The US Supreme Court heard arguments on October 3, 2022 on an unclaimed property case for the first time since the early 1990s. The case, Delaware v. Pennsylvania, is a state-versus-state dispute between Delaware and thirty other states. At issue are potentially hundreds of millions of dollars of unclaimed MoneyGram Official Checks that MoneyGram—a money transfer company—reported to Delaware under the federal common law priority rules that typically govern which state is entitled to take custody of unclaimed funds. The case is about whether these “official checks” are instead subject to a 1974 federal statute—The Federal Disposition Act¹—that covers “a money order, traveler’s check, or other similar written instrument” and provides that unclaimed amounts are to be escheated to the state where they were purchased.²

Pennsylvania and other states argue that the unclaimed funds should not have been sent to Delaware, MoneyGram’s state of incorporation, but should instead be escheated to the various states where the checks were issued. Under common law rules, unclaimed funds are generally sent to a company’s state of incorporation when the last-known address of the owner is unknown, but the Federal Disposition Act overrides the common law rules for an unclaimed amount “payable on a money order, traveler’s check, or other similar written instrument (other than a third party bank check) on which a banking or financial organization or a business association is directly liable.”³ On this basis, Pennsylvania and other states argue that they, not Delaware, are entitled to unclaimed funds from MoneyGram Official Checks. A special master appointed by the Supreme Court ruled against Delaware and has recommended that the Federal Disposition Act should control. Delaware is challenging the Special Master’s report before the full Court.⁴

In the oral argument on October 3, 2022, many of the Justices’ questions concerned skepticism about Delaware’s narrow reading of the statute. Justice Clarence Thomas, who asked the first question, asked Delaware how much weight is put on the money order designation and what would happen if “tomorrow morning, they simply stamp the top of these, the two disputed instruments, ‘money order,’ ‘commercial money order’? Would that solve your problem?”⁵ Delaware responded that the specific labels are important for consumers and banks. If “money order” were to be defined broadly, Delaware argued, “it blows up things like cashier’s checks, certified checks.”⁶ Justice Neil Gorsuch similarly asked about the reliance on labels noting that “does it underline another point that may be problematic, and that is that labels cannot control substance in our analysis here.”⁷ Chief Justice John Roberts wondered why Pennsylvania and other states had not required MoneyGram to ask for address information, which “would solve your problem just like that because . . . then all of that stuff would escheat to your state rather than Delaware.”⁸

New Associate Justice, Justice Ketanji Brown Jackson, acknowledged that the statute was “weird” regarding collection of address information, since “the statute did not just say collect the information, which would have solved the problem directly,” but instead “[t]he statute seemed to take into account the fact that there were going to be circumstances in which that information was not collected, and Congress appeared to be trying to override the common law with respect to what happened because it was really concerned with equitable escheatment.”⁹ The Justices were also interested in the potential impacts of their ruling, and whether Pennsylvania and other states would be entitled to damages under the statute for funds escheated to Delaware if they prevailed.

Pennsylvania and Arkansas have led the group of 30 states seeking to recover the funds from Delaware and have been outspoken against Delaware’s escheat practices in this case. “Delaware has an aggressive, well-documented history of demanding unclaimed funds and then using those funds to cover a substantial portion of its state budget,” said Pennsylvania State Treasurer Stacy Garrity in a statement.¹⁰ Similarly, Arkansas Attorney General Leslie Rutledge criticized Delaware for “using Arkansans’ money to balance [its own] budget.¹¹ ”In the oral argument, Arkansas counsel referred to Delaware’s position as seeking a potential “$250 million windfall.”

Notably, the MoneyGram case was heard on the first day of oral argument of the October 2022 Term before a Court that now includes new Associate Justice Ketanji Brown Jackson, who has recently replaced Justice Stephen Breyer.

Key Takeaway: Although the impact of this case seems limited to the treatment of money orders and similar instruments, the issues implicate one of the key areas of unclaimed property law: the rules governing which state’s laws apply. State unclaimed property laws vary, and so determining which state’s law applies can significantly impact the treatment of a particular item and the states’ jurisdiction to conduct examinations. This case illustrates a situation where a company has been caught in the middle between multiple states asserting jurisdiction over the same unclaimed property.

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1 The Federal Disposition of Abandoned Money Orders and Traveler’s Checks Act (the “Federal Disposition Act”), 12 U.S.C. § § 2501–03.

2 The Supreme Court has played a key role in the development of unclaimed property law, including establishing the rules for which state has “priority” to take custody of unclaimed property.  Under the common law priority rules, unclaimed funds with no known owner can be claimed by the state of incorporation.

3 12 U.S.C. § § 2501–03.

4 The case has been on the Supreme Court’s docket since 2016, and was assigned to a Special Master in 2017. On July 27, 2021, the Supreme Court received the Special Master’s first interim report, which recommended that although “money order” is undefined in the statute, MoneyGram Official Checks are “money orders” or, in the alternative, “similar written instruments.” Delaware v. Pennsylvania & Wisconsin, Arkansas v. Delaware, Nos. 220145 & 220146 (First Interim Report of the Special Master, July 23, 2021). In an amicus brief, the American Bankers Association has urged the Supreme Court to clarify the federal law so as to provide clear priority rules for escheat of bank-issued checks.

5 Oral Argument at 6, Delaware v. Pennsylvania, No. 145, 146 (Oct. 3, 2022), 145, Orig. (supremecourt.gov).

6 Id. at 8. 

7 Id. at 22

8 Id. at 42. 

9 Id. at 10. 

10 Arneson, Erik, Treasurer Stacy Garrity: U.S. Supreme Court to Hear Pennsylvania Treasury’s Landmark Unclaimed Property Case, Pennsylvania Treasury (Sept. 26, 2022).

11 Epperson, Andrew, Arkansas AG’s Office to Argue Case Against Delaware in U.S. Supreme Court Next Week, Fox16.com (last updated Sept. 28, 2022). 

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