On August 28, 2024, Delaware and a coalition of 30 states announced that they have settled the MoneyGram litigation, a case involving the proper escheat treatment of certain bank instruments issued by MoneyGram. This settlement concludes the long-running dispute that Delaware lost on the merits in early 2023 when the U.S. Supreme Court ruled 9-0 in favor of the 30 states. Following the Supreme Court’s 2023 opinion, the sole issue that remained was how much in damages Delaware would be obligated to pay to the 30 states.
The settlement resolved the damages question. In sum, Delaware agreed to transfer $102 million of escheated MoneyGram funds to the states and relinquish its claim to the additional $89 million that MoneyGram deposited into an escrow account while the litigation was pending.
However, the settlement does not impact the Court’s 2023 opinion regarding the applicability of the Federal Disposition Act (FDA) to the MoneyGram instruments at issue in the litigation. In that opinion, the Court concluded that the MoneyGram instruments—teller’s checks and agent checks—were governed by the priority rules of the FDA rather than the federal common-law priority rules articulated by the Court in Texas v. New Jersey and its progeny. As such, the state where the instrument was purchased was determined to have jurisdiction to escheat the instrument rather than MoneyGram’s state of domicile (i.e., Delaware). In a prior advisory, we summarized the Court’s 2023 MoneyGram opinion.
The settlement also does not impact the potential for the Court’s opinion to be applied to other property types such as bank-issued cashier’s checks, certified checks, and teller’s checks, though the Court expressly declined to opine on these other instrument categories. In our view, the 2023 opinion established that a bank-issued instrument could be subject to escheatment under the FDA based on the test articulated by the Court, which turns in part on whether the instrument would “inequitably escheat” to the state of domicile due to the nature of the bank’s records (i.e., the bank does not collect/maintain a record of the owner’s address). If an instrument is subject to the FDA and not the federal common-law rules, then it would be escheatable to the state of purchase rather than the state of domicile.
Once the MoneyGram litigation officially concludes, there will be no active litigation between the states regarding jurisdiction to escheat property, at least that we are aware of. However, it would not be surprising if one or more states later sues Delaware or another state regarding application of the FDA to analogous property types such as cashier’s checks or other bank-issued payment instruments, or perhaps even to instruments such as gift cards or stored-value cards. States may want to test the limits of the Supreme Court’s expressed interest in ensuring that escheatment occurs in an equitable manner. See, for example, footnote 9 of the Court’s opinion:
Both Congress (in the text of the FDA) and this Court (in our precedents) have indicated a preference for the equitable distribution of escheats, and our common-law rules can result in equitable escheatment if the business practices of the company possessing the funds suffice. The FDA is a recognition that, sometimes, our common-law rules do not achieve that outcome, i.e., it is the equivalent of a statutory “BandAid” if our common-law rules fail. In other words, the FDA is a statutory fix that need only kick in when, as a matter of business practice, the company holding the funds does not generally collect the relevant address information, such that inequitable escheatment occurs. The text and context of the FDA—and especially the phrase “other similar written instrument”—connote that flexibility and do not suggest that the statute only and exclusively applies to a static category of products.
Whether the Court’s opinion indicates a future expansion of the FDA beyond the MoneyGram instruments remains to be seen, but it does seem fairly certain to us that the states will at least test the boundaries of the act in some capacity.
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If you have any questions, or would like additional information, please contact one of the attorneys on our Unclaimed Property Team.