Supreme Court on Abandoned Property Lawsuit

On February 28, 2023, the US Supreme Court docket issued its choice in the abandoned property lawsuit, Delaware v. Pennsylvania (see https://www.supremecourt.gov/opinions/22pdf/145orig_kjfl.pdf)

The issue tackled by the Court docket centered on which state was entitled to accumulate unclaimed assets, which arose from  two fiscal products offered by banking institutions on behalf of Moneygram: Agent Checks and Teller’s Checks (collectively, the “Checks”).

Subsequent the framework proven in the seminal circumstance of Texas v. New Jersey, 379 U. S. 674 (1965), simply because Moneygram did not have the title and deal with of the owners of the Checks, Moneygram had been escheating (that is, paying out over to the state) the resources fundamental these dormant Checks to its condition of incorporation, Delaware. 

That rule, paying unclaimed residence to the state of incorporation in cases the place the title and handle of the particular person property proprietor is not recognized, broadly applies to most assets, besides for money orders and vacationers checks.   This exception arises from a 1974 federal law, the Federal Disposition Act (“FDA”), 12 USC  § 2501 et seq), which involves holders of money fundamental unused dollars orders and tourists checks (and other identical instruments) to remit those people money to the state in which the instruments ended up ordered, not the holder’s point out of incorporation.

Hence, the Supreme Court centered on  whether the Checks must be matter to the Texas v. New Jersey framework or regardless of whether they were being very similar ample to revenue orders so that they, also, at the time deserted, should really be paid out to the point out the place ordered and not the point out of incorporation. 

The Supreme Courtroom held, in the 1st greater part impression penned by new Supreme Courtroom Justice Ketanji Brown Jackson, that the Checks have been in fact very similar to cash orders, and must be escheated to the state of purchase less than the Food and drug administration, and not the point out of incorporation:

When a financial product operates like a revenue order— i.e., when it is a pay as you go published instrument utilised to transmit cash to a named payee—and when it would also escheat inequitably solely to the State of incorporation of the business holding the funds under our widespread-legislation regulations because of to recordkeeping gaps, then it is sufficiently “similar” to a income purchase to slide presumptively inside the Food and drug administration.  (598 U.S. __ slip op. at 22)

This is thought of a extra equitable rule, enabling the residence to be distributed among many states in which the professional activity transpired.

There was a incredible amount of money at stake: some estimate Delaware will owe additional than $400 million to the other states based on the end result in this lawsuit.

The more substantial question is regardless of whether, now that the definition of “money orders” (and identical instruments) under the Fda has been widened to consist of the Checks, will other monetary products and devices also be topic to a equivalent determination?  We foresee that lots of states will be using a nearer glimpse at “prepaid published devices utilised to transmit money” in order to maximize their deserted home collections.