is higher is a matter of state law that is outside the scope
of this lawsuit. Federal courts generally may not issue injunctive or declaratory relief against
the state under state law. Benning v. Board of Regents of Regency Universities, 928 F.2d 775, 778
(7th Cir. 1991).
B. Injunctive relief
The secretary objects to injunctive relief on numerous grounds, but the court need only
consider one issue, which is that plaintiffs’ proposed injunction does not comply with Federal
Rule of Civil Procedure 65(d). That rule requires the injunction to “describe in reasonable
detail . . . the act or acts restrained or required,” among other things. The problem is that
plaintiffs do not explain how to account for the state’s reasonable expenses.
The Court of Appeals for the Seventh Circuit has held in three cases that the state is
entitled to deduct reasonable expenses from the property it returns to an owner. Goldberg v.
Frerichs, 912 F.3d 1009, 1010 (7th Cir. 2019) (“[P]eople whose property is taken into custody
by [the state] are entitled to receive the time value of their property (that is, interest or other
earnings), less reasonable custodial fees.”); Kolton v. Frerichs, 869 F.3d 532, 533 (7th Cir. 2017)
(“A state may charge a bookkeeping fee.”); Cerajeski v. Zoeller, 735 F.3d 577, 579–80 (7th Cir.
2013) (“The state is certainly entitled to charge a fee for its services in taking custody of
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unclaimed property and trying to locate the owner.”). The court said little about how the
reasonableness of the expenses is to be determined, except that the amount of the expenses
should “bear[] [a] relation to the cost of the services that the state has performed in relation
to the account.” Cerajeski, 735 F.3d at 579–80.
Plaintiffs’ 	proposed 	injunction 	says 	nothing 	about 	the 	state’s 	right 	to 	deduct
administrative expenses, suggesting that the secretary would violate the injunction if he
attempted to deduct those expenses. The court understands plaintiffs to contend that language
about administrative expenses is not needed because there is no statutory authority for
deducting expenses, so there is no need to account for them in the order. The secretary disputes
plaintiffs’ understanding of state law, contending that Wis. Stat. § 177.0801(2) authorizes
deductions.2 But even if the court assumes that current law does not allow deductions, it does
not follow that the court may ignore the issue.
There is some support for plaintiffs’ view in Cerajeski, in which the court held that the
plaintiff was entitled to relief without regard to the state’s expenses because the state’s
unclaimed property law did not authorize the deduction of any expenses that were relevant to
the plaintiff’s property. 735 F.3d at 579–80. But Cerajeski was an individual claim for damages.
This is a class action for permanent injunctive relief, so this case has consequences not just for
the named plaintiffs but for anyone in Wisconsin who seeks the return of unclaimed property
in the future. If the court were to issue an injunction that did not account for reasonable
expenses, that injunction would preclude state officials from enacting a statute, regulation, or
2 Section 177.0801(2) directs the secretary to “deposit in the general fund an amount that the
administrator reasonably estimates is sufficient to pay claims allowed under this chapter and
administrative expenses.” The provision does not say where the money for administrative
expenses may be drawn from.
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policy that allowed the court to deduct those expenses. Officials would have to move to modify
the injunction before they could take action. So any injunction must account for reasonable
expenses.
Plaintiffs say that the court can wait to provide guidance about what expenses can be
deducted until an individual class member has a dispute with the secretary over a deduction:
If and when Defendant commences to deduct expenses, by
statutory authorization or otherwise, and if and when the Court
approves 	such 	deductions, 	Defendant 	will 	likely 	make 	the
deductions from class members’ recoveries automatically, without
Plaintiffs 	having to “show” anything. If 	Plaintiffs challenge
Defendant’s deductions, Plaintiffs may need to show something
but until then, Plaintiffs need not “show” anything.
Dkt. 93, at 10. Plaintiffs’ proposal is inconsistent with Rule 65. As already noted, any
injunctive relief must “describe in reasonable detail . . . the act or acts restrained or required.”
The court cannot omit a key term or leave it undefined, to be resolved at some later date.
If the court were to adopt plaintiffs’ proposal, it could require numerous individualized
determinations for what qualifies as a reasonable expense as applied to particular class
members. That is not how injunctive relief is supposed to work. The injunction must be specific
enough at the outset so that “the enjoined party is fairly apprised of his responsibilities and
the court can objectively assess compliance.” Kartman v. State Farm Mut. Auto. Ins. Co., 634
F.3d 883, 892–93 (7th Cir. 2011). The court of appeals has rejected requests for injunctions
when, as in this case, “[s]upervising compliance with the envisioned injunction would be
administratively challenging.” Id.
The only specific suggestion is offered by the secretary, who says that, “[a]t the time of
briefing, [administrative costs] costs were approximately $20.58 of statutorily-authorized
expenses per claimed property.” Dkt. 97, at 25. This figure appears to be based on estimates
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of the state’s average amount of administrative expenses in 2022. See Dkt. 66, ¶ 36. Plaintiffs
object to that figure on multiple grounds, and the court agrees with plaintiffs that the
secretary’s proposal should not be incorporated into the judgment. The secretary does not
explain why a flat fee would be reasonable regardless of circumstances, and he acknowledges
that the amount could change in the future. So the figure is inadequately supported and fails
to take into account changing circumstances. But plaintiffs do not offer an alternative proposal
for the court to consider.
The bottom line is that injunctive relief is not appropriate because plaintiffs have not
proposed an injunction that complies with Rule 65. Plaintiffs had the opportunity in their
summary 	judgment 	submissions, 	their 	opening 	supplemental 	brief, 	and 	their 	reply
supplemental brief to submit an appropriate proposal, so the court declines to give plaintiffs
another chance. The relief in this case will be limited to a declaration. The declaration likewise
does not define “reasonable expenses,” but that is not a bar to declaratory relief, which is not
governed by Rule 65. See Marseilles Hydro Power, LLC v. Marseilles Land & Water Co., 299 F.3d
643, 647 (7th Cir. 2002). If any class member has a dispute with the secretary about the
reasonableness of any deducted expenses, that issue will have to be raised in a separate lawsuit.
The only remaining question is whether to stay the judgment pending appeal. In making
that determination, the court must balance the harms that could follow from granting or
denying a stay. Cavel Int’l, Inc. v. Madigan, 500 F.3d 544, 549 (7th Cir. 2007).
In this case, the balance of harms counsels in favor of a stay. Once the state changes its
method for calculating interest and begins making payments under that method, it would be
virtually impossible for the state to claw back any overpayments it made if an appellate court
determines that plaintiffs are not entitled to any relief. But any class members who believe that
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they will receive a larger payment under the new method are free to wait until the appeal is
resolved before asking for the return of their property. So the court concludes that the balance
of harms favors the state, and the court will stay the judgment.
ORDER
IT IS ORDERED that:
1. 	It is DECLARED that Wisconsin Statute §§ 177.0607(2) and (3)(c) violate the
Takings Clause of the Fifth Amendment of the United States Constitution because
they do not guarantee that property owners who are entitled under Wisconsin
Statute § 177.0904 to the return of unclaimed property with a principal value of
more than $100 will be paid no less interest on their unclaimed property than what
the state earned on such property while held in its custody, less reasonable
administrative expenses.
2. 	Plaintiffs’ request for injunctive relief is DENIED.
3. 	The clerk of court is directed to enter judgment accordingly and close this case.
4. 	Enforcement of the judgment will be STAYED for 30 days after entry and, if any
party files an appeal, until the appeal is resolved.
Entered March 23, 2026.
BY THE COURT:
/s/
________________________________________
JAMES D. PETERSON
District Judge
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