A Supreme Court Surprise in the MoneyGram Case: Is It a Money Order or an Official Check?
Tax Development Nov 02, 2022
Tax Development Nov 02, 2022
In an unusual development in the battle in Delaware regarding the true nature of MoneyGram’s official checks, the Special Master assigned to review the case reversed his original opinion given to the U.S. Supreme Court (“the Court”) in the consolidated cases of Delaware v. Pennsylvania1 and Arkansas v. Delaware.2 As reported earlier, the battle includes more than 30 states arguing over the definitions used in unclaimed property statutes to require escheatment to the appropriate states for abandoned checks and money orders. Hundreds of millions of dollars are at stake.
In a case involving states filing suits against each other, an appointed Special Master acts as a court of original jurisdiction to hear testimony and review documentation provided by each side. Special Master Pierre N. Leval, Senior U.S. Circuit Judge for the Second Circuit, issued his opinion to the Court in May 2021, which stated that the MoneyGram “official checks” were subject to the Federal Disposition of Abandoned Money Orders and Traveler’s Checks Act (“the Act”). Under the terms of the Act, MoneyGram’s instruments should be classified as money orders and, as such, should escheat to the place of purchase. In the report issued, the Special Master agreed with the states against Delaware.
On October 26, 2022, Special Master Leval changed his recommendation to the Court after reading the arguments presented to the Court by both sides on October 3, 2022. In the order issued, Special Master Leval stated that contrary to his earlier opinion, he now believes that MoneyGram Teller Checks are not subject to the Act, while he continues to believe that Agent Checks should escheat to the directive of the Act. He distinguished the two types of checks issued: Teller Checks that are sold at banks and list the bank as the “drawer,” and Agent Checks that are also sold at banks but name MoneyGram as issuer. In his opinion, different treatment is justified for the different types of money orders issued by MoneyGram. No additional information was provided in the order to explain the unusual change in opinion. The lack of rationale for the change is raising more questions and uncertainty in the issues involving unclaimed property treatment for these property types at issue. Although the Court is not required to follow the recommendation of the Special Master, the opinion carries substantial weight.
Special Master Leval has requested a response from the defendant states in one week, with Delaware’s response due one week following. Either way this case is decided, we anticipate the Court will narrowly apply this to the property types at issue.
We will keep you updated on the progress of this case in the coming months.
1 Case No. 220145.
2 Case No. 220146.
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