Supreme Court decides MoneyGram unclaimed property case

On Feb. 28, 2023, the Supreme Court decided an important state and local tax case related to unclaimed property. In Delaware v. Pennsylvania, et. al., the Supreme Court unanimously ruled in favor of 30 states and against Delaware. The court held that abandoned MoneyGram agent and teller’s checks should escheat to the jurisdiction where the check was purchased rather than to Delaware, the jurisdiction where MoneyGram is incorporated.

Crowe observation

One reason this case is noteworthy is because the last time the Supreme Court resolved an unclaimed property dispute between jurisdictions was in 1993 in Delaware v. New York.¹

Case background

MoneyGram is a Delaware corporation that offers various types of financial products and check outsourcing services, including agent checks and teller’s checks (the court collectively referred to these as the disputed checks). The disputed checks are prepaid financial instruments with a named payee. MoneyGram, as a regular business practice, does not keep records of addresses for either the payee or purchaser. Due to the lack of addresses, MoneyGram historically has escheated abandoned, disputed checks to Delaware as its state of incorporation in accordance with the common law priority rules set forth in the 1965 U.S. Supreme Court case, Texas v. New Jersey.²

Pennsylvania, Wisconsin, and Arkansas, joined by 27 other states, sued arguing that the MoneyGram disputed checks fall under the 1974 Disposition of Abandoned Money Orders and Traveler's Checks Act (also referred to as the Federal Disposition Act or FDA) as “similar written instrument[s]” and should, instead, escheat to the jurisdiction where purchased.

The court acknowledged that the FDA does not define money orders, but it disagreed with Delaware’s arguments to the contrary and ruled that the MoneyGram disputed checks are sufficiently similar to money orders such that they are covered under the FDA. The court cited two key aspects of disputed checks to support its decision:

1. MoneyGram disputed checks operate in the same manner as money orders. They are prepaid financial instruments used to transfer funds to a named payee.
2. MoneyGram disputed checks implicate the inequitable escheatment feature of money orders that Congress attempted to address with the FDA. The alternative escheatment rules established by the FDA work to more equitably allocate abandoned, unknown address property across the states.

The court has appointed a special master to determine the amounts Delaware owes to each of the 30 states that filed suit. According to these states, MoneyGram has escheated approximately $250 million to Delaware between 2002 and 2017.

Looking ahead

Companies that issue instruments similar to the MoneyGram disputed checks should consider the court’s decision and how it might impact prospective unclaimed property compliance. Companies that hold property substantially similar to the disputed checks should consult their advisers to determine whether abandoned and unclaimed property should escheat to the state that the instrument was purchased or to the state where the company is legally domiciled.

¹ Delaware v. New York, 507 U.S. 490 (1993)
² Texas v. New Jersey, 379 U.S. 674 (1965)