State-vs.-State Unclaimed Property Dispute May be Heading to the Supreme Court

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In March, we issued an advisory highlighting a lawsuit filed by the Pennsylvania Treasury Department against the State of Delaware in federal district court seeking to recover uncashed official checks escheated to Delaware by MoneyGram.  (http://www.alston.com/advisories/money-gram/).  Essentially, the dispute centers upon whether MoneyGram’s official checks were subject to the Federal Disposition Act, in which case they would have been reportable to the state(s) in which they were issued rather than Delaware, the state of MoneyGram’s domicile.  In our prior advisory, we pointed out that it was notable that Pennsylvania did not file the action with the U.S. Supreme Court under its original jurisdiction to hear state-versus-state disputes.

On May 19, Pennsylvania sought an order by the district court suspending the case so that the state could submit to the U.S. Supreme Court an original jurisdiction motion for leave to file.  Both MoneyGram and Delaware have argued that the federal district court lacks subject matter jurisdiction, and that the case should properly be heard by the Supreme Court.  MoneyGram’s primary concern is that it is being subject to the demands of approximately 20 states for property that has already been escheated to Delaware, including Arkansas.  As MoneyGram states in its motion to dismiss, “this is a fight between states over property over which MoneyGram has no control, and in which MoneyGram has no interest, other than not wanting to be required to escheat the same property twice.”  This is a valid concern and one of the chief reasons why it makes sense for the Supreme Court to exercise original jurisdiction.

Similarly, Delaware, in seeking dismissal, has argued that “this is a suit by one State against another State and as such is subject to the original and exclusive jurisdiction of the Supreme Court.”

The federal district court judge granted Pennsylvania’s order on May 23 and has instructed the state to file a report within seven days of a ruling by the U.S. Supreme Court on the state’s motion for leave to file advising the court of the outcome.  We will continue to monitor this state-versus-state litigation as it progresses.