Unclaimed accounts
O’Connor v. Eubanks
Date: Aug. 26, 2026
Issue: Whether Michigan violated the 14th Amendment’s Due Process Clause by treating unclaimed property and the interest it earned as state-owned property after taking custody under Michigan’s Uniform Unclaimed Property Act.
Case Summary: In a unanimous decision, a Sixth Circuit panel vacated a Michigan federal court’s dismissal of a lawsuit accusing Michigan of unlawfully keeping interest earned on unclaimed property in its custody.
In December 2021, Dennis O’Connor sued Michigan State Treasurer Rachael Eubanks and State Administrative Manager Terry Stanton in their official capacities, along with the state of Michigan, alleging they violated the Due Process Clause and Takings Clause by taking custody of his funds and keeping the interest they later earned.
Michigan’s Uniform Unclaimed Property Act treats property left unclaimed for a set period as presumed abandoned and requires the holder to transfer it to the state. Michigan then takes custody of the property, deposits unclaimed funds into its general fund, and may earn interest on those funds. If an owner later claims the property, Michigan returns the principal but pays interest only if the property was already interest-bearing when the state received it. Plaintiff Dennis O’Connor owned two non-interest-bearing accounts that private companies transferred to Michigan after losing contact with him. Michigan deposited the funds into its general fund and kept any interest they generated while in state custody.
Judge Nancy Edmunds of the Eastern District of Michigan dismissed all of O’Connor’s claims. She ruled that sovereign immunity barred his claims against Michigan and that Eubanks and Stanton had qualified immunity. In her view, they followed state law, and O’Connor had not shown a clearly established right to interest on non-interest-bearing property. The Sixth Circuit affirmed the dismissal of O’Connor’s takings claims. However, the panel vacated the dismissal of his due process claims against the state officials and remanded those claims for further proceedings. On remand, the district court again dismissed the due process claims, reasoning that Michigan provided O’Connor sufficient process when it took ownership of the accounts and that Michigan therefore also owned any interest the funds generated. Because the court dismissed all remaining claims, it also denied O’Connor’s request for class discovery. O’Connor appealed, arguing that Michigan deprived him of two types of property without sufficient process: the original funds in his accounts (the principal); and the interest that those accounts generated while they were in Michigan’s custody.
On appeal, the panel ruled that O’Connor retained ownership of the principal in his accounts while Michigan held the funds. The panel explained that courts look to state law, traditional property principles, historical practice, and Supreme Court precedent to determine whether someone has a protected property interest. Michigan’s Uniform Unclaimed Property Act repeatedly describes the state as taking “custody” of unclaimed property while continuing to refer to the claimant as the “owner.” The panel also relied on Michigan common law, which treated the state as a custodian rather than the owner of unclaimed property. Because neither the Uniform Unclaimed Property Act nor Michigan’s historical property rules transferred ownership to the state, the panel concluded that O’Connor continued to own the principal while Michigan held it.
Next, the panel determined that O’Connor also owned the interest that Michigan generated from his accounts under the longstanding common-law “interest follows principal” rule. The panel explained that interest earned on private property belongs to the owner of the principal that generated it. That rule applies even when the principal did not earn interest before the state took custody of it. Because O’Connor continued to own the principal, he also owned the interest that his funds earned while Michigan held them.
Finally, the panel concluded that the district court based its due process analysis on the mistaken view that Michigan owned both O’Connor’s principal and the interest it generated. The panel rejected the district court’s reliance on the Michigan Court of Appeals’ decision in Kemerer v. State, which held that Michigan takes ownership of unclaimed property when it assumes custody under the Uniform Unclaimed Property Act. The panel explained that the Uniform Unclaimed Property Act’s text, Michigan property law, and prior Michigan decisions instead show that the state acts as a custodian while the original owner keeps title to the property. Because O’Connor retained ownership of both the principal and the interest, the panel concluded that the district court’s contrary ownership finding undermined its due process rulings.
In concurrence, Judge John Nalbandian agreed that O’Connor had a viable due process claim to the interest earned on his property. He explained that, without the Sixth Circuit’s decision in Hendershot v. Stanton, he would have followed Kemerer because Michigan courts treat published Michigan Court of Appeals decisions as binding. Hendershot, however, held that a property owner has Article III standing to challenge the state’s failure to return interest earned on unclaimed property. Bound by Hendershot, Judge Nalbandian agreed that O’Connor retained ownership of his principal. He also questioned the district court’s reliance on the U.S. Supreme Court’s decision in Texaco Inc. v. Short because Michigan plays a much larger role in its unclaimed property system, which may require greater due process protections.
Bottom Line: The Sixth Circuit ruled that Michigan’s custody of unclaimed property does not transfer ownership of the principal or the interest it earns, requiring the district court to reconsider O’Connor’s due process claims.
Document: Opinion
