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Justices Skeptical of Delaware’s Claim to MoneyGram Millions (1)

Oct. 3, 2022, 5:56 PMUpdated: Oct. 3, 2022, 8:51 PM

Several US Supreme Court justices appeared skeptical of Delaware’s argument that it—and not other states—is the rightful recipient of hundreds of millions in unclaimed funds from Delaware-based MoneyGram, the second-largest money transfer company in the world.

Justice Clarence Thomas opened questioning at argument Monday, asking Delaware attorney Neal Katyal of Hogan Lovells US LLP whether the state’s reading of a 1974 federal statute is too narrow. What MoneyGram calls “official checks” are bank drafts just like the money orders and similar written instruments named in the statute, he said.

Katyal warned that broadening the definition of money orders could blow up the statute to cover all kinds of financial transactions Congress didn’t intend to include.

Unclaimed property is particularly important to Delaware, making up its third-largest revenue source and accounting for $448.6 million of its $5.4 billion in 2021 revenue. Thirty other states are challenging Delaware’s position and are seeking some of MoneyGram’s unclaimed millions.

Chief Justice John G. Roberts Jr. seemed to stand up for Delaware, asking Arkansas Solicitor General Nicholas J. Bronni, arguing for the 30 states, why the states don’t change their laws to ensure they get the unclaimed funds. “That would solve your problem just like that,” he said, snapping his fingers.

‘Weird’ Statute

When the states brought the case before the justices in 2016, the court assigned US Court of Appeals for the Second Circuit Senior Judge Pierre Leval as special master to handle the trial-like portions of the proceedings. Leval filed an interim report in July 2021 recommending the court find that MoneyGram’s transfers are covered by the 1974 Disposition of Abandoned Money Orders and Traveler’s Checks Act because they are “money orders” or “other similar written instruments.” As such, any unclaimed funds should be returned to the state where the purchase occurred, rather than the state where the issuer is based.

Katyal said when Congress passed the act it was concerned with the burden of imposing address collection requirements on every small-figure money order.

“If that was so, they certainly did a weird thing in terms of the statute that they wrote,” the newest addition to the court, Justice Ketanji Brown Jackson, said on her first day of arguments. She understood that Congress was concerned about these funds being equitably distributed among the states, she said.

Much of the argument was spent figuring out how to classify MoneyGram’s checks and exploring what exactly fits into the statute.

Katyal stressed that only transactions labeled “money orders” are money orders, and it can’t be a catchall term for every transfer that is prepaid, as the defendant states argued. Instead he said the “other similar written instruments” phrase only covers different spellings—traveler’s check versus traveller’s cheque—or Congress’s concern that money orders might come to be called “Western Unions” generically.

“I take your point,” Justice Neil M. Gorsuch said. “But does it underline another point that may be problematic, and that is that labels cannot control substance in our analysis here.” He asked why labels are good for some purposes but not for others.

Labels help banks know what to do if they have unclaimed funds, but sweeping too many things into the same label “would be a disaster,” Katyal said.

Katyal distinguished MoneyGram official checks from money orders, saying only the former are sold exclusively at banks, require the purchaser to have an account, and carry the bank’s signature.

“It feels as though you’re picking things that make you succeed in the case,” Justice Elena Kagan told Katyal. “But I could pick three other things that make Arkansas succeed.”

Damages Theory Undeveloped


The argument included a lot of discussion about what else might fall under the act’s umbrella, with Justice Samuel A. Alito Jr. asking whether tellers checks, cashiers checks, prepaid VISA cards, and gift cards are covered.

Bronni said he needed more facts to be sure, leading Kagan to ask why he seemed to be “trying very hard to exclude various kinds of products.”

Bronni said Congress wanted to limit the “other similar written instruments” language to include only those products that “share some of the core characteristics” with money orders and traveler’s checks.

One not-yet-developed issue could put a snag in the other states’ plans even if the court agrees that Delaware shouldn’t have been getting these funds for the past two decades.

Gorsuch asked Bronni if he was after money damages and not just a declaration of rights to future funds. “If we were to agree with you, what happens next and under what theory?”

Bronni answered that he believes there is an implied right of action under the statute, but that the parties haven’t addressed it yet because the special master split off any discussion of damages from the merits.

The case is Delaware v. Pennsylvania, U.S., No. 22O145, argued 10/3/22.

(Updated with additional reporting throughout.)

To contact the reporter on this story: Perry Cooper in New Bern, N.C. at pcooper@bloomberglaw.com

To contact the editors responsible for this story: Kimberly Wayne at kwayne@bgov.com; Kathy Larsen at klarsen@bloombergtax.com