On February 28, 2023, the United States Supreme Court issued a decision in Delaware v. Pennsylvania, No. 145, Orig., holding that certain instruments offered by MoneyGram are similar to money orders and are therefore covered by the Federal Disposition Act (FDA). Because the FDA applies to these instruments, when the proceeds from those instruments become abandoned, the proceeds escheat to the State where the instrument was purchased.
Among the financial products MoneyGram offers are Agent Checks and Teller’s Checks. These products generally require a purchaser to prepay the amount of the instrument plus a fee. MoneyGram then holds the proceeds until the payee presents the instrument for payment. MoneyGram keeps only limited records about these transactions; it records where the product was sold, but not information about the purchaser or the payee. When the proceeds of these products become abandoned, MoneyGram gives the abandoned proceeds from those instruments to the State of its incorporation, Delaware.
Several States sued Delaware under the Supreme Court’s original jurisdiction to challenge Delaware’s escheatment of abandoned proceeds from MoneyGram’s Agent Checks and Teller’s Checks. The Supreme Court appointed a Special Master to the dispute. The Special Master issued several reports, which ultimately concluded that the Agent Checks and Teller’s Checks are excluded from the FDA as “third party bank checks,” and that abandoned proceeds from those products would generally escheat to Delaware under the common law.
In a unanimous decision, the Supreme Court held that Agent Checks and Teller’s Checks are covered by the FDA and, as a result, abandoned proceeds would generally escheat to the State where the instrument was purchased. As the opinion put it, “[t]he plain text of the FDA applies to not only money orders and traveler’s checks but also written instruments that are ‘similar’ to those financial products.” Although the FDA does not define the term “money order,” the Agent Checks and Teller’s Checks operate and function similar to how a “money order” is ordinarily defined and to how the Supreme Court has defined a “money order” in prior escheatment cases. Beyond that, the FDA targets instruments such as the Agent Checks and Teller’s Checks because “they inequitably escheat,” given that MoneyGram does not keep adequate records to follow the common law’s escheatment rules. Because the FDA governs the escheatment of Agent Checks and Teller’s checks, the common law is displaced, and the abandoned proceeds will generally escheat to the State where the product was purchased.
The Supreme Court rejected Delaware’s argument that the checks are “third party bank checks” for two reasons. First, the Court held that Delaware and the Special Master failed to offer a meaningful definition of “third party bank checks” that would persuade the Court to hold that the Agent Checks and Teller’s Checks are not otherwise “similar” to money orders. Second, the Court held that the FDA’s legislative history confirmed that the Agent Checks and Teller’s Checks were not intended to be classified as “third party bank checks.” Justices Thomas, Alito, Gorsuch, and Barrett did not join the portion of the opinion discussing the FDA’s legislative history.
Justice Jackson authored the opinion for a unanimous court. The opinion was her first written majority opinion.
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