Supreme Court-Appointed Special Master Applies Place of Purchase Jurisdiction to Unclaimed MoneyGram “Official Checks” | Alston and Bird
Our Unclaimed Property team examines the Special Master report of the United States Supreme Court analyzing the definitions of “warrants” and “like instruments” and how those words decide whether certain unclaimed property falls under federal common law or of the Federal Abandoned Money Order Provision and Travelers Checks Act.
- The report is a master class in statutory construction
- The Special Master analyzed MoneyGram “official checks” to determine that they meet three statutory conditions for an instrument to constitute a “similar instrument”
- This analytical framework may have a broader scope than what the case might suggest.
Delaware’s claims for uncashed “official checks” issued by MoneyGram and sold nationwide were ruled invalid by the Supreme Court-appointed Special Master, who considered the partial summary judgment motions filed by Delaware for one side of a long-standing dispute and over 20 other states on the other side. Delaware v. Pennsylvania and Wisconsin; Arkansas et al. v. Delaware, Nos 22O145 and 22O146 (consolidated) DRAFT first interim report of the special captain (20 May 2021). The dispute revolves around whether the instruments constitute “money orders” or “similar instruments,” in which case the Federal Disposal of Abandoned Money Orders and Travelers Checks Act (FDA) would prevail over the federal rules of. common law established by the Supreme Court in 1965. Texas vs. New Jersey and reaffirmed later in Pennsylvania v. New York and Delaware vs. New York. If the FDA applied, uncashed official checks would be escheatable to the states where they were purchased; otherwise, checks, for which MoneyGram did not collect a buyer or payee address, would be sent in bulk to Delaware, which is MoneyGram’s home state.
The Special Master’s Report constitutes a masterclass in statutory interpretation, examining the development of federal common law jurisdictional priority rules – with an emphasis on the two-pronged jurisdictional regime articulated by the Supreme Court and the reasons for its adoption. from rules that rejected a place of purchase or “transactional” rule – to the FDA interpretation that does not define “mandate” or “a similar instrument” but applies a place of purchase declaration rule to these instruments when they are not claimed. Presented with two disparate views of what these terms meant when the FDA was enacted in 1974, the Special Master sorted through various principles of statutory interpretation, dictionary definitions, legislative history, and related evidence to discern the intent of the Treasury and Congress in the drafting and enactment of the FDA.
Much to Delaware’s dismay, the Special Master did not find convincing any of the state’s arguments that the FDA does not apply to official MoneyGram checks, which were denominated either as agent checks or as counter checks. In fact, he concluded that these instruments were prepaid drafts “used by a buyer to send money securely to a named payee”; issued by MoneyGram, which is a financial institution or trade association, for which MoneyGram was directly responsible; and “are ‘mandates’ or, at the very least, are similar instruments.” The Special Master observed that the distribution channels through which MoneyGram sold the instruments, and the fee arrangements to which they were subject, did not distinguish official checks from money orders because they were irrelevant to the “fundamental nature” of the instruments. , unlike the Delaware assertion. As noted in the FDA’s “Congressional Findings and Statement of Intent” section, these devices – like warrants – are sold without collection of buyer and recipient data, and the Special Master concluded that buyers of these instruments were also likely to reside. in the state of purchase.
The Special Master noted that in order to be a “similar instrument” for FDA purposes, an instrument under review must meet three conditions:
- Instruments must be “like” a money order or traveller’s check – the captain concluded that this issue could be decided by motion for summary judgment since no material fact was in issue and other courts rendered summary judgment based on similar comparative assessments.
- Instruments may not be third-party checks – the captain concluded that while this term is somewhat vague, the best evidence of Treasury and Congressional understanding of the term indicated that they were ordinary checks drawn on a current account.
- A banking or financial institution or trade association must be “directly liable” for the payment obligation associated with the instrument – the captain rejected Delaware’s analogy with the UCC “unconditional liability” standard because Congress did not use this term, while the 1966 uniform ownership was not claimed. Act used the term “directly responsible”, which the drafters said meant “of last resort.”
Each of these conditions has been met by official controls in this case, according to the Special Master. The Special Master found the defendants’ argument that the instruments were similar to a money order or traveller’s check convincing: “like money orders, [the instruments] are prepaid drafts issued by a financial or official entity, providing for the payment of an exact amount of money to a designated person (making them a convenient and secure way for one person to pass funds to another). “
Two final issues are worth mentioning, although they did not affect the end result. First, Delaware argued that if official controls were considered “like instruments” according to the FDA, 10 of the respondent states did not have laws providing for their escheat. The Special Master also aired this argument, noting that states that had adopted the Unclaimed Property Unclaimed Act 1995 referred to “similar instruments” in other sections of their law, even though the warrant provision and travelers’ checks did not refer to “similar instruments” – but the drafters of the Uniform Act noted that this provision was intended to follow the FDA. Second, Pennsylvania argued that if the instruments were not considered to be money orders or similar instruments for the purposes of the FDA, then the Court should override the “secondary rule” under federal common law, which normally grants the competence to renounce the State of domicile of the holder if the address of the owner is unknown, and to provide that if the holder does not know the address of the buyer or the beneficiary of the prepaid financial instruments (unlike all other types of goods), the instruments should then be transferred to the place of purchase rather than to the place of purchase. State of domicile of the holder. The Special Master dismissed this argument as moot, assuming the Supreme Court accepts the recommended ruling that MoneyGram instruments are covered by the FDA. Pennsylvania’s attempt to climb that hill once more seems, for the moment, to have been blocked.
Assuming that the Court adopts the decisions recommended by the Special Master, this framework of analysis of the “like instrument” may have a broader scope than what the case might suggest. Indeed, financial institutions and other professional associations will need to assess whether various instruments they issue, which are not listed in the FDA or in state unclaimed property laws, can be subject to this alternative jurisdictional regime; if this is the case, and such instruments are not claimed during a period of legal dormancy, they would henceforth be enforceable against the State of purchase rather than the State of the last known address of the owner (if it is known) or to the State of domicile of the holder (if the owner’s address is unknown).
The special teacher separated the questions of jurisdiction from the calculation of damages. If the Court adopts these recommendations, Delaware will make a determination of what funds it will be required to transfer to other states associated with MoneyGram’s long-standing practice of discarding official checks from owner / unknown address to its state of. home. Notably, MoneyGram is on the sidelines for these previously abandoned funds and will not be required to pay out of pocket to satisfy state claims against Delaware, in accordance with Delaware’s legal obligation to indemnify a holder against claims made by another state to property delivered by the holder in good faith to Delaware.
 As long as the books and records of the issuer of the instrument indicate the state of the purchase, and this state provides for the escheat of warrants or similar instruments.
 Pennsylvania has now argued for a place of purchase jurisdiction rule in three separate lawsuits against the United States Supreme Court: Western Union Telegraph Co. v. Pennsylvania, 368 US 71 (1961); Pennsylvania v. New York, 407 US 206 (1972); and the present case. In 1974, Pennsylvania Senator Hugh Scott sponsored the FDA in response to Pennsylvania’s loss to the Supreme Court two years earlier.
Download the PDF of the opinion