Delaware v. Pennsylvania and Wisconsin

MONEYGRAM OFFICIAL CHECKS AS “MONEY ORDERS” OR “TRAVELER’S CHECKS” UNDER THE FDA

Petitioner Delaware argues that MoneyGram Official Checks (“Official Checks”) are not “money orders” or “traveler’s checks;” therefore, they are not subject to the Federal Disposition of Abandoned Money Orders and Traveler’s Checks Act (“FDA”). Exceptions to Report of the Special Master at 16. Delaware maintains that the funds payable on unclaimed Official Checks properly escheated and should continue to be remitted to Delaware under the common law. Id. Delaware contends that, in the context of the FDA, the Court should read the terms money order and traveler’s check narrowly to mean only specific commercial products that are labeled as a money order or traveler’s check. Id. at 17. According to Delaware, this would exclude Official Checks because MoneyGram does not label them as money orders or traveler’s checks. Id. Delaware posits that MoneyGram chooses not to label its Official Checks in this way because MoneyGram sells the Official Checks to people who specifically want a different product meant for a different purpose. Id. at 48. Delaware argues that when Congress enacted the FDA the terms money order and traveler’s check referred specifically to the products that people without bank accounts or travelers would use for relatively small transactions, where the payer’s address was not kept by the seller. Id. at 25, 28. Delaware contends that if Congress had meant the FDA to apply to more than money orders and traveler’s checks, Congress would have used the broader term of art “prepaid drafts and notes.” Id. at 25. Delaware asserts that identifying money orders and traveler’s checks based on the label of the instrument is the type of “bright-line rule” that the Court prefers in escheatment cases. Id. at 46.

Respondents Pennsylvania and Wisconsin counter that Official Checks are money orders under the FDA, and the related funds should remit to the state in which the instruments were purchased, rather than to Delaware. Reply to Delaware’s exceptions to Report of Special Master at 27, 51. Pennsylvania and Wisconsin argue that Official Checks are money orders under the FDA because they are prepaid “drafts” issued by a business entity for sending money to a named payee. Id. at 22. According to Pennsylvania and Wisconsin, Congress enacted the FDA in part because transaction records for banks that issue or sell money orders and traveler’s checks do not show the last known address of the purchasers of such instruments. Id. at 29–30. Thus, Pennsylvania and Wisconsin contend that Official Checks are the kind of financial product that Congress wanted to address in the FDA since MoneyGram does not record the addresses of those who purchase Official Checks. Id. at 30. Moreover, Pennsylvania and Wisconsin contend that Delaware does not dispute that certain other MoneyGram products are money orders. Id. at 27-28. Pennsylvania and Wisconsin then argue that little, if anything, operationally differentiates the Official Checks from the aforementioned products. Id. In addition, Pennsylvania and Wisconsin assert that classifying Official Checks as money orders would promote “equity and predictability” because it would result in the distribution of funds payable on these unclaimed instruments to the states of purchase, not just to Delaware. Id. at 52. Further, Pennsylvania and Wisconsin argue that Delaware’s contention that the business labels of a financial product should determine whether the FDA applies to that particular product diminishes the Act’s predictability. See id. at 51-52.

MONEYGRAM OFFICIAL CHECKS AS “THIRD PARTY BANK CHECKS”

Delaware argues that Official Checks are “third party bank checks,” which are not subject to the FDA but are subject to escheatment under the common law. Exceptions to Report of the Special Master at 42–44. According to Delaware, “bank checks,” which are not subject to the FDA, must have a bank employee’s signature, as opposed to that of a purchaser, and consumers typically prefer to use these bank checks for relatively large purchases. Id. Thus, Delaware argues that since Official Checks become effective with the signature of a bank employee and are typically used in the same manner, they are third party bank checks. Id. at 43. Delaware contends that the fact that Official Checks are processed through a third-party is not dispositive since they are processed this way to save costs. Sur-Reply in support of exceptions to the Report of the Special Master at 19.

Pennsylvania and Wisconsin counter that even if the Court holds that Official Checks are not money orders, they are still not third party bank checks. Reply to Delaware’s exceptions to Report of Special Master at 40. Pennsylvania and Wisconsin argue that Official Checks do not meet the definition “of a third party bank check . . . [that] is a check that is drawn by a bank on a bank that has been indorsed over to a new . . . ‘third party’ payee.” Id. at 45. According to Pennsylvania and Wisconsin, Delaware’s argument conflicts with three expert opinions in this case, including the opinion of Delaware’s own expert, who concluded that the Official Checks do not meet the definition of third party bank checks. Id. at 44. Pennsylvania and Wisconsin argue that, based on the legislative history and text of the FDA, Congress did not likely consider any material difference between bank checks offered by third parties and bank checks issued directly by banks. Id. at 48. Thus, Pennsylvania and Wisconsin contend that the FDA’s legislative history reveals that Congress intended for financial instruments that banks sell, “[but are] paid through third parties”—as is the case with Official Checks—to fall under the jurisdiction of the FDA. Id.

MONEYGRAM OFFICIAL CHECKS AS “OTHER SIMILAR WRITTEN INSTRUMENTS” UNDER THE FDA

In the alternative, Delaware argues that even if the Court holds that the term third party bank check refers only to personal checks, thus excluding Official Checks, then Official Checks are still not “other similar written instruments” that would be subject to the FDA. Exceptions to Report of the Special Master at 42. Delaware contends that “the Court should [interpret the term] ‘other similar written instrument’ narrowly.” Id. Delaware argues that “Congress . . . intended [for] the term ‘other similar written instrument’” to apply to financial products that are money orders and traveler’s checks that use “alternat[ive] spellings of [the words] money order or traveler’s check.” Id. at 44. Delaware contends that reading the phrase “other similar written instrument” to mean only products labeled with such alternate spellings results in broadly applicable standards that ensure consistency in the Court’s escheatment cases. Id. at 46.

Pennsylvania and Wisconsin counter that even if the Court holds that Official Checks are not money orders, they still fall under the FDA as “other similar written instruments.” Reply to Delaware’s exceptions to Report of Special Master at 40. Pennsylvania and Wisconsin contend that since money orders and traveler’s checks are “instruments for the transmission of money” and that Official Checks are also “prepaid instruments for transmitting funds,” then under the plain meaning of the word “similar,” the latter are “similar written instruments.” Id. at 41. Moreover, Pennsylvania and Wisconsin argue that Delaware does not provide citations to the text of the FDA or its legislative history to support its contention that Congress believed there was an issue regarding alternate spellings of these commercial products. Id. at 43. Furthermore, Pennsylvania and Wisconsin contend that Delaware does not offer examples of any alternative spellings for money order products. Id. at 43.