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Litigation update: Pennsylvania files complaint and seeks ruling that “official checks” are treated like money orders in suit against Delaware and MoneyGram, Part 2

Posted By Contribution from Sam Schaunaman, J.D. and GRAC member, Friday, June 24, 2016

Treasury Department of the Commonwealth and Treasurer Timothy Reese, Plaintiffs v. Delaware State Escheator David Gregor and MoneyGram Payment Systems Inc., Defendants (U.S. District Court for Middle District of Pennsylvania)


Part 1 of this article provides background on lawsuit filed by the state of Pennsylvania against MoneyGram Payment Systems Inc. (MoneyGram), and the state of Delaware, as well as a separate suit filed against the same defendants by the state of Wisconsin.


MoneyGram’s Motion to Dismiss

Defendant MoneyGram filed a Motion to Dismiss the lawsuit brought by Pennsylvania. In an April 25, 2016 brief supporting its motion, the company explained how the dispute arose and why it believes the lawsuit lacks merit to proceed.


According to allegations made in MoneyGram’s Motion to Dismiss, the dispute began in 2014 when Arkansas demanded the company pay substantial sums to that state for uncashed official checks that had already been escheated to Delaware. MoneyGram declined and encouraged Arkansas to resolve the matter with Delaware. Arkansas refused, informing MoneyGram that the state intended to audit the company and “request that every state join” the audit, unless the state’s demands were met. As a result, approximately 20 states have made similar demands of MoneyGram.


MoneyGram’s brief raises numerous issues, two of which are especially noteworthy:

  • The company alleges that the District Court does not have subject matter jurisdiction. It cites 28 U.S. Code sec. 1251(a), which says, in part, that the U.S. Supreme Court “…shall have original and exclusive jurisdiction of all controversies between two or more states.”
  • The company also alleges that the plaintiffs’ claims violate MoneyGram’s constitutional due process rights. It cites the U.S. Supreme Court case of Western Union Telegraph Co. v. Pennsylvania, and claims that requiring MoneyGram (as opposed to Delaware) to pay Pennsylvania for property already escheated to another state would improperly result in the company paying a single debt more than once, taking its property without due process of law. MoneyGram notes that the Supreme Court in the Western Union case stated, “Our Constitution has wisely provided a way in which controversies between states can be settled without subjecting individuals and companies affected by those controversies to a deprivation of their right to due process of law. Article III, Section 2 of the Constitution gives this court original jurisdiction of cases in which a State is a party.”

Delaware’s Motion to Dismiss

Defendant David Gregor, Delaware state escheator, also filed a Motion to Dismiss. In an April 20, 2016 brief in support of the motion, it is stated that the case should be dismissed because it essentially is a disagreement between two states, Pennsylvania and Delaware. Therefore, under 28 U.S. Code sec. 1251(a) and other authorities cited, it is argued that the U.S. Supreme Court has original and exclusive jurisdiction over the dispute.   


Supreme Court motions

Despite the disagreement between states, it appears there is one thing on which they agree. They all contend that the U.S Supreme Court (Supreme Court) is the appropriate venue for the dispute. In recent weeks, there have been multiple motions to the U.S. Supreme Court related to the MoneyGram disputes:

  • On May 26, 2016, Delaware filed a motion, asking the Supreme Court to hear its dispute against Pennsylvania and Wisconsin.
  • On June 3, 2016, Wisconsin filed a motion, making a request to the Supreme Court, seeking leave to file a counterclaim against Delaware.
  • On June 9, 2016, 21 states filed a motion, asking the court to hear their dispute against Delaware. The states note that hundreds of millions of dollars are at stake.  For example, they state that between May 2011 and March 2015, at least $162 million in unclaimed funds attributable to MoneyGram official checks went uncashed or were not redeemed. They are asking the court, among other things, to: (i) declare that funds payable on unclaimed MoneyGram official checks sold in their states should be remitted to them, rather than Delaware, (ii) instruct Delaware to turn over funds for unclaimed official checks that have already escheated by MoneyGram, and (iii) award damages, including interest.
  • On June 13, 2016, Pennsylvania filed a motion with the Supreme Court, stating that it concurs in Delaware’s Motion for Leave to file Bill of Complaint, and asking the Supreme Court to grant Delaware’s motion.

The U.S. Supreme Court will review the motions and decide whether to hear the cases or decline. UPPO will continue to monitor and report on developments surrounding these cases as they occur.


About the contributor

Sam Schaunaman, senior manager at Ryan AUP and member of the UPPO Government Relations and Advocacy Committee, contributes to UPPO’s monthly litigation update blog posts. Schaunaman has over 26 years of unclaimed property experience in all aspects of unclaimed property and is a frequent author of unclaimed property articles and whitepapers. Schaunaman is a member of the Oklahoma Bar Association and American Bar Association.    


Disclaimer: This case summary contains a general description of the case, and neither UPPO nor Ryan, or any of their affiliated or related entities, by means of this summary, is rendering business, financial, legal, tax, reporting or compliance or other professional advice or services.  This summary blog is not a substitute for such professional advice.

Tags:  Delaware  litigation  money orders  MoneyGram  official checks  Pennsylvania  unclaimed property 

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