Last May, the Special Master appointed by the U.S. Supreme Court (“the Court”) to review the legislative history of the Federal Disposition of Abandoned Money Orders and Traveler’s Checks Act (“the Act”), issued its First Interim Report. [See Part I]. The report related to the consolidated cases Delaware v. Pennsylvania1 and Arkansas v. Delaware2 regarding a dispute joined by 30 states involving checks issued by MoneyGram Payment Systems Inc. for purposes of unclaimed property jurisdictional rules. The dispute concerned the differing treatment of money orders and checks for purposes of unclaimed property under the Act. Abandoned money orders would escheat to the state of purchase, while third-party checks would escheat to the state of legal domicile of the issuer.
The Special Master determined that the MoneyGram Official Checks (“the Checks”) were similar to money orders. As a result, the Special Master concluded that Delaware’s claim that the Checks were more akin to third-party checks was unsupported by the Act. The recommendation was that Delaware’s motion for partial summary judgment be denied and that the other states’ motion for partial summary judgement be granted. This recommendation is still pending with the Court.
In a brief filed January 19, 2022, Delaware is urging the Court to reject the Special Master’s Report and conclude that the unclaimed Checks are subject to escheatment under common law rules set out in Texas v. New Jersey.3 In this case, the U.S. Supreme Court adopted the priority rules that guide where to escheat unclaimed property, namely first to the state of the creditor’s last known address, as reflected on the holder’s books and records. In situations in which there is no last address known for the creditor, the Court determined that the property was “subject to escheat by the State of corporate domicile, provided that another State could later escheat upon proof that the last known address of the creditor was within its borders.” Corporate domicile is the state of incorporation or formation of the holder, not to be confused with the holder’s corporate headquarters.
Several amicus briefs have been filed on behalf of the defendant states and the members of the American Bankers Association, asking for clarity of the rules such that they will not impose unfair burdens on compliance.
We will keep you updated as this saga continues to unfold. Our team of abandoned and unclaimed property experts are available to discuss these updates and others that are on the horizon.
1 Case No. 220145.
2 Case No. 220146.
3 380 U.S. 518 (1965).
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