According to the complaint on behalf of Simon Aragon and a dozen others, the incident began on Jan. 11, 2010, when deputies tracked down a stolen skip loader to an abandoned lot north of Castaic.
Deputies also found boats, trailers, tractors and cargo containers filled with jewelry, artwork and other valuables, all totaling $7 million.
The lawsuit alleging violation of due process states the deputies "jumped to the conclusion" that they had discovered the headquarters of a criminal ring.
A lawyer for the plaintiffs said the lot was used as an auto salvage yard and for storage. He said the department refuses to return the property and threatened filing criminal charges if they kept asking.
The lawsuit seeks either the return of the seized property or monetary compensation for its loss.
Sheriff's spokesman Steve Whitmore said that while he hadn't yet seen the complaint, "lawsuits never tell the whole story. We look forward to telling the whole story."
City News Service contributed to this report.