Arkansas and 28 other states are suing Delaware, seeking part of about $250 million in unclaimed funds. Justices of the U.S. Supreme Court heard oral arguments on Monday, the first day of its current term, in the case which began in 2016.
At issue is unclaimed money transfers sent through the company MoneyGram, which the plaintiffs accuse Delaware of claiming and using to balance its state budget.
Arkansas Solicitor General Nicholas Bronni argued Delaware is attempting to get around laws from the early 1970s by classifying the transfers as separate from “money orders.”
“Now, 50 years later, Delaware claims that it’s entitled to the exact same sort of windfall that led to the enactment of the [law]. To justify that, it argues that the [law] doesn’t cover instruments that function precisely like other money orders, but are marketed differently. But marketing strategies do not define commercial instruments and they don’t justify $250 million windfalls,” Bronni said.
Under a 1974 law, money orders that are unclaimed should be returned to the states in which they were purchased, rather than the state where the company handling them is incorporated, which in this case would be Delaware.
Arguing on behalf of Delaware, former U.S. Solicitor General Neal Katyal said the distinction is important, as certain money transfers do not require the recording of names and addresses. He argued Congress feared requiring that across the board would drive up the price of typically lower-value transfers, like money orders.
Katyal said states can easily fix the problem by requiring banks to share addresses of clients with companies like MoneyGram to help facilitate the returning of unclaimed funds.
“That means MoneyGram will now be under a duty to go and find those people and say, ‘Here, there’s this abandoned check,’ and if they can’t find them even with the address, then that information all goes into the state unclaimed database and then you can search by name and address,” Katyal said.
A special master in the case has recommended the Supreme Court side with Arkansas and the other plaintiffs. Attorney General Leslie Rutledge has estimated Arkansas would see about $650,000 returned if the high court rules in her favor.
Supreme Court opinions are typically handed out on the final day of its term in late June.
