Seeking
to bypass lower courts, a number of states have asked permission to sue each
other directly in the Supreme Court in a high-stakes fight over millions of
dollars’ worth of unclaimed property. Delaware wants to sue two states, one of those states — Wisconsin — wants to sue Delaware, and twenty-one other states also want to sue Delaware.
At issue is which state has authority to claim ownership of
an unclaimed check-like instrument that works as if it were
a money order or traveler’s check, but is issued mainly by a bank or other
financial institution in larger amounts, compared with the
items issued by convenience stores or small businesses in smaller
sums. Delaware claims as its own all of these different
instruments if unclaimed and if originally issued by a company with
its legal home in Delaware, no matter where the instrument was issued.
The core legal issue in each of the new filings is whether a 1974 law
with an assignment of priority of state ownership for unclaimed tangible
property applies to the new instrument, which some 1,900 banks or other
institutions across the country are using instead of cashier’s or teller’s
checks. Delaware says the law does not apply; the other states disagree.
The Supreme Court has issued three rulings on competing state claims to
unclaimed intangible property; Congress has overruled one of those, in
a 1974 law known as the Disposition of Abandoned Money Orders and
Traveler’s Checks Act. That law is at the center of the cases that have
reached the Court under its “original” jurisdiction — that is, its authority to
decide, in the fashion of a trial court, a legal dispute not decided by a lower
court. This jurisdiction is often implicated in resolving disputes
between states — as in the new filings over unclaimed property.
The Court has no binding obligation to take on such a case.
However, if it does, it customarily names a “special master” to act
like a junior judge to gather facts and make a recommendation for a
decision. A special master’s report is not final unless it becomes the
ruling of the Supreme Court.
While Delaware’s claims are at the center of this new financial fight
between the states, the controversy actually turns on the specific financial
instrument involved, and the Texas company that has been issuing those items,
which it calls “official checks.” That company, MoneyGram Payments
Systems, Inc., has its main business office in Texas but it is incorporated in
Delaware. It does business in all fifty states.
Its main business is as a kind of financial partner to banks and other
institutions that prefer not to issue cashier’s checks or teller’s checks in
their own name. MoneyGram does it for them, so it acts as the financial
backer of its “official checks.”
That kind of transaction is conducted for some of the same reasons
that stores do a business in money orders or traveler’s checks. The idea
is that, in the form of a money order or traveler’s check, the piece of paper
is a guaranteed form of payment that works like cash; in other words, it won’t
“bounce” for lack of sufficient funds behind it. Typically, this kind of
instrument is in fairly small amounts.
But some financial institutions want to do business in larger amounts,
so MoneyGram steps in and issues official checks, for which it receives fees
from the financial institutions. MoneyGram also makes money by investing
money that the financial institution has put up for the checks, pending the
clearing (cashing, as it were) of the official checks.
If its official checks are abandoned or not claimed, MoneyGram has an
understanding with Delaware that it will hand over the money involved to
Delaware for that state’s own use. That is the way Delaware’s legal
officials interpret prior Supreme Court rulings, which they say remain intact
because the priority they assigned — to the corporate home of the issuing firm
— was not overturned by the 1974 law. That law, from Delaware’s
perspective, dealt primarily with money orders and traveler’s checks, not the
kind of instrument that is at the core of its business.
On May 26, Delaware filed its own request to
pursue a lawsuit directly in the Supreme Court (Delaware v. Pennsylvania and
Wisconsin) after those two states had filed lawsuits against
Delaware in federal district courts — the normal path for federal law
disputes. Delaware has been seeking to have those lower court cases
dismissed, on the theory that this kind of dispute between states belongs in
the Supreme Court under its “original” jurisdiction.
In answering Delaware’s complaint, Wisconsin asked the Court to allow it
to counter-sue Delaware in the Court.
Then, on Thursday, a group of twenty-one states filed their own original
complaint (which has not yet been docketed) in the Court, making the same claim
as Wisconsin: the unclaimed official checks belong to the states where they
were purchased, not to Delaware as MoneyGram’s corporate home.
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