Delaware v. Pennsylvania

by Supreme Court of the United States

Note: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

Syllabus

DELAWARE v. PENNSYLVANIA ET AL.
ON EXCEPTIONS TO REPORTS OF SPECIAL MASTER
No. 145, Orig. Argued October 3, 2022—Decided February 28, 2023^[1]

A State may take custody of abandoned property located within its borders; this process is commonly known as “escheatment.” When abandoned property is intangible, however, the lack of a physical location means that multiple States may have arguable claims. In these cases, the question is which States have the right to escheat two financial products sold by banks on behalf of MoneyGram: Agent Checks and Teller’s Checks (collectively, Disputed Instruments). Operating much like money orders, both products are prepaid financial instruments used to transfer funds to a named payee. When these prepaid instruments are not presented for payment within a certain period of time, they are deemed abandoned, and, currently, MoneyGram applies the common-law escheatment practices outlined in Texas v. New Jersey, 379 U. S. 674. There the Court established the rule that the proceeds of abandoned financial products should escheat to the State of the creditor’s last known address, id., at 680–681, or where such records are not kept, to the State in which the company holding the funds is incorporated, id., at 682. Because MoneyGram does not, as a matter of regular business practice, keep records of creditor addresses for the two products at issue in this case, it applies the secondary common-law rule and transmits the abandoned proceeds to its State of incorporation, i.e., Delaware.

Multiple States invoked this Court’s original jurisdiction to determine whether the abandoned proceeds of the Disputed Instruments are governed by the Disposition of Abandoned Money Orders and Traveler’s Checks Act (Federal Disposition Act or FDA) rather than the common law. The FDA provides that “a money order … or other similar written instrument (other than a third party bank check)” should generally escheat to “the State in which such … instrument was purchased.” 12 U. S. C. §2503. This Court consolidated the actions and appointed a Special Master. In his initial report, the Special Master concluded that the Disputed Instruments were covered by the FDA. Following oral argument in this Court, he reassessed that decision and issued a second report, concluding that many of the Disputed Instruments were or could be “third party bank check[s],” which are excluded from the FDA and would generally escheat to Delaware under the circumstances.

Held: The Disputed Instruments are sufficiently “similar” to a money order to fall within the FDA. Pp. 9–23.

(a) The parties disagree whether the Disputed Instruments qualify as “money order[s]” or “other similar written instrument[s] (other than a third party bank check)” under §2503. Because a finding that the Disputed Instruments are similar to money orders would be sufficient to bring the Disputed Instruments within §2503’s reach, the Court need not decide whether they actually are money orders. Instead, the Court concludes that the Disputed Instruments are sufficiently “similar” to money orders so as to fall within the “other similar written instrument” category of the FDA. Pp. 9–16.

(1) The Disputed Instruments share two relevant similarities with money orders. First, they are similar in function and operation. Although the FDA does not define “money order,” a variety of dictionary definitions contemporaneous with the Act’s passage universally define a “money order” as a prepaid financial instrument used to transmit a specified amount of money to a named payee. And this Court’s common-law precedents—the backdrop against which the FDA was enacted—are in accord with that definition. In addition, the features that money orders share with the Disputed Instruments, e.g., the fact that they are prepaid, make them likely to escheat, and thus implicate the FDA in the first place.

Second, due to the recordkeeping practices of the entity issuing and holding on to the prepaid funds, abandoned money orders and the Disputed Instruments both escheat inequitably under the Court’s common-law rules. The FDA was passed to abrogate this Court’s common-law precedents precisely because, for certain instruments like money orders, the entities selling such products often did not keep adequate records of creditor address information as a matter of business practice, which meant that the common law’s secondary rule mandating escheatment to the State of incorporation always applied. The FDA prevents this “windfall” to the State of incorporation by instead adopting a place-of-purchase escheatment rule that distributes escheats “as a matter of equity among the several States.” §§2501(3), 2503. Because MoneyGram does not keep records of creditor addresses as a matter of business practice, application of the common law to the Disputed Instruments would produce the same inequitable result that the FDA is designed to remedy. Pp. 9–14.

(2) Delaware’s contrary arguments are unpersuasive. First, the State contends that “money order” refers to a specific commercial product labeled as such on the instrument and sold to low-income individuals in small amounts. Unable to present a dictionary definition that cabins the term as described, Delaware attempts to highlight the various ways in which the Disputed Instruments differ from money orders. But Delaware never explains how the differences are relevant to the assessment of similarity for FDA purposes or how such differences undermine the similarities previously outlined above.

In an effort to make those proffered differences more relevant, Delaware asserts that the FDA was actually concerned with dissuading States from adopting costly recordkeeping requirements that would then be passed on to consumers. Delaware argues that the Disputed Instruments are unlike money orders in that the consumers of the Disputed Instruments are typically more capable of absorbing the cost of recordkeeping requirements. The text of the FDA, however, does not support this argument.

Finally, Delaware’s suggestion that §2503 be read narrowly to avoid creating surplusage and sweeping in all sorts of unintended financial products goes too far. While there is some merit to Delaware’s concern about a broad definition of “money order,” this Court need not actually define that term, as it suffices under the FDA that the instruments in question be “similar” to a money order. Pp. 14–16.

(b) Both Delaware and, to some extent, the Special Master, claim that even if the Disputed Instruments qualify as “other similar written instrument[s]” under the FDA, they are also “third party bank check[s],” which are expressly excluded from the FDA. The problem with this argument is that the FDA does not define that phrase. Nor does that phrase have a commonly accepted meaning. Delaware insists that the term means a check signed by a bank officer and paid through a third party. But the State provides no theory as to why it matters to the FDA’s escheatment rules whether a financial instrument is or is not paid through a third party. In his Second Interim Report, the Special Master offered the view that “third party bank check” was intended to exclude from the FDA’s reach certain well-known financial instruments upon which a bank may be liable, specifically, cashier’s checks, certified checks, and teller’s checks and thus, to the extent a bank shares liability with MoneyGram on a Disputed Instrument, that product should likewise be characterized as a third party bank check and thereby excluded from the FDA. The Special Master did not explain why Congress would use an amorphous term to describe well-known financial products, while also calling out other well-known instruments, such as money orders, by name in the FDA. Nor did the Special Master explain how bank liability relates to the FDA’s escheatment rules in any meaningful way. Bank liability also does not seem to be a tipping point for triggering an exclusion from the FDA given that banks can be liable on money orders and those products are expressly covered by the statute. Finally, the legislative history of the FDA does not support the contention that the Disputed Instruments constitute “third party bank check[s].” The well-documented circumstances surrounding the insertion of the phrase into §2503 support the conclusion that, whatever the intended meaning of “third party bank check,” it cannot be read broadly to exclude from the FDA large swaths of prepaid instruments that escheat inequitably due to the business practices of the company holding the funds. Pp. 17–22.

Exceptions to Special Master’s First Interim Report overruled; First Interim Report and order adopted to the extent consistent with this opinion; and cases remanded.

Jackson, J., delivered the opinion for a unanimous Court with respect to Parts I, II, III, and IV–A, and the opinion of the Court with respect to Part IV–B, in which Roberts, C. J., and Sotomayor, Kagan, and Kavanaugh, JJ., joined.

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1. Together with No. 146, Orig., Arkansas et al. v. Delaware, also on exceptions to reports of Special Master.

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