Delaware v. Pennsylvania et al
Delaware v. Pennsylvania et al (consolidated with Arkansas et al v. Delaware) were two cases, both of which invoked the United States Supreme Court's authority of original jurisdiction, which ruled on what constitutes a "similar written instrument" to a money order or traveler's check under Federal law. The cases are notable as being the first cases on which Justice Ketanji Brown Jackson authored the Court's opinion.[1]
Background of Prior Law and Court Cases
When property is unclaimed, after a period of time it is forfeited to the state, a process commonly known as escheat. Though it is easy to determine the state to which tangible property (such as the unclaimed items in a safe deposit box, or the proceeds of a dormant bank account) should be forfeited (it is the state in which the property resides, such as the physical location of the safe deposit box, or the last known address of the account holder from the bank's business records), the state to which intangible property (such as the proceeds from an uncashed check) should be forfeited has not been easy: at least three separate court cases have attempted to do so.
The first case, Western Union Telegraph Co. v. Pennsylvania (from 1961) ruled that a company could hold intangible property only until the period after which it must be escheated to the state.
The second case, Texas v. New Jersey (from 1965), would become the standard by which intangible property disputes between states would originally be decided. In that case, if the holder knew the address of the person entitled to the property, and if that state had an escheat law entitling it to the proceeds, then the funds would escheat to that state; otherwise, the funds would escheat to the state where the company was incorporated.
The third case, Pennsylvania v. New York (from 1972), attempted to persuade the Court to change the default rule for property where an address was unknown (as it resulted in a windfall for states having large financial corporations incorporated in their state); however, the Court declined and left the Texas rule in place.
However, Congress decided that the Court had ruled wrongly in the 1972 case, and in 1974 passed the Disposition of Abandoned Money Orders and Travelerâs Checks Act (also known as the Federal Disposition Act, or FDA) which had the effect of overturning the Court's ruling for the most part. The FDA decreed that, in the event of an unknown address, the state in which a money order, traveler's checks, or "similar written instruments" was purchased, was entitled to escheat (on the basis that the majority of such transactions involved residents of the state where the purchase was made). Notably, however, the FDA specifically exempted "third party bank checks" (a financial instrument written on one bank, but where the funds come from another), leaving unclaimed proceeds subject to the common law as defined in Texas.
Background of the Case
Two states (Pennsylvania and Wisconsin) audited the escheatment practices of MoneyGram (a large company which issues millions of dollars of money orders and similar instruments) and learned that the company was escheating the proceeds of "Official Checks"[2] to Delaware (the state of its incorporation); however, Delaware was retaining all the proceeds for itself instead of remitting them to other states in accordance with the FDA.[3] MoneyGram stated that it followed the direction of Delaware officials in its practice, and once it did so had no obligation to remit the same proceeds to the other states.
Pennsylvania and Wisconsin then sued Delaware officials in their official capacities in Federal District Courts within those states. Delaware responded by arguing that the disputes were between states, and thus could only be heard at the Supreme Court; their motion was granted. Meanwhile, a group of 24 states led by Arkansas filed a similar complaint at the Supreme Court, which was consolidated with the Delaware complaint.
The Supreme Court appointed a Special Master to rule on the complaint. Initially, the Special Master ruled that the Official Checks were similar to money orders, and thus fell under the FDA (to which Delaware objected); however, after oral argument the Special Master ruled that they were similar to third party bank checks and thus specifically exempt (to which all parties objected).
Ruling
In a nearly unanimous ruling authored by Justice Jackson[4], the Court ruled that the Official Checks were similar to money orders, and thus fell within the FDA as to the state entitled to escheat.
References
- â By Court tradition, the first opinion authored by the newest Justice is (if possible) on a matter where the Justices are in unanimous agreement.
- â The terms used by MoneyGram in the ordinary course of business were "Agent's Checks" and "Teller's Checks". There were two other financial instruments involved; however, only these were in dispute before the Court.
- â MoneyGram previously followed a similar practice when it was incorporated in Minnesota; however, that state remitted funds to other states in accordance with the FDA.
- â All nine Justices joined as to Parts I, II, III, and IV-A. However, only five Justices joined as to Part IV-B; Chief Justice Roberts and Justices Sotomayor, Kagan, and Kavanaugh joined Justice Jackson.