Delaware v. Pennsylvania

Jump to content

From Wikipedia, the free encyclopedia

U.S. Supreme Court case from 2023

2023 United States Supreme Court case

Delaware v. Pennsylvania, 598 U.S. 115 (2023), was a United States Supreme Court case related to unclaimed money and check escheatment . This case was Justice Ketanji Brown Jackson 's first majority opinion on the Supreme Court.

It was also the first case the Supreme Court had taken on unclaimed property in over 30 years.

Background

[(https://en.wikipedia.org/w/index.php?title=Delaware_v._Pennsylvania&action=edit&section=1 "Edit section: Background")
]

States are entitled to take custody of abandoned personal property through escheatment. MoneyGram reports that hundreds of millions of dollars in abandoned funds are in dispute, with more than $500 million in dispute in recent years. The state of Delaware used the escheatment of "assets like bank and brokerage accounts, unclaimed life insurance policies, uncashed paychecks, traveler's checks, and gift cards" as a source of the state's revenue. It was Delaware's third-largest source of revenue, representing 10% of incoming funds. Delaware is home to over 2 million businesses.

Multiple states filed suit to petition the Supreme Court to resolve a dispute between the states regarding whether abandoned proceeds are subject to the Disposition of Abandoned Money Orders and Travelers Check Act (Federal Disposition Act or FDA), 12 U.S.C. § 2503.

MoneyGram is a Delaware corporation that provides prepaid financial instruments that are sold to consumers to pay their own obligations. MoneyGram International, Inc. is the second-largest money transfer business in the world, with revenues of over $1 billion. MoneyGram sells two products: "Official Checks" and "Retail Money Orders". The retail money orders are not the instrument in dispute in this case. Images of the disputed items can be viewed in the two affidavits from Jennifer Whitlock, head of global supply chain for MoneyGram.

There are two types of MoneyGram "official checks": "Agent Checks" and "Teller's Check" These checks are sold only by financial institution banks and credit unions. They are not sold at retail locations.

Many large companies in the United States incorporate in Delaware for the legal and tax protections that the state offers.

Delaware sought to have this issue be a matter of common law , rather than the Federal Disposition Act covers disputed instruments in dispute. The rules came from the case of _Texas v. New Jersey _, 379 U.S. 674, 675 (1965).

Supreme Court of the United States Special Master

[(https://en.wikipedia.org/w/index.php?title=Delaware_v._Pennsylvania&action=edit&section=2 "Edit section: Supreme Court of the United States Special Master")
]

On May 26, 2016, a motion was filed for leave to file a bill of complaint. The special master heard oral arguments on the case on March 10, 2021.

First Interim Order

[(https://en.wikipedia.org/w/index.php?title=Delaware_v._Pennsylvania&action=edit&section=3 "Edit section: First Interim Order")
]

The Supreme Court appointed special master Pierre N. Leval to the case. On July 23, 2021, the special master issued the First Interim Report, ruling that disputed instruments are covered by the Federal Disposition Act. Leval split the case into two parts: a liability and a damage phase.

There are two ways laws that the special master was asked consider: the Disposition of Abandoned Money Orders and Travelers Check Act (Federal Disposition Act or FDA) 12 U.S.C. § 2503, and the federal common law rule in which debts left unclaimed by creditors would escheat "to the State of the Creditor's last known address as shown by the debtor's books and records."

MoneyGram's two instruments, "Agent Checks" and "Teller's Checks", are the case's disputed instruments. If the common law related to escheatment applies to the disputed instruments, the abandoned property escheats to the state of incorporation. However, if the FDA applies, the abandoned property goes to the state of purchase.

The special master covered the historical precedent of escheatment. Under English common law, all land titles and property originated from the Crown. "[T]he process by which tenurial land returned to the lord of the fee upon the occurrence of an event obstructing the normal course of descent."

Under American law, escheatment has been justified under the public policy that unclaimed and abandoned assets should be "used for the general good rather than for the chance enrichment of particular individuals or organizations", per _Standard Oil Co. v. New Jersey _ 341 U.S. 428, 436 (1951).

The special master then evaluated the Uniform Disposition of Unclaimed Property Act , drafted by the Uniform Law Commission , first published in 1954. The act was not universally adopted and did not resolve claims between the states. The revised Uniform Disposition of Unclaimed Property Act, published in 1966, included "money orders and traveler's checks". However, the act did not define these terms.

The FDA applies only to money payable on "a money order, traveler's check, or other similar written instruments (excluding third-party bank check).

The special master highlighted the congressional findings in the FDA that noted:

"(1) the books and records of banking and financial organizations and business associations engaged in issuing and selling money orders and traveler’s checks do not, as a matter of business practice, show the last known addresses of purchasers of such instruments;

(2) a substantial majority of such purchasers reside in the states where such instruments are purchased;

(3) the states wherein the purchasers of money orders and traveler’s checks reside should, as a matter of equity among the several states, be entitled to the proceeds of such instruments in the event of abandonment;"

— 12 U.S.C. § 2501(1)–(3).

Second Interim Order

[(https://en.wikipedia.org/w/index.php?title=Delaware_v._Pennsylvania&action=edit&section=4 "Edit section: Second Interim Order")
]

The special master held oral arguments on December 8, 2022. On December 13, 2022, he issued a Second Interim Report, in which the special master issued an apology to the Supreme Court, stating: "Upon reading the arguments before the Supreme Court and returning to the record in the case, I can no longer subscribe to the entirety of the recommendations I made to the Supreme Court."

The special master stated that he read the oral arguments before the Supreme Court, where he felt that Delaware was "emphasizing a circumstance that, if correct, would distinguish between rights and obligations, at least comparing the disputed instruments with those that MoneyGram labels as 'money orders.'" The special master notified the court clerk and ordered an expedited briefing. After briefing and oral arguments, the special master revised his recommendation to the court.

The special master concluded that the disputed instruments did fall in the category of "other similar written instruments", but were not "money orders". However, because some of the disputed instruments are drawn by a bank, they fell within the exclusion of the "third-party bank checks". FDA 12 U.S.C. 2503.

Delaware exception to the Supreme Court of the United States Special Master ruling

[(https://en.wikipedia.org/w/index.php?title=Delaware_v._Pennsylvania&action=edit&section=5 "Edit section: Delaware exception to the Supreme Court of the United States Special Master ruling")
]

Once the special master's First Interim Report concluded that the disputed instruments were covered under the FDA, Delaware filed an exception.

The court accepted briefs and oral arguments, then the special master announced

…