In this corner, we have Delaware who has possession and custody of certain uncashed checks. In the other corner, we have Pennsylvania which is attempting to collect the money that it says was owed to it in the first place. In the middle, MoneyGram International is caught between the two warring states as they fight it out to decide which state gets the cash. At issue is over $10 million in uncashed checks that may or may not be money orders.
Typically, the reporting priorities make unclaimed property reportable first to the owner's state (as determined by the address on the holder's books and records) and, if there is no name or address, then to the holder's state of incorporation. However, uncashed money orders, which typically do not have a name or address, are payable to the state in which they are issued. This is the result of a federal law passed in 1974 in response to the 1972 Supreme Court ruling in Pennsylvania v. New York.
By mid-2015, Pennsylvania had conducted an audit, by an unnamed-in-the-complaint audit firm, in which it was discovered that certain checks remained uncashed. MoneyGram marketed these checks as "official checks" but Pennsylvania says are functionally money orders. According to Pennsylvania, MoneyGram sells two substantially similar products: money orders and official checks. Both require that the purchaser pay a transaction fee plus the face value of the check which is then pre-printed on the face of the check. MoneyGram does not collect the name or address of the purchaser of either the money order or the official check. Pennsylvania says the only differences between money orders and official checks are where they are marketed or sold and the typical face value (money orders are typically sold in retail stores for lower values while official checks are typically sold in banks for higher amounts). For both products, the amounts are immediately withdrawn from the purchaser's accounts and placed in MoneyGram accounts. MoneyGram is directly liable for the amounts.
In July 2015, Pennsylvania made a demand on Delaware for payment of these amounts. After an initial "preliminary analysis" was conducted by Delaware, the Delaware State Escheator determined that the items were in the proper custody of the State of Delaware. Like many holders seeking answers from Delaware, Pennsylvania says that it heard nothing further from the Delaware State Escheator for the remainder of 2015. In 2016, Pennsylvania made a second demand for payment. Delaware continued to refuse payment on the checks. On a call between the parties on February 22, 2016, Delaware made the claim that the checks are third party bank checks, not money orders, and thus reportable to Delaware. Pennsylvania filed this lawsuit to resolve the dispute between the states.
As support for its position that these official checks are in fact money orders or products substantially similar which fall under the federal law, Pennsylvania cited where Minnesota has transferred to Pennsylvania "official checks" previously erroneously remitted to it by MoneyGram. Pennsylvania also references two other institutions that have similar official checks which are reported according to the money order rules.
MoneyGram is already out the amounts paid to Delaware and does not wish to pay the amounts again to Pennsylvania. MoneyGram has stated that it will comply with the mutual decision of the states, or in the absence of such a decision, a court's decision on which state is entitled to the money. Meanwhile, Pennsylvania is seeking 12% interest and $1,000 per day penalties (and attorneys' fees and costs) from the company for remitting the checks to the wrong state.
Conflicting state claims often seem like a discussion fit for theoretical discussion in the halls of academia or drafting rooms for model acts. However, this case shows that there are real repercussions for holders when they pick the wrong state to remit property to. Much of the work being done this weekend in Dallas and throughout the process to revise the Uniform Unclaimed Property Act is specifically targeting the uncertainties and conflicts facing holders when they attempt to comply with the various state unclaimed property acts. Most holders prefer to do the right thing by reporting property to clean up its books, to prevent later claims and to comply with the law, but the inconsistent provisions between the states make this nearly impossible.
No matter the winner, Pennsylvania or Delaware, the real loser here is MoneyGram who attempted to comply with the confusing, burdensome and conflicting unclaimed property laws. After reporting checks and removing the cash from its own accounts, the company has been the subject of an audit, which historically are invasive and burdensome on companies even when there are no adverse findings. Presumably, if MoneyGram had paid the money to Pennsylvania, eventually Delaware would have audited the company and attempted to make its own claim for the uncashed checks despite payment to another state and then assessed its own penalties and interest provisions.