In the

United States Court of Appeals

For the Seventh Circuit ____________________

No. 18-2432

S. DAVID GOLDBERG,

Plaintiff-Appellant,

v.

MICHAEL W. FRERICHS, Treasurer of Illinois,

Defendant-Appellee.

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 16 C 3792 — Charles P. Kocoras, Judge.

____________________

SUBMITTED DECEMBER 14, 2018 — DECIDED JANUARY 2, 2019

____________________

Before EASTERBROOK, KANNE, and ROVNER, Circuit Judges.

EASTERBROOK, Circuit Judge. An earlier opinion in this 

case concluded that people whose property is taken into custody by Illinois under the state’s Disposition of Unclaimed 

Property Act, 765 ILCS 1026/15-607, 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 (7th Cir. 2017); see also Cerajeski v. Zoeller, 735 

F.3d 577 (7th Cir. 2013). On remand the district court de-
2 No. 18-2432

clined to certify the proposed class, ruling that, despite what 

our opinion said, owners of property in the state’s custody 

are entitled to be compensated for the time value of money 

only if the property was earning interest at the moment the 

state took it into custody. 2018 U.S. Dist. LEXIS 51062 (N.D. 

Ill. Mar. 28, 2018). This meant that the class had internal divisions that made certification inappropriate. The court then 

granted summary judgment to the state on the claim of S. 

David Goldberg, one of the putative class representatives, 

whose property had not been earning interest before the 

state took custody of it. The judge entered a partial final 

judgment under Fed. R. Civ. P. 54(b), leading to this appeal.

For the proposition that the owner receives the property’s time value only if the property was earning interest in 

private hands the district court relied principally on Cwik v. 

Topinka, 389 Ill. App. 3d 21 (2009), a state court’s decision 

that precedes both Kolton and Cerajeski and interprets a state 

statute rather than the Takings Clause of the Constitution. 

The proposition is untenable, as we have already explained:

The Supreme Court has held that the Takings Clause protects the 

time value of money just as much as it does money itself. Brown 

v. Legal Foundation of Washington, 538 U.S. 216, 235 (2003); Phillips 

v. Washington Legal Foundation, 524 U.S. 156, 165–72 (1998); Webb’s 

Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 162–65 (1980). 

In Cerajeski v. Zoeller, 735 F.3d 577 (7th Cir. 2013), we applied 

these precedents to an Indiana statute like the Illinois statute in 

this case. We held that a state may not take custody of property 

and retain income that the property earns. A state may charge a 

bookkeeping fee, which for small accounts may exceed the property’s time value, but must allow the owner the benefit of the 

property’s earnings, however large or small they turn out to be. 

Id. at 578–80.
No. 18-2432 3

Kolton, 869 F.3d at 533. The property’s owner is entitled to 

“income that the property earns” less custodial fees; what 

the property earns in the state’s hands does not depend on 

what it had been earning in the owner’s hands.

To see this, consider a simple example. Owner puts a rare 

coin in a safe deposit box, then neglects to pay the annual 

rental. Bank turns the coin over to the state under the Disposition of Unclaimed Property Act. The state sells the coin and 

invests the proceeds. The coin was not earning interest while 

in the safe deposit box but was an investment property:

Owner hoped that its market price would rise. If the state 

kept the coin and returned it to Owner on demand, then the 

state would not owe interest; Owner could sell the coin and 

obtain any change in value while it was in the state’s custody. But if the state sells the coin and cuts off the possibility of 

appreciation, then Owner is entitled to the earnings on the 

invested cash as the best substitute. The fact that the coin 

was not earning interest in the safe deposit box would not 

detract from the fact that its price could rise. The loss of that 

time value is compensated by giving Owner the benefit of 

interim earnings.

Goldberg did not have a coin. He had a check—or, rather, the payor that had made out a check to Goldberg had 

the instrument because he had not claimed it, and the payor 

delivered it to the state when the statute required. A check 

represents cash, which cannot appreciate as a coin, stamp, or 

painting might. But the principle is the same: cash has time 

value even if not invested. Holding cash is sensible for a person who fears that prices of stocks, bonds, and other investments will decline. If the state turns the check into cash and 

makes an investment on the owner’s behalf (and against the
4 No. 18-2432

wishes of someone who did not want to invest), then it is vital to turn any gain over to the owner. The Takings Clause 

does not set up a situation in which someone who wanted to 

be “in cash” bears the risk of loss as market conditions 

change without any prospect of offseming gain. That would 

make the owner worse off. (To put this differently, cash has 

an option value—the option to invest or refrain from investing—that is lost if the state invests without the owner’s consent. That loss has a compensable value.)

Brown v. Legal Foundation of Washington holds that a state 

need not hand over earnings if the amount of the principal is 

so small that (in the Court’s words) it “cannot earn net interest”—in other words, when administrative expenses exceed 

the return on investment. 538 U.S. at 224. The statutory system under review in Brown required lawyers to turn over 

small client trust funds so that they could be pooled, and 

when pooled earn net interest. The principal would be returned to counsel when they needed to disburse it to clients; 

the state kept the interest for other uses. The Justices concluded that this system did not offend the Takings Clause

because, by definition, the money could not have earned a 

net return in the absence of the pooling and the owner could 

not have lost anything. No loss, no need for compensation.

Id. at 235–41. Illinois could use Brown on remand to contend 

that it does not owe interest on small amounts, such as the 

$100 it held on behalf of Goldberg. Amounts as slight as $100 

probably cannot earn net interest. But this has nothing to do 

with how the owner held or invested the money or other 

property before it came into the state’s hands.

It may be hard to administer the line established by

Brown. That will be among the district court’s tasks if the 
No. 18-2432 5

state contends on remand that particular parcels in its custody could not earn net interest in private hands. All we decide 

today is that it does not mamer under Brown, or any other 

decision by the Supreme Court or this court, whether property that is able to earn net interest was in an interest-bearing 

account before its transfer to the state. (This conclusion also 

may lead the district court to reconsider its ruling on class 

certification.)

The judgment is vacated, and the case is remanded for 

proceedings consistent with Kolton and this opinion.