Delaware Asks Supreme Court to Take MoneyGram Case

US Supreme CourtDelaware followed up its filings in the Federal District Court case with a Motion for Leave to File a Bill of Complaint with the U.S. Supreme Court in the case concerning official checks issued by MoneyGram. In late April, Delaware and the holder MoneyGram filed motions to dismiss a federal district court case filed by Pennsylvania, saying that the case properly belongs before the U.S. Supreme Court under its original jurisdiction of controversies between states. In late May, Delaware file a Motion with the U.S. Supreme Court asking for them to take the case on the same basis.

Delaware adds Wisconsin to the case, as it has also sued the state over the same fact pattern. Wisconsin sued Delaware in Wisconsin District Court; Delaware has until July 5, 2016, to respond to that suit. In its filings to the Supreme Court, Delaware indicated its intent to file substantially the same response it did to Delaware, stating that the Supreme Court has exclusive jurisdiction over a dispute between the states and that Delaware does not have substantial contacts with Wisconsin.

Delaware claims that the demands by Pennsylvania, Wisconsin, and presumably the other states involved in the MoneyGram audit are "an attack on the sovereignty of Delaware to govern its corporate citizens" and that "fundamental State fiscal concerns are necessarily implicated." Delaware State Escheator David Gregor says that this case ultimately impacts the MoneyGram official checks worth hundreds of millions of dollars.

While holders may be entertained by the states duking it out over property that only a handful of holders may possess and concede is unclaimed property, there could be substantial impacts for all holders should the U.S. Supreme Court decide to take the case and ultimately rule on the merits. While not probable, the Court could upend the general priority rules applicable to all holders. More probable is explicit instructions that the priority rules apply not only to disputes between the states but also to disputes between holders and the states. This could affect strategy and outcomes in ongoing multi-state audits and compliance programs for all holders.

This case is also another step to the broader awareness of unclaimed property among the legal and financial communities. In Taylor v. California, Justices Alito and Thomas indicated that they would be receptive to an unclaimed property case, particularly to address due process concerns. Increased attention on the dollar amounts in controversy could bring further action by Congress, stepping in to provide additional complexity or one-off exceptions similar to money orders in controversy here. Meanwhile, any movement could change the progress being made by the Uniform Law Commission's effort for a revised uniform model act, scheduled for a final reading and approval this summer. At the least, it should provide for interesting conversation at next week's National Association of State Treasurers meeting, where treasurers and unclaimed property officials from almost all states will meet to discuss developments in the industry.

See Also:
Nine Year Unclaimed Property Audit Leads to Federal Lawsuit
Recent Litigation Spotlights Due Diligence Efforts (or Lack Thereof)
Overreaching State Authority in Unclaimed Property Audits