Delaware and 30 other states have reached a settlement resolving yearslong litigation over unclaimed checks issued by MoneyGram. The settlement follows last year’s Supreme Court decision in Delaware v. Pennsylvania et al.1 In that case, a unanimous Supreme Court determined that Agent and Teller Checks sold by financial institutions on behalf of MoneyGram fell under the Federal Disposition of Abandoned Money Orders and Traveler’s Checks Act (FDA). Under the FDA, money orders, traveler’s checks, and other similar written instruments escheat to the state where the instrument was purchased, not to the state of MoneyGram’s incorporation. Further analysis of the Supreme Court’s decision can be found in our previous article on the topic.
The settlement ends the damages phase of the litigation. Delaware will transfer more than $102 million of property reported by MoneyGram from 2011 to 2017 to the 30 states, based on where each monetary instrument was purchased. An additional $89 million that had been placed in a litigation escrow account from 2018 to 2022 will be distributed among all 50 states based on each instrument’s place of purchase. The 30 states involved in the litigation expect to receive nearly $55 million, plus interest, from the escrow account.
Notably, the settlement does not impact the Supreme Court’s 2023 decision on applying the FDA to the MoneyGram checks at issue and does not impact that decision’s potential future application to other bank-issued monetary instruments such as cashier’s checks. The test laid out in Delaware v. Pennsylvania et al. will continue to be used. Under that test, an instrument is sufficiently similar to a money order and falls under FDA escheatment rules when it 1) is a prepaid written instrument used to transmit money to a named payee and 2) will escheat inequitably to one state when inadequate records are maintained because of the holder’s business practice of not recording the instrument owner’s address.
This case’s history shows the importance of a broad strategic approach to unclaimed property because states can get creative in sourcing and claiming a right to unclaimed funds. If you have questions about this case or other unclaimed property issues, contact the Ryan experts listed below.
1 598 U.S. 115, February 28, 2023.
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