morris nichols

MORRIS NICHOLS’ DELAWARE UNCLAIMED PROPERTY LAW COMPANION

2013 - 2014

Courtesy of the Unclaimed Property Counseling Group

Morris, Nichols, Arsht & Tunnell LLP

Copyright © 2013 Morris, Nichols, Arsht & Tunnell LLP

Preface to

Morris Nichols’ Delaware Unclaimed Property Law Companion / 2013-2014

Morris Nichols’ Delaware Unclaimed Property Law Companion (the “Companion”) is a practical and convenient resource for our clients and friends to use in connection with their Delaware unclaimed property matters. While we make no claim to original U.S. or Delaware state government works included in the Companion, we think we have assembled a collection of materials that will be useful to those engaged in a Delaware unclaimed property audit or voluntary disclosure, as well as to those who may want to know more about Delaware’s unclaimed property laws, regulations, and procedures.

Michael Houghton, ed.(302) 351-9215

[email protected]

___________________________

Highlights

(i) the Delaware Unclaimed Property Statute

(ii) Delaware Unclaimed Property Regulations

(iii) various State materials and forms for holders and filers of unclaimed property

(iv) Uniform Unclaimed Property Acts

(v) seminal U.S. Supreme Court, Circuit Court and state cases relating to unclaimed property

How to Use

The Companion is divided into six sections identified (and abbreviated) as Statutes (S), Regulations (R), State Materials (SM), Forms (F), Uniform Acts (UA), and Cases (C). Printed on the back of the Companion are coded tabs that correspond to and will help you easily access these sections. A complete listing of all materials by page number is provided in the Table of Contents.

TABLE OF CONTENTS MORRIS NICHOLS’ DELAWARE UNCLAIMED PROPERTY LAW COMPANION / 2013-2014

TABLE OF CONTENTS

STATUTES (S) ..................................................................................................................................6

DELAWARE ABANDONED AND UNCLAIMED PROPERTY (AUP) STATUTE: TITLE 12 CHAPTER 11. ESCHEATS ................................................................................6

§ 1101 - § 1116 Subchapter I. Intestate Property ...................................................... 6

§ 1130 - § 1177 Subchapter II. Abandoned or Unclaimed Property ....................... 14

§ 1180 - § 1194 Subchapter III. Unclaimed Life Insurance Funds ........................... 42

§ 1197 - § 1212 Subchapter IV. Other Unclaimed Property ...................................... 50

§ 1220 - § 1224 Subchapter V. Escheat of Postal Savings System Accounts ...... 62

REGULATIONS (R) .......................................................................................................................66

Abandoned or Unclaimed Property Voluntary Disclosure Agreement Program ........ 67

Policies and Procedures Regarding FOIA Requests ..................................................... 70

Regulation on Practice and Procedure for Appeals of Determinations

of the Audit Manager ...................................................................................................75

Regulation on Practice and Procedure for Establishing Running of the

Full Period of Dormancy for Certain Securities Related Property .......................... 82

Regulation on Practices and Procedures for Record Examinations by the

State Escheator ............................................................................................................85

STATE MATERIALS (SM) .............................................................................................................88

Contact Information for Delaware AUP ...........................................................................89

Delaware AUP Deadlines ..................................................................................................89

Delaware AUP Holder Reporting Escheat Handbook .................................................... 90

FORMS (F) .…………………………………………………… ......................................................108

AP1 State of Delaware Report of Unclaimed or Abandoned Property ....................... 109

Instructions for Completing AP1 Form ......................................................................... 115

AP2 State of Delaware Report of Unclaimed or Abandoned Property

Detail Sheet ........................................................................................................... 117

TABLE OF CONTENTS MORRIS NICHOLS’ DELAWARE UNCLAIMED PROPERTY LAW COMPANION / 2013-2014

Instructions for Completing AP2 Form ......................................................................... 118

Form VDA-1 Disclosure and Notice of Intent to Voluntarily Comply

Abandoned Property Law Pursuant to 12 Del. C. § 1177 .................................... 120

Form VDA-2 Voluntary Self Disclosure Agreement ..................................................... 123

AP DE-1 Disclosure and Notice of Intent to Voluntarily Comply with Abandoned

Property Law .........................................................................................................127

AP DE-2 Voluntary Self Disclosure Agreement ............................................................128

Publication Deadline Waiver Form ................................................................................131

State of Delaware Unclaimed Property Filing Extension Request ............................. 132

UNIFORM ACTS (UA) ..................................................................................................................134

UNIFORM UNCLAIMED PROPERTY ACTS ...................................................................135

1981 UNIFORM ACT ........................................................................................................135

1995 UNIFORM ACT ........................................................................................................192

CASES (C) .....................................................................................................................................228

Texas v. New Jersey, 379 U.S. 674 (1965) ................................................................229

Pennsylvania v. New York, 407 U.S. 206 (1972) .......................................................235

Delaware v. New York, 507 U.S. 490 (1993) ..............................................................244

New Jersey Retail Merchants Association v. Sidamon-Eristoff,

669 F.3d 374 (3d Cir. 2012) ......................................................................................257

Am. Express Travel Related Services, Inc. v. Sidamon-Eristoff,

669 F.3d 359 (3d Cir. 2012) ......................................................................................284

Staples, Inc. v. Cook, 35 A.3d 421 (Del. Ch. 2012) ...................................................300

CONTACT INFORMATION ........................................................................................................308

MORRIS NICHOLS’ DELAWARE UNCLAIMED PROPERTY LAW COMPANION

2013 - 2014

Courtesy of the Commercial Law Counseling Group Morris, Nichols, Arsht & Tunnell LLP


S Statutes DE AUP STATUTE: TITLE 12 CHAPTER 11. ESCHEATS

Subchapter I. Intestate Property

§ 1101. Escheat of estates ................................................................................7

§ 1102. Escheator of the State ..........................................................................7

§ 1103. Suit to determine escheat .....................................................................7

§ 1104. Final hearing and order .........................................................................8

§ 1105. Presumption of death ............................................................................8

§ 1106. Seizure of escheated personalty ...........................................................8

§ 1107. Sale of seized property by sheriff ..........................................................9

§ 1108. Return of writ of seizure ........................................................................9

§ 1109. Lease, retention or sale of real property ...............................................9

§ 1110. Conveyance of realty to purchaser after sale ........................................9

§ 1111. Nature of title of purchaser of realty ....................................................10

§ 1112. Proceeds of sale .................................................................................10

§ 1113. Claims to proceeds of sale ..................................................................10

§ 1114. Recovery of credits or property of the intestate not included in the

Court’s initial escheat order ................................................................... 11

§ 1115. Expenses of Escheator ....................................................................... 11

§ 1116. Conveyance of certain escheated real property previously owned

by a religious body ............................................................................ 11

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Subchapter I. Intestate Property

§ 1101. Escheat of estates ................................................................................7

§ 1102. Escheator of the State ..........................................................................7

§ 1103. Suit to determine escheat .....................................................................7

§ 1104. Final hearing and order .........................................................................8

§ 1105. Presumption of death ............................................................................8

§ 1106. Seizure of escheated personalty ...........................................................8

§ 1107. Sale of seized property by sheriff ..........................................................9

§ 1108. Return of writ of seizure ........................................................................9

§ 1109. Lease, retention or sale of real property ...............................................9

§ 1110. Conveyance of realty to purchaser after sale ........................................9

§ 1111. Nature of title of purchaser of realty ....................................................10

§ 1112. Proceeds of sale .................................................................................10

§ 1113. Claims to proceeds of sale ..................................................................10

§ 1114. Recovery of credits or property of the intestate not included in the

Court’s initial escheat order ................................................................... 11

§ 1115. Expenses of Escheator ....................................................................... 11

§ 1116. Conveyance of certain escheated real property previously owned

by a religious body ............................................................................ 11

TITLE 12 §§ 1101–1116 MORRIS NICHOLS’ DELAWARE UNCLAIMED PROPERTY LAW COMPANION / 2013-2014

§ 1101. Escheat of estates.

If any person, being at the time of death seized or possessed of any real or personal estate within this State, dies intestate, without heirs or any known kindred who can inherit and hold the intestate’s estate, such estate is escheat to the State, subject to all legal demands on the same.

Code 1852, § 1587; Code 1915, § 123; Code 1935, § 112; 42 Del. Laws, c. 57, § 1; 12 Del. C. 1953, § 1101; 49 Del. Laws, c. 51; 60 Del. Laws, c. 292, § 1; 70 Del. Laws, c. 186, § 1.;

§ 1102. Escheator of the State.

There shall be an Escheator of the State, who shall be the Secretary of Finance or the Secretary’s delegate. The administration and enforcement of this subchapter are vested in the Secretary of Finance or the Secretary’s delegate.

Code 1852, § 1588; Code 1915, § 124; Code 1935, § 113; 42 Del. Laws, c. 57, § 1; 12 Del. C. 1953, § 1102; 57 Del. Laws, c. 741, § 48A; 60 Del. Laws, c. 292, § 1; 70 Del. Laws, c. 186, § 1.;

§ 1103. Suit to determine escheat.

(a) Filing suit. -- The Escheator, upon personal knowledge or upon receipt of information of any person dying intestate and without heirs or any known kindred who can inherit and hold the intestate property within this State, of which at the time of death such person was seized or possessed, and which has not previously been escheated to the State by order of the Probate Court, shall cause to be filed a suit in the Court of Chancery of the State in the county wherein such property is located (or if located in more than 1 county in any such county) to inquire whether, as shall be alleged, the person has died without heirs or any known kindred who can inherit and hold the estate, and whether such person was, at the time of death, seized or possessed of any and what estate, real or personal, in the county or counties, and also in whose possession the same shall be.

(b) Notice of Court action. -- Upon filing suit in the Court of Chancery, the Escheator shall cause to be published at least once a week for 3 consecutive weeks in a newspaper of general circulation in the county or counties wherein such property is located, notice that the State has filed suit in the Court of Chancery to secure an order that the decedent’s property has escheated to the State due to failure of heirs or next of kin qualified to inherit such property.

Said notice shall invite any person having a valid claim to the intestate


property of the decedent to file written notice of such claim with the Court of Chancery within 30 days of the date of the third and final publication notice. The Escheator shall also cause similar notice to be posted at the site of any real property the decedent may have owned, and give similar notice by registered mail to all persons known to the Escheator to be in actual possession of the decedent’s property.

Code 1852, § 1590; Code 1915, § 126; Code 1935, § 115; 42 Del. Laws, c. 57, § 1; 12 Del. C. 1953, § 1103; 60 Del. Laws, c. 292, § 1; 70 Del. Laws, c. 186, § 1.;

§ 1104. Final hearing and order.

After the required notice has been given, a hearing shall be scheduled by the Court of Chancery at which all claimants may present evidence in support of their respective claims. If the Court finds that the conditions for escheat have been met, the Court shall issue an order that the decedent’s property escheated to the State as of the date of death. If the Court finds that the conditions for escheat have not been met, the State’s petition shall be dismissed and the decedent’s property shall be disposed of as otherwise provided by law.

Code 1852, § 1591; Code 1915, § 127; Code 1935, § 116; 12 Del. C. 1953, § 1104; 60 Del. Laws, c. 292, § 1; 70 Del. Laws, c. 186, § 1.;

§ 1105. Presumption of death.

If any person is absent from the State for 7 consecutive years, and no evident proof is made of the person’s life in any hearing held under the foregoing provisions of this subchapter, the person shall be accounted dead.


§ 1106. Seizure of escheated personalty.

If, after hearing as provided herein, the Court finds that goods and chattels have escheated to the State and that said goods and chattels are not in the possession of the Court or the Escheator, the Escheator shall issue a writ, directed to the sheriff of the county, commanding the sheriff to seize, attach and secure such escheated goods and chattels, in whose hands the same are found, or if it is found at the aforesaid hearing that the goods and chattels or any part thereof have been eloigned, then to seize and attach so much of the goods and chattels of the person who has eloigned the same as shall be equal in value to the goods and chattels which the person eloigned.

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§ 1107. Sale of seized property by sheriff.

The sheriff shall sell the goods and chattels seized and attached in accordance with this subchapter at public auction, after notice as in the case of sale of goods and chattels under execution process and shall, without delay, pay over the proceeds, thence arising to the Escheator for deposit in the General Fund. The sheriff shall be accountable, as in other cases, to the Escheator for money which by virtue of this section, shall come into the sheriff’s hands.

Code 1852, § 1594; Code 1915, § 130; Code 1935, § 119; 12 Del. C. 1953, § 1107; 57 Del. Laws, c. 741, § 48B; 60 Del. Laws, c. 292, § 1; 70 Del. Laws, c. 186, § 1.;

§ 1108. Return of writ of seizure.

(a) The writ prescribed in § 1106 of this title shall be duly returned to the Escheator, with an inventory and appraisement of the goods and chattels seized and attached by virtue thereof, and an account of the sale.

(b) The Escheator shall immediately upon receiving the writ transmit a duly certified copy thereof, and of the return, inventory and appraisement and account of sale to the Secretary of Finance and the State Treasurer.

Code 1852, §§ 1595, 1596; Code 1915, §§ 131, 132; Code 1935, §§ 120, 121; 12 Del. C. 1953, §§ 1108, 1109; 60 Del. Laws, c. 292, § 1.;

§ 1109. Lease, retention or sale of real property.

If, after hearing under this subchapter, the Court finds that real property has escheated to the State, the Escheator, subject to the approval of the Governor, may lease such property upon a reasonable rent therefor, or retain such property for the benefit and use of the State. If the real property is not leased or retained, the Escheator shall sell such property, at public auction, upon like public notice as required by law for the sale of lands under execution process.

Code 1852, § 1597; Code 1915, § 133; Code 1935, § 122; 12 Del. C. 1953, § 1110; 60 Del. Laws, c. 292, § 1.;

§ 1110. Conveyance of realty to purchaser after sale.

Immediately after sale under § 1109 of this title, the Escheator shall certify the same to the Governor, who, on filing such certificate in the


office of the Secretary of State, together with a receipt from the State Treasurer for the price of the lands, shall, by and under the great seal, grant the lands and tenements to the purchaser thereof, to hold to the purchaser, the purchaser’s heirs and assigns forever.

Code 1852, § 1602; Code 1915, § 138; Code 1935, § 127; 12 Del. C. 1953, § 1115; 57 Del. Laws, c. 741, § 48B; 60 Del. Laws, c. 292, § 1; 70 Del. Laws, c. 186, § 1.;

§ 1111. Nature of title of purchaser of realty.

The title conveyed by virtue of a deed under § 1110 of this title shall be subject to any reversion, remainder, lease, rent, mortgage or encumbrance of the lands to which they were respectively subject prior to escheat as determined by the Court of Chancery at the hearing; in default of presentment at the hearing, such claims shall forever be barred.


§ 1112. Proceeds of sale.

The Escheator shall pay over the proceeds received from the sale or disposition of all escheated intestate property, real or personal, to the State Treasurer for deposit in the General Fund.

60 Del. Laws, c. 292, § 1.;

§ 1113. Claims to proceeds of sale.

Any person who did not participate in or receive actual notice of the hearing provided by § 1104 of this title shall have the right within 2 years of the date of sale of any property under this subchapter to file a claim by way of petition in the Court of Chancery, to all or any portion of the escheated property. If such claim is established and allowed by the Court, such person shall be entitled to receive from the State Treasurer, under a warrant for the same signed by the Secretary of Finance, all such proceeds as the State shall have received on the sale of such property or portion thereof, after all charges thereon are deducted, or all escheated property, real or personal, still held by the State, subject to paying all costs of the escheat.

Code 1852, §§ 1604, 1605; Code 1915, §§ 140, 141; Code 1935, §§ 129, 130; 12 Del. C. 1953, § 1117; 49 Del. Laws, c. 57, § 1; 57 Del. Laws, c. 741, § 48B; 60 Del. Laws, c. 292, § 1.;

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§ 1114. Recovery of credits or property of the intestate not included in the Court’s initial escheat order.

If any person, at the death of any intestate, shall be indebted to the intestate, or if any part of such estate, real or personal, was not mentioned and included in the Court’s initial escheat order, be in the possession of any person, the same shall be recovered to the use of the State by such action as the case may require, in which proceedings the initial escheat order touching the estate of such intestate shall be admissible evidence to prove that the intestate died without heirs or known kindred.


§ 1115. Expenses of Escheator.

The Escheator may, from time to time, draw a warrant upon the State Treasurer for sums necessary to pay the expenses of the enforcement of this subchapter, which warrants, when approved by the Secretary of Finance, shall be paid by the Treasurer out of the General Fund of the State.

Code 1935, § 133; 42 Del. Laws, c. 57, § 1; 12 Del. C. 1953, § 1120; 57 Del. Laws, c. 741, § 48B; 60 Del. Laws, c. 292, § 1; 70 Del. Laws, c. 186, § 1.;

§ 1116. Conveyance of certain escheated real property previously owned by a religious body.

The Secretary of State shall convey to a properly organized corporation of this State whatever title the State may have in any real property which was formerly held by or for a religious body and which has or may have escheated provided that:

(1) The Secretary is satisfied that the grantee corporation is the proper successor to the body previously holding equitable or legal title to the property;

(2) A certified copy of the recorded certificate of incorporation of the grantee corporation is provided;

(3) Prior notice of any such proposed conveyance is given by registered mail to the record title holders where known; and

(4) Notice of such proposed conveyance is published in a newspaper of general circulation in the county where the property is situated each week for 3 weeks prior to the execution of the conveyance.


All expenses of such conveyance and notices shall be paid by the grantee corporation.

Code 1852, § 1587; Code 1915, § 123; Code 1935, § 112; 42 Del. Laws, c. 57, § 1; 12 Del. C. 1953, § 1101; 49 Del. Laws, c. 51; 60 Del. Laws, c. 292, § 1; 70 Del. Laws, c. 186, § 1.;

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Subchapter II. Abandoned or Unclaimed Property

§ 1130. Definitions .................................................................................................. 15§ 1131. Deposit to General Fund ........................................................................... 15§ 1132. [Reserved.] ................................................................................................ 15§ 1140. Statutes of limitations not a bar .................................................................. 15§ 1141. Escheator to maintain public record ........................................................... 15§ 1142. Publication of abandoned property by State Escheator ............................. 16§ 1143. Sale of personal property by State Escheator............................................ 18§ 1144. Assumption of liability by the State; return of property eroneously paid to the State Escheator .................................................... 17§ 1145. Interest not to run after report of abandoned property ............................... 19§ 1146. Claims for abandoned property paid to the State; procedure for determination of claims; appeals ......................................................... 19§ 1147. Payment by State Escheator ...................................................................... 20§ 1148. Verification .................................................................................................. 20§ 1149. Payment for publication .............................................................................. 20§ 1150. Designation of newspapers ........................................................................ 20§ 1151. Waiver of publication .................................................................................. 20§ 1152. Penalties and interest ................................................................................. 21§ 1153. Penalty for false oath ................................................................................. 21§ 1154. State Escheator to make regulations ......................................................... 21§ 1155. Examination of records .............................................................................. 21§ 1156. Internal Review Procedure; Court of Chancery -- Jurisdiction ................... 22§ 1157. Presumption of abandonment of personal property held by federal government ................................................................................... 25§ 1158. Limitations .................................................................................................. 26§ 1159. Penalties .................................................................................................... 27§ 1160. Abandoned property defined ...................................................................... 28§ 1161. Publication of list of abandoned property ................................................... 29§ 1162. Payment of abandoned property; presumption as to last known address .......................................................................................... 30§ 1163. Report to accompany payment .................................................................. 30§ 1170. Abandoned property defined ...................................................................... 31§ 1171. Annual report of abandoned property......................................................... 33§ 1172. Publication of list of abandoned property ................................................... 35§ 1173. Payment of abandoned property ................................................................ 36§ 1174. Abandoned property held by the State Bank Commissioner after receivership ............................................................................................. 37§ 1175. Payment of abandoned property after receivership ................................... 37§ 1176. Reimbursement for instruments paid ......................................................... 38§ 1177. Abandoned property reporting outreach program [Sunsets on July 1, 2015, by operation of 78 Del. Laws, c. 317, § 3] ...................................... 38

§ 1130. Definitions.

As used in this subchapter:

“Banking organization” includes any organization, corporation or association organized and existing under Chapter 7, 15 or 17 of Title 5 or the corresponding provisions of statutes in effect prior to February 12, 1953, or any bank or credit union created under the laws of the United States or any state.

12 Del. C. 1953, § 1130; 50 Del. Laws, c. 507, § 1; 67 Del. Laws, c. 267, § 3; 70 Del. Laws, c. 298, § 1; 70 Del. Laws, c. 327, § 49.;

§ 1131. Deposit to General Fund.

(a) The State Escheator shall deposit into the General Fund all moneys or proceeds of property received pursuant to this subchapter.

(b) The payment of all claims, the right to which is established pursuant to this subchapter, shall be made from the General Fund upon voucher signed by the State Escheator.

12 Del. C. 1953, § 1131; 50 Del. Laws, c. 507, § 1; 57 Del. Laws, c. 741, § 48B; 60 Del. Laws, c. 598, § 2.;

§ 1132. [Reserved.]

§ 1140. Statutes of limitations not a bar.

The expiration of any period of time specified by law during which an action or proceeding may be commenced or enforced to secure payment of a claim for money or recovery of property shall not prevent any money or property from being deemed abandoned property as defined in this subchapter, nor affect any duty to file a report required by this subchapter or to pay or deliver to the State Escheator any such abandoned property, and shall not serve as a defense in any action or proceeding by or on behalf of the State Escheator to compel the filing of any report or the payment or delivery of any abandoned property required by this subchapter or to enforce or collect any penalty provided by this subchapter.

12 Del. C. 1953, § 1140; 50 Del. Laws, c. 507, § 1.;

§ 1141. Escheator to maintain public record.

The State Escheator shall maintain a public record of all names and last

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known addresses of the person or persons appearing to be entitled to abandoned property paid or delivered to the State Escheator pursuant to this chapter. Other identifying information set forth in any report or record made or delivered to the State Escheator shall be retained by the State Escheator but shall be considered confidential and may be disclosed only in the discretion of the State Escheator. The State Escheator shall not reveal the amount of any abandoned property, except to a person who has presented satisfactory proof of an interest in or title to such property or except for purposes directly connected with the administration of this chapter.

12 Del. C. 1953, § 1141; 50 Del. Laws, c. 507, § 1; 79 Del. Laws, c. 2, § 1.;

§ 1142. Publication of abandoned property by State Escheator.

(a) In the month of October of each year the State Escheator shall publish in a daily newspaper of this State a statement of abandoned or unclaimed property or funds paid to the Escheator during the 12 months ending July 1 next preceding such publication which shall not have been paid to claimants and which shall not have been previously advertised under the provisions of § 1161, § 1172 or § 1183 of this title.

(b) Such statement shall be in such form and classified in such manner as the State Escheator shall determine, except that names of persons appearing to be entitled to any such abandoned property shall be listed in alphabetical order within each such classification.

(c) Such statement shall set forth:

(1) The names and last known addresses of all persons appearing from the records in the State Escheator’s office to be entitled to receive such abandoned property consisting of money not less than $10 in amount;

(2) The names and last known addresses of all persons appearing from the records in the State Escheator’s office to be entitled to receive such abandoned property consisting of personal property other than money and which the State Escheator shall not have determined, as provided in § 1143 of this title, to be valueless or of such little value that a sale thereof would cost in excess of the probable proceeds therefrom;

(3) Where any such abandoned property consisted of personal property other than money and was converted into money pursuant to § 1143 of this title and such money amounts to $10 or more, the names and last known addresses of the persons appearing from

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the records in the State Escheator’s office to be entitled to receive the same;

(4) Such other information as the State Escheator may determine; and

(5) A statement:

a. That a public record is maintained in the office of the State Escheator of all abandoned property in accordance with § 1141 of this title; and

b. That a claim for any such abandoned property should be filed with the State Escheator at the Escheator’s office in the City of Wilmington.

(d) Notwithstanding the foregoing provisions of this section, the State Escheator may omit from such statement the name and last known address of any person where special circumstances make it desirable that such information be withheld.


§ 1143. Sale of personal property by State Escheator.

(a) All abandoned property, other than money, delivered to the State Escheator pursuant to this subchapter may be sold or disposed of at public auction to the highest bidder or in such manner and at such times as the State Escheator, in the Escheator’s discretion, shall determine to be in the best interest of the State. In the case of stocks, bonds or other securities, disposition may be made by sale through a registered broker on a recognized securities exchange or over the counter market or, if there is no ready market for such security, by negotiation or public auction.

(b) The proceeds from the sale of any such abandoned property, less all costs incurred in connection with such sale, shall be held in the place of such property and any claimant for abandoned property shall be entitled only to the money so received, less lawful service charges.

(c) The State Escheator shall not be liable in any action for any act made in good faith pursuant to this section.



§ 1144. Assumption of liability by the State; return of property erroneously paid to the State Escheator.

(a) The care and custody, subject only to the duty of conversion prescribed in § 1143 of this title, of all abandoned property paid to the State Escheator is assumed for the benefit of those entitled to receive the same and the State shall hold itself responsible for the payment of all claims established thereto pursuant to law, less any lawful deductions, which cannot be paid from the General Fund.

(b) Any person, court, copartnership, unincorporated association or corporation making a payment of abandoned property to the State Escheator shall immediately and thereafter be relieved and held harmless from any or all liability for the property so paid and no action shall be maintained against them or it for:

(1) The recovery of abandoned property paid to the State Escheator pursuant to this subchapter or for interest thereon subsequent to the date of the report of such abandoned property to the State Escheator pursuant to this subchapter; and

(2) Damages alleged to have resulted from any such payment.

(c) Nothing in this section shall be construed to relieve any person, court, copartnership, unincorporated association or corporation from liability for:

(1) Any property not paid to the State Escheator;(2) Damages for negligence or the mishandling of funds or property prior

to the time such funds or property are paid to the State Escheator.

(d) Whenever it appears to the satisfaction of the State Escheator that because of some mistake of fact, error in calculation or erroneous interpretation of a statute any person has paid or delivered to the State Escheator, pursuant to any provision of this subchapter, any moneys or other property not required by this subchapter to be so paid or delivered, the Escheator shall have power, during the 6 years immediately succeeding such erroneous payment or delivery, to refund or redeliver such moneys or other property to such person; provided that such moneys or property shall not have been paid or delivered to a claimant or otherwise disposed of in accordance with this subchapter. Any such cash refund shall be paid from the General Fund without the deduction of any service charge. The State Escheator shall not be liable for any interest or other charge for the money or property so refunded or redelivered.

(e) Whenever, because of some mistake of fact, error in calculation or erroneous interpretation of a statute, any person pays or delivers to

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the State Escheator any moneys or other property not required by this subchapter to be so paid or delivered, such moneys or other property shall, for the purposes of this subchapter, be deemed to be abandoned property, unless and until refunded or redelivered by the State Escheator to the person who paid or delivered the same.

12 Del. C. 1953, § 1144; 50 Del. Laws, c. 507, § 1; 60 Del. Laws, c. 598, § 6; 70 Del. Laws, c. 186, § 1.;

§ 1145. Interest not to run after report of abandoned property.

Notwithstanding any other provision of law, no person entitled to or owner of abandoned property shall be entitled to receive interest on account of such abandoned property from and after the date a report of such abandoned property is made to the State Escheator pursuant to this subchapter whether or not the person was entitled to interest on such property prior to such date.


§ 1146. Claims for abandoned property paid to the State; procedure for determination of claims; appeals.

(a) Claim may be filed with the State Escheator for any abandoned property amounting to over $3 paid to the State Escheator pursuant to this subchapter.

(b) The State Escheator shall possess full and complete authority to determine all such claims and shall forthwith send written notice of such determination to the claimant. At any time within 4 months thereafter such claimant may apply for a hearing and determination of claim by the Tax Appeal Board. The procedure before the Tax Appeal Board for such hearings shall be the same as that provided for by § 329 of Title 30 and the Board shall have the same power to compel the attendance of witnesses and the production of evidence as is provided in § 330 of Title 30.

(c) Within 30 days after notice of a decision upon such hearing, the State Escheator or any claimant may appeal such decision to the Court of Chancery upon notice to all parties to the proceeding before the Tax Appeal Board and upon such other notice as the Court of Chancery may order.

(d) The Court of Chancery may make such rules as it may deem proper for the perfection, hearing and determination of such appeals.

12 Del. C. 1953, § 1146; 50 Del. Laws, c. 507, § 1; 57 Del. Laws, c. 718, § 18; 57 Del. Laws, c. 741, § 48C; 70 Del. Laws, c. 186, § 1.;


§ 1147. Payment by State Escheator.

Any claim which is allowed by, or ordered to be paid by, the State Escheator pursuant to § 1146 of this title, together with such costs and disbursements as may be allowed by the Court or the Tax Appeal Board, shall be paid out of the General Fund and the State Escheator shall not be liable in any action for any claim paid in good faith.

12 Del. C. 1953, § 1147; 50 Del. Laws, c. 507, § 1; 57 Del. Laws, c. 741, § 48C; 60 Del. Laws, c. 598, §§ 4, 6; 70 Del. Laws, c. 186, § 1.;

§ 1148. Verification.

Any report required to be verified by this subchapter shall be verified if made by a person, by such person, if made by a partnership, by 1 of the members thereof, if made by an unincorporated association or private corporation, by 1 principal officer thereof if made by a public corporation, by the chief fiscal officer thereof and if made by a court, by a judge or the clerk of such court.

12 Del. C. 1953, § 1148; 50 Del. Laws, c. 507, § 1.;

§ 1149. Payment for publication.

Any amount paid by a person to a newspaper or newspapers for any publication of names as required by this subchapter may be charged equally against all abandoned property held or owing by such person at the time of such publication, except abandoned property of individual amounts of less than $25.

12 Del. C. 1953, § 1149; 50 Del. Laws, c. 507, § 1.;

§ 1150. Designation of newspapers.

Any notice required by this subchapter shall be published in such newspapers as shall be designated by the State Escheator.

12 Del. C. 1953, § 1150; 50 Del. Laws, c. 507, § 1.;

§ 1151. Waiver of publication.

The State Escheator may waive the publication of any notice required by this subchapter, except a notice required by § 1142 of this title, whenever in the Escheator’s opinion the cost of publishing such notice would be unreasonable

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in relation to the amount of abandoned property.


§ 1152. Penalties and interest.

Repealed by 73 Del. Laws, c. 417, § 3, effective July 22, 2002, and effective for reports filed or required to be filed on or after July 22, 2002.

§ 1153. Penalty for false oath.

The making of a wilful false oath in any report required under this subchapter shall be perjury and punishable as such according to law.

12 Del. C. 1953, § 1153; 50 Del. Laws, c. 507, § 1.;

§ 1154. State Escheator to make regulations.

The State Escheator may make such rules and regulations as the Escheator may deem necessary to enforce this subchapter.


§ 1155. Examination of records.

The State Escheator may at reasonable times and upon reasonable notice examine the records of any person or business association or organization to determine whether the person has complied with any provision of this chapter and may by summons require the attendance of any person having knowledge in the premises, and may take testimony and require proof material for the investigation, with the power to administer oaths to such person or persons; provided, however, that the State Bank Commissioner shall act on behalf of the State Escheator with regard to examinations of banking organizations. The State Escheator is authorized to reimburse the State Bank Commissioner for the cost of examinations undertaken on the Commissioner’s behalf and may pay for such reimbursement out of custodian accounts held for the State Escheator. The State Escheator may disclose such information as the Escheator possesses to the State Bank Commissioner as may aid in the Commissioner’s examination of any banking organization and may disclose any information received from the State Bank Commissioner as may be required:

(1) In conjunction with enforcement proceedings; or


(2) In summary form to the extent necessary for the proper disposition of the property.

Where the records of the holder available for the periods subject to this chapter are insufficient to permit the preparation of a report, the State Escheator may require the holder to report and pay to the State the amount of abandoned or unclaimed property that should have been but was not reported that the State Escheator reasonably estimates to be due and owing on the basis of any available records of the holder or by any other reasonable method of estimation.

67 Del. Laws, c. 267, § 2; 70 Del. Laws, c. 186, § 1; 77 Del. Laws, c. 417, § 4.;

§ 1156. Internal review procedure; Court of Chancery -- Jurisdiction.

(a) If, after examining any report required by this chapter and filed by or on behalf of a holder (as defined in § 1198 of this title) or after the conclusion of an examination of a holder, the Abandoned Property Audit Manager (hereinafter the “Audit Manager”) determines that a holder has underreported abandoned or unclaimed property due and owing under this chapter, the Audit Manager shall mail a statement of findings and request for payment to the holder that filed, or on whose behalf the report was filed, or that was the subject of an examination. Sixty days after the date on which the Audit Manager mails a statement of findings and request for payment, it shall constitute the Audit Manager’s final determination of the amount of the holder’s liability, including interest and penalties, if any, for the abandoned or unclaimed property specified in the statement of findings and request for payment, excepting only the property types and amounts included in the statement of findings and request for payment as to which the holder files a timely protest with the Audit Manager pursuant to subsection (b) of this section. The State Escheator may thereafter enforce any final determination in accordance with subsection (k) of this section.

(b) Within 60 days after the date of the mailing of a statement of findings and request for payment under subsection (a) of this section the holder may file with the Audit Manager a written protest of the statement of findings and request for payment in which the holder shall set forth the property type or types and amount of abandoned or unclaimed property protested, and the specific grounds upon which the protest is based. The protest is intended to allow the holder to have its objections to the final request for payment reconsidered in the first instance internally within the Department of Finance by the Audit Manager as a means of expediting

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resolution of any dispute. If the holder elects to file a protest and to have its objections to the final request for payment reconsidered internally within the Department of Finance, as provided by subsections (b) through (k) of this section, the holder shall exhaust these administrative remedies before initiating any proceeding in any Delaware court of competent jurisdiction.

(c) The only matters that the Audit Manager shall reconsider on a protest are those property types, amounts and issues related to the examination that are set out in the written protest of the holder. The holder shall remit with the protest any abandoned or unclaimed property liability attributable to property types for which payment is requested in the statement of findings and request for payment that are not protested and shall also remit with the protest the amount of abandoned or unclaimed property liability, if any, that the holder believes to be due and owing with respect to the property types or liability that are the subject of the protest. The pendency of a protest shall not prevent the accrual of interest on any protested amount finally found to be due and owing. Holders may remit the entire amount in the statement of findings and request for payment in order to prevent the accrual of additional interest without waiving any rights for reconsideration or review of protested amounts under subsections (a) through (j) of this section, and such remittance shall be subject to refund, without interest, to the extent not finally determined to be due and owing. Failure to remit amounts required by this subsection shall result in termination of the protest and the State Escheator may thereafter enforce any final determination in accordance with subsection (k) of this section.

(d) The holder may submit additional documentation and written submissions to the Audit Manager in support of the protest, provided, however, that such additional documentation and written submissions shall be made no later than 30 days following receipt of the holder’s protest. The Audit Manager may convene meetings with the holder to facilitate review of the statement of findings and request for payment and the protest thereof.

(e) The Audit Manager shall, within 60 days of the receipt of the holder’s protest, or if additional documentation is submitted, no later than 90 days after the receipt of the holder’s protest, make a written determination on the protest setting forth the Audit Manager’s basis of any determination that is adverse, in whole or in part, to the holder, provided, however, that the time periods set forth in this subsection shall be subject to extension by the Audit Manager for good cause, but in no event shall any extension hereunder exceed 540 days from the day the Audit Manager received the holder’s protest. The Audit Manager shall mail the written determination on the protest to the holder by certified or registered mail at the address set forth in the holder’s protest.

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(f) Thirty days after the date on which it is mailed, the determination by the Audit Manager of a holder’s protest shall be final, unless within that time a holder files a notice of appeal with the Secretary of Finance. If the holder does not file a timely notice of appeal with the Secretary of Finance, the State Escheator may enforce any final determination in accordance with subsection (k) of this section. The notice of appeal shall set forth the holder’s name, mailing address, telephone number, the name of the person or persons representing the holder, the mailing address and telephone number of such persons and the matters in which the holder asserts that the Audit Manager erred in the determination on the protest of the holder.

(g) After receipt of a holder’s written notice of appeal, the Secretary of Finance shall as soon as practicable, but in no event later than 90 days after receipt, appoint a person who is not otherwise currently employed by the Department of Finance to act as an independent reviewer to consider the appeal of the Audit Manager’s findings and make a written report to the Secretary of Finance. The independent reviewer shall be a former member of the Delaware judiciary, an individual who has been previously appointed and served as a master of any Delaware court, or an attorney licensed in the State who is qualified by experience or training to serve.

(h) The appeal to the independent reviewer is de novo on the record. The record on the appeal to the independent reviewer shall be based solely upon documents submitted during the course of the examination to the Audit Manager or a person who conducted an examination on the Audit Manager’s behalf, other nonprivileged materials prepared by or for the Audit Manager during the conduct of an examination, expert reports submitted to the Audit Manager by the person filing a protest, other nonprivileged materials and expert reports prepared by or for the Audit Manager during the consideration of a protest.

(i) The independent reviewer shall hold an oral hearing on the appeal, which shall be held, absent agreement of the parties, within 90 days after the date on which the Secretary of Finance appoints the independent reviewer pursuant to subsection (g) of this section. At least 5 days prior to the oral hearing date, or at such other time ordered by the independent reviewer, the holder and Audit Manager shall each submit to the independent reviewer and each other a brief containing argument and referencing supporting documentation from the record before the Audit Manager or an explanation as to why such supporting documentation is not available. A decision in writing by the independent reviewer setting forth findings of fact and conclusions of law shall be submitted by the independent reviewer to the Secretary of Finance within 90 days from the date of the conclusion of the oral hearing or the completion of any post-hearing briefing requested by the independent reviewer, whichever is later. The independent reviewer

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shall assess costs, including the independent reviewer’s fee, against a party or between the parties in the independent reviewer’s discretion.

(j) The Secretary of Finance may adopt or reject the independent reviewer’s determination in whole or in part. If the Secretary of Finance modifies or rejects, in whole or in part, the determination of the independent reviewer, the Secretary of Finance shall issue a decision in writing setting forth the basis of any rejection or modification of the determination of the independent reviewer. Within 60 days of the receipt by the Secretary of Finance of the independent reviewer’s decision, a copy of the Secretary of Finance’s determination, if any along with, the independent reviewer’s written decision shall be sent to the holder by certified or registered mail at the address set forth in the holder’s notice of appeal. The determination of the Secretary of Finance as to those liabilities that are the subject of the appeal shall be final as to the Department of Finance, and amounts determined to be due and owing shall be subject to collection by the State Escheator under subsection (k) of this section below if unpaid after the review. The holder may, within 30 days after the Secretary’s written decision was mailed, appeal the Secretary’s determination to the Court of Chancery. The Court’s review shall be limited to whether the Secretary’s determination was supported by substantial evidence on the record. If the Court determines that the record is insufficient for its review, it shall remand the case to the agency for further proceedings on the record.

(k) If any person refuses to pay or deliver property, including penalty or interest thereon, to the State Escheator as required by this chapter, the State Escheator may bring an action in the Court of Chancery in the county wherein the holder resides or has a principal place of business (or if none such exists, in New Castle County) to enforce such payment or delivery.

(l) Whenever a holder disputes whether reasonable cause exists for abating penalty or interest determined by the State Escheator to be due under this chapter, such holder may bring an action in the Court of Chancery for the purpose of showing an abuse of discretion by the State Escheator in making the determination that penalty or interest was due.

68 Del. Laws, c. 122, § 7; 70 Del. Laws, c. 186, § 1; 77 Del. Laws, c. 417, § 1.;

§ 1157. Presumption of abandonment of personal property held by federal government.

(a) All tangible personal property or intangible personal property, including choses in action in amounts certain, and all debts owed or entrusted funds or other property held by the federal government, or any federal agency, or any officer or appointee thereof, shall be presumed abandoned in this


State if the last known address of the owner of the property is in this State and the property has remained unclaimed for 5 years.

(b) This section shall apply to all abandoned property held by the federal government, or any federal agency, or any officer or any appointee thereof, as of July 8, 1991, or at any time thereafter, regardless of when such property became presumptively abandoned.

68 Del. Laws, c. 122, § 14.;

§ 1158. Limitations.

(a) The State Escheator, as soon as is practicable after receipt of any report required by this chapter, shall examine it to determine if it is correct. If the Escheator finds that the report is not correct, the Escheator shall notify the holder in writing by certified or registered mail of the amount of any underreported abandoned or unclaimed property due and owing. Notice of the proposed deficiency in payment shall be mailed to the holder within 3 years from the date the report was filed. A report filed before the due date shall be deemed to have been filed on the due date for purposes of this section. No suit to enforce the payment of a deficiency in payment of abandoned or unclaimed property shall be brought under § 1156 of this title against a holder unless the notice of deficiency in payment is mailed to the holder within the 3-year period provided in this subsection. In the case of an omission of abandoned or unclaimed property from a report having a value in excess of 25% of the amount of abandoned or unclaimed property disclosed in a report, a notice of deficiency in payment may be mailed to the holder within 6 years from the date the report was filed.

(b) If no report is filed, or if a false or fraudulent report is filed with the intent to evade the obligation to pay over abandoned property, a notice of deficiency in payment may be mailed to the holder at any time.

(c) If the holder shall file an amended report changing or correcting the amount of any abandoned or unclaimed property previously reported, a notice of deficiency in payment may be mailed to the holder at any time within 2 years from the date the amended report is filed.

(d) Where, before the expiration of time prescribed in this section for the mailing of a notice of deficiency in payment, both the Escheator and the holder have consented in writing to the extension of the time within which a notice of deficiency in payment may be mailed, a notice of deficiency may be mailed at any time prior to the expiration of the time agreed upon. The time agreed upon may be extended by subsequent agreements in writing made before the expiration of the time previously agreed upon.

(e) The running of the period of limitations provided for in this section

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for the mailing of a notice of deficiency in payment shall, in a case under Title 11 of the United States Code, be suspended for the period during which the Escheator is prohibited by reason of such case from mailing a deficiency in payment plus 60 days.

73 Del. Laws, c. 417, § 1.;

§ 1159. Penalties.

(a) In the case of the failure to file any report required by this chapter on or before the due date prescribed therefor (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause and not wilful neglect, there shall be added to the amount of abandoned or unclaimed property required to be shown on the report 5% of the amount thereof if the failure is not for more then 1 month, with an additional 5% for each additional month or fraction thereof during which such failure continues, not to exceed 50% in the aggregate. For purposes of this section the amount of abandoned or unclaimed property required to be shown on any report shall be reduced by the amount of property which is paid on or before the date prescribed for payment of the abandoned or unclaimed property.

(b) In the case of the failure to pay the amount of abandoned or unclaimed property required to be shown on any report required by this chapter on or before the due date prescribed for the payment of such property (determined with regard to any extension of time for payment), unless it is shown that such failure is due to reasonable cause and not wilful neglect, there shall be added to the amount of such property required to be shown on any report 0.5% of the amount of such property if the failure is for not more than 1 month, with an additional 0.5% for each additional month or fraction thereof during which such failure continues, not to exceed 25% in the aggregate. For purposes of this subsection, the amount of property shown on any report shall be reduced by the amount of any property which is paid on or before the beginning of the month for which a calculation is made under this subsection.

(c) If any part of a deficiency in payment of abandoned or unclaimed property required to be shown on any report is due to fraud, there shall be added to the property required to be shown on the report an amount equal to 75% of the portion of the deficiency in payment which is attributable to fraud. The penalty prescribed by this section shall apply only in cases where a report of abandoned or unclaimed property is filed and only to that part of the deficiency in payment the Escheator establishes is attributable to fraud.

(d) Interest at .5% per month on outstanding unpaid amounts, including penalty shall accrue from the date the amounts or property were due under


this subchapter until paid. Interest due in accordance with this subsection shall in no event exceed 50% of the amount required to be paid; provided, however, that penalties under subsection (a), (b) or (c) of this section shall not be deemed to be interest for purposes of this subsection.


§ 1160. Abandoned property defined.

(a) The following property shall be deemed abandoned property:

(1) Any legacy, residue of intestate personal estate, distributive share or trust fund paid into the Court of Chancery by any executor, administrator or trustee because the person entitled thereto was absent from the State, unknown or incompetent to receive the same or because the shares of the persons entitled to receive the same were unknown and as to which no action has been taken in any proceeding in the Court of Chancery to recover the same within a period of 5 years; provided, however, that if the Chancellor or Vice-Chancellor shall be of the opinion that the person entitled to any funds deposited in or held by the Court of Chancery is living and intends to claim such funds when able, but is prevented from doing so by reasons beyond the person’s control, the Chancellor or Vice-Chancellor shall so certify to the State Escheator in lieu of the report otherwise required by this subchapter and such funds shall not be deemed abandoned in any year in which such certification is made;

(2) Any money or other property held by the Court of Chancery, on account of the receivership or creditors’ composition of any person or organization, for distribution to a creditor, owner or shareholder and as to which no claim or request for payment has been made by the person appearing to be entitled thereto within 5 years after any order discharging the receiver or trustee; provided, however, that if the Chancellor or Vice-Chancellor shall be of the opinion that the person entitled to any funds deposited in or held by the Court of Chancery is living and intends to claim such funds when able, but is prevented from doing so by reasons beyond the person’s control, the Chancellor or Vice-Chancellor shall so certify to the State Escheator in lieu of the report otherwise required by this subchapter and such funds shall not be deemed abandoned in any year in which such certification is made.

(b) Any abandoned property held or owing by any court or by the clerk of any court to which or to whom the right to receive the same is established

to the satisfaction of such court or clerk shall cease to be abandoned.

(c) Any abandoned property defined by this section which, under this section, would have become abandoned prior to January 1, 1956, shall be deemed abandoned on January 1, 1956.

12 Del. C. 1953, § 1160; 50 Del. Laws, c. 507, § 1; 68 Del. Laws, c. 122, §§ 8, 9; 70 Del. Laws, c. 186, § 1.;

§ 1161. Publication of list of abandoned property.

(a) On or before February 1 in each year, any court or any clerk of a court having abandoned property in the court’s or the clerk’s possession shall cause to be published a notice entitled:

“NOTICE OF NAMES OF PERSONS APPEARING AS OWNERS OF CERTAIN UNCLAIMED PROPERTY HELD BY (name of court or title of officer).”

(b) As to all abandoned property payable in New Castle County, such notice shall be published at least once in a daily newspaper published in said County. As to all abandoned property payable in Kent County or Sussex County, such notice shall be published at least once in a newspaper published at least weekly in the County in which said abandoned property is payable.

(c) Such notice shall be classified as the State Escheator shall prescribe and shall set forth:

(1) The names and last known addresses, in alphabetical order, of all persons appearing to be entitled to any such abandoned property as of January 1 next preceding amounting to $25 or more, except the names of persons appearing to be the owners of abandoned property which since such date has ceased to be abandoned. With the consent of the State Escheator, the name and last known address of any person may be omitted from such notice where special circumstances make it desirable that such information be withheld;

(2) Such other information as the State Escheator may require; and(3) A statement:

a. That a list of the names contained in such notice is on file and open to public inspection at a place designated therein;

b. That such unclaimed moneys or other property will be paid or delivered by the court or officer on or before March 31 to persons establishing to the court’s or officer’s satisfaction their

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right to receive the same; andc. That in the succeeding month of April and on or before April 10,

such unclaimed moneys or other property still remaining will be paid or delivered to the State Escheator and that the court or officer shall thereupon cease to be liable therefor.

12 Del. C. 1953, § 1161; 50 Del. Laws, c. 507, § 1; 70 Del. Laws, c. 186,§ 1.;

§ 1162. Payment of abandoned property; presumption as to last known address.

(a) In such succeeding month of April, and on or before April 10, the Court of Chancery shall pay or deliver to the State Escheator all property held by it and which was abandoned as specified in § 1160(a)(1) of this title, as of January 1 next preceding.

(b) In such succeeding month of April, and on or before April 10, the Court of Chancery shall pay or deliver to the State Escheator all abandoned property specified in § 1160(a)(2) of this title, which was so abandoned as of January 1 next preceding.

(c) With respect to items of property of a value of less than $25 deemed abandoned under § 1160 of this title, the last known address of any person appearing to be entitled to such property shall be presumed to be an address within this State. This presumption may be rebutted by filing a claim with the State Escheator pursuant to § 1146 of this title.


§ 1163. Report to accompany payment.

Each such payment of abandoned property, pursuant to § 1162 of this title, shall be accompanied by a verified written report classified as the State Escheator shall prescribe, setting forth:

(1) The names and last known addresses, if any, of the persons appearing to be entitled to receive any such abandoned property of the value of $25 or more;

(2) The title of any proceeding relating to such abandoned property; and(3) Such other identifying information as the State Escheator may require.



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§ 1170. Abandoned property defined.

(a) The following unclaimed property held or owing by banking organizations shall be deemed abandoned property:

(1) Any amounts due on deposits or any amounts to which a shareholder of a savings and loan association, building and loan association or credit union is entitled held or owing by a banking organization which shall have remained unclaimed for 5 years by the person or persons appearing to be entitled thereto, including any interest or dividends credited thereon, excepting:

a. Any such amount which has been reduced or increased, exclusive of dividend or interest payment, within 5 years; or

b. Any such amount which is represented by a passbook not in the possession of the banking organization which has been presented for entry of dividend or interest credit within 5 years; or

c. Any such amount with respect to which the banking organization has on file written evidence received within 5 years that the person or persons appearing to be entitled to such amounts had knowledge thereof; or

d. Any such amount payable only at or by a branch office located in a foreign country or payable in currency other than United States currency; or

e. Any amount held or owing by the banking organization as agent or as trustee of an express trust (active or passive) for the purpose of making payment to holders of or in respect of stocks, bonds or other securities of a governmental or other public issuer or of a corporation, association or joint stock company, other than a corporation, association or joint stock company which shall have discontinued the conduct of its business or the corporate existence of which shall have terminated, without the right to receive such amount having passed to a successor or successors.

(2) Any amount held or owing by a banking organization for the payment of a negotiable instrument or a certified check whether negotiable or not on which such organization is directly liable,



which instrument shall have been outstanding for more than 5 years from the date it was payable or from the date of its issuance, if payable on demand; provided, however, that this paragraph shall not apply:

a. To any negotiable instrument payable outside the continental limits of the United States; or

b. To any instrument payable in currency other than United States currency; or

c. To any negotiable instrument issued to pay out any amount held or owing by the banking organization as agent or as trustee of an express trust (active or passive) for the purpose of making payment to holders of or in respect of stocks, bonds or other securities of a governmental or other public issuer or of a corporation, association or joint stock company which shall have discontinued the conduct of its business or the corporate existence of which shall have terminated without the right to receive such amount having passed to a successor or successors.

(3) Any surplus amounts arising from a sale by a banking organization of the contents of a safe or box, pursuant to law.

(4) Any amount representing a dividend or other payment received by a banking organization or its nominee as the record holder of any stock, bond or other security of any corporation, association or joint stock company to which amount an unknown person (except a person entitled to such dividend or other payment upon the surrender of other outstanding securities) is entitled and which shall have remained unclaimed by the person entitled thereto for 5 years after receipt thereof by such banking organization or its nominee.

(5) Any amount which shall have become payable by a banking organization (other than a foreign banking corporation) to a holder or owner of its capital stock and which shall have remained unclaimed for 5 years by the person or persons appearing to be entitled thereto.

(b) Any abandoned property held or owing by a banking organization to which the right to receive the same is established to the satisfaction of such banking organization shall cease to be deemed abandoned.

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(c) Any abandoned property defined by this section which, under this section, would have become abandoned prior to June 30, 1956, shall be deemed abandoned on June 30, 1956.


§ 1171. Annual report of abandoned property.

(a) On or before November 10 in each year every banking organization shall make a verified written report to the State Escheator which shall contain a true and accurate statement, as of June 30 next preceding, of all abandoned property specified in § 1170 of this title, held owing by it.

(b) Such report shall, with respect to amounts specified in § 1170(a)(1) of this title which are abandoned property, set forth:

(1) The name and last known address, if any, of the person or persons appearing from the records of such banking organization to be the owner of any such abandoned property;

(2) The amount appearing from such records to be due such person or persons;

(3) The date of the last transaction with respect to such abandoned property if such date is subsequent to December 31, 1909;

(4) The nature and identifying number, if any, of such abandoned property; and

(5) Such other identifying information as the State Escheator may require.

(c) Such report shall, with respect to amounts specified in § 1170(a)(2) of this title which are abandoned property, set forth:

(1) The name and last known address, if any, of the person or persons appearing from the records of such banking organization to be entitled to receive such abandoned property;

(2) A description of such abandoned property including identifying numbers, if any, and the amount appearing from such records to be due or payable;


(3) The amount of any interest or other increment due thereon;

(4) The date such abandoned property was payable or demandable;

(5) The amount and identifying number of any such instrument where the payee thereof is unknown to the banking organization; and


(d) Such report shall, with respect to amounts specified in § 1170(a)(3) of this title which are abandoned property, set forth:


(2) The articles sold and price obtained therefor;

(3) Such other information as the State Escheator may require.

(e) Such report shall, with respect to amounts specified in § 1170(a)(4) of this title which are abandoned property, set forth:



(3) The date when such property was received by the banking organization and the date when it became payable to the owner;

(4) A description of the stock or security on account of which such property was received;


(f) Such report shall, with respect to amounts specified in § 1170(a)(5) of this title which are abandoned property, set forth:

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(3) The date when such property became payable to the said owner;

(4) A description of the capital stock on account of which the said property is payable; and


(g) Such report shall be in such form as the State Escheator may prescribe. All names of persons appearing in the section of such report relating to deposits, appearing to be the owners thereof, shall be listed in alphabetical order. Abandoned property other than deposits listed in such report shall be classified in such manner as the State Escheator may prescribe and names of persons appearing to be entitled to such abandoned property appearing in such report shall be listed alphabetically within each such classification.

(h) In case any banking organization shall on June 30 in any year neither hold nor owe any abandoned property specified in § 1170 of this title, it shall on or before November 10 next succeeding make a verified written report to the State Escheator so stating.


§ 1172. Publication of list of abandoned property.

(a) A minimum of 60 days prior to making a report of abandoned property and remitting payment pursuant to §§ 1171 and 1173 of this title, such banking organization shall cause to be published a notice entitled:

“NOTICE OF NAMES OF PERSONS APPEARING AS OWNERS OF CERTAIN UNCLAIMED PROPERTY HELD BY (name of banking organization).”

(b) For all abandoned property payable in New Castle County, such notice shall be published at least twice in a daily newspaper published in said County. For all abandoned property payable in Kent County or Sussex County, such notice shall be published at least once in a newspaper published at least weekly in the County in which said abandoned property is payable.


(c) Such notice shall, in accordance with the classification prescribed by the State Escheator for the report pursuant to § 1171 of this title, set forth:

(1) The names and last known addresses, which were in such report, of all persons appearing to be entitled to any such abandoned property amounting to $25 or more; provided, however, that with the consent of the State Escheator the name and last known address of any person may be omitted from such notice where special circumstances make it desirable that such information be withheld. Such names shall be listed in alphabetical order. If, however, such banking organization has reported abandoned property payable in more than 1 county, the names shall be listed alphabetically for each such county and such notice shall include only the names of the persons appearing to be entitled to abandoned property payable in such county;

(2) Such other information as the State Escheator may require; and

(3) A statement:

a. That such unclaimed moneys or other property will be paid or delivered by it on or before the succeeding October 31 to persons establishing to its satisfaction their right to receive the same; and

b. That in the succeeding month of November, and on or before November 10, such unclaimed moneys or other property still remaining will be paid or delivered to the State Escheator and that it shall thereupon cease to be liable therefor.

12 Del. C. 1953, § 1172; 50 Del. Laws, c. 507, § 1; 77 Del. Laws, c. 417, §§ 6, 7.;

§ 1173. Payment of abandoned property.

(a) In such succeeding month of November, and on or before November 10, every banking organization shall pay or deliver to the State Escheator all abandoned property specified in such report, excepting such abandoned property as since the date of such report shall have ceased to be abandoned.

(b) Such payment shall be accompanied by a statement setting forth such information as the State Escheator may require relative to such abandoned property as shall have ceased to be abandoned.

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12 Del. C. 1953, § 1173; 50 Del. Laws, c. 507, § 1.;

§ 1174. Abandoned property held by the State Bank Commissioner after receivership.

(a) All amounts held by the State Bank Commissioner as receiver of a banking organization, pursuant to § 131 of Title 5, which shall be payable to depositors of such banking organization and which shall not have been claimed and paid within 4 years after receipt by the State Bank Commissioner, shall be deemed abandoned property.

(b) Any such abandoned property held by the State Bank Commissioner to which the right to receive the same is established while in the Commissioner’s hands shall cease to be deemed abandoned.


§ 1175. Payment of abandoned property after receivership.

(a) Not later than February 1 in each year the State Bank Commissioner shall pay to the State Escheator all such abandoned property held by the Commissioner which shall have become abandoned property at any time prior to the July 1 next preceding, excepting such abandoned property as since such July 1 shall have ceased to be abandoned.

(b) Such payment shall be accompanied by a statement signed by the State Bank Commissioner setting forth the name and last known address of and the amount owing to each person appearing to be the owner of any such abandoned property or, if the name is unknown, the nature and identifying number of the indebtedness and the name of the banking organization or foreign banking corporation from which such abandoned property was received together with such other identifying information as the State Escheator may require.



§ 1176. Reimbursement for instruments paid.

Any banking organization which has paid to the State Escheator abandoned property held or owing for the payment of a negotiable instrument or a certified check may make payment to the person entitled thereto, upon presentation of the instrument by such person, and shall thereby be entitled to reimbursement of the amount paid to the State Escheator. Any issuer of money orders and traveler’s checks who has paid to the State Escheator abandoned property held or owing for the payment of a money order or traveler’s check may make payment to the person entitled thereto and shall thereby be entitled to reimbursement of the amount paid to the State Escheator upon proof of such payment in the form of the paid instrument, or in the absence of the paid instrument, the agreement of the issuer to hold harmless and indemnify the State and its State Escheator from any and all claims with regard to such instrument. Such reimbursement shall be made by the State Escheator after audit of a claim of the banking organization without the deduction of any service or other charge.


§ 1177. Abandoned property reporting outreach program [Sunsets on July 1, 2015, by operation of 78 Del. Laws, c. 317, § 3]

(a) Notwithstanding any other provision of this title or Chapter 23 of Title 29, the Secretary of State is authorized to resolve and compromise claims for abandoned property otherwise owing to the State Escheator pursuant to this chapter, provided that such holders must voluntarily disclose to the Secretary of State such abandoned property on or before the dates provided in this section. The Secretary of State shall possess full and complete authority to determine and resolve all such claims consistent with this chapter and exercise such authorities as are granted to the State Escheator pursuant to this chapter except that any unclaimed property disclosure agreement accepted by the Secretary of State shall be deemed as waiving the right of the Secretary of State and the State Escheator to seek payment of any amounts of property pursuant to § 1156 or § 1158 of this title with respect to the abandoned property voluntarily disclosed by the holder in the agreement, except in circumstances where there is evidence of fraud or wilful misrepresentation as to any such voluntary disclosure by the holder or those acting on the holder’s behalf. In the event the Secretary is unable to resolve such claims by agreement, the Secretary of State may refer the resolution of such claims to the State Escheator at any time. The care and custody of all property paid pursuant to this section is assumed for the benefit of those entitled to receive the same and the State shall

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have all the responsibilities, duties, and obligations as if such property were recovered by the State Escheator. The Secretary of State may make such rules and regulations as deemed necessary to enforce this section.

(b) The Secretary of State may not initiate an examination of records or an investigation pursuant to § 1155 of this title, or seek payment of any amounts of property pursuant to § 1156 or § 1158 of this title, as to any calendar year prior to:

(1) 1996, with respect to any holder that has indicated in writing its intent to enter into an unclaimed property voluntary disclosure agreement by completing, executing and delivering, on or before June 30, 2013, to the Secretary of State such form as is acceptable to the Secretary of State, and who enters an unclaimed property voluntary disclosure agreement and makes payment in full or enters into a payment plan no later than June 30, 2015; or

(2) 1993, with respect to any holder that has indicated in writing its intent to enter into an unclaimed property voluntary disclosure agreement by completing, executing and delivering, after June 30, 2013, and on or before June 30, 2014, to the Secretary of State such form as is acceptable to the Secretary of State, and who enters an unclaimed property voluntary disclosure agreement and makes payment in full or enters into a payment plan on or before June 30, 2015.

(c) The Secretary of State shall have no authority to accept a notice in writing of intent to enter into an unclaimed property voluntary disclosure agreement after June 30, 2014, and shall have no authority to enter an unclaimed property voluntary self-disclosure agreement with a holder or otherwise receive or seek payment of any amounts of abandoned property after June 30, 2015.

(d) Notwithstanding any other provision of this section or of this chapter, the Secretary of State shall have no authority to enter an unclaimed property voluntary self-disclosure agreement with or otherwise receive or seek payment of any amounts of abandoned property from:

(1) Those holders that have indicated in writing their intent to enter into an unclaimed property voluntary disclosure agreement by completing,

executing and delivering, on or before June 30, 2012, the appropriate form promulgated by the State Escheator;

(2) Those holders that have entered a voluntary self-disclosure agreement with the State Escheator on or before June 30, 2012, provided that the Secretary of State shall be permitted to enter an unclaimed property voluntary disclosure agreement with any holder with respect


to property types or periods or both property types and periods that were not included in a voluntary self-disclosure agreement executed prior to June 30, 2012, or with respect to the holder, its subsidiaries or related entities that were not included in a voluntary self-disclosure agreement executed prior to June 30, 2012;

(3) Those holders to which a notice of examination has been mailed by the State Escheator; and

(4) Those holders that the Secretary of State has previously referred to the State Escheator.

(e) Each of the holders described in paragraph (d)(1) or (d)(2) of this section shall be accorded the benefit of the same deadlines established in subsection (b) of this section, but the State Escheator shall retain authority over all voluntary self-disclosure agreements so described.

(f) Unless referred by the Secretary of State pursuant to subsection (a) of this section, the State Escheator shall not conduct, prior to July 1, 2015, any examination of records or an investigation pursuant to § 1155 of this title of any holder who has indicated in writing its intent to enter into an unclaimed property voluntary disclosure agreement by completing, executing and delivering to the Secretary of State, on or before June 30, 2014, such form as is acceptable to the Secretary of State, unless such holder’s participation is prohibited by subsection (d) of this section.

78 Del. Laws, c. 317, § 1; 79 Del. Laws, c. 2, §§ 2, 3.;


Subchapter III. Unclaimed Life Insurance Funds

§ 1180. Scope ............................................................................................. 43

§ 1181. Definitions ....................................................................................... 43

§ 1182. Annual report of unclaimed funds ................................................... 44

§ 1183. Publication of list of unclaimed funds ............................................. 44

§ 1184. Payment for publication .................................................................. 45

§ 1185. Payment to State Escheator ........................................................... 45

§ 1186. Custody of unclaimed funds in State; insurers

indemnified .................................................................................... 46

§ 1187. Reimbursement for claims paid by insurers ................................... 46

§ 1188. Determination and review of claims ............................................... 46

§ 1189. Payment of allowed claims ............................................................. 47

§ 1190. Records required ............................................................................ 47

§ 1191. Other acts not applicable ................................................................ 47

§ 1192. Penalties and interest ..................................................................... 48

§ 1193. Penalty for false oath ...................................................................... 48

§ 1194. Effect of failure to report ................................................................. 48

§ 1180. Scope.

(a) This subchapter shall apply to unclaimed funds, as defined in § 1181 of this title, of any life insurance company doing business in this State where the last known address, according to the records of such company, of the person entitled to such funds is within this State; provided that, if a person other than the insured or annuitant be entitled to such funds and no address of such person be known to such company or if it be not definite and certain from the records of such company what person is entitled to such funds, then in either event it shall be presumed for the purposes of this subchapter that the last known address of the person entitled to such funds is the same as the last known address of the insured or annuitant according to the records of such company.

(b) This subchapter shall also apply to unclaimed funds, as defined in § 1181 of this title, of any life insurance company doing business in this State where the last person entitled to any such fund is or was a Delaware corporation and such corporation abandoned, disclaimed or otherwise relinquished all right, title and interest to such funds. This subchapter shall also apply where such corporation terminated or cancelled any life or endowment insurance policy or annuity contract, or permitted any life or endowment insurance policy or annuity contract to be terminated or cancelled, and such funds resulting from any policy or contract to which the corporation would otherwise have been entitled accrued or became due and payable after such cancellation or termination.

12 Del. C. 1953, § 1180; 50 Del. Laws, c. 568, § 1; 59 Del. Laws, c. 278, §§ 1, 2.;


The term “unclaimed funds” as used in this subchapter means and includes all moneys held and owing by any life insurance company doing business in this State which shall have remained unclaimed and unpaid for 5 years or more after it is established from the records of such company that such moneys became due and payable under any life or endowment insurance policy or annuity contract which has matured or terminated. A life insurance policy not matured by actual proof of the prior death of the insured shall be deemed to be matured and the proceeds thereof shall be deemed to be “due and payable” within the meaning of this subchapter if such policy is in force when the insured shall have attained the limiting age under the mortality table on which the reserve is based. Moneys otherwise admittedly due and payable shall be deemed to be “held and owing” within the meaning of this subchapter although the policy or contract shall not have been surrendered as required.


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TITLE 12 §§ 1180 - 1194 MORRIS NICHOLS’ DELAWARE UNCLAIMED PROPERTY LAW COMPANION / 2013-2014

§ 1182. Annual report of unclaimed funds.

(a) Every such life insurance company shall on or before December 20 of each year make a report in writing to the State Escheator of all unclaimed funds, as defined in § 1181 of this title, held and owing by it on December 31 next preceding; provided, however, such report shall not be required to include amounts of less than $5.00 which on February 29, 1956, shall have been unclaimed and unpaid for more than 10 years or amounts which have been paid to another state or jurisdiction prior to said date.

(b) Such report shall be signed and sworn to by an officer of such company and shall set forth:

(1) In alphabetical order the full name of the insured or annuitant, the last known address according to the company’s records and the policy or contract number;

(2) The amount appearing from the company’s records to be due on such policy or contract, except that amounts under $50 each may be reported in the aggregate;

(3) The date such unclaimed funds became payable;

(4) The name and last known address of each beneficiary or other person who, according to the company’s records, may have an interest in such unclaimed funds; and



§ 1183. Publication of list of unclaimed funds.

(a) On or before the first day of September prior to the making of such reports under § 1182 of this title, every such life insurance company shall cause to be published notices based on the information contained in such reports and entitled:

“NOTICE OF CERTAIN UNCLAIMED FUNDS HELD AND OWING BY LIFE INSURANCE COMPANIES.”

(b) For all unclaimed funds payable to a person appearing to be entitled to such funds whose last known address is located in New Castle County, such notice shall be published at least twice in a daily newspaper published in that County. For all unclaimed funds payable where such last known address is located in Kent County or Sussex


County, such notice shall be published at least once in a newspaper published at least weekly in the County in which unclaimed funds are payable. For all unclaimed funds payable to corporations as provided in § 1180(b) of this title, notice shall be published in the county of the last known address of the corporation’s registered agent in the manner provided in this section.

(c) Each such notice shall set forth in alphabetical order the names of the insureds or annuitants under policies or contracts where the last known address of the person appearing to be entitled to such funds is in the county of publication, together with:

(1) The amount reported due and the date it became payable;

(2) The name and last known address of each beneficiary or other person who, according to the company’s reports, may have an interest in such unclaimed funds; and

(3) The name and address of the company.

The notice shall also state that such unclaimed funds will be paid by the company to persons establishing to its satisfaction before the following December 1 their right to receive the same and that not later than the following December 20 such unclaimed funds still remaining will be paid to the State Escheator who shall thereafter be liable for the payment thereof.

(d) Publication as required by this section may be waived in the discretion of the State Escheator where the amount involved in a particular policy or contract does not exceed $50.


§ 1184. Payment for publication.

Any amounts paid by a life insurance company to newspapers for any publication of names as required by this subchapter may be charged against all unclaimed funds held or owing by such life insurance company at the time of such publication.

12 Del. C. 1953, § 1184; 50 Del. Laws, c. 568, § 1.;

§ 1185. Payment to State Escheator.

(a) All unclaimed funds contained in the report required to be filed by § 1182 of this title, excepting those which have ceased to be unclaimed funds, less the amount paid for publication under § 1184 of this title, shall be paid over to the State Escheator with the annual report on or

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before December 20.

(b) The State Escheator shall have the power, for cause shown, to extend for a period of not more than 1 year the time within which a life insurance company shall file any report and in such event the time for publication and payment required by this subchapter shall be extended for a like period.


§ 1186. Custody of unclaimed funds in State; insurers indemnified.

Upon the payment of such unclaimed funds to the State Escheator, the State shall assume, for the benefit of those entitled to receive the same and for the safety of the money so paid, the custody of such unclaimed funds, and the life insurance company making such payment shall immediately and thereafter be relieved of and held harmless by the State from any and all liability for any claim or claims which exist at such time with reference to such unclaimed funds or which thereafter may be made or may come into existence on account of or in respect to any such unclaimed funds.

12 Del. C. 1953, § 1186; 50 Del. Laws, c. 568, § 1.;

§ 1187. Reimbursement for claims paid by insurers.

Any life insurance company which has paid moneys to the State Escheator pursuant to this subchapter may make payment to any person appearing to such company, in accordance with its customary rules and regulations governing the payment of claims, to be entitled thereto and upon proof of such payment the State Escheator shall forthwith reimburse such company for such payment out of the General Fund of the State.


§ 1188. Determination and review of claims.

(a) Any person claiming to be entitled to unclaimed funds paid to the State Escheator may file a claim at any time with such official. The State Escheator shall possess full and complete authority to accept or reject any such claim. If the Escheator rejects such claim or fails to act thereon within 90 days after receipt of such claim, the claimant may within 4 months thereafter apply for a hearing and determination of the claim by the Tax Appeal Board. The procedure before the Tax Appeal


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Board for such hearing shall be the same as that provided for by § 329 of Title 30 and the Board shall have the same power to compel the attendance of witnesses and the production of evidence as is provided in § 330 of Title 30.

(b) Within 30 days after notice of a decision upon such hearing, the State Escheator or any claimant may appeal such decision to the Court of Chancery, upon notice to all parties to the proceedings before the Tax Appeal Board, and upon such other notice as the Court of Chancery may order.

(c) The Court of Chancery may make such rules as it may deem proper for the perfection, hearing and determination of such appeals.

12 Del. C. 1953, § 1189; 50 Del. Laws, c. 568, § 1; 57 Del. Laws, c. 718, § 19; 57 Del. Laws, c. 741, § 48C; 70 Del. Laws, c. 186, § 1.;

§ 1189. Payment of allowed claims.

Any claim which is accepted by the State Escheator or ordered to be paid by the Escheator by the Tax Appeal Board or the Court of Chancery shall be paid out of the General Fund.

12 Del. C. 1953, § 1190; 50 Del. Laws, c. 568, § 1; 57 Del. Laws, c. 741, § 48C; 59 Del. Laws, c. 148, § 3; 70 Del. Laws, c. 186, § 1.;

§ 1190. Records required.

The State Escheator shall keep in the office a public record of each payment of unclaimed funds received by the Escheator from any life insurance company. Such record shall show in alphabetical order the name and last known address of each insured or annuitant and of each beneficiary or other person who, according to the company’s reports, may have an interest in such unclaimed funds and with respect to each policy or contract its number, the name of the company and the amount due.


§ 1191. Other acts not applicable.

No other provisions of this Code relating to escheat or abandoned or unclaimed funds shall apply to life insurance companies nor shall any statute enacted after February 29, 1956, so apply unless specifically made applicable by its terms.


12 Del. C. 1953, § 1192; 50 Del. Laws, c. 568, § 1.;


Repealed by 73 Del. Laws, c. 417, § 3, effective July 22, 2002, and effective for reports filed or required to be filed on or after July 22, 2002.

§ 1193. Penalty for false oath.

The making of a wilful false oath in any report required under this subchapter shall be perjury and punishable as such according to law.

12 Del. C. 1953, § 1194; 50 Del. Laws, c. 568, § 1.;

§ 1194. Effect of failure to report.

Nothing in this subchapter shall prevent the State Escheator from making claim to any fund, to which the State would otherwise be entitled, because it has not been reported in accordance with this subchapter.

59 Del. Laws, c. 278, § 4.;


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Subchapter IV. Other Unclaimed Property

§ 1197. Other property escheated. .......................................................................51

§ 1198. Definitions. ...............................................................................................51

§ 1199. Report by holders of abandoned property. ..............................................55

§ 1200. [Reserved.] ..............................................................................................56

§ 1201. Payment or delivery of abandoned property. ...........................................56

§ 1202. Periods of limitation not a bar. .................................................................57

§ 1203. Effect of payment and delivery.................................................................57

§ 1204. Sale of abandoned property. ...................................................................58

§ 1205. Deposit and disbursement of funds. ........................................................59

§ 1206. Claims for abandoned property paid or delivered; determination of claims; appeals. ...........................................................59

§ 1207. Penalties and interest. .............................................................................59

§ 1208. Rules and regulations. .............................................................................59

§ 1209. [Reserved.] ..............................................................................................60

§ 1210. No private escheats. ................................................................................60

§ 1211. Limited exception, uninvoiced payables not reportable. ..........................60

§ 1212. No private escheat of gift certificates. ......................................................61

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Subchapter IV. Other Unclaimed Property

§ 1197. Other property escheated. .......................................................................51

§ 1198. Definitions. ...............................................................................................51

§ 1199. Report by holders of abandoned property. ..............................................55

§ 1200. [Reserved.] ..............................................................................................56

§ 1201. Payment or delivery of abandoned property. ...........................................56

§ 1202. Periods of limitation not a bar. .................................................................57

§ 1203. Effect of payment and delivery.................................................................57

§ 1204. Sale of abandoned property. ...................................................................58

§ 1205. Deposit and disbursement of funds. ........................................................59

§ 1206. Claims for abandoned property paid or delivered; determination of claims; appeals. ...........................................................59

§ 1207. Penalties and interest. .............................................................................59

§ 1208. Rules and regulations. .............................................................................59

§ 1209. [Reserved.] ..............................................................................................60

§ 1210. No private escheats. ................................................................................60

§ 1211. Limited exception, uninvoiced payables not reportable. ..........................60

§ 1212. No private escheat of gift certificates. ......................................................61


§ 1197. Other property escheated.

Except as otherwise provided elsewhere in the Delaware Code all property, as hereinafter defined and not otherwise subject to escheat in accordance with this chapter, the title to which has failed and the power of alienation suspended by reason of: (1) The death of the owner thereof, intestate, leaving no known heirs-at-law; (2) the owner thereof having disappeared or being missing from the owner’s last known place of residence for a continuous period of 5 years or more, leaving no known heirs-at-law; or (3) the same having been abandoned by the owner thereof, as hereinafter defined, shall descend to the State as an escheat in accordance with the Constitution, the general laws of this State or this subchapter.



For purposes of this subchapter, the following definitions shall apply:

(1) “Abandoned property” means property against which a full period of dormancy has run.

(2) “Appropriation” means the act of the State, through its duly constituted officers or agencies, in taking or accepting possession or custody of abandoned, unprotected, unclaimed or lost property as conservator thereof for later disposition by descent to the State as an escheat or redemption by the owner as provided in this subchapter.

(3) “Distributions held by financial intermediaries for unknown owners” means property as generally defined in paragraph (11) of this section, which consists of dividends, interest, stock and other distributions made by issuers of securities which are held by financial intermediaries (including, by way of example and not limitation, banks, transfer agents, brokers and other depositories) for beneficial owners whose identities are unknown.

(4) “Escheat” means the descent or devolution of property to the State under and by virtue of the Constitution of the State, the general laws of this State or this subchapter.

(5) “Escheatable property” means property which is subject to escheat to the State under and by virtue of the Constitution of the State, the general laws of this State or this subchapter.

(6) “Escheated property” means property which has descended

to the State as an escheat.

(7) “Holder” means any person having possession, custody or control of the property of another person and includes a post office, a depository, a bailee, a trustee, a receiver or other liquidating officer, a fiduciary, a governmental department, institution or agency, a municipal corporation and the fiscal officers thereof, a public utility, service corporation and every other legal entity incorporated or created under the laws of this State or doing business in this State. For purposes of this subchapter, the issuer of any intangible ownership interest in a corporation, whether or not represented by a stock certificate, which is registered on stock transfer or other like books of the issuer or its agent, shall be deemed a holder of such property. This definition shall be construed as distinguishing the term “holder” of property from the term “owner” of property as hereinbefore defined and as excluding from the term “holder” any person holding or possessing property by virtue of title or ownership.

(8) “Owner,” in addition to its commonly accepted meaning, shall be construed to particularly mean and include any person, as hereinbefore defined, having the legal or equitable title to property coming within the purview of this subchapter.

(9)a. “Period of dormancy” means the full and continuous period of 5 years, except a period of 15 years for traveler’s checks, during which an owner has ceased, failed or neglected to exercise dominion or control over property or to assert a right of ownership or possession or to make presentment and demand for payment and satisfaction or to do any other act in relation to or concerning such property. Notwithstanding the foregoing, “period of dormancy” means the full and continuous period of 3 years with respect to intangible ownership or indebtedness in a corporation or other entity whether or not represented by a stock certificate or other certificate of membership, bonds and other securities including fractional shares, interest, dividends, cash, coupon interest, liquidation value of stocks and bonds, funds to redeem stocks and bonds, and distributions held by financial intermediaries.

b. A full period of dormancy shall be deemed to have run with respect to any dividends or other distributions held for or owing to an owner at the time a period of dormancy shall have run with respect to the intangible ownership interest in a corporation partnership, statutory or common law trust, limited liability company, or other entity to which such dividend or other distribution attaches. For good cause shown, and upon notice to the State Escheator, the Court of Chancery may, with respect to property over which the Court has otherwise assumed jurisdiction, extend the period of dormancy to a


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specific date by which an owner may exercise a right, make a demand or file a claim, provided each extension is set forth in a separate order of the court referring specifically to this section, and each extension is no longer than 3 years, provided further there shall be no more than 2 extensions under this subsection. Except as provided in § 1210 of this title, the period of dormancy shall not commence to run with respect to which claims, demands or other property held by a holder pursuant to a written agreement which contemplates that there shall be a specific period of inactivity, until the expiration of the contemplated period of inactivity. This definition shall be construed as excluding any act or doing of a holder of abandoned property not done at the express request or authorization of the owner. Notwithstanding the foregoing, the “period of dormancy” with regard to gift certificates shall be the shorter of:

1. 5 years, or

2. The expiration period, if any, of the gift certificate less 1 day. In the event the period of dormancy is determined by reference to the expiration period of the gift certificate, the rights of the Escheator shall attach at the time provided in this paragraph (9)b.2. of this section, but the issuer may continue to hold the property and may report and pay over such property as if the period of dormancy were 5 years.

A full period of dormancy shall be deemed to have run with respect to any property that is otherwise reportable and payable to this State that a holder in accordance with the laws of the jurisdiction wherein the holder is located, is obligated or required to report and pay over such property to the other jurisdiction because of a shorter period of dormancy or reporting period.

c. Notwithstanding the foregoing, “period of dormancy” means the full and continuous period of 1 year following the last day of the meet with respect to sums held for the payment of outstanding pari-mutuel tickets from the meet.

(10) “Person” includes a natural person, a corporation organized or created under the laws of this State or a corporation doing business or which has been engaged in business in this State, a copartnership, a voluntary association and every or any other association or organization of individuals, but excludes banking organizations and any life insurance company.

(11) “Property” means personal property, including “distributions held by financial intermediaries for unknown owners” as that phrase is defined in paragraph (3) of this section, of every kind or description, tangible or intangible, in the possession or under the control of a holder,


as hereinafter defined, and includes, but not by way of limitation, (i) money; (ii) bills of exchange; (iii) intangible ownership interests in corporations, whether or not represented by a stock certificate, bonds and other securities; (iv) credits, including wages and other allowances for services earned or accrued on or after January 1, 1958, money orders and traveler’s checks, also amounts received in consideration for gift certificates which are unredeemed, or, in lieu of which the State Escheator may in the Escheator’s discretion and upon the specific request of the issuer, accept: (1) Gift certificates reissued at face value on the date on which they are tendered to the Escheator; or (2) where the gift certificates provide that they are redeemable for merchandise only, an amount in money representing the maximum cost to the issuer of merchandise represented by the certificate. The burden of proof as to the cost of merchandise shall be on the issuer of the certificate; (v) dividends, cash or stock; (vi) certificates of membership in a corporation or association; (vii) security deposits; (viii) funds deposited by holder with fiscal agents of fiduciaries for payment to owner of dividends, coupon interest and liquidation value of stocks and bonds; (ix) funds to redeem stocks and bonds; (x) amounts refundable from excess or increased rates or charges heretofore or hereafter collected by a corporation for utility services lawfully furnished by it which have been or shall hereafter lawfully be ordered refunded to consumers or other persons entitled thereto and any interest due thereon and which have remained unclaimed by the persons entitled thereto for 5 years from the date they became payable in accordance with the final determination or order providing for the refunds; (xi) amounts refundable from customer deposits heretofore or hereafter collected by a public utility and any interest due thereon, and which have remained unclaimed by the persons entitled thereto for 5 years from the date they become payable; (xii) sums held for the payment of outstanding pari-mutuel tickets; and (xiii) all other liquidated choses in action of whatsoever kind or character. For purposes of this subsection, the phrase “amounts received in consideration for gift certificates” shall not include amounts received in consideration for gift certificates having a face value of $5.00 or less and which are issued by a holder whose business is described in § 2906 of Title 30 whether or not such holder conducts such business within this State. The word “property” does not include:

a. Credits or deposits evidenced by cash balances on unclaimed or refused personal property nor any property, except the items specifically enumerated above in paragraph (11) of this section including specifically and without limitation consideration received for unredeemed gift certificates, the right to recover which in a proceeding brought by the owner would be barred by any statute of limitations, state or federal; or


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b. Non-escheat capital credits as defined in § 909 of Title 26.

12 Del. C. 1953, § 1198; 58 Del. Laws, c. 275, § 1; 58 Del. Laws, c. 426, §§ 1-3; 59 Del. Laws, c. 320, §§ 1, 2; 63 Del. Laws, c. 311, § 4; 65 Del. Laws, c. 351, §§ 1-3; 66 Del. Laws, c. 379, §§ 3, 4; 67 Del. Laws, c. 264, §§ 1-3; 68 Del. Laws, c. 122, § 10; 69 Del. Laws, c. 180, §§ 1, 2; 70 Del. Laws, c. 186, § 1; 70 Del. Laws, c. 298, § 2; 71 Del. Laws, c. 448, § 1; 72 Del. Laws, c. 45, § 2; 75 Del. Laws, c. 19, § 3; 76 Del. Laws, c. 276, §§ 1, 2; 76 Del. Laws, c. 277, §§ 1, 2; 77 Del. Laws, c. 417, § 11.;

§ 1199. Report by holders of abandoned property.

(a) Every holder of funds or other property, tangible or intangible, deemed abandoned under this subchapter shall file with the State Escheator, on or before March 1 of each year, as of December 31 next preceding, a report with respect to such property. The report shall be verified and shall include:

(1) The name, if known, and last known address, if any, of each person appearing from the records of the holder to be the owner of any property deemed abandoned under this subchapter;

(2) The nature and identifying number, if any, or description of the property and the amount appearing from the records to be due, except that items of value under $50 each may be reported in aggregate;

(3) The date when the property became payable, demandable or returnable and the date of the last transaction with the owner with respect to the property; and

(4) Other information which the State Escheator may prescribe.

(b) Upon written request the State Escheator may grant an extension of time with respect to the date for filing the report.

(c) The requirements of this section for filing an annual report shall not apply to municipal corporations or counties and the fiscal officers thereof.

(d) Verification, if made by a partnership, shall be executed by a partner, if made by an unincorporated association or private corporation, by an officer and if made by a public corporation, by its chief fiscal officer.

(e) If the person holding property deemed abandoned is a successor


to other persons who previously held the property for the owner or if the holder has changed name while holding the property, the person holding the property shall file with the report all prior known names and addresses of each holder of the property.

(f)(1) With respect to any stock or other certificate of ownership or any dividend, profit, distribution, interest, payment on principal or other sum held owing by a corporation or other business association for or to a shareholder, certificate holder, member, bondholder or other security holder, the initial report filed under this section shall include all such items of property deemed abandoned under this subchapter without limitation as to time.

(2) Except as provided in paragraph (1) of this subsection, the initial report shall include all such items of property which, under this subchapter, would have been deemed abandoned on the effective date of this subchapter had this subchapter been in effect on January 1, 1964.

(g) No reporting shall be required solely by virtue of holding property constituting consideration paid for unredeemed gift certificates which, in the aggregate, for the reporting period have a face value of less than $5,000 or for gift certificates having a face value of $5 or under issued by a holder whose business is described in § 2906 of Title 30 whether or not such firm conducts business in this State.

12 Del. C. 1953, § 1199; 58 Del. Laws, c. 275, § 1; 58 Del. Laws, c. 426, § 4; 66 Del. Laws, c. 379, § 6; 67 Del. Laws, c. 264, § 5; 70 Del. Laws, c. 186, § 1; 70 Del. Laws, c. 298, § 3; 72 Del. Laws, c. 45, § 1.;


§ 1201. Payment or delivery of abandoned property.

(a) On or before the date required for the filing of the report pursuant to § 1199 of this title, every holder of abandoned property shall pay or deliver to the State Escheator all abandoned property specified in the report, except that if it appears the reported abandonment is erroneous, the holder need not pay or deliver the property, which will no longer be deemed abandoned, to the State Escheator, but in lieu thereof shall file a verified written explanation of the proof of claim or other reason. The holder of any intangible ownership interest in a corporation deemed abandoned under this subchapter shall, when making the delivery contemplated by this section:

(1) If such interest is a certificated security as defined in §

TITLE 12 §§ 1197–1212 MORRIS NICHOLS’ DELAWARE UNCLAIMED PROPERTY LAW COMPANION /2013-2014

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8-102(a) of Title 6 deliver either the original stock certificate evidencing the abandoned property, if such is in its possession or a duly issued replacement certificate evidencing such property in a form suitable for transfer; or

(2) If such interest is an uncertificated security as defined in § 8-102(a) of Title 6 cause such uncertificated security to be registered in the name of the State Escheator.

(b) [Deleted.]

12 Del. C. 1953, § 1201; 58 Del. Laws, c. 275, § 1; 58 Del. Laws, c. 426, § 6; 65 Del. Laws, c. 351, § 4; 68 Del. Laws, c. 122, § 3; 69 Del. Laws, c. 180, §§ 3, 4; 75 Del. Laws, c. 19, §§ 1, 2.;

§ 1202. Periods of limitation not a bar.

The expiration of any period of time specified by statute or court order, during which an action or proceeding may be commenced or enforced to obtain payment of a claim for money or recovery of property, shall not prevent the money or property from being deemed abandoned property nor affect any duty to file a report required by this subchapter or to pay or deliver abandoned property to the State Escheator.


§ 1203. Effect of payment and delivery.

(a) Unless otherwise addressed in subsection (b) of this section, the payment or delivery of property to the State Escheator by any holder shall terminate any legal relationship between the holder and the owner and shall release and discharge such holder from any and all liability to the owner, the owner’s heirs, personal representatives, successors and assigns by reason of such delivery or payment, regardless of whether such property is in fact and in law abandoned property and such delivery and payment may be pleaded as a bar to recovery and shall be a conclusive defense in any suit or action brought by such owner, the owner’s heirs, personal representatives, successors and assigns or any claimant against the holder by reason of such delivery or payment. Application of this subsection (a) is mutually exclusive of subsection (b) of this section and, accordingly, shall not be applied in conjunction with subsection (b) of this section.

(b) Upon the delivery in good faith of a duplicate certificated security to the State Escheator or the registration of an uncertificated security to the State Escheator pursuant to § 1201 of this title, the holder and any transfer agent, registrar or other person acting for or on behalf of the


holder in executing or delivering such duplicate certificate or effectuating such registration, is relieved of all liability of every kind to every person, including any person acquiring the original of a certificated security or the duplicate of a certificated security issued to the State Escheator, for any losses or damages resulting to any person by issuance and delivery to the State Escheator of the duplicate certificated security or the registration to the holder’s name of an uncertificated security.

(c) If the holder pays or delivers property to the State Escheator in good faith and thereafter another person claims the property from the holder or another state claims the money or property under its laws relating to escheat or abandoned or unclaimed property, the State Escheator acting on behalf of the State, upon written notice of the claim, shall defend the holder against the claim and indemnify the holder against any liability on the claim.

(d) For the purposes of this section, “good faith” means that:

(1) Payment or delivery was made in a reasonable attempt to comply with this subchapter;

(2) The person delivering the property was not a fiduciary then in breach of trust in respect to the property and had a reasonable basis for believing, based on the facts then known to the person, that the property was abandoned for the purposes of this subchapter; and

(3) There is no showing that the records pursuant to which the delivery was made did not meet reasonable commercial standards of practice in the industry.

(e) The State Escheator at the request of a holder and in the State Escheator’s sole discretion, may allow a holder to pay over or deliver property otherwise properly payable to the State but against which a full period of dormancy has not yet run. In the event the State Escheator acquiesces to the request and accepts such property, the holder shall be entitled to the protections of this section and the property shall be treated generally as if it had been paid over after a full period of dormancy had run. The provisions of §§ 1145 and 1206(c) of this title shall not apply to property accepted by the State Escheator under this subsection until a full period of dormancy has run against the property.

12 Del. C. 1953, § 1203; 58 Del. Laws, c. 426, § 8; 65 Del. Laws, c. 351, § 5; 70 Del. Laws, c. 186, § 1; 75 Del. Laws, c. 19, § 4; 78 Del. Laws, c. 81, §§ 1, 2.;

§ 1204. Sale of abandoned property.

(a) All abandoned property, other than money, delivered to the


State Escheator under this subchapter shall be sold or disposed of in accordance with § 1143 of this title.

(b) All sales of property made by the State Escheator under this subchapter shall pass absolute title to the purchaser. The State Escheator or the Secretary of State shall execute all documents necessary to complete the transfer of title.

12 Del. C. 1953, § 1204; 58 Del. Laws, c. 426, § 9.;

§ 1205. Deposit and disbursement of funds.

(a) All funds received by the State Escheator under this subchapter, including the proceeds of sale under § 1204 of this title, shall forthwith be paid and deposited into the General Fund of the State.

(b) All disbursements for expenses, claims, storage, etc., made or authorized by the State Escheator in connection with the administration of this subchapter shall be paid by the Secretary of Finance upon presentation of a signed voucher by the State Escheator.

12 Del. C. 1953, § 1205; 58 Del. Laws, c. 426, § 10.;

§ 1206. Claims for abandoned property paid or delivered; determination of claims; appeals.

(a) Any person claiming an interest in any property paid or delivered to the State Escheator under this subchapter may file a claim thereto or to the proceeds from the sale thereof with the State Escheator.

(b) The determination of claims and rights of appeal shall be accomplished as prescribed in § 1146(b) of this title.

(c) When property is paid or delivered to the State Escheator under this subchapter, the owner is not entitled to receive income or other increments accruing thereafter.

12 Del. C. 1953, § 1206; 58 Del. Laws, c. 426, § 11.;


Transferred by 73 Del. Laws, c. 417, § 4, effective July 22, 2002, and effective for reports filed or required to be filed on or after July 22, 2002.

§ 1208. Rules and regulations.

The State Escheator may make such rules and regulations as the Escheator may deem necessary to administer and enforce this

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subchapter.

12 Del. C. 1953, § 1208; 58 Del. Laws, c. 426, § 13; 70 Del. Laws, c.

186, § 1.;


§ 1210. No private escheats.

Any provision in a certificate of incorporation, by law, trust agreement, contract or any other writing regulating the relationships between an owner and a holder, relating to property with the exception of non-escheat capital credits as defined in § 909 of Title 26, which is or may be subject to the provisions of this chapter, which provides that upon the owner’s failure to act or make a claim regarding property in possession of the holder, that such property reverts to or becomes the property of the holder, in contravention of this chapter, shall be void and unenforceable.

68 Del. Laws, c. 122, § 13; 71 Del. Laws, c. 448, § 2.;

§ 1211. Limited exception, uninvoiced payables not reportable.

(a) Property as defined in § 1198 of this title shall be deemed to exclude uninvoiced payables as more particularly defined in this section.

(b) “Uninvoiced payables” are amounts due between merchants as defined in the Delaware Uniform Commercial Code, §§ 1-101 et seq. of Title 6, from a holder who is a buyer to a creditor who is the seller of goods ordered by a holder in the ordinary course of business when the goods were received and accepted by the holder, but which for any reason were never invoiced by the seller.

(c) Uninvoiced payables include the value of goods received by a holder from a seller from out of balance transactions where the holder’s purchase order for goods and the amount of goods received by the holder do not match.

(d) Uninvoiced payables include unsolicited goods received by a holder from a seller that fall within § 2505 of Title 6.

(e) Uninvoiced payables specifically do not include accounts payable, accounts receivable, or any other type of credit or amount due to the creditor, including uncashed checks of any kind whatsoever whether relating to inventory, goods, or services, and all of these types of

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property are still reportable as abandoned or unclaimed property.

(f) Nothing in this section shall be construed to create a business-to-business exemption of any kind regardless of whether a current business relationship exists between the holder and the creditor.

77 Del. Laws, c. 417, § 2.;

§ 1212. No private escheat of gift certificates.

Any provision on or relating to any gift certificate the amount paid in consideration of which is defined as “property” for purposes of this chapter, which provides that, upon the owner’s failure to act or make a claim pursuant to such gift certificate within a certain period of time, the owner of the gift certificate shall lose rights with respect to the gift certificate against the issuer, which provision, if applied as against the State Escheator, would have the effect of defeating the escheat of any amount with regard to such gift certificate, shall be unenforceable as against the State Escheator.

67 Del. Laws, c. 264, § 4.;



Subchapter V. Escheat of Postal Savings System Accounts

§ 1220. Declaration of escheat. ............................................................................63

§ 1221. Obtaining information on accounts. .........................................................63

§ 1222. Proceeding to adjudicate escheat. ..........................................................63

§ 1223. Notice. .....................................................................................................63

§ 1224. Collection and deposit of funds; indemnification

of United States. .....................................................................................64

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Subchapter V. Escheat of Postal Savings System Accounts

§ 1220. Declaration of escheat. ............................................................................63

§ 1221. Obtaining information on accounts. .........................................................63

§ 1222. Proceeding to adjudicate escheat. ..........................................................63

§ 1223. Notice. .....................................................................................................63

§ 1224. Collection and deposit of funds; indemnification

of United States. .....................................................................................64

§ 1220. Declaration of escheat.

All postal savings system accounts created by the deposits of persons whose last known addresses are in this State which have not been claimed by the persons entitled thereto before June 1, 1971, are presumed to have been abandoned by their owners and are declared to escheat and become the property of the State.

12 Del. C. 1953, § 1220; 58 Del. Laws, c. 329; 58 Del. Laws, c. 426, § 18.;

§ 1221. Obtaining information on accounts.

The Secretary of State shall request from the Bureau of Accounts of the United States Treasury Department records providing the following information:

(1) The names of depositors at the post offices of this State whose accounts are unclaimed;

(2) The last known addresses of such persons, as shown by the records of the Post Office Department; and

(3) The balance remaining in each account, as shown by the records of the Post Office Department.

The Secretary of State shall agree to return to the Bureau of Accounts, promptly, all account cards showing last addresses in another state.


§ 1222. Proceeding to adjudicate escheat.

The Secretary of State may bring proceedings in the United States District Court to escheat unclaimed postal savings system accounts held by the United States Treasury Department. A single proceeding may be used to escheat as many accounts as may be available for escheat at 1 time.


§ 1223. Notice.

The Secretary of State shall notify depositors whose accounts are to be escheated, as follows:

(1) A letter advising that a postal savings system account in



the name of the addressee is about to be escheated and setting forth the procedure by which a deposit may be claimed shall be mailed by first-class mail to the named depositor at the last address shown on the account records for each account to be escheated having an unpaid principal balance of more than $25;

(2) General notice of intention to escheat postal savings system accounts shall be published once in each of 3 successive weeks in 1 or more newspapers which combine to provide general circulation throughout the State;

(3) Special notice of intention to escheat the unclaimed postal savings system accounts originally deposited in each post office must be published once in each of 3 successive weeks in a newspaper published in the county in which the post office is located. Such notice must list the names of the owners of each unclaimed account to be escheated if the account has a principal balance of $3 or more.


§ 1224. Collection and deposit of funds; indemnification of United States.

(a) The Secretary of State shall present a copy of each final judgment of escheat to the United States Treasury Department for payment of the principal due and the interest computed under regulations of the United States Treasury Department. The payment received shall be deposited in the General Fund in the State Treasury.

(b) This State shall indemnify the United States for any losses suffered as a result of the escheat of unclaimed postal savings system accounts. The burden of the indemnification falls upon the fund into which the proceeds of the escheated accounts have been paid.


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R Regulations

Abandoned or Unclaimed Property Voluntary Disclosure Agreement Program .............................................................................................67 Policies and Procedures Regarding FOIA Requests ..............................................70

Regulation on Practices and Procedures for Appeals of Determinations of the Audit Manager - Final Order 3/1/12 ...............................................................75

Regulation on Practice and Procedure for Establishing Running of the Full Period of Dormancy for Certain Securities Related Property - Final Order 3/1/12 ...............................................................................82

Regulation on Practices and Procedures for Records Examinations by the State Escheater - Final Order 11/1/12 ......................................................85

DE AUP REGULATIONS MORRIS NICHOLS’ DELAWARE UNCLAIMED PROPERTY LAW COMPANION / 2013-2014

REGULATIONS

DEPARTMENT OF FINANCE DIVISION OF REVENUE

Statutory Authority: 12 Delaware Code, Section 1154 (12 Del. C. § 1154)

Abandoned or Unclaimed Property Voluntary Disclosure Agreement Program

Policy:

The State of Delaware Division of Revenue is com-mitted to promoting Holder compliance. In an effort to accomplish this objective, a Voluntary Disclosure Agreement (VDA) process is available to Holders who are not presently in compliance but want to comply with the Abandoned or Unclaimed Property Law. The VDA program allows Holders to come forward to report their abandoned property liability for a limited reporting pe-riod. The agreement releases the Holder from all claims, demands, interest, penalties, actions or causes of action related to all property reported properly under the term of the VDA.

In our commitment to fairness in the administration of Delaware’s Abandoned or Unclaimed Property Law, the Division of Revenue will adhere to the following gen-eral guidelines:

• Any Holder who wishes to comply with the Delaware Abandoned or Unclaimed PropertyLaw may file a VDA. • Holders, which includes any subsidiary and all

related entities, who have received an audit letter or are currently under audit by the State of Delaware may not file a VDA.

• The Holder shall complete a review of its books and records and file reports beginning with calendar year 1991, report year 1996, as well as for all subse-quent report years, and pay over all abandoned prop-erty due the State of Delaware for those years.

• The State of Delaware reserves the right for three years to audit a VDA. Interest and penalty may be assessed pursuant to §1159 of the Abandoned or Unclaimed Property Law on all abandoned property due for all reporting years, if it is determined that the property reported on a VDA is materially under-reported. In such a case, the VDA shall be and of no force or ef-fect. The State of Delaware reserves the right to fully audit the Holder in such a circumstance.

Process:

Initial Holder Contact

The Holder or the Holder’s representative initi-ates the process by sending a completed Form AP DE-1, Disclosure and Notice of Intent to Voluntarily Comply with Abandoned or Unclaimed Property Law, to the following address:

Delaware Division of Revenue Attn: Abandoned Property Audit Manager 820 North French Street Wilmington, DE 19801 Fax: 302-577-8982

The following information must be provided:

• Completed Form AP DE-1, signed by the Holder • Holder’s name and address • List of all subsidiaries and all related entities partici-

pating in VDA • Federal Employer Identification Number for each

entity participating • Holder representative’s contact information,

including an executed power of attorney signed by the Holder authorizing the representative to act on behalf of the Holder

Processing the VDA

• Upon acceptance of the Form AP DE-1 by the State of Delaware, the Holder shall complete a review of its books and records and file reports beginning with calendar year 1991, report year 1996, as well as for all subsequent report years and pay all aban-doned property due the State for those years within six months from the date of the acceptance of Form AP DE-1. Acceptance shall be indicated by the State’s signing and returning a copy of the Form to the Holder.

• After the review of its books and records, the Holder is required to file a Form AP DE-2, Voluntary Self Disclosure Agreement. The Form AP DE –2 must be signed and sent along with the audit report outlining the Holder’s potential li-

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REGULATIONS

Auditing of Holders:

As allowed by law, the State of Delaware will examine selected Holders’ books and records for compliance with the Abandoned Property Law. The audit will be assigned to an auditor in the Division of Revenue or to a third-party auditing firm that the State has retained for such purposes. At the request of a Holder the State’s third party auditor will enter into a confidential-ity agreement with the Holder in a from approved by the State Escheator before any of the Holder’s confidential records are produced.

Notification of Audit:

An official letter from the Abandoned Property Audit Manager will be issued to Holders selected for audit. The letter will outline the State’s intention to examine the books and records of the Holder (including subsid-iary and related entities) and identify the assigned audi-tor or third-party auditing firm. Third-party auditors are not authorized to engage in any examination or audit without prior written consent from the State of Dela-ware Division of Revenue. The issuance of an intent to audit letter terminates the Holder’s ability to enter into a Voluntary Disclosure Agreement (VDA).

Opening Conference:

Once an audit is assigned, an opening conference will be scheduled with the auditor and representatives of the Holder. During the opening conference, the auditor will:

• Advise the Holder of the reporting requirements of the Delaware Abandoned or Unclaimed Property Law,

• Identify the time period to be covered by the exami-nation,

• Schedule a time period for field work to be com-menced, and

• Request records and materials necessary to initiate the audit.

The State expects the Holder’s cooperation and an-ticipates that with the Holder’s cooperation the time to complete a typical audit should not exceed twelve (12) months. If an audit lasts longer than 12-months, the Abandoned Property Audit Manager will meet with

ability. • The audit report shall identify in detail the work

performed, the property types reviewed, any esti-mation techniques employed, and a calculations showing the potential amount of property due under the VDA.

• The State reserves the right to assess interest on any liability being reported under the VDA, if the VDA has not been received or an extension has not been granted within the six-month period.

• The State of Delaware will review the report submit-ted by the Holder and either accept it and request payment of their liability, or contact the Holder for additional information

General Information:

• The State of Delaware reserves the right to deny or void the VDA if a Holder does not adhere to the Program policies and procedures.

• The State of Delaware reserves the right to audit a VDA for three years from the date that a Holder has paid over property under a VDA.

• The VDA forms may not be altered without writ-ten consent of the State.

Abandoned or Unclaimed Property Audit Guidelines

Authority to Conduct Abandoned Property Audits:

Section 1155 of Title 12, Delaware Code provides the State Escheator with the authority to examine the re-cords of any person or business association or organiza-tion to determine whether the person has complied with any provision of the Abandoned or Unclaimed Property Law of Delaware.

Section 123 of House Bill 400 from the 140th General Assembly of the State of Delaware originally granted the Director of Revenue the authority, approved annu-ally, to enter into an agreement with organizations to identify abandoned property to be escheated to the State by means of audit or otherwise.


REGULATIONS

the Holder to facilitate completion of the audit. Interest and penalty may be assessed pursuant to §1159 of the Abandoned or Unclaimed Property Law on all abandoned property due for all reporting years under audit.

Examination:

The auditor may conduct the examination on-site or re-motely with the consent of the Holder if records are avail-able electronically or can be shipped. Onsite work may last a few days to several weeks depending on the size and complexity of the Holder the availability of records, and the availability of holder personnel necessary to ex-plain and discuss the records. During the examination, the auditor will review all necessary books and records, interview key personnel and review relevant policies and procedures related to abandoned property. During the examination, the auditor may make subsequent requests to the Holder for additional books and records as required to complete the audit.

The Holder will be kept informed of the progress of the audit and may contact the State directly to address issues or related to the audit. At the end of the examination, the auditor will present the preliminary findings to the Holder at an exit conference. These findings are not final. The auditor will allow the Holder reasonable time to complete required research and gather more records to address mat-ters raised in the preliminary findings.

Third-Party Advocates:

Holders may retain third party advocates (Advocate) to assist them in the audit process. The retention of an Advocate is no basis to delay the commencement of the State’s audit and the State will not delay the audit so that the Advocate may conduct a review or it’s own au-dit of the Holder’s books and records in advance of the State’s audit. The State will cooperate with the Holder and its Advocate and keep both of them apprised of the records requests, interviews and the progress of the audit in general. It is understood that the State will not audit or be limited to a review of work papers, compilations or record summaries prepared by the Holder or the Advo-cate but shall have access to such of the Holder’s origi-nal books and records that are necessary to ascertain the Holder’s compliance with the law. The State shall direct all requests and communications directly to the Holder and, if requested by the Holder, will also direct copies to the Advocate.

Final Report:

At the close of the audit, the Holder will re-ceive a statement of findings letter from the Delaware’s Abandoned Property Audit Man-ager. This letter will outline the findings of the audit and make a formal demand for the property under question (if applicable). The Holder has thirty (30) days to directly remit to the State of Delaware any abandoned property identified during the examination as owed to the State of Delaware.

General Information:

For more information on abandoned property Voluntary Disclosure Agreements and/or audits, please contact Mark Udinski, Audit Manager at 302-577-8260 or [email protected] or write to:

Delaware Division of Revenue Attn: Mark Udinski, Abandoned Property Audit Manager 820 North French Street Wilmington, DE 19801

Fax: 302-577-8982

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TITLE 8 PUBLIC INFORMATION DELAWARE ADMINISTRATIVE CODE

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DEPARTMENT OF FINANCEOFFICE OF THE SECRETARY

500 Policies and Procedures Regarding FOIA Requests

1.0 Purpose1.1 The purpose of this policy is to set forth the rules and procedures for responding to requests from the public for

Public Records under Title 29, Chapter 100 of the Delaware Code, the Freedom of Information Act.1.2 Agency employees are reminded that all Public Records requested under FOIA shall be considered open and

subject to disclosure to the Requesting Party, and any information therein may be withheld only if a specificexception applies. Exceptions shall be construed in a manner that shall further the accountability of the Agencyand to comply with the policy that the public shall have reasonable access to Public Records.

2.0 DefinitionsThe following words and terms, when used in this policy, shall have the following meaning unless the context

clearly indicates otherwise:“Agency” means the Department of Finance.“FOIA” means the Freedom of Information Act as established pursuant to Title 29, Chapter 100 of theDelaware Code.“FOIA Coordinator” shall mean the person designated by the Secretary to receive and process FOIARequests.“FOIA Request” or “Request” means a request to inspect or copy Public Records pursuant to Chapter 29,Section 10003 of the Delaware Code and in accordance with the policy hereunder.“FOIA Request Form” means the form promulgated by the Office of the Attorney General upon which requestsfor Public Records may be made.“Non-Custodial Records” shall have the meaning set forth in Section 3.6.“Public Record” shall have the meaning set forth in 29 Del.C. §10002.“Requesting Party” shall mean the party filing a FOIA Request.“Secretary” means the Secretary of Finance.

3.0 Records Request, Response Procedures and Access3.1 Form of Request

3.1.1 All FOIA Requests shall be made in writing to the Agency in person, by email, by fax, or online inaccordance with the provisions hereunder. FOIA Requests may be submitted using the FOIA RequestForm promulgated by the Office of the Attorney General; provided, however, that any FOIA Request thatotherwise conforms with the policy hereunder shall not be denied solely because the request is not on thepromulgated form. Copies of the FOIA Request Form may be obtained from the Agency’s website, or fromthe office or website of any state agency.

3.1.2 All requests shall adequately describe the records sought in sufficient detail to enable the Agency to locatesuch records with reasonable effort. The Requesting Party shall be as specific as possible whenrequesting records. To assist the Agency in locating the requested records, the Agency may request thatthe Requesting Party provide additional information known to the Requesting Party, such the types ofrecords, dates, parties to correspondence, and subject matter of the requested records.

3.2 Method of Filing Request3.2.1 FOIA Requests may be made by mail or in person to the FOIA Coordinator at FOIA Coordinator,

Department of Finance, Carvel State Office Building, Mail Stop C900, 820 North French Street,Wilmington, DE, 19801; by email to [email protected]; by fax at (302) 577-8656; or via onlinerequest form, which may be found on the Agency’s home page at www.finance.delaware.gov.

3.3 FOIA Coordinator3.3.1 The Secretary shall designate a FOIA Coordinator, who shall serve as the point of contact for FOIA

Requests and coordinate the Agency’s responses thereto. The FOIA Coordinator shall be identified on the


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Agency's website. The FOIA Coordinator may designate other Agency employees to perform specificduties and functions hereunder.

3.3.2 The FOIA Coordinator and/or his or her designee, working in cooperation with other Agency employeesand representatives, shall make every reasonable effort to assist the Requesting Party in identifying therecords being sought, and to assist the Agency in locating and providing the requested records. The FOIACoordinator and/or his or her designee will also work to foster cooperation between the Agency and theRequesting Party. Without limitation, if a Requesting Party initiates a FOIA Request that would moreappropriately be directed to another agency, the FOIA Coordinator shall promptly forward such request tothe relevant agency and promptly notify the Requesting Party that the request has been forwarded. TheAgency may close the initial request upon receipt of a written confirmation from the FOIA Coordinator ofthe relevant agency that the relevant agency has received such request. The Agency shall provide theRequesting Party with the name and phone number of the FOIA Coordinator of the relevant agency.

3.3.3 The FOIA Coordinator shall maintain a document tracking all FOIA Requests for the then-current calendaryear. For each FOIA Request, the document shall include, at a minimum: the Requesting Party’s contactinformation; the date the Agency received the Request; the Agency’s response deadline pursuant to §3.4;the date of the Agency’s response pursuant to §3.4 (including the reasons for any extension pursuant to§3.4.1); the names, contact information and dates of correspondence with individuals contacted inconnection with requests pursuant to §§3.3.2, 3.5 and 3.6; the dates of review by the Agency pursuant to§3.7 and the names of individuals who conducted such reviews; whether documents were made available;the amount of copying and/or administrative fees assessed; and the date of final disposition.

3.4 Agency Response to Requests3.4.1 The Agency shall respond to a FOIA Request as soon as possible, but in any event within fifteen (15)

business days after the receipt thereof, either by providing access to the requested records; denyingaccess to the records or parts of them; or by advising that additional time is needed because the request isfor voluminous records, requires legal advice, or a record is in storage or archived. If access cannot beprovided within fifteen (15) business days, the Agency shall cite one of the reasons hereunder why moretime is needed and provide a good-faith estimate of how much additional time is required to fulfill therequest.

3.4.2 If the Agency denies a request in whole or in part, the Agency’s response shall indicate the reasons for thedenial. The Agency shall not be required to provide an index, or any other compilation, as to each record orpart of a record denied.

3.5 Requests for Email3.5.1 Requests for email records shall be fulfilled by the Agency from its own records, if doing so can be

accomplished by the Agency with reasonable effort. If the Agency determines that it cannot fulfill all or anyportion of such request, the Agency shall promptly request that the Department of Technology andInformation (“DTI”) provide the email records to the Agency. Upon receipt from DTI, the Agency mayreview the email records in accordance with § 3.7 hereunder.

3.5.2 Before requesting DTI to provide email records, the Agency shall provide a written cost estimate from DTIto the Requesting Party, listing all charges expected to be incurred by DTI in retrieving such records. Uponreceipt of the estimate, the Requesting Party may decide whether to proceed with, cancel or modify therequest.

3.6 Requests for Other Non-Custodial Records3.6.1 If all or any portion of a FOIA Request seeks records controlled by the Agency but that are either not within

its possession or cannot otherwise be fulfilled by the Agency with reasonable effort from records itpossesses (collectively, the “Non-Custodial Records”), then the Agency shall promptly request that therelevant public body provide the Non-Custodial Records to the Agency. Prior to disclosure, records may bereviewed in accordance with §3.7 hereunder by the Agency, the public body fulfilling the request, or both.Without limitation, Non-Custodial Records shall include budget data relating to the Agency.

3.6.2 Before requesting any Non-Custodial Records, the Agency shall provide a written cost estimate to theRequesting Party, listing all charges expected to be incurred in retrieving such records. Upon receipt of theestimate, the Requesting Party may decide whether to proceed with, cancel or modify the request.

3.7 Review by Agency3.7.1 Prior to disclosure, records may be reviewed by the Agency to ensure that those records or portions of

records deemed non-public may be removed pursuant to 29 Del.C. §10002(g) or any other applicableprovision of law. In reviewing the records, all documents shall be considered Public Records unless



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subject to one of the exceptions set forth in 29 Del.C. §10002(g) or any other applicable provision of law.Nothing herein shall prohibit the Agency from disclosing or permitting access to Public Records if theAgency determines to disclose such records, except where such disclosure or access is otherwiseprohibited by law or regulation.

3.8 Hours of Review3.8.1 The Agency shall provide reasonable access for reviewing Public Records during regular business hours.

4.0 Fees4.1 Photocopying Fees

4.1.1 In instances in which paper records are provided to the Requesting Party, photocopying fees shall be asfollows:

4.1.1.1 Standard Sized, Black and White Copies: The first 20 pages of standard sized, black and whitecopied material shall be provided free of charge. The charge for copying standard sized, black andwhite Public Records for copies over and above 20 shall be $0.10 per sheet (i.e., $0.10 for asingle-sided sheet, $0.20 for a double-sided sheet). This charge applies to copies on the followingstandard paper sizes: 8.5” x 11”; 8.5” x 14”; and 11” x 17”.

4.1.1.2 Oversized Copies/Printouts: The charge for copying oversized Public Records shall be as follows:

4.1.1.3 Color Copies/Printouts: An additional charge of $1.00 per sheet will be assessed for all colorcopies or printouts for standard sized copies (8.5” x 11”; 8.5” x 14”; and 11” x 17”), and $1.50 persheet for larger copies.

4.2 Administrative Fees4.2.1 Administrative fees shall be levied for requests requiring more than one hour of staff time to process.

Charges for administrative fees may include staff time associated with processing FOIA Requests,including, without limitation, (a) identifying records; (b) monitoring file reviews; and (c) generating computerrecords (electronic or print-outs). Administrative fees shall not include any cost associated with theAgency’s legal review of whether any portion of the requested records is exempt from FOIA. The Agencyshall make every effort to ensure that administrative fees are minimized, and may only assess suchcharges as shall be reasonably required to process FOIA Requests. In connection therewith, the Agencyshall minimize the use of non-administrative personnel in processing FOIA Requests, to the extentpossible.

4.2.2 Prior to fulfilling any request that would require a Requesting Party to incur administrative fees, the Agencyshall provide a written cost estimate of such fees to the Requesting Party, listing all charges expected to beincurred in retrieving such records. Upon receipt of the estimate, the Requesting Party may decide whetherto proceed with, cancel or modify the request.

4.2.3 Administrative fees will be billed to the Requesting Party per quarter hour. These charges will be billed atthe current hourly pay grade (pro-rated for quarter hour increments) of the lowest-paid employee capableof performing the service. Administrative fees will be in addition to any other charges incurred under thisSection 4, including copying fees.

4.2.4 When multiple FOIA Requests are submitted by or on behalf of a Requesting Party in an effort to avoidincurring administrative charges, the Agency may in its discretion aggregate staff time for all such requestswhen computing fees hereunder.

4.3 Microfilm and/or Microfiche Printouts: The first 20 pages of standard sized, black and white material copiedfrom microfilm and/or microfiche shall be provided free of charge. The charge for microfilm and/or microficheprintouts over and above 20 shall be $0.15 per sheet.

4.4 Electronically Generated Records: Charges for copying records maintained in an electronic format will becalculated by the material costs involved in generating the copies (including but not limited to DVD, CD, orother electronic storage costs) and administrative costs.

4.5 Payment4.5.1 The Agency may require all fees to be paid prior to any service being performed hereunder.4.5.2 The Agency may require pre-payment of all fees prior to fulfillment of any request for records hereunder.

18" x 22": $2.00 per sheet24" x 36": $3.00 per sheetDocuments larger than 24" x 36": $1.00 per square foot


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4.6 Appointment Rescheduling or Cancellation: Requesting Parties who do not reschedule or cancel appointmentsto view files at least one full business day in advance of the appointment may be subject to the chargesincurred by the Agency in preparing the requested records. The Agency shall prepare an itemized invoice ofthese charges and provide the same to the Requesting Party for payment.

5.0 ApplicabilityTo the extent any provision in this policy conflicts with any other law or regulation, such law or regulation shall

control, and the conflicting provision herein is expressly superseded.

6.0 Agency-Specific Provisions6.1 The definition of Public Record contains various specific exceptions to the general definition of what records

constitute Public Records. Several of these exceptions frequently apply to records in the custody of theAgency. These exceptions include, but are not limited to:

6.1.1 Investigatory files compiled for civil or criminal law-enforcement. The Agency routinely keeps investigatoryfiles in connection with its enforcement of the tax, escheat and lottery statutes.

6.1.2 Any records specifically exempted from public disclosure by statute or common law. The Agency is subjectto several statutes that prohibit public disclosure of particular types of records. These statutes prohibitdisclosure of:

6.1.2.1 tax returns and information in tax returns,6.1.2.2 most information in reports made to the State Escheator, and6.1.2.3 the names and addresses of lottery prize winners, unless the winners consent.

6.1.3 Any records pertaining to pending or potential litigation which are not records of any court. The Agency isfrequently involved in enforcement and other litigation. Accordingly, it creates and has custody of recordsthat pertain to pending or potential litigation that are not records of any court in all areas over which it hasadministrative responsibility.

6.2 The Agency reserves the right to refuse Requests, in whole or in part, that seek disclosure of records that arenot Public Records because of any exception to the statutory definition of Public Records, including thosedescribed in section 6.1.

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DEPARTMENT OF FINANCEDIVISION OF UNCLAIMED PROPERTY

Statutory Authority: 12 Delaware Code, Section 1156 (12 Del.C. §1156)

FINAL

ORDER

Regulation on Practices and Procedures for Appeals of Determinations of the Audit Manager

NATURE OF PROCEEDINGS

Delaware Department of Finance (“Department”), Division of Unclaimed Property, Escheator of the State of Delaware(the “State Escheator”), initiated proceedings to adopt regulations regarding practices and procedures for appeals ofdeterminations of the Audit Manager. The Department’s proceedings to adopt its regulations were initiated pursuant to 29Delaware Code, Section 10115, with authority prescribed by 12 Delaware Code, Section 1154 and Section 1208.

The Department published its notice of proposed regulation pursuant to 29 Delaware Code, Section 10115 in theJanuary 2012 Delaware Register of Regulations, requiring written materials and suggestions from the public concerningthe proposed regulation to be produced by January 31, 2012 at which time the Department would receive information,factual evidence and public comment to the proposed regulation.

SUMMARY OF PROPOSAL

The proposal creates practices and procedures for appeals of determinations of the Audit Manager under theadministrative appeal process created by recent amendments to 12 Del.C. §1156.

STATUTORY AUTHORITY12 Delaware Code, §1154, State Escheator to make regulations.12 Delaware Code, §1156, Internal Review Procedure; Court of Chancery – Jurisdiction.12 Delaware Code, §1208, Rules and regulations.

SUMMARY OF COMMENTS RECEIVED

Morris, Nichols, Arsht & Tunnell LLP (MNAT), McKenna, Long & Aldridge LLP (MLA), and Council on State Taxation(COST) offered the following observations. The State Escheator has considered each of the comments and responds asfollows.

MLA and COST propose certain additional restrictions upon the selection by the Secretary of Finance of anindependent reviewer, interlocutory appeals, assessment of costs, the standard of review to be applied by the Secretary ofFinance, and the prohibition against disruptive conduct.

Response: The criteria for selection of the independent reviewer are established by 12 Del.C. §1156. The StateEscheator sees no to create additional criteria, even assuming he has the authority to do so. The creation of aninterlocutory appeal defeats the purpose of creating an administrative appeal process. The independent reviewer’sdiscretion to assess costs is established by 12 Del.C. §1156. The State Escheator sees no to limit that discretion, evenassuming he has the authority to do so. Likewise, the standard of review to be applied by the Secretary of Finance isestablished by 12 Del.C. §1156. Finally, the State Escheator sees no reason the independent reviewer should not havecontrol over the tribunal, especially when his or her decisions are subject to review by the Secretary of Finance and,potentially, by the Court of Chancery.

MNAT’s proposals are focused on the procedural aspects of administrative appeals, rather than on the statutoryscheme created by the General Assembly. Though numerous, all of the proposals have been given thorough consideration.

Response: The proposals are incorporated in the regulation.

FINDINGS OF FACT:

The Department, acting through the State Escheator, finds that the proposed regulation set forth in the January 2012Register of Regulations should be adopted, subject to the modifications identified above which are purely procedural andnot substantive.

THEREFORE IT IS ORDERED, that the proposed changes to the Regulation on Practices and Procedures for Appealsof Determinations of the Audit Manager, with the modification indicated herein, is adopted and shall be final effective March31, 2012.

Mark Udinski, State EscheatorDepartment of Finance



Regulation on Practices and Procedures for Appeals of Determinations of the Audit Manager

1.0 Construction of Rules of Practice and Procedure1.1 Unless otherwise provided, these Rules of Practice govern appeals to the Secretary of Finance of any

determination by the Audit Manager brought under 12 Del.C. §1156.1.2 For purposes of these rules: (1) any term in the singular includes the plural, and any term in the plural includes

the singular, if such use would be appropriate; and (2) any use of a masculine, feminine, or neuter genderencompasses such other genders as would be appropriate.

2.0 Appearance and Practice Before the Independent Reviewer2.1 In any appeal, a person [may shall] be represented by an attorney at law admitted to practice before the

Supreme Court of the State of Delaware. Attorneys who are not so admitted must apply for admission pro hacvice through Rule 2.2 below.

2.2 Pursuant to Rule 72(a) of the Delaware Supreme Court Rules, attorneys who are not members of theDelaware Bar may be admitted pro hac vice in an appeal in the discretion of the independent reviewer uponwritten motion by a member of the Delaware Bar who maintains an office in this State for the practice of law("Delaware Counsel"). Pursuant to Delaware Supreme Court Rule 72(c), Delaware Counsel for any party shallappear in the matter for which admission pro hac vice is filed and shall sign or receive service of all notices,orders, pleadings or other papers filed in the matter and shall attend all proceedings before the independentreviewer, unless excused by the independent reviewer.

2.3 Designation of address for service; notice of appearance; withdrawal.2.3.1 When an attorney first makes any filing or otherwise appears in a representative capacity before an

independent reviewer in an appeal, he or she shall file with the independent reviewer, and keep current, awritten notice of appearance stating the name of the appeal; the attorney's name, bar identificationnumber, business address, telephone number, and electronic mail address; and the name and address ofthe person or persons represented.

2.3.2 Withdrawal by any attorney shall be permitted [only by upon] written [order of notice to] the independentreviewer. [A motion seeking leave to withdraw shall state with specificity the reason for suchwithdrawal.]

3.0 Appointment of an Independent ReviewerIf a holder timely files a written notice of appeal with the Secretary of Finance of a determination of the AuditManager, the Secretary of Finance shall [as soon as practicable, but in no event later than 90 days afterreceipt,] designate a qualified person to act as the independent reviewer in a particular appeal[,.Alternatively, the Secretary of Finance may generally designate an independent reviewer or] indefinitelyuntil the authority is transferred. [If no independent reviewer has been generally designated, the AuditManager shall give notice to the Secretary of Finance requesting the appointment of an independentreviewer for the particular appeal. In either case, the Secretary of Finance shall provide written noticeto the holder within 5 days regarding the appointed or generally designated independent reviewer,including address and contact information to facilitate filing under Rule 8.0.]

4.0 Disqualification and Recusal of an Independent ReviewerIf at any time an independent reviewer believes himself or herself to be disqualified from considering anappeal, the independent reviewer shall issue a notice stating that he or she is withdrawing from the appeal andsetting forth the reasons therefor.

5.0 Ex Parte Communications5.1 No party to an appeal, or counsel to or representative of a party to an appeal, shall make or knowingly cause to

be made an ex parte communication relevant to the merits of that appeal to the independent reviewer.5.2 No independent reviewer with respect to an appeal shall make or knowingly cause to be made to a party to that

appeal, or counsel to a party to that appeal, an ex parte communication relevant to the merits of that appeal.

DE AUP REGULATIONS MORRIS NICHOLS’ DELAWARE UNCLAIMED PROPERTY LAW COMPANION / 2012-2013 DE AUP REGULATIONS MORRIS NICHOLS’ DELAWARE UNCLAIMED PROPERTY LAW COMPANION / 2012-2013

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6.0 Motions6.1 Generally. Unless made during a hearing or conference, [including those conducted by telephone or other

similar means,] a motion shall be in writing, shall state with particularity the grounds therefor, shall set forththe relief or order sought, and shall be accompanied by a written brief of the points and authorities relied uponand a proposed order. All written motions shall be served in accordance with Rule 7.0, be filed in accordancewith Rule 8.0, meet the requirements of Rule 9.0, and be signed in accordance with Rule 10.0. Theindependent reviewer may order that an oral motion be submitted in writing. No oral argument shall be heardon any motion unless the independent reviewer otherwise directs.

6.2 Opposing and reply briefs. Briefs in opposition to a motion shall be served and filed within 20 days after serviceof the motion. Reply briefs shall be served and filed within 10 days after service of the brief in opposition.

6.3 Length limitation. A brief in support of or opposition to a motion shall not exceed [10 30] pages, exclusive ofpages containing any table of contents, table of authorities, and/or addendum[, unless the independentreviewer modifies this limitation]. Requests for leave to file briefs in excess of [10 30] pages are disfavored.

7.0 Service of Papers by Parties7.1 Service initiating an appeal. At the outset of an appeal, the notice of appeal and any accompanying papers

shall be served on the [Secretary of Finance, with a copy to the] Audit Manager[,] by certified mail, returnreceipt requested. [The return of a return receipt signed by the Audit Manager is not required for serviceto be effective.]

7.2 Service of all other filings.7.2.1 When required. In every appeal, each paper, including each notice of appearance, written motion, brief, or

other written communication, shall be served upon each party in accordance with the provisions of thissection until such time as a notice of appearance has been served by counsel for the party or other personrepresented pursuant to Rule 2.0, after which time service shall be made pursuant to paragraph 7.2.2 ofthis section upon counsel for the party or other person represented, unless service upon the party or otherperson represented is ordered by the independent reviewer.

7.2.2 How made. Service shall be made by delivering a copy of the filing. “Delivering” means:7.2.2.1 Personal service by handing a copy to the person required to be served; or leaving a copy at the

person's office with a clerk or other person in charge thereof, or, if there is no one in charge,leaving it in a conspicuous place therein; or, if the office is closed, or the person to be served hasno office, leaving it at the person's dwelling house or usual place of abode with some person ofsuitable age and discretion then residing therein;

7.2.2.2 Mailing the papers through the U.S. Postal Service by first class, registered, or certified mail orExpress Mail delivery addressed to the person;

7.2.2.3 Sending the papers through a commercial courier service or express delivery service; or7.2.2.4 Transmitting the papers by facsimile machine or electronic mail transmission where the following

conditions are met:7.2.2.4.1 The persons serving each other by facsimile transmission or electronic mail transmission have

agreed to do so in a writing, and7.2.2.4.2 Receipt of each document served is confirmed electronically [by a system-generated

confirmation] or by a manually signed receipt.7.2.3 When service is complete. Personal service, service by U.S. Postal Express Mail or service by commercial

courier or express delivery service is complete upon delivery. Service by mail is complete upon mailing.Service by facsimile or electronic mail transmission is complete upon confirmation of transmission[,whether system-generated or manual].

8.0 Filing of Papers with the Independent Reviewer: Procedures8.1 When to file. All papers required to be served by a party upon any person shall be filed with the independent

reviewer at the time of service. Papers required to be filed with the independent reviewer must be receivedwithin the time limit, if any, for such filings.

8.2 Where to file. Filing of papers shall be made by filing the original papers or duplicates of the original paperswith the independent reviewer.

8.3 To whom to direct the filing. All motions, objections, applications or other filings made during an appeal shall bedirected to and decided by the independent reviewer.


8.4 Certificate of service. Papers filed with the independent reviewer shall be accompanied by a certificate statingthe name of the person or persons served, the date of service, the method of service and the mailing address,facsimile telephone number, or electronic mail address to which service was made, if not made in person.

9.0 Filing of Papers: Form9.1 Specifications. Papers filed in connection with any administrative appeal shall:

9.1.1 Be on one grade of unglazed white paper measuring 8-1/2 x 11 inches, except that, to the extent that thereduction of larger documents would render them illegible, such documents may be filed on larger paper;

9.1.2 Be typewritten or printed in either ten or twelve-point typeface or otherwise reproduced by a process thatproduces permanent and plainly legible copies;

9.1.3 Include at the head of the paper, or on a title page, the title of the appeal, the names of the parties, thesubject of the particular paper or pleading, and the file number assigned to the appeal;

9.1.4 Be paginated with all margins at least one inch wide;9.1.5 Be double-spaced, with single-spaced footnotes and single-spaced indented quotations; and9.1.6 Be stapled, clipped or otherwise fastened in the upper left corner.

9.2 Signature required. All papers must be dated and signed as provided in Rule 10.0.9.3 Suitability for record keeping. Documents which, in the opinion of the independent reviewer, are not suitable for

computer scanning or microfilming may be rejected. The party submitting the document shall have 10 dayswithin which to provide a suitable copy.

10.0 Filing of Papers: Signature Requirement and Effect.10.1 General requirements. Every filing of a party represented by counsel shall be signed by Delaware Counsel of

record in his or her name and shall state that counsel's bar identification number, business address, electronicmail address, and telephone number. [Any form of electronic signature is sufficient for compliance withthis Rule.]

10.2 Effect of signature.10.2.1 The signature of counsel or a party shall constitute a certification that:

10.2.1.1 the person signing the filing has read the filing;10.2.1.2 to the best of his or her knowledge, information and belief, formed after reasonable inquiry, the

filing is well grounded in fact and is warranted by existing law or a good faith argument for theextension, modification, or reversal of existing law; and

10.2.1.3 the filing is not made for any improper purpose, such as to harass or to cause unnecessary delayor needless increase in the cost of adjudication.

10.2.2 If a filing is not signed, the independent reviewer shall strike the filing, unless it is signed promptly after theomission is called to the attention of the person making the filing.

11.0 Computation of Time11.1 Computation. In computing any period of time prescribed in or allowed by these Rules of Practice or by order of

the independent reviewer, the day of the act, event or default from which the designated period of time beginsto run shall not be included. The last day of the period so computed shall be included unless it is a Saturday,Sunday or State legal holiday in which event the period runs until the end of the next day that is not a Saturday,Sunday or State legal holiday. Unless otherwise specified, intermediate Saturdays, Sundays and State legalholidays shall be excluded from the computation when the period of time prescribed or allowed is 10 days orless, not including any additional time allowed for service by mail in paragraph 11.2 of this section. If on the daya filing is to be made, weather or other conditions have caused the designated filing location to close, the filingdeadline shall be extended to the end of the next day that is neither a Saturday, Sunday nor State legal holiday.

11.2 Additional time for service by mail. If service is made by mail, three days shall be added to the prescribedperiod for response.

12.0 Notice of Appeal: Form and Content12.1 Each notice of appeal shall be in writing and signed by the holder’s Delaware Counsel. The notice of appeal

shall specify in reasonable detail the matters in which the holder asserts that the Audit Manager erred in thedetermination of the protest of the holder, and any statutory provision, rule or regulation the Audit Manager isalleged to be violating or to have violated.

12.2 If the appeal consists of several claims, each claim shall be stated separately.


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12.3 Upon [filing of the notice of appeal the holder’s receipt of notice from the Secretary of Finance of theappointment or general designation of an independent reviewer], the holder shall within 20 daysdesignate all evidence it deems necessary to include in the record on appeal. The Audit Manager shall thenhave an additional 10 days within which to designate all evidence he or she deems necessary to include in therecord on appeal.

12.4 It shall not be necessary to include copies of any evidence as a part of the record if (and to the extent that) allparties having an interest in the outcome of the appeal shall execute within 10 days after the [filing of theappeal a written stipulation that the evidence may be omitted as part of the record holder’s receipt ofnotice from the Secretary of Finance of the appointment or general designation of an independentreviewer], in which case the stipulation shall be included as part of the record; provided that the independentreviewer or any Chancellor or Vice Chancellor of the Court of Chancery (as the case may be) may order copiesof all or part of the omitted evidence to be filed as a part of the record at any time during the pendency of theappeal.

13.0 Notice of Appeal: Amendment and Withdrawal13.1 At any time prior to [the end of the] thirty days after the date on which the [determination by the Audit

Manager of the holder’s protest is mailed holder receives notice from the Secretary of Finance of theappointment or general designation of an independent reviewer], the holder may amend the notice ofappeal, after which period the notice of appeal may not be amended.

13.2 The holder may withdraw the notice of appeal without prejudice at any time prior to the end of the thirty daysafter the date on which the [determination by the Audit Manager of the holder’s protest was mailedholder receives notice from the Secretary of Finance of the appointment or general designation of anindependent reviewer], but the holder may only re-file before the end of the thirty days after the date on whichthe [determination by the Audit Manager of the holder’s protest was mailed holder receives notice fromthe Secretary of Finance of the appointment or general designation of an independent reviewer].Otherwise the withdrawal shall be with prejudice.

14.0 Scheduling a Hearing.14.1 Independent reviewer order requiring hearing. [Upon the filing of the notice of appeal, the The] independent

reviewer should promptly schedule an oral hearing on the appeal to be held, absent agreement of the parties,within 90 days after the date [on which the holder received notice from] the Secretary of Finance [appointsthe of the appointment or general designation of an] independent reviewer.

14.2 Notice of hearing. Upon scheduling a hearing, the independent reviewer shall issue a notice stating the date,time and place of the hearing, and shall serve such notice on the parties.

15.0 Pre-Hearing Submissions15.1 Submissions generally. At least 5 days prior to the oral hearing date, or at such other time ordered by the

independent reviewer, the holder and the Audit Manager shall each submit to the independent reviewer andeach other a brief containing argument and referencing supporting documentation from the record before theAudit Manager or an explanation as to why such supporting documentation is not available. [Lengthlimitations, if any, may be determined by the independent reviewer.]

15.2 Timing of production. The independent reviewer may modify the time limits for production of evidence set bythese rules.

16.0 Oral Hearings16.1 Oral Hearings. The oral hearing on the appeal shall be held upon order of the independent reviewer.

16.1.1 All hearings shall be conducted in a fair, impartial, expeditious and orderly manner.16.1.2 All hearings shall open to the public unless otherwise ordered by the independent reviewer.16.1.3 All hearings shall be recorded by sound, sound-and-visual, or stenographic means. The cost of recording

shall initially be borne by the Audit Manager, subject to later assessment as costs against a party orbetween the parties in the independent reviewer’s discretion, and subject to confirmation by the Secretaryof Finance. Any party may at its own expense arrange for a transcription to be made from the recording ofany oral hearing recorded by non-stenographic means.

16.2 Continuance. Any motion for a continuance of the hearing date shall be filed as far in advance of the hearingdate as practicable. Motions must be for good cause and state with specificity the reason for the continuance


request. Any motion for a continuance filed within 10 days of a scheduled hearing is disfavored and will bedenied in the absence of extraordinary circumstances.

16.3 Hearing procedure. In the hearing, each party is entitled to present its case or defense by oral argument.

17.0 Evidence17.1 Admissibility. The independent reviewer may consider all relevant evidence de novo on the record.

17.1.1 The independent reviewer may make reference to and be guided by the Delaware Uniform Rules ofEvidence. Notwithstanding those rules, the independent reviewer may consider any evidence thatreasonable and prudent individuals would commonly accept in the conduct of their affairs, and giveprobative effect to that evidence.

17.1.2 Evidence may not be excluded solely on the ground that it is hearsay, but the weight to be given to anysuch evidence is subject to the independent reviewer’s discretion.

17.2 Objections. Objections to the admission or exclusion of evidence must be made on the record and shall be inshort form, stating the grounds relied upon.

18.0 Proposed Findings of Fact and Conclusions of Law, and Post-hearing Briefs.18.1 At the discretion of the independent reviewer, the parties may be ordered to file proposed findings of fact and

conclusions of law, or post-hearing briefs, or both. The independent reviewer may order that such proposedfindings and conclusions be filed together with, or as part of, post-hearing briefs.

18.2 Proposed findings of fact or other statements of fact in briefs shall be supported by specific references to therecord.

18.3 In any case in which the independent reviewer has ordered the filing of proposed findings of fact andconclusions of law, or post-hearing briefs, the independent reviewer shall, after consultation with the parties,prescribe the period within which proposed findings of fact and conclusions of law and/or post-hearing briefsare to be filed. The period shall be reasonable under all the circumstances but the total period allowed for thefiling of post-hearing submissions shall not exceed 30 days after the conclusion of the hearing unless theindependent reviewer permits a different period and sets forth in an order the reasons why a longer period isnecessary.

18.4 Unless the independent reviewer orders otherwise, no post-hearing submission shall exceed [25 50] pages,exclusive of cover sheets, tables of contents and tables of authorities, and exclusive of the evidence in therecord to which the post-hearing submission refers.

19.0 Decision After a Hearing.19.1 In any appeal in which a hearing is held, the independent reviewer shall issue a written decision. The decision

shall be submitted to the Secretary of Finance within 90 days after the last day of the hearing or the filing of anypost-hearing submission, whichever is later. The decision shall include: (i) a brief summary of the evidence; (ii)findings of fact based on the evidence; (iii) conclusions of law; and (iv) an assessment of costs, including theindependent reviewer’s fee, against a party or between the parties in the independent reviewer’s discretion.

19.2 The Secretary of Finance may adopt or reject the independent reviewer’s decision in whole or in part. If theSecretary of Finance modifies or rejects, in whole or in part, the decision of the independent reviewer, theSecretary of Finance shall issue a determination in writing setting forth the basis of any rejection ormodification of the independent reviewer’s decision.

20.0 Failure to Appear at HearingA party’s failure to appear at a hearing that has been duly noticed shall not be cause to continue the hearing. Ifthe independent reviewer so orders, the hearing shall proceed in the party’s absence, which shall be noted inthe record.

21.0 Disruptive ConductIf a party, or counsel to a party, engages in conduct in violation of an order of the independent reviewer, orother disruptive conduct during an oral hearing, the independent reviewer may impose non-monetarysanctions therefor, including the issuance of an order: (i) excluding the party and/or his or her counsel from anyfurther participation in the hearing; (ii) striking briefs from the record; (iii) providing that certain facts shall betaken to be established for purposes of the appeal; or (iv) providing for such other relief as is just and equitableunder the circumstances.


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22.0 Appeals22.1 Any holder aggrieved by a final determination of the Secretary of Finance may file an appeal to the Court of

Chancery. A copy of the notice of appeal shall be promptly filed with the Secretary of Finance.22.2 Upon the filing of an appeal to the Court of Chancery, the administrative record shall be filed [by the Secretary

of Finance or a designee of the Secretary of Finance] with the Court in accordance with Court of ChanceryRule 72.

22.3 Any party that files an appeal to the Court of Chancery shall be responsible for filing with the Court in a timelymanner the transcript of that portion of the appeal in which error allegedly occurred. Each party on appeal shallbear his, her or its own costs of transcription.

15 DE Reg. 1323 (03/01/12) (Final)


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Statutory Authority: 12 Delaware Code, Section 1198 (12 Del.C. §1198)

FINAL

ORDER

Regulation on Practice and Procedure for Establishing Running of the Full Period of Dormancy for Certain Securities Related Property

NATURE OF PROCEEDINGS:

Delaware Department of Finance (“Department”), Division of Unclaimed Property, Escheator of the State of Delaware(the “State Escheator”), initiated proceedings to adopt regulations regarding the establishment of the running of the fullPeriod of Dormancy for certain securities related property. The Department’s proceedings to adopt its regulations wereinitiated pursuant to 29 Delaware Code, Section 10115, with authority prescribed by 12 Delaware Code, Section 1208.

The Department published its notice of proposed regulation pursuant to 29 Delaware Code, Section 10115 in theJanuary 2012 Delaware Register of Regulations, requiring written materials and suggestions from the public concerningthe proposed regulation to be produced by January 31, 2012 at which time the Department would receive information,factual evidence and public comment to the proposed regulation.

SUMMARY OF PROPOSAL

The proposal creates practices and procedures for establishing whether the full period of dormancy has run againstcertain securities related property as described in 12 Del.C. §1198.

STATUTORY AUTHORITY12 Delaware Code, §1154, State Escheator to make regulations.12 Delaware Code, §1198(9), Definition of Period of Dormancy.12 Delaware Code, §1199, Report by holders of abandoned property12 Delaware Code, §1208, Rules and regulations.

SUMMARY OF COMMENTS RECEIVED AND RESPONSE AND EXPLANATION OF CHANGE

Morris, Nichols, Arsht & Tunnell LLP (MNAT), Council on State Taxation (“COST”), and Computershare offered thefollowing observations. The State Escheator has considered each of the comments and responds as follows.

MNAT correctly observes that more than forty states and other jurisdictions have established “Holder Due Diligence”requirements by legislative adoption, in whole or in part, of either the 1981 version or the 1995 version of the UniformUnclaimed Property Act the “Act”), and that at least one state that has adopted neither version of the Act has neverthelessadopted “Holder Due Diligence” requirements by statute. Both MNAT and COST express concern that the Department mayleave itself vulnerable to potential litigation challenging the validity of the regulation because the due diligence requirementit contains was not adopted by legislative action, and that the General assembly is the appropriate vehicle for adoption of adue diligence requirement.

Response: The State of Delaware has not adopted either version of the Act. It has, however, granted specific authorityto the State Escheator in 12 Del.C. §§1154 and 1208 to “make such rules and regulations as the Escheator may deemnecessary to administer and enforce this subchapter.” The regulation as proposed falls squarely within the definition of“Regulation” in 29 Del.C. §10102(7). Given the broad authority granted the State Escheator by the General Assembly topromulgate regulations that, among other things, act as a guide for the decision of cases before the Department and theCourts, it does not appear that the regulation exceeds the State Escheator’s authority to promulgate regulations eventhough the vast majority of states have adopted the same requirement through legislation.

Computershare expresses its belief that a specific due diligence requirement is an important component of any state’sunclaimed property program, but it also expresses concern that the regulation may cause confusion among owners ofsecurities related property. It also expresses concern that, while the regulation is clear about the consequences of non-return of mail, the statute to which the regulation applies is silent.

Response: Recent amendments to 12 Del.C. §1198(9) have changed the status of the State of Delaware from a “lostowner” state to a “no activity” state. Rather than causing confusion among owners, the regulation eliminates confusionamong owners about the type of contact that constitutes “activity.” It also eliminates the uncertainty inherent in the silenceof the statute to which the regulation applies regarding the consequences of non-return of mail.


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MNAT comments that the regulation should be modified to make clear that holders may recover costs of complianceallowed by the regulation without violating 12 Del.C. §1201.

Response: Appropriate language has been added.

FINDINGS OF FACT:

The Department, acting through the State Escheator, finds that the proposed regulation set forth in the January 2012Register of Regulations should be adopted, subject to the modification described above which is not substantive.

THEREFORE IT IS ORDERED, that the proposed changes to the Regulation on Practice and Procedure forEstablishing Running of the Full Period of Dormancy for Certain Securities and Related Property, with the modificationindicated herein, is adopted and shall be final effective March 31, 2012.


Regulation on Practice and Procedure for Establishing Running of the Full Period of Dormancy for Certain Securities and Related Property

1.0 Construction of Rules of Practice and Procedure1.1 Unless otherwise provided, these Rules of Practice and Procedure govern the determination or whether the full

period of dormancy has run against certain securities and related property as described in 12 Del.C. §1198.1.2 For purposes of these rules: (1) any term in the singular includes the plural, and any term in the plural includes

the singular, if such use would be appropriate; and (2) any use of a masculine, feminine, or neuter genderencompasses such other genders as would be appropriate.

2.0 Definitions2.1 All capitalized terms in this regulation shall have the same meaning ascribed to them in 12 Del.C. §1198 as it

may be amended from time to time.2.2 “Securities and Related Property” shall mean Property that consists of (a) intangible ownership interests in

corporations, whether or not represented by a stock certificate, bonds and other securities; (b) dividends, cash,stock and other distributions made (or attempted to be made) by issuers of securities in respect of thesecurities issued; (c) certificates of membership in a corporation or association; (d) funds deposited by aHolder with fiscal agents or fiduciaries for payment to Owners of dividends, coupon interest and liquidationvalue of stocks and bonds; and (e) funds to redeem stocks and bonds.

3.0 Attempt to Contact Owners of Securities and Related PropertyNo more than 120 days, and no less than 60 days, before reporting to the State Escheator any Securities andRelated Property with a value of $250.00 or more that is otherwise deemed to be Abandoned Property, theHolder of the Securities and Related Property shall attempt to contact the apparent Owner of the Property byletter sent via first class mail, postage prepaid, in substantially the following form:

[Date]

Missing Owner Name Missing Owner Last-Known Address [City], [State] [Zip Code]

Re: Abandoned or Unclaimed Property

Dear [Missing Owner Name]:

Our records show that we, [Holder], are holding unclaimed property that may belong to you. We have not had directcontact with you since [mm/dd/yyyy]. The check or identifying number for the [$Amount] we are holding is No. [xxxxxx], andthe item is dated [mm/dd/yyyy].

Under Delaware law, we may be required to deliver this property to the State Escheator, on or before [mm/dd/yyyy] if theproperty is not claimed. Please complete the information below and return this letter to [Holder] no later than [mm/dd/yyyy],


so that we may meet our unclaimed property reporting obligations. Do not forget to sign and date your response.

□_____ I am entitled to the above referenced property. Please issue a new check and mail to the following address:_______________________________________________________________________________________

□_____ I am not entitled to the above referenced funds or these funds have already been paid to me. □_____ I am aware of these funds and choose not to claim them at the present time.

□_____ Please change the address on my account to:_________________________________________________________________________________

________________________________ _________Owner signature Date signed

If any letter is returned to the Holder undelivered, or if any letter appears to have been delivered but the apparent Owner ofthe Property fails to respond to the letter before the Holder’s report of Abandoned Property is due, the Securities andRelated Property shall be deemed Abandoned Property against which a full Period of Dormancy has run.

4.0 Attempt to Contact Owner ExcusedThe Holder is excused from attempting to contact the apparent Owner if the Holder has no record of anaddress for the apparent Owner, or if the Holder has already given notice to the apparent Owner in a formsubstantially similar to that required by this regulation under existing federal or state law, rules, or regulationswithin 90 days of the time specified for notice in this regulation.

5.0 Cost of Compliance; Charge Against PropertyA Holder that provides notice under this regulation may charge the cost of postage and other reasonableadministrative costs, not to exceed five dollars per mailing, against the Securities and Related Property [thatwould otherwise be paid or delivered to the State pursuant to 12 Del.C. §1201].

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Escheator of the State of DelawareStatutory Authority, 12 Delaware Code, Section 1155 (12 Del.C. §1155)

FINAL

ORDER

Regulation on Practices and Procedures for Records Examinations by the State Escheator

NATURE OF PROCEEDINGS

Delaware Department of Finance ("Department"), Division of Unclaimed Property, Escheator of the State of Delaware(the "State Escheator"), initiated proceedings to adopt a regulation on practices and procedures for records examinationsby the State Escheator as described in 12 Del.C. § 1155. The Department's proceedings to adopt its regulations wereinitiated pursuant to 29 Del.C. §10115, with authority prescribed by 12 Del.C. § 1208.

The Department published its notice of proposed regulation pursuant to 29 Del.C. §10115 in the July 2012 DelawareRegister of Regulations, requiring written materials and suggestions from the public concerning the proposed regulation tobe produced by July 31, 2012 at which time the Department would receive information, factual evidence and publiccomment to the proposed regulation.

SUMMARY OF PROPOSAL

The proposal creates a regulation on practices and procedures for records examinations by the State Escheator asdescribed in 12 Del.C. §1155. The regulation sets forth the rules governing the historical periods for which the StateEscheator will examine historical records to determine whether the person whose records are being examined hascomplied with any provision of 12 Del.C. Ch. 11.

STATUTORY BASIS AND LEGAL AUTHORITY TO ACT

12 Delaware Code, § 1154, State Escheator to make regulations.12 Delaware Code, § 1155, Examination of records.12 Delaware Code, § 1208, Rules and regulations.

SUMMARY OF COMMENTS RECEIVED AND RESPONSE AND EXPLANATION OF CHANGE

Morris, Nichols, Arsht & Tunnell LLP ("MNAT"), Council on State Taxation ("COST"), and Reed Smith LLP ("ReedSmith") offered the following observations. The State Escheator has considered each of the comments and responds asfollows.

Reed Smith requests the regulation include a provision requiring the Department to provide a "Remediation ImpactStatement" at the request of a holder in order to allow the holder to decide whether to terminate remediation efforts in orderto complete its records examination by June 30, 2015. COST requests that the Department be required to provide areasonable and accurate statement of the holder's potential liability no less than ninety (90) days prior to June 30, 2015.

Response: Holders may already request a preliminary Report of Examination that provides data sufficient to allowexaminees to make informed decisions whether to terminate remediation efforts.

MNAT, COST, and Reed Smith concede that Section 2.1 is literally true, but they contend that it may create confusionbecause of other statutory provisions that limit, for example, the period during which the State Escheator must providenotice of a proposed deficiency in payment under 12 Del.C. § 1158.

Response: The regulation by its terms governs only the historical period for which the State Escheator may conductexaminations under 12 Del.C. § 1155.

MNAT, COST, and Reed Smith contend that the completion of an examination is largely not within the control of theholder. Reed Smith and MNAT note that examinations are sometimes bifurcated by category of property, so that anexamination may be completed for some types of property before completion of the examination of other types of property.

Response: Appropriate language has been added.COST proposes addition of a provision abating interest and penalties for all examinations that qualify for the shortened

look-back period.Response: There are a number of examinations that may qualify for the shortened look-back period for which

abatement of interest and penalties are not warranted. A blanket abatement would reward those holders for no good

Office of the Registrar of Regulations,Legislative Council, State of Delaware


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reason.

FINDINGS OF FACT

The Department, acting through the State Escheator, finds that the proposed regulation set forth in the July 2012Register of Regulations should be adopted, subject to the modification described above which is not substantive.

THEREFORE IT IS ORDERED, that the proposed Regulation on Practice and Procedure for Records Examinations bythe State Escheator, with the modification indicated herein, is adopted and shall be final effective December 1, 2012.


Regulation on Practices and Procedures for Records Examinations by the State Escheator

1.0 Construction of Rules of Practice and Procedure1.1 Unless otherwise provided, these Rules of Practice govern examinations of records of any person or business

association or organization to determine whether the person has complied with any provision of 12 Del.C. Ch.11.

1.2 For purposes of these rules: (1) any term in the singular includes the plural, and any term in the plural includesthe singular, if such use would be appropriate; and (2) any use of a masculine, feminine, or neuter genderencompasses such other genders as would be appropriate.

2.0 Length of Examination Periods.2.1 There is no provision of Delaware law that now limits the historical period for which the State Escheator may

examine records under 12 Del.C. §1155 to determine whether the person under examination has compliedwith any provision of 12 Del.C. Ch. 11.

2.2 As a matter of policy, in previous examinations the State Escheator has not examined records created beforeJanuary 1, 1981 to determine whether the person under examination has complied with any provision of 12Del.C. Ch. 11.

2.3 As a part of a larger revenue stabilization initiative, the State Escheator has determined that in order toencourage compliance with 12 Del.C. Ch. 11, the following starting periods for examinations will be observed:

2.3.1 For all persons who are now the subject of a records examination under 12 Del.C. §1155, or who becomethe subject of an examination before the effective date of this regulation, no records created beforeJanuary 1, 1986 will be included in the determination of compliance with the provisions of 12 Del.C. Ch. 11,provided that the examination is completed by June 30, 2015.

2.3.2 For all persons who become the subject of examinations on or after the effective date of this regulation,and for all other persons whose examinations are not completed by the close of business on June 30,2015, the State Escheator will continue his existing policy of examining records created on or after January1, 1981 to determine whether the person under examination has complied with any provision of 12 Del.C.Ch. 11.

[2.3.3 For purposes of this regulation only, an examination is deemed to be complete for any category ofproperty as of the date on which the Audit Manager mails the statement of findings and request forpayment as described in 12 Del.C. §1156(a) for that category of property.]

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Contact Information For Delaware AUP .................................................................. 89

Delaware AUP Deadlines ..................................................................................89

Delaware AUP Escheat Handbook ........................................................................90

STATE MATERIALS MORRIS NICHOLS’ DELAWARE UNCLAIMED PROPERTY LAW COMPANION / 2013-2014

CONTACT INFORMATION

For Claims [email protected]

For Holder Reporting [email protected]

For Department of Finance Voluntary

[email protected]

For Department of State Delaware VDA Program [email protected]

General Questions 302-577-8220

SM State Materials

Contact Information For Delaware AUP .................................................................. 89

Delaware AUP Deadlines ..................................................................................89

Delaware AUP Escheat Handbook ........................................................................90

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HOLDERS REMITTING UNCLAIMED PROPERTY TO DELAWARE DEADLINES **

Holder Type Period Ending Report Due Remittance Due

Corporations 12/31 3/1 3/1

Financial Institutions 6/30 11/10 11/10

Financial Intermediaries 12/31 3/1 3/1

Life Insurance Companies 12/31 12/20 12/20

Courts 12/31 4/10 4/10

**Dates are as listed on the State of Delaware's Unclaimed Property website, http://revenue.delaware.gov/unprop/unprop_holders.shtml


STATE OF DELAWARE DEPARTMENT OF FINANCE

DIVISION OF REVENUE BUREAU OF UNCLAIMED PROPERTY

ESCHEAT HANDBOOK INSTRUCTIONS FOR PREPARING

UNCLAIMED PROPERTY REPORTS

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IF YOU HAVE QUESTIONS OR PROBLEMS

CALL OR WRITE

Mailing Address:

Bureau of Unclaimed Property

P.O. Box 8931

Wilmington, DE 19899

Street address for courier deliveries:

Bureau of Unclaimed Property

c/o Division of Revenue

8th floor

820 North French Street


Phone Number: 302-577-8782

Fax Number: 302-577-7179

E-Mail: [email protected]

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TABLE OF CONTENTS

FILING REQUIREMENTS Page 4 REPORT AND REMITTANCE DEADLINES Page 5 REPORTING REQUIREMENTS Page 6 ADVERTISING REQUIREMENTS Page 7 NEGATIVE REPORTS Page 8 OWNER INQUIRIES Page 8 AP-1 INSTRUCTIONS Page 9 AP-2 INSTRUCTIONS Page 12 PAYMENT INSTRUCTIONS – CHECK, WIRE, ACH Page 14 SECURITIES TRANSFER AND RE-REGISTRATION INSTRUCTIONS Page 15

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REPORTING METHODS

The State of Delaware utilizes the Unclaimed Property System (UPS 2000) licensed by ACS Wagers to collect and track unclaimed property items. UPS 2000 provides the capability to import the National Association of Unclaimed Property Administrators (NAUPA) standard electronic holder reports and also offers a free Holder Reporting System (HRS) Software package for holders to collect and report their unclaimed property in the NAUPA format on CD-ROM or diskette.

Holders may download this free software and a User’s Manual from the ACS Wagers website at: www.wagers.net. From the main page, click on the icon “HRS Pro (Holder Reporting System)” and follow the instructions to download. It is recommended that you update your software annually for any updates prior to beginning your reporting process. For questions or additional information regarding this software, please contact ACS Wagers at (303) 413-9450.

FILING REQUIREMENTS:

AP-1 (report verification): must be provided by all Holders. The AP-1 must be completed, and contain An authorized, notarized signature affirming its contents.

AP-2 (owner detail): is used to report owner information and other required detail.

The AP-1 and AP-2 forms can be downloaded from the Division of Revenue’s website at: http://revenue.delaware.gov/information/Escheat.shtml

Delaware offers two methods of filing Unclaimed Property Reports:

1. ELECTRONIC REPORTING - Holders are required to electronically file reports (in NAUPA format) when the owner count is greater than 10. All electronic filings must be accompanied by a hard copy AP-1 form, AP-2 form and supplemental details.

Electronic reports may be remitted on CD-ROM or diskette using HRS software. Thesoftware can be downloaded for free at www.wagers.net

. Be sure to clearly label the diskette or CD-ROM with the holder name, Federal EIN as well as the names of each file contained. If reporting more than one company, please assign a separate file name for each. All electronic filings must be accompanied by the paper AP-1 form, AP-2 form, hard-copy documentation of owner details and securities statements (if remitting equity property).

*NOTE: MAGNETIC TAPES ARE NOT ACCEPTED*

2. PAPER REPORTING ONLY – Holders are permitted to file paper reports without electronic media only when the owner count being reported is 10 or less.

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GENERAL INFORMATION FOR PREPARING ABANDONED AND UNCLAIMED PROPERTY REPORT

WHO MUST REPORT

Financial Institutions including any bank, bank and trust company, trust company, savings bank, private bank, credit union, building and loan, and savings and loan association, must report. Both state and federally chartered institutions are required to report. (12 Del Code, Chapter 11, Section 1130)

Life Insurance Company includes all moneys held and owing by any life insurance company doing business in this state which shall have remained unclaimed and unpaid for five (5) years or more. (12 Del Code, Chapter 11, Section 1181)

Corporation and other business entities include a post office, a depository, a bailee, a trustee, a receiver or other liquidating officer, a fiduciary, a governmental department, institution or agency, a municipal corporation and the fiscal officers thereof, a public utility, service corporation and every other legal entity incorporated or created under the laws of this state or doing business in this state. (12 Del Code, Chapter 11, Section 1198,(6))

Financial Intermediaries The Delaware Escheats Law requires financial intermediaries to report and remit distributions for unknown owners on March 1 of each year. Section 1198 (11) defines distributions held by financial intermediaries for unknown owners as “Dividends, interest, stock and other distributions made by issuers of securities which are held by financial intermediaries (including, by the way of example and not limitation, banks, transfer agents, brokers, and other depositories) for the beneficial owners whose identities are unknown.”

WHEN TO REPORT AND REMIT PAYMENT

*Senate Bill 272 passed during the 145thGeneral Assembly eliminated preliminary reporting requirements for financial institutions and life insurance companies.

Holder Reports should be mailed to: Delaware Division of Revenue, P.O. Box 8931, Wilmington, DE 19899. (See pages 14-16 for cash and securities remittance or transfer instructions.)

HOLDER TYPE PERIOD ENDING PRELIMINARY *REPORT DUE

FINAL REPORT AND PAYMENT

DUE Corporations 12/31 N/A 3/1 Financial Institutions 6/30 N/A 11/10 Financial Intermediaries 12/31 N/A 3/1

Life Insurance Companies 12/31 N/A 12/20

Courts 12/31 N/A 4/10

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WHAT TO REPORT

Senate Bill No. 334 changed the dormancy period for unclaimed investment type properties from five (5) years to three (3) years effective July 1, 2008. Investment type property includes stocks, bonds, and securities including fractional shares, interest, dividends, cash, coupon interest, liquidation value of stocks and bonds, funds to redeem stocks and bonds, and distributions held by financial intermediaries. This dormancy period change affects all Security NAUPA codes SC 01-SC99.

Any other non-securities debt or obligation which has gone unclaimed or undelivered that has remained undelivered for five (5) or more years after the date the owner should have received it or was entitled to claim it must be reported. Include all property that has gone unclaimed for five (5) or more years as of the preceding December 31, for all holders except Financial Institutions. Financial Institutions include all property that has gone unclaimed for five (5) years or more as of the preceding June 30.

Holders also must report and deliver all underlying share certificates where the owner for three (3) years has failed to cash a dividend or correspond in writing regarding the property.

Unclaimed property should be reported to the State of Delaware pursuant to the U.S. Supreme case Texas v New Jersey, 379 U.S. 674 (65). On March 30, 1993 the United State Supreme Court ruled in the case of Delaware v New York,113 s.ct. 1550 (93) that the primary and backup rules set forth in Texas v New Jersey still stand and remain unchanged. Pursuant to Texas v New Jersey unclaimed property will be reported to the state of the lost owner’s last known address. If the owner’s address is unknown or is in a foreign country, the unclaimed property is reported to the state of incorporation of the Holder of the unclaimed property. For those lost owners with a last known address that is in a state which does not have an applicable statute for the type of property being reported, the unclaimed property is reported to the state of incorporation of the Holder.

REMINDER Pursuant to the primary rule as set forth in Texas v New Jersey, the Delaware State Escheator will not accept property where the last known address of the owner is in another state. Please contact this office if you have any questions concerning this matter.

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NOTICES TO OWNERS & ADVERTISING REQUIREMENTS

There is no provision under the Delaware Escheat Law for due diligence. Holders are encouraged to make reasonable efforts to locate owners when an account first becomes inactive or a check remains un-cashed.

Financial institutions, courts, and life insurance companies are required by statute to publish the name and last know address of lost owners. Please refer to the following chart for publication information:

The expense incurred for the advertisement is deducted from the remittance due. Please attach an affidavit from the newspaper attesting to the placement and cost of the advertise-ment to your final report. In circumstances where the expense of the advertisement exceeds 50% of the reported value, a publication waiver may be requested by submitting a waiver request form which can be found at: http://revenue.delaware.gov/information/waiver.pdf .

TYPE OF HOLDER

PUBLICATION DATE COUNTY

PAPER TYPE

TIMES PUBLISHED

INQUIRY CUT-OFF

FINANCIAL INSTITUTIONS BY 9/1

NEW CASTLE DAILY TWICE 10/31

KENT WEEKLY ONCE 10/31

SUSSEX WEEKLY ONCE 10/31

COURTS BY 2/1 NEW

CASTLE DAILY ONCE 3/31



LIFE INSURANCE BY 9/1

NEW CASTLE DAILY TWICE 12/1



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OTHER INFORMATION

Reciprocal Agreements

At present the State of Delaware has no reciprocal agreements with any other jurisdiction. Holders must report property directly to the State of Delaware.

Negative Reports

Required for financial institutions only.

Aggregate Amounts

Only remit aggregate amounts when account or owner details are truly unknown.

Preliminary Reports

No longer required.

Claims and Owner Inquiries

All owner inquiries must be in writing. Submit written inquiries to:

Delaware Office of Unclaimed Property P.O. Box 8931


After receiving a claim form from our claims processing unit claimants may contact the Unclaimed Property Office at 302-577-8782 or via e-mail at [email protected] .

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INSTRUCTIONS FOR COMPLETING THE VERIFICATION AND CHECKLIST REPORT OF

UNCLAIMED OR ABANDONED PROPERTY (AP-1 FORM)

Verification for period ended:

This is the cut-off date for reviewing your records. Enter the report year.

Type of Report:

Please indicate if you are filing a preliminary, final or supplemental report, by checking the appropriate box. For final reports, please indicate the date you filed your preliminary report. For supplemental reports, please indicate the date of your previously filed report.

Preliminary reports are required to be filed by Banking organizations and Life Insurance companies only.

Holder Information:

• Federal Employer Identification Number (EIN): enter the nine digit tax ID number assigned to you by the federal government. This line must be completed.

• Holder’s Name and Address: Complete the name and address lines with your company name and mailing address. Do not forget to include the department names if they are an important part of your address. The holder name and address lines must be completed and include the street address, city, state, and zip code.

• State of Incorporation: Corporations should enter the state in which they were incorporated. Savings and loan associations, banks, and credit unions should enter the state in which they were chartered.

• Date of Incorporation/Charter Date: Corporations should enter the date on which they were incorporated. Savings and loan associations, banks, credit unions should enter the date their organization was chartered.

• Primary NAICS Code: Please enter your North American Industry Classification System code, as provided by the Internal Revenue Service. (usually this information can be found on your Federal Corporate Income Tax return)

• Contact person for reporting: List the name, address, e-mail, phone number, and fax number of the person who completed your report. This is the person the Delaware State Escheator will contact if there are questions or problems with your report. This is also the person to whom the State will mail future reporting information.

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• Successor Corporations and Name Changes: Please indicate if the present holder is a successor corporation. If you have answered yes, please attach a listing of previous corporate names and dates of acquisition. If your corporation has changed names in the past year, please indicate the previous name, federal ID, and date of name change.

Report Recapitulation:

Owner Count: please indicate the total number of owners AND properties remitted on your checklist and form AP-2. (Owner count is defined as the aggregate number of property owners; Property count is defined as the total number of individual property items being remitted. Example: Property owned jointly would have two owners, but count as only one piece of property)

Cash Amount: total amount of cash from your checklist and form AP-2.

Number of shares: total number of shares from your checklist and form AP-2.

* If you are filing a final or supplemental report, please indicate the Item Count, Cash Amount and Number of shares filed with your previous report. Document all additions and/or deletions to these original figures in the space provided on the AP-1 form. The Grand Total Columns on the AP-1 form represent the net Items, Cash and Share figures being reported. When filing the final report, the names of owners listed on the preliminary report who have since been reimbursed should not be listed as “zero” dollar properties on the final AP2 report.

Advertising Expenses: bank and life insurance companies must indicate the total expenses for advertising being deducted from the cash amount indicated in the grand total. All other Holders should leave this line blank.

Remittance Amount and Shares: please indicate the total cash and share amount being remitted to the Delaware State Escheator with this report.

Delivery of Securities:

Please confirm whether securities have been transferred to the State account in accordance with the guidelines as set forth in the Securities Registration and Remittance Section of this handbook (page 15). In addition, confirm whether account statements or “proof of transfer” documentation is included with this report. Your full liability is not satisfied until this information is received.

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Verification:

Verification if made by a partnership shall be executed by a partner. If made by an unincorporated association or private corporation, by an officer. If made by a public corporation, by its Chief Financial Officer or Escheatment Manager. All signatures must be notarized.

Form AP-1 Checklist:

Please complete the checklist by indicating the total number of owners and cash/share amount for each property type you are reporting.

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INSTRUCTIONS FOR COMPLETING REPORT OF UNCLAIMED OR ABANDONED PROPERTY

DETAIL SHEET (AP-2 FORM)

Column Entries:

Items of unclaimed property must be identified and grouped by the categories described on the Verification and Checklist form (AP-1), titled by category of property with corresponding and separate pages used for each type of property in alphabetical or numerical sequence by account number. Each page should be totaled and each property type should have its own separate total.

Type of Property:

List category of property to be itemized on the AP-2 form. Please make copies of this page so that each page represents only one NAUPA category / property type.

Account Number / Property ID#:

List the owners account number or other identifying number of each item (i.e.: check number, certificate number, account number, etc.).

Note regarding aggregate property: For refund efficiency, it is recommended that aggregate property amounts be provided for unknown owners only. Account details, when known, should be provided for all owners regardless of the dollar value.

Social Security or Federal ID Number:

Enter the owners Social Security Number/ Federal ID number in this area.

Owner’s Information:

• List last name, full first name, and middle initial, if available. List all information which would help with identification, such as Jr., Sr.. Do not include titles such as Mr., Mrs., Ms., etc.

• Corporate titles should be entered exactly as adopted, except the word “the” should be deleted when it is the first word of the title.

• List the complete address, including zip code. If the address is unknown, insert “address unknown” in first line of address information.

• If a single item has two or more owners, the names and addresses of both must be shown, along with the relationship (e.g. “Trustee”, “Or”, “And”, etc.) If the owners have the same address, the address may be entered once beneath the names.

• If the owners have the same address, the address may be entered once beneath the names.

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Date of Last Contact:

This is the date of the last deposit or withdrawal made by the owner. The date of last contact can also be, for example, the date the dividend became payable, the date a note became payable, the date a check or draft was issued, the date a gift certificate was purchased, etc. If payable on demand, the date the instrument was issued should be used. The date of computer conversion shall not be used as the date of last contact.

Amount Due Owner:

The total value due owner is the amount of cash due the owner of the item, including all interest earned on deposits and without the deduction of any service charges, with-holding, escheats fees and/or charges.

Shares Due Owner:

The number of shares due the owner should be listed.

Value of Shares Due Owner:

Enter the dollar value at time of escheat of the shares reported in the previous column.

Total This Page:

Total each column and enter the sum for each column.

Total This Property Type:

This is the total for all owners under a given NAUPA code/property type. The number of owners owed cash property and the corresponding cash amount due should be entered on the applicable line on the AP-1 checklist. The number of owners owed shares and the number of shares due should also be entered on the applicable line on the AP-1 Checklist.

Note: The value of shares due owner should not be entered on the AP-1 Checklist.

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PAYMENT INSTRUCTIONS

CHECKS, WIRE TRANSFERS, ACH

• CASH REPORTING ONLY (CHECKS, WIRE TRANSFERS, & ACH PAYMENTS)

Please make checks payable to Delaware State Escheator. Delaware’s Federal Employer Identification is 51-6000279.

For Checks Only

Please issue a check payable to: Delaware State Escheator.

Include your check with your signed & notarized AP-1 and CD/diskette and mail to:

Delaware Department of Finance Office of Unclaimed Property P.O. Box 8931 Wilmington, DE 19899

For ACH or Wire Transfers

Please contact the State of Delaware at (302) 577-8782 to receive payment instructions. Advance notification of ACH and wire payments are required.

Holders must mail the signed and notarized AP 1 and CD/Diskettes to:

Delaware Department of Finance Office of Unclaimed Property P.O. Box 8931 Wilmington, DE 19899

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SECURITIES REGISTRATION AND REMITTANCE

All DTC eligible shares must be deposited through DTC or DWAC (if not a DTC participant). It is recommended that fractional shares be sold prior to escheatment and reported as cash in lieu. The DTC Transfer and Physical delivery instructions are listed below.

IMPORTANT: Documentation demonstrating that reported securities have been transferred into the ownership of the state is required to satisfy an escheat liability.

For DTC (Electronic) Transfer

DTC # 954 Agent Bank # 26017 Reference: Dover & Co Acct # AUZF0192702

Two days prior to actual delivery a list of the securities including cusip numbers, the number of shares, issue names, and the delivering party’s DTC participant number should be faxed to:

1. ACS Unclaimed Property Clearinghouse at 617-722-9660, Attn: Custody Department AND

2. DELAWARE State Escheator at 302-577-7179, Attn: Custody Department or E-mailed to [email protected]

All dividend reinvestment elections should terminate after registration. All income dividends and capital gains should be paid in CASH. DO NOT ELECT A REINVESTMENT OPTION.

Federal Reserve Book Eligible Securities Delivery Instructions

Federal Reserve Bank of New York ABA#0210-0001-8 BK of NYC/TRUST FBO - State of Delaware; Account # AUZF0192702

Delivery of Foreign Securities

When attempting to deliver foreign securities, please contact ACS Unclaimed Property Clearinghouse at 617-722-9655 to obtain delivery instructions and account information.

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REV.02/20/12


SM

For Dividend Reinvestment Plans (DRP) and Closed End Mutual Fund Accounts:

DTC # 954 Agent Bank # 26017 Reference: Dover & Co. Acct # AUZF0192702

Close DRP accounts and forward whole shares via DTC. Fractional shares should be sold and proceeds applied to each individual owner when filing. Do not total fractions for all owners and liquidate. Please include the proceed remittance check with your final filing and payment.

For Physical Stock Certificates – Securities not eligible for DTC

To remit physical stock certificates, the stock must be reregistered in the following name:

Dover & Co. EIN: 43-2016158 820 North French Street Wilmington, DE 19801

Please include all physical stock certificates with your Form AP-1.


For Open End Mutual Fund Accounts

For Open End Mutual fund accounts contact ACS Unclaimed Property Clearinghouse at 617-722-9656 to obtain account numbers 72 hours prior to attempting delivery OR contact [email protected] and provide a list including CUSIP number, name of the fund, and share amount. ACS will provide account numbers and registration information for all mutual funds that will be transferred to the state’s account. Do not register mutual funds to state name or nominee name until proper instructions have been received.

Please ensure that interested party statements are sent to:

Delaware Office of Unclaimed Property P.O. Box 8931 Wilmington, DE 19899

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REV.02/20/12


Two days prior to actual delivery a list of the mutual funds including cusip numbers, the number of shares and issue names should be faxed to:

1. ACS Unclaimed Property Clearinghouse at 617-722-9660, Attn: Custody Department AND

2. DELAWARE State Escheator at 302-577-7179 Attn: Custody Department


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REV.02/20/12


SM


F Forms

AP1 State of Delaware Report of Unclaimed or Abandoned Property ......................... 109

Instructions for Completing the Verification and Checklist Report (AP1) ......................115

AP2 State of Delaware Report of Unclaimed or Abandoned Property - Detail Sheet ...117

Instructions for Completing AP2 Form ...........................................................................118

Form VDA-1 Disclosure and Notice of Intent to Voluntarily Comply with

Abandoned Property Law Pursuant to 12 Del. C. § 1177 ................................... 120

Form VDA-2 Voluntary Self Disclosure Agreement ...................................................... 123

AP DE-1 Disclosure and Notice of Intent to Voluntarily Comply with Abandoned

Property Law ...................................................................................................... 127

AP DE-2 Voluntary Self Disclosure Agreement ............................................................ 128

Publication Deadline Waiver Form ............................................................................... 131

State of Delaware Unclaimed Property Filing Extension Request ............................... 132

FORMS MORRIS NICHOLS’ DELAWARE UNCLAIMED PROPERTY LAW COMPANION / 2013-2014

FORM AP1 STATE OF DELAWARE Department of Finance REPORT OF UNCLAIMED Division of Revenue OR ABANDONED PROPERTY P O Box 8931 Wilmington DE 19899 Verification For Report Year 20_____

REPORT INFORMATION Please Check One Media Submitted [ ] Final Report - Date preliminary report filed ____________________ [ ] Paper [ ] Supplemental report - Date previous report___________________ [ ] Compact Disc [ ] Preliminary Report [ ] Diskette

Note: Preliminary reports are filed by Banking organizations, on or before August 1st, and by Life Insurance companies by or before May 1st only.

_______________________________________________________ HOLDER INFORMATION Enter Your Federal E.I.#- 1 -______________________________

Company Name: ________________________________________________________________________ Address: ___________________________________________________________________________ City,State, Zip ____________________________________________________________ State of Incorporation: ___________________Date of Incorporation:__________________Primary SIC Code:___________________ Contact Person:__________________________Email_______________________________Title:_____________________________ Telephone:________________________________FAX Number:__________________________________ 1.Is the above a successor corporation Yes___No___? If you answered yes, please attach a listing of previous corporate names and date of acquisition. 2. Has the corporation changed names in the past year Yes___NO___? If yes please enter the following information: Previous Name Federal E.I.# Date of Change

_______________________________________________________ REPORT RECAPITULATION

OWNER & PROPERTY COUNT* CASH AMOUNT NUMBER OF SHARES

This report: ____________________ ____________________ _____________________

For Banking organizations or Life Insurance comp anies, please complete the following calculation when submitting a final or supplemental report:

Preliminary Report: ____________________ ____________________ _____________________ Additions: ____________________ ____________________ _____________________ Deletions: ____________________ ____________________ _____________________ Grand Total: ____________________ ____________________ _____________________

Advertising Expenses (Bank & Insurance Holders Only): ____________________

REMITTANCE AMOUNT & SHARES: ____________________ _____________________

* Owner count is defined as the aggregate number of property owners; Property count is defined as the total number of individual property items being remitted. (Ex: Property owned jointly would have two owners, but count as only one piece of property)

F


FORM AP1 STATE OF DELAWARE Department of Finance REPORT OF UNCLAIMED Division of Revenue OR ABANDONED PROPERTY P O Box 8931 Wilmington DE 19899 Verification For Report Year 20_____

HOLDER DELIVERY OF SECURITIES:

Holders delivering securities must provide account statements and documentation related to the State of Delaware Escheatment.

Have securities been transferred to the State account: ______Yes ______ No

Are account statements and transfer documentation included with this report: ______Yes ______ No

_____________________________________________________________________________________ VERIFICATION State of_________________________: County of________________________: ss

I, ________________________________________ being first duly sworn, on oath depose and state that I have caused to be prepared and have examined this report as to property presumed abandoned under the Delaware Unclaimed Property Law for the year ending as stated; that I am duly authorized by the holder to execute this report; and I believe that said report is true, correct and complete as of said date, excepting for such property as has ceased to be abandoned.

Signature__________________________________ Title________________________________________

Subscribed and sworn to before me this____________day of__________, 20_________.

DOCUMENT NO: 25-06/87/11/10

F


F

AP-1 CHECKLIST

# OWNERS / # PROP. $ REPORTED # SHARES

ACCOUNT BALANCES stnuoccA gnikcehC 10CA stnuoccA sgnivaS 20CA .streC sgnivaS ro DC derutaM 30CA stnuoccA bulC samtsirhC 40CA

AC05 Money on Deposit to Secure Funds stisopeD ytiruceS 60CA

stisopeD deifitnedinU 70CA stnuoccA esnepsuS 80CA

etagerggA 99CATOTAL

COURT DEPOSITSCT01 Escrow FundsCT02 Condemnation AwardsCT03 Missing Heirs’ FundCT04 Suspense AccountsCT05 Other Court DepositsCT99 AggregateTOTAL

EDUCATIONAL SAVINGS ACCOUNTSCS01 CashCS02 Mutual FundsCS03 SecuritiesTOTAL

UNCASHED CHECKS skcehC sreihsaC 10KC skcehC deifitreC 20KC

skcehC deretsigeR 30KC skcehC srerusaerT 40KC

stfarD 50KC stnarraW 60KC

sredrO yenoM 70KC skcehC srelevarT 80KC

skcehC egnahcxE ngieroF 90KC skcehC esnepxE 01KC skcehC noisneP 11KC

someM ro skcehC tiderC 21KC skcehC rodneV 31KC

emocnI ot ffo nettirW skcehC 41KC skcehC laiciffO rehtO 51KC

skcehC tseretnI DC 61KC etagerggA 99KC

TOTAL


AP-1 CHECKLIST - CONTINUED

# OWNERS / # PROP. $ REPORTED # SHARES

MINERAL PROCEEDS & INTERESTS tseretnI euneveR teN 10IM

seitlayoR 20IM seitlayoR gnidirrevO 30IM stnemyaP noitcudorP 40IM

tseretnI gnikroW 50IM sesunoB 60IM

slatneR yaleD 70IM seitlayoR ni-tuhS 80IM

seitlayoR muminiM 90IM etagerggA 99IM

TOTAL

IRA - ROTHIR05 Cash IR06 Mutual Funds IR07 Securities TOTAL

IRA - TRADITIONAL, SEP, SARSEP, AND SIMPLEIR01 Cash IR02 Mutual Funds IR03 SecuritiesTOTAL

HEALTH SAVINGS PLANHS01 Health Savings Account HS02 Health Savings Account Investment TOTAL

INSURANCE smialC ro stifeneB yciloP .vidnI 10NI smialC ro stifeneB yciloP puorG 20NI

seiraicifeneB euD sdeecorP 30NI ,seiciloP derutaM morF sdeecorP 40NI

seitiunnA ro stnemwodnE sdnufeR muimerP 50NI

secnattimeR deifitnedinU 60NIIN07 Other Amounts Due Under Policy

secnalaB tiderC tnegA 80NI etagerggA 99NI

TOTAL

F


AP-1 CHECKLIST - CONCLUDED # OWNERS / #PROP. $ REPORTED # SHARES

SECURITIES sdnediviD 10CS

)snopuoC dnoB( tseretnI 20CS stnemyaP lapicnirP 30CS

stnemyaP ytiuqE 40CS stiforP 50CS

serahS esahcruP ot sdnuF 60CS sdnoB & skcotS rof sdnuF 70CS

SC08 Shares of Stock (Returned by P.O.)

serahS lanoitcarF roF hsaC 90CSSC10 Unexchanged Shares of Successor Corp

pihsrenwO fo .streC rehtO 11CS serahS gniylrednU 21CS

SC13 Funds for Liquadition/Redemptionof unsurrendered Stock or bonds

serutnebeD 41CS seitiruceS tnemnrevoG SU 51CS

serahS dnuF lautuM 61CS )sthgiR( stnarraW 71CS

lapicnirP dnoB derutaM 81CS snalP tnemtsevnieR dnediviD 91CS

secnalaB tiderC 02CS etagerggA 99CS

TOTAL

SAFE DEPOSIT BOX (SAFEKEEPING)

SD01 SD Box Net ProceedsSD02 Other SafekeepingTOTAL

MISC. CHECKS & INTANGIBLE PERSONAL PROPERTY yralaS ,lloryaP ,segaW 10SM

snoissimmoC 20SMMS03 Workers Compensation Benefits

secivreS & sdooG rof tnemyaP 40SM stnemyaprevO remotsuC 50SM secnattimeR deifitnedinU 60SM segrahcrevO dednufernU 70SM

elbayaP stnuoccA 80SMMS09 Credit Balances (Accounts Rec.)

euD stnuocsiD 01SM euD sdnufeR 11SM

setacifitreC tfiG demeedernU 21SM laretalloC naoL demialcnU 31SM

snalP gnirahS tiforP & noisneP 41SM noitadiuqiL ro noitulossiD 51SM skcehC gnidnatstuO csiM 61SM

ytreporP elbignatnI csiM 71SM seitilibaiL esnepsuS 81SM

etagerggA 99SMTOTAL


AP-1 CHECKLIST - CONCLUDED

# OWNERS / #PROP.

ALL OTHER PROPERTY NOT IDENTIFIED ABOVE YTREPORP REHTO LLA ZZZZ

TOTAL

GRAND TOTAL *

* Please total all property categories and enter grand total on front of form AP-1 in the Report Recapitulation section.

UTILITIES stisopeD ytilitU 10TU

seeF pihsrebmeM 20TU setabeR ro sdnufeR 30TU

snoitubirtsiD tiderC latipaC 40TU etagerggA 99TU

TOTAL

$ REPORTED # SHARES

TRUST, INVESTMENT & ESCROW ACCOUNTS stnuoccA tnegA gniyaP 10RT

TR02 Undelivered or Uncashed Dividends

TR03 Funds Held In Fiduciary Capacity stnuoccA worcsE 40RT

srehcuoV tsurT 50RTTOTAL

(Revised 02/17/11)


9

INSTRUCTIONS FOR COMPLETINGTHE VERIFICATION AND CHECKLIST REPORT OF

UNCLAIMED OR ABANDONED PROPERTY (AP-1 FORM)

Verification for period ended:

This is the cut-off date for reviewing your records. Enter the report year.

Type of Report:

Please indicate if you are filing a preliminary, final or supplemental report, by checking the appropriate box. For final reports, please indicate the date you filed yourpreliminary report. For supplemental reports, please indicate the date of your previouslyfiled report.

Preliminary reports are required to be filed by Banking organizations and Life Insurance companies only.

Holder Information:

Federal Employer Identification Number (EIN): enter the nine digit tax ID number assigned to you by the federal government. This line must be completed.

Holder’s Name and Address: Complete the name and address lines with your company name and mailing address. Do not forget to include the department names if they are an important part of your address. The holder name and address lines mustbe completed and include the street address, city, state, and zip code.

State of Incorporation: Corporations should enter the state in which they wereincorporated. Savings and loan associations, banks, and credit unions should enterthe state in which they were chartered.

Date of Incorporation/Charter Date: Corporations should enter the date on whichthey were incorporated. Savings and loan associations, banks, credit unions shouldenter the date their organization was chartered.

Primary NAICS Code: Please enter your North American Industry Classification System code, as provided by the Internal Revenue Service. (usually this information can befound on your Federal Corporate Income Tax return)

Contact person for reporting: List the name, address, e-mail, phone number, and fax number of the person who completed your report. This is the person the DelawareState Escheator will contact if there are questions or problems with your report.This is also the person to whom the State will mail future reporting information.

Successor Corporations and Name Changes: Please indicate if the present holder is asuccessor corporation. If you have answered yes, please attach a listing of previous

F

REV.02/20/12


Form AP-1 Checklist:Please complete the checklist by indicating the total number of owners and cash/share amount for each property type you are reporting.

10

corporate names and dates of acquisition. If your corporation has changed names inthe past year, please indicate the previous name, federal ID, and date of namechange.

Report Recapitulation:

Owner Count: please indicate the total number of owners AND properties remitted on your checklist and form AP-2. (Owner count is defined as the aggregate number of property owners; Property count is defined as the total number of individual property items being remitted. Example: Property owned jointly would have two owners, but count as only one piece of property)

Cash Amount: total amount of cash from your checklist and form AP-2.

Number of shares: total number of shares from your checklist and formAP-2.

* If you are filing a final or supplemental report, please indicate the Item Count, Cash Amount and Number of shares filed with your previous report. Document all additions and/or deletions to these original figures in the space provided on theAP-1 form. The Grand Total Columns on the AP-1 form represent the net Items,Cash and Share figures being reported. When filing the final report, the names of owners listed on the preliminary report who have since been reimbursed should not be listed as “zero” dollar properties on the final AP2 report.

Advertising Expenses: bank and life insurance companies must indicate the totalexpenses for advertising being deducted from the cash amount indicated in thegrand total. All other Holders should leave this line blank.

Remittance Amount and Shares: please indicate the total cash and share amountbeing remitted to the Delaware State Escheator with this report.

Delivery of Securities:

Please confirm whether securities have been transferred to the State account in accordance with the guidelines as set forth in the Securities Registration and Remittance Section of this handbook (page 15). In addition, confirm whether account statements or “proof of transfer” documentation is included with this report. Your full liability is not satisfied until this information is received.

Verification:

Verification if made by a partnership shall be executed by a partner. If made by an unincorporated association or private corporation, by an officer. If made by a public corporation, by its Chief Financial Officer or Escheatment Manager. All signatures must be notarized.

REV.02/20/12


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12

INSTRUCTIONS FOR COMPLETING REPORT OFUNCLAIMED OR ABANDONED PROPERTY

DETAIL SHEET (AP-2 FORM)

Column Entries:

Items of unclaimed property must be identified and grouped by the categories described on the Verification and Checklist form (AP-1), titled by category ofproperty with corresponding and separate pages used for each type of property inalphabetical or numerical sequence by account number. Each page should be totaledand each property type should have its own separate total.

Type of Property:

List category of property to be itemized on the AP-2 form. Please make copies ofthis page so that each page represents only one NAUPA category / property type.

Account Number / Property ID#:

List the owners account number or other identifying number of each item (i.e.: check number, certificate number, account number, etc.).

Note regarding aggregate property: For refund efficiency, it is recommended that aggregate property amounts be provided for unknown owners only. Account details, when known, should be provided for all owners regardless of the dollar value.

Social Security or Federal ID Number:

Enter the owners Social Security Number/ Federal ID number in this area.

Owner’s Information:

List last name, full first name, and middle initial, if available. List all information which would help with identification, such as Jr., Sr.. Do not include titles such as Mr., Mrs., Ms., etc. Corporate titles should be entered exactly as adopted, except the word “the” should be deleted when it is the first word of the title. List the complete address, including zip code. If the address is unknown, insert “address unknown” in first line of address information. If a single item has two or more owners, the names and addresses of both must be shown, along with the relationship (e.g. “Trustee”, “Or”, “And”, etc.) If the owners have the same address, the address may be entered once beneath the names.

Date of Last Contact:

This is the date of the last deposit or withdrawal made by the owner. The date of last

REV.02/20/12


REV.02/20/12

13

contact can also be, for example, the date the dividend became payable, the date a note became payable, the date a check or draft was issued, the date a gift certificate was purchased, etc. If payable on demand, the date the instrument was issued should be used. The date of computer conversion shall not be used as the date of last contact.

Amount Due Owner:

The total value due owner is the amount of cash due the owner of the item, including all interest earned on deposits and without the deduction of any service charges, withholding, escheats fees and/or charges.

Shares Due Owner:

The number of shares due the owner should be listed.

Value of Shares Due Owner:

Enter the dollar value at time of escheat of the shares reported in the previous column.

Total This Page:

Total each column and enter the sum for each column.

Total This Property Type:

This is the total for all owners under a given NAUPA code/property type. The number of owners owed cash property and the corresponding cash amount due should be entered on the applicable line on the AP-1 checklist. The number of owners owed shares and the number of shares due should also be entered on the applicable line on the AP-1 Checklist.

Note: The value of shares due owner should not be entered on the AP-1 Checklist.

F

REV.02/20/12


Form VDA-1 (Updated: 1/24/13)

DISCLOSURE AND NOTICE OF INTENT TO VOLUNTARILY COMPLY WITH ABANDONED PROPERTY LAW PURSUANT TO 12 Del. C. § 1177

COMES NOW _____________________________________________________________________ (Holder), an entity incorporated or formed under the laws of the State of Delaware or an entity seeking to remit abandoned or unclaimed property for which the last known address of the owner was in the State of Delaware, acting by its duly authorized officer. WHEREAS, the Holder may not be in compliance with the Delaware Abandoned Property Law, Chapter 11 of Title 12 of the Delaware Code, WHEREAS, the Holder is now coming forward in good faith to comply with the Abandoned Property Law, and WHEREAS, the State desires to induce the Holder's compliance with the Abandoned Property Law,. NOW THEREFORE, in consideration of the mutual promises hereinafter set forth, the parties agree as follows: The Holder discloses (check the applicable box):

[ ] that the Holder has not filed any abandoned property or abandoned property reports as required by the State's Abandoned Property Law for report year _____, to the present. [ ] that the Holder has filed abandoned property reports with the State for report year _____, to the present, but has neglected to report certain abandoned property, through inadvertence, mistake or oversight. [ ] that the Holder has filed abandoned property reports with the State for some report years and for some property types, but has neglected to report certain abandoned property, through inadvertence, mistake or oversight. [ ] that the Holder believes it is presently in compliance with the Delaware Abandoned Property Law, but wishes to come forward so it can conduct a review of its books and records to determine whether it has neglected to report certain abandoned property, through inadvertence, mistake or oversight.

The Holder shall complete a review of its books and records and file reports for all abandoned property related to all transaction years beginning January 1, 1996 (i.e., property that was deemed abandoned under 12 Del. C. § 1198) to the present. The State agrees that, upon its satisfactory review and approval of the reports and materials submitted by the Holder, and upon payment of the abandoned property to the State or the establishment of a payment plan by the Holder that is accepted by the State, the State will enter into its form Voluntary Self Disclosure Agreement with the Holder, granting the Holder the protections contemplated by that agreement.


The Holder agrees to enter into a Voluntary Self Disclosure Agreement with the State and to either pay the abandoned or unclaimed property due to the State under the Abandoned Property Law, or enter into a plan for its payment, no later than June 30, 2015. However, the Holder and Department of State shall work together in good faith to complete the Program as soon as practicable from the first meeting date between the Department of State and the Holder. The Holder understands that time is of the essence and the Holder's delay in completing its review may result in either (i) removal of the Holder from the program, or (ii) the imposition of interest on the abandoned property payable to the State, notwithstanding the parties’ expectation that by the terms of the form Voluntary Self Disclosure Agreement to be executed after the Holder's review of its books and records that interest is to be waived. In the event of such delay, the form Voluntary Self Disclosure Agreement will be amended to provide for the imposition of interest on all abandoned property payable to the State from the due date of the report(s). Holder Signature and Information Date: _________________________ By: ____________________________________________

Name: (Print) ______________________________________ Title: (Print) ______________________________________

Name and title of designated Holder contact: _________________________________________ ______________________________________________________________________________ Holder Address: ________________________________________________________________ ______________________________________________________________________________ Holder Telephone number: ________________________________________________________ Holder E-mail address: ___________________________________________________________ Holder FEIN: __________________________________________________________________ Affiliated Companies: ____________________________________________________ ____________________________________________________ ____________________________________________________ ____________________________________________________ ____________________________________________________ ____________________________________________________

F


(IF ADDITIONAL SPACE IS NEEDED FOR AFFILIATED COMPANIES, PLEASE ATTACH AN ADDENDA) Holder Advocate contact information: __________________________________ (Print) __________________________________ __________________________________ State Signature ACCEPTED: Date _______________ By: ______________________________

The Honorable Jeffrey W. Bullock Secretary of State State of Delaware

To submit, please e-mail a PDF of the executed VDA-1 to [email protected] Please also send two (2) signed originals to

Secretary of State of the State of Delaware Delaware Voluntary Disclosure Program c/o Peg Broadwater PO Box 26166 Wilmington, Delaware 19899


VOLUNTARY SELF DISCLOSURE AGREEMENT

Form VDA-2

State of Delaware Delaware Secretary of State 820 North French Street, 4th Floor Wilmington, DE 19801

This Voluntary Self Disclosure Agreement (“Agreement”) is entered into between the State of Delaware, by and through the Delaware Secretary of State ("STATE"), acting by its undersigned duly authorized representative, and _________________________________________________ , ("HOLDER"), a corporation incorporated under the laws of the State of ________________, acting by its duly authorized officer:

WHEREAS, the HOLDER, is not presently in compliance with the Delaware Abandoned Property Law, Chapter 11 of Title 12 of the Delaware Code, (“Abandoned Property Law”); and

WHEREAS, the HOLDER voluntarily came forward on ____________________, and entered into a Disclosure and Notice Agreement of Intent to Voluntarily Comply with Abandoned Property Law pursuant to 12 Del. C. § 1177, evidencing a good faith desire to comply with the Abandoned Property Law and deliver to the STATE property presumed abandoned or unclaimed and, therefore, subject to escheatment to the STATE; and

WHEREAS, the HOLDER is not prohibited from participating in the Voluntary Disclosure Program by 12 Del. C. § 1177(d); and

WHEREAS, the HOLDER desires to resolve all claims which the STATE may assert and the STATE desires to induce the HOLDER to voluntarily comply with the Abandoned Property Law, including compliance with future annual reporting requirements:

NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth, the parties agree as follows:

1. The following terms shall have the following definitions: (a) The term “Abandoned or Unclaimed Property” shall mean property against which a full

period of dormancy has run, pursuant to the Abandoned Property Law. (b) The term “Agreement Look-Back Period” shall mean the period of time which began on

January 1, 1996 and continued to the final day of the calendar year next preceding the submission date of the report attached hereto as “Exhibit A” (i.e. the end of the prior year). [The STATE will consider including the next reporting period’s Abandoned or Unclaimed Property in the VDA, which should be discussed prior to execution of the VDA-2]

(c) The term “Payable Property” shall mean all property for which the dormancy period began during the Agreement Look-Back Period and that became Abandoned or Unclaimed Property during the Agreement Look-Back Period.

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________________________________________________________________________

________________________________________________________________________

2. The HOLDER agrees to pay and deliver to the STATE, in accordance with § 1177(b) of the Abandoned Property Law, the Payable Property which has been identified and fully described in the report attached hereto as “Exhibit A.” This report shall constitute the HOLDER’s reports required under § 1199 of the Abandoned Property Law for the Agreement Look-Back Period.

3. The HOLDER has identified and designated the following individual as its contact for all correspondences with the STATE related to the Abandoned Property Law or any matter associated with this Agreement, and has provided to the STATE the contact’s mailing address, telephone number, email address, title, and the HOLDER’s Federal Employer Identification Number (“FEIN”). The HOLDER is obligated to notify the STATE in the case of any change of the designated individual, or any change of contact information provided herein.

HOLDER Name and title of designated contact: ________________________________

HOLDER Address: _______________________________________________________

HOLDER Telephone number: ______________________________________________

HOLDER Email address: __________________________________________________

HOLDER FEIN: _________________________________________________________

4. The HOLDER represents that, except as otherwise specifically made known to the STATE, and as noted in an attachment hereto as “Exhibit B,” the HOLDER is entering into this Agreement intending to fully comply with the Abandoned Property Law and the rules of priority set forth by the United States Supreme Court in the cases of Texas v. New Jersey and Delawarev. New York. The HOLDER also represents that the payment and delivery of the Payable Property is made in good faith compliance with the Abandoned Property Law, including but not limited to § 1203 of the Abandoned Property Law.

5. In this Agreement, “good faith” requires, inter alia, that in presenting the final HOLDER’s report of Abandoned or Unclaimed Property liability to the STATE, the HOLDER disclose to the STATE all determinations related to the Abandoned Property Law made by the HOLDER in connection with this Agreement. This includes, but is not limited to, any determination by the HOLDER that a particular item, kind, or type of property is not abandoned or unclaimed property under the Abandoned Property Law where such determination results in a reduction in the amount of property reported, by the HOLDER to the STATE, or the omission of a particular kind or type of property from disclosure, by the HOLDER to the STATE. The HOLDER’s reliance on an independent third-party to process the HOLDER’s books and records and to determine the amount of the Payable Property does not, by itself alone, without more, constitute “good faith.”

6. The STATE releases the HOLDER from all claims, demands, interest, penalties, fines, actions or causes of action the STATE may have from the beginning of time through and including the date of this Agreement that relate to the Payable Property, subject only to the conditions in


paragraphs No. 7 and 10 below. Upon payment of the Payable Property, the STATE agrees to indemnify the HOLDER pursuant to the terms of § 1203 of the Abandoned Property Law.

7. The STATE releases the HOLDER from any further reporting requirements from the beginning of time to the calendar year next preceding the submission date of the report attached hereto as “Exhibit A.” The HOLDER agrees to file and report, to the STATE, abandoned or unclaimed property annually as required by the Abandoned Property Law. Should the HOLDER fail to fulfill Delaware’s annual reporting requirements in any of the subsequent three (3) report years after the execution of this Agreement, the STATE will issue a warning letter to the HOLDER to the individual listed in paragraph 3, notifying the HOLDER of its failure to comply with the Agreement, no earlier than 30 days after the deadline to submit the annual report. In the event that the HOLDER fails to adhere to the reporting requirements of the Abandoned Property Law after the STATE issues a warning letter, the STATE, at its sole discretion, may void paragraphs Nos. 6 and 10 of this Agreement and, at the STATE’s discretion, audit the HOLDER for any time, including but not limited the Agreement Look-Back Period.

8. The HOLDER has disclosed to the STATE any estimation techniques which were used to determine the Payable Property for any periods where the HOLDER’s records either do not exist, or are inadequate to determine the exact amount of property which became abandoned or unclaimed during the Agreement Look-Back Period. The STATE’s entry into this Agreement constitutes the STATE’s assent to the assumptions and methodology employed by the HOLDER to estimate the Payable Property. The HOLDER swears that no estimation techniques were used to infer, create, or otherwise identify addresses for persons appearing to be owners of abandoned or unclaimed property where the HOLDER’s books and records do not in fact contain the addresses of the persons appearing to be owners of the abandoned or unclaimed property.

9. The STATE will maintain the confidentiality of information voluntarily disclosed and shall only disclose such information as provided in § 1141 of the Abandoned Property Law, or as otherwise required by law.

10. The STATE recognizes that the HOLDER has come forward on a voluntary basis and hereby enters into compliance with the Abandoned Property Law. Except in circumstances where there is evidence of fraud or willful misrepresentation by the HOLDER or those acting on the HOLDER’s behalf or non-compliance with annual reporting requirements in the Abandoned Property Law and described in paragraph 7 above, the STATE waives its right to audit the HOLDER, pursuant to the Abandoned Property Law, concerning property that became Abandoned or Unclaimed Property during or prior to the Agreement Look-Back Period. In other words, the STATE waives its right to audit the HOLDER, pursuant to the Abandoned Property Law, concerning property that became Abandoned or Unclaimed Property for the Agreement Look-Back Period and all preceding years.

Agreed to by:

HOLDER:

(Signature) By: (Print) Title: (Print) Date:

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____________________________________

I, (Holder's Representative), (Title), on behalf of

(Holder Name),declare under penalty of perjury that I am authorized to sign this Agreement on behalf of the Holder, have examined this Agreement and the accompanying schedules and exhibits and swear that they are true and correct to the best of my knowledge, information and belief.

________________________________ (Signature of Holder’s Authorized Representative)

Date: _______________________

Agreed to by:

STATE OF DELAWARE:

The Honorable Jeffrey W. Bullock Secretary of State State of Delaware


Form AP DE-1 rev. 8/27/02

DISCLOSURE AND NOTICE OF INTENT TO VOLUNTARILY

COMPLY WITH ABANDONED PROPERTY LAW

COMES NOW __________________________________, a corporation incorporated under the laws of the State of Delaware (Holder), acting by its duly authorized officer.

WHEREAS, the Holder is not presently in co mpliance with the Delaware Abandoned Property Law, Chapter 11 of Title 12 of the Delaware Code,

Whereas the Holder is now coming forward to disclose its non-compliance and in good faith wishes to comply with the Abandoned Property Law, and

Whereas the State desires to induce the Holder’s compliance with the Abandoned Property Law,

NOW THEREFORE, in consideration of the mutual promises hereinafter set forth, the parties agree as follows:

The Holder discloses [ ] that it has not filed any abandoned property reports as required by the State’s Abandoned Property Law for report year 19__, to the present; or [ ] the Holder has filed aban-doned property reports with the State for report year 19__, to the present but has neglected to report the fol-lowing types of abandoned property through inadvertence, mistake or oversight. (Check the applicable box.) The Holder shall complete a review of its books and records and file reports for report year 1996, as well as for all other report years to the present and pay over all abandoned or unclaimed property due the State for those years within six months from the date of this disclosure.

The State agrees that it will enter in its form Voluntary Self Disclosure Agreement with the Holder upon the Holders timely completion of the review of its books and records and contemporaneous with the filing of the abandoned property reports and the payment of the abandoned property to the State, subject only to the next paragraph.

The State for good cause may extend the time agreed to above for filing the aforementioned reports and paying over the abandoned property. However, the Holder understands that time is of the essence and the Holder’s unreasonable delay in completing its review may result in the imposition of interest on the abandoned property payable to the State, notwithstanding the parties expectation that by the terms of the form Voluntary Self Disclosure Agreement to be executed after the Holder’s review of its books and records that interest is to be waived. In the event of such unreasonable delay, the form Voluntary Self Disclosure Agreement will be amended to provide form the imposition of interest on all abandoned property payable to the State form the due date of the report(s).

Date: _________________________ By: ______________________________ Title

ACCEPTED: Date _______________ By: ______________________________ Division of Revenue

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VOLUNTARY SELF DISCLOSURE AGREEMENT Page 1

Form AP DE-2

State of Delaware Delaware Division of Revenue May 1, 2006 Bureau of Abandoned Property 820 North French Street, 8th Fl Wilmington, De 19801

VOLUNTARY SELF DISCLOSURE AGREEMENT

This Agreement is entered into between the State of Delaware, Delaware State Es-cheator (“STATE”), acting by its undersigned duly authorized representative, and _______________(“HOLDER”), a corporation incorporated under the laws of the State of ________________, acting by its duly authorized officer:

WHEREAS, the HOLDER, is not presently in compliance with the Delaware Aban-doned Property Law, Chapter 11 of Title 12 of the Delaware Code, (“Abandoned Property Law”); and

WHEREAS, the HOLDER voluntarily came forward on ________________________, and entered into a Disclosure and Notice Agreement evidenc-ing a good faith desire to comply with the Delaware Abandoned Property Law; and

WHEREAS, the HOLDER had not been c ontacted by the STATE or any of the STATE’S auditor representatives on behalf of the STATE in order to schedule or conduct an examination of the books and records of the HOLDER before the Holder entered into a Dis-closure and Notice Agreement on _________________________; and

WHEREAS, the HOLDER desire s to resolve all claims which the STATE may assert and the STATE desires to induce the Holder to voluntarily comply with the Delaware Aban-doned Property Law:

NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth, the parties agree as follows:

1. The HOLDER agrees to file reports and to pay and deliver all abandoned or unclaimed property for the report year 1996 through report year _____.

2. The HOLDER agrees to pay and deliver to the STATE upon execution hereof the property identified and fully described in the report to be provided (Exhibit A) and incorporated herein by reference. This report shall constitute the HOLDER’S reports required by section 1199 of the Abandoned Property Law for the periods set out in paragraph No.1 above.

3. The Holder represents that except as otherwise specifically made known to the State and as noted in an addendum to this agreement, the Holder is entering into this agreement intending to fully comply with the Delaware Abandoned Property Law and the rules of priority set forth in the decisions of the United States Supreme Court in the cases of Texas v. New Jersey and



Delaware v. New York. Holder also represents that the payment and delivery of property pursu-ant to this agreement is made in good faith compliance with the Delaware Abandoned Property Law, including but not limited to section 1203 of the Law. 4. The STATE releases the HOLDER from all claims, demands, interest, penalties, actions or causes of action the STATE may have for the reporting years set out in paragraph No. 1 above and for all preceding years, subject only to the conditions set out in paragraph No. 8 below. Upon payment of the abandoned or unclaimed property the STATE agrees to indemnify the HOLDER pursuant to the terms of section 1203, Chapter 11 of Title 12 of the Delaware Code.

5. The STATE releases the HOLDER from any further reporting requirements of the Delaware Abandoned Property Law for the abandoned or unclaimed property identified, paid and de-livered pursuant to this agreement, for the reporting years covered by paragraph No. 1 of this agreement, and for all preceding reporting years. The Holder agrees to file and report aban-doned property annually going forward as required by the Abandoned Property Law.

6. The HOLDER, if applicable, has disclosed to the STATE that estimation techniques were used to determine the amount of abandoned or unclaimed property identified in paragraph No. 1 for those periods where the HOLDER’S records either do not exist, or are inadequate to determine the exact amount of abandoned or unclaimed property payable to the STATE. The STATE’S entry into this agreement constitutes the STATE’S assent to the assumptions and methodology employed by the HOLDER to estimate the amount of abandoned or unclaimed property. The HOLDER swears that no estimation techniques were used to infer, create, or otherwise identify addresses for persons appearing to be owners of abandoned or unclaimed property where the HOLDER’S books and records do not in fact contain the addresses of the persons appearing to be the owners of the abandoned or unclaimed property.

7. The STATE will maintain the confidentiality of information voluntarily disclosed and shall only disclose such information as provided in Section 1141, Chapter 11 of Title 12 of the Dela-ware Code, or as otherwise required by law.

8. The STATE recognizes that the HOLDER has come forward on a voluntary basis and hereby has entered into compliance with the Escheat Law and will take the HOLDER’S actions into consideration in any decision whether to audit the HOLDER’S books and records. Furthermore, if the STATE has not notified the HOLDER within eighteen months from the date that a Holder has paid over property under a VDA of its intent to audit the HOLDER’S books and records, the STATE waives its right to audit the HOLDER for the reporting years covered by paragraph No. 1 and for all preceding periods. An audit of the HOLDER’S books and re-cords shall commence within six months of the HOLDER’S receipt of the STATE’S notification unless commencement of the audit is delayed by the HOLDER or the parties agree to extend the time within which the audit may be conducted. If the STATE does examine the books and records of the HOLDER, as is its right, and the examination discloses that the HOLDER has not acted in good faith or has materially failed to disclose the full amount of abandoned or unclaimed property held by the HOLDER and payable to the STATE for the reporting years set out in paragraph No. 1, then paragraphs 4 and 5 of the agreement shall be null and void and the STATE may, in its sole discretion, expand the scope of the

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audit to cover years prior to those covered by this agreement. In this event, the State shall require the HOLDER to pay over the additional abandoned or unclaimed property uncovered by the examination of the years covered by this agreement as well as any abandoned or unclaimed property due and ow-ing for reporting years preceding those years set out in paragraph No.1. The STATE may also assess interest and penalties pursuant to section 1159 of the Abandoned Property Law on all abandoned or unclaimed property due for all reporting years. In any proceeding brought under this clause to enforce the payment of additional abandoned property this agreement shall not be admissible against a Holder as evidence that a particular item, kind or type of property constitutes abandoned property within the meaning of the Abandoned Property Law.

“Good Faith” requires, inter alia, that the HOLDER disclose to the STATE all determinations made in connection with this voluntary disclosure agreement that a particular item, kind or type of property is not abandoned or unclaimed property under the Delaware Abandoned Property Law, and which result in a reduction in the amount of property reported or in the omission of a particular kind or type of property from disclosure.

Reliance on an independent third party to process the HOLDER’S books and records and to de-termine the amount of abandoned or unclaimed property to be reported and paid over under this agree-ment does not by itself alone, without more, constitute “good faith.”

An amount attributable to owner/address unknown gift certificates, gift cards, stored value cards and the like is included in the amount of abandoned or unclaimed property disclosed in this agreement. The Holder and the State recognize that the amount attributable thereto is an estimate based upon several imprecise factors. The Holder in exchange for the concessions made by the State in valuing this portion of the abandoned or unclaimed property, including the waiver of interest and penalty, agrees to make no claim for the return of this property unless the Holder can establish that: 1) it possesses the name and address of the owner in the Holder’s books and records, or 2) it has redeemed a certificate previously reported as abandoned property.

Date: ________________________ Date: ________________________

______________________________ ______________________________ Mark Udinski Abandoned Property Audit Manager

_______________________________ (Title)

I, ________________________, _____________________________, declare under

penalties of perjury that I have examined this agreement and the accompanying schedules and exhibits and swear that they are true and correct to the best of my knowledge information and belief.


Publication Deadline Waiver Form

Name of Firm: ______________________________________________

Tax ID: __-__________

Contact Name: ______________________________________________

Phone Number: ( ) _____-_________ Fax ( ) _____-___________

Email: ______________________________________________

Number of owner names: ______________________

Number of properties with value less than $100.00: ___________________________

Total value of Properties: $_____________________

Est. cost of publication: $______________________

In the past three years have you ever applied for a wavier? YES______ NO______

Bureau of Unclaimed Property Division of Revenue 8th Floor 820 North French Street Wilmington, DE 19801 Phone: (302) 577-8220 Fax: (302) 577-7179

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State of Delaware Unclaimed Property

Filing Extension Request

Name of Firm: ______________________________________________

Tax ID: __-__________

Contact Name: ______________________________________________

Phone Number: ( ) _____-_________ Fax ( ) _____-___________

Email: ______________________________________________

Name of Holder (s) ______________________________________________ Extension requests will only be considered when holder names and tax-id’s are listed on this form.Holder FEIN: __-_________

Est. value of report: * $_____________.___

Extension Request : ________________ days

Explanation:________________________________________________

____________________________________________________________________________________________________________________________________________________________________________________

In the past three years have you ever applied for an extension? YES______ NO______

* - Per 30 Del Code § 1159(d) Interest at ½ % per month on outstanding unpaid amounts shall accrue from the date the amounts of property were due until paid. Interest due in accordance with this subsection shall in no event exceed 50% of the amount required to be paid; provided, however, that penalties under subsection (a), (b) or (c) of this section shall not be deemed to be interest for purposes of this subsection.

Bureau of Unclaimed Property Division of Revenue - 8th Floor Carvel State Office Building

820 North French Street Wilmington, DE 19801 Phone: (302) 577-8220 Fax: (302) 577-7179



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UA Uniform Acts

UNIFORM UNCLAIMED PROPERTY ACTS

1981 UNIFORM ACT ………………… .................................................................... 135

1995 UNIFORM ACT ………………… .................................................................... 192

UNIFORM ACTS (1981) MORRIS NICHOLS’ DELAWARE UNCLAIMED PROPERTY LAW COMPANION / 2013-2014

UNIFORM UNCLAIMED PROPERTY ACT

drafted by the

NATIONAL CONFERENCE OF COMMISSIONERSON UNIFORM STATE LAWS

and by it

APPROVED AND RECOMMENDED FOR ENACTMENTIN ALL THE STATES

at its

ANNUAL CONFERENCEMEETING IN ITS

WITH PREFATORY NOTE AND COMMENTS

Copyright ©By

NATIONAL CONFERENCE OF COMMISSIONERSON UNIFORM STATE LAWS

UNIFORM UNCLAIMED PROPERTY ACT

1981 ACT

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The Committee that acted for the National Conference of Commissioners on Uniform State Laws in preparing the Uniform Unclaimed Property Act was as follows:

Howard T. Rosen, Gateway I, Newark, NJ 07102, ChairmanSandra Day, Suite 100, Legislative Services Wing, State Capitol, Phoenix, AZ 85007Andrew W. McThenia, Jr., Washington and Lee University, School of Law, Lewis Hall,

Lexington, VA 24450, ReporterCharles O. Ragan, Jr., Suite 610, First Tennessee Bank Building, Chattanooga, TN 37402William A. Robinson, 2920 Military Road, N.W., Washington, DC 20015Howard J. Swibel, Suite 5800, 200 East Randolph Drive, Chicago, IL 60601Charles M. Welling, 900 Law Building, Charlotte, NC 28202David J. Epstein, Suite 2060, Two Century Plaza, 2049 Century Park East, Los Angeles,

CA 90067, ReporterJohn C. Deacon, P.O. Box 1245, Jonesboro, AR 72401, President (Member Ex Officio)M. King Hill, Jr., Sixth Floor, 100 Light Street, Baltimore, MD 21202, Chairman,

Executive Committee (Member Ex Officio)William J. Pierce, University of Michigan, School of Law, Ann Arbor, MI 48109,

Executive DirectorEdward I. Cutler, P.O. Box 3239, Tampa, FL 33601, Chairman, Division H (Member Ex

Officio)

Review Committee

C. Ben Dutton, 710 Guaranty Building, Indianapolis, IN 46204, ChairmanRobert E. Sullivan, Legal Department, 40 East Broadway, Butte, MT 59701

Advisors to Special Committee on Uniform Unclaimed Property Act

Gary Bosco, American Bankers AssociationJoy Cherian, American Council of Life InsuranceEarl J. Grimm, American Society of Corporate SecretariesJohn T. Higginbotham, American Bar Association, Section of TaxationJim Lord, National Association of Unclaimed Property AdministratorsThomas E. Montgomery, American Bar AssociationStephen P. Norman, Issuers of Money Orders and Travelers ChecksWilliam Roche, Edison Electric InstituteWilliam M. Tartikoff, Investment Company InstituteDonald H. Weeks, United States League of Savings Associations


Why Change is Needed

Thirty-one states and the District of Columbia have enacted either the original 1954 version of the Uniform Disposition of Unclaimed Property Act, or the 1966 revision of that Act. Of the remaining 19 states, all but 2 have some form of escheat or abandoned property legislation. The 1954 Uniform Act was drafted as a response to conflicting legislation among the various states and in response to a series of Supreme Court decisions in the late 1940’s and early 1950’s. The 1954 and 1966 Acts served well as evidenced by their numerous adoptions. However, the era of stability was ended with the decision in Texas v. New Jersey, 379 U.S. 674 (1965). That decision established a set of priorities for claimant states which were, in some instances, inconsistent with those established by the Uniform Act. A few states which previously had enacted the Uniform Act have changed their legislation to reflect the holding in Texas v. New Jersey.

In the last decade states have become increasingly aware of the opportunities for collecting and returning to their residents unclaimed money and using the “windfall” unreturned funds as general fund receipts for the benefit of citizens of the state. Accordingly several states have sought to enforce their unclaimed property laws with enhanced vigor. They have found, however, that obtaining compliance with the law has been extremely difficult. In some instances the uncertain status of unclaimed property statutes in the wake of Texas v. New Jersey accounts for the high degree of noncompliance; many holders feel they do not know what is required of them. In addition the enforcement provisions of the Uniform Act are inadequate and have not served to encourage compliance with the Act.

The Uniform Act served its time. However, to conform the Uniform Act expressly to the Supreme Court ruling in Texas v. New Jersey a comprehensive revision is desirable.

The Impact of Texas v. New Jersey

The 1954 and 1966 Uniform Acts basically tied the enacting state’s claim to abandoned property to the ability of that state’s courts to assert personal jurisdiction over the holder. The basic jurisdictional test of Sections 2, 4, 5, 6, 7, 8 and 9 for a presumption of abandonment bears a direct relationship to events taking place within the state. The thrust of this “contacts” test generally is to allow any state with jurisdiction over the holder, i.e., the debtor, to take unclaimed property. In recognition of the potential for conflict among jurisdictions over the application of a contacts test, the Uniform Act contained a reciprocity clause in Section 10. Section 10 allowed another state to claim abandoned property if the last known address of the claimant was in that state and if other states with contacts would forego their claims. The success of this clause was dependent upon uniform enactment by competing states. However, this was never forthcoming, and the assertion of competing claims by states continued.

The Supreme Court decisions leading up to Texas v. New Jersey did little to clarify the law. The state of residence of the creditor could claim, Connecticut Mutual Life Insurance v. Moore, 333 U.S. 541 (1948), and the state of the holder’s domicile could likewise escheat,

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Standard Oil Co. v. New Jersey, 347 U.S. 428 (1951).

Standard Oil also held that it was a denial of due process for more than one state to escheat the same property. This rule created a race of diligence among the states. In Western Union Telegraph Co. v. Pennsylvania, 368 U.S. 71 (1962), however, the court told the most diligent state (Pennsylvania) that it had to assure Western Union that no other state would claim the property. In Western Union, Pennsylvania sought to escheat uncashed money orders and drafts which were held by Western Union and unclaimed by either the senders or the payees. The court held that Western Union should not be embroiled in a race of diligence among New York, Pennsylvania and other states. The Supreme Court’s opinion in effect admonished the states mutually to resolve which state was entitled to claim abandoned property or, absent agreement, to present their conflicting claims to the only judicial forum in which they could be resolved, the Supreme Court. Thus any state facing an actual or potential dispute by a sister state was forced to bring an original action in the Supreme Court for a declaration of its rights before it could take the property. This was the condition of the law when the Supreme Court decided Texas v. New Jersey.1

The problem in Texas v. New Jersey was which of several states was entitled to escheat intangible property consisting of debts owed by Sun Oil Company and left unclaimed by creditors. Four rules were proposed:

1. that the funds should go to the state having the most significant “contacts” with the debt;

2. that the funds should go to the state of the debtor company’s incorporation;3. that the funds should be paid to the state in which the company has its principal place

of business; and4. that the funds should be paid to the state of the creditor’s last known address as shown

by the debtor’s books and records.

Rule 4 was adopted by the Supreme Court as a “simple and easy” standard to follow. The court pointed out that this rule tended to “distribute escheats among the states in proportion of the commercial activities of their residents”. In addition to the holding that the state of the creditor’s last known address is entitled to escheat or custodially claim the property owed to the creditor, the court held that, if the creditor’s address does not appear on the debtor’s books or is in a state that does not provide for the escheat of intangibles, then the state of the debtor’s incorporation may take custody of the property until some other state comes forward with proof that it has a superior right to escheat or take custody.

The Texas v. New Jersey rule makes the Uniform Act inadequate because the Uniform Act is based on the claimant state’s ability to assert jurisdiction over the holder. Under Texas v New Jersey a Uniform Act state may not claim certain property held by persons subject to its. jurisdiction (which the Uniform Act covers) but can assert custody to property held by persons not subject to its jurisdiction (which the Uniform Act does not cover).

1 While the court in Texas v. New Jersey set down rules applying to both escheat statutes and custodial


type unclaimed property statutes (such as the Uniform Act), all but a few of the states have laws which are custodial and allow the lawful owner to claim the property at any time

A simple hypothetical illustrates the problem of meshing the rule of Texas v. New Jersey with the Uniform Act. Assume a corporate holder, incorporated in State A, holding unclaimed property (an uncashed dividend check) belonging to a claimant whose last known address was in State B. The holder does not do business in State B. Under the Texas v. New Jersey rule, State B is the first priority claimant. However, since the holder does not do business there the Uniform Act would not authorize State B to assert a claim to the property. State A, if it had enacted the Uniform Act, could claim the property under its abandoned property law in accordance with the second priority rule of Texas v. New Jersey; however, that frustrates the goal of equitable distribution of unclaimed property among creditor states.

Why Uniformity is Necessary

The 1954 and 1966 Uniform Acts responded to the need for symmetry in the law for the benefit of persons doing business in more than one state. Widespread enactment of the Uniform Act by the States indicates their recognition of the need for uniformity.

Since the 1954 and 1966 Acts are inconsistent with Texas v. New Jersey and other cases, the Conference, after receiving the report of a Study Committee, decided to revise the Uniform Act once again.

What the Act Does to Conform With Texas v. New Jersey

Section 3 of the Act provides a statutory response which is consistent with the Court’s pronouncement in Texas v. New Jersey. Basically, the Act provides that unclaimed intangible property is payable to the state of last known address of the owner. In those instances in which that information is unknown or the state of the owner’s last known address does not assert a claim to the property, it is payable to the state of the holder’s domicile.

There are other sections which shore up this scheme of priority, some of which are necessitated by the Texas v. New Jersey decision and some of which merely represent a statutory enactment of existing practices among states. One issue which has been raised by academic commentators concerns the reporting requirements of abandoned property legislation in light of the priority rules among claimant states enunciated by Texas v. New Jersey. Because the Texas v. New Jersey decision authorizes a state to claim abandoned property even though it cannot assert personal jurisdiction over the holder, the question has arisen as to whether a claimant state in that instance has the power to compel reporting from a holder to ascertain the existence of its claim. That is an important consideration, for the right given to the state of last known address by Texas v. New Jersey is a hollow one if the state is without sufficient information to assert its claim to abandoned property.2

2 Texas v. New Jersey did not decide whether the state which is entitled to the first priority claim can compel reporting by a foreign corporation. The issue was neither briefed nor argued in the case; however

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footnote 8 of the decision implies that such a legislative power exists. The right given to creditor states would be meaningless without the remedy of compelling reports.

The state acts as a conservator of the lost owner’s property and the Act is akin to a succession statute.3 The Texas v. New Jersey rule, as the Supreme Court noted, is a variation of the common law concept of mobilia sequunter personam, according to which the law of the state of domicile of the intestate owner determines the right of succession to personal property. The state in which the owner last resided is a rough indicator of domicile, and that state is entitled to provide by legislation for succession. The state of last known address, succeeding to the right of the owner, is entitled to compel a holder to disclose the existence of property which belongs to the owner in the same manner that a conservator of an estate of an incompetent or the administrator of the estate of a missing person or decedent can compel the holder of that person’s property to account for it.4 That the state may not be able to assert its claim in its own courts, but would be required to use the courts of another jurisdiction, is not determinative of its power to act as a custodian.5 Hence the suggestion that corporate holders not “doing business” in a state might escape their obligation to pay unclaimed property owing to persons with last known addresses in that state is incorrect.6

The Supreme Court’s failure to expressly mandate a reporting requirement in Texas v. New Jersey does not appear significant. Holders rarely raise a defense of failure to “do business” in response to a request for reporting. In any event many major holders are subject to the regulatory jurisdiction of most states. Even in those instances in which a holder is not subject to the regulatory jurisdiction of a state, the claimant state can nevertheless require reporting under this succession analysis.

3 The Court’s decision in Connecticut Mutual Life Insurance Co. v. Moore, 333 U.S. 541, 546-47 (1947), described the state as a “conservator” when claiming property under a custodial unclaimed property law. The Court in Standard Oil Co. v. New Jersey, 347 U.S. 428, 437 (1951), characterized the Moore case as involving a “conservation statute”.

4 As the United States Supreme Court noted in upholding the constitutionality of the Massachusetts custodial unclaimed property laws: “[i]f the facts warrant it, a legal representative can be appointed at any time with all the rights incident to such appointment, including that of withdrawing the funds and holding them for the true owner when he shall establish his claim.” Provident Institution for Savings v. Malone, 221 U.S. 660, 666 (1911).

5 In this connection, see Commonwealth of Pennsylvania v. Kervick, 60 N.J. 289, 288 A.2d 289 (1972) (Pennsylvania held entitled to sue in New Jersey state courts for property owing to Pennsylvania residents.)

6 “Doing business”, for purposes of service of process is limited only by the Fourteenth Amendment of the United States Constitution. On the other hand, jurisdiction to regulate a foreign corporation in a substantive fashion must run the gauntlet of the Commerce Clause, the Equal Protection Clause, and the Impairment of Contracts Clause as well as the Due Process Clause. (See Miller Bros. Co. v. Maryland, 347 U.S. 340 (1954) (a Delaware business is not


required to collect a sales tax from Maryland purchasers even though it makes some deliveries in Maryland)).

Other Changes in the Act

In recent years the National Association of Unclaimed Property Administrators has become an active group. There is growing cooperation among member states to exchange information. Several states have joined together to conduct joint investigations of holders. States also have agreed that they will collect property for each other from holders, and they regularly exchange property. This Act seeks to encourage further cooperation among the states by authorizing such joint agreements and by authorizing the adoption of uniform reporting forms. See Section 33. Neither the existing agreements among states nor the agreements envisioned under Section 33 require the consent of Congress under the Compact Clause of the Constitution, Art. I, § 10, cl. 3. The Supreme Court has held that the Compact Clause is limited to combinations or agreements that tend to increase the political power of the states to such an extent that it interferes with the supremacy of the United States. United States Steel v. Multi-State Comm., 434 U.S. 452 (1978).

The 1966 Act provided a presumption of abandonment of unclaimed dividend or interest checks but arguably did not cover the underlying ownership interest represented by issued and outstanding securities certificates. In recent years several states have amended their statutes to authorize taking of this property and indications are that the trend is likely to continue. California, Florida, Indiana, Maine, Massachusetts, Montana, Rhode Island and Virginia have statutes with such provisions and other states are known to be considering similar proposals. The new Act specifically covers securities even though they are not in the possession of the issuer. See Section 10.

Two major concerns have been expressed with the concept of presuming abandonment of underlying shares of stock or principal amounts of debt securities where the dividends or interest payments have been unclaimed. First, under what circumstances is it proper to presume abandonment and, second, what are the rights of the various parties when the conditions precedent to abandonment have occurred? As to the first question, Section 10 of the Act requires that there must be the passage of at least 7 years after the failure of an entitled person to claim or inquire about a dividend, interest payment, or other distribution and also the payment of at least 7 dividends, interest sums, or other distributions during such period which remain unclaimed.

As to the rights of the parties under the Act, the Administrator is entitled to have duplicate certificates issued in the state’s name. The issuer of the duplicate certificate is relieved of all liability respecting the property delivered (Section 19) and is protected against claims by virtue of the administrator’s duty to defend on behalf of the issuer and to indemnify that party against any liability on account of such claims (Section 20).

Under the Act, the administrator may require any person who has not filed a report to file a verified statement that he has or has not any unclaimed and reportable property (Section 30).

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The administrator has a right to audit records not limited to cases where there is reason to believe a person is not complying with the Act (Section 30).

In keeping with the Act’s focus on the last known address of an owner as vesting a state with a priority claim to property, the revision requires a holder who has a record of the last known address to retain it for 10 years after the property becomes reportable (Section 31).

The Act reflects a tendency among state legislatures in recent years to reduce dormancy periods. The current high inflation rate exacts a severe penalty from one who holds money or its equivalent for extended periods; an inference of loss or abandonment may be drawn more quickly than in 1966 when the value of money was more stable. The general rule of presumed abandonment is 5 years (Section 2) as compared with 7 years in the 1966 Act. A one year dormancy period is provided for unclaimed wages (Section 15), utility deposits (Section 8), refunds due from utilities (Section 9), and property held by courts and government agencies (Section 13).

Another set of problems addressed in the revision has to do with service charges imposed on abandoned property. Experience has shown that service charges levied against outstanding items such as money orders and cashier’s checks as well as inactive and dormant checking and savings accounts have completely wiped out otherwise reportable property. Sections 5(b) and 6(c) of this revision codify the case law which has limited these charges.

The 1966 Act did not address the small but active heir finder’s industry; that is, those businesses which pursuant to contract attempt to locate owners of abandoned property. Some state statutes have placed limits on the role of heir finders from the time property becomes reportable until a specified time after it has been turned over to the state. Section 35 of the new Act prohibits heir finder activity during a two-year period after payment or delivery to the state.


UNCLAIMED PROPERTY (1981 ACT)TABLE OF COMPARATIVE SECTIONS

Showing Sections of the Uniform Unclaimed Property Act (1981) and the 1966 Uniform Disposition of Unclaimed Property Act.

Uniform Unclaimed Property Act 1966 Uniform ActSection 1 [Definitions and Use of Terms.] Section 1Section 2 [Property Presumed Abandoned; General Rule.] Section 9Section 3 [General Rules for Taking Custody of Intangible Unclaimed Property.] No Comparable sectionSection 4 [Travelers Checks and Money Orders.] Section 2Section 5 [Checks, Drafts and Similar Instruments Issued or Certified by Banking and Financial Organizations.] Section 2

Section 6 [Bank Deposits and Funds in Financial Organizations.] Section 2Section 7 [Funds Owing Under Life Insurance Policies.] Section 3Section 8 [Deposits Held by Utilities.] Section 4Section 9 [Refunds Held by Business Associations.] Section 4Section 10 [Stock and Other Intangible Interests in Business Associations.] Section 5Section 11 [Property of Business Associations Held in Course of Dissolution.] Section 6Section 12 [Property Held by Agents and Fiduciaries.] Section 7Section 13 [Property Held by Courts and Public Agencies.] Section 8Section 14 [Gift Certificates and Credit Memos.] Section 9Section 15 [Wages.] Section 9Section 16 [Contents of Safe Deposit Box or Other Safekeeping Repository.] Section 2(d)Section 17 [Report of Abandoned Property.] Section 11Section 18 [Notice and Publication of Lists of Abandoned Property] Section 12Section 19 [Payment or Delivery of Abandoned Property.] Section 13

Section 20 [Custody by State; Holder Relieved From Liability; Reimbursement of Holder Paying Claim; Reclaiming for Owner; Defense of Holder; Payment of Safe Deposit Box or Repository Charges.]

Section 14

Section 21 [Crediting of Dividends, Interest or Increments to Owner’s Account.] No comparable sectionSection 22 [Public Sale of Abandoned Property.] Section 17Section 23 [Deposit of Funds.] Section 18Section 24 [Filing of Claim With Administrator.] Sections 19 and 20Section 25 [Claim of Another State to Recover Property; Procedure.] No comparable sectionSection 26 [Action to Establish Claim.] Section 21Section 27 [Election to Take Payment or Delivery.] Section 22Section 28 [Destruction or Disposition of Property Having Insubstantial Commercial Value; Immunity from Liability.] No comparable section

Section 29 [Periods of Limitation.] Section 16Section 30 [Requests for Reports and Examination of Records.] Section 23Section 31 [Retention of Records.] No comparable sectionSection 32 [Enforcement.] Section 24Section 33 [Interstate Agreements and Cooperation; Joint and Reciprocal Actions with Other States.] No comparable section

Section 34 [Interest and Penalties.] Section 25Section 35 [Agreement to Locate Reported Property.] No comparable sectionSection 36 [Foreign Transactions.] No comparable sectionSection 37 [Effect of New Provisions; Clarification of Application.] No comparable sectionSection 38 [Rules.] Section 26Section 39 [Severability.] Section 28Section 40 [Uniformity of Application and Construction.] Section 29Section 41 [Short Title.] Section 30Section 42 [Repeal.] Section 31Section 43 [Time of Taking Effect.] Section 32

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UNCLAIMED PROPERTY (1981 ACT)

Table of Contents

Introduction: Why Change is NeededSection1. [Definitions and Use of Terms.]2. [Property Presumed Abandoned; General Rule.]3. [General Rules for Taking Custody of Intangible Unclaimed Property.]4. [Travelers Checks and Money Orders.]5. [Checks, Drafts and Similar Instruments Issued or Certified by Banking and Financial

Organizations.]6. [Bank Deposits and Funds in Financial Organizations.]7. [Funds Owing Under Life Insurance Policies.]8. [Deposits Held by Utilities.]9. [Refunds Held by Business Associations.]10. [Stock and Other Intangible Interests in Business Associations.]11. [Property of Business Associations Held in Course of Dissolution.]12. [Property Held by Agents and Fiduciaries.]13. [Property Held by Courts and Public Agencies.]14. [Gift Certificates and Credit Memos.]15. [Wages.]16. [Contents of Safe Deposit Box or Other Safekeeping Repository.]17. [Report of Abandoned Property.]18. [Notice and Publication of Lists of Abandoned Property.]19. [Payment or Delivery of Abandoned Property.]20. [Custody by State; Holder Relieved from Liability; Reimbursement of Holder Paying

Claim; Reclaiming for Owner; Defense of Holder; Payment of Safe Deposit Box or Repository Charges.]21. [Crediting of Dividends, Interest, or Increments to Owner’s Account.]22. [Public Sale of Abandoned Property.]23. [Deposit of Funds.]24. [Filing of Claim with Administrator.]25. [Claim of Another State to Recover Property; Procedure.]26. [Action to Establish Claim.]27. [Election to Take Payment or Delivery.]28. [Destruction or Disposition of Property Having Insubstantial Commercial Value; Immunity

from Liability.]29. [Periods of Limitation.]30. [Requests for Reports and Examination of Records.]31. [Retention of Records.]32. [Enforcement.]33. [Interstate Agreements and Cooperation; Joint and Reciprocal Actions with Other States.]34. [Interest and Penalties.]35. [Agreement to Locate Reported Property.]36. [Foreign Transactions.]37. [Effect of New Provisions; Clarification of Application.]38. [Rules.]39. [Severability.]40. [Uniformity of Application and Construction.]41. [Short Title.]42. [Repeal.]43. [Time of Taking Effect.]


UNCLAIMED PROPERTY (1981 ACT)

§ 1. [Definitions and Use of Terms].

As used in this Act, unless the context otherwise requires:

(1) “Administrator” means [ ].

(2) “Apparent owner” means the person whose name appears on the records of the holder as

the person entitled to property held, issued, or owing by the holder.

(3) “Attorney general” means the chief legal officer of this State.

(4) “Banking organization” means a bank, trust company, savings bank, [industrial bank, land

bank, safe deposit company,] private banker, or any organization defined by other law as a bank or

banking organization.

(5) “Business association” means a non-public corporation, joint stock company, investment

company, business trust, partnership, or association for business purposes of 2 or more individuals,

whether or not for profit, including a banking organization, financial organization, insurance

company, or utility.

(6) “Domicile” means the state of incorporation of a corporation and the state of the principal

place of business of a unincorporated person.

(7) “Financial organization” means a savings and loan association, [cooperative bank,]

building and loan association, or credit union.

(8) “Holder” means a person, wherever organized or domiciled, who is:

(i) in possession of property belonging to another,

(ii) a trustee, or

(iii) indebted to another on an obligation.

(9) “Insurance company” means an association, corporation, fraternal or mutual

benefit organization, whether or not for profit, which is engaged in providing insurance

coverage, including accident, burial, casualty, credit life, contract performance, dental,

fidelity, fire, health, hospitalization, illness, life (including endowments and annuities),

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malpractice, marine, mortgage, surety, and wage protection insurance.

(10) “Intangible property” includes:

(i) monies, checks, drafts, deposits, interest, dividends, and income;

(ii) credit balances, customer overpayments, gift certificates, security

deposits, refunds, credit memos, unpaid wages, unused airline tickets, and

unidentified remittances;

(iii) stocks and other intangible ownership interests in business associations;

(iv) monies deposited to redeem stocks, bonds, coupons, and other securities,

or to make distributions;

(v) amounts due and payable under the terms of insurance policies; and

(vi) amounts distributable from a trust or custodial fund established under a

plan to provide health, welfare, pension, vacation, severance, retirement, death, stock

purchase, profit sharing, employee savings, supplemental unemployment insurance,

or similar benefits.

(11) “Last known address” means a description of the location of the apparent owner

sufficient for the purpose of the delivery of mail.

(12) “Owner” means a depositor in the case of a deposit, a beneficiary in case of a trust other

than a deposit in trust, a creditor, claimant, or payee in the case of other intangible property, or a

person having a legal or equitable interest in property subject to this Act or his legal representative.

(13) “Person” means an individual, business association, state or other government,

governmental subdivision or agency, public corporation, public authority, estate, trust, 2 or more

persons having a joint or common interest, or any other legal or commercial entity.

(14) “State” means any state, district, commonwealth, territory, insular possession, or any

other area subject to the legislative authority of the United States.

(15) “Utility” means a person who owns or operates for public use any plant, equipment,

property, franchise, or license for the transmission of communications or the production, storage,

transmission, sale, delivery, or furnishing of electricity, water, steam, or gas.


CommentPrior Uniform Act Provision:

Section 1.

The definitions have been revised to reflect, pursuant to Texas v. New Jersey, 379 U.S. 674 (1965), the fact that the Act applies to persons in other states who are holding property, eliminating any requirement that those persons be engaged in business in the enacting state.

Subsection (2) has been added to facilitate reference to the person who appears on the holder’s records to be the person entitled to the property. The right of a state to claim abandoned property depends on the information in the holder’s records concerning the apparent owner’s identification. It is of no consequence that without notice to the holder, he may have transferred his interest to another person. In Nellius v. Tampax, Inc., 394 A.2d 333 (Del.Ch.Ct.1978), the court held that the address of the apparent, not the actual, owner controlled. The holder is not required to ascertain the name of the current owner or resolve a dispute between the owner of record and a successor contesting ownership. However, nothing in this Act prohibits the actual owner from recovering the property, pursuant to Sections 20 and 24, from the holder or the administrator. Similarly, the state of last known address of the actual owner can recover the property, pursuant to Section 25, from the state which initially receives custody.

The definition of “business association” in subsection (5) expressly includes non-profit corporations.

The Act provides exclusively for the disposition of unclaimed intangible property with one exception in Section 16 for tangible property contained in safe deposit boxes.

Subsection (10) is not intended as a substantive addition to the coverage of Section 9 of the prior Acts. Included as intangible property are a variety of items which are often overlooked by holders, all of which were included within the 1966 Act and are within the coverage of this Act.

Subsection (11) defines “last known address” as the location of the apparent owner for the purpose of mail delivery, consistent with most state laws which have defined an address.

§ 2. [Property Presumed Abandoned; General Rule].

(a) Except as otherwise provided by this Act, all intangible property, including any income

or increment derived therefrom, less any lawful charges, that is held, issued, or owing in the ordinary

course of a holder’s business and has remained unclaimed by the owner for more than 5 years after it

became payable or distributable is presumed abandoned.

(b) Property is payable or distributable for the purpose of this Act notwithstanding the

owner’s failure to make demand or to present any instrument or document required to receive

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payment.


Section 9.

Section 2 establishes as a general proposition that all intangible property held or owing in the ordinary course of the holder’s business is within the coverage of this Act. See the comment to Section 1(10).

This section provides that unless a different time period is specified all intangible property which has remained unclaimed for more than 5 years is presumed abandoned. Sections 4-16 deal with specific types of property and prescribe the events which raise a presumption of abandonment.

The general dormancy period of the 1966 Uniform Act was 7 years. Some legislatures have recently shortened that time period. Likewise, a few recently enacted abandoned property laws have provided for a longer dormancy period. Given the greater mobility of the population in 1981 as compared with that of a quarter century ago when the 7-year dormancy period was first established, a reduction of the general dormancy period to 5 years is warranted. Additionally, the experiences of those states with shorter abandonment periods reveal that they are able to return to owners a substantially higher percentage of property reported as abandoned. There are exceptions in this Act to the 5-year dormancy period, however. For instance, statistical evidence indicates that a period of 15 years continues to be appropriate in the case of travelers checks. A majority of travelers checks will ultimately be presented for payment within the 15-year period. Also, in certain instances a shorter period is appropriate. For instance, the likelihood of finding the owner of a payroll check is materially decreased after one year. Hence, Section 15 has a one year dormancy period for unpaid wages.

Subsection (b) is intended to make clear that property is reportable notwithstanding that the owner, who has lost or otherwise forgotten his entitlement to property, fails to present to the holder evidence of his ownership or to make a demand for payment. See Connecticut Mutual Life Insurance Co. v. Moore, 333 U.S. 541 (1948), in which the Court stated: “When the state undertakes the protection of abandoned claims, it would be beyond a reasonable requirement to compel the state to comply with conditions that may be quite proper as between the contracting parties.” See also Provident Institution for Savings v. Malone, 221 U.S. 660 (1911), involving savings accounts; Insurance Co. of North America v. Knight, 8 Ill.App.3d 871, 291 N.E.2d 40 (1972), involving negotiable instruments, and People v. Marshall Field & Co., 83 Ill.App.3d 811, 404 N.E.2d 368 (1980), involving gift certificates.

Section 2(b) obviates the result reached in Oregon Racing Comm. v. Multonamah Kennel Club, 242 Or. 572, 411 P.2d 63 (1963), involving unpresented winning parimutuel tickets.

Since the holder is indemnified against any loss resulting from the delivery of the property to the administrator, no possible harm can result in requiring that holders turn over property, even though the owner has not presented proof of death or surrendered the insurance policy, savings account passbook, the gift certificate, winning racing ticket, or other memorandum of ownership.


A draft issued by a property or casualty insurance company as an offer of settlement of a claim for property damage or personal injury is not subject to the presumption of abandonment if the offer was not accepted by the payee. In this situation, the draft never became payable or distributable. The issue of whether a draft is accepted by a payee is a question of fact that is not addressed by the Act.

§ 3. [General Rules for Taking Custody of Intangible Unclaimed Property].

Unless otherwise provided in this Act or by other statute of this State, intangible property is

subject to the custody of this State as unclaimed property if the conditions raising a presumption of

abandonment under Sections 2 and 5 through 16 are satisfied and:

(1) the last known address, as shown on the records of the holder, of the apparent owner is in

this State;

(2) the records of the holder do not reflect the identity of the person entitled to the property

and it is established that the last known address of the person entitled to the property is in this State;

(3) the records of the holder do not reflect the last known address of the apparent owner, and

it is established that:

(i) the last known address of the person entitled to the property is in this

State, or

(ii) the holder is a domiciliary or a government or governmental subdivision

or agency of this State and has not previously paid or delivered the property to the

state of the last known address of the apparent owner or other person entitled to the

property;

(4) the last known address, as shown on the records of the holder, of the apparent owner is in

a state that does not provide by law for the escheat or custodial taking of the property or its escheat

or unclaimed property law is not applicable to the property and the holder is a domiciliary or a

government or governmental subdivision or agency of this State;

(5) the last known address, as shown on the records of the holder, of the apparent owner is

in a foreign nation and the holder is a domiciliary or a government or governmental subdivision or

agency of this State; or

(6) the transaction out of which the property arose occurred in this State, and

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(i) (A) the last known address of the apparent owner or other person

entitled to the property is unknown, or

(B) the last known address of the apparent owner or other person

entitled to the property is in a state that does not provide by law for the

escheat or custodial taking of the property or its escheat or unclaimed

property law is not applicable to the property, and

(ii) the holder is a domiciliary of a state that does not provide by law for the

escheat or custodial taking of the property or its escheat or unclaimed property law is

not applicable to the property.


None.

Section 3 describes the general circumstances under which a state may claim abandoned intangible property. (There is a special provision for travelers checks and money orders in Section 4 infra). This section closely follows the language of Texas v. New Jersey,1 in which the court reasoned that unclaimed property is an asset of the creditor and should generally be paid to the creditor state, i.e., the state of residence of the apparent owner. Consistent with that reasoning it held that unclaimed intangible property is subject to escheat or custody as unclaimed property first by the state of the owner’s last known address. If that state cannot claim the property, the state of the holder’s domicile is entitled to it. Consistent with the court’s concern for a simple rule which would avoid the complexities of proving domicile and residence the court established the priority on the basis of information contained in the holder’s records. Recognizing that the holder’s records might be incomplete, the court’s ruling permits a claimant state to prove by other means that the last known address of the owner is within its boundaries. Where the holder’s records do not show the owner’s last address, the second priority claimant, the state of domicile of the holder, is entitled to claim the property. The state of the owner’s last known address can later assume custody from the state of the holder’s domicile by showing that the last known address of the owner is within its borders.

1 Section 3 is akin to a jurisdictional section, in that it empowers the state to assert custody. At the same time it limits that jurisdictional assertion and establishes a partial system of priorities. It would be possible, of course, to separate the two concepts of jurisdiction and priority. However, the court did not do so in Texas v. New Jersey, and to do so in this Act might have some unfortunate and unforseen consequences. The decision directs the state of corporate domicile to take only if the state of the owner cannot. If Section 3 established as an independent basis of jurisdiction that the state of the holder’s domicile could take without regard to the prior claim of the creditor state, there might well be a race between holder and creditor states, with attendant confusion for both states and holders. A priority section ranking the order of asserting claims would diminish the race if it were uniformly enacted. However, there is a strong likelihood that the domiciliary states of major holders


would not enact a priority section and thereby would frustrate the system established by Texas v. New Jersey. Section 3 combined with Section 25 establish a system of priorities consistent with Texas v. New Jersey.Likewise, if the state of last known address does not have an unclaimed property law which applies to the property, the state of the holder’s domicile can take the property, again subject to the right of the state of last known address to recover the property if and when it enacts an unclaimed property or escheat law.

Paragraph (1) restates the factual situation in Texas v. New Jersey. As the court there said “. . . the address on the records of a debtor, which in most cases will be the only one available, should be the only relevant last known address.” If the holder’s records are erroneous and the actual last known address of the owner is in another state, that other state can reclaim the property pursuant to Section 25.

Paragraph (2) covers the situation in which the identity of the person entitled to the property is unknown, but it is established, either through the holder’s records or by some other means, that the property was owned by or payable to a person whose last known address was within the claiming state. This is a rational extension of Texas v. New Jersey. Reunification of the owner with his property in this circumstance is impossible, and insofar as that issue is concerned, it makes no difference whether the property is delivered to the state of the holder’s domicile or the state of the owner’s last known address. However, following the equitable concept of distributing unclaimed property among creditor states articulated by the Supreme Court in Texas v. New Jersey, the subsection directs that, where there is no record of a name but there is a record of last known address, the state of last known address can claim the property.

Paragraph (3) is the secondary rule of Texas v. New Jersey. The Supreme Court ruled that, when property is owed to persons for whom there are no addresses, the property will be subject to escheat by the state of the holder’s domicile, provided that another state may later claim upon proof that the last known address of the person entitled to the property was within its borders. If the property is initially paid or turned over to the state of corporate domicile, the state of last known address is authorized to assert its claim pursuant to Section 25. However, unless the right to claim the property is initially conferred in this section, there would be no basis for a reclamation action under Section 25. Where a holder originally had the address of the owner and it has been subsequently destroyed, a computer code may be one way of establishing an address within the state.

Paragraph (4) provides that, if the law of the state of the owner’s last known address does not provide for escheat or taking custody of the unclaimed property or if that state’s escheat or unclaimed property law is not applicable to the property in question, the property is subject to claim by the state in which the holder is domiciled. In that instance, the state of the owner’s last known address may thereafter claim the property if it enacts an applicable unclaimed property law. The holder state will act as custodian and pay or deliver the property to the owner or the state which has priority under Texas v. New Jersey upon request; see also State v. Liquidating Trustees of Republic Petroleum Co., 510 S.W.2d 311 (Texas 1974). See Section 25.

Paragraph (5) provides that, when the last known address of the apparent owner is in a foreign nation the state in which the holder is domiciled may claim the property. This issue was not dealt with by the Supreme Court in Texas v. New Jersey, but is a rational extension of that ruling.

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Paragraph (6) provides for a situation in which neither of the priority claims discussed in Texas v. New Jersey can be made, but the state has a genuine and important contact with the property. An example of the type of claim which might be made under paragraph (6) arose in O’Connor v. Sperry & Hutchinson Co., 412 A.2d 539 (Pa.1980). There Pennsylvania sought to escheat unredeemed trading stamps sold by a corporation domiciled in New Jersey to retailers located in Pennsylvania. Pennsylvania took the position that Texas v. New Jersey did not create a jurisdictional bar to escheat by other states when the states granted priority were unable to take. There was no first priority claim since there were no addresses of the trading stamp purchasers. The second priority claimant, the state of corporate domicile (New Jersey), was not permitted under its law to escheat trading stamps (see New Jersey v. Sperry & Hutchinson Co., 56 N.J.Super. 589, 153 A.2d 691 (1959), affirmed per curiam, 31 N.J. 385, 157 A.2d 505 (1960)) and hence Pennsylvania urged that in order to prohibit a corporate windfall it should be allowed to claim this property. The Pennsylvania Supreme Court affirmed a lower court decision which overruled Sperry & Hutchinson’s motion to dismiss but did not reach the Texas v. New Jersey issue.

Gift certificates, unused airline tickets, and other property for which there is no last known address may be claimed by the state of purchase if the state of corporate domicile does not have an abandoned property law covering the property in question under paragraph (6).

Wholly foreign transactions are excluded from the coverage of the Act. See Section 36.

§ 4. [Travelers Checks and Money Orders].

(a) Subject to subsection (d), any sum payable on a travelers check that has been outstanding

for more than 15 years after its issuance is presumed abandoned unless the owner, within 15 years,

has communicated in writing with the issuer concerning it or otherwise indicated an interest as

evidenced by a memorandum or other record on file prepared by an employee of the issuer.

(b) Subject to subsection (d), any sum payable on a money order or similar written

instrument, other than a third-party bank check, that has been outstanding for more than 7 years after

its issuance is presumed abandoned unless the owner, within 7 years, has communicated in writing

with the issuer concerning it or otherwise indicated an interest as evidenced by a memorandum or

other record on file prepared by an employee of the issuer.

(c) A holder may not deduct from the amount of a travelers check or money order any charge

imposed by reason of the failure to present the instrument for payment unless there is a valid and

enforceable written contract between the issuer and the owner of the instrument pursuant to which

the issuer may impose a charge and the issuer regularly imposes such charges and does not regularly

reverse or otherwise cancel them.


(d) No sum payable on a travelers check, money order, or similar written instrument, other

than a third-party bank check, described in subsections (a) and (b) may be subjected to the custody of

this State as unclaimed property unless:

(1) the records of the issuer show that the travelers check, money order, or

similar written instrument was purchased in this State;

(2) the issuer has its principal place of business in this State and the

records of the issuer do not show the state in which the travelers check, money order,

or similar written instrument was purchased; or

(3) the issuer has its principal place of business in this State, the records of

the issuer show the state in which the travelers check, money order, or similar written

instrument was purchased and the laws of the state of purchase do not provide for the

escheat or custodial taking of the property or its escheat or unclaimed property law is

not applicable to the property.

(e) Notwithstanding any other provision of this Act, subsection (d) applies to sums payable

on travelers checks, money orders, and similar written instruments presumed abandoned on or after

February 1, 1965, except to the extent that those sums have been paid over to a state prior to January

1, 1974.


Section 2.

Section 4 is concerned with travelers checks and money orders which are unclaimed. Subsections (a) and (b) deal with the substantive requirements for presuming this property abandoned and follow closely the provisions of Section 2 of the 1966 Act. Although the general dormancy period has been reduced for many kinds of property, the 15-year period for travelers checks and the 7-year period for money orders is retained. Statistical and economic evidence has shown that these periods continue to be appropriate.

Subsection (c) is consistent with those cases which have ruled on the issue of service charges by money order issuers under the 1966 Act.

Subsections (d) and (e) are new and adopt the rules, including the dates, provided by congressional legislation which determine the state entitled to claim sums payable on travelers checks, money orders, and similar instruments, see Pub.L. 93-495, §§ 603, 604 (Oct. 28, 1974), 88

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Stat. 1525-26, 12 U.S.C. §§ 2501 et seq. The congressional action was in response to the Supreme Court decision in Pennsylvania v. New York, 407 U.S. 206 (1972), which held that the state of corporate domicile was entitled to escheat money orders when there was no last known address of the purchaser although the property had been purchased in other states. Subsection (d) substitutes as the test for asserting a claim to travelers checks and money orders the place of purchase rather than the state of incorporation of the issuer.

§ 5. [Checks, Drafts and Similar Instruments Issued or Certified by Banking and Financial

Organizations].

(a) Any sum payable on a check, draft, or similar instrument, except those subject to Section

4, on which a banking or financial organization is directly liable, including a cashier’s check and

a certified check, which has been outstanding for more than 5 years after it was payable or after

its issuance if payable on demand, is presumed abandoned, unless the owner, within 5 years, has

communicated in writing with the banking or financial organization concerning it or otherwise

indicated an interest as evidenced by a memorandum or other record on file prepared by an employee

thereof.

(b) A holder may not deduct from the amount of any instrument subject to this section any

charge imposed by reason of the failure to present the instrument for payment unless there is a valid

and enforceable written contract between the holder and the owner of the instrument pursuant to

which the holder may impose a charge, and the holder regularly imposes such charges and does not

regularly reverse or otherwise cancel them.


Section 2.

Section 5 covers checks and similar instruments issued or certified by banking and financial organizations. Checks and other instruments issued by persons other than banking and financial organizations are covered generally by Section 2. Travelers checks and money orders are covered by Section 4.

§ 6. [Bank Deposits and Funds in Financial Organizations].

(a) Any demand, savings, or matured time deposit with a banking or financial organization,


including a deposit that is automatically renewable, and any funds paid toward the purchase of a

share, a mutual investment certificate, or any other interest in a banking or financial organization is

presumed abandoned unless the owner, within 5 years has:

(1) in the case of a deposit, increased or decreased its amount or presented the

passbook or other similar evidence of the deposit for the crediting of interest;

(2) communicated in writing with the banking or financial organization

concerning the property;

(3) otherwise indicated an interest in the property as evidenced by a

memorandum or other record on file prepared by an employee of the banking or

financial organization;

(4) owned other property to which paragraph (1), (2), or (3) applies and if

the banking or financial organization communicates in writing with the owner with

regard to the property that would otherwise be presumed abandoned under this

subsection at the address to which communications regarding the other property

regularly are sent; or

(5) had another relationship with the banking or financial organization

concerning which the owner has

(i) communicated in writing with the banking or financial

organization; or

(ii) otherwise indicated an interest as evidenced by a

memorandum or other record on file prepared by an employee of

the banking or financial organization and if the banking or financial

organization communicates in writing with the owner with regard to

the property that would otherwise be abandoned under this subsection

at the address to which communications regarding the other

relationship regularly are sent.

(b) For purposes of subsection (a) property includes interest and dividends.

(c) A holder may not impose with respect to property described in subsection (a) any charge

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due to dormancy or inactivity or cease payment of interest unless:

(1) there is an enforceable written contract between the holder and the owner of the

property pursuant to which the holder may impose a charge or cease payment of interest;

(2) for property in excess of $2.00, the holder, no more than 3 months before

the initial imposition of those charges or cessation of interest, has given written

notice to the owner of the amount of those charges at the last known address of the

owner stating that those charges will be imposed or that interest will cease, but the

notice provided in this section need not be given with respect to charges imposed or

interest ceased before the effective date of this Act; and

(3) the holder regularly imposes such charges or ceases payment of interest

and does not regularly reverse or otherwise cancel them or retroactively credit

interest with respect to the property.

(d) Any property described in subsection (a) that is automatically renewable is matured for

purposes of subsection (a) upon the expiration of its initial time period, but in the case of any renewal

to which the owner consents at or about the time of renewal by communicating in writing with the

banking or financial organization or otherwise indicating consent as evidenced by a memorandum or

other record on file prepared by an employee of the organization, the property is matured upon the

expiration of the last time period for which consent was given. If, at the time provided for delivery

in Section 19, a penalty or forfeiture in the payment of interest would result from the delivery of the

property, the time for delivery is extended until the time when no penalty or forfeiture would result.


Section 2.

Section 6 covers bank accounts and follows closely Section 2(a) of the 1966 Act. In addition to the depositor or owner contacts contained in the 1966 Act which will prevent a presumption of abandonment, paragraphs (4) and (5) of subsection (a) add two additional tests rebutting the presumption of abandonment. Activity by an owner with another account in the bank or another active relationship between the owner and the holder such as a loan will prevent abandonment provided the holder gives notice to the owner of the inactive account. These changes will conform the Act to the practices of financial organizations which issue unified bank statements or which are otherwise able to cross reference owners of inactive accounts with owners of active accounts.


Subsection (c) is consistent with those cases which have construed the 1966 Act to require the reporting of savings accounts (together with interest thereon) and checking accounts where the holder for purposes of reporting seeks to impose service charges and cease the payment of interest but regularly reverses or cancels such charges and cessation of interest for customers that reactivate their accounts. If the holder does not have a contract with the owner providing for charges he must, in any event, report and deliver the property.

Subsection (c) may change banking statutes or regulations in certain states.

Paragraph (2) of subsection (c) imposes the additional requirement that notice of the imposition of such charges must be provided to the owner at his last known address. Since the cost of mailing such a notice might approximate the amount of a $2.00 balance, notices are required only when the balance exceeds $2.00.

Subsection (d) prevents a certificate of deposit with automatic renewal provisions from being treated as perpetually exempt from a presumption of abandonment. The subsection also insures that no interest penalty will result from the delivery of such property during the interest term then in effect. Although delivery of such property is deferred, reporting is not.

§ 7. [Funds Owing Under Life Insurance Policies].

(a) Funds held or owing under any life or endowment insurance policy or annuity contract

that has matured or terminated are presumed abandoned if unclaimed for more than 5 years after the

funds became due and payable as established from the records of the insurance company holding or

owing the funds, but property described in subsection (c)(2) is presumed abandoned if unclaimed for

more than 2 years.

(b) If a person other than the insured or annuitant is entitled to the funds and an address of the

person is not known to the company or it is not definite and certain from the records of the company

who is entitled to the funds, it is presumed that the last known address of the person entitled to the

funds is the same as the last known address of the insured or annuitant according to the records of the

company.

(c) For purposes of this Act, a life or endowment insurance policy or annuity contract not

matured by actual proof of the death of the insured or annuitant according to the records of the

company is matured and the proceeds due and payable if:

(1) the company knows that the insured or annuitant has died; or

(2) (i) the insured has attained, or would have attained if he were living,

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the limiting age under the mortality table on which the reserve is based;

(ii) the policy was in force at the time the insured attained, or

would have attained, the limiting age specified in subparagraph (i);

and

(iii) neither the insured nor any other person appearing to

have an interest in the policy within the preceding 2 years, according

to the records of the company, has assigned, readjusted, or paid

premiums on the policy, subjected the policy to a loan, corresponded

in writing with the company concerning the policy, or otherwise

indicated an interest as evidenced by a memorandum or other record

on file prepared by an employee of the company.

(d) For purposes of this Act, the application of an automatic premium loan

provision or other nonforfeiture provision contained in an insurance policy does not

prevent a policy from being matured or terminated under subsection (a) if the insured

has died or the insured or the beneficiary of the policy otherwise has become entitled

to the proceeds thereof before the depletion of the cash surrender value of a policy by

the application of those provisions.

(e) If the laws of this State or the terms of the life insurance policy require the company to

give notice to the insured or owner that an automatic premium loan provision or other nonforfeiture

provision has been exercised and the notice, given to an insured or owner whose last known address

according to the records of the company is in this State, is undeliverable, the company shall make a

reasonable search to ascertain the policyholder’s correct address to which the notice must be mailed.

(f) Notwithstanding any other provision of law, if the company learns of the death of the

insured or annuitant and the beneficiary has not communicated with the insurer within 4 months after

the death, the company shall take reasonable steps to pay the proceeds to the beneficiary.

(g) Commencing 2 years after the effective date of this Act, every change of beneficiary form

issued by an insurance company under any life or endowment insurance policy or annuity contract to

an insured or owner who is a resident of this State must request the following information:


(1) the name of each beneficiary, or if a class of beneficiaries is named, the

name of each current beneficiary in the class;

(2) the address of each beneficiary; and

(3) the relationship of each beneficiary to the insured.


Section 3.

Subsections (a) and (b) restate the substance of Section 3(a) of the 1966 Act. Paragraph (1) of subsection (c) provides that proceeds of a life insurance policy are presumed abandoned if the insurer is aware that the insured has died even though actual proof of death has not been furnished to the insurer. Under the 1966 Act these proceeds generally would not have been reportable until the 103rd anniversary of the decedent’s birth. Paragraph (2) of subsection (c) provides that the policy proceeds are payable if the limiting age under the mortality table on which the reserve is based is reached and there has been no activity with respect to the policy for 2 years. This is a restatement of a similar provision in subsection (b) of Section 3 of the 1966 Act; however, the abandonment period has been reduced from 7 to 2 years.

Subsection (d) provides that the application of an automatic premium loan provision will not be used to consume the proceeds of a policy and prevent the policy from being matured under subsection (a) if the insured has died or if the beneficiaries have otherwise become entitled to the proceeds of the policy.

Subsection (e) in certain instances imposes an affirmative duty upon the insurer to ascertain a correct address of an insured who fails to receive notice of the exercise of the nonforfeiture option. In these cases it is expected that as a result of the search the insurer will become aware that the insured is deceased. Subsection (f) then requires the insurer to attempt to locate the beneficiaries and pay the policy proceeds, a duty apparently not heretofore imposed on insurance companies. See Insurer’s Duty to Disclose the Existence of a Policy, 76 Colum.L.Rev. 825 (1976).

Subsection (f) provides for the insurer to request the addresses of beneficiaries if the insured changes a beneficiary designation. Most insurance companies do not request address information for beneficiaries. Since in many instances the initial beneficiary resides in the same household as the insured and the administrative burden of accumulating address information is thought to be considerable, the obligation to obtain the address is deferred until such time as a change of beneficiary occurs. This subsection will assist in locating this limited class of beneficiaries. By making the commencement date of this subsection 2 years after enactment, insurers will be provided sufficient time within which to undertake the necessary administrative steps to implement this provision.

Civil penalties are provided by Section 34(b) for failure to perform the duties imposed by subsections (f) and (g).

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§ 8. [Deposits Held by Utilities].

A deposit, including any interest thereon, made by a subscriber with a utility to secure

payment or any sum paid in advance for utility services to be furnished, less any lawful deductions,

that remains unclaimed by the owner for more than one year after termination of the services for

which the deposit or advance payment was made is presumed abandoned.


Section 4.

The requirement that the services be furnished in the state before a presumption of abandonment arises is eliminated. This is consistent with Texas v. New Jersey, 379 U.S. 674 (1965). The dormancy period for the property is one year. The fact that a deposit in the hands of the utility can be of no benefit to the former subscriber raises a strong inference that it has been forgotten by the owner.

See Section 1(10) for the definition of “utility.”

Intangible property held by utilities other than deposits are subject to the 5-year period set forth in Section 2(a).

§ 9. [Refunds Held by Business Associations].

Except to the extent otherwise ordered by the court or administrative agency, any sum that

a business association has been ordered to refund by a court or administrative agency which has

remained unclaimed by the owner for more than one year after it became payable in accordance with

the final determination or order providing for the refund, whether or not the final determination or

order requires any person entitled to a refund to make a claim for it, is presumed abandoned.


Section 4.

Section 9 provides that court or administrative agency ordered refunds which remain unclaimed for more than one year are presumed abandoned. The short dormancy period of one


year is justified since no possible advantage can occur to the owner by leaving his property with the holder, and failure to claim a refund is strong evidence that the property has been abandoned.

§ 10. [Stock and Other Intangible Interests in Business Associations].

(a) Except as provided in subsections (b) and (e), stock or other intangible ownership interest

in a business association, the existence of which is evidenced by records available to the association,

is presumed abandoned and, with respect to the interest, the association is the holder, if a dividend,

distribution, or other sum payable as a result of the interest has remained unclaimed by the owner for

7 years and the owner within 7 years has not:

(1) communicated in writing with the association regarding the interest or a

dividend, distribution, or other sum payable as a result of the interest; or

(2) otherwise communicated with the association regarding the interest or a

dividend, distribution, or other sum payable as a result of the interest, as evidenced by

a memorandum or other record on file with the association prepared by an employee

of the association.

(b) At the expiration of a 7-year period following the failure of the owner to claim a dividend,

distribution, or other sum payable to the owner as a result of the interest, the interest is not presumed

abandoned unless there have been at least 7 dividends, distributions, or other sums paid during the

period, none of which has been claimed by the owner. If 7 dividends, distributions, or other sums

are paid during the 7-year period, the period leading to a presumption of abandonment commences

on the date payment of the first such unclaimed dividend, distribution, or other sum became due and

payable. If 7 dividends, distributions, or other sums are not paid during the presumptive period, the

period continues to run until there have been 7 dividends, distributions, or other sums that have not

been claimed by the owner.

(c) The running of the 7-year period of abandonment ceases immediately upon the

occurrence of a communication referred to in subsection (a). If any future dividend, distribution, or

other sum payable to the owner as a result of the interest is subsequently not claimed by the owner,

a new period of abandonment commences and relates back to the time a subsequent dividend,

distribution, or other sum became due and payable.

(d) At the time an interest is presumed abandoned under this section, any dividend,

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distribution, or other sum then held for or owing to the owner as a result of the interest, and not

previously presumed abandoned, is presumed abandoned.

(e) This Act does not apply to any stock or other intangible ownership interest enrolled in a

plan that provides for the automatic reinvestment of dividends, distributions, or other sums payable

as a result of the interest unless the records available to the administrator of the plan show, with

respect to any intangible ownership interest not enrolled in the reinvestment plan, that the owner has

not within 7 years communicated in any manner described in subsection (a).

Comment

Prior Uniform Act Provision:

Section 5.

Section 10 covers underlying shares of stock and principal amounts of debt securities, i.e., stock certificates in the possession of the record owner.1 Dividends and other distributions which were included in Section 5 of the 1966 Act are to be reported pursuant to Section 2 of this Act.

Even if underlying shares not in the possession of the issuer were not within the coverage of Section 5 of the 1966 Act, the comment to Section 9 of that Act, the omnibus provision,

1 It has generally been assumed that Section 5 of the 1966 Act did not cover underlying shares unless those shares were in the actual possession of the issuer (i.e., as undeliverable stock). However, the Supreme Court’s analysis of the New Jersey escheat statute in Standard Oil Co. v. New Jersey, 341 U.S. 428 (1951), suggests that Sections 5 and 9 of the 1966 Act apply to underlying shares even though they are not in the possession of the issuer but have been delivered to an owner who is lost and has made no claim on the stock. It has generally been assumed that actual certificates for the abandoned shares in Standard Oil were in the possession of the company or its transfer agent. However, the record clearly reflects that neither the company or its transfer agent had custody of the shares. (See Stipulation Of Facts Entered Between the state of New Jersey and the Standard Oil Company, Exhibit 3, Clerks Transcript, pp. 198a and 199a, see also, p. 77a, p. 233a.) The Supreme Court affirmed New Jersey’s claim to escheat the shares notwithstanding that its laws did not expressly refer to underlying shares.indicate that this type of property was within the coverage of Section 9. However, the fact remains that no states with the Uniform Act have sought to recover this property in a systematic way.

Several states have enacted specific provisions for the presumption of abandonment of underlying share certificates. Typical is the provision of California (Cal.Civ.Pro.Code § 1516) which provides that the underlying intangible interest is presumed abandoned if the owner has not contacted the company within the abandonment period and he cannot be found whether or not dividends on that interest are paid. Connecticut, Florida, Indiana, Massachusetts, Montana, New York, Rhode Island, Wisconsin and Virginia also have specific provisions for the presumption of abandonment


of underlying shares. States with escheat laws similar to New Jersey’s would be entitled to claim underlying shares based on the Standard Oil precedent.

Two major concerns have been expressed with the concept of presuming abandonment of underlying stock interests. The first deals with the evidential showing necessary to raise a presumption of abandonment, and the second concerns the rights of the various parties when underlying stock interests are presumed abandoned.

Under what set of circumstances is it appropriate to presume that stock has been abandoned when the shares have been delivered to an owner and are no longer in the possession of the issuer? Section 10 establishes a longer dormancy period, (7 years) for this property than for other property covered by this Act. Further, Section 10 requires that there must be at least 7 consecutive dividend checks issued during this period of dormancy which remain uncashed. Additionally, the presumption of abandonment will not arise in the event the missing owner has communicated with the association. In this regard, the communication would normally be with an agent of the association such as a transfer agent or a dividend disbursing agent. Of course, such communication would satisfy the provision of this section. The existing underlying shares statutes make no formal distinction between dividend and nondividend paying stock and provide that the mere passage of time with no contact is sufficient to raise the presumption of abandonment. Section 10 combines both a period of inactivity, 7 years, with the requirement that distributions paid on the underlying intangible interest remain unclaimed, thus avoiding concerns that abandonment should not be presumed where a shareholder has not contacted a non-dividend paying company.

If the conditions leading to a presumption of abandonment have occurred, the holder (issuer of the security) must report to the state pursuant to Section 17, and if the holder has in its records an address of the owner, it must send written notice to the owner in an effort to reunite the owner with his property. Thereafter the administrator must give notice by advertising the existence of the property and send mailed notice to owners of property valued at $50 or more. See Section 18.

Many owners will be located through the publication and mail notice requirements of the Act. In the event abandonment is presumed and the owner subsequently appears, there are at least 3 formal opportunities to reunite that owner with the issuer before a duplicate certificate is turned over to the administrator.

If the owner is not located, however, a duplicate certificate is issued to the administrator pursuant to Section 19(d) and the original certificate will be cancelled. Thereafter, if the owner appears, the duplicate certificate may be claimed from the administrator. The Act is designed to encourage the administrator to hold the certificate for at least 3 years. (See Section 22(d).) If the administrator does sell the stock before the expiration of this 3-year period, the original owner may recover the net proceeds of sale or the market value of the property at the time he makes a claim, whichever is higher. If the owner appears after the 3-year holding period and after his interest has been sold, he recovers the net proceeds of sale.

The issuer who delivers a duplicate certificate under the Act is protected, because upon delivery it is relieved of all liability to the extent of the value of the property delivered under Section 20. If any person thereafter makes a claim against the holder, the administrator is required to indemnify the holder against any liability on the claim. The required indemnity is complete, and it is

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not restricted to the value of the property turned over.

If a purchaser from the owner turns up and presents the original share for registration after the property has been presumed abandoned, his claim is initially under the UCC. However, because of the indemnity provision in Section 20, the state will be required to assume all liability. UCC § 8-405 provides that the issuer must register the transfer unless to do so would result in overissue. In this event, the purchaser’s rights are determined by UCC § 8-104 and, if a similar security is not reasonably available for purchase, he recovers the price he paid the original owner. Presumably the issuer would call on the administrator to fulfill his requirement of indemnity. If the administrator still has the duplicate certificate, he would turn it over to the purchaser.

Subsection (e) would not require the reporting of interests enrolled in dividend reinvestment plans unless the owner has other stock which is not in dividend reinvestment and which would be presumed abandoned under Section 10.

§ 11. [Property of Business Associations Held in Course of Dissolution].

Intangible property distributable in the course of a dissolution of a business association which

remains unclaimed by the owner for more than one year after the date specified for final distribution

is presumed abandoned.

Comment


Section 6.

This section closely follows Section 6 of the 1966 Act except that the dormancy period has been reduced to one year from 2 years. This section covers both voluntary and involuntary dissolutions.

§ 12. [Property Held By Agents and Fiduciaries].

(a) Intangible property and any income or increment derived therefrom held in a fiduciary

capacity for the benefit of another person is presumed abandoned unless the owner, within 5 years

after it has become payable or distributable, has increased or decreased the principal, accepted

payment of principal or income, communicated concerning the property, or otherwise indicated an

interest as evidenced by a memorandum or other record on file prepared by the fiduciary.

(b) Funds in an individual retirement account or a retirement plan for self-employed

individuals or similar account or plan established pursuant to the Internal Revenue laws of the United


States are not payable or distributable within the meaning of subsection (a) unless, under the terms of

the account or plan, distribution of all or part of the funds would then be mandatory.

(c) For the purpose of this section, a person who holds property as an agent for a business

association is deemed to hold the property in a fiduciary capacity for that business association alone,

unless the agreement between him and the business association provides otherwise.

(d) For the purposes of this Act, a person who is deemed to hold property in a fiduciary

capacity for a business association alone is the holder of the property only insofar as the interest of

the business association in the property is concerned, and the business association is the holder of the

property insofar as the interest of any other person in the property is concerned.


Section 7.

Intangible property is not “payable or distributable” under subsection (a) if the fiduciary possesses merely the discretion to pay or distribute property and has not exercised the discretion.

Subsection (d) is designed to clarify the status of transfer agents. That is, they are agents for the business association and the administrator must look to the principal, the business association, as the holder, unless they have contractually undertaken the obligation to report the property. A later section provides that the administrator is authorized to examine the records of the holder or records relating to the holder which are in the possession of the transfer agent. See Section 30.

§ 13. [Property Held by Courts and Public Agencies].

Intangible property held for the owner by a court, state or other government, governmental

subdivision or agency, public corporation, or public authority which remains unclaimed by the owner

for more than one year after becoming payable or distributable is presumed abandoned.


Section 8.

§ 14. [Gift Certificates and Credit Memos].

(a) A gift certificate or a credit memo issued in the ordinary course of an issuer’s business

which remains unclaimed by the owner for more than 5 years after becoming payable or distributable

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is presumed abandoned.

(b) In the case of a gift certificate, the amount presumed abandoned is the price paid by the

purchaser for the gift certificate. In the case of a credit memo, the amount presumed abandoned is

the amount credited to the recipient of the memo.


Section 9.

Section 14 should be read in conjunction with Section 2. The comment to Section 2 is particularly pertinent to this section. Holders did not routinely report gift certificates and credit memos under the 1966 Act, but it has been held that both kinds of property are within the coverage of Section 9 of that Act. See, for instance, People v. Marshall Field & Co., 83 Ill.App.3d 811, 404 N.E.2d 368 (1980).

Subsection (b) is intended to clarify the amount reportable which is represented by gift certificates and credit memos. In the case of a gift certificate, it is the price paid by the purchaser. In the case of a credit memo, it is the amount credited to the recipient’s account.

§ 15. [Wages].

Unpaid wages, including wages represented by unpresented payroll checks, owing in the

ordinary course of the holder’s business which remain unclaimed by the owner for more than one

year after becoming payable are presumed abandoned.


Section 9.

Since the chance of locating the missing owner of a wage check materially decreases with the passage of time, this property is presumed abandoned at an earlier period than that for most other property.

§ 16. [Contents of Safe Deposit Box or Other Safekeeping Repository].

All tangible and intangible property held in a safe deposit box or any other safekeeping

repository in this State in the ordinary course of the holder’s business and proceeds resulting from

the sale of the property permitted by other law, which remain unclaimed by the owner for more

than 5 years after the lease or rental period on the box or other repository has expired, are presumed


abandoned.Comment


Section 2(d).

Section 16 parallels Section 2(d) of the 1966 Act. This Section is not intended to cover property left in places other than safekeeping repositories, for example, airport lockers or field warehouses. Its coverage is limited to safe deposit boxes in banks and other financial institutions. Most states have statutory provisions apart from the unclaimed property law for the disposition of property abandoned in such places as airport lockers. § 17. [Report of Abandoned Property].

(a) A person holding property tangible or intangible, presumed abandoned and subject

to custody as unclaimed property under this Act shall report to the administrator concerning the

property as provided in this section.

(b) The report must be verified and must include:

(1) except with respect to travelers checks and money orders, the name, if known,

and last known address, if any, of each person appearing from the records of the holder to be

the owner of property of the value of $25 or more presumed abandoned under this Act;

(2) in the case of unclaimed funds of $25 or more held or owing under any

life or endowment insurance policy or annuity contract, the full name and last known

address of the insured or annuitant and of the beneficiary according to the records of

the insurance company holding or owing the funds;

(3) in the case of the contents of a safe deposit box or other safekeeping

repository or of other tangible property, a description of the property and the place

where it is held and may be inspected by the administrator and any amounts owing to

the holder;

(4) the nature and identifying number, if any, or description of the property

and the amount appearing from the records to be due, but items of value under $25

each may be reported in the aggregate;

(5) the date the property became payable, demandable, or returnable, and the

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date of the last transaction with the apparent owner with respect to the property; and

(6) other information the administrator prescribes by rule as necessary for the

administration of this Act.

(c) If the person holding property presumed abandoned and subject to custody as unclaimed

property is a successor to other persons who previously held the property for the apparent owner or

the holder has changed his name while holding the property, he shall file with his report all known

names and addresses of each previous holder of the property.

(d) The report must be filed before November 1 of each year as of June 30, next preceding,

but the report of any life insurance company must be filed before May 1 of each year as of December

31 next preceding. On written request by any person required to file a report, the administrator may

postpone the reporting date.

(e) Not more than 120 days before filing the report required by this section, the holder in

possession of property presumed abandoned and subject to custody as unclaimed property under this

Act shall send written notice to the apparent owner at his last known address informing him that the

holder is in possession of property subject to this Act if:

(i) the holder has in its records an address for the apparent owner which the

holder’s records do not disclose to be inaccurate,

(ii) the claim of the apparent owner is not barred by the statute of limitations,

and

(iii) the property has a value of $50 or more.

Comment


Section 11.

The $25 minimum provided in subsection (b)(1)(2) and (4) represents an increase from $3.00 in the 1966 Act in order to minimize reporting expenses. Almost every state which enacted the prior Uniform Act now provides for a $25 minimum.

Before filing its report, the holder must send written notice to the apparent owner, if the owner’s claim is not barred by the statute of limitations, the property has a value of $50 or more, and the holder’s records do not disclose the address to be inaccurate. Other efforts to locate the owner


are no longer required. Since most notifications under the 1966 Act were returned as undeliverable, and the administrator must also mail a notice under Section 18 to owners of property having a value of $50 or more, the holder should not be compelled to incur the expense of preparing and mailing notices under all circumstances.

The subsection now requires that the notice be sent not more than 120 days before the filing of the report. The previous subsection did not specify when the notice was to be given, and some holders felt that notices given years earlier were sufficient.

§ 18. [Notice and Publication of Lists of Abandoned Property].

(a) The administrator shall cause a notice to be published not later than March 1, or in

the case of property reported by life insurance companies, September 1, of the year immediately

following the report required by Section 17 at least once a week for 2 consecutive weeks in a

newspaper of general circulation in the [county] of this State in which is located the last known

address of any person to be named in the notice. If no address is listed or the address is outside

this State, the notice must be published in the [county] in which the holder of the property has its

principal place of business within this State.

(b) The published notice must be entitled “Notice of Names of Persons Appearing to be

Owners of Abandoned Property” and contain:

(1) the names in alphabetical order and last known address, if any, of persons

listed in the report and entitled to notice within the [county] as specified in subsection

(a);

(2) a statement that information concerning the property and the name and

last known address of the holder may be obtained by any person possessing an

interest in the property by addressing an inquiry to the administrator; and

(3) a statement that if proof of claim is not presented by the owner to the

holder and the owner’s right to receive the property is not established to the holder’s

satisfaction before April 20, or, in the case of property reported by life insurance

companies, before October 20, the property will be placed not later than May 1, or in

the case of property reported by life insurance companies, not later than November 1,

in the custody of the administrator and all further claims must thereafter be directed

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to the administrator.

(c) The administrator is not required to publish in the notice any items of less than $[50]

unless the administrator considers their publication to be in the public interest.

(d) Not later than March 1, or in the case of property reported by life insurance companies,

not later than September 1, of the year immediately following the report required by Section 17, the

administrator shall mail a notice to each person whose last known address is listed in the report and

who appears to be entitled to property of the value of $[50] or more presumed abandoned under this

Act and any beneficiary of a life or endowment insurance policy or annuity contract for whom the

administrator has a last known address.

(e) The mailed notice must contain:

(1) a statement that, according to a report filed with the administrator,

property is being held to which the addressee appears entitled;

(2) the name and last known address of the person holding the property and

any necessary information regarding the changes of name and last known address of

the holder; and

(3) a statement that, if satisfactory proof of claim is not presented by the

owner to the holder by the date specified in the published notice, the property will be

placed in the custody of the administrator and all further claims must be directed to

the administrator.

(f) This section is not applicable to sums payable on travelers checks, money orders, and

other written instruments presumed abandoned under Section 4.

Comment


Section 12.

Subsections (a) and (b)(3) set forth the dates by which the administrator must publish the names of missing owners and mail notification to the last known address of each owner. This section eliminates the requirement of the 1966 Act that a separate notification be given by the administrator to the holder to establish when the final report and remittance is required.


Subsections (c) and (d) have increased from $25 to $50 the minimum value required for advertising and notification. The amounts were increased because the costs of publishing newspaper advertisements now range from $12 to $22 per name. Because most mailed notifications are returned to administrators as undeliverable, the mailing minimum was also increased.

§ 19. [Payment or Delivery of Abandoned Property].

(a) Except as otherwise provided in subsections (b) and (c), a person who is required to file

a report under Section 17, within 6 months after the final date for filing the report as required by

Section 17, shall pay or deliver to the administrator all abandoned property required to be reported.

(b) If the owner establishes the right to receive the abandoned property to the satisfaction

of the holder before the property has been delivered or it appears that for some other reason the

presumption of abandonment is erroneous, the holder need not pay or deliver the property to the

administrator, and the property will no longer be presumed abandoned. In that case, the holder shall

file with the administrator a verified written explanation of the proof of claim or of the error in the

presumption of abandonment.

(c) Property reported under Section 17 for which the holder is not required to report the name

of the apparent owner must be delivered to the administrator at the time of filing the report.

(d) The holder of an interest under Section 10 shall deliver a duplicate certificate or other

evidence of ownership if the holder does not issue certificates of ownership to the administrator.

Upon delivery of a duplicate certificate to the administrator, the holder and any transfer agent,

registrar, or other person acting for or on behalf of a holder in executing or delivering the duplicate

certificate is relieved of all liability of every kind in accordance with the provision of Section 20 to

every person, including any person acquiring the original certificate or the duplicate of the certificate

issued to the administrator, for any losses or damages resulting to any person by the issuance and

delivery to the administrator of the duplicate certificate.

Comment


Section 13.

Subsections (a) through (c) restate the substance of Section 13 of the 1966 Act. The holder

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is required to pay over the property within 6 months after reporting its existence. However, if the holder does not know the owner’s name or the value of the property is less than $25, then the property must be turned over to the administrator at the time of filing the report. The notification provisions of Sections 17 and 18 often stimulate owners to reclaim their property and the retention period of 6 months permits the holder to honor these claims.

Subsection (d) provides that the holder of an underlying stock interest presumed abandoned under Section 10 shall deliver a duplicate certificate to the administrator. Upon delivery the holder, in accordance with the provisions of Section 20, is relieved of all liability to any person occasioned by the reappearance of the original certificate or the issuance of the duplicate certificate. In this connection, see the comment to Section 10.

§ 20. [Custody by State; Holder Relieved from Liability; Reimbursement of Holder

Paying Claim; Reclaiming for Owner; Defense of Holder; Payment of Safe Deposit

Box or Repository Charges].

(a) Upon the payment or delivery of property to the administrator, the state assumes custody

and responsibility for the safekeeping of the property. A person who pays or delivers property to the

administrator in good faith is relieved of all liability to the extent of the value of the property paid

or delivered for any claim then existing or which thereafter may arise or be made in respect to the

property.

(b) A holder who has paid money to the administrator pursuant to this Act may make

payment to any person appearing to the holder to be entitled to payment and, upon filing proof of

payment and proof that the payee was entitled thereto, the administrator shall promptly reimburse

the holder for the payment without imposing any fee or other charge. If reimbursement is sought for

a payment made on a negotiable instrument, including a travelers check or money order, the holder

must be reimbursed under this subsection upon filing proof that the instrument was duly presented

and that payment was made to a person who appeared to the holder to be entitled to payment. The

holder must be reimbursed for payment made under this subsection even if the payment was made to

a person whose claim was barred under Section 29(a).

(c) A holder who has delivered property (including a certificate of any interest in a business

association) other than money to the administrator pursuant to this Act may reclaim the property if

still in the possession of the administrator, without paying any fee or other charge, upon filing proof

that the owner has claimed the property from the holder.


(d) The administrator may accept the holder’s affidavit as sufficient proof of the facts that

entitle the holder to recover money and property under this section.

(e) If the holder pays or delivers property to the administrator in good faith and thereafter

another person claims the property from the holder or another state claims the money or property

under its laws relating to escheat or abandoned or unclaimed property, the administrator, upon

written notice of the claim, shall defend the holder against the claim and indemnify the holder against

any liability on the claim.

(f) For the purposes of this section, “good faith” means that

(1) payment or delivery was made in a reasonable attempt to comply with this Act;

(2) the person delivering the property was not a fiduciary then in breach of

trust in respect to the property and had a reasonable basis for believing, based on the

facts then known to him, that the property was abandoned for the purposes of this

Act; and

(3) there is no showing that the records pursuant to which the delivery was

made did not meet reasonable commercial standards of practice in the industry.

(g) Property removed from a safe deposit box or other safekeeping repository is received

by the administrator subject to the holder’s right under this subsection to be reimbursed for the

actual cost of the opening and to any valid lien or contract providing for the holder to be reimbursed

for unpaid rent or storage charges. The administrator shall reimburse or pay the holder out of the

proceeds remaining after deducting the administrator’s selling cost.

Comment


Section 14.

When property is turned over to the state, the holder is relieved of all liability for any turnover made in good faith. Subsection (f) sets forth a definition of good faith which inter alia allows the holder to rely on its records if they meet reasonable commercial standards of practice in the industry.

The section also permits the holder to obtain reimbursement for claims it elected to pay to owners who appeared after the property was turned over. If a state in enacting Section 24(c) provides

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for the payment of interest on property delivered to the administrator, then the holder will add such interest when paying the claim. See Section 24(d).

If after turnover, any person or another state makes a claim on the holder, the state, upon request, is required to defend the holder and indemnify him against any liability. This provision is particularly important in light of the underlying share provisions of Section 10. The comment to that section is pertinent here as well.

§ 21. [Crediting of Dividends, Interest, or Increments to Owner’s Account].

Whenever property other than money is paid or delivered to the administrator under this Act,

the owner is entitled to receive from the administrator any dividends, interest, or other increments

realized or accruing on the property at or before liquidation or conversion thereof into money.Comment


Section 15.

This section changes Section 15 of the 1966 Act which provided that the owner was not entitled to receive any income or other increment accruing after the delivery of unclaimed property to the administrator. This Act provides for some substantial retention periods by the administrator. For instance, securities obtained pursuant to Section 10 will generally be held for a 3-year period prior to sale. The owner will be entitled to dividends, interest or other increment realized or accruing on the property during this 3-year period.

§ 22. [Public Sale of Abandoned Property].

(a) Except as provided in subsections (b) and (c), the administrator, within 3 years after the

receipt of abandoned property, shall sell it to the highest bidder at public sale in whatever city in

the state affords in the judgment of the administrator the most favorable market for the property

involved. The administrator may decline the highest bid and reoffer the property for sale if in the

judgment of the administrator the bid is insufficient. If in the judgment of the administrator the

probable cost of sale exceeds the value of the property, it need not be offered for sale. Any sale held

under this section must be preceded by a single publication of notice, at least [3] weeks in advance of

sale, in a newspaper of general circulation in the [county] in which the property is to be sold.

(b) Securities listed on an established stock exchange must be sold at prices prevailing at the

time of sale on the exchange. Other securities may be sold over the counter at prices prevailing at


the time of sale or by any other method the administrator considers advisable.

(c) Unless the administrator considers it to be in the best interest of the state to do otherwise,

all securities, other than those presumed abandoned under Section 10, delivered to the administrator

must be held for at least one year before he may sell them.

(d) Unless the administrator considers it to be in the best interest of the state to do otherwise,

all securities presumed abandoned under Section 10 and delivered to the administrator must be

held for at least 3 years before he may sell them. If the administrator sells any securities delivered

pursuant to Section 10 before the expiration of the 3-year period, any person making a claim

pursuant to this Act before the end of the 3-year period is entitled to either the proceeds of the sale of

the securities or the market value of the securities at the time the claim is made, whichever amount

is greater, less any deduction for fees pursuant to Section 23(b). A person making a claim under

this Act after the expiration of this period is entitled to receive either the securities delivered to the

administrator by the holder, if they still remain in the hands of the administrator, or the proceeds

received from sale, less any amounts deducted pursuant to Section 23(b), but no person has any

claim under this Act against the state, the holder, any transfer agent, registrar, or other person acting

for or on behalf of a holder for any appreciation in the value of the property occurring after delivery

by the holder to the administrator.

(e) The purchaser of property at any sale conducted by the administrator pursuant to this

Act takes the property free of all claims of the owner or previous holder thereof and of all persons

claiming through or under them. The administrator shall execute all documents necessary to

complete the transfer of ownership.

Comment


Section 17.

In order to give additional protection to the missing owner of a security which has been presumed abandoned and is not subject to Section 10, this section directs the administrator to hold that security for at least one year.

If the security is one which has been presumed abandoned pursuant to Section 10 the

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administrator is expected to hold the security for 3 years. He is permitted to sell the security within this 3-year period, but if the missing owner appears and makes claim for the security within this 3-year period after the administrator has sold it, the missing owner is entitled to receive the proceeds of the sale or the market value of the securities at the time the claim is made. Thus there is a genuine incentive for an administrator to hold this property for the requisite 3-year period.

Subsection (b) permits an administrator to sell securities at prevailing prices directly to the issuing companies.

§ 23. [Deposit of Funds].

[ (a) ] Except as otherwise provided by this section, the administrator shall promptly deposit

in the [general fund] of this State all funds received under this Act, including the proceeds from the

sale of abandoned property under Section 22. The administrator shall retain in a separate trust fund

an amount not less than $[100,000] from which prompt payment of claims duly allowed must be

made by him. Before making the deposit, the administrator shall record the name and last known

address of each person appearing from the holders’ reports to be entitled to the property and the name

and last known address of each insured person or annuitant and beneficiary and with respect to each

policy or contract listed in the report of an insurance company its number, the name of the company,

and the amount due. The record must be available for public inspection at all reasonable business

hours.

[ (b) Before making any deposit to the credit of the [general fund], the administrator may

deduct:

(1) any costs in connection with the sale of abandoned property;

(2) costs of mailing and publication in connection with any abandoned

property;

(3) reasonable service charges; and

(4) costs incurred in examining records of holders of property and in

collecting the property from those holders.]


Section 18.


This section increases from $25,000 to $100,000 the sum which is recommended to be retained in a trust account for payment of claims. Each state based on its own experience will establish a minimum amount to be kept on hand in order that claims will be quickly paid. If a state receives substantial amounts represented by underlying stock certificates pursuant to Section 10, it is contemplated that the amount of the trust fund which it selects will reflect its experience in paying owners’ claims. The practice in most states is for the legislature in its appropriation bill to provide for a continuing appropriation of general funds to pay abandoned property claims.

§ 24. [Filing of Claim with Administrator].

(a) A person, excluding another state, claiming an interest in any property paid or delivered to

the administrator may file with him a claim on a form prescribed by him and verified by the claimant.

(b) The administrator shall consider each claim within 90 days after it is filed and give

written notice to the claimant if the claim is denied in whole or in part. The notice may be given by

mailing it to the last address, if any, stated in the claim as the address to which notices are to be sent.

If no address for notices is stated in the claim, the notice may be mailed to the last address, if any, of

the claimant as stated in the claim. No notice of denial need be given if the claim fails to state either

the last address to which notices are to be sent or the address of the claimant.

(c) If a claim is allowed, the administrator shall pay over or deliver to the claimant the

property or the amount the administrator actually received or the net proceeds if it has been sold by

the administrator, together with any additional amount required by Section 21. If the claim is for

property presumed abandoned under Section 10 which was sold by the administrator within 3 years

after the date of delivery, the amount payable for that claim is the value of the property at the time

the claim was made or the net proceeds of sale, whichever is greater. If the property claimed was

interest-bearing to the owner on the date of surrender by the holder, the administrator also shall pay

interest at a rate of [ ] percent a year or any lesser rate the property earned while in the possession of

the holder. Interest begins to accrue when the property is delivered to the administrator and ceases

on the earlier of the expiration of 10 years after delivery or the date on which payment is made to the

owner. No interest on interest-bearing property is payable for any period before the effective date of

this Act.

(d) Any holder who pays the owner for property that has been delivered to the state and

which, if claimed from the administrator, would be subject to subsection (c) shall add interest as

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provided in subsection (c). The added interest must be repaid to the holder by the administrator in

the same manner as the principal.

Comment

Prior Uniform Act Provisions:

Sections 19 and 20.

If a valid claim to property turned over to the administrator is made, the administrator is to return the property or, if it has been sold, to pay the net proceeds of sale. If the claim is for an underlying share interest presumed abandoned under Section 10 and the administrator has sold the property within 3 years, the claimant is entitled to the net proceeds of sale or the market value of the property at the time claim was made for it, whichever is higher, together with any additional amount payable under Section 21.

Several states have added to the 1966 Act a provision for paying interest on property which was interest-bearing to the owner. Subsections (c) and (d) set forth provisions which a state may wish to enact providing for the payment of interest.

Subsection (c) provides for the administrator to pay interest on property which was interest bearing to the owner. The rate of interest will be fixed by each state enacting the Act and should fairly reflect prevailing rates.

§ 25. [Claim of Another State to Recover Property; Procedure].

(a) At any time after property has been paid or delivered to the administrator under this Act

another state may recover the property if:

(1) the property was subjected to custody by this State because the records

of the holder did not reflect the last known address of the apparent owner when the

property was presumed abandoned under this Act, and the other state establishes that

the last known address of the apparent owner or other person entitled to the property

was in that state and under the laws of that state the property escheated to or was

subject to a claim of abandonment by that state;

(2) the last known address of the apparent owner or other person entitled to

the property, as reflected by the records of the holder, is in the other state and under

the laws of that state the property has escheated to or become subject to a claim of

abandonment by that state;


(3) the records of the holder were erroneous in that they did not accurately

reflect the actual owner of the property and the last known address of the actual

owner is in the other state and under the laws of that state the property escheated to or

was subject to a claim of abandonment by that state;

(4) the property was subjected to custody by this State under Section 3(6) and

under the laws of the state of domicile of the holder the property has escheated to or

become subject to a claim of abandonment by that state; or

(5) the property is the sum payable on a travelers check, money order, or

other similar instrument that was subjected to custody by this State under Section 4,

and the instrument was purchased in the other state, and under the laws of that state

the property escheated to or became subject to a claim of abandonment by that state.

(b) The claim of another state to recover escheated or abandoned property must be presented

in a form prescribed by the administrator, who shall decide the claim within 90 days after it is

presented. The administrator shall allow the claim if he determines that the other state is entitled to

the abandoned property under subsection (a).

(c) The administrator shall require a state, before recovering property under this section, to

agree to indemnify this State and its officers and employees against any liability on a claim for the

property.Comment

Paragraph 2 parallels Section 3(4), which permits the state of corporate domicile to take if the state of the last known address does not provide for the escheat or custodial taking of the property. If the state of the last known address subsequently enacts an unclaimed property law which covers the property, the taking state must turn it over.

Paragraph 4, parallelling Section 3(6), provides that property initially claimed under a “contacts” test because there was no last known address and the state of domicile had no applicable unclaimed property law may be reclaimed by the state of corporate domicile if it enacts an applicable unclaimed property law.

Prior Uniform Act Provisions:

None, but compare Sections 10 and 19.

Section 25 should be read together with Sections 3 and 4. Sections 3 and 25 are designed to carry out the priority scheme enunciated in Texas v. New Jersey, 379 U.S. 674 (1965). In general

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the state of last known address is entitled to claim abandoned property. Where there is insufficient information to permit this assertion of custody, the state of the holder’s domicile takes the property subject to a later claim by the state of the last known address.

Paragraph 1 provides that, if property was paid to the state of the holder’s domicile because the last known address of the owner was unknown and it is later established that the last known address of the person entitled to the property was in another state, the state of domicile should pay over to the state of last known address.

Paragraph 2 parallels subsection (d)(3), which permits the state of corporate domicile to take if the state of the last known address does not provide for the escheat or custodial taking of the property. If the state of the last known address subsequently enacts an unclaimed property law which covers the property, the taking state must turn it over.

Paragraph 3 addresses the problem of Nellius v. Tampax, Inc., 394 A.2d 333 (Del.Ch.Ct.1978) in which the holder’s records did not reflect the fact that the record owner had sold the property to another. The court concluded, under Texas v. New Jersey, that the holder’s records were controlling and that the apparent and not actual owner state could initially claim the property. Paragraph 3 provides that the state of the actual owner can reclaim this property from the taking state.

Paragraph 4, parallelling subsection (3)(f), provides that property initially claimed under a “contacts” test because there was no last known address and the state of domicile had no applicable unclaimed property law may be reclaimed by the state of corporate domicile if it enacts an applicable unclaimed property law.

Subsection (c) provides that the state that initially receives the property and which is requested to remit it to another state should be indemnified by the claiming state.

§ 26. [Action to Establish Claim].

A person aggrieved by a decision of the administrator or whose claim has not been acted

upon within 90 days after its filing may bring an action to establish the claim in the [ ] court, naming

the administrator as a defendant. The action must be brought within [90] days after the decision of

the administrator or within [180] days after the filing of the claim if he has failed to act on it. [If the

aggrieved person establishes the claim in an action against the administrator, the court shall award

him costs and reasonable attorney’s fees.]


Section 21.

After property is presumed abandoned and reported to the administrator (Section 17) the


administrator must attempt to locate the missing owner (Section 18). Thereafter, if the property has been delivered to the administrator (Section 19) and the owner or his representative appears, the administrator must pay the claim (Section 24). The owner’s rights are never cut off. If one claiming to be the owner cannot satisfy the administrator of his right to claim the property in an administrative proceeding pursuant to Section 24, he retains a right to assert his claim in a court of appropriate jurisdiction under this section.

§ 27. [Election to Take Payment or Delivery].

(a) The administrator may decline to receive any property reported under this Act which he

considers to have a value less than the expense of giving notice and of sale. If the administrator

elects not to receive custody of the property, the holder shall be notified within [120] days after filing

the report required under Section 17.

(b) A holder, with the written consent of the administrator and upon conditions and terms

prescribed by him, may report and deliver property before the property is presumed abandoned.

Property delivered under this subsection must be held by the administrator and is not presumed

abandoned until such time as it otherwise would be presumed abandoned under this Act.

Comment


Section 22.

Subsection (b) is new. It authorizes the administrator to assume custody of property prior to the time for presuming abandonment. Administrators have expressed a need for this authority to enable them to take possession of property, such as the contents of a safe deposit box repository, when the holder is terminating business but the property is not yet reportable. Additionally, other holders which have conducted business in the state and are ceasing operations might use the provisions of this section. The property must be held by the administrator until the abandonment period runs and then the property will be subject to the other provisions of the Act.

§ 28. [Destruction or Disposition of Property Having Insubstantial Commercial Value;

Immunity from Liability].

If the administrator determines after investigation that any property delivered under this

Act has insubstantial commercial value, the administrator may destroy or otherwise dispose of the

property at any time. No action or proceeding may be maintained against the state or any officer or

against the holder for or on account of any action taken by the administrator pursuant to this section.

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None.

This section provides for the disposition of property which has no commercial value. As an example, the contents of safety deposit boxes often include such items as rent receipts, personal correspondence and lapsed insurance policies. In such cases, these contents might have some personal significance to the owner, which the administrator would take into consideration in determining for what period of time he will hold the property awaiting a claim by the owner. However, in the usual situation there will be no interest to be preserved by maintaining this property under state custody.

Under this section the administrator would be free to retain property having no commercial value. Further, the administrator could transfer it to other agencies or institutions which might have an interest in the property because of its historical value or other independent significance.

This section provides that the administrator in exercising his discretion in disposing of such property is not subject to a claim by the missing owner.

§ 29. [Periods of Limitation].

(a) The expiration, before or after the effective date of this Act, of any period of time

specified by contract, statute, or court order, during which a claim for money or property can be

made or during which an action or proceeding may be commenced or enforced to obtain payment

of a claim for money or to recover property, does not prevent the money or property from being

presumed abandoned or affect any duty to file a report or to pay or deliver abandoned property to the

administrator as required by this Act.

(b) No action or proceeding may be commenced by the administrator with respect to any duty

of a holder under this Act more than 10 years after the duty arose.


Section 16.

Section 29 has an added provision that the expiration of time periods set forth in contracts will not prevent the property from becoming reportable. See People v. Marshall Field & Co., 83 Ill.App.3d 811, 404 N.E.2d 368 (1980); Screen Actors Guild, Inc. v. Cory, 91 Cal.App.3d 111, 154 Cal.Rptr. 77 (1979); State v. Jefferson Lake Sulphur Co., 36 N.J. 577, 178 A.2d 329 (1962). Section 2 abrogates another contractual condition often asserted as a defense to reporting property otherwise presumed abandoned, the failure to present the evidence of indebtedness.


Subsection (a) is written to insure that although the owner’s claim against the holder may be barred by the statute of limitations prior to the effective date of the Act, the holder is not relieved of his obligation to pay abandoned property to the administrator. The comment to Section 16 of the 1966 Act noted that local law must be consulted in order to ascertain whether legislation constitutionally may be enacted reviving a cause of action barred by the statute of limitations. This issue has been litigated in several states, e.g., Country Mutual Insurance Co. v. Knight, 40 Ill.2d 523, 240 N.E.2d 612 (1968); Douglas Aircraft Co. v. Cranston, 24 Cal.Rptr. 851, 374 P.2d 819 (1962); cf. Standard Oil v. New Jersey, 5 N.J. 281, 74 A.2d 565 (1950). Even though the statute of limitations has run before the effective date of the Act, the holder must report and deliver the property to the state if the holder does not regularly enforce the statute. See South Carolina Tax Commission v. Metropolitan Life Insurance Co., 266 S.C. 34, 221 S.E.2d 522 (1975).

Subsection (b) provides that an administrator must commence an action against a holder within 10 years after the time the property was first reportable. Under existing law it is not clear that statutes of limitations apply to the state in compelling a holder to report or deliver unclaimed property. A holder may under the 1966 Act be subject to suit for an indeterminate period. Certain states have argued that Section 16 of the 1966 Act applies to states and thus there is no statute of limitations. The 10-year limitation period will provide a holder with a cut-off date on which it can rely.

§ 30. [Requests for Reports and Examination of Records].

(a) The administrator may require any person who has not filed a report to file a verified

report stating whether or not the person is holding any unclaimed property reportable or deliverable

under this Act.

(b) The administrator, at reasonable times and upon reasonable notice, may examine the

records of any person to determine whether the person has complied with the provisions of this Act.

The administrator may conduct the examination even if the person believes it is not in possession of

any property reportable or deliverable under this Act.

(c) If a person is treated under Section 12 as the holder of the property only insofar as the

interest of the business association in the property is concerned, the administrator, pursuant to

subsection (b), may examine the records of the person if the administrator has given the notice

required by subsection (b) to both the person and the business association at least 90 days before the

examination.

(d) If an examination of the records of a person results in the disclosure of property

reportable and deliverable under this Act, the administrator may assess the cost of the examination

against the holder at the rate of $[ ] a day for each examiner, but in no case may the charges exceed

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the value of the property found to be reportable and deliverable. The cost of examination made

pursuant to subsection (c) may be imposed only against the business association.

(e) If a holder fails after the effective date of this Act to maintain the records required by

Section 31 and the records of the holder available for the periods subject to this Act are insufficient

to permit the preparation of a report, the administrator may require the holder to report and pay such

amounts as may reasonably be estimated from any available records.


Section 23.

This section is designed to facilitate compliance with the Act. Subsection (a) provides for the filing of a negative report if the administrator requires such a report and will minimize disruption which would otherwise be caused to the holder if an examination of records instead were conducted by the administrator. Subsection (b) is based on Section 23 of the 1966 Act. The 1966 Act authorizes examination if the administrator has reason to believe the holder has failed to report property. To require as prerequisite for an examination that a state has reason to believe information has been withheld encourages litigation and imposes an unnecessary burden on the state.

Subsection (c) is intended to provide a useful method whereby the administrator can conduct a single examination of a dividend disbursing agent or transfer agent serving in such capacity for numerous business associations. Under the 1966 Act, dividend disbursing agents and transfer agents have refused to permit any examination of records unless the affirmative consent of the business association was first obtained. This procedure has proved unwieldy and very expensive to the enforcing states. By requiring prior notice to the dividend disbursing agent and the business association, the agent will have an opportunity to make the necessary arrangements with its principal, the business association, to provide the necessary information in the event that the business association elects not to report the property in question voluntarily. This section, together with Section 33, will enable several states to conduct joint examinations of numerous holders at one time, saving substantial expense and thus permitting examinations which might otherwise be economically unfeasible.

Subsection (e) permits the use of estimates in instances where the holder has failed to report and deliver property that is abandoned and no longer has records with which to prepare such a report. Additionally, if the holder fails to maintain records of the last known address, states can assert claims based on any other records which might exist. Resort may be had to computer codes. This subsection does not resolve the issue of whether the domiciliary state of the holder can also claim the property from the holder. See comment to Section 1(11). While the holding in Texas v. New Jersey is intended to prevent multiple liability of holders, this subsection, viewed as a penalty for failure to maintain records of names and last known address, is not inconsistent with that decision. Subsection (e) is prospective only.


§ 31. [Retention of Records].

(a) Every holder required to file a report under Section 17, as to any property for which it has

obtained the last known address of the owner, shall maintain a record of the name and last known

address of the owner for 10 years after the property becomes reportable, except to the extent that a

shorter time is provided in subsection (b) or by rule of the administrator.

(b) Any business association that sells in this State its travelers checks, money orders,

or other similar written instruments, other than third-party bank checks on which the business

association is directly liable, or that provides such instruments to others for sale in this State, shall

maintain a record of those instruments while they remain outstanding, indicating the state and date of

issue for 3 years after the date the property is reportable.


None.

Many holders are not retaining records of addresses of owners. While Section 11(e) of the 1966 Act may be interpreted to require that those records be kept, this section makes express such a requirement if the holder initially had an address. The experience of several states has confirmed that substantial amounts of unclaimed property, for which at one time the holder had records of address, are now subject to claim only by the domiciliary state of the holder since the recorded address has not been retained.

This section does not require that the holder in the first instance obtain the address of the owner, a matter which each state may wish to consider as to specific types of property. For example, a record of the address of the purchaser or recipient of a gift certificate customarily is not obtained.

Initially, the period for which records of address must be obtained is established at 10 years from the date the property was first reportable as abandoned property. However, this section permits a state to shorten this period by rule. Because the reporting practices of holders vary, an administrator will want to consider such factors as the burden imposed on the holder in maintaining such records, the opportunity of returning the property, and the type of business of the holder. For example, in the case of property that would be reportable in the aggregate without the name and address of the apparent owner under Section 17, a state might adopt a rule providing for a relatively short record retention period on condition that the holder maintain a record sufficient to satisfy the requirements of Texas v. New Jersey that there be a last known address or that the state can prove that the last known address of the creditor was within its borders.

Subsection (b) is designed to insure that the information required for asserting a claim to travelers checks and money orders specified in subsection 4(c) is retained by the issuers of travelers checks and money orders.

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§ 32. [Enforcement].

The administrator may bring an action in a court of competent jurisdiction to enforce this Act.

Comment


Section 24.

Section 32 authorizes suit by the administrator in any court of competent jurisdiction. Although generally an administrator would be expected to sue in his own state, he can use the courts of another forum to enforce the Act. See Section 33. See also, Commonwealth of Pennsylvania v. Kervick, 60 N.J. 289, 288 A.2d 289 (1972).

§ 33. [Interstate Agreements and Cooperation; Joint and Reciprocal Actions With Other

States].

(a) The administrator may enter into agreements with other states to exchange information

needed to enable this or another state to audit or otherwise determine unclaimed property that it or

another state may be entitled to subject to a claim of custody. The administrator by rule may require

the reporting of information needed to enable compliance with agreements made pursuant to this

section and prescribe the form.

(b) To avoid conflicts between the administrator’s procedures and the procedures

of administrators in other jurisdictions that enact the Uniform Unclaimed Property Act, the

administrator, so far as is consistent with the purposes, policies, and provisions of this Act, before

adopting, amending or repealing rules, shall advise and consult with administrators in other

jurisdictions that enact substantially the Uniform Unclaimed Property Act and take into consideration

the rules of administrators in other jurisdictions that enact the Uniform Unclaimed Property Act.

(c) The administrator may join with other states to seek enforcement of this Act against any

person who is or may be holding property reportable under this Act.

(d) At the request of another state, the attorney general of this State may bring an action in

the name of the administrator of the other state in any court of competent jurisdiction to enforce the

unclaimed property laws of the other state against a holder in this State of property subject to escheat


or a claim of abandonment by the other state, if the other state has agreed to pay expenses incurred

by the attorney general in bringing the action.

(e) The administrator may request that the attorney general of another state or any other

person bring an action in the name of the administrator in the other state. This State shall pay all

expenses including attorney’s fees in any action under this subsection. [The administrator may agree

to pay the person bringing the action attorney’s fees based in whole or in part on a percentage of the

value of any property recovered in the action.] Any expenses paid pursuant to this subsection may

not be deducted from the amount that is subject to the claim by the owner under this Act.

Comment


None-but compare, Section 10.

Cooperation among states is essential if abandoned property programs are to be efficiently administered. In recent years several states have joined together to audit major holders. Additionally, several states have entered into agreements to act as collection agents for each other. Interstate cooperation and the development of uniform reporting forms and uniform regulations will be of assistance to holders as well as program administrators. Section 33 encourages joint agreements and cooperation among the states.

In many instances holders apparently fail to report based on the correct assumption that individual and distant states will not go to the expense of auditing records. This section will permit spreading the very real expense of conducting audits among several collecting states and the pooling of information which should make enforcement of the Act less burdensome to the state and potentially less burdensome to major corporate holders. An agreement among the states might expressly relieve holders from reporting piecemeal to separate states. Instead, they might be able to file a single report of all abandoned property, wherever located, and regardless of the address of the owner.

Reciprocal agreements envisioned under subsection (c) do not require the consent of Congress under the Compact Clause of the Constitution, Art. I, § 10, cl. 3. The Supreme Court has held that the restriction of the Compact Clause is limited to combinations or agreements that tend to increase the political power of the states to such an extent that it interferes with the supremacy of the United States. United States Steel v. Multi-State Tax Commission, 434 U.S. 452 (1978). In Multi-State Tax Commission the Court upheld a tax compact, that had not been approved by Congress creating a permanent administrative body to perform audits of multi-state taxpayer operations, and at the request of a member state, to sue to enforce the audits in the courts of the member states.

This section simply authorizes an economical approach to enforcing a state’s claim under Texas v. New Jersey. Each state retains discretion to bring suit or to decide against such action,

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remaining free to adopt its own abandoned property policies. The position of the states will not be politically improved at the expense of the federal government although the process for claiming abandoned property will be more efficient.

Action by one state for another is expressly permitted by this section. In some cases the administrator of a state may deem it wise to seek counsel in a foreign jurisdiction. There may be small claims which would not justify individual action by the claimant state in a foreign forum, but if several states join forces and retain counsel in the holder state to sue for all of them, it might be administratively justified. This section expressly permits such joint action.

§ 34. [Interest and Penalties].

(a) A person who fails to pay or deliver property within the time prescribed by this Act

[shall] [may be required to] pay to the administrator interest at the annual rate of [18 percent] [10

percent above the annual rate of discount, in effect on the date the property should have been paid or

delivered, for the most recent issue of 52-week United States Treasury bills] on the property or value

thereof from the date the property should have been paid or delivered.

(b) A person who willfully fails to render any report or perform other duties required under

this Act shall pay a civil penalty of $[100] for each day the report is withheld or the duty is not

performed, but not more than $[5000].

(c) A person who willfully fails to pay or deliver property to the administrator as required

under this Act shall pay a civil penalty equal to 25 percent of the value of the property that should

have been paid or delivered.

(d) A person who willfully refuses after written demand by the administrator to pay or deliver

property to the administrator as required under this Act is guilty of a [ ] and upon conviction may

be punished by a fine of not less than $[ ] nor more than $[ ], or imprisonment for not more than [ ]

months, or both.


Section 25.

A major weakness of the 1966 Act was its ineffective penalty provision. Primary reliance on the criminal law as a compliance mechanism is misplaced. Often the reason for withholding property is economic, and economic sanctions in those cases are generally more effective in assuring compliance.


The experience of several states is that many holders find the economic incentive for noncompliance so great that violations of the law are frequent and extensive. The holder who neglects to report or pay has the use of property which is extremely valuable to it. The provision for civil penalties in subsection (a) is designed to give a holder sufficient incentive to report and pay over abandoned property. It is also designed to ensure that the true owners or their representatives, the states, receive the income from the property while it is wrongfully withheld. Similar provisions have been enacted by several states, for example, California (Cal.Civ.Pro.Code § 1577 (Supp.1981)) and Minnesota (Minn.Stat. § 345.55 subd. 3).

Criminal penalties are provided in subsection (d) for willful refusal, after written demand by an administrator, to pay or deliver property.

§ 35. [Agreement to Locate Reported Property].

All agreements to pay compensation to recover or assist in the recovery of property reported

under Section 17, made within 24 months after the date payment or delivery is made under Section

19, are unenforceable.Comment


None.

This section is in part based on Cal.Civ.Pro.Code § 1582 (Supp.1981).

§ 36. [Foreign Transactions].

This Act does not apply to any property held, due and owing in a foreign country and arising

out of a foreign transaction.Comment


None.

This provision is designed to exclude from the coverage of the Act wholly foreign transactions.

§ 37. [Effect of New Provisions; Clarification of Application].

(a) This Act does not relieve a holder of a duty that arose before the effective date of this Act

to report, pay, or deliver property. A holder who did not comply with the law in effect before the

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effective date of this Act is subject to the applicable enforcement and penalty provisions that then

existed and they are continued in effect for the purpose of this subsection, subject to Section 29(b).

(b) The initial report filed under this Act for property that was not required to be reported

before the effective date of this Act but which is subject to this Act must include all items of property

that would have been presumed abandoned during the 10-year period preceding the effective date of

this Act as if this Act had been in effect during that period.

Comment


None.

This Act adds, amends, clarifies and repeals sections of the 1966 Act. The new Act may provide for the presumption of abandonment of one type of property that arguably was not subject to a presumption of abandonment under the 1966 Act. For example, the 1966 Act did not expressly cover underlying share certificates unless they were held or owing by business associations. Underlying share certificates are now expressly covered in this Act pursuant to Section 10. Additionally, the state of last known address under the 1966 Act perhaps could not reach property otherwise presumed abandoned where the holder was not doing business in the state of last known address.

Subsection (a) provides that if a state had an unclaimed property law prior to the adoption of this Act, a holder is not relieved of his duty to report and pay over the property abandoned under the Act then existing.

Subsection (b) deals with the problem of how far back a holder must check his records to determine what property not subject to the prior Act must be paid to the state under this Act. The period chosen is 10 years. A holder is required to pay to the state any property which 10 years before the date of enactment would have been payable in the enacting state if this Act had been in effect. For example, if a state enacts the new Act effective January 1, 1983 for property not previously presumed abandoned, the holder must report it if, as of January 1, 1973, it had been unclaimed for the abandonment period. A similar provision is found in Section 11(g) of the 1966 Act.

However, some property subject to this Act but which was not covered by the then existing Act may have been paid to another state. If a holder has already paid this property to another state under its then existing unclaimed or abandoned property laws, it is not required to pay again to this State. Nothing in this section, however, prohibits this State from making a claim on the state to which the property was originally paid.

§ 38. [Rules].

The administrator may adopt necessary rules to carry out the provisions of this Act.


§ 39. [Severability].

If any provision of this Act or the application thereof to any person or circumstance is held

invalid, the invalidity shall not affect other provisions or applications of this Act which can be given

effect without the invalid provision or application, and to this end the provisions of this Act are

severable.

§ 40. [Uniformity of Application and Construction].

This Act shall be applied and construed as to effectuate its general purpose to make uniform

the law with respect to the subject of this Act among states enacting it.

§ 41. [Short Title].

This Act may be cited as the Uniform Unclaimed Property Act (1981).

§ 42. [Repeal].

The following acts and parts of acts are hereby repealed:

(a)

(b)

(c)

§ 43. [Time of Taking Effect].

This Act shall take effect .....

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UNIFORM UNCLAIMED PROPERTY ACT (1995)Drafted by the

NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWSand by it

APPROVED AND RECOMMENDED FOR ENACTMENT IN ALL THE STATESat its

ANNUAL CONFERENCE MEETING IN ITS ONE-HUNDRED-AND-FOURTH YEARIN KANSAS CITY, MISSOURI JULY 28 – AUGUST 4, 1995

WITH PREFATORY NOTE AND COMMENTS

COPYRIGHT 1995 By NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS

The Committee that acted for the National Conference of Commissioners on Uniform State Laws in preparing the Uniform Unclaimed Property Act (1995) was as follows:

WILLIS E. SULLIVAN, III, P.O. Box 359, 1423 Tyrell Lane, Boise, ID 83701, ChairOWEN L. ANDERSON, University of Oklahoma, College of Law, 300 Timberdell Road, Norman, OK 73019DAVID D. BIKLEN, Law Revision Commission, Room 509A, State Capitol, Hartford, CT 06106FRED C. CORNISH, Suite 917, 321 South Boston, Tulsa, OK 74103EDWARD I. CUTLER, P.O. Box 3239, Tampa, FL 33601STANLEY M. FISHER, 1100 Huntington Building, Cleveland, OH 44115PATRICK C. GUILLOT, Suite 900, 8080 North Central Expressway, Dallas, TX 75206JOHN F. HAYES, Suite 260, 335 North Washington, Hutchinson, KS 67504RAYMOND P. PEPE, 13th Floor, 240 North Third Street, Harrisburg, PA 17101ROBERT E. SULLIVAN, 112 Hillcrest Loop, Missoula, MT 59803ROBERT WILLIAMS, Suite 800, 770 L Street, Sacramento, CA 95814CURTIS D. FORSLUND, 5555 Via Entrada, Tucson, AZ 85718, Reporter

EX OFFICIORICHARD C. HITE, 200 West Douglas Avenue, Suite 600, Wichita, KS 67202, PresidentW. JACKSON WILLOUGHBY, Placer County Municipal Court, 300 Taylor Street, Roseville, CA 95678, Chair, Division B

EXECUTIVE DIRECTOR

FRED H. MILLER, University of Oklahoma, College of Law, 300 Timberdell Road, Norman, OK 73019, Executive DirectorWILLIAM J. PIERCE, 1505 Roxbury Road, Ann Arbor, MI 48104, Executive Director Emeritus

ADVISORSE. SUZANNE DARLING, National Association of Unclaimed Property AdministratorsSONYA M. DAVIS, American Bar AssociationDAVID J. EPSTEIN, Boston, MA

ADDITIONAL PARTICIPANTS

THOMAS E. HAIDER, Travelers Express Company, Inc.TODD D. LEBSACK, National Retail FederationSTEPHEN P. NORMAN, American Society of Corporate Secretaries, Inc.CAROL B. ROSEN, Keane Tracers Inc.PAULA YOUNG SMITH, National Association of Division Order AnalystsTODD R. STIMMEL, The National Abandoned Property Processing CorporationMATHEW H. STREET, American Bankers AssociationROBERT A. WITTIE, Investment Company Institute

Copies of this Act may be obtained from: NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS 676 North St. Clair Street, Suite 1700 Chicago, Illinois 60611 312/915-0195


UNIFORM UNCLAIMED PROPERTY ACT (1995)Copyright © By NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS

TABLE OF CONTENTSSECTION 1. DEFINITIONS ...............................................................................................................................2

SECTION 2. PRESUMPTIONS OF ABANDONMENT ...................................................................................7

SECTION 3. CONTENTS OF SAFE DEPOSIT BOX OR OTHER SAFEKEEPING DEPOSITORY ..........12

SECTION 4. RULES FORTAKING CUSTODY .............................................................................................13

SECTION 5. DORMANCY CHARGE .............................................................................................................16

SECTION 6. BURDEN OF PROOF AS TO PROPERTY EVIDENCED BY RECORD OF CHECK

OR DRAFT ................................................................................................................................17

SECTION 7. REPORT OF ABANDONED PROPERTY .................................................................................18

SECTION 8. PAYMENT OR DELIVERY OF ABANDONED PROPERTY ...................................................20

SECTION 9. NOTICE AND PUBLICATION OF LISTS OF ABANDONED PROPERTY ...........................21

SECTION 10. CUSTODY BY STATE; RECOVERY BY HOLDER; DEFENSE OF HOLDER ......................22

SECTION 11. CREDITING OF DIVIDENDS, INTEREST, AND INCREMENTS TO OWNER’S

ACCOUNT ..............................................................................................................................24

SECTION 12. PUBLIC SALE OF ABANDONED PROPERTY .......................................................................25

SECTION 13. DEPOSIT OF FUNDS .................................................................................................................26

SECTION 14. CLAIM OF ANOTHERSTATE TO RECOVERPROPERTY ....................................................27

SECTION 15. FILING CLAIM WITH ADMINISTRATOR; HANDLING OF CLAIMS BY

ADMINISTRATOR ................................................................................................................29

SECTION 16. ACTION TO ESTABLISH CLAIM ............................................................................................29

SECTION 17. ELECTION TO TAKE PAYMENT OR DELIVERY ..................................................................30

SECTION 18. DESTRUCTION OR DISPOSITION OF PROPERTY HAVING NO

SUBSTANTIAL COMMERCIAL VALUE; IMMUNITY FROM LIABILITY ....................31

SECTION 19. PERIODS OF LIMITATION .......................................................................................................31

SECTION 20. REQUESTS FORREPORTS AND EXAMINATION OF RECORDS .......................................33

SECTION 21. RETENTION OF RECORDS ......................................................................................................35

SECTION 22. ENFORCEMENT ........................................................................................................................36

SECTION 23. INTERSTATE AGREEMENTS AND COOPERATION; JOINT AND

RECIPROCAL ACTIONS WITH OTHER STATES .......................................................36

SECTION 24. INTEREST AND PENALTIES ...................................................................................................38

SECTION 25. AGREEMENT TO LOCATE PROPERTY ..................................................................................40

SECTION 26. FOREIGN TRANSACTIONS .....................................................................................................41

SECTION 27. TRANSITIONAL PROVISIONS ................................................................................................41

SECTION 28. RULES ........................................................................................................................................42

SECTION 29. UNIFORMITY OF APPLICATION AND CONSTRUCTION ..................................................42

SECTION 30. SHORT TITLE ............................................................................................................................42

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SECTION 31 SEVERABILITY CLAUSE ...................................................................................................42

SECTION 32. EFFECTIVE DATE ................................................................................................................42

SECTION 33. REPEALS ...............................................................................................................................43

UNIFORM UNCLAIMED PROPERTY ACT (1995)

PREFATORY NOTE

Statement of the History of the Act

This Act is preceded by the 1954 Uniform Disposition of Unclaimed Property Act (1954), which was revised in 1966, and the Uniform Unclaimed Property Act (1981). The 1954 Act was drafted during a period of conflicting legislation among the various States and several Supreme Court decisions in the late 1940’s and early 1950’s. In 1965, these conflicts were resolved by the decision in Texas v. New Jersey, 379 U.S. 674 (1965), which established a set of priorities for claim-ant States. These rules of priority were then adopted in the 1981 Act. They were re-examined and reaffirmed in Delaware v. New York, _____U.S. _____, 113 S.Ct. 1550, 123 L.Ed.2d 211 (1993). Although the Delaware Court made no change in the rules of priority, it clarified the issue of how to determine the identity of the “debtor” – the “holder” under this Act – when payments by intermedi-aries are at stake. The “debtor” will be defined by reference to the state law that creates the property interest; an intermediary which holds property in its own name will generally be the debtor, and not the original obligor which has satisfied its obligation by transmitting payment to the intermediary. Delaware v. New York also makes it clear that no State may supersede the Court’s priority rules by seeking to establish different priorities under state law. See Comments to Section 1 and Section 4 for further discussion of these rules.

This Act retains the custodial features of the 1954 Act and the 1981 Act. Thus, the State does not take title to unclaimed property, but takes custody only, and holds the property in perpetuity for the owner.

A State may enforce its claim of custody in the courts of other jurisdictions, see Commonwealth of Pennsylvania v. Kervick, 60 N.J. 289, 288 A.2d 289 (1972), or in its own courts. Even if a holder does not do business in the State, that State should be able to require the holder to report and deliver unclaimed property in the State, under the Texas v. New Jersey rationale, based on the common law rule of mobilia sequunter personam: the right of succession to personal property is governed by the law of the owner’s domicile. See also Connecticut Mutual Life Insurance Co. v. Moore, 333 U.S. 541, 546-47 (1947), where the Supreme Court described the State as a “conserva-tor” when claiming property under a custodial unclaimed property law. The Court in Standard Oil Co. v. New Jersey, 347 U.S. 428, 437 (1951), characterized the Moore case as involving a “con-servation statute.” See generally Epstein, McThenia and Forslund, “Unclaimed Property Law and Reporting Forms,” sections 2.01, 3.02, 4.01 (Matt. Bend. 1984).


UNIFORM UNCLAIMED PROPERTY ACT (1995)

SECTION 1. DEFINITIONS. In this [Act]:

(1) “Administrator” means [insert name of appropriate officer].

(2) “Apparent owner” means a person whose name appears on the records of a holder as the person entitled to property held, issued, or owing by the holder.

(3) “Business association” means a corporation, joint stock company, investment company, partnership, unincorporated association, joint venture, limited liability company, business trust, trust company, [land bank], safe deposit company, [safekeeping depository], financial organiza-tion, insurance company, mutual fund, utility, or other business entity consisting of one or more persons, whether or not for profit.

(4) “Domicile” means the State of incorporation of a corporation and the State of the prin-cipal place of business of a holder other than a corporation.

(5) “Financial organization” means a savings and loan association, [building and loan as-sociation, savings bank, industrial bank,] bank, banking organization, or credit union.

(6) “Holder” means a person obligated to hold for the account of, or deliver or pay to, the owner property that is subject to this [Act].

(7) “Insurance company” means an association, corporation, or fraternal or mutual benefit organization, whether or not for profit, engaged in the business of providing life endowments, an-nuities, or insurance, including accident, burial, casualty, credit life, contract performance, dental, disability, fidelity, fire, health, hospitalization, illness, life, malpractice, marine, mortgage, surety, wage protection, and workers’ compensation insurance.

(8) “Mineral” means gas; oil; coal; other gaseous, liquid, and solid hydrocarbons; oil shale; cement material; sand and gravel; road material; building stone; chemical raw material; gemstone; fissionable and nonfissionable ores; colloidal and other clay; steam and other geothermal resource; or any other substance defined as a mineral by the law of this State.

(9) “Mineral proceeds” means amounts payable for the extraction, production, or sale of minerals, or, upon the abandonment of those payments, all payments that become payable thereaf-ter. The term includes amounts payable:

(i) for the acquisition and retention of a mineral lease, including bonuses, royalties, compensatory royalties, shut-in royalties, minimum royalties, and delay rentals;

(ii) for the extraction, production, or sale of minerals, including net revenue inter-ests, royalties, overriding royalties, extraction payments, and production payments; and

(iii) under an agreement or option, including a joint operating agreement, unit agreement, pooling agreement, and farm-out agreement.

(10) “Money order” includes an express money order and a personal money order, on which the remitter is the purchaser. The term does not include a bank money order or any other

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instrument sold by a financial organization if the seller has obtained the name and address of the payee.

(11) “Owner” means a person who has a legal or equitable interest in property subject to this [Act] or the person’s legal representative. The term includes a depositor in the case of a deposit, a beneficiary in the case of a trust other than a deposit in trust, and a creditor, claimant, or payee in the case of other property.

(12) “Person” means an individual, business association, financial organization, estate, trust, government, governmental subdivision, agency, or instrumentality, or any other legal or commercial entity. (13) “Property” means tangible property described in Section 3 or a fixed and certain inter-est in intangible property that is held, issued, or owed in the course of a holder’s business, or by a government, governmental subdivision, agency, or instrumentality, and all income or increments therefrom. The term includes property that is referred to as or evidenced by:

(i) money, a check, draft, deposit, interest, or dividend;

(ii) credit balance, customer’s overpayment, gift certificate, security deposit, refund, credit memorandum, unpaid wage, unused ticket, mineral proceeds, or unidentified remit-tance;

(iii) stock or other evidence of ownership of an interest in a business association or financial organization;

(iv) a bond, debenture, note, or other evidence of indebtedness;

(v) money deposited to redeem stocks, bonds, coupons, or other securities or to make distributions;

(vi) an amount due and payable under the terms of an annuity or insurance policy, including policies providing life insurance, property and casualty insurance, workers’ compensa-tion insurance, or health and disability insurance; and

(vii) an amount distributable from a trust or custodial fund established under a plan to provide health, welfare, pension, vacation, severance, retirement, death, stock purchase, profit sharing, employee savings, supplemental unemployment insurance, or similar benefits.

(14) “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

(15) “State” means a State of the United States, the District of Columbia, the Common-wealth of Puerto Rico, or any territory or insular possession subject to the jurisdiction of the United States.

(16) “Utility” means [a person who owns or operates for public use any plant, equipment, real property, franchise, or license for the transmission of communications or the production, storage, transmission, sale, delivery, or furnishing of electricity, water, steam, or gas] [insert cross reference to statute defining public utility].


Comment

The definitions reflect, pursuant to Texas v. New Jersey, 379 U.S. 674, 85 S.Ct. 626, 13 L.Ed. 2d 596 (1965), the fact that the Act applies to persons in other States who are holding prop-erty, eliminating any requirement that those persons be engaged in business in the enacting State. The obligation of a holder to report to all States in which a creditor had an address, or in which a transaction took place, or which is the holder’s domicile, is now well established in the abandoned property statutes of the States and in the decisions of the Supreme Court. The holder’s obligation to report is not confined to situations where the holder is authorized to do business or actually transacts business in a State. These jurisdictional rules are spelled out in detail in Section 4.

Paragraph (2) defines “apparent owner” in terms of reference to the person who appears on the holder’s records to be the person entitled to the property. The right of a State to claim aban-doned property depends on the information in the holder’s records concerning the apparent own-er’s identification. It is of no consequence that without notice to the holder, the owner may have transferred the property to another person. In Nellius v. Tampax, Inc., 394 A.2d 333 (Del. Ch. Ct. 1978), the court held that the address of the apparent, not the actual, owner controlled. The holder is not required to ascertain the name of the current owner or resolve a dispute between the owner of record and a successor contesting ownership. However, nothing in this Act prohibits the actual owner from recovering the property, pursuant to Sections 10 and 15, from the holder or the ad-ministrator. Similarly, the State of last known address of the actual owner can recover the property, pursuant to Section 14, from the State which initially receives custody.

The definition of “business association” in paragraph (3) expressly includes mutual funds, which previously were covered in general terms.

The definition of “holder” in paragraph 5 is a clarification. There had been some confusion in the past over the identity of the holder of an obligation that had been transferred by the original obligor, as in the payment of dividends on corporate stock. As held by the Supreme Court in Delaware v. New York, the holder is the person indebted under the applicable state law. Thus, if the original debtor, the dividend-paying corporation, has satisfied its debt under its share contract and under state law by transmitting payment to an intermediary, which has undertaken to make the payment, the intermediary becomes the debtor. The holder thus is “a person obligated,” i.e., a person who could be sued successfully by the owner for refusing to make payment.

Although the 1981 Act defined “last known address” as “a description of the location of the apparent owner sufficient for the purpose of the delivery of mail,” that Act indicated some uncertainty over whether this was an accurate interpretation of Texas v. New Jersey, since this definition was accompanied by a Commissioners’ Comment that appeared to be at odds with the definition itself. Thus, the Comment stated that “Where a holder originally had the address of the owner and it has been subsequently destroyed, a computer code may be one way of establishing an address within the state.” “Last known address” is no longer defined in the Act; instead, the sections dealing with the jurisdictional rules (Sections 4 and 14) are rewritten so that they define, individually, the rules of the States’ priorities of taking.

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The touchstone of those rules of priority is Texas v. New Jersey, 379 U.S. 674, 85 S.Ct. 626, 13 L.Ed. 2d 596 (1965), in which the Court established as a primary rule that unclaimed property goes to “the State of the last known address of the creditor, as shown by the debtor’s books and records.” Id. at 681-82, 85 S.Ct. at 631, 13 L.Ed. 2d at 601. Where the debtor has “no record of any address at all,” the state of corporate domicile could take, id. at 682, 85 S.Ct. at 631, 13 L.Ed. 2d at 601, subject to proof by another State “that the last known address of the creditor was within its borders.” Id., 13 L.Ed. 2d at 602. See also Pennsylvania v. New York, 407 U.S. 206, 32 L.Ed. 2d 693, 92 S.Ct. 2075 (1972).

In Delaware v. New York, the Court reaffirmed the rules of Texas v. New Jersey: Delaware, as the State of corporate domicile, would take the property initially where the holder’s records did not contain a last known address. That delivery of the property to Delaware, however, would not cut off the rights of another State to later claim the property from Delaware. For instance:

On remand, if New York can establish by reference to debtors’ records that the creditors who were owed particular securities distributions had last known addresses in New York, New York’s right to escheat under the primary rule will supersede Delaware’s right under the secondary rule. As we noted in Texas, “the State of corporate domicile should be allowed to...retai[n] the property for itself only until some other State comes forward with proof that it has a superior right to escheat.” 379 U.S., at 682. Accord, Pennsylvania, 407 U.S., at 210-211. If New York or any other claimant State fails to offer such proof on a transaction-by-transaction basis or to provide some other proper mechanism for ascertaining creditors’ last known ad-dresses, the creditor’s State will not prevail under the primary rule, and the secondary rule will control.

Id. at _____, 113 S.Ct. at 1561-62, 123 L.Ed. 2d at 227-28. (Deletions in original.)

In sum, Delaware v. New York requires that some “proper mechanism” show that the own-er had an address within the State that asserts a primary claim. A computer code would appear to be such a means of proof. On the other hand, showing that the transaction took place in the State would not be sufficient proof of an owner’s address. Pennsylvania v. New York, 407 U.S. 206, 92 S.Ct. 2075, 32 L.Ed. 2d 693 (1972).

For purposes other than these jurisdictional rules – i.e., the holder’s duties of reporting and maintenance of records and the States’ duties of publication – the “last known address” will de-pend on the nature and extent of the holder’s records. Thus, the holder will include in its report the best address it has, which may or may not include a street address, or, for example, an “E mail” address.

The definition of “money order” in paragraph (10) is designed to distinguish between per-sonal money orders issued by business entities which are not financial organizations, which have a seven year holding period, and those issued by financial organizations, which have a five year holding period.

The Act provides exclusively for the disposition of unclaimed intangible property and does not apply to tangible property, with one exception: Section 3 applies to tangible property con-tained in safe deposit boxes. Paragraph (12), defining property, is not intended as a substantive ad-dition to the coverage of the 1981 Act. It is, however, intended to be all-inclusive; the descriptions


of property interests that are set forth as examples are not limiting, but are stated to help holders identify kinds of property interests which otherwise may be overlooked. Thus, “property” is not the check, note, certificate or other document that evidences the property interest, but the underly-ing right or obligation. See Blue Cross of Northern California v. Cory, 120 Cal. App. 3d 723, 174 Cal. Rptr. 901 (1981) (“right to be paid” is the “„intangible personal property’ (or „chose in ac-tion’) . . . which is recognized in the UPL”). The requirement that the right be “fixed and certain” excludes unliquidated claims from the coverage of the Act, such as disputed tort claims. Many States already have laws that define utilities. Paragraph (15) gives a State the option to adopt the Act’s definition of a utility, or another definition contained in existing law. The term is intended to be broadly applied.

SECTION 2. PRESUMPTIONS OF ABANDONMENT.

(a) Property is presumed abandoned if it is unclaimed by the apparent owner during the time set forth below for the particular property:

(1) traveler’s check, 15 years after issuance;

(2) money order, seven years after issuance;

(3) stock or other equity interest in a business association or financial organization, including a security entitlement under [Article 8 of the Uniform Commercial Code], five years after the earlier of (i) the date of the most recent dividend, stock split, or other distribution un-claimed by the apparent owner, or (ii) the date of the second mailing of a statement of account or other notification or communication that was returned as undeliverable or after the holder discon-tinued mailings, notifications, or communications to the apparent owner;

(4) debt of a business association or financial organization, other than a bearer bond or an original issue discount bond, five years after the date of the most recent interest payment un-claimed by the apparent owner;

(5) a demand, savings, or time deposit, including a deposit that is automatically renewable, five years after the earlier of maturity or the date of the last indication by the owner of interest in the property; but a deposit that is automatically renewable is deemed matured for pur-poses of this section upon its initial date of maturity, unless the owner has consented to a renewal at or about the time of the renewal and the consent is in writing or is evidenced by a memorandum or other record on file with the holder;

(6) money or credits owed to a customer as a result of a retail business transaction, three years after the obligation accrued;

(7) gift certificate, three years after December 31 of the year in which the certifi-cate was sold, but if redeemable in merchandise only, the amount abandoned is deemed to be [60] percent of the certificate’s face value;

(8) amount owed by an insurer on a life or endowment insurance policy or an annu-ity that has matured or terminated, three years after the obligation to pay arose or, in the case of a policy or annuity payable upon proof of death, three years after the insured has attained, or would have attained if living, the limiting age under the mortality table on which the reserve is based;

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(9) property distributable by a business association or financial organization in a course of dissolution, one year after the property becomes distributable;

(10) property received by a court as proceeds of a class action, and not distributed pursuant to the judgment, one year after the distribution date;

(11) property held by a court, government, governmental subdivision, agency, or instrumentality, one year after the property becomes distributable;

(12) wages or other compensation for personal services, one year after the compen-sation becomes payable;

(13) deposit or refund owed to a subscriber by a utility, one year after the deposit or refund becomes payable;

(14) property in an individual retirement account, defined benefit plan, or other ac-count or plan that is qualified for tax deferral under the income tax laws of the United States, three years after the earliest of the date of the distribution or attempted distribution of the property, the date of the required distribution as stated in the plan or trust agreement governing the plan, or the date, if determinable by the holder, specified in the income tax laws of the United States by which distribution of the property must begin in order to avoid a tax penalty; and

(15) all other property, five years after the owner’s right to demand the property or after the obligation to pay or distribute the property arises, whichever first occurs.

(b) At the time that an interest is presumed abandoned under subsection (a), any other prop-erty right accrued or accruing to the owner as a result of the interest, and not previously presumed abandoned, is also presumed abandoned.

(c) Property is unclaimed if, for the applicable period set forth in subsection (a), the ap-parent owner has not communicated in writing or by other means reflected in a contemporane-ous record prepared by or on behalf of the holder, with the holder concerning the property or the account in which the property is held, and has not otherwise indicated an interest in the property. A communication with an owner by a person other than the holder or its representative who has not in writing identified the property to the owner is not an indication of interest in the property by the owner.

(d) An indication of an owner’s interest in property includes:

(i) the presentment of a check or other instrument of payment of a dividend or other distribution made with respect to an account or underlying stock or other interest in a business association or financial organization or, in the case of a distribution made by electronic or similar means, evidence that the distribution has been received; (ii) owner-directed activity in the account in which the property is held, including a direction by the owner to increase, decrease, or change the amount or type of property held in the account; (iii) the making of a deposit to or withdrawal from a bank account; and

(iv) the payment of a premium with respect to a property interest in an insurance policy; but the application of an automatic premium loan provision or other nonforfeiture provi-


sion contained in an insurance policy does not prevent a policy from maturing or terminating if the insured has died or the insured or the beneficiary of the policy has otherwise become entitled to the proceeds before the depletion of the cash surrender value of a policy by the application of those provisions.

(e) Property is payable or distributable for purposes of this [Act] notwithstanding the owner’s failure to make demand or present an instrument or document otherwise required to ob-tain payment.

Comment

Section 2 continues the general proposition that all intangible property is within the cov-erage of this Act. It provides in a single section for all the various periods of abandonment that were separately stated in several sections of the 1981 Act. With limited exceptions this reorganiza-tion does not alter the bases for presuming abandonment of the property from that established in the 1981 Act, but merely restates those standards in a unified section, more easily applied, with less repetition. One exception is that whereas the 1981 Act exempted from the presumption of abandonment certain property held by a bank if the bank held other property of the depositor not presumptively abandoned, the present Act does not. It was the conclusion of the Commissioners that an owner’s knowledge of some property does not necessarily imply knowledge of all his or her property held by the bank, and that the owner is entitled to the protection of this Act as to all the owner’s property.

This section treats underlying bond obligations the same as underlying stock, except as to bearer bonds and original issue discount bonds. Thus, registered interest paying bonds will be presumed abandoned five years after the date of an unpresented instrument issued to pay interest. In the case of bearer bonds, however, although interest held on deposit for more than five years that has not been paid out as a result of failure to present a coupon for payment will be considered abandoned, the underlying principal represented by the bearer certificate, provided such certificate is not held by an agent due to a mail return or other similar circumstance, will not be considered abandoned even if the coupons that were attached to that certificate at the time of original issuance have not been presented for payment. Where interest is accrued but not paid until the return of principal at the time the obligation matures or is called, and there is no making of periodic interest payments, there is not the same motivation for bond holders to communicate with the trustee or paying agent as in the case of interest paying bonds, and a lack of communication should not give rise to a presumption of abandonment. Therefore, bearer bonds and original issue discount bonds are excluded from paragraph (4) of this section, and will fall instead under paragraph (15). Those bonds will be presumed abandoned five years after the issuer’s obligation to pay arises, i.e., five years after call or maturity.

The 1981 Act shortened the general dormancy period from 7 years to 5 years. Certain exceptions continue to be appropriate. For instance, statistical evidence indicates that a period of 15 years continues to be appropriate in the case of travelers checks, and seven years in the case of personal money orders and money orders issued by express companies. Also, in certain instances shorter periods are appropriate. For instance, the likelihood of finding the owner of a payroll check is materially decreased after one year. Hence, there is a one year dormancy period for unclaimed wages. Coverage of consumer credits is specifically provided, which is a clarification of the 1981 Act. The term covers credits owed on consumer transactions such as returns of merchandise,

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cancellation of layaways, and various kinds of deposits. The existence and amounts of such credits will of course be dependent on the terms of the contract between the holder and the consumer.

The dormancy period for unpaid distributions from retirement accounts and plans has been modified to shorten the period of presumed abandonment from five to three years, since an earlier date of presumed abandonment should be of assistance in assuring that the assets of the plan are ultimately claimed by their owner.

Because the unclaimed property laws are matters of traditional state powers, are laws of general application, and have only a tenuous, remote and peripheral impact on ERISA plans, it has been held that they are not pre-empted by federal law. AetnaLife Ins. Co.v.Borges, 869 F.2d 142 (2nd Cir. 1989); Attorney General v. Blue Cross and Blue Shield of Michigan, 168 Mich. App. 372, 424 N.W.2d 54 (Ct. App. 1988), appeal denied, No. 83788 (March 31, 1989). These cases declined to follow two advisory opinions to the contrary, issued by the Department of Labor (Opinions 78-32A, December 22, 1978, and 79-30A, May 14, 1979). Thereafter, notwithstand-ing the Second Circuit and Michigan decisions, the Department continued to adhere to its posi-tion that unclaimed property laws “relate to” ERISA, and are thus pre-empted, in a letter opinion issued March 3, 1995. 22 BNA Pension & Benefits Reporter 743 (1995). That opinion relied on Ingersoll-Rand Co. v. McClendon, 498 U.S. 133 (1990), as holding that pre-emption extended to state laws that had only an indirect economic affect on ERISA plans. Subsequently, the Supreme Court in New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., _____ U.S. _____ (63 Law Week 4372, April 26, 1995), expounded a much narrower meaning of Ingersoll-Rand. The case held that ERISA does not pre-empt the imposition of statutorily-man-dated surcharges on bills of hospital patients whose commercial insurance coverage is purchased by an ERISA plan, or on HMOs insofar as their membership fees are paid by an ERISA plan. The Court emphasized that even though such state statutes would affect choices made by plan administrators, the ERISA pre-emption was not so broad as to nullify those state laws. The Court emphasized the basic presumption that “Congress does not intend to supplant state law” (63 LW at 4374). The Court said that Ingersoll-Rand does not hold that “merely economic influence” on administrative decisions will trigger pre-emption. (63 LW at 4376.) Ingersoll-Rand was explained to hold only that pre-emption would be found where state law produced “such acute, albeit indi-rect, economic effects” as to force a certain substantive scheme of coverage or effectively restrict insurance choices. (Id. at 4375.) Thus, “the basic thrust of the [ERISA] pre-emption clause, then, was to avoid a multiplicity of regulation in order to permit the nationally uniform administration of employee benefit plans.” (Id. at 4375.) See also Mackey v. Lanier Collection Agency & Service, Inc., 486 U.S. 825 (1988), holding that ERISA does not pre-empt a state garnishment statute under which a creditor may reach plan participants’ benefits. A state claim under its unclaimed property law would appear to be no more intrusive to the federal regulatory scheme than its garnishment laws. Accordingly, with one exception, the final distribution of assets of a terminated plan, which is governed by 29 U.S.C. sec. 1350, this Act presumes that it is not pre-empted by ERISA.

Intangible property held by a utility other than subscribers’ deposits and refunds

are subject to the five year rule of subsection (a)(15).

Subsection (e) is intended to make clear that property is reportable notwithstanding that the owner, who has lost or otherwise forgotten his or her entitlement to property, fails to present to


the holder evidence of ownership or to make a demand for payment. See Connecticut Mutual Life Insurance Co. v. Moore, 333 U.S. 541 (1948), in which the Court stated: “When the state under-takes the protection of abandoned claims, it would be beyond a reasonable requirement to compel the state to comply with conditions that may be quite proper as between the contracting parties.” See also Provident Institution for Savings v. Malone, 221 U.S.. 660 (1911), involving savings account; Insurance Co. of North America v. Knight, 8 Ill. App. 3d 871, 291 N.E.2d 40 (1972), involving negotiable instruments, and People v. Marshall Field & Co., 83 Ill. App. 3d 811, 404 N.E.2d 368 (1980), involving gift certificates. With respect to gift certificates, see also Section 19(a), which invalidates private periods of limitation. Thus, gift certificates will be reportable notwithstanding language on the certificate purporting to avoid escheat by creating an expiration date prior to the time of presumed abandonment. Section (c) also obviates the result reached in Oregon Racing Comm. v. Multonamah Kennel Club, 242 Or. 572, 411 P.2d 63 (1963), involving unpresented winning parimutuel tickets.

Since the holder is indemnified against any loss resulting from the delivery of the property to the administrator, no possible harm can result in requiring that holders turn over the property, even though the owner has not presented proof of death or surrendered the insurance policy, sav-ings account passbook, the gift certificate, winning racing ticket, or other memorandum of owner-ship.

SECTION 3. CONTENTS OF SAFE DEPOSIT BOX OR OTHER SAFEKEEPING DEPOSITORY. Tangible property held in a safe deposit box or other safekeeping depository in this State in the ordinary course of the holder’s business and proceeds resulting from the sale of the property permitted by other law, are presumed abandoned if the property remains unclaimed by the owner for more than five years after expiration of the lease or rental period on the box or other depository.

Comment

Section 3 parallels Section 2(d) of the 1966 Act and Section 16 of the 1981 Act. This sec-tion is not intended to cover property left in places other than safekeeping depositories, for ex-ample, airport lockers or field warehouses. Its coverage is limited to tangible property held in safe deposit boxes in banks and financial institutions. Intangible property, evidence of which is found in a safe deposit box, is covered by Section 2.

SECTION 4. RULES FOR TAKING CUSTODY. Except as otherwise provided in this [Act] or by other statute of this State, property that is presumed abandoned, whether located in this or another State, is subject to the custody of this State if:

(1) the last known address of the apparent owner, as shown on the records of the holder, is in this State;

(2) the records of the holder do not reflect the identity of the person entitled to the property and it is established that the last known address of the person entitled to the property is in this State;

(3) the records of the holder do not reflect the last known address of the apparent owner

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and it is established that:

(i) the last known address of the person entitled to the property is in this State; or

(ii) the holder is domiciled in this State or is a government or governmental subdi-vision, agency, or instrumentality of this State and has not previously paid or delivered the prop-erty to the State of the last known address of the apparent owner or other person entitled to the property;

(4) the last known address of the apparent owner, as shown on the records of the holder, is in a State that does not provide for the escheat or custodial taking of the property and the holder is domiciled in this State or is a government or governmental subdivision, agency, or instrumentality of this State; (5) the last known address of the apparent owner, as shown on the records of the holder, is in a foreign country and the holder is domiciled in this State or is a government or governmental subdivision, agency, or instrumentality of this State;

(6) the transaction out of which the property arose occurred in this State, the holder is do-miciled in a State that does not provide for the escheat or custodial taking of the property, and the last known address of the apparent owner or other person entitled to the property is unknown or is in a State that does not provide for the escheat or custodial taking of the property; or

(7) the property is a traveler’s check or money order purchased in this State, or the issuer of the traveler’s check or money order has its principal place of business in this State and the issuer’s records show that the instrument was purchased in a State that does not provide for the escheat or custodial taking of the property, or do not show the State in which the instrument was purchased.

Comment

Section 4 describes the general circumstances under which a State may claim abandoned intangible property. This section closely follows the language of Texas v. New Jersey, in which the court reasoned that unclaimed property is an asset of the creditor and should gener-ally be paid to the creditor State, i.e., the State of residence of the apparent owner. Consistent with that reasoning it held that unclaimed intangible property is subject to escheat or custody as unclaimed property first by the State of the owner’s last known address. (See Section 1(7) and the Comment with regard to “last known address.”) If that State cannot claim the property, the State of the holder’s domicile is entitled to custody. Consistent with the court’s concern for a simple rule which would avoid the complexities of proving domicile and residence the court established the priority on the basis of information contained in the holder’s records. Where the holder’s records do not show that the owner had an address within the State, the second priority claimant, the State of domicile of the holder, is entitled to claim the property. Another State can later assume custody from the State of the holder’s domicile by showing that the last known address of the owner was within its borders. Likewise, if the State of last known address does not have an unclaimed proper-ty law which applies to the property, the State of the holder’s domicile can take the property, again subject to the right of the State of last known address to recover the property if and when it enacts an unclaimed property or escheat law.

Paragraph (1) restates the factual situation in Texas v. New Jersey.As the courtthere said


“...the addressonthe recordsofadebtor,which in most cases will be the only one available, should be the only relevant last known address.”

Paragraph (2) covers the situation in which, on the basis of the holder’s records, the identity of the person entitled to the property is unknown, and the holder therefore reports to the State of its domicile, but it is later established by another State that the property was owned by or payable to a person whose last known address was within the claiming State. This is a ra-tional extension of Texas v. New Jersey. Reunification of the owner with his or her property in this circumstance is impossible, and insofar as that issue is concerned, it makes no difference whether the property is delivered to the State of the holder’s domicile or the State of the owner’s last known address. However, following the equitable concept of distributing unclaimed property among creditor States articulated by the Supreme Court in Texas v. New Jersey, and reaffirmed in Delaware v. New York, the subsection directs that where there is no record of a name but there is a record that the last known address was within the State, that State where the owner had an address can claim the property.

Paragraph (3) is the secondary rule of Texas v. New Jersey. The Supreme Court ruled that when property is owed to persons for whom there are no addresses, the property will be subject to escheat by the State of the holder’s domicile, provided that another State may later claim upon proof that the last known address of the person entitled to the property was within its borders.

Paragraph (4) provides that if the law of the State of the owner’s last known address does not provide for escheat or taking custody of the unclaimed property or if that State’s escheat or un-claimed property law is not applicable to the property in question, the property is subject to claim by the State in which the holder is domiciled. In that instance, the State of the owner’s last known address may thereafter claim the property if it enacts an applicable unclaimed property law. The holder State will act as custodian and pay or deliver the property to the owner or the State which has priority under Texas v. New Jersey upon request. As held in State v. Liquidating Trustees of Republic Petroleum Co., 510 S.W.2d 311 (Texas 1974), Texas v. New Jersey dealt only with conflicting claims of two or more States, and provides no basis for a holder to object to the claim of its State of domicile by asserting that another State has a superior claim, if the holder has not already reported the property to that other State. Therefore a State which claims custody on the ground that it is the holder’s domicile is not required to prove that the laws of some or all of the other 49 States do not “provide” for the taking of the property; if the holder has not reported and paid the property to another State, as between the domiciliary State and the holder, it will be presumed that such other State’s laws do not apply. If another State does claim the property, it may of course proceed under Section 14.

Paragraph (5) provides that when the last known address of the apparent owner is in a for-eign nation the State in which the holder is domiciled may claim the property. This issue was not dealt with by the Supreme Court in Texas v. New Jersey, but is a rational extension of that ruling.

Paragraph (6) provides for a situation in which neither of the priority claims discussed in Texas v. New Jersey can be made, but the State has a genuine and important contact with the prop-erty. An example of the type of claim which might be made under paragraph (6) arose in O’Connor v. Sperry & Hutchinson Co., 412 A.2d 539 (Pa.1980). There Pennsylvania sought to escheat

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unredeemed trading stamps sold by a corporation domiciled in New Jersey to retailers located in Pennsylvania. Pennsylvania took the position that Texas v. New Jersey did not create a jurisdic-tional bar to escheat by other States when the States granted priority were unable to take. There was no first priority claim since there were no addresses of the trading stamp purchasers. The second priority claimant, the State of corporate domicile (New Jersey), was not permitted under its law to escheat trading stamps (see New Jersey v. Sperry & Hutchinson Co., 56 N.J.Super. 589, 153 A.2d 691 (1959), affirmed per curiam, 31 N.J. 385, 157 A.2d 505 (1960)) and hence Pennsylvania urged that in order to prohibit a corporate windfall it should be allowed to claim this property. The Pennsylvania Supreme Court affirmed a lower court decision which overruled Sperry & Hutchin-son’s motion to dismiss but did not reach the Texas v. New Jersey issue.

Gift certificates, unused airline tickets, and other property for which there is no last known address may be claimed by the State where the purchase was made if the State of corporate domi-cile does not have an abandoned property law covering the property in question under paragraph (6).

Travelers checks and money orders are covered under paragraph (7), which states the rule adopted by Congress in 12 U.S.C. sections 2501 et seq.The congressional action was in response to the Supreme Court decision in Pennsylvania v. New York, 407 U.S. 206 (1972), which held that the State of corporate domicile was entitled to escheat money orders when there was no last known address of the purchaser although the property had been purchased in other States. Para-graph (7), pursuant to the congressional mandate, substitutes as the test for asserting a claim to travelers checks and money orders the place of purchase rather than the State of incorporation of the issuer.

Wholly foreign transactions are excluded from the coverage of the Act. See Section 26.

SECTION 5. DORMANCY CHARGE. A holder may deduct from property presumed aban-doned a charge imposed by reason of the owner’s failure to claim the property within a specified time only if there is a valid and enforceable written contract between the holder and the owner un-der which the holder may impose the charge and the holder regularly imposes the charge, which is not regularly reversed or otherwise canceled. The amount of the deduction is limited to an amount that is not unconscionable.

Comment

This section is consistent with those cases which have ruled on the issue of service charges under the 1966 Act and the 1981 Act. Section 5 is a limitation on the deduction of charges based solely on dormancy and is applicable to all intangible property presumed abandoned. This section, which applies to all unclaimed property, replaces similar limitations that were specifically focused on various types of property in the 1981 Act. The limitation of a service charge to an amount that is not unconscionable is new and is drawn from Article 2, Section 302, of the Uniform Commer-cial Code.

SECTION 6. BURDEN OF PROOF AS TO PROPERTY EVIDENCED BY RECORD OF CHECK OR DRAFT. A record of the issuance of a check, draft, or similar instrument is prima facie evidence of an obligation. In claiming property from a holder who is also the issuer,


the administrator’s burden of proof as to the existence and amount of the property and its aban-donment is satisfied by showing issuance of the instrument and passage of the requisite period of abandonment. Defenses of payment, satisfaction, discharge, and want of consideration are affirma-tive defenses that must be established by the holder.

Comment

This provision clarifies the burden of proof in situations where the obligation evidenced by a negotiable instrument is disputed by the holder, and is consistent with cases which have ruled on the matter. See Insurance Co. of North America v. Knight, 8 Ill.App.3d 871, 291 N.E.2d 40 (1972), app. dismissed 414 804, 38 L.Ed.2d 40, 94 S.Ct. 165 (1973), Blue Cross of Northern Cal. v. Cory, 120 Cal. App.3d 723, 174 Cal. Rptr. 901 (1981), and Revenue Cabinet v. Blue Cross & Blue Shield, 702 S.W.2d 433, 435 (Ky. 1986). See also Riggs Nat’l Bank v. Dis-trict of Columbia, 581 A.2d 1229 (D.C. App. 1990). It is also consistent with the cases holding that when claiming abandoned property the State steps into the shoes of the owner (see Epstein, McThenia and Forslund, “Unclaimed Property and Reporting Forms,” sec. 3.02 (Matt. Bend. 1984), and Article 3-308 of the Uniform Commercial Code. Under U.C.C. Section 3-308(2), “When signatures are admitted or established, production of the instrument entitles a holder to recover on it unless the defendant establishes a defense.” The reason for requiring a plaintiff to produce the instrument is “to show that the plaintiff is in fact the holder, and in order to protect the defendant from double liability.” 6 Anderson, Uniform Commercial Code, sec. 3-307:4, p. 158 (3rd ed., 1993). The administrator, by proving issuance of the instrument, succeeds to all rights of the payee. Because the issuer is relieved of all liability on the instrument by paying the obliga-tion to the State as unclaimed property, and is indemnified by the State, there is no chance that the issuer would be held liable twice, and therefore the administrator is not required to produce the instrument in order to possess the same rights as a holder in due course.

SECTION 7. REPORT OF ABANDONED PROPERTY.

(a) A holder of property presumed abandoned shall make a report to the administrator con-cerning the property.

(b) The report must be verified and must contain:

(1) a description of the property;

(2) except with respect to a traveler’s check or money order, the name, if known, and last known address, if any, and the social security number or taxpayer identification number, if readily ascertainable, of the apparent owner of property of the value of $50 or more;

(3) an aggregated amount of items valued under $50 each;

(4) in the case of an amount of $50 or more held or owing under an annuity or a life or endowment insurance policy, the full name and last known address of the annuitant or insured and of the beneficiary;

(5) in the case of property held in a safe deposit box or other safekeeping deposi-tory, an indication of the place where it is held and where it may be inspected by the administrator, and any amounts owing to the holder;

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(6) the date, if any, on which the property became payable, demandable, or return-able, and the date of the last transaction with the apparent owner with respect to the property; and

(7) other information that the administrator by rule prescribes as necessary for the administration of this [Act]. (c) If a holder of property presumed abandoned is a successor to another person who previ-ously held the property for the apparent owner or the holder has changed its name while holding the property, the holder shall file with the report its former names, if any, and the known names and addresses of all previous holders of the property. (d) The report must be filed before November 1 of each year and cover the 12 months next preceding July 1 of that year, but a report with respect to a life insurance company must be filed before May 1 of each year for the calendar year next preceding.

(e) The holder of property presumed abandoned shall send written notice to the apparent owner, not more than 120 days or less than 60 days before filing the report, stating that the holder is in possession of property subject to this [Act], if:

(1) the holder has in its records an address for the apparent owner which the hold-er’s records do not disclose to be inaccurate;

(2) the claim of the apparent owner is not barred by a statute of limitations; and

(3) the value of the property is $50 or more.

(f) Before the date for filing the report, the holder of property presumed abandoned may request the administrator to extend the time for filing the report. The administrator may grant the extension for good cause. The holder, upon receipt of the extension, may make an interim pay-ment on the amount the holder estimates will ultimately be due, which terminates the accrual of additional interest on the amount paid.

(g) The holder of property presumed abandoned shall file with the report an affidavit stat-ing that the holder has complied with subsection (e).

Comment

The $50 minimum provided in subsection (b)(1), (2), and (3) represents an increase from $3.00 in the 1966 Act and $25 in the 1981 Act in order to minimize reporting expenses. Almost every State which enacted the prior Uniform Act now provides for a $25 minimum.

Before filing its report, the holder must send written notice to the apparent owner, if the owner’s claim is not barred by the statute of limitations, the property has a value of $50 or more, and the holder’s records do not disclose the address to be inaccurate. Other efforts to locate the owner are no longer required.

Subsection (f) provides new flexibility to the holder and to the administrator in cases where the holder’s timely compliance is not feasible. In the past, some administrators have felt themselves to be without authority to extend the filing deadlines, or to accept less than a final re-


port. It is now made clear that an extension can be had for good cause, and the holder can limit its exposure to interest by making a partial payment.

SECTION 8. PAYMENT OR DELIVERY OF ABANDONED PROPERTY. (a) Except for property held in a safe deposit box or other safekeeping depository, upon filing the report required by Section 7, the holder of property presumed abandoned shall pay, deliver, or cause to be paid or delivered to the administrator the property described in the report as unclaimed, but if the property is an automatically renewable deposit, and a penalty or forfeiture in the payment of interest would result, the time for compliance is extended until a penalty or forfei-ture would no longer result. Tangible property held in a safe deposit box or other safekeeping de-pository may not be delivered to the administrator until [120] days after filing the report required by Section 7.

(b) If the property reported to the administrator is a security or security entitlement under [Article 8 of the Uniform Commercial Code], the administrator is an appropriate person to make an indorsement, instruction, or entitlement order on behalf of the apparent owner to invoke the duty of the issuer or its transfer agent or the securities intermediary to transfer or dispose of the se-curity or the security entitlement in accordance with [Article 8 of the Uniform Commercial Code].

(c) If the holder of property reported to the administrator is the issuer of a certificated secu-rity, the administrator has the right to obtain a replacement certificate pursuant to [Section 8-405 of the Uniform Commercial Code], but an indemnity bond is not required.

(d) An issuer, the holder, and any transfer agent or other person acting pursuant to the instructions of and on behalf of the issuer or holder in accordance with this section is not liable to the apparent owner and must be indemnified against claims of any person in accordance with Sec-tion 10.

Comment

Subsections (b) and (c) particularize the general duty stated in subsection (a) with respect to investment securities, including securities positions held directly and securities positions held through accounts with brokers or other intermediaries (referred to as security entitlements” under revised Article 8 of the Uniform Commercial Code). UCC Article 8 provides that the issuer of a security, or intermediary with respect to a security entitlement, has a duty to act at the direction of the “appropriate person.” Subsection (b) provides that with respect to securities and security en-titlements that have been reported as abandoned property pursuant to Section 7, the administrator is an “appropriate person.” Accordingly, the administrator has the same rights under UCC Article 8 as other persons who succeed by operation of law to securities or security entitlements, such as the executor or administrator of a decedent. Subsection (c) deals with situations where the holder reporting abandoned property is itself the issuer of a certificated security, and hence does not have the original certificate to turn over to the administrator. Accordingly, subsection (b) provides that the administrator can invoke the provisions of UCC Article 8 governing replacement certificates, without an indemnity bond.

Subsection (d) indemnifies a person causing a replacement certificate to be issued to the administrator from any claims that the person acted wrongfully in so doing. This indemnifica-

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tion is desireable in that it eliminates any duty of the transferring authority to make an indepen-dent investigation into whether the listed owner of the security is in fact missing, or into other factors which might affect the administrator’s right to obtain custody of the property.

SECTION 9. NOTICE AND PUBLICATION OF LISTS OF ABANDONED PROPERTY.

(a) The administrator shall publish a notice not later than November 30 of the year next following the year in which abandoned property has been paid or delivered to the administrator. The notice must be published in a newspaper of general circulation in the [county] of this State in which is located the last known address of any person named in the notice. If a holder does not report an address for the apparent owner, or the address is outside this State, the notice must be published in the [county] in which the holder has its principal place of business within this State or another [county] that the administrator reasonably selects. The advertisement must be in a form that, in the judgment of the administrator, is likely to attract the attention of the apparent owner of the unclaimed property. The form must contain:

(1) the name of each person appearing to be the owner of the property, as set forth in the report filed by the holder;

(2) the last known address or location of each person appearing to be the owner of the property, if an address or location is set forth in the report filed by the holder;

(3) a statement explaining that property of the owner is presumed to be abandoned and has been taken into the protective custody of the administrator; and

(4) a statement that information about the property and its return to the owner is available to a person having a legal or beneficial interest in the property, upon request to the ad-ministrator.

(b) The administrator is not required to advertise the name and address or location of an owner of property having a total value less than $50, or information concerning a traveler’s check, money order, or similar instrument.

Comment

This section sets forth the minimum requirements for advertisement. The administrator may publish more frequently or extensively. The Act does not establish a specific time for the publication so that the administrator can choose a time that will provide the best expo-sure and flexibility in scheduling the workload and personnel available.

The advertisement must contain a minimum of two items of information, one of which explains that the abandoned property has been paid into the protective custody of the admin-istrator. Since abandoned property is delivered with the report under the revisions of this Act, this statement is necessary to explain the location of the property and to insure that inquiries are directed to the administrator.

Subsection (b) limits the duty to advertise in recognition of the fact in the specified circumstances the value of the property is so slight as to negate the benefits of the advertising, or


the names and addresses of the owners of the instruments are not maintained by the holder, or in the case of travelers checks, after 15 years the advertisement is unlikely to be productive.

SECTION 10. CUSTODY BY STATE; RECOVERY BY HOLDER; DEFENSE OF HOLDER.

(a) In this section, payment or delivery is made in “good faith” if:

(1) payment or delivery was made in a reasonable attempt to comply with this [Act];

(2) the holder was not then in breach of a fiduciary obligation with respect to the property and had a reasonable basis for believing, based on the facts then known, that the property was presumed abandoned; and

(3) there is no showing that the records under which the payment or delivery was made did not meet reasonable commercial standards of practice. (b) Upon payment or delivery of property to the administrator, the State assumes custody and responsibility for the safekeeping of the property. A holder who pays or delivers property to the administrator in good faith is relieved of all liability arising thereafter with respect to the property.

(c) A holder who has paid money to the administrator pursuant to this [Act] may subse-quently make payment to a person reasonably appearing to the holder to be entitled to payment. Upon a filing by the holder of proof of payment and proof that the payee was entitled to the pay-ment, the administrator shall promptly reimburse the holder for the payment without imposing a fee or other charge. If reimbursement is sought for a payment made on a negotiable instrument, including a traveler’s check or money order, the holder must be reimbursed upon filing proof that the instrument was duly presented and that payment was made to a person who reasonably ap-peared to be entitled to payment. The holder must be reimbursed for payment made even if the payment was made to a person whose claim was barred under Section 19(a).

(d) A holder who has delivered property other than money to the administrator pursuant to this [Act] may reclaim the property if it is still in the possession of the administrator, without pay-ing any fee or other charge, upon filing proof that the apparent owner has claimed the property from the holder.

(e) The administrator may accept a holder’s affidavit as sufficient proof of the holder’s right to recover money and property under this section.

(f) If a holder pays or delivers property to the administrator in good faith and thereafter another person claims the property from the holder or another State claims the money or property under its laws relating to escheat or abandoned or unclaimed property, the administrator, upon written notice of the claim, shall defend the holder against the claim and indemnify the holder against any liability on the claim resulting from payment or delivery of the property to the admin-istrator.

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(g) Property removed from a safe deposit box or other safekeeping depository is received by the administrator subject to the holder’s right to be reimbursed for the cost of the opening and to any valid lien or contract providing for the holder to be reimbursed for unpaid rent or storage charges. The administrator shall reimburse the holder out of the proceeds remaining after deduct-ing the expense incurred by the administrator in selling the property.

Comment

When property is turned over to the State, the holder is relieved of all liability for any turnover made in good faith. Subsection (a) sets forth a definition of good faith which inter alia allows the holder to rely on its records if they meet reasonable commercial standards of practice in the industry.

The section also permits the holder to obtain reimbursement for claims it elected to pay to owners who appeared after the property was turned over. If a State in enacting Section 12(b) provides for the payment of interest on property delivered to the administrator, then the holder will add such interest when paying the claim.

If after turnover, any person or another State makes a claim on the holder, the State, upon request, is required to defend the holder and provide indemnification against any liability.

SECTION 11. CREDITING OF DIVIDENDS, INTEREST, AND INCREMENTS TO OWNER’S ACCOUNT. If property other than money is delivered to the administrator under this [Act], the owner is entitled to receive from the administrator any income or gain realized or accruing on the property at or before liquidation or conversion of the property into money. If the property was an interest bearing demand, savings, or time deposit, including a deposit that is au-tomatically renewable, the administrator shall pay interest at a rate of [insert legal rate] percent a year or any lesser rate the property earned while in the possession of the holder. Interest begins to accrue when the property is delivered to the administrator and ceases on the ear-lier of the expiration of 10 years after delivery or the date on which payment is made to the owner. Interest on interest bearing property is not payable for any period before the effective date of this [Act], unless authorized by law superseded by this [Act].

Comment

Under this section the owner of interest earning bonds or bank deposits, or dividend pay-ing stock, will generally receive interest or income which the property earned while in the State’s custody.

SECTION 12. PUBLIC SALE OF ABANDONED PROPERTY.

(a) Except as otherwise provided in this section, the administrator, within three years after the receipt of abandoned property, shall sell it to the highest bidder at public sale at a location in the State which in the judgment of the administrator affords the most favorable market for the property. The administrator may decline the highest bid and reoffer the property for sale if the administrator considers the bid to be insufficient. The administrator need not offer the property for


sale if the administrator considers that the probable cost of sale will exceed the proceeds of the sale. A sale held under this section must be preceded by a single publication of notice, at least three weeks before sale, in a newspaper of general circulation in the [county] in which the prop-erty is to be sold.

(b) Securities listed on an established stock exchange must be sold at prices prevailing on the exchange at the time of sale. Other securities may be sold over the counter at prices prevailing at the time of sale or by any reasonable method selected by the administrator. If securities are sold by the administrator before the expiration of three years after their delivery to the administrator, a person making a claim under this [Act] before the end of the three-year period is entitled to the proceeds of the sale of the securities or the market value of the securities at the time the claim is made, whichever is greater, plus dividends, interest, and other increments thereon up to the time the claim is made, less any deduction for expenses of sale. A person making a claim under this [Act] after the expiration of the three-year period is entitled to receive the securities delivered to the administrator by the holder, if they still remain in the custody of the administrator, or the net proceeds received from sale, and is not entitled to receive any appreciation in the value of the property occurring after delivery to the administrator, except in a case of intentional misconduct or malfeasance by the administrator.

(c) A purchaser of property at a sale conducted by the administrator pursuant to this [Act] takes the property free of all claims of the owner or previous holder and of all persons claiming through or under them. The administrator shall execute all documents necessary to complete the transfer of ownership.

Comment

If the security is stock or other intangible interest in a business association, the administra-tor is permitted to sell the security, but if the missing owner appears and makes claim for the secu-rity within three years after the administrator has sold it, the missing owner is entitled to receive the proceeds of the sale or the market value of the securities at the time the claim is made. Thus there is a genuine incentive for an administrator to hold this property for the requisite three-year period.

Subsection (b) permits an administrator to sell securities at prevailing prices directly to the issuing companies.

This section is not intended as a direction to the administrator to sell “money,” although money is included in the definition of property, unless it is a collector’s specie having value greater than the face value of the money as cash.

SECTION 13. DEPOSIT OF FUNDS.

[(a) Except as otherwise provided by this section, the] [The] administrator shall promptly deposit in the [general fund] of this State all funds received under this [Act], including the pro-ceeds from the sale of abandoned property under Section 12. [The administrator shall retain in a separate trust fund at least [$100,000] from which the administrator shall pay claims duly al-lowed.] The administrator shall record the name and last known address of each person appearing from the holders’ reports to be entitled to the property and the name and last known address of each insured person or annuitant and beneficiary and with respect to each policy or annuity listed

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in the report of an insurance company, its number, the name of the company, and the amount due.

[(b) Before making a deposit to the credit of the [general fund], the administrator may deduct:

(1) expenses of sale of abandoned property;

(2) costs of mailing and publication in connection with abandoned property;

(3) reasonable service charges; and

(4) expenses incurred in examining records of holders of property and in collecting the property from those holders.]

Comment

This section increases from $25,000 to $100,000 the sum which is recommended to be re-tained in a trust account for payment of claims. It is contemplated that the amount of the trust fund which is ultimately established will reflect a State’s experience in paying owners’ claims.

SECTION 14. CLAIM OF ANOTHER STATE TO RECOVER PROPERTY.

(a) After property has been paid or delivered to the administrator under this [Act], another State may recover the property if:

(1) the property was paid or delivered to the custody of this State because the records of the holder did not reflect a last known location of the apparent owner within the borders of the other State and the other State establishes that the apparent owner or other person entitled to the property was last known to be located within the borders of that State and under the laws of that State the property has escheated or become subject to a claim of abandonment by that State;

(2) the property was paid or delivered to the custody of this State because the laws of the other State did not provide for the escheat or custodial taking of the property, and under the laws of that State subsequently enacted the property has escheated or become subject to a claim of abandonment by that State;

(3) the records of the holder were erroneous in that they did not accurately identify the owner of the property and the last known location of the owner within the borders of another State and under the laws of that State the property has escheated or become subject to a claim of abandonment by that State;

(4) the property was subjected to custody by this State under Section 4(6) and un-der the laws of the State of domicile of the holder the property has escheated or become subject to a claim of abandonment by that State; or

(5) the property is a sum payable on a traveler’s check, money order, or similar instrument that was purchased in the other State and delivered into the custody of this State under Section 4(7), and under the laws of the other State the property has escheated or become subject to a claim of abandonment by that State.


(b) A claim of another State to recover escheated or abandoned property must be presented in a form prescribed by the administrator, who shall decide the claim within 90 days after it is presented. The administrator shall allow the claim upon determining that the other State is entitled to the abandoned property under subsection (a).

(c) The administrator shall require another State, before recovering property under this sec-tion, to agree to indemnify this State and its officers and employees against any liability on a claim to the property.

Comment

Section 14 should be read together with Section 4. Sections 4 and 14 are designed to carry out the priority scheme enunciated in Texas v. New Jersey, 379 U.S. 674 (1965). In general the State in which the owner had his or her last known address is entitled to claim abandoned property. Where there is insufficient information to permit this assertion of custody, the State of the holder’s domicile takes the property subject to a later claim by the State of the last known ad-dress.

Paragraph (1) of subsection (a) provides that if property was paid to the State of the hold-er’s domicile because the last known address of the owner was unknown and it is later established by another State that the last known address of the person entitled to the property was in the other State, the State of domicile should pay the property over to the other State.

Paragraph (2) parallels Section 4, paragraph (4), which permits the State of corporate do-micile to take if the State of the last known address does not provide for the escheat or custodial taking of the property. If the State of the last known address subsequently enacts an unclaimed property law which covers the property, the taking State must turn it over.

Paragraph (3) addresses the problem of Nellius v. Tampax, Inc., 394 A.2d 333 (Del. Ch. Ct. 1978) in which the holder’s records did not reflect the fact that the record owner had sold the property to another. The court concluded, under Texas v. New Jersey, that the holder’s records were controlling and that it could properly report and deliver the property to the State in which its records showed the owner to be resident. However, as provided in Texas v. New Jersey and in paragraph 4, the State of the owner’s actual residence could then claim the property from the State to which it was initially reported.

Paragraph (4), paralleling Section 4(6), provides that property initially claimed under a “contacts” test because there was no last known address and the State of domicile had no appli-cable unclaimed property law may be reclaimed by the State of corporate domicile if it enacts an applicable unclaimed property law.

Subsection (c) provides that the State that initially receives property later claimed by another State may require an indemnification agreement from the claiming State.

SECTION 15. FILING CLAIM WITH ADMINISTRATOR; HANDLING OF CLAIMS BY ADMINISTRATOR.

(a) A person, excluding another State, claiming property paid or delivered to the adminis-trator may file a claim on a form prescribed by the administrator and verified by the claimant.

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(b) Within 90 days after a claim is filed, the administrator shall allow or deny the claim and give written notice of the decision to the claimant. If the claim is denied, the administrator shall inform the claimant of the reasons for the denial and specify what additional evidence is required before the claim will be allowed. The claimant may then file a new claim with the administrator or maintain an action under Section 16.

(c) Within 30 days after a claim is allowed, the property or the net proceeds of a sale of the property must be delivered or paid by the administrator to the claimant, together with any divi-dend, interest, or other increment to which the claimant is entitled under Sections 11 and 12.

(d) A holder who pays the owner for property that has been delivered to the State and which, if claimed from the administrator by the owner would be subject to an increment under Sections 11 and 12, may recover from the administrator the amount of the increment.

Comment

A person claiming property from the administrator is not limited to the number of times the claim may be filed or refiled prior to commencing an action under Section 16. The adminis-trator’s decision on a claim does not operate as collateral estoppel or res judicata. A person who has commenced an action under Section 16 may also reassert a claim before the administrator if the action has been dismissed without prejudice. A claim which has become the subject of a final judgment may not thereafter by refiled with the administrator.

SECTION 16. ACTION TO ESTABLISH CLAIM. A person aggrieved by a decision of the administrator or whose claim has not been acted upon within 90 days after its filing may maintain an original action to establish the claim in the [appropriate] court, naming the [administrator] as a defendant. [If the aggrieved person establishes the claim in an action against the administrator, the court may award the claimant reasonable attorney’s fees.]

Comment

After property is presumed abandoned and reported to the administrator the administra-tor must attempt to locate the missing owner. Thereafter, if the property has been delivered to the administrator and the owner or his representative appears, the administrator must pay the claim. The owner’s rights are never cut off; under this Act, the owner’s rights exist in perpetuity. Al-though some state administrators have urged legislation that would terminate an owner’s right to the property merely by the passage of time, such enactments may be unconstitutional. In Hamilton v. Brown, 161 U.S. 256, 275, 16 S. Ct. 585, 592, 40 L. Ed. 691, 699, (1896), the Supreme Court held that any procedure by which the State seeks to cut off the owner’s title through escheat must include “actual notice by service of summons to all known claimants, and constructive notice by publication to all possible claimants who are unknown....” Any lesserprocedureappearstofallshor-tof due process. The history of escheat, as compared with modern unclaimed property legislation, is discussed in “Unclaimed Property and Reporting Forms,” Epstein, McThenia & Forslund, ch. 1 (Matt. Bend. 1984).

In any judicial action commenced to recover the property from the administrator, the claimant may proceed de novo, and the court will not be limited to a mere review of the adminis-


trator’s decision.

SECTION 17. ELECTION TO TAKE PAYMENT OR DELIVERY.

(a) The administrator may decline to receive property reported under this [Act] which the administrator considers to have a value less than the expenses of notice and sale.

(b) A holder, with the written consent of the administrator and upon conditions and terms prescribed by the administrator, may report and deliver property before the property is presumed abandoned. Property so delivered must be held by the administrator and is not presumed aban-doned until it otherwise would be presumed abandoned under this [Act].

Comment

Subsection 17(b) authorizes the administrator to assume custody of property prior to the time for presuming abandonment. Administrators have expressed a need for this authority to en-able them to take possession of property, such as the contents of a safe deposit box repository, when the holder is terminating business but the property is not yet reportable. Additionally, other holders which have conducted business in the State and are ceasing operations might use the provisions of this section. The property must be held by the administrator until the abandonment period runs and then the property will be subject to the other provisions of the Act.

SECTION 18. DESTRUCTION OR DISPOSITION OF PROPERTY HAVING NO SUB-STANTIAL COMMERCIAL VALUE; IMMUNITY FROM LIABILITY.

If the administrator determines after investigation that property delivered under this [Act] has no substantial commercial value, the administrator may destroy or otherwise dispose of the prop-erty at any time. An action or proceeding may not be maintained against the State or any officer or against the holder for or on account of an act of the administrator under this section, except for intentional misconduct or malfeasance.

Comment

This section provides for the disposition of property which has no commercial value. As an example, the contents of safety deposit boxes often include such items as rent receipts, personal correspondence and lapsed insurance policies. In such cases, these contents might have some personal significance to the owner, which the administrator would take into consideration in deter-mining for what period of time he will hold the property awaiting a claim by the owner. However, in the usual situation there will be no interest to be preserved by maintaining this property under state custody.

Under this section the administrator would be free to retain property having no commercial value. Further, the administrator could transfer it to other agencies or institutions which might have an interest in the property because of its historical value or other independent significance.

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SECTION 19. PERIODS OF LIMITATION.

(a) The expiration, before or after the effective date of this [Act], of a period of limitation on the owner’s right to receive or recover property, whether specified by contract, statute, or court order, does not preclude the property from being presumed abandoned or affect a duty to file a report or to pay or deliver or transfer property to the administrator as required by this [Act].

(b) An action or proceeding may not be maintained by the administrator to enforce this [Act] in regard to the reporting, delivery, or payment of property more than 10 years after the holder specifically identified the property in a report filed with the administrator or gave express notice to the administrator of a dispute regarding the property. In the absence of such a report or other express notice, the period of limitation is tolled. The period of limitation is also tolled by the filing of a report that is fraudulent.

Comment

Subsection (a) is consistent with cases such as People v. Marshall Field & Co., 83 Ill. App. 3d 811, 404 N.E.2d 368 (1980), Screen Actors Guild, Inc. v. Cory, 91 Cal.App.3d 111, 154 Cal.Rptr. 77 (1979), and State v. Jefferson Lake Sulphur Co., 36 N.J. 577, 178 A.2d 329 (1962). It also abrogates another contractual condition often asserted as a defense to reporting property otherwise presumed abandoned, the failure to present the evidence of indebtedness.

Subsection (a) is written to insure also that although the owner’s claim against the holder may be barred by the statute of limitations prior to the effective date of the Act, the holder is not relieved of his obligation to pay abandoned property to the administrator. The Comment to Section 16 of the 1966 Act noted that local law must be consulted in order to ascertain whether legisla-tion constitutionally may be enacted reviving a cause of action barred by the statute of limitations. This issue has been litigated in several States, e.g., Country Mutual Insurance Co. v. Knight, 40 Ill.2d 523, 240 N.E.2d 612 (1968); Douglas Aircraft Co.v.Cranston, 24 Cal.Rptr. 851, 374 P.2d 819 (1962); cf. Standard Oil v. New Jersey, 5 N.J. 281, 74 A.2d 565 (1950). Even though the statute of limitations has run before the effective date of the Act, the holder may be required to report and deliver the property to the State if the holder does not regularly enforce the statute. See South Carolina Tax Commission v. Metropolitan Life Insurance Co., 266 S.C. 34, 221 S.E.2d 522 (1975). But see State of Washington v. Puget Sound Power & Light Co., 103 Wash.2d 501, 694 P.2d 7, 10 (1985).

Subsection (b) provides that an administrator must commence an action against a holder within 10 years after the time the property was first reported or specifically placed in issue. The 1995 amendment clarifies existing law and codifies the holdings of abandoned property cases that have ruled on issues of limitations. See Blue Cross of Northern California v. Cory, 174 Cal. Rptr. 901, 913, 120 Cal. App.3d 743 (App., 1981) (no statute of limitations will commence to run against the State until after the holder duly reports in compliance with the unclaimed prop-erty act); Travelers Express Co., Inc. v. Cony, 664 F.2d 763 (9th Cir. 1981) (statute of limitations commences to run only after filing of report which contains written explanation of why property is not subject to the act); Employers Insurance of Wausau v. Smith, 453 N.W.2d 856 (Wis. 1990) (filing of report essential to running of statute of limitations, since unclaimed property act depends on self-reporting); Sennet v. Insurance Co. of North America, 432 Pa. 5215, 247 A.2d 774, 777-78 (1968) (same; “INA simply has to take its stand: if it reports the holding [of funds in issue] (as a


precautionary measure), the statute will run; if it doesnot,the Commonwealth is not precluded....”); State of New Jersey v. U.S. Steel Corporation, 22 N.J. 341, 126 A.2d 168 (1956) (same); Trea-surer and Rec. Gen. v. John Hancock Mut. Life Ins. Co., 388 Mass. 410, 446 N.E.2d 1376 (1983) (same). The provision also parallels the Internal Revenue Code, 26 U.S.C. sec. 6501(c). Since the Unclaimed Property Act is based on a theory of truthful self-reporting, a holder which conceals property, wilfully or otherwise, cannot expect the protection of the stated limitations period.

SECTION 20. REQUESTS FOR REPORTS AND EXAMINATION OF RECORDS. (a) The administrator may require a person who has not filed a report, or a person who the administrator believes has filed an inaccurate, incomplete, or false report, to file a verified re-port in a form specified by the administrator. The report must state whether the person is holding property reportable under this [Act], describe property not previously reported or as to which the administrator has made inquiry, and specifically identify and state the amounts of property that may be in issue.

(b) The administrator, at reasonable times and upon reasonable notice, may examine the re-cords of any person to determine whether the person has complied with this [Act]. The administra-tor may conduct the examination even if the person believes it is not in possession of any property that must be reported, paid, or delivered under this [Act]. The administrator may contract with any other person to conduct the examination on behalf of the administrator.

(c) The administrator at reasonable times may examine the records of an agent, including a dividend disbursing agent or transfer agent, of a business association or financial association that is the holder of property presumed abandoned if the administrator has given the notice required by subsection (b) to both the association or organization and the agent at least 90 days before the examination.

(d) Documents and working papers obtained or compiled by the administrator, or the administrator’s agents, employees, or designated representatives, in the course of conducting an examination are confidential and are not public records, but the documents and papers may be:

(1) used by the administrator in the course of an action to collect unclaimed prop-erty or otherwise enforce this [Act];

(2) used in joint examinations conducted with or pursuant to an agreement with another State, the federal government, or any other governmental subdivision, agency, or instru-mentality;

(3) produced pursuant to subpoena or court order; or

(4) disclosed to the abandoned property office of another State for that State’s use in circumstances equivalent to those described in this subdivision, if the other State is bound to keep the documents and papers confidential.

(e) If an examination of the records of a person results in the disclosure of property report-able under this [Act], the administrator may assess the cost of the examination against the holder at the rate of [$200] a day for each examiner, or a greater amount that is reasonable and was incurred, but the assessment may not exceed the value of the property found to be reportable. The cost of an examination made pursuant to subsection (c) may be assessed only against the business association or financial organization.

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(f) If, after the effective date of this [Act], a holder does not maintain the records required by Section 21 and the records of the holder available for the periods subject to this [Act] are insuf-ficient to permit the preparation of a report, the administrator may require the holder to report and pay to the administrator the amount the administrator reasonably estimates, on the basis of any available records of the holder or by any other reasonable method of estimation, should have been but was not reported.

Comment

This section is designed to facilitate compliance with the Act. Subsection (a) provides for the filing of a negative report if the administrator requires such a report and will minimize disruption which would otherwise be caused to the holder if an examination of records instead were conducted by the administrator. Subsection (b) is based on Section 30 of the 1981 Act. Aside from the requirement that the administrator conduct the examination at reasonable times and upon reasonable notice, the only limitations on the administrator’s right to examine are constitutional limitations. Even though the Fourth Amendment does not extend as broadly to corporations as to individuals, Oklahoma Press Pub. Co. v. Walling, 327 U.S. 186, 90 L.Ed. 614, 66 S.Ct. 494 (1946), inspections of commercial property may be unreasonable if they are not authorized by law or are unnecessary for the furtherance of a governmental interest. Donovan v. Dewey, 452 U.S. 594, 56 L.Ed.2d 486, 98 S.Ct. 1942 (1980). This Act is deemed to meet that standard. Also, since one of the dual purposes of this Act is the collection of revenue, reference may be made to the cases holding that it is not an unreasonable search to require taxpayers to produce their books and records. See Annot., “Constitutionality of statutory provisions for examination of records, books, or documents for taxation purposes,” 103 ALR 522.

Subsection (c) is intended to provide a useful method whereby the administrator can conduct a single examination of a dividend disbursing agent or transfer agent serving in such ca-pacity for numerous business associations.

Subsection (f) permits the use of estimates in instances where the holder has failed to re-port and deliver property that is abandoned and no longer has reasonably accessible records suf-ficient to prepare a specific report. Additionally, if the holder fails to maintain records of the last known address, States can assert claims based on any other records which might exist. Resort may be had to computer codes. While the holding in Texas v. New Jersey is intended to prevent multiple liability of holders, this subsection, viewed as a penalty for failure to maintain re-cords of names and last known address, is not inconsistent with that decision. That part of subsec-tion (f) which permits the State to make estimates was prospective only from the date of adoption of the 1981 Act. This Act expressly states the bases on which estimates may be made. Thus, the State may use estimating techniques – where a holder has not maintained records as required by statute – based on industry averages, and may rely on inferences that may be based on statistics drawn from a broader basis than that of the holder in question who has failed to keep records. This section, together with Section 23, also clarifies the administrator’s authority to enter into agree-ments to enforce the State’s custodial powers in all States.

SECTION 21. RETENTION OF RECORDS.

(a) Except as otherwise provided in subsection (b), a holder required to file a report under


Section 7 shall maintain the records containing the information required to be included in the re-port for 10 years after the holder files the report, unless a shorter period is provided by rule of the administrator.

(b) A business association or financial organization that sells, issues, or provides to others for sale or issue in this State, traveler’s checks, money orders, or similar instruments other than third-party bank checks, on which the business association or financial organization is directly li-able, shall maintain a record of the instruments while they remain outstanding, indicating the State and date of issue, for three years after the holder files the report.

Comment

This section does not require that the holder in the first instance obtain the address of the owner. For example, a record of the address of the purchaser or recipient of a gift certificate customarily is not obtained.

Initially, the period for which records of address must be obtained is established at 10 years from the date the property was first reportable as abandoned property. However, this section permits a State to shorten this period by rule. Because the reporting practices of holders vary, an administrator will want to consider such factors as the burden imposed on the holder in maintain-ing such records, the opportunity of returning the property, and the type of business of the holder. For example, in the case of property that would be reportable in the aggregate without the name and address of the apparent owner under Section 7, a State might adopt a rule providing for a relatively short record retention period on condition that the holder maintain a record sufficient to satisfy the requirements of Texas v. New Jersey that there be a last known address or that the State can prove that the last known address of the creditor was within its borders.

Subsection (b) is designed to assure that the information required for asserting a claim to travelers checks and money orders is retained by the issuers of travelers checks and money orders.

SECTION 22. ENFORCEMENT. The administrator may maintain an action in this or an-other State to enforce this [Act]. The court may award reasonable attorney’s fees to the prevailing party.

Comment

Although generally an action would be brought in an administrator’s own State, action to enforce the Act may also be brought in the courts of another State. See Section 23. See also, Com-monwealth of Pennsylvania v. Kervick, 60 N.J. 289, 288 A.2d 289 (1972).

SECTION 23. INTERSTATE AGREEMENTS AND COOPERATION; JOINT AND RE-CIPROCAL ACTIONS WITH OTHER STATES. (a) The administrator may enter into an agreement with another State to exchange informa-tion relating to abandoned property or its possible existence. The agreement may permit the other State, or another person acting on behalf of a State, to examine records as authorized in Section

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20. The administrator by rule may require the reporting of information needed to enable compli-ance with an agreement made under this section and prescribe the form.

(b) The administrator may join with another State to seek enforcement of this [Act] against any person who is or may be holding property reportable under this [Act].

(c) At the request of another State, the attorney general of this State may maintain an action on behalf of the other State to enforce, in this State, the unclaimed property laws of the other State against a holder of property subject to escheat or a claim of abandonment by the other State, if the other State has agreed to pay expenses incurred by the attorney general in maintaining the action.

(d) The administrator may request that the attorney general of another State or another attorney commence an action in the other State on behalf of the administrator. With the approval of the attorney general of this State, the administrator may retain any other attorney to commence an action in this State on behalf of the administrator. This State shall pay all expenses, including attorney’s fees, in maintaining an action under this subsection. With the administrator’s approval, the expenses and attorney’s fees may be paid from money received under this [Act]. [The admin-istrator may agree to pay expenses and attorney’s fees based in whole or in part on a percentage of the value of any property recovered in the action.] Any expenses or attorney’s fees paid under this subsection may not be deducted from the amount that is subject to the claim by the owner under this [Act].

Comment

To avoid conflicts between the administrator’s procedures and the procedures of admin-istrators in other jurisdictions that enact the Uniform Unclaimed Property Act, the administrator, before adopting, amending or repealing rules, should advise and consult with administrators in other jurisdictions that adopt this Act substantially and take into consideration the rules of admin-istrators in other jurisdictions that enact the Uniform Unclaimed Property Act.

Cooperation among States is essential if abandoned property programs are to be efficiently administered. In recent years several States have joined together to audit major holders. Addition-ally, several States have entered into agreements to act as collection agents for each other. Inter-state cooperation and the development of uniform reporting forms and uniform regulations will be of assistance to holders as well as program administrators. This section encourages joint agree-ments and cooperation among the States. An agreement among the States might expressly relieve holders from reporting piecemeal to separate States. Instead, they might be able to file a single report of all abandoned property, wherever located, and regardless of the address of the owner.

Reciprocal agreements envisioned under subsection (c) do not require the consent of Congress under the Compact Clause of the Constitution, Art. I, § 10, cl. 3. The Supreme Court has held that the restriction of the Compact Clause is limited to combinations or agreements that tend to increase the political power of the States to such an extent that it interferes with the supremacy of the United States. United States Steel v. ulti-State Tax Commission, 434 U.S. 452 (1978). In Multi-State Tax Commission the Court upheld a tax compact, that had not been approved by Con-gress creating a permanent administrative body to perform audits of multi-state taxpayer opera-tions, and at the request of a member State, to sue to enforce the audits in the courts of the mem-ber States.


This section simply authorizes an economical approach to enforcing a State’s claim under

Texas v. New Jersey. Each State retains discretion to bring suit or to decide against such action, remaining free to adopt its own abandoned property policies. The position of the States will not be politically improved at the expense of the federal government although the process for claiming abandoned property will be more efficient.

Action by one State for another is expressly permitted by this section. In some cases the administrator of a State may deem it wise to seek counsel in a foreign jurisdiction. There may be small claims which would not justify individual action by the claimant State in a foreign forum, but if several States join forces and retain counsel in the holder State to sue for all of them, it might be administratively justified. This section expressly permits such joint action.

SECTION 24. INTEREST AND PENALTIES.

(a) A holder who fails to report, pay, or deliver property within the time prescribed by this [Act] shall pay to the administrator interest at the annual rate of [12 percent] [two percentage points above the annual rate of discount in effect on the date the property should have been paid or delivered for the most recent issue of 52-week United States Treasury bills] on the property or value thereof from the date the property should have been reported, paid or delivered.

(b) Except as otherwise provided in subsection (c), a holder who fails to report, pay, or deliver property within the time prescribed by this [Act], or fails to perform other duties imposed by this [Act], shall pay to the administrator, in addition to interest as provided in subsection (a), a civil penalty of [$200] for each day the report, payment, or delivery is withheld, or the duty is not performed, up to a maximum of [$5,000].

(c) A holder who willfully fails to report, pay, or deliver property within the time pre-scribed by this [Act], or willfully fails to perform other duties imposed by this [Act], shall pay to the administrator, in addition to interest as provided in subsection (a), a civil penalty of [$1,000] for each day the report, payment, or delivery is withheld, or the duty is not performed, up to a maximum of [$25,000], plus 25 percent of the value of any property that should have been but was not reported.

(d) A holder who makes a fraudulent report shall pay to the administrator, in addition to interest as provided in subsection (a), a civil penalty of [$1,000] for each day from the date a re-port under this [Act] was due, up to a maximum of [$25,000], plus 25 percent of the value of any property that should have been but was not reported. (e) The administrator for good cause may waive, in whole or in part, interest under subsec-tion (a) and penalties under subsections (b) and (c), and shall waive penalties if the holder acted in good faith and without negligence.

Comment

A major weakness of the 1966 Act was its ineffective penalty provision. Although the 1981 Act increased penalties for non-compliance, voluntary compliance with the Act continued to be a problem. In this Act, compliance failures not accompanied by willfulness are dealt with by moderate increases in the applicable penalties, and the administrator simultaneously is given au-

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thority to waive both interest and penalties where the holder has attempted in good faith to comply, or where the failure has been due to excusable neglect. Where the holder’s failure is willful or fraudulent, and not in good faith, penalties are increased more substantially.

Criminal penalties, which were the sole enforcement mechanism of the 1954 Act and which were retained in the 1981 Act have been eliminated, as they were not effective and rarely, if ever, pursued.

The provision for the discretionary waiver of interest upon a showing of good cause is intended to apply to situations in which the holder has attempted to comply with the Act. Estab-lishment of “good cause” is likely to be difficult where the holder has failed to file a report.

SECTION 25. AGREEMENT TO LOCATE PROPERTY.

(a) An agreement by an owner, the primary purpose of which is to locate, deliver, recover, or assist in the recovery of property that is presumed abandoned is void and unenforceable if it was entered into during the period commencing on the date the property was presumed abandoned and extending to a time that is 24 months after the date the property is paid or delivered to the administrator. This subsection does not apply to an owner’s agreement with an attorney to file a claim as to identified property or contest the administrator’s denial of a claim.

(b) An agreement by an owner, the primary purpose of which is to locate, deliver, recover, or assist in the recovery of property is enforceable only if the agreement is in writing, clearly sets forth the nature of the property and the services to be rendered, is signed by the apparent owner, and states the value of the property before and after the fee or other compensation has been de-ducted.

(c) If an agreement covered by this section applies to mineral proceeds and the agreement contains a provision to pay compensation that includes a portion of the underlying minerals or any mineral proceeds not then presumed abandoned, the provision is void and unenforceable.

(d) An agreement covered by this section which provides for compensation that is uncon-scionable is unenforceable except by the owner. An owner who has agreed to pay compensation that is unconscionable, or the administrator on behalf of the owner, may maintain an action to reduce the compensation to a conscionable amount. The court may award reasonable attorney’s fees to an owner who prevails in the action.

(e) This section does not preclude an owner from asserting that an agreement covered by this section is invalid on grounds other than unconscionable compensation.

Comment

This section is intended to enhance the likelihood that the owner of the abandoned prop-erty will be located by the efforts of the State, and will receive a return of the property without payment of a “finder’s fee.” In the past, it appears to have been the practice in many States for unclaimed property locators or heir finders to utilize the State’s lists of names and addresses of missing owners to contact them and propose to find their property for them for a fee, before the State has had an opportunity to locate the missing owners. Some States have enacted legislation that prohibits examination of these lists by anyone except an apparent owner or other person hav-


ing a legal interest in the property, but in many States that kind of provision may be in conflict with the State’s public records laws.

Subsections (b) and (d) apply to agreements entered into at any time. These subsections apply to all finders’ and locators’ contracts, regardless of when the contract is made, including agreements with an owner as a result of a holder providing to private parties, the holder’s informa-tion regarding an inactive account.

This section is not intended to apply to situations such as the probating of an estate, which may incidentally include a necessity of locating unclaimed property. Agreements in such cases do not have as their principal purpose, the rendition of services to locate, deliver or recover unclaimed property. This section also does not apply to agreements for legal representation of an owner who is claiming property the identity of which is already known to the owner.

SECTION 26. FOREIGN TRANSACTIONS.

This [Act] does not apply to property held, due, and owing in a foreign country and arising out of a foreign transaction.

SECTION 27. TRANSITIONAL PROVISIONS.

(a) An initial report filed under this [Act] for property that was not required to be reported before the effective date of this [Act] but which is subject to this [Act] must include all items of property that would have been presumed abandoned during the 10-year period next preceding the effective date of this [Act] as if this [Act] had been in effect during that period.

(b) This [Act] does not relieve a holder of a duty that arose before the effective date of this [Act] to report, pay, or deliver property. Except as otherwise provided in Section 19(b), a holder who did not comply with the law in effect before the effective date of this [Act] is subject to the applicable provisions for enforcement and penalties which then existed, which are continued in ef-fect for the purpose of this section.

Comment

Paragraph (a) is retained from the 1981 Act and deals with the problem of how far back a holder must check its records to determine what property not subject to the prior Act must be paid to the State under this Act. Thus, property which was not covered by any unclaimed property law prior to adoption of the 1981 Act, but was covered by that Act, continues to be covered by this Act if the obligation was incurred not more than 10 years prior to adoption of the 1981 Act and the statute of limitations is not tolled under Section 19(b). For example, if a State enacts this Act effective January 1, 1996 for property not previously presumed abandoned, the holder must report it if, as of January 1, 1986, it had been unclaimed for the abandonment period. A similar provision is found in Section 11(g) of the 1966 Act.

Paragraph (b) provides that if a State had an unclaimed property law prior to the adop-tion of this Act, a holder is not relieved of his duty to report and pay over the property abandoned under the Act then existing. Except as otherwise provided in Section 19(b), a holder who did not

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comply with the law in effect before the effective date of this Act is subject to the applicable pro-visions for enforcement and penalties which then existed and which are continued in effect for the purpose of this section.

SECTION 28. RULES. The administrator may adopt [pursuant to the Administrative Proce-dures Act] rules necessary to carry out this [Act].

SECTION 29. UNIFORMITY OF APPLICATION AND CONSTRUCTION. This [Act] shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this [Act] among States enacting it.

SECTION 30. SHORT TITLE. This [Act] may be cited as the Uniform Unclaimed Property Act (1995).

SECTION 31. SEVERABILITY CLAUSE. If any provision of this [Act] or the application thereof to any person or circumstance is held invalid, the invalidity does not affect other provi-sions or applications of this [Act] which can be given effect without the invalid provision or ap-plication, and to this end the provisions of this [Act] are severable.

SECTION 32. EFFECTIVE DATE. This [Act] takes effect ............................. . SECTION 33. REPEALS. The following acts and parts of acts are repealed:

(a) (b) (c)



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C CASES

Texas v. New Jersey, 379 U.S. 674 (1965) ..................................................... 229

Pennsylvania v. New York, 407 U.S. 206 (1972) ............................................. 235

Delaware v. New York, 507 U.S. 490 (1993) ................................................... 244

New Jersey Retail Merchants Association v. Sidamon-Eristoff,

669 F.3d 374 (3d Cir. 2012) .......................................................................... 257

Am. Express Travel Related Services, Inc. v.

Sidamon-Eristoff, 669 F.3d 359 (3d Cir. 2012) ............................................. 284

Staples, Inc. v. Cook, 35 A.3d 421 (Del. Ch. 2012) ......................................... 300

CASES MORRIS NICHOLS’ DELAWARE UNCLAIMED PROPERTY LAW COMPANION / 2013-2014

379 U.S. 674TEXAS v. NEW JERSEY ET AL.

ON BILL OF COMPLAINT.

No. 13, Original. Argued November 9, 1964. Decided February 1, 1965.

Jurisdiction to escheat abandoned intangible personal property lies in the State of the creditor's last known address on the debtor's books and records or, absent such address or an escheat law, in the State of corpo-rate domicile - but subject to later escheat to the former State if it proves such an address to be within its borders and provides for escheat of such property. Pp. 680-683.

W. O. Shultz II, Assistant Attorney General of Texas, argued the cause for plaintiff. With him on the brief was Waggoner Carr, Attorney General of Texas.

Charles J. Kehoe, Deputy Attorney General of New Jersey, argued the cause for the State of New Jersey, defendant. With him on the brief were Arthur J. Sills, Attorney General of New Jersey, and Theodore I. Botter, First Assistant Attorney General.

Fred M. Burns, Assistant Attorney General of Florida, argued the cause for the State of Florida, intervenor. With him on the brief were James W. Kynes, Attorney General of Florida, and Jack W. Harnett, Assistant Attorney General.

Joseph H. Resnick, Assistant Attorney General of Pennsylvania, argued the cause for the State of Pennsylvania, defendant.

Augustus S. Ballard argued the cause for the Sun Oil Company, defendant.

Ralph W. Oman argued the cause for the Life Insurance Association of America, as amicus cur-iae. On the brief were William B. McElhenny and Warren Elliott. [379 U.S. 674, 675]

MR. JUSTICE BLACK delivered the opinion of the Court.

Invoking this Court's original jurisdiction under Art. III, 2, of the Constitution, 1 Texas brought this action against New Jersey, Pennsylvania, and the Sun Oil Company for an injunction and declaration of rights to settle a controversy as to which State has jurisdiction to take title to certain abandoned intangible personal property through escheat, a procedure with ancient ori-

1 “The judicial Power shall extend . . . to Controversies between two or more States . . . .“In all Cases . . . in which a State shall be Party, the supreme Court shall have original Jurisdiction.”28 U.S.C. 1251 (a) (1958 ed.) provides in relevant part:“The Supreme Court shall have original and exclusive jurisdiction of:“(1) All controversies between two or more States . . . .”

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gins 2 whereby a sovereign may acquire title to abandoned property if after a number of years no rightful owner appears. The property in question here consists of various small debts totaling $26,461.65 3 which the Sun Oil Company for periods of approximately seven to 40 years prior to the bringing of this action has owed to approximately 1,730 small creditors who have never appeared to collect them. The amounts owed, most of them resulting from failure of creditors to claim or cash checks, are either evidenced on the books of Sun's two Texas offices or are owing to persons whose last known address was in Texas, or both. 4 [379 U.S. 674, 676] Texas says that this intangible property should be treated as situated in Texas, so as to permit that State to escheat it. New Jersey claims the right to escheat the same property because Sun is incorporated in New Jersey. Pennsylvania claims power to escheat part or all of the same property on the ground that Sun's principal business offices were in that State. Sun has disclaimed any interest in the property for itself, and asks only to be protected from the possibility of double liability. Since we held in Western Union Tel. Co. v. Pennsylvania, 368 U.S. 71 , that the Due Process Clause of the Fourteenth Amendment prevents more than one State from escheating a given item of prop-erty, we granted Texas leave to file this complaint against New Jersey, Pennsylvania and Sun, 371 U.S. 873 , and referred the case to the Honorable Walter A. Huxman to sit as Special Master to take evidence [379 U.S. 674, 677] and make appropriate reports, 372 U.S. 926 . 5 Florida was permitted to intervene since it claimed the right to escheat the portion of Sun's escheatable obligations owing to persons whose last known address was in Florida. 373 U.S. 948 . 6 The Master has filed his report. Texas and New Jersey each have filed exceptions to it, and the case is 2 See generally Enever, Bona Vacantia Under the Law of England; Note, 61 Col. L. Rev. 1319.

3 The amount originally reported by Sun to the Treasurer of Texas was $37,853.37, but payments to owners subse-quently found reduced the unclaimed amount. 4 The debts consisted of the following:(1) Amounts which Sun attempted to pay through its Texas offices owing to creditors some of whose last known addresses were in Texas, [379 U.S. 674, 676] some of whose last known addresses were elsewhere, and some of whom had no last known address indicated:

(a) uncashed checks payable to employees for wages and reimbursable expenses;(b) uncashed checks payable to suppliers for goods and services;(c) uncashed checks payable to lessors of oil-and gas-producing land as royalty payments;(d) unclaimed “mineral proceeds,” fractional mineral interests shown as debts on the books of the Texas offices.

(2) Amounts for which various offices of Sun throughout the country attempted to make payment to creditors all of whom had last known addresses in Texas:

(a) uncashed checks payable to shareholders for dividends on common stock;(b) unclaimed refunds of payroll deductions owing to former employees;(c) uncashed checks payable to various small creditors for minor obligations;(d) undelivered fractional stock certificates resulting from stock dividends.

5 Texas’ motion for leave to file the bill of complaint also prayed for temporary injunctions restraining the other States and Sun from taking steps to escheat the property. The other States voluntarily agreed not to act pending determination of this case, and so the motion for injunctions was denied. 370 U.S. 929 . 6 Illinois, which claims no interest in the property involved in this case, also sought to intervene to urge that jurisdic-tion to escheat should depend on the laws of the State in which the indebtedness was created. Leave to intervene was denied. 372 U.S. 973 .


now ready for our decision. We agree with the Master's recommendation as to the proper disposi-tion of the property.

With respect to tangible property, real or personal, it has always been the unquestioned rule in all jurisdictions that only the State in which the property is located may escheat. But intangible property, such as a debt which a person is entitled to collect, is not physical matter which can be located on a map. The creditor may live in one State, the debtor in another, and matters may be further complicated if, as in the case before us, the debtor is a corporation which has connec-tions with many States and each creditor is a person who may have had connections with several others and whose present address is unknown. Since the States separately are without constitu-tional power to provide a rule to settle this interstate controversy and since there is no applicable federal statute, it becomes our responsibility in the exercise of our original jurisdiction to adopt a rule which will settle the question of which State will be allowed to escheat this intangible prop-erty. [379 U.S. 674, 678]

Four different possible rules are urged upon us by the respective States which are parties to this case. Texas, relying on numerous recent decisions of state courts dealing with choice of law in private litigation, 7 says that the State with the most significant "contacts" with the debt should be allowed exclusive jurisdiction to escheat it, and that by that test Texas has the best claim to escheat every item of property involved here. Cf. Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 ; Atkinson v. Superior Court, 49 Cal. 2d 338, 316 P.2d 960, appeals dismissed and cert. denied sub nom. Columbia Broadcasting System, Inc. v. Atkinson, 357 U.S. 569 . But the rule that Texas proposes, we believe, would serve only to leave in permanent turmoil a question which should be settled once and for all by a clear rule which will govern all types of intangible obligations like these and to which all States may refer with confidence. The issue before us is not whether a defendant has had sufficient contact with a State to make him or his property rights subject to the jurisdiction of its courts, a jurisdiction which need not be exclusive. Compare McGee v. International Life Ins. Co., 355 U.S. 220 ; Mullane v. Central Hanover Bank & Trust Co., supra; International Shoe Co. v. Washington, 326 U.S. 310 . 8 Since this Court has held in Western Union Tel. Co. v. Pennsylvania, supra, that the same property cannot constitutionally be escheated [379 U.S. 674, 679] by more than one State, we are faced here with the very different problem of deciding which State's claim to escheat is superior to all others. The "contacts" test as applied in this field is not really any workable test at all - it is simply a phrase suggesting that this Court should examine the circumstances surrounding each particular item of escheatable proper-ty on its own peculiar facts and then try to make a difficult, often quite subjective, decision as to which State's claim to those pennies or dollars seems stronger than another's. Under such a doc-

7 E. g., Schmidt v. Driscoll Hotel, Inc., 249 Minn. 376, 82 N. W. 2d 365; Auten v. Auten, 308 N. Y. 155, 124 N. E. 2d 99; Haumschild v. Continental Casualty Co., 7 Wis. 2d 130, 95 N. W. 2d 814. See also Clay v. Sun Insurance Office, Ltd., 377 U.S. 179 ; Watson v. Employers Liability Assurance Corp., 348 U.S. 66 ; cf. Richards v. United States, 369 U.S. 1 ; Vanston Bondholders Protective Committee v. Green, 329 U.S. 156 . 8 Nor, since we are dealing only with escheat, are we concerned with the power of a state legislature to regulate activities affecting the State, power which like court jurisdiction need not be exclusive. Compare Osborn v. Ozlin, 310 U.S. 53 .

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trine any State likely would easily convince itself, and hope to convince this Court, that its claim should be given priority - as is shown by Texas' argument that it has a superior claim to every single category of assets involved in this case. Some of them Texas says it should be allowed to escheat because the last known addresses of the creditors were in Texas, others it claims in spite of the fact that the last known addresses were not in Texas. The uncertainty of any test which would require us in effect either to decide each escheat case on the basis of its particular facts or to devise new rules of law to apply to ever-developing new categories of facts, might in the end create so much uncertainty and threaten so much expensive litigation that the States might find that they would lose more in litigation expenses than they might gain in escheats. 9

New Jersey asks us to hold that the State with power to escheat is the domicile of the debtor - in this case New Jersey, the State of Sun's incorporation. This plan has [379 U.S. 674, 680] the obvious virtues of clarity and ease of application. But it is not the only one which does, and it seems to us that in deciding a question which should be determined primarily on principles of fairness, it would too greatly exalt a minor factor to permit escheat of obligations incurred all over the country by the State in which the debtor happened to incorporate itself.

In some respects the claim of Pennsylvania, where Sun's principal offices are located, is more persuasive, since this State is probably foremost in giving the benefits of its economy and laws to the company whose business activities made the intangible property come into existence. On the other hand, these debts owed by Sun are not property to it, but rather a liability, and it would be strange to convert a liability into an asset when the State decides to escheat. Cf. Case of the State Tax on Foreign-held Bonds, 15 Wall. 300, 320. Moreover, application of the rule Pennsylvania suggests would raise in every case the sometimes difficult question of where a company's "main office" or "principal place of business" or whatever it might be designated is located. Similar uncertainties would result if we were to attempt in each case to determine the State in which the debt was created and allow it to escheat. Any rule leaving so much for decision on a case-by-case basis should not be adopted unless none is available which is more certain and yet still fair. We think the rule proposed by the Master, based on the one suggested by Florida, is.

The rule Florida suggests is that since a debt is property of the creditor, not of the debtor, 10 fairness among the States requires that the right and power to escheat the debt should be ac-corded to the State of the creditor's [379 U.S. 674, 681] last known address as shown by the debtor's books and records. 11 Such a solution would be in line with one group of cases dealing

9 Texas argues in particular that at least the part of the intangible obligations here which are royalties, rents, and mineral proceeds derived from land located in Texas should be escheatable only by that State. We do not believe that the fact that an intangible is income from real property with a fixed situs is significant enough to justify treating it as an exception to a general rule concerning escheat of intangibles. 10 On this point Florida stresses what is essentially a variation of the old concept of “mobilia sequuntur personam,” according to which intangible personal property is found at the domicile of its owner. See Blodgett v. Silberman, 277 U.S. 1, 9 -10. 11 We agree with the Master that since our inquiry here is not concerned with the technical domicile of the creditor, and since ease of administration is important where many small sums of money are involved, the address on the


with intangible property for other purposes in other areas of the law. 12 Adoption of such a rule involves a factual issue simple and easy to resolve, and leaves no legal issue to be decided. It takes account of the fact that if the creditor instead of perhaps leaving behind an uncashed check had negotiated the check and left behind the cash, this State would have been the sole possible escheat claimant; in other words, the rule recognizes that the debt was an asset of the creditor. The rule recommended by the Master will tend to distribute escheats among the States in the proportion of the commercial activities of their residents. And by using a standard of last known address, rather than technical legal concepts of residence and domicile, administration and appli-cation of escheat laws should be simplified. It may well be that some addresses left by vanished creditors will be in States other than those in which they lived at the time the obligation arose or at the time of the escheat. But such situations probably will be the exception, and any errors thus created, if indeed they could be called errors, probably will tend to a large extent to cancel each other out. We therefore hold that each item of property [379 U.S. 674, 682] in question in this case is subject to escheat only by the State of the last known address of the creditor, as shown by the debtor's books and records. 13

This leaves questions as to what is to be done with property owed persons (1) as to whom there is no record of any address at all, or (2) whose last known address is in a State which does not pro-vide for escheat of the property owed them. The Master suggested as to the first situation - where there is no last known address - that the property be subject to escheat by the State of corporate domicile, provided that another State could later escheat upon proof that the last known address of the creditor was within its borders. Although not mentioned by the Master, the same rule could apply to the second situation mentioned above, that is, where the State of the last known address does not, at the time in question, provide for escheat of the property. In such a case the State of corporate domicile could escheat the property, subject to the right of the State of the last known address to recover it if and when its law made provision for escheat of such property. In other words, in both situations the State of corporate domicile should be allowed to cut off the claims of private persons only, retaining the property for itself only until some other State comes for-ward with proof that it has a superior right to escheat. Such a solution for these problems, likely to arise with comparative infrequency, seems to us conducive to needed certainty and we there-fore adopt it. [379 U.S. 674, 683]

records of the debtor, which in most cases will be the only one available, should be the only relevant last-known address. 12 See, e. g., Baldwin v. Missouri, 281 U.S. 586 ; Farmers Loan & Trust Co. v. Minnesota, 280 U.S. 204 ; Blodgett v. Silberman, 277 U.S. 1 . However, it has been held that a State may allow an unpaid creditor to garnish a debt ow-ing to his debtor wherever the person owing that debt is found. Harris v. Balk, 198 U.S. 215 . But cf. New York Life Ins. Co. v. Dunlevy, 241 U.S. 518 . 13 Cf. Connecticut Mutual Life Ins. Co. v. Moore, 333 U.S. 541 . As was pointed out in Western Union Tel. Co. v. Pennsylvania, 368 U.S. 71, 77 -78, none of this Court’s cases allowing States to escheat intangible property decided the possible effect of conflicting claims of other States. Compare Standard Oil Co. v. New Jersey, 341 U.S. 428, 443 ; Connecticut Mutual Life Ins. Co. v. Moore, supra; Anderson National Bank v. Luckett, 321 U.S. 233 ; Security Savings Bank v. California, 263 U.S. 282 .

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We realize that this case could have been resolved otherwise, for the issue here is not controlled by statutory or constitutional provisions or by past decisions, nor is it entirely one of logic. It is fundamentally a question of ease of administration and of equity. We believe that the rule we adopt is the fairest, is easy to apply, and in the long run will be the most generally acceptable to all the States.

The parties may submit a proposed decree applying the principles announced in this opinion.

It is so ordered.

MR. JUSTICE STEWART, dissenting.

I adhere to the view that only the State of the debtor's incorporation has power to "escheat" intan-gible property when the whereabouts of the creditor are unknown. See Western Union Tel. Co. v. Pennsylvania, 368 U.S. 71, 80 (separate memorandum). The sovereign's power to escheat tan-gible property has long been recognized as extending only to the limits of its territorial jurisdic-tion. Intangible property has no spatial existence, but consists of an obligation owed one person by another. The power to escheat such property has traditionally been thought to be lodged in the domiciliary State of one of the parties to the obligation. In a case such as this the domicile of the creditor is by hypothesis unknown; only the domicile of the debtor is known. This Court has thrice ruled that where the creditor has disappeared, the State of the debtor's domicile may escheat the intangible property. Standard Oil Co. v. New Jersey, 341 U.S. 428 ; Anderson Nat. Bank v. Luckett, 321 U.S. 233 ; Security Savings Bank v. California, 263 U.S. 282 . Today the Court overrules all three of those cases. I would not do so. Adherence to settled precedent seems to me far better than giving the property to the State within which is located the one place where we know the creditor is not.


407 U.S. 206PENNSYLVANIA v. NEW YORK ET AL.

ON BILL OF COMPLAINT

No. 40. Orig. Argued March 29, 1972 Decided June 19, 1972

Pennsylvania brought this original action against New York to determine the authority of States to escheat, or take custody of, unclaimed funds paid to Western Union Telegraph Co. for purchase of money orders. The Special Master, following Texas v. New Jersey, 379 U.S. 674 , recommended that any sum held by Western Union unclaimed for the time period prescribed by state statute may be escheated or taken into custody by the State in which the company's records placed the creditor's address, whether the creditor be the payee of an unpaid draft, the sender of a money order entitled to a refund, or an individual whose claim has been erroneously underpaid; and where the records show no address, or where the State in which the creditor's address falls has no applicable escheat law, the right to escheat or take custody shall be in the debtor's domiciliary State, here New York. The recommended decree is adopted and entered, and the cause is remanded to the Special Master for a proposed supplemental decree with respect to the distribution of the costs to the States of the inquiry as to available addresses. Pp. 208-216.

BRENNAN, J., delivered the opinion of the Court, in which BURGER, C. J., and DOUGLAS, STEWART, WHITE, and MARSHALL, JJ., joined. POWELL, J., filed a dissenting opinion, in which BLACKMUN and REHNQUIST, JJ., joined, post, p. 216.

Herman Rosenberger II, Assistant Attorney General of Pennsylvania, argued on the exceptions to the Report of the Special Master for plaintiff. On the brief were J. Shane Creamer, Attorney Gen-eral, and Joseph H. Resnick, Assistant Attorney General.

F. Michael Ahern, Assistant Attorney General, argued on the exceptions to the Report of the Spe-cial Master for intervenor-plaintiff the State of Connecticut. With him on the brief was Robert K. Killian, Attorney General. Theodore L. Sendak, Attorney General, and Robert [407 U.S. 206, 207] A. Zaban, Deputy Attorney General, filed a brief on exceptions to the Report of the Special Master for intervenor-plaintiff the State of Indiana.

Winifred L. Wentworth, Assistant Attorney General, argued on the exceptions to the Report of the Special Master for defendant the State of Florida. With her on the brief was Robert L. Shevin, Attorney General. Julius Greenfield, Assistant Attorney General, argued in support of the Report of the Special Master for defendant the State of New York. With him on the brief were Lou-is J. Lefkowitz, Attorney General, Samuel A. Hirshowitz, First Assistant Attorney General, and Gustave Harrow, Assistant Attorney General. Lee Johnson, Attorney General, John W. Osburn, Solicitor General, and Philip J. Engelgau, Assistant Attorney General, filed a brief on exceptions to the Report of the Special Master for defendant the State of Oregon.

MR. JUSTICE BRENNAN delivered the opinion of the Court.

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Pennsylvania and other States except to, and New York supports, 1 the Report of the Special Master filed in this original action brought by Pennsylvania against New York for a determination respecting the authority of the several States to escheat, or take custody of, unclaimed funds paid to the Western Union Telegraph Company for the purchase of money orders. 2 We overrule [407 U.S. 206, 208] the exceptions and enter the decree recommended by the Special Master, see post, p. 223. 3

The nature of Western Union's money order business, and the source of the funds here in dis-pute, were described by the Court in Western Union Telegraph Co. v. Pennsylvania, 368 U.S. 71 (1961):

"Western Union is a corporation chartered under New York law with its principal place of business in that State. It also does business and has offices in all the other States except Alaska and Hawaii, [as well as] in the District of Columbia, and in foreign countries, and was from 1916 to 1934 subject to regulation by the I. C. C. and since then by the F. C. C. In addition to sending telegraphic messages throughout its world-wide system, it carries on a telegraphic money order business which commonly works like this. A sender goes to a Western Union office, fills out an application and gives it to the company clerk who waits on him together with the money to be sent and the charges for sending it. A receipt is given the sender and a telegraph message is transmitted to the company's office nearest to the payee directing that office to pay the money order to the payee. The payee is then notified and upon properly identifying himself is given a negotiable draft, which he can either endorse and cash at once or keep for use in the future. If the payee cannot be located for delivery of the notice, or fails to call for the draft within 72 hours, the office of destination notifies the sending of-fice. This office then notifies the original sender of the failure to deliver and makes a refund, as it [407 U.S. 206, 209] makes payments to payees, by way of a negotiable draft which may be either cashed immediately or kept for use in the future."In the thousands of money order transactions carried on by the company, it sometimes hap-pens that it can neither make payment to the payee nor make a refund to the sender. Similarly payees and senders who accept drafts as payment or refund sometimes fail to cash them. For this reason large sums of money due from Western Union for undelivered money orders and unpaid drafts accumulate over the years in the company's offices and bank accounts through-out the country." Id., at 72-73.

1 Of the remaining States party to this case, Florida has filed exceptions as defendant, and Connecticut and Indiana as intervening plaintiffs. New Jersey has filed a brief amicus curiae in support of Pennsylvania’s position. 2 We granted leave to file the bill of complaint, 398 U.S. 956 , permitted the State of Connecticut to intervene as a party plaintiff, and appointed Mr. John F. Davis as a Special Master to take evidence and make appropriate reports. 400 U.S. 811 . Thereafter, California and Indiana were permitted to intervene as plaintiffs, and Arizona as a defen-dant. 400 U.S. 924, 1019 ; 401 U.S. 931 . 3 The exception of Indiana as to a typographical error in the recommended decree is sustained. The phrase “escheat of custodial taking” in paragraph 2, lines 4-5 of the decree should read “escheat or custodial taking.”


In 1953 Pennsylvania began state proceedings under its escheat statute 4 to take custody of those unclaimed funds, held by Western Union, that arose from money order purchases in the company's Pennsylvania offices. The Supreme Court of Pennsylvania affirmed a judgment for the State of about $40,000, Commonwealth v. Western Union, 400 Pa. 337, 162 A. 2d 617 (1960), but this Court reversed, Western Union Telegraph Co. v. Pennsylvania, supra, holding that the state court judgment denied Western Union due process of law because it could not protect the company against rival claims of other States. We noted that controversies among different [407 U.S. 206, 210] States over their right to escheat intangibles could be settled only in a forum "where all the States that want to do so can present their claims for consideration and final, authoritative determi-nation. Our Court has jurisdiction to do that." Id., at 79.

Thereafter, in Texas v. New Jersey, 379 U.S. 674 (1965), the Court was asked to decide which of several States was entitled to escheat intangible property consisting of debts owed by the Sun Oil Co. and left unclaimed by creditors. Four different rules were proposed. Texas argued that the funds should go to the State having the most significant "contacts" with the debt, as measured by a number of factors; New Jersey, that they should go to the State of the debtor company's incorpora-tion; Pennsylvania, to the State where the company had its principal place of business; and Florida, to the State of the creditor's last known address as shown by the debtor's books and records. We rejected Texas' and Pennsylvania's proposals as being too uncertain and difficult to administer, and rejected New Jersey's because "it would too greatly exalt a minor factor to permit escheat of obligations incurred all over the country by the State in which the debtor happened to incorporate itself." Id., at 680. Florida's proposal, on the other hand, was regarded not only as a "simple and easy" standard to follow, but also as one that tended "to distribute escheats among the States in the proportion of the commercial activities of their residents." Id., at 681. We therefore held that the State of the creditor's last known address is entitled to escheat the property owed him, adding that if his address does not appear on the debtor's books or is in a State that does not provide for escheat of intangibles, then the State of the debtor's incorporation may take custody of the funds "until some other [407 U.S. 206, 211] State comes forward with proof that it has a superior right to escheat." Id., at 682. The opinion concluded:

"We realize that this case could have been resolved otherwise, for the issue here is not con-trolled by statutory or constitutional provisions or by past decisions, nor is it entirely one of logic. It is fundamentally a question of ease of administration and of equity. We believe that the rule we adopt is the fairest, is easy to apply, and in the long run will be the most generally acceptable to all the States." Id., at 683.

On March 13, 1970, Pennsylvania filed this original action to renew its efforts to escheat part of

4 The Pennsylvania statute, Act of July 29, 1953, P. L. 986, 1, (Pa. Stat. Ann., Tit. 27, 333) provides in part:

“(b) Whensoever the . . . person entitled to any . . . personal property within or subject to the control of the Com-monwealth or the whereabouts of such . . . person entitled has been or shall be and remain unknown for the period of seven successive years, such . . . personal property . . . shall escheat to the Commonwealth . . . .“(c) Whensoever any . . . personal property within or subject to the control of this Commonwealth has been or shall be and remain unclaimed for the period of seven successive years, such . . . personal property . . . shall escheat to the Commonwealth . . . .”

C


Western Union's unclaimed money order proceeds. The complaint alleged that Western Union had accumulated more than $1,500,000 in unclaimed funds "on account of money orders purchased from the company on or before December 31, 1962," and that about $100,000 of that amount, "held by Western Union on account of money orders purchased from it in Pennsylvania," was subject to escheat by that State. Pennsylvania asked for a judgment resolving the conflicting claims of it and the defendant States, and for a temporary injunction against payment of the funds by Western Union or a taking of them by the defendant States, pending disposition of the case. 5

In their arguments before the Special Master, the parties suggested three different formulas to re-solve their conflicting claims. Pennsylvania contended that Western Union's money order records do not identify anyone as a "creditor" of the company and in many instances do [407 U.S. 206, 212] not list an address for either the sender or payee; therefore, strict application of the Texas v. New Jersey rule to this type of intangible would result in the escheat of almost all the funds to the State of incorporation, here New York. To avoid this result, Pennsylvania proposed that the State where the money order was purchased be permitted to take the funds. It claimed that the State where the money orders are bought should be presumed to be the State of the sender's residence. Connecticut, California, and Indiana supported this proposal, as did New Jersey as amicus curiae.

Florida and Arizona also supported Pennsylvania, but argued that where the payee had received but not cashed the money order, his address, if known, should determine escheat, regardless of the sender's address.

New York argued that Texas v. New Jersey should be strictly applied, but that it was not retroac-tive. Thus, as to money orders purchased between 1930 and 1958 (seven years before the Texas decision) 6 New York asserted its right as the State of incorporation to all unclaimed funds, re-gardless of the creditor's address. 7 As for money orders drawn after 1958, New York would apply the Texas rule, and take the funds in all cases where the creditor's address did not appear or was located in a State not providing for escheat.

The Special Master has submitted a report recommending that the Texas rule "be applied to all the items involved in this case regardless of the date of the transactions [407 U.S. 206, 213] out of which they arose." Report 21. The Report expresses some doubt about the constitutionality of the suggested alternatives, stating that both the place-of-purchase and place-of-destination rules might permit intangible property rights to be "cut off or adversely affected by state action in an in rem proceeding in a forum having no continuing relationship to any of the parties to the proceedings." Id., at 19. These doubts, however, were not the sole basis for the Special Master's recommendation.

5 The Court has taken no action on the plea for temporary injunction, and accepts the recommendation of the Spe-cial Master that it now “be denied as unnecessary.” Report 3 n. 2. 6 New makes no claim with respect to money orders issued before 1930. 7 Section 1309 of New York’s Abandoned Property Law provides for the custodial taking, not escheat, of uncashed money orders, so that “the rights of a holder of a . . . money order to payment . . . shall be in no wise affected, im-paired or enlarged by reason of the provisions of this section or by reason of the payment to the state comptroller of abandoned property hereunder.”


He found that "[a]s in the case of the obligations in [Texas v. New Jersey], [the Texas] rule presents an easily administered standard preventing multiple claims and giving all parties a fixed rule on which they can rely." Id., at 20. He concluded that:

"Any sum now held by Western Union unclaimed for the period of time prescribed by the applicable State statutes may be escheated or taken into custody by the State in which the records of Western Union placed the address of the creditor, whether that creditor be the payee of an unpaid draft, the sender of a money order entitled to a refund, or an individual whose claim has been underpaid through error. . . . [I]f no address is contained in the records of Western Union, or if the State in which the address of the creditor falls has no applicable escheat law, then the right to escheat or take custody shall be in the domiciliary State of the debtor, in this case, New York." Id., at 20-21.

The Report also states that New York would bear the burden of establishing "as to all escheatable items the absence from Western Union's records of an address for the creditor." Id., at 16.Pennsylvania's exceptions argue that where a transaction is of a type that "the obligor does not make entries upon its books and records showing the address of the [407 U.S. 206, 214] obligee," only "the State of origin of the transaction" should be permitted to escheat. Florida and Arizona have abandoned their state-of-destination test, and together with the other participating States save New York, have joined in Pennsylvania's exceptions. Tr. of Oral Arg. 20, 42.

Pennsylvania's proposal has some surface appeal. Because Western Union does not regularly re-cord the addresses of its money order creditors, it is likely that the corporate domicile will receive a much larger share of the unclaimed funds here than in the case of other obligations, like bills for services rendered, where such records are kept as a matter of business practice. In a sense, there is some inconsistency between that result and our refusal in Texas to make the debtor's domicile the primary recipient of unclaimed intangibles. Furthermore, the parties say, the Texas rule is nothing more than a legal presumption that the creditor's residence is in the State of his last known address. A presumption based on the place of purchase is equally valid, they argue, and should be applied in order to prevent New York from gaining this windfall.

Assuming, without resolving the doubts expressed by the Special Master, that the Pennsylvania rule provides a constitutional basis for escheat, we do not regard the likelihood of a "windfall" for New York as a sufficient reason for carving out this exception to the Texas rule. Texas v. New Jersey was not grounded on the assumption that all creditors' addresses are known. Indeed, as to four of the eight classes of debt involved in that case, the Court expressly found that some of the creditors "had no last address indicated." 379 U.S., at 675 -676, n. 4. Thus, the only arguable basis for distinguishing money orders is that they involve a higher percentage of unknown addresses. But we are not told what percentage [407 U.S. 206, 215] is high enough to justify an exception to the Texas rule, nor is it entirely clear that money orders constitute the only form of transaction where the percentage of unknown addresses may run high. In other words, to vary the application of the Texas rule according to the adequacy of the debtor's records would require this Court to do precisely what we said should be avoided - that is, "to decide each escheat case on the basis of its particular facts or to devise new rules of law to apply to everdeveloping new categories of facts." Texas v. New Jersey, 379 U.S., at 679 .

C


Furthermore, a substantial number of creditors' addresses may in fact be available in this case. Although Western Union has not kept ledger records of addresses, the parties stipulated, and the Special Master found, that money order applications have been retained in the company's records "as far back as 1930 in some instances and are generally available since 1941." Report 9. To the extent that creditor addresses are available from those forms, the "windfall" to New York will, of course, be diminished.

We think that as a matter of fairness the claimant States, and not Western Union, should bear the cost of finding and recording the available addresses, and we shall remand to the Special Master for a hearing and recommendation as to the appropriate formula for distributing those costs. As for future money order transactions, nothing we say here prohibits the States from requiring West-ern Union to keep adequate address records. The decree recommended by the Special Master is adopted and entered, 8 and the cause is remanded to the [407 U.S. 206, 216] Special Master for further proceedings and the filing of a proposed supplemental decree with respect to the distribu-tion of costs of the inquiry as to available addresses.

It is so ordered.[For decree adopted and entered by the Court, see post, p. 223.] MR. JUSTICE POWELL, with whom MR. JUSTICE BLACKMUN and MR. JUSTICE REHN-QUIST join, dissenting.

The majority opinion today purports to apply the rule laid down in Texas v. New Jersey, 379 U.S. 674 (1965), to a fact situation not contemplated when that case was decided. In applying that rule to these new facts, it seems to me that the Court exalts the rule but derogates the reasons support-ing it.

I

Texas v. New Jersey, a case decided within the Court's original jurisdiction, is a unique precedent. Disposition of that case necessarily required a departure from the Court's usual mode of decision-making. Our role in this country's scheme of government is ordinarily a restricted one, limited in large measure to the resolution of conflicts calling for the interpretation and application either of statutory acts or of provisions of the Federal Constitution. In the performance of this function, an individual Justice's views as to what he might consider "fair" or "equitable" or "expeditious" are largely immaterial. Infrequently, however, we are called on to resolve disputes arising under the original jurisdiction of the Court (Art. III, 2) in which our judgment is unaided by statutory or constitutional directives.

In approaching such cases, we may find, as did the [407 U.S. 206, 217] Court in Texas v. New Jersey, that fairness and expeditiousness provide the guideposts for our decision:8 Insofar as the invocation of any provision of the Revised Uniform Disposition of Unclaimed Property Act would be inconsistent with this decree, the decree prevails. See Board of Education v. Swann, 402 U.S. 43, 45 -46 (1971).


"[T]he issue here is not controlled by statutory or constitutional provisions or by past deci-sions, nor is it entirely one of logic. It is fundamentally a question of ease of administration and of equity." Id., at 683.

The case before us today requires the application of similar principles, and I agree that Mr. Justice Black's opinion in Texas v. New Jersey points the way to the most desirable result. In my view, however, the majority's application of that precedent to the facts of this case offends both the "fair-ness" and "ease of administration" bases of that opinion.

The Court in Texas v. New Jersey was asked to decide which States could take title to escheat-able intangible personal property in the form of debts owed by Sun Oil Co. to a large number of individual creditors. After rejecting several alternatives offered by the parties, the Court adopted the rule proposed by the State of Florida and approved by the Special Master. Under that rule the power to escheat the debts in question, in the first instance, was to be accorded "to the State of the creditor's last known address as shown by the debtor's books and records." Id., at 680-681. In the "infrequent" case in which no record of last address was available or in which the appropriate State's laws did not provide for the escheat of abandoned intangibles, the property was to go to the State of the debtor's corporate domicile. Id., at 682.

This disposition recommended itself to the Court for several reasons. The rule was generally con-sistent with the common-law maxim "mobilia sequuntur personam" * [407 U.S. 206, 218] under which intangible personal property may be found to follow the domicile of its owner - here the creditor. Id., at 680 n. 10. In looking to the residence of the creditor, the rule adopted by the Court recognized that the Company's unclaimed debts were assets of the individual creditors rather than assets of the debtor. Id., at 681. Also, in distributing the property among the creditors' States, the rule had the advantage of dividing the property in a manner roughly proportionate to the com-mercial activities of each State's residents. In using the last-known address as the sole indicator of domicile, the rule would be easy to administer and apply. The Court recognized, of course, that this approach might lead to the escheat of property to a State from which the creditor had removed himself in the period since the debt arose. Yet it concluded that these instances would "tend to a large extent to cancel each other out," and would not disrupt the basic fairness and expeditiousness of the result. Id., at 681.

Paradoxically, the mechanistic application of the Texas v. New Jersey rule to the present case leads ultimately to the defeat of each of the beneficial justifications for that rule. Unlike the records of the numerous debts owed by Sun Oil, Western Union's records may reflect the creditors' addresses for only a relatively small percentage of the transactions. As a consequence, the greater portion of the entire Western Union fund will go to the State of New York - the State of corporate domicile. Effectively then, the obligation of the debtor will be converted into an asset of the debtor's State of domicile to the exclusion of the creditors' States. The Court in Texas v. New Jersey specifically repudiated this result on the ground that it was inconsistent with "principles of fairness." Id., at 680. It would have "exalt[ed] a minor factor to permit escheat of obligations incurred all over the country by the State in which the debtor happened [407 U.S. 206, 219] to incorporate itself." Ibid. The fact that the Court was willing to permit this result in the few cases in which no record of ad-

C


dress was available or in which no law of escheat governed, does not diminish the clear view of the Court that this result would be impermissible as a basis for disposing of more than a small mi-nority of the debts. Yet the decision today ignores the Court's unwillingness to "exalt" the largely coincidental domicile of the corporate debtor. It also disregards the Court's clearly expressed intent that the escheatable property be distributed in proportions roughly comparable to the volume of transactions conducted in each State.

Furthermore, the rule today is incompatible with the Court's view in Texas v. New Jersey that an easily and inexpensively discernible mode of allocation be utilized. The majority's rule will require the examination of every available money order application to determine whether the applicant filled out the address blank for his own address, or in the case of money order drafts received but not cashed, whether the holder's address had been preserved. Western Union estimated in the stipulated statement of facts that such an item-by-item examination could be undertaken at a cost of approximately $175,000. Report of the Special Master 16.

In sum, the invocation of the Texas v. New Jersey rule in the manner contemplated by the majority will lead to a result that is neither expeditious nor equitable.

II

The reasons underlying Texas v. New Jersey could best be effectuated by a relatively minor but logical deviation in the manner in which that rule is implemented in this case. Rather than embark-ing upon a potentially fruitless search for the creditor's last-known address as a rough indicator of domicile, reliance should be placed upon the State where the debtor-creditor relationship was [407 U.S. 206, 220] established. In most cases that State is likely also to be the site of the creditor's do-micile. In other words, in the case of money orders sent and then returned to the initiating Western Union office because the sendee failed to claim the money, the State in which the money order was purchased may be presumed to be the State of the purchaser-creditor's domicile. And, where the draft has been received by either the initiating party or by the recipient but not negotiated, the State in which the draft was issued may be assumed to be the State of that creditor's domicile.

This modification is preferable, first, because it preserves the equitable foundation of the Texas v. New Jersey rule. The State of the corporate debtor's domicile is denied a "windfall"; the fund is divided in a proportion approximating the volume of transactions occurring in each State; and the integrity of the notion that these amounts represent assets of the individual purchasers or recipients of money orders is maintained. Secondly, the relevant information would be more easily obtain-able. The place of purchase and the office of destination are reflected in Western Union's ledger books and it would, therefore, be unnecessary to examine the innumerable application forms them-selves. Since the ledgers are more readily available, the allocation of the fund would be effected at less expense than would be required by the majority's resolution.

Despite these advantages, the Special Master rejected this alternative. He reasoned that an undeter-mined number of these transactions must have taken place outside the creditors' State of domicile. Specifically, he cited the cases in which a New Jersey or Connecticut resident might purchase a money order in New York, or cases in which a resident of Virginia or Maryland might make his


purchase in the District of Columbia. Report of the Special Master 18. While such cases [407 U.S. 206, 221] certainly exist, they are merely exceptions to a generally reliable rule that money order purchases are likely to have occurred within the State of the purchaser's domicile. That perfection is not achieved is no reason to reject this alternative. The Texas v. New Jersey Court recognized that absolute fairness was not obtainable and that the most that could be expected was a rule pro-viding a reasonable approximation. Id., at 681 n. 11. Certainly this objection should not be allowed to frustrate the better alternative in favor of one that is less fair and more difficult to administer.

III

The majority opinion intimates, as I think it must, that the ultimate consequence of its decision to-day is inconsistent (ante, at 214) with the result in Texas v. New Jersey. While the opinion appears to recognize that New York will reap the very "windfall" that Texas v. New Jersey sought to avoid, its refusal to bend in the face of this consequence goes largely unexplained. Apparently, the basis for its decision is the conviction that the Court's prior precedent was designed to settle the question of escheat of intangible personal property "once and for all." Id., at 678. The majority adheres to the existing rule because of some apprehension that flexibility in this case will deprive the Court of a satisfactory test for the resolution of future cases. The opinion anticipates that departure from Texas v. New Jersey will leave other cases to be decided on an ad hoc basis, depending in each case on the "adequacy of the debtor's records." Ante, at 215. Although the factual circumstances of future cases cannot be predicted, it is likely that most of such cases can be resolved within the principles of Texas v. New Jersey. The factual range is limited. The debtor either will or will not maintain creditors' addresses in the ordinary course of business. [407 U.S. 206, 222] In some categories of transactions, such as those involving money orders and traveler's checks, adequate address records may not be available. In the case of ordinary corporate debts, however, it is more likely that records will be available. Moreover, as the majority points out, any State is free to re-quire corporations doing business in that State to maintain records of their creditors' addresses. Ante, at 215.

In short, the threat of frequent and complicated cases in this area seems remote. It provides little justification for the majority's Cinderella-like compulsion to accommodate this ill-fitting prec-edential "slipper." From a result that seems both inflexible and inequitable, I dissent.

[ Footnote * ] See Blodgett v. Silberman, 277 U.S. 1, 9 -10 (1928). [407 U.S. 206, 223]

C


507 U.S. 490DELAWARE v. NEW YORK

ON EXCEPTIONS TO REPORT OF SPECIAL MASTER No. 111, Orig.

Argued December 9, 1992 Decided March 30, 1993

Most of the funds at issue are unclaimed dividends, interest, and other securities distributions held by inter-mediary banks, brokers, and depositories in their own names for beneficial owners who cannot be identified or located. New York escheated $360 million in such funds held by intermediaries doing business in that State, without regard to the beneficial owner's last known address or the intermediary's State of incorpora-tion. After Delaware initiated this original action against New York, alleging that certain of the securities were wrongfully escheated, the Special Master filed a report recommending that this Court award the right to escheat to the State in which the principal executive offices of the securities issuer are located. Both Delaware and New York lodged exceptions to the report.

Held:

The State in which the intermediary is incorporated has the right to escheat funds belonging to beneficial owners who cannot be identified or located. Pp. 497-510.

(a) Under the primary and secondary rules adopted in Texas v. New Jersey, 379 U.S. 674, 680 -682, reaffirmed in Pennsylvania v. New York, 407 U.S. 206 and reaffirmed in this case, the Court resolves disputes among States over the right to escheat abandoned intangible personal property in three steps. First, the Court must determine the precise debtor-creditor relationship, as defined by the law that created the property at issue. Second, because the property interest in any debt belongs to the creditor, rather than the debtor, the primary rule gives the first opportu-nity to escheat to the State of the creditor's last known address, as shown by the debtor's books and records. Third, if the primary rule fails because the debtor's records disclose no address or because the creditor's last known address is in a State whose laws do not provide for escheat, the secondary rule awards the right to escheat to the State in which the debtor is incorporated. Pp. 497-500.

(b) Because the bulk of the abandoned distributions at issue cannot be traced to any identifiable beneficial owner, much less one with a last known address, these funds fall out of the primary rule and into the secondary rule. P. 500.

(c) Intermediaries who hold unclaimed securities distributions in their own names are the rel-evant "debtors." Issuers cannot be considered "debtors" once they make distributions to interme-diaries that are record [507 U.S. 490, 491] owners, since payment to a record owner discharges all of an issuer's obligations to the beneficial owner under the Uniform Commercial Code, which is the law in all 50 States and the District of Columbia. Instead, an intermediary serving as the record owner is the "debtor" insofar as it has a contractual duty to transmit distributions to the beneficial owner. Unlike an issuer, it remains liable should a "lost" beneficial owner reappear to collect distributions due under such a contract. The Master thus erred in concluding that the is-suer is the relevant "debtor," and Delaware's and New York's exceptions in this regard are sus-tained. Pp. 500-505.


(d) Precedent, efficiency, and equity dictate rejection of the second major premise underly-ing the Master's recommendation: his proposal to locate a corporate debtor in the jurisdiction of its principal domestic executive offices, rather than in the State of its incorporation. This sua sponte proposal would change the Court's longstanding practice under Texas and Pennsylvania. Moreover, as the Court recognized in Texas, supra, at 680, the proposal would leave too much for decision on a case-by-case basis. The mere introduction of any factual controversy over the location of a debtor's principal executive offices needlessly complicates an inquiry made irreduc-ibly simple by Texas's adoption of a test based on the State of incorporation. Finally, the proposal cannot survive independent of the Master's erroneous decision to treat the issuers as the relevant "debtors." The arguably arbitrary decision to incorporate in one jurisdiction bears no less on a company's business activities than the equally arbitrary decision to locate its principal offices in another jurisdiction, and there is no inequity in rewarding a State whose laws prove more attrac-tive to firms that wish to incorporate. Thus, Delaware's exception to the Master's proposal in this regard is sustained. Pp. 505-507.

(e) New York's exception to the Master's application of the primary rule is overruled. New York contends that many of the disputed funds need not be escheated under the secondary rule because a statistical analysis of the relevant transactions on the books of the debtor brokers reveals credi-tor brokers, virtually all of whom have New York addresses. This proposal rests on the dubious supposition that the relevant "creditors" under the primary rule are other brokers, whereas this Court has already held that "creditors" are the parties to whom the intermediaries are contractu-ally obligated to deliver unclaimed securities distributions. Moreover, the exception must fail because the Court rejected a practically identical proposal in Pennsylvania, supra, at 214-215. On remand, however, if New York or one of the other claimant States can prove on a transaction-by-transaction basis that the creditors who were owed particular distributions had last known addresses within [507 U.S. 490, 492] its borders or can provide some other proper mechanism for ascertaining those addresses, that State will prevail under the primary rule, and the secondary rule will not control. Pp. 507-509.

(f) To depart from the Court's interstate escheat precedent by crafting different rules for the novel facts of each case would generate much uncertainty and threaten much expensive litiga-tion. If the States are dissatisfied with the outcome of a particular case, they may air their griev-ances before Congress, which may reallocate abandoned property among them without regard to the Court's rules. P. 510.

Exceptions sustained in part and overruled in part, and case remanded.

THOMAS, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and O'CONNOR, SCALIA, KENNEDY, and SOUTER, JJ., joined. WHITE, J., filed a dissenting opinion, in which BLACKMUN and STEVENS, JJ., joined, post, p. 510.

Dennis G. Lyons argued the cause for plaintiff. With him on the briefs were Charles M. Oberly III, Attorney General of Delaware, J. Patrick Hurley, Jr., Deputy Attorney General, and Kent A. Yalowitz.

Jerry Bonne, Solicitor General of New York, argued the cause for defendant. With him on the briefs were Robert Abrams, Attorney General, and Robert A. Forte, Assistant Attorney General.

C


Bernard Nash argued the cause for intervenors State of Alabama et al. With him on the briefs were Andrew P. Miller, William Bradford Reynolds, Judith E. Schaeffer, Dan Schweitzer, Dan-iel E. Lungren, Attorney General of California, Roderick E. Walston, Chief Assistant Attorney General, Thomas F. Gede, Special Assistant Attorney General, and Yeoryios C. Apallas, Deputy Attorney General, and by the Attorneys General for their respective States as follows: Jimmy Ev-ans of Alabama, Charles Cole of Alaska, Winston Bryant of Arkansas, Robert A. Butterworth of Florida, Michael J. Bowers of Georgia, Warren Price III of Hawaii, Roland W. Burris of Illinois, Linley E. Pearson of Indiana, Bonnie Campbell of Iowa, Robert T. Stephan of Kansas, Chris Gorman of Kentucky, Richard Ieyoub of Louisiana, [507 U.S. 490, 493] Michael E. Carpenter of Maine, Mike Moore of Mississippi, William L. Webster of Missouri, Marc Racicot of Mon-tana, Frankie Sue Del Papa of Nevada, John P. Arnold of New Hampshire, Robert J. Del Tufo of New Jersey, Nicholas J. Spaeth of North Dakota, Lee Fisher of Ohio, Susan B. Loving of Okla-homa, Ernest D. Preate, Jr., of Pennsylvania, James E. O'Neil of Rhode Island, Mark Barnett of South Dakota, R. Paul Van Dam of Utah, Jeffrey L. Amestoy of Vermont, Kenneth O. Eikenberry of Washington, Mario J. Palumbo of West Virginia, and Joseph B. Meyer of Wyoming.

James F. Flug, Martin Lobel, Frank J. Kelley, Attorney General of Michigan, J. Joseph Curran, Jr., Attorney General of Maryland, John Payton, Corporation Counsel of District of Columbia, Charles L. Reischel, Deputy Corporation Counsel, and Lutz Alexander Prager, Assistant Deputy Corporation Counsel, Don Stenberg, Attorney General of Nebraska, and Dale A. Comer, Assis-tant Attorney General, filed briefs for intervenors State of Michigan et al.

A brief for intervenors State of Texas et al. was filed by Dan Morales, Attorney General of Texas, Will Pryor, First Assistant Attorney General, Mary R. Keller, Deputy Attorney General, and James A. Thomassen and Jeffrey A. Coryell, Assistant Attorney General, Grant Woods, Attor-ney General of Arizona, and Gail H. Boyd, Assistant Attorney General, Gale A. Norton, Attor-ney General of Colorado, Raymond T. Slaughter, Chief Deputy Attorney General, Timothy M. Tymkovich, Solicitor General, and Maurice Knaizer, Assistant Attorney General, Richard Blu-menthal, Attorney General of Connecticut, and William J. Prensky, Assistant Attorney General, Larry EchoHawk, Attorney General of Idaho, and Theodore V. Spangler, Jr., and Lawrence G. Sirhall, Jr., Deputy Attorneys General, Hubert H. Humphrey III, Attorney General of Minnesota, and Alan Gilbert, Assistant Attorney General, Tom Udall, Attorney General of New Mexico, and Guru Terath Singh Khalsa, [507 U.S. 490, 494] Assistant Attorney General, Lacy H. Thornburg, Attorney General of North Carolina, Andrew A. Vanore, Jr., Chief Deputy Attorney General, M. Ann Reed, Senior Deputy Attorney General, and Douglas A. Johnston, Assistant Attorney General, Charles S. Crookham, Attorney General of Oregon, Jack L. Landau, Deputy Attorney General, Virginia L. Linder, Solicitor General, and William R. Cook, Assistant Attorney General, T. Travis Medlock, Attorney General of South Carolina, Ray N. Stevens, Chief Deputy Attorney General, and Roland W. Urban, Deputy Attorney General, Charles W. Burson, Attorney General of Tennessee, and Michael W. Catalano, Deputy Attorney General, James E. Doyle, Attorney General of Wisconsin, and Burneatta Bridge, Assistant Attorney General, Mary Sue Terry, At-torney General of Virginia, Stephen D. Rosenthal, Chief Deputy Attorney General, Gail Starling Marshall and Mary Yancey Spencer, Deputy Attorneys General, and E. Suzanne Darling, Assis-tant Attorney General. *


[ Footnote * ] Briefs of amici curiae were filed for Midwest Securities Trust Co. et al. by Mi-chael Fischer and Ilene Knable Gotts; and for the Securities Industry Association et al. by Judith Welcom.

JUSTICE THOMAS delivered the opinion of the Court.

In this original action, we resolve another dispute among States that assert competing claims to abandoned intangible personal property. Most of the funds at issue are unclaimed securities distributions held by intermediary banks, brokers, and depositories for beneficial owners who cannot be identified or located. The Special Master proposed awarding the right to escheat such funds to the State in which the principal executive offices of the securities issuer are located. Ad-hering to the rules announced in Texas v. New Jersey, 379 U.S. 674 (1965), and Pennsylvania v. New York, 407 U.S. 206 (1972), we hold that the State in which the intermediary is incorporated has the right to escheat funds belonging to beneficial owners who cannot be identified or located. [507 U.S. 490, 495]

I

This case involves unclaimed dividends, interest, and other distributions made by issuers of securities. Such payments are often channeled through financial intermediaries such as banks, brokers, and depositories before they reach their beneficial owners. By arrangement with the beneficial owners, these intermediaries frequently hold securities in their own names, rather than in the names of the beneficial owners; as "record owners," the intermediaries are fully entitled to receive distributions based on those securities. 1 This practice of holding securities in "nominee name" or "street name" facilitates the offering of customized financial services such as cash man-agement accounts, 2 brokerage margin accounts, 3 discretionary trusts, 4 and dividend reinvest-ment programs. 5 Street name accounts also permit changes in beneficial ownership to be effect-

1 An individual investor who opts to retain record ownership of a security will receive distributions directly from the issuer. This case does not concern transactions of this sort. 2 In a cash management account, the broker holds, rather than distributes, dividends and interest paid on a cus-tomer’s securities. The customer withdraws funds through a check-like negotiable instrument, and receives interest on held funds, typically at a rate higher than that offered on passbook savings accounts and negotiable-order-of-withdrawal accounts. 3 In a brokerage margin account, the broker holds the customer’s securities as collateral against any margin debt generated by the customer’s stock market transactions. Dividends and other distributions may be credited against a customer’s margin debt to the broker. 4 In a discretionary trust, the financial institution as trustee enjoys the discretion not to distribute current income, but rather to accumulate it for further investment. 5 In a dividend reinvestment program, the beneficial owner authorizes the broker to use dividends to purchase ad-ditional shares and fractional shares.

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ed through book entries, rather than the unwieldy physical transfer of securities certificates. See Brown, The Shareholder Communication Rules and the Securities and Exchange Commission: An Exercise in Regulatory [507 U.S. 490, 496] Utility or Futility?, 13 J.Corp.L. 683, 688-691 (1988). The economies of scale attained in the modern financial services industry are epitomized by the securities depository, a large institution that holds only the accounts of "participant" bro-kers and banks and serves as a clearinghouse for its participants' securities transactions. Because a depository retains record ownership of securities, it effectively "immobilizes" the certificates in its possession by allowing its participants to trade securities without the physical transfer of certificates. Most of the equity securities traded on the New York Stock Exchange are immobi-lized in this fashion. See App. to Report of the Special Master B-2. Cf. Securities and Exchange Commission, Division of Market Regulation, Progress and Prospects: Depository Immobilization of Securities and Use of Book-Entry Systems 4 (1985).

The intermediaries are unable to distribute a small portion of the securities to their beneficial owners. 6 When an intermediary claims no property interest in funds so held, they become es-cheatable. 7 Between 1985 and 1989, New York escheated $360 million in funds of abandoned securities held for more than three years by intermediaries doing business in New York, without regard to the last known address of the beneficial owner or the intermediary's State of incorpora-tion. N.Y. Abandoned Property Law 511 (McKinney 1991). See Report of Special Master 10, n. 9. Alleging that certain of these securities were wrongfully escheated, Delaware sought leave in 1988 to initiate an original action in this Court against [507 U.S. 490, 497] New York. We granted leave to file the complaint, 486 U.S. 1030 (1988), and appointed a Special Master, 488 U.S. 990 (1988). We granted Texas' motion to file a complaint as an intervening plaintiff, 489 U.S. 1005 (1989), and every State not already a party to this proceeding and the District of Co-lumbia sought leave to intervene.

On January 28, 199, the Master filed his report and recommendation. Both Delaware and New York have lodged exceptions to the report, as have four other parties whose motions for leave to intervene have not been granted by this Court. 8 We now sustain two of Delaware's exceptions in their entirety, one of Delaware's exceptions in part, and one of New York's exceptions. We also grant all pending motions to intervene and to file briefs as amici curiae, overrule all exceptions not sustained in this opinion, and remand for further proceedings before the Master.

II6 Approximately 0.02% of funds distributed through intermediaries cannot be traced to their beneficial owners. This low percentage nevertheless accounts for a very substantial amount of escheatable property. See Report of Special Master 10, n. 9. 7 Unlike Depository Trust Company, the two other securities depositories in the United States “do claim entitlement to certain securities, interest payments, dividends and distributions that cannot be accounted for.” Brief for Midwest Securities Trust Co. and Philadelphia Depository Trust Co. as Amici Curiae 2. The issue of these depositories’ “en-titlement to the excess funds under their rules” is not before us. Id., at 3. 8 In a joint brief, Michigan, Maryland, Nebraska, and the District of Columbia filed two exceptions to the Master’s report.


States as sovereigns may take custody of or assume title to abandoned personal property as bona vacantia, a process commonly (though somewhat erroneously) called escheat. 9 See, e.g., Chris-tianson v. King County, 239 U.S. 356, 36366 (1915); Cunnius v. Reading School Dist., 198 U.S. 458, 469 -476 (1905); Hamilton v. Brown, 161 U.S. 256, 263 -264 (1896). No serious contro-versy can arise between States seeking to escheat "tangible property, real or personal," for "it has always been the unquestioned rule in all jurisdictions that only the State in which the property is located may [507 U.S. 490, 498] escheat." Texas v. New Jersey, 379 U.S., at 677 . On the other hand, intangible property "is not physical matter which can be located on a map," ibid., and fre-quently no single State can claim an uncontested right to escheat such property.

In Texas v. New Jersey, we discharged "our responsibility in the exercise of our original jurisdic-tion" to resolve escheat disputes that "the States separately are without constitutional power . . . to settle." Ibid. 10 We adopted two rules intended to "settle the question of which State will be al-lowed to escheat [abandoned] intangible property." Ibid. "[S]ince a debt is property of the credi-tor, not of the debtor," we reasoned, "fairness among the States requires that the right and power to escheat the debt should be accorded to the State of the creditor's last known address as shown by the debtor's books and records." Id., at 680-681 (footnote omitted). This primary rule had the virtue of "involv[ing] a factual issue simple and easy to resolve," made even simpler by the Court's resort to "last known address, rather than technical legal concepts of residence and domi-cile." Id., at 681. It also achieved rough equity in that it "tend[ed] to distribute escheats among the States in the proportion of the commercial activities of their residents." Ibid. We recognized, however, that the primary rule could not resolve escheat claims over "property owed persons (1) as to whom there is no record of any address at all, or (2) whose last known address is in a State which does not provide for escheat of the property owed them." Id., at 682. For these situations, we adopted a secondary rule awarding the right to escheat to the debtor's "State of corporate domicile," subject to the claims of the State with "a superior right to escheat" under the primary rule. Ibid. We characterized the Texas scheme as "the fairest, . . . easy to apply, and in the [507 U.S. 490, 499] long run . . . the most generally acceptable to all the States." Id., at 683.

We reaffirmed Texas in Pennsylvania v. New York, 407 U.S. 206 (1972). Texas had involved the relatively simple case of a debtor that "disclaimed any interest" in "various small debts . . . owed to . . . small creditors who ha[d] never appeared to collect them." Texas, supra, at 676, 675. In Pennsylvania, by contrast, the Western Union Company held proceeds left unclaimed because Western Union was unable to locate the payee of a money order or to make a refund to the sender or because drafts issued by Western Union were not negotiated. See 407 U.S., at 208 -209; Western Union Telegraph Co. v. Pennsylvania, 368 U.S. 71, 72 -73 (1961). Because West-9 “At common law, abandoned personal property was not the subject of escheat, but was subject only to the right of appropriation by the sovereign as bona vacantia.” Anderson Nat. Bank v. Luckett, 321 U.S. 233, 240 (1944). See generally 7 W. Holdsworth, A History of English Law 495-496 (2d ed. 1937). Our opinions, however, have under-stood “escheat” as encompassing the appropriation of both real and personal property, and we use the term in that broad sense. 10 See also Western Union Telegraph Co. v. Pennsylvania, 368 U.S. 71, 75 (1961); Standard Oil Co. v. New Jersey, 341 U.S. 428, 443 (1951).

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ern Union did not "regularly record the addresses of its money order creditors," the primary rule would rarely apply, and the debtor's State of incorporation - Western Union's "corporate domi-cile" - would "receive a much larger share of the unclaimed funds" under the secondary rule. Pennsylvania, 407 U.S., at 214 . In response to this perceived injustice, other States advocated a rule allowing the State of "the place of purchase" to escheat under the primary rule. We neverthe-less adhered to our decision in Texas. The "only arguable" difference between money orders and the obligations at issue in Texas lay in the fact that money orders "involve a higher percentage of unknown addresses." 407 U.S., at 214 . We reasoned that neither this distinction nor the resulting "likelihood of a `windfall'" for the debtor's State of incorporation would justify the "carving out [of an] exception to the Texas rule." Ibid.

We therefore resolve disputes among States over the right to escheat intangible personal property in the following three steps. First, we must determine the precise debtor-creditor relationship as defined by the law that creates the property at issue. Second, because the property interest in any debt belongs to the creditor, rather than the debtor, the primary rule gives the first opportunity to escheat to the [507 U.S. 490, 500] State of "the creditor's last known address as shown by the debtor's books and records." Texas, supra, at 680-681. Finally, if the primary rule fails because the debtor's records disclose no address for a creditor or because the creditor's last known address is in a State whose laws do not provide for escheat, the secondary rule awards the right to escheat to the State in which the debtor is incorporated. These rules arise from our "authority and duty to determine for [ourselves] all questions that pertain" to a controversy between States, Kentucky v. Indiana, 281 U.S. 163, 176 (1930), and no State may supersede them by purporting to prescribe a different priority under state law.

III

None of the parties contests the primary rule or the Master's recommendation that, "where the state of domicile of an unlocatable entitled recipient is known, through finding a last known address, that state may take custody of the unclaimed distributions." Report of Special Master 56-57 (footnote omitted). 11 The bulk of the abandoned distributions at issue, however, cannot be traced to any identifiable beneficial owner, much less one with a last known address. These funds thus fall out of the primary rule and into the secondary rule. Consequently, under Texas and Pennsylvania, the debtor's State of incorporation should be entitled to escheat this unclaimed property. The Master's report concludes, first, that the issuer of securities is the relevant "debtor" and, second, that the State in which the debtor's "principal executive offices" are located should be considered the debtor's State. We reject both of these recommendations.

A

"[W]here the entitled recipient's domicile is undeterminable (no last known address), but the state of domicile of the [507 U.S. 490, 501] originator of the distribution is known," the Master rec-

11 New York has filed an exception to the Master’s application of the primary rule. We address this argument in Part IV below.


ommended that the originator's State be awarded the right to escheat, "whether or not the origina-tor would have been entitled to receive the funds back in its own right." Report of Special Master 57. Because he construed the use of the terms "debtor" and "creditor" in Texas and Pennsylvania as a merely "descriptive . . . attempt to identify the relevant parties," rather than "prescriptive legal commands," Report of Special Master 29, the Master defined "debtor" as "the last owner of the funds, in the sense of the last person who had a claim to the funds as an asset that would appropriately be reflected in the net worth of the entity in question," id., at 32. In its first excep-tion, Delaware argues that "the Report's recommendation in this regard does not comport with the ordinary meaning of the words `debtor' and `creditor,' is inconsistent with universally ac-cepted state and common law and with the principles underlying the Texas rule, and changes the law in an area where the law should be settled." Exceptions and Brief for Plaintiff Delaware E-4. Delaware also objects to the Master's failure to "ascrib[e] . . . legal relevance to [intermediar-ies'] status as record security holders," a "fundamental factual error" that effectively treats record owners "as if they were paying agents." Id., at E-5. New York's first exception likewise objects to the Master's use of "the term `debtor' as `shorthand' to identify parties with `debtor attributes,' rather than the obligor of the debt." Exceptions of Defendant New York 52. We agree with both States, and sustain their exceptions.

We have not relied on legal definitions of "creditor" and "debtor" merely for descriptive conve-nience. Rather, we have grounded the concepts of "creditor" and "debtor" in the positive law that gives rise to the property at issue. In framing a State's power of escheat, we must first look to the law that creates property and binds persons to honor property rights. "Property interests, of course, are not created by the Constitution," but rather "by existing rules or understandings [507 U.S. 490, 502] that stem from an independent source such as state law." Board of Regents of State Colleges v. Roth, 408 U.S. 564, 577 (1972). Accord, e.g., Bishop v. Wood, 426 U.S. 341, 344 -347 (1976); Paul v. Davis, 424 U.S. 693, 710 -712 (1976). See also Barnhill v. Johnson, 503 U.S. 393, 398 (1992) ("In the absence of any controlling federal law, `property' and `interests in property' are creatures of state law"). Furthermore, law that creates property necessarily defines the legal relationships under which certain parties ("debtors") must discharge obligations to oth-ers ("creditors").

To define "debtor" as "the last person who ha[s] a claim to the funds as an asset that would ap-propriately be reflected in [his] net worth," Report of Special Master 32, would convert a term rich with prescriptive legal content into little more than a description of bookkeeping phenom-ena. Funds held by a debtor become subject to escheat because the debtor has no interest in the funds - precisely the opposite of having "a claim to the funds as an asset." We have recognized as much in cases upholding a State's power to escheat neglected bank deposits. Charters, bylaws, and contracts of deposit do not give a bank the right to retain abandoned deposits, and a law requiring the delivery of such deposits to the State affects no property interest belonging to the bank. Security Savings Bank v. California, 263 U.S. 282, 285 -286 (1923); Provident Institution for Savings v. Malone, 221 U.S. 660, 665 -666 (1911). Thus, "deposits are debtor obligations of the bank," and a State may "protect the interests of depositors" as creditors by assuming custody over accounts "inactive so long as to be presumptively abandoned." Anderson Nat. Bank v. Luck-ett, 321 U.S. 233, 241 (1944) (emphasis added). Such "disposition of abandoned property is a function of the state," a sovereign "exercise of a regulatory power" over property and the private

C


legal obligations inherent in property. Standard Oil Co. v. New Jersey, 341 U.S. 428, 436 (1951). [507 U.S. 490, 503]

Our rules regarding interstate disputes over competing escheat claims cannot be severed from the law that creates the underlying creditor-debtor relationships. In Texas and Pennsylvania, our ex-amination of the holder's legal obligations not only defined the escheatable property at issue, but also carefully identified the relevant "debtors" and "creditors." See Texas, 379 U.S., at 675 -676, n. 4; Pennsylvania, 407 U.S., at 208 -209, 213. In Pennsylvania, we noted that Western Union was a "debtor" insofar as it owed contractual duties to two separate creditors. Western Union was obligated not merely to deliver a negotiable draft to the sender's payee; if Western Union could not locate the payee or if the payee failed to claim his money order, the company was bound to make a refund to the sender. Id., at 208-209. Correspondingly, we recognized that the relevant "creditor" might be either a payee or a sender: "the payee of an unpaid draft, the sender of a money order entitled to a refund," or a payee or sender "whose claim has been underpaid through error." Id., at 213 (internal quotation marks omitted).

Moreover, the rules developed in Texas and Pennsylvania reflect the traditional view of escheat as an exercise of sovereignty over persons and property owned by persons. The primary rule flowed from the common law "concept of `mobilia sequuntur personam,' according to which intangible personal property is found at the domicile of its owner." Texas, supra, at 680, n. 10. Accord, Pennsylvania, supra, at 217-218 (Powell, J., dissenting). See also Blodgett v. Silberman, 277 U.S. 1, 10 (1928) ("[I]ntangible personalty has . . . a situs at the domicile of the owner"). In recognizing that "a debt is property of the creditor," Texas, supra, at 680, the primary rule permits the escheating State to protect the interest of a creditor last known to have resided there. Reason-ing that "debts owed by" a holder of unclaimed funds "are not property to it, but rather a liabil-ity," we concluded that "it would be strange to convert a liability into an asset when the State decides to escheat." 379 U.S., at 680 . Cognizant of the [507 U.S. 490, 504] creditor's status as owner of intangible personal property, we awarded the primary right to escheat to the creditor's State. Conversely, when a creditor's last known address cannot be determined or the laws of the creditor's State do not provide for escheat, the secondary rule protects the interests of the debtor's State as sovereign over the remaining party to the underlying transaction. Unless we define the terms "creditor" and "debtor" according to positive law, we might "permit intangible property rights to be cut off or adversely affected by state action . . . in a forum having no continuing relationship to any of the parties to the proceedings." Pennsylvania, supra, at 213 (internal quota-tion marks omitted). Cf. Connecticut Mut. Life Ins. Co. v. Moore, 333 U.S. 541, 549 -550 (1948) (upholding New York's escheat of unclaimed insurance benefits only "as to policies issued for delivery in New York upon the lives of persons then resident therein where the insured continues to be a resident and the beneficiary is a resident at . . . maturity"). Texas and Pennsylvania avoid-ed this conundrum by resolving escheat disputes according to the law that creates debtor-creditor relationships; only a State with a clear connection to the creditor or the debtor may escheat. Be-cause the Master failed to identify the relevant "creditors" and "debtors" by reference to that law, we now perform this task.

We hold that intermediaries who hold unclaimed securities distributions in their own name are the relevant "debtors" under the secondary rule of Texas and Pennsylvania. From an issuer's


perspective, the only creditors are registered shareholders, those whose names appear on the issuer's records. Issuers cannot be considered debtors once they pay dividends, interest, or other distributions to record owners; payment to a record owner discharges all of an issuer's obliga-tions. Under 8-207(1) of the Uniform Commercial Code, which is the law of all 50 States and the District of Columbia, "the issuer . . . may treat the registered owner as the person exclusively . . . to exercise all the rights and [507 U.S. 490, 505] powers of an owner." Payment to an interme-diary that is the record owner of securities extinguishes any liability the issuer might have to the beneficial owner. U.C.C. 8-207, comment 1, 2C U.L.A. 341 (1991). The Master acknowledged as much, see Report of Special Master 25, and none of the parties contends otherwise. Instead, an intermediary serving as the record owner of securities is the "debtor" insofar as the intermediary has a contractual duty to transmit distributions to the beneficial owner. Unlike an issuer, which discharges all liabilities upon payment to a record owner, an intermediary remains liable should a "lost" beneficial owner reappear to collect distributions due under a contract with the inter-mediary. The Master thus erred in equating intermediary banks, brokers, and depositories with the issuers' paying agents, who owe no duty to beneficial owners, but rather bear the contractual obligation to "return . . . unclaimed distributions to the issuer after a certain period of time." App. to Report of Special Master B-6. Intermediaries who hold securities in street name or nominee name are the relevant "debtors," because they alone, and not the issuers, are legally obligated to deliver unclaimed securities distributions to the beneficial owners.

B

The Master's recommended disposition of this case rested on a second major premise: his pro-posal to locate a corporate debtor in "the jurisdiction of the entity's principal domestic executive offices, rather than the state of incorporation." Report of Special Master 49 (footnote omitted). In Texas and Pennsylvania, however, we explicitly granted the right to escheat under the secondary rule to the State in which the debtor was incorporated. Texas, supra, at 682; Pennsylvania, supra, at 210-211, 212, 223-224. By the Master's own admission, relying on the location of a debtor's principal executive offices "change[s] [this Court's] longstanding practice." Report of Special Master 50. The Master proposed [507 U.S. 490, 506] this innovation sua sponte; no party sought this alteration of our settled law. Delaware excepts to this "[d]epart[ure] from the rule of corporate domicile" as "inconsistent not only with this Court's precedents, but with fundamental principles of jurisprudence defining the relationship between the sovereign and its corporate citi-zens." Exceptions and Brief for Plaintiff Delaware E-4 to E-5. Finding that the "heavy burden" that attends a request "to reconsider not one but two prior decisions" has not been borne, Walker v. Armco Steel Corp., 446 U.S. 740, 749 (1980), we sustain Delaware's exception.

In Texas, we considered and rejected a proposal to award the primary right to escheat to the State "where [the debtor's] principal offices are located." 379 U.S., at 680 . Although we recognized that "this State is probably foremost in giving the benefits of its economy and laws to the compa-ny whose business activities made the intangible property come into existence," we rejected the rule because its application "would raise in every case the sometimes difficult question of where a company's "main office" or "principal place of business" or whatever it might be designated, is located." Ibid. Even when we formulated the secondary rule, we looked instead to the debtor's State of incorporation. Id., at 682. As in Texas, we find that determining the State of incorpora-

C


tion is the most efficient way to locate a corporate debtor. Exclusive reliance on incorporation permits the disposition of claims under the secondary rule upon the taking of judicial notice. Although "a general inquiry into where the principal executive office is located [may] see[m] neither burdensome [n]or complex," Report of Special Master 49, we cannot embrace a "rule leaving so much for decision on a case-by-case basis," Texas, supra, at 680. The mere introduc-tion of any factual controversy over the location of a debtor's principal executive offices need-lessly complicates an inquiry made irreducibly simple by Texas' adoption of a test based on the State of incorporation. [507 U.S. 490, 507]

Even if we were to endorse the Master's redefinition of a debtor's location, we doubt that his pro-posal could fulfill its promise "to distribute the funds [more] fairly among the various jurisdic-tions." Report of Special Master 50. The Master sought to counteract the inequity he perceived in the happenstance that "the larger, publicly traded, enterprises that generate the lion's share of the securities distributions . . . are, by any standard, disproportionately incorporated in one state." Id., at 47. His "principal executive offices" initiative, however, cannot survive independent of his erroneous decision to treat the issuers as the relevant "debtors." Because we have already decided that the intermediaries are the proper debtors under the secondary rule, this change would simply transfer the bulk of the disputed funds from Delaware, where many intermediaries are incorpo-rated, to New York, where many intermediaries have located their principal executive offices. A company's arguably arbitrary decision to incorporate in one State bears no less on its business activities than its officers' equally arbitrary decision to locate their principal executive offices in another State. It must be remembered that we refer to a debtor's State of incorporation only when the creditor's last address is unknown or when the creditor's State does not provide for escheat. When the creditor's State cannot assert its predominant interest, we detect no inequity in reward-ing a State whose laws prove more attractive to firms that wish to incorporate.

Precedent, efficiency, and equity all dictate the rejection of the Master's "principal executive of-fices" proposal. We accordingly adhere to Texas and Pennsylvania and award the right to escheat under the secondary rule to the State in which the debtor is incorporated.

IV

We turn, finally, to New York's contention that many of the disputed funds need not be escheated under the [507 U.S. 490, 508] secondary rule at all. New York concedes that "the creditors of unclaimed distributions" held by depositories and custodian banks "are always unknown." Exceptions of Defendant New York 81. It argues, however, that "reconstruct[ion]" of "the debtor brokers' transactions" will lead to "creditor brokers that purchased the underlying securities and were underpaid the distributions." Id., at 80 (emphasis added). Because "the amount of time and resources that would be required to reconstruct the overpayment transactions would be very considerable," however, New York "has suggested the use of statistical sampling to prove that virtually all of the creditor brokers and banks recorded on the books of debtor brokers in New York have New York addresses." Ibid.

We overrule New York's exception. As an initial matter, New York's proposal rests on the dubi-ous supposition that the relevant "creditors" under the primary rule are other brokers. We have al-


ready held that "creditors" are the parties to whom the intermediaries are contractually obligated to deliver unclaimed securities distributions. Accordingly, to the extent that beneficial owners are the relevant "creditors," New York's exception is inapposite.

Even if we indulge New York's premise that most creditors of New York brokers are, in fact, other New York brokers, the exception must fail. As the Master correctly observed: "[N]othing in the Court's jurisprudence . . . suggest[s] that New York can prevail by making a statistical show-ing that "most" [creditor-brokers'] addresses are in New York." Report of Special Master 67. In Pennsylvania, we rejected a proposal practically identical to New York's. In that case, because Western Union's records frequently did not disclose a creditor's identity or last known address, the debtor's State of incorporation stood to "receive a much larger share of the unclaimed funds" under the secondary rule. 407 U.S., at 214 . The plaintiff States urged us to define the creditor's residence according to a "presumption [507 U.S. 490, 509] based on the place of purchase." Ibid. Like New York's proposal, the rule advocated in Pennsylvania would use a statistical surro-gate instead of the debtor's records to locate the last known addresses of creditors. That much is clear from the Pennsylvania dissent's description of the rejected rule as "a reasonable approxima-tion." Id., at 221 (opinion of Powell, J.). New York may object to the cost and difficulty of cull-ing creditors' last known addresses from brokers' records, 12 but, in Pennsylvania, we expressly refused "to vary the application of the [primary] rule according to the adequacy of the debtor's records." Id., at 215. And we decline to do so here.

Despite our refusal to adopt New York's proposal for statistical analysis of creditors' addresses under the primary rule, we decline Delaware's invitation to enter judgment against New York on the basis of the Master's findings. Exceptions and Brief for Plaintiff Delaware 85. On remand, if New York can establish by reference to debtors' records that the creditors who were owed partic-ular securities distributions had last known addresses in New York, New York's right to escheat under the primary rule will supersede Delaware's right under the secondary rule. As we noted in Texas, "the State of corporate domicile should be allowed to . . . retai[n] the property for itself only until some other State comes forward with proof that it has a superior right to escheat." 379 U.S., at 682 . Accord, Pennsylvania, 407 U.S., at 210 -211. If New York or any other claim-ant State fails to offer such proof on a transaction-by-transaction basis or to provide some other proper mechanism for ascertaining creditors' last known addresses, the creditor's State will not prevail under the primary rule, and the secondary rule will control. Id., at 215. [507 U.S. 490, 510]

V

Only by adhering to our precedent can we resolve escheat disputes between States in a fair and efficient manner. We have repeatedly declared our unwillingness "either to decide each escheat case on the basis of its particular facts or to devise new rules of law to apply to ever-developing new categories of facts." Texas, supra, at 679. Accord, Pennsylvania, supra, at 215. To craft dif-ferent rules for the novel facts of each case would generate "so much uncertainty and threaten

12 New York and other States could have anticipated and prevented some of the difficulties stemming from incomplete debtor records, for nothing in our decisions “prohibits the States from requiring [debtors] to keep adequate address records.” Pennsylvania, 407 U.S., at 215

C


so much expensive litigation that the States might find that they would lose more in litigation expenses than they might gain in escheats." Texas, supra, at 679. If the States are dissatisfied with the outcome of a particular case, they may air their grievances before Congress. That body may reallocate abandoned property among the States without regard to this Court's interstate es-cheat rules. Congress overrode Pennsylvania by passing a specific statute concerning abandoned money orders and traveler's checks, 601-603, 88 Stat. 1525, 12 U.S.C. 2501-2503, and it may ultimately settle this dispute through similar legislation.

We remand this case to the Master for further proceedings consistent with this opinion and for the preparation of an appropriate decree.

So ordered. JUSTICE WHITE, with whom JUSTICE BLACKMUN and JUSTICE STEVENS join, dissent-ing.

In my view, the Special Master did no violence to our precedents, and has a much superior ap-proach and more equitable result than does the Court. I would overrule all of the exceptions to the Special Master's Report, adopt his recommended findings and conclusions, and issue a decree in accordance therewith. [507 U.S. 490, 511]


C

Page 257

374 669 FEDERAL REPORTER, 3d SERIES

Therefore, Amex failed to show a reason-able probability of success on the merits ofits Commerce Clause claim.

E. Remaining preliminary injunc-tion factors

Because Amex was unable to show alikelihood of success on the merits of itsclaims, we need not address the remainingpreliminary injunction factors, see Criss-man, 239 F.3d at 364 (listing preliminaryinjunction factors), and the District Court’sdenial of Amex’s motion for preliminaryinjunction must be affirmed. See In reArthur Treacher’s Franchisee Litig., 689F.2d at 1143.

IV. Conclusion

We hold that Amex failed to show alikelihood of success on the merits of itsDue Process Clause, Contract Clause, Tak-ings Clause, and Commerce Clause claims.Thus, the motion for preliminary injunc-tion of Chapter 25 must be denied. Forthe foregoing reasons, we will affirm theorder of the District Court.

,

NEW JERSEY RETAIL MERCHANTSASSOCIATION

v.

Andrew P. SIDAMON–ERISTOFF,Treasurer of the State of New Jersey;Steven R. Harris, Administrator ofUnclaimed Property of the State ofNew Jersey, Appellants in 10–4551.

New Jersey Food Council, a NewJersey Not–for–Profit Entity

v.

State of New Jersey; Andrew P. Sida-mon–Eristoff, Treasurer of the Stateof New Jersey; Steven R. Harris, Ad-ministrator of Unclaimed Property ofthe State of New Jersey, Appellants in10–4552.

American Express Prepaid CardManagement Corporation

v.

Andrew P. Sidamon–Eristoff, as Trea-surer of the State of New Jersey; Ste-ven R. Harris, as Administrator of Un-claimed Property of the State of NewJersey, Appellants in 10–4553.

New Jersey Retail MerchantsAssociation, Appellant in

10–4714

v.

Andrew P. Sidamon–Eristoff, as Trea-surer of the State of New Jersey; Ste-ven R. Harris, as Administrator of Un-claimed Property of the State of NewJersey.

New Jersey Food Council, a NewJersey Not–for–Profit Entity,

Appellant in 10–4715

v.

State of New Jersey; Andrew P. Sida-mon–Eristoff, Treasurer of the Stateof New Jersey; Steven R. Harris, Ad-ministrator of Unclaimed Property ofthe State of New Jersey.


375NEW JERSEY RETAIL MERCHANTS v. SIDAMON–ERISTOFFCite as 669 F.3d 374 (3rd Cir. 2012)

American Express Prepaid CardManagement Corporation,


v.


American Express Prepaid CardManagement Corporation,


v.




v.



11–1170

v.


Nos. 10–4551, 10–4552, 10–4553, 10–4714,10–4715, 10–4716, 11–1141, 11–1164,

11–1170.

United States Court of Appeals,Third Circuit.

Argued Sept. 12, 2011.

Filed: Jan. 5, 2012.

Background: Merchants association, trav-elers check issuer, and issuers of gift cardsand other stored value cards (SVCs)brought action challenging provisions ofNew Jersey’s unclaimed property statute,which modified presumptive abandonmentperiod for travelers checks from 15 yearsto three years, and which provided forcustodial escheat of SVCs. The UnitedStates District Court for the District ofNew Jersey, Freda L. Wolfson, J., 755F.Supp.2d 556, granted in part plaintiffs’motion to preliminarily enjoin state defen-dants from implementing statute duringpendency of cases. Defendants appealed.

Holdings: The Court of Appeals, Fisher,Circuit Judge, held that:

(1) issuers showed reasonable likelihood ofsuccess on merits of their ContractClause claim alleging that New Jerseyescheat statute substantially impairedissuers’ existing contractual relation-ship by imposing unexpected obli-gations in area where reliance was vi-tal;

(2) statute furthered public purpose of re-uniting abandoned property with itsowners;


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(3) issuers established that there was rea-sonable probability that statute did notmake accommodations that were rea-sonable and appropriate in light of itspurpose, in violation of ContractClause;

(4) issuers established that they wouldhave been irreparably injured by deni-al of preliminary injunction to enjoinNew Jersey from retroactively enforc-ing statute;

(5) granting preliminary injunction wouldnot have resulted in greater harm tostate;

(6) granting preliminary injunction wouldhave been in public’s interest;

(7) issuers established that there was rea-sonable probability that place-of-pur-chase presumption under statute waspreempted; and

(8) issuers established that there was rea-sonable probability that guidance fromstate treasurer was preempted underfederal common law.

Affirmed.

1. Amicus Curiae O3Although an amicus brief can be help-

ful in elaborating issues properly present-ed by the parties, it is normally not amethod for injecting new issues into anappeal, at least in cases where the partiesare competently represented by counsel.

2. Federal Courts O776, 815, 862A district court’s grant or denial of a

preliminary injunction is generally re-viewed for abuse of discretion, but theunderlying factual findings are reviewedfor clear error and legal conclusions areexamined de novo.

3. Injunction O1092A court must consider four factors

when ruling on a motion for preliminary

injunction: (1) whether the movant hasshown a reasonable probability of successon the merits; (2) whether the movant willbe irreparably injured by denial of therelief; (3) whether granting preliminaryrelief will result in even greater harm tothe nonmoving party; and (4) whethergranting preliminary relief will be in thepublic interest.

4. Constitutional Law O2671, 2672To ascertain whether there has been a

Contract Clause violation, a court mustfirst inquire whether the change in statelaw has operated as a substantial impair-ment of a contractual relationship; if thisthreshold inquiry is met, the court mustthen determine whether the law at issuehas a legitimate and important public pur-pose, and, if so, the court must ascertainwhether the adjustment of the rights ofthe parties to the contractual relationshipwas reasonable and appropriate in light ofthat purpose. U.S.C.A. Const. Art. 1,§ 10, cl. 1.

5. Constitutional Law O2669The Contract Clause only protects ex-

isting contractual relationships and legiti-mate expectations based on the law ineffect at the time of the contract.U.S.C.A. Const. Art. 1, § 10, cl. 1.

6. Civil Rights O1457(7)On motion for preliminary injunction,

issuers of stored value cards (SVCs), re-deemable for merchandise or services,showed reasonable likelihood of successon merits of their Contract Clause claimalleging that New Jersey statute thatprovided for custodial escheat of SVCssubstantially impaired issuers’ existingcontractual relationship by imposing un-expected obligations in area where reli-ance was vital, since statute required is-suers to submit entire value of SVCs incash to state at end of abandonment peri-od, even though SVCs were not redeema-



ble for cash under issuers’ contract withcustomer and value of SVCs included ex-pected profit or merchant fee, which ef-fectively transferred their expected bene-fits to state custody. U.S.C.A. Const.Art. 1, § 10, cl. 1; N.J.S.A. 46:30B–42.1(c).

7. Constitutional Law O2671When assessing substantial impair-

ment on a Contract Clause claim, a courtlooks to the legitimate expectations of thecontracting parties, and whether the modi-fication imposes an obligation or liabilitythat was unexpected at the time the par-ties entered into the contract and relied onits terms. U.S.C.A. Const. Art. 1, § 10, cl.1.

8. Constitutional Law O2745 Escheat O2

In consideration of motion for prelimi-nary injunction to enjoin state defendantsfrom retroactively implementing New Jer-sey statute providing for custodial escheatof stored value cards (SVCs), redeemablefor merchandise or services, during pen-dency of case alleging violation of ContractClause, statute furthered public purpose ofreuniting abandoned property with itsowners by requiring SVC issuers to retainname and address of purchaser or ownerand securing state custody of abandonedfunds in perpetuity for owners to reclaim.U.S.C.A. Const. Art. 1, § 10, cl. 1; N.J.S.A.46:30B–42.1(c).

9. Escheat O1The custodial escheat of abandoned

property is a significant and legitimatepublic purpose; state escheat law works toremedy the broad and general social prob-lem of reuniting abandoned property withits owners.

10. Civil Rights O1457(7)Issuers of stored value cards (SVCs),

redeemable for merchandise or services,established on motion for preliminary in-

junction that there was reasonable proba-bility that New Jersey statute which pro-vided for custodial escheat of stored valuecards (SVCs) did not make accommoda-tions that were reasonable and appropriatein light of its purpose, in violation of Con-tract Clause, since state’s public purposeof reuniting abandoned property with own-ers did not require state to retroactivelydeprive issuers of entire existing expecta-tion under contractual relationship of real-izing profit or merchant fee when ownerredeemed gift card. U.S.C.A. Const. Art.1, § 10, cl. 1; N.J.S.A. 46:30B–42.1(c).

11. Constitutional Law O2689Unless the state is a contracting par-

ty, courts ordinarily defer to legislativejudgment as to the necessity and reason-ableness of a particular measure; however,complete deference to a legislative assess-ment of reasonableness and necessity isnot appropriate where the state’s self-in-terest is at stake. U.S.C.A. Const. Art. 1,§ 10, cl. 1.

12. Injunction O1212Issuers of stored value cards (SVCs),

redeemable for merchandise or services,established that they would have been ir-reparably injured by denial of preliminaryinjunction to enjoin New Jersey from ret-roactively enforcing statute that providedfor custodial escheat of stored value cards(SVCs), since issuers either had to faceprosecution and fines for noncompliance,or turn over remaining value of existinggift cards, in cash, that had not been re-deemed within two years and they wouldnot be entitled to receive those funds backif statute was later found to be unconstitu-tional under Contract Clause, due to statesovereign immunity. U.S.C.A. Const. Art.1, § 10, cl. 1; N.J.S.A. 46:30B–42.1(c).

13. Injunction O1212Granting preliminary injunction to en-

join New Jersey from retroactively enforc-


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ing statute that provided for custodial es-cheat of stored value cards (SVCs) wouldnot have resulted in greater harm to statethan to issuers, since state did not haveinterest in the enforcement of law thatlikely violated Contract Clause. U.S.C.A.Const. Art. 1, § 10, cl. 1; N.J.S.A. 46:30B–42.1(c).

14. Injunction O1212Granting preliminary injunction to en-

join New Jersey from enforcing statutethat provided for custodial escheat ofstored value cards (SVCs) would have beenin public’s interest, including those of re-tailers and customers, since public interestwas not served by enforcement of law thatlikely violated Contract Clause. U.S.C.A.Const. Art. 1, § 10, cl. 1; N.J.S.A. 46:30B–42.1(c).

15. States O18.11Express preemption occurs when a

federal law contains express language pro-viding for the preemption of any conflict-ing state law.

16. States O18.5Implied conflict preemption occurs

when it is either impossible for a privateparty to comply with both state and feder-al requirements, or where state law standsas an obstacle to the accomplishment andexecution of the full purposes and objec-tives of Congress.

17. Escheat O2 States O18.15

New Jersey statute providing for cus-todial escheat of stored value cards (SVCs)provided greater protection than federalCredit CARD Act, and thus state statutewas shielded from express preemption,even though it provided more cumbersomeprocess for consumer to access his or herfunds once funds were presumed aban-doned, since state statute did not imposeany time restriction on consumer’s right to

recover his or her funds and allowed con-sumer holding SVC to receive cash backafter abandonment period, which was rightholder did not possess under his or heragreement with SVC issuer. CreditCARD Act of 2009, §§ 401(A), 402, 15U.S.C.A. § 1693q; N.J.S.A. 46:30B–1 etseq.

18. Antitrust and Trade RegulationO132

Consumer Credit O8.1 States O18.19, 18.84

Congress authorized the weighing ofrelative consumer benefits when it explicit-ly allowed state laws that provided greaterprotection than the Credit CARD Act tobe shielded from federal preemption.Credit CARD Act of 2009, §§ 401(A), 402,15 U.S.C.A. § 1693q.

19. Escheat O2 States O18.15

District court’s finding that data col-lection provision in New Jersey statuteproviding for custodial escheat of storedvalue cards (SVCs) provided greater pro-tection to consumers than federal creditCARD Act was supported by reasonablereading of federal law and state law andwas not clearly erroneous, since provisionrequired SVC issuers to retain name andaddress of purchaser or owner, CARD Actonly required funds to be available for fiveyears whereas state statute protectedfunds in perpetuity, and consumer understate statute was able to reclaim full cashvalue of SVC after two years. CreditCARD Act of 2009, §§ 401(A), 402, 15U.S.C.A. § 1693q; N.J.S.A. 46:30B–42.1(c).

20. Federal Courts O850.1Under clear error review of factual

findings, the Court of Appeals accepts thedistrict court’s ultimate factual determina-tions unless that determination either (1) iscompletely devoid of minimum evidentiary



support displaying some hue of credibility,or (2) bears no rational relationship to thesupportive evidentiary data.

21. Escheat O2

States O18.15

A state law providing for custodialescheat of stored value cards (SVCs) is notpreempted by the federal Credit CARDAct simply because it provides for an aban-donment period shorter than five years, ifthe state law is ultimately more protectiveof consumers. Credit CARD Act of 2009,§§ 401(A), 402, 15 U.S.C.A. § 1693q; 12C.F.R. § 205.12(b)(2); N.J.S.A. 46:30B–1 etseq.

22. Escheat O2

States O18.15

Two-year abandonment period fromdate of purchasing or using stored valuecard (SVC), under New Jersey statute thatprovided for custodial escheat of SVCs, didnot stand as obstacle to congressional pur-pose under federal Credit CARD Act ofprotecting customer interests, and thusimplied conflict preemption did not apply,since customers under state law could ac-cess funds in cash in perpetuity after thattwo year period, thus furthering federalinterest under five-year expiration provi-sion of ensuring that consumers had accessto their funds for at least first five yearsafter purchasing gift cards. Credit CARDAct of 2009, §§ 401(A), 402, 15 U.S.C.A.§ 1693q; N.J.S.A. 46:30B–42.1(a).

23. States O18.5

Implied conflict preemption occurswhen state law stands as an obstacle to theaccomplishment and execution of the fullpurposes and objectives of Congress.

24. Escheat O2

States O18.15

Issuers of stored value cards (SVCs)established that there was reasonableprobability that place-of-purchase pre-sumption under New Jersey statute thatprovided for custodial escheat of storedvalue cards (SVCs) was preempted underfederal common law, since address of placeof purchase was substituted for address ofpurchaser in all instances where address ofpurchaser was unknown, but under federalcommon law state of incorporation wouldhave escheated that property; therefore,when SVC issuer was not incorporated inNew Jersey, it would have been impossiblefor issuer to comply with both place-of-purchase presumption and federal commonlaw because two states could not both es-cheat same abandoned property. U.S.C.A.Const. Art. 6, cl. 2; N.J.S.A. 46:30B–42.1(c).

25. States O18.3

State law can be preempted by federalcommon law as well as federal statutes.

26. Escheat O6

When a property is deemed aban-doned, the first opportunity to escheat theproperty belongs to the state of the lastknown address of the creditor, as shownby the debtor’s books and records; if thereis no record of any address for a creditoror because the creditor’s last known ad-dress is in a state which does not providefor the escheat of abandoned property, thestate in which the debtor is incorporatedhas the right to escheat until another statecomes forward with proof that it has asuperior right to escheat.


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27. Escheat O2

States O18.15

Issuers of stored value cards (SVCs)established that there was reasonableprobability that guidance from state trea-surer, in adopting place-of-purchase pre-sumption under New Jersey statute whichprovided for custodial escheat of storedvalue cards (SVCs), which allowed state toescheat abandoned property by virtue offact that property was purchased in NewJersey, was preempted under federal com-mon law, since presumption would haveallowed state to escheat SVCs when itlacked a clear connection to owner or is-suer, and thus infringe on sovereign au-thority of other states and resulted in com-peting state claims to abandoned property.U.S.C.A. Const. Art. 6, cl. 2; N.J.S.A.46:30B–42.1(c).

28. Statutes O64(2)

Data collection provision in New Jer-sey statute which provided for custodialescheat of stored value cards (SVCs) wasseverable from place-of-purchase presump-tion, and, thus, data collection provisioncould stand alone even if place-of-purchasepresumption was preempted under federalcommon law; although latter worked tooverride federal common law priorityscheme by presuming that address of pur-chaser was that of place of purchase, for-mer aided state in determining what statewas entitled to escheat SVC in accordancewith that priority scheme. N.J.S.A.46:30B–42.1(c).

29. Federal Courts O433

Statutes O64(1)

The issue of severability of a statestatute is a question of state law, and,under New Jersey law, requires an inquiryinto legislative intent.

30. Statutes O64(1)When inquiring under New Jersey

law whether a statute is severable, a courtmust determine whether the objectionablefeature can be excised without substantialimpairment of or conflict with the over-alllegislative purpose.

31. Statutes O64(1)To sever a part of a statute under

New Jersey law, there must be such amanifest independence of the parts as toclearly indicate a legislative intention thatthe constitutional insufficiency of the onepart would not render the remainder inop-erative.

32. Statutes O64(1)Under New Jersey law, when differ-

ent parts of the statute are not so inti-mately connected with and dependentupon each other so as to make the statuteone composite whole, unconstitutionalparts may be rejected and the constitution-al parts may stand.


New Jersey statute that provided forcustodial escheat of stored value cards(SVCs) was supported by legitimate stateinterests, including protecting consumersand modernizing its unclaimed propertylaws, as required by substantive due pro-cess under rational basis review, even ifrevenue-raising was primary purpose be-hind enacting it. U.S.C.A. Const.Amend.14; N.J.S.A. 46:30B–1 et seq.

34. Constitutional Law O3867, 3893The Due Process Clause contains both

a procedural and substantive component.U.S.C.A. Const.Amend. 14.

35. Constitutional Law O3893Substantive due process contains two

lines of inquiry, one that applies when aparty challenges the validity of a legisla-



tive act, and one that applies to the chal-lenge of a non-legislative action. U.S.C.A.Const.Amend. 14.

36. Constitutional Law O3895In a case challenging a legislative act,

the act will withstand substantive due pro-cess scrutiny if (1) there is a legitimatestate interest that (2) could be rationallyfurthered by the statute. U.S.C.A. Const.Amend. 14.

37. Constitutional Law O3895The substantive due process rational

basis test, although ‘‘not a toothless one,’’requires significant deference to the legis-lature’s decision-making and assumptions;those attacking the rationality of the legis-lative classification have the burden tonegative every conceivable basis whichmight support it. U.S.C.A. Const.Amend.14.


Two-year abandonment period underNew Jersey statute that provided for cus-todial escheat of stored value cards (SVCs)was rationally related to protecting con-sumers, as required by substantive dueprocess, even without specific legislativefindings; although federal credit CARDAct had five-year abandonment period,state statute did not impose any time re-striction on consumer’s right to recover hisor her funds and allowed consumer holdingSVC to receive cash back after abandon-ment period, which was right holder didnot possess under agreement with SVCissuer. U.S.C.A. Const.Amend. 14;N.J.S.A. 46:30B–1 et seq.

39. Constitutional Law O3895Under substantive due process ration-

al basis review, legislative choice may bebased on rational speculation unsupportedby evidence or empirical data. U.S.C.A.Const.Amend. 14.

40. Constitutional Law O4090

Escheat O2

Allowing single issuers that sold lessthan $250,000 in gift cards in any givenyear to be exempt from New Jersey stat-ute that provided for custodial escheat ofstored value cards (SVCs) was rationallyrelated to legitimate state interest, as re-quired by substantive due process, sincestate conceivably could have wanted toprotect smaller businesses and businessesthat did not derive substantial revenuefrom gift cards. U.S.C.A. Const.Amend.14; N.J.S.A. 46:30B–1 et seq.


Escheat O2

Allowing gift cards issued under pro-motional or customer loyalty program orcharitable program, where owner of carddid not tender any monetary or other con-sideration, to be exempt from New Jerseystatute that provided for custodial escheatof stored value cards (SVCs) was rationallyrelated to legitimate state interest, as re-quired by substantive due process, sinceissuer offering cards for charitable pur-poses in exchange for monetary or otherconsideration could seek to obtain tax ben-efit for difference between payment re-ceived and full value of card and statuteencouraged issuers to receive no consider-ation in exchange for cards issued underpromotional, loyalty, or charitable pro-grams. U.S.C.A. Const.Amend. 14;N.J.S.A. 46:30B–1 et seq.


Escheat O2

Data collection provision under NewJersey statute that provided for custodialescheat of stored value cards (SVCs) relat-ing to retaining zip code of purchaser orowner was rationally related to legitimatestate interest in determining which statehad right to escheat abandoned property,


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as required by substantive due process;even when property could not be returnedto owner, state’s unclaimed property lawrationally relates to goal of protectingabandoned property by safeguarding it intrust account and making it available forconsumers to reclaim in perpetuity.U.S.C.A. Const.Amend. 14; N.J.S.A.46:30B–1 et seq.

West Codenotes

Preempted

N.J.S.A. 46:30B–42.1(c)

Robert T. Lougy (Argued), Gregory A.Spellmeyer, Office of Attorney General ofNew Jersey, Trenton, NJ, for Andrew P.Sidamon–Eristoff, Steven R. Harris andthe State of New Jersey.

Jennifer Borek, James M. Burns (Ar-gued), Genova Burns, Newark, NJ, forNew Jersey Retail Merchants Association.

Edward T. Kole (Argued), Wilentz,Goldman & Spitzer, Woodbridge, NJ, forNew Jersey Food Council.

Philip R. Sellinger (Argued), LouisSmith, Greenberg Traurig, Florham Park,NJ, Edward J. Reich, Richard M. Zucker-man (Argued), New York, NY, for Ameri-can Express Prepaid Card ManagementCorporation.

Joseph R. Scholz, McCarter & English,Newark, NJ, for Amicus Appellee, LimitedBrands, Inc.

Paul J. Watford, Henry Weissmann,Munger, Tolles & Olson, Los Angeles, CA,for Amicus Appellee, Chamber of Com-merce of the United States.

Michael Houghton, Morris, Nichols,Arsht & Tunnell, Wilmington, DE, forAmicus Curiae, Unclaimed Property Pro-fessionals Organization.

OPINION OF THE COURT

FISHER, Circuit Judge.

[1] In this consolidated appeal, NewJersey Retail Merchants Association(‘‘Retail Merchants’’), New Jersey FoodCouncil (‘‘Food Council’’), and AmericanExpress Prepaid Card Management Cor-poration (‘‘Amex Prepaid’’) (collectively,‘‘SVC Issuers’’) challenge the constitution-ality of 2010 N.J. Laws Chapter 25(‘‘Chapter 25’’), which amended New Jer-sey’s unclaimed property statute, N.J.Stat. Ann. § 46:30B (2002), and providedfor the custodial escheat of stored valuecards (‘‘SVCs’’ or ‘‘gift cards’’) for thefirst time.1 SVC Issuers filed a motionfor preliminary injunction against NewJersey Treasurer Andrew P. Sidamon–Eristoff (‘‘Treasurer’’) and New JerseyUnclaimed Property Administrator StevenR. Harris (collectively, ‘‘New Jersey’’ or‘‘State’’) in the United States DistrictCourt on the basis that Chapter 25 vio-lates the Contract Clause, the TakingsClause, the Supremacy Clause, the Sub-stantive Due Process Clause, and theCommerce Clause 2 of the United States

1. This opinion is limited to the challengebrought against 2010 N.J. Laws Chapter 25(‘‘Chapter 25’’) with respect to stored valuecards (‘‘SVCs’’). We discuss the companioncase challenging Chapter 25 with respect totravelers checks, Am. Express Travel RelatedServices Co., Inc. v. Sidamon–Eristoff, No. 10–4328, in a separate opinion.

2. The District Court held that SVC Issuersfailed to show a likelihood of success on theCommerce Clause claim. SVC Issuers do notraise this issue on appeal. The issue is onlyraised in an amicus brief filed by LimitedBrands, Inc. ‘‘Although an amicus brief canbe helpful in elaborating issues properly pre-sented by the parties, it is normally not amethod for injecting new issues into an ap-



Constitution. The District Court grantedthe motion in part and denied it in part.For the reasons discussed below, we willaffirm.

I. Background

SVCs, often called gift cards, are formsof electronic payment that come in twovarieties: ‘‘closed loop’’ and ‘‘open loop’’cards. Closed loop cards may be re-deemed only for merchandise or servicesfrom the retailer that issued the card.Retail Merchants and Food Council issueonly closed loop cards. Open loop cardsmay be redeemed at a variety of retailstores, including Internet sites, not affiliat-ed with the issuer of the card. AmexPrepaid issues open loop cards. Someopen loop cards are redeemable for cash,but most open loop cards issued by AmexPrepaid are only redeemable for merchan-dise or services.

When the purchaser tenders paymentfor the face value of the SVC, the issuer, inexchange, ‘‘promises to provide to thebearer [of the gift card] merchandise ofequal value to the remaining balance’’ onthe card. N.J. Stat. Ann. 56:8–110c (2006).The funds for the SVCs are held in a bankaccount maintained by the card issuers orin a separate database. Some issuers is-sue the cards directly, while others usesubsidiaries, vendors, or cooperatives toissue the cards. Once the SVC is redeemedfor purchase, each issuer recognizes aprofit based on the difference between theissuer’s cost of acquiring the goods or ofoffering the services and the retail pricepaid by the customer.

All fifty states, and the District of Co-lumbia, have a set of unclaimed property

laws (often called escheat laws), most ofwhich are based on a version of the Uni-form Unclaimed Property Act (‘‘UUPA’’).These laws require that once property hasbeen deemed abandoned, the holder turn itover to the state; however, the originalproperty owner still maintains the right tothe property. The purpose of unclaimedproperty laws is to provide for the safe-keeping of abandoned property and thento reunite the abandoned property with itsowner. Usually, before turning over aban-doned property to the state, the holdermust attempt to return the property bycontacting the owner, using the owner’sname and last known address. If the hold-er is unable to return the property to theowner and turns it over to the state, theholder provides the state with the nameand last known address of the owner. Theholder is no longer liable to the propertyowner once it turns over the property tothe state. The state then makes an effortto reunite the owner with the property.Under New Jersey’s custodial escheatstatute, the rightful owner may file a claimto recover the property at any time afterthe property is turned over to the State.

Prior to the enactment of Chapter 25,gift certificates (the predecessors to SVCs)were not covered by New Jersey’s escheatstatute. See In re November 8, 1996, De-termination of the State of N.J., Dept. ofthe Treasury, Unclaimed Prop. Office, 309N.J.Super. 272, 706 A.2d 1177, 1179–81(1998). This was a departure from theUUPA, which did provide for the escheatof gift certificates. Id. at 1179. The keyreason New Jersey did not escheat giftcertificates was that they were not re-deemable for cash. Id. at 1179–80. If the

peal, at least in cases where the parties arecompetently represented by counsel.’’ Uni-versal City Studios, Inc. v. Corley, 273 F.3d429, 445 (2d Cir.2001) (citation omitted); seealso Olmsted v. Pruco Life Ins. Co. of N.J., 283

F.3d 429, 436 n. 5 (2d Cir.2002) (stating ‘‘anissue raised only by an amicus curiae is nor-mally not considered on appeal’’). Accord-ingly, we decline to address the CommerceClause claim.


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State were to escheat gift certificates, theissuers would have had to turn over thevalue of the gift certificates in cash to theState, when they were originally bound toturn over only merchandise or services tothe owner. Id. at 1179. The SuperiorCourt of New Jersey found that theState’s escheat law was not intended to‘‘impose an obligation different from theobligation undertaken to the original own-er’’ of the gift certificates. Id. at 1180.

Chapter 25 now provides for the escheatof SVCs, which include closed loop cards,open loop cards redeemable only for mer-chandise or services, and open loop cardsredeemable only for cash. N.J. Stat. Ann.46:30B–6t (2010). When an SVC is pre-sumed abandoned, ‘‘the amount presumedabandoned is the amount credited to therecipient,’’ which is the entire remainingbalance on the gift cards. N.J. Stat. Ann.46:30B–43 (2002). Chapter 25 also author-izes the Treasurer to grant exemptions tocertain classes of businesses based on goodcause. N.J. Stat. Ann. 46:30B–42.1f(2010). Finally, the statute does not applyto SVCs ‘‘issued under a promotional orcustomer loyalty program or a charitableprogram for which no consideration hasbeen tendered.’’ N.J. Stat. Ann. 46:30B–42.1e (2010). Neither does it apply toSVCs issued by an issuer that sold lessthan $250,000 worth of SVCs in the pastyear. Id.

Pertinent to this case, Chapter 25 pre-sumes SVCs to be abandoned after twoyears of inactivity and requires issuers totransfer to the State the remaining valueon the SVCs at the end of the two-yearabandonment period. N.J. Stat. Ann.46:30B–42.1a (2010) (Chapter 25, § 5a).Under Chapter 25, issuers ‘‘shall obtainthe name and address of the purchaser orowner of each stored value card issued orsold and shall, at a minimum, maintain arecord of the zip code of the owner or

purchaser.’’ N.J. Stat. Ann. 46:30B–42.1c(2010) (Chapter 25, § 5c). We will refer tothis as the ‘‘data collection provision.’’ Inaddition, the same subsection provides that

[i]f the issuer of a stored value card doesnot have the name and address of thepurchaser or owner of the stored valuecard, the address of the owner or pur-chaser of the stored value card shallassume the address of the place wherethe stored value card was purchased orissued and shall be reported to NewJersey if the place of business where thestored value card was sold or issued islocated in New Jersey.

Id. This provision will be referenced as the‘‘place-of-purchase presumption.’’

Since Chapter 25 was enacted, the Trea-surer has issued several guidances inter-preting the statute. Notably, the Trea-sury Guidance dated September 23, 2010elaborates on the place-of-purchase pre-sumption found in Chapter 5, § 5c:

1 If the issuer is domiciled in New Jer-sey, any unredeemed balances ofstored value cards issued prior to thedate of this announcement where thenames and addresses or zip code of thepurchasers or owners were not record-ed must be reported to New Jersey.

1 If the issuer is not domiciled in NewJersey, any unredeemed balances ofstored value cards issued prior to thedate of this announcement where thenames and addresses or zip code of thepurchasers or owners were not record-ed should be reported to the state inwhich the issuer is domiciled in accor-dance with that state’s unclaimedproperty laws.

1 If the issuer is not domiciled in NewJersey and the issuer’s state of domi-cile exempts this type of property fromits unclaimed property statute, anyunredeemed balances of stored valuecards issued prior to the date of this



announcement where the names andaddresses or zip code of the purchas-ers or owners were not recorded mustbe reported to New Jersey if the cardswere issued or sold in New Jersey. Inthese instances, the issuer must main-tain the address of the business wherethe stored value card was purchasedor issued.

Office of the State Treasurer, State ofNew Jersey, Treasury Announcement FY2011–03, Guidance on Implementation andNotice of Exemption from Certain Provi-sions of L.2010, c. 25, at 3 (September 23,2010) (emphasis added) (‘‘Treasury Guid-ance’’).

Beginning in September 2010, RetailMerchants, Food Council, and Amex Pre-paid filed separate complaints in the Unit-ed States District Court for the District ofNew Jersey, seeking declaratory and in-junctive relief. They challenged Chapter25 under the Supremacy Clause, the DueProcess Clause, the Commerce Clause, theContract Clause, and the Takings Clauseof the Constitution. They also filed mo-tions for preliminary injunction to preventthe State from enforcing Chapter 25 whilethe case was pending. In a consolidatedNovember 13, 2010 opinion, the DistrictCourt preliminarily enjoined the retroac-tive application of Chapter 25 to SVCsredeemable for merchandise or servicesthat were issued before the enactment ofChapter 25. The Court also enjoined theprospective enforcement of the place-of-purchase presumption under Chapter 25,§ 5c and the Treasury Guidance dated

September 23, 2010. The Court, however,declined to prospectively enjoin the datacollection provision found in the same sub-section, holding that the provision was sev-erable.3 Finally, the Court declined toprospectively enjoin the two-year abandon-ment period provision under Chapter 25,§ 5a.

The State appeals the District Court’sgrant of preliminary injunction with re-spect to the retroactive enforcement ofChapter 25 and the prospective enforce-ment of the place-of-purchase presumptionand the accompanying Treasury Guidance.SVC Issuers cross-appeal the DistrictCourt’s denial of preliminary injunction asto the data collection provision and thetwo-year abandonment period. For thereasons discussed below, we will affirm theDistrict Court’s orders.

II. Standard of Review

[2] ‘‘We generally review a districtcourt’s [grant or] denial of a preliminaryinjunction for abuse of discretion[,] butreview the underlying factual findings forclear error and examine legal conclusionsde novo.’’ Brown v. City of Pittsburgh,586 F.3d 263, 268 (3d Cir.2009) (citationomitted). ‘‘We have jurisdiction to reviewthe order [granting or] denying a prelimi-nary injunction under 28 U.S.C.§ 1292(a)(1).’’ Id. at 268 n. 6.

III. Discussion

[3] A court must consider four factorswhen ruling on a motion for preliminaryinjunction: ‘‘(1) whether the movant has

3. The District Court’s November 13, 2010opinion stated that it was ‘‘preliminarily en-join[ing the State] from enforcing subsection5c of Chapter 25 and Treasury Guidance dat-ed September 23, 2010, which apply a place-of-purchase presumption for all stored valuecardsTTTT’’ Am. Express Travel Related Servs.Co., Inc. v. Sidamon–Eristoff, 755 F.Supp.2d556, 616–17 (D.N.J.2010). SVC Issuers filed

a motion for clarification or construction ofthe November 13 order. On January 14,2011, the District Court clarified that it waspreliminarily enjoining the place-of-purchasepresumption found in Chapter 25, § 5c butnot the data collection provision under thesame subsection because the latter was sever-able. Id. at 619.


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shown a reasonable probability of successon the merits; (2) whether the movant willbe irreparably injured by denial of therelief; (3) whether granting preliminaryrelief will result in even greater harm tothe nonmoving party; and (4) whethergranting preliminary relief will be in thepublic interest.’’ Crissman v. DoverDowns Entm’t Inc., 239 F.3d 357, 364 (3dCir.2001). We will examine these factorswith respect to each constitutional chal-lenge.

A. Contract Clause

[4, 5] The Contract Clause under Arti-cle I, Section 10, Clause 1 of the U.S.Constitution provides that ‘‘[n]o State shallTTT pass any TTT Law impairing the Obli-gation of Contracts.’’ To ascertain wheth-er there has been a Contract Clause viola-tion, a court must first inquire whether thechange in State law has ‘‘operated as asubstantial impairment of a contractual re-lationship.’’ Gen. Motors Corp. v. Romein,503 U.S. 181, 186, 112 S.Ct. 1105, 117L.Ed.2d 328 (1992) (citations omitted);Nieves v. Hess Oil Virgin Islands Corp.,819 F.2d 1237, 1243 (3d Cir.1987) (citationsomitted). If this threshold inquiry is met,the court must then determine ‘‘whetherthe law at issue has a legitimate and im-portant public purpose.’’ Transport Work-ers Union of Am., Local 290 v. S.E. Pa.Transp. Auth., 145 F.3d 619, 621 (3d Cir.1998). If so, the court must ascertain‘‘whether the adjustment of the rights ofthe parties to the contractual relationshipwas reasonable and appropriate in light ofthat purpose.’’ Id. Because the Contract

Clause only protects existing contractualrelationships and legitimate expectationsbased on the law in effect at the time ofthe contract, see Troy Ltd. v. Renna, 727F.2d 287, 296–99 (3d Cir.1984), a prelimi-nary injunction based on a ContractClause violation would only apply retroac-tively to SVCs issued before the enactmentof Chapter 25. We hold that SVC Issuersshowed a reasonable likelihood of successon the merits of their Contract Clauseclaim with respect to SVCs that are re-deemable for merchandise or services.4

[6, 7] First, under the threshold inqui-ry, Chapter 25 operates a substantial im-pairment on the contractual relationshipsof SVC Issuers. In assessing substantialimpairment, the court looks to ‘‘the legiti-mate expectations of the contracting par-ties,’’ U.S. Trust Co. of N.Y. v. New Jer-sey, 431 U.S. 1, 19 n. 17, 97 S.Ct. 1505, 52L.Ed.2d 92 (1977), and whether the modi-fication imposes an obligation or liabilitythat was unexpected at the time the par-ties entered into the contract and reliedon its terms. Allied Structural Steel Co.v. Spannaus, 438 U.S. 234, 247, 98 S.Ct.2716, 57 L.Ed.2d 727 (1978). The contrac-tual agreement between SVC Issuers andpurchasers provides that the balance onthe gift card may be redeemed only formerchandise or services; thus, Issuers ofclosed loop SVCs expected to realize aprofit when the bearer redeemed the cardfor the Issuers’ merchandise or services,and the Issuers of open loop SVCs expect-ed to realize a merchant fee, which is afee Issuers like Amex retained from re-tailers, when the bearer redeemed the

4. The District Court held that the SVC Issuersthat sell prepaid SVCs redeemable for cashfailed to show a reasonable likelihood of suc-cess on the merits of their Contract Clauseclaim because they did not point to ‘‘anyexpress or implied contractual obligation be-tween themselves and prepaid SVC purchas-ers that [was] impaired by Chapter 25.’’ Am.

Express Travel Related Servs., 755 F.Supp.2dat 609. On appeal, SVC Issuers raise noargument regarding this determination. Assuch, their Contract Clause claim with respectto SVCs redeemable for cash is waived. SeeGonzalez v. AMR, 549 F.3d 219, 225 (3d Cir.2008).



card from retailers that accept open loopSVCs. Decl. of Stefan Happ at 2, Am.Express Travel Related Servs. v. Sida-mon–Eristoff, 755 F.Supp.2d 556 (D.N.J.2010) (No. 10–5206). Chapter 25 requiresSVC Issuers to submit the value of theSVCs in cash to the State at the end ofthe abandonment period, even though theSVCs are not redeemable for cash underthe SVC Issuers’ contract with the cus-tomer. Because the value of the SVCsincludes the expected profit or merchantfee, requiring SVC Issuers to turn overthe entire value of the SVC in cash effec-tively transfers their expected benefits tostate custody. By imposing such an unex-pected obligation on SVC Issuers, Chapter25 impaired their contractual relationship.5

See Allied Structural Steel, 438 U.S. at247, 98 S.Ct. 2716 (holding state law retro-actively modifying compensation the com-pany had agreed to pay to its employeesimpaired its contractual relationship byimposing a completely unexpected liabili-ty).

This impairment was substantial be-cause SVC Issuers’ reliance on the expect-ed profit or merchant fee was vital to itscontractual relationship. In Allied Struc-tural Steel, Minnesota’s Private PensionBenefits Protection Act retroactively modi-fied the company’s statutory vesting re-quirement in the funding of a pension plan,such that ‘‘the company’s past contribu-tions [to the pension plan] were adequatewhen made’’ but ‘‘not adequate when com-puted under the [new] statutory vestingrequirement.’’ Id. at 246, 98 S.Ct. 2716.Because the company’s reliance on suchcontribution requirement was vital to the

contract, id., and the Minnesota law im-posed a completely unanticipated retroac-tive obligation upon the company by ‘‘[e]n-tering a field it had never before sought toregulate,’’ the Court held that the Statelaw substantially impaired the company’scontractual relationship. Id. at 249, 98S.Ct. 2716. Similarly, SVC Issuers’ reli-ance on the expected profit or merchantfee was vital to their contractual relation-ships; the expected benefits supported theadministrative cost of issuing and process-ing SVCs and allowed them to issue SVCswithout charging the purchaser additionalfees beyond the face value of the giftcards. Moreover, Chapter 25 imposed ret-roactive obligations on SVC Issuers thatwere unanticipated because New Jerseylaw never before provided for the escheatof SVCs. Therefore, Chapter 25 substan-tially impaired the SVC Issuers’ contractu-al relationship by imposing unexpected ob-ligations in an area where reliance wasvital.

[8, 9] With respect to the second inqui-ry, it has been recognized that the custodi-al escheat of abandoned property is a sig-nificant and legitimate public purpose.See Anderson Nat’l Bank v. Luckett, 321U.S. 233, 240, 64 S.Ct. 599, 88 L.Ed. 692(1944) (‘‘[I]t is no longer open to doubt thata state, by a procedure satisfying constitu-tional requirements, may compel surren-der to it of deposit balances, when there issubstantial ground for belief that theyhave been abandonedTTTT’’). State es-cheat law works to remedy the ‘‘broad andgeneral social TTT problem’’ of reunitingabandoned property with its owners. See

5. The State submits that even after the valueof the SVCs have been turned over to theState, SVC Issuers that wish to profit fromthe gift card transactions can honor the cardwhen presented and seek reimbursementfrom the State. However, if the owner neverpresents the card and instead directly files a

claim with the State, SVC Issuers are re-moved entirely from the transaction and areunable to collect their expected profits ormerchant fee. The same result occurs if theowner does not present the card or file aclaim with the State.


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Energy Reserves Grp. v. Kan. Power andLight Co., 459 U.S. 400, 412, 103 S.Ct. 697,74 L.Ed.2d 569 (1983). Chapter 25 fur-thers this public purpose by requiring SVCIssuers to retain the name and address ofthe purchaser or owner and securing Statecustody of the abandoned funds in perpe-tuity for the owners to reclaim.

[10, 11] However, under the third in-quiry, Chapter 25 does not reasonably ac-commodate the rights of the contractingparties in light of the State’s public pur-pose because it fails to allow SVC issuersto collect their bargained-for expectedprofits or merchant fees. See TransportWorkers Union of Am., Local 290, 145F.3d at 621. Unless the state is a con-tracting party, courts ordinarily ‘‘defer tolegislative judgment as to the necessityand reasonableness of a particular meas-ure.’’ Energy Reserves Grp., 459 U.S. at413, 103 S.Ct. 697 (internal quotationmarks and citation omitted). AlthoughNew Jersey is not a contracting party inthe present case, ‘‘complete deference to alegislative assessment of reasonablenessand necessity is not appropriate [where]the State’s self-interest is at stake.’’ U.S.Trust Co. of N.Y., 431 U.S. at 26, 97 S.Ct.1505.

Here, under the contractual relationship,SVC Issuers had an expectation of realiz-ing a profit or merchant fee when theowner redeemed the gift card. Notably,the purchaser implicitly accepted that theSVC Issuers had an expectation of realiz-ing a profit or merchant fee when thepurchaser agreed to redeem the gift cardonly in exchange for merchandise or ser-vices. Serving the State’s public purposeof reuniting abandoned property with own-ers did not require the State to entirelydeprive SVC Issuers of this bargained-forbenefit. Like many other states that es-cheat gift cards, New Jersey could haveaccommodated the SVC Issuers’ expecta-

tions by requiring them to turn over apercentage of the value of the abandonedgift card, reflecting a discount based onthe expected profit or merchant fee, ratherthan the card’s entire remaining value.See, e.g., Ala.Code § 35–12–72(a)(17) (es-cheating 60% of value of gift cards re-deemable only for merchandise). Thiswould still allow the State to escheat theowner’s bargained-for value of the SVC inorder to reunite the funds with the owner.Accordingly, SVC Issuers establishedthere was a reasonable probability that theState violated the Contract Clause by fail-ing to make accommodations that werereasonable and appropriate in light ofChapter 25’s purpose.

[12–14] Having shown a likelihood ofsuccess on the merits of their ContractClause claim, SVC Issuers must also showthat they will be irreparably injured by adenial of the preliminary injunction;granting the preliminary injunction willnot result in even greater harm to thenonmoving party; and granting the pre-liminary injunction will be in the publicinterest. See Crissman, 239 F.3d at 364.SVC Issuers will suffer irreparable harm ifthe preliminary injunction is denied. Ifthe State enforces Chapter 25, SVC Is-suers must either face prosecution andfines for noncompliance or turn over, incash, the remaining value of existing giftcards that have not been redeemed withintwo years. They would not be entitled toreceive those funds back if Chapter 25 islater found to be unconstitutional, due tostate sovereign immunity. See Edelmanv. Jordan, 415 U.S. 651, 663, 94 S.Ct. 1347,39 L.Ed.2d 662 (1974) (stating ‘‘suit byprivate parties seeking to impose a liabilitywhich must be paid from public funds inthe state treasury is barred by the Elev-enth Amendment’’). Granting the prelimi-nary injunction would not result in a great-er harm to the State because the State



‘‘does not have an interest in the enforce-ment of an unconstitutional law[.]’’ Am.Civil Liberties Union v. Ashcroft, 322 F.3d240, 247 (3d Cir.2003) (internal quotationmarks and citation omitted). Finally,granting a preliminary injunction would bein the public’s interest, including those ofretailers and customers, because ‘‘the pub-lic interest [is] not served by the enforce-ment of an unconstitutional law.’’ Id. Allfour preliminary injunction conditions hav-ing been met, the District Court did notabuse its discretion in enjoining the Statefrom retroactively enforcing Chapter 25with respect to existing SVCs redeemablefor merchandise or services.6

B. Federal statutory preemption un-der Credit CARD Act

[15, 16] Under the Supremacy Clauseof the U.S. Constitution, ‘‘the Laws of theUnited States TTT shall be the supremelaw of the Land,’’ and state law is invalid iffederal law preempts state law. U.S.Const. art. VI, cl. 2. ‘‘Express preemptionoccurs when a federal law contains expresslanguage providing for the preemption ofany conflicting state law.’’ Kurns v. A.W.Chesterton Inc., 620 F.3d 392, 395 (3d Cir.2010) (citation omitted). ‘‘Implied conflictpreemption occurs when it is either impos-sible for a private party to comply withboth state and federal requirements, orwhere state law stands as an obstacle to

the accomplishment and execution of thefull purposes and objectives of Congress.’’Id. at 395–96 (internal quotation marksand citations omitted). We address SVCIssuers’ arguments regarding express pre-emption and implied preemption in turn.

1. Express preemption

[17] SVC Issuers failed to show a rea-sonable likelihood of success on the meritsof their claim that Chapter 25’s two-yearabandonment period is expressly preempt-ed by the federal Credit CARD Act of2009 (‘‘CARD Act’’). 15 U.S.C. § 1693l–1(c). Under the CARD Act, a ‘‘State lawis not inconsistent with this subchapter ifthe protection such law affords any con-sumer is greater than the protection af-forded by this subchapter.’’ 15 U.S.C.§ 1693q. The District Court found that‘‘Chapter 25 affords consumers greaterprotection than that provided by theCARD Act’s expiration provision’’ 7 be-cause ‘‘Chapter 25 imposes no time restric-tion on the consumer’s right to recover hisor her funds’’ and allows the consumerholding the SVC to receive ‘‘cash backafter the abandonment period—a right theholder did not possess under his or heragreement with the SVC issuer.’’ Am.Express Travel Related Servs. v. Sida-mon–Eristoff, 755 F.Supp.2d 556, 592(D.N.J.2010). According to the District

6. Although the District Court held that‘‘Chapter 25 could conceivably effect a takingof the gift card sale and redemption,’’ theCourt did not need to ‘‘rest its decision togrant a preliminary injunction on the Takingsclaim in light of the TTT Contract[ ] Clauseanalysis’’ in favor of SVC Issuers. Am. Ex-press Travel Related Servs., 755 F.Supp.2d at612. Because we affirm the District Court’sgrant of preliminary injunction based on SVCIssuers’ Contract Clause claim, we need notreach the Takings Clause claim. For thesame reasons, we do not reach Food Coun-cil’s argument that Chapter 25 violates thederivative rights rule and the manifest injus-

tice rule under the New Jersey state constitu-tion.

7. Under the Credit CARD Act, ‘‘it shall beunlawful for any person to sell or issue a giftcertificate, store gift card, or general-use pre-paid card that is subject to an expiration dateTTT [unless] the expiration date is not earlierthan 5 years after the date on which the giftcertificate was issued, or the date on whichcard funds were last loaded to a store giftcard or general-use prepaid card; and TTT theterms of expiration are clearly and conspicu-ously stated.’’ 15 U.S.C. § 1693l–1(c).


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Court, ‘‘[w]hile Chapter 25 may make it amore cumbersome process for a consumerto access his/her funds once the funds arepresumed abandoned, it ultimately pro-vides greater protection to the consum-erTTTT’’ Id.

[18, 19] SVC Issuers submit on appealthat the ‘‘greater protection’’ analysis inap-propriately allows the District Court toweigh the relative benefits of differenttypes of consumer protection mechanismsand rewrite the CARD Act, thus, deprivingthe consumer of the benefits Congress de-cided to provide and replacing them withdifferent ones. However, ultimately, thecontrolling language in the CARD Act isclear: ‘‘[a] State law is not inconsistentwith this subchapter if the protection suchlaw affords any consumer is greater thanthe protection afforded by this subchap-ter.’’ 15 U.S.C. § 1693q. Congress au-thorized the weighing of relative consumerbenefits when it explicitly allowed statelaws that provided greater protection thanthe Act to be shielded from federal pre-emption. See id.

[20] In the alternative, SVC Issuerssubmit that even if the District Court hadthe authority to assess whether the Statelaw provided greater consumer protection,Chapter 25 does not actually providegreater protection for consumers. We re-view the District Court’s factual findingsfor clear error. Brown, 586 F.3d at 268.Under this standard, we accept the Dis-trict Court’s ultimate factual determina-tions unless ‘‘that determination either (1)is completely devoid of minimum evidentia-ry support displaying some hue of credibil-ity, or (2) bears no rational relationship tothe supportive evidentiary data.’’ Krasnovv. Dinan, 465 F.2d 1298, 1302 (3d Cir.1972). Specifically, SVC Issuers arguethat it is unclear how the State will use thezip code of the purchaser to reunite theowner with the escheated gift card funds.

However, the data collection provision firstand foremost requires SVC Issuers to re-tain the name and address of the purchas-er or owner, which helps the State reunitethe property with the owner. Chapter 25,§ 5c. Moreover, even if the specific pro-cess the State uses to operate its escheatlaw is unclear, we do not believe that thisnegates the overall protection Chapter 25provides to consumers. First, the CARDAct only requires the funds to be availablefor five years whereas Chapter 25 protectsthe funds in perpetuity. Second, evenwith respect to non-expiring gift cards,Chapter 25 still provides greater protec-tion because the consumer is able to re-claim the full cash value of the SVC underChapter 25 after two years, whereas hewould have been able to redeem only mer-chandise or services using the SVC. Thus,the District Court’s finding that Chapter25 provides greater protection to consum-ers than the CARD Act was supported bya reasonable reading of the federal lawand state law and was not clearly errone-ous.

[21] SVC Issuers’ reliance on the lan-guage of the Federal Reserve Board’s reg-ulation is also misplaced. The FederalReserve Board, which is responsible for‘‘prescribe[ing] regulations to carry out thepurposes of the Act,’’ 15 U.S.C. § 1693b(a),issued a regulation stating that ‘‘State lawis inconsistent with the requirements ofthe [CARD Act] TTT if it (i) Requires orpermits a practice or act prohibited by thefederal law.’’ 12 C.F.R. § 205.12(b)(2).SVC Issuers argue that under Chapter 25,they are ‘‘permitted’’ to dishonor SVCswhen the funds are escheated after thetwo-year abandonment period, and this is‘‘a practice or act prohibited by [the CARDAct],’’ which requires a minimum five-yearexpiration period (unless certain disclosurerequirements are met). Id. Thus, theysubmit that the two-year abandonment pe-



riod is inconsistent with and preempted bythe CARD Act. However, the Federal Re-serve Board explicitly refused to make ageneral preemption determination basedon abandonment periods, despite recogniz-ing that many state laws provide for anabandonment period of shorter than fiveyears. Board of Governors of the FederalReserve System, Final Rule, Regulation E(12 CFR 205), Docket No. R–1377, at 69(Aug. 22, 2010) (‘‘certain state laws requireissuers of unused gift cards to remit theremaining funds to the state TTT after aperiod of time—typically three to fiveyears after the card is sold or used’’). TheBoard reasoned that ‘‘state escheat lawsvary significantly’’ and ‘‘the regulation pro-vides that a state law is not inconsistentwith any provision if it is more protectiveof consumers.’’ Id. at 70. Therefore, theBoard recognized that a state law is notpreempted simply because it provides foran abandonment period shorter than fiveyears, if the state law is ultimately moreprotective of consumers. This reading ofthe Board’s regulation and explanationsupports the District Court’s ‘‘greater con-sumer protection’’ analysis.

2. Implied preemption

[22, 23] SVC Issuers also failed toshow that Chapter 25 is likely to be impli-edly preempted by the CARD Act. Impliedconflict preemption occurs when state law‘‘stands as an obstacle to the accomplish-ment and execution of the full purposesand objectives of Congress.’’ English v.Gen. Elec. Co., 496 U.S. 72, 79, 110 S.Ct.2270, 110 L.Ed.2d 65 (1990) (citations omit-ted). SVC Issuers contend that Chapter25 thwarts Congress’ consumer protectionobjective by preventing consumers fromeasily accessing the SVC funds from theretailer and instead requiring them to filea claim with the state after two years. Wereject this argument. The five-year expi-ration provision was designed to ensure

that consumers had access to their fundsfor at least the first five years after pur-chasing the gift cards. 15 U.S.C. § 1693l–1(c). Chapter 25’s two-year abandonmentperiod furthers this interest by protectingthe funds in perpetuity and allowing con-sumers to access those funds in cash byfiling a claim with the State. SVC Issuersfailed to present any evidence that Con-gress was concerned with the exact meth-od by which consumers could access thosefunds.

In addition, SVC Issuers submit that thetwo-year abandonment period would de-prive them of the economic incentive toadopt longer expiration periods becausetheir expected profit would be turned overto the State at the end of the two-yearperiod, regardless of the SVC’s expirationdate. And because longer expiration peri-ods benefit customers, they argue thatChapter 25’s effect on this incentive struc-ture stands as an obstacle to the customerprotection purpose of the CARD Act. Butthe new abandonment period renders long-er expiration periods unnecessary becauseafter two years from the date of purchas-ing or using the SVC, the customers canaccess the funds in cash in perpetuity.Thus, the two-year abandonment perioddoes not stand as an obstacle to the con-gressional purpose of protecting customerinterests.

Because we agree with the DistrictCourt that SVC Issuers failed to show alikelihood of success on their federal statu-tory preemption claim with respect to thetwo-year-abandonment period found inChapter 25, Section 5a, we need not ad-dress the remaining preliminary injunctionfactors.

C. Federal common law preemptionunder Texas v. New Jersey

[24] SVC Issuers submit that Chapter25 and the Treasury Guidance are


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preempted by the escheat priority rulesannounced in Texas v. New Jersey (Tex-as), 379 U.S. 674, 681–82, 85 S.Ct. 626, 13L.Ed.2d 596 (1965), and reaffirmed inPennsylvania v. New York (Pennsylva-nia), 407 U.S. 206, 217–18, 92 S.Ct. 2075,32 L.Ed.2d 693 (1972), and Delaware v.New York (Delaware), 507 U.S. 490, 499–500, 113 S.Ct. 1550, 123 L.Ed.2d 211(1993). The State contends that its imple-mentation of Chapter 25 through the Trea-sury Guidance comports with the priorityrules established by the Supreme Court.We agree with the District Court that SVCIssuers demonstrated a reasonable likeli-hood of success on their claim that Chap-ter 25’s place-of-purchase presumption aswell as the Treasury Guidance arepreempted under federal common law.The language of Chapter 25’s place-of-pur-chase presumption directly contradicts thesecond priority rule announced in Texas.And even if the Guidance were a properexercise of the Treasurer’s power 8, it isalso preempted under Texas. Moreover,we agree that the data collection provisionis severable from the place-of-purchasepresumption; thus, the data collection pro-vision may stand alone even if the place-of-purchase presumption is preempted underfederal common law.

1. Chapter 25

[25] Under the Supremacy Clause ofthe U.S. Constitution, ‘‘the Laws of theUnited States TTT shall be the supremelaw of the Land,’’ and state law is invalid iffederal law preempts state law. U.S.Const. art. VI, cl. 2. It is undisputed thatstate law can be preempted by federalcommon law as well as federal statutes.

Boyle v. United Techs. Corp., 487 U.S. 500,518, 108 S.Ct. 2510, 101 L.Ed.2d 442 (1988)(Brennan, J., dissenting) (stating federalcommon law can displace state law in limit-ed instances, such as areas involving inter-state disputes). ‘‘Implied conflict preemp-tion occurs when it is either impossible fora private party to comply with both stateand federal requirements, or where statelaw stands as an obstacle to the accom-plishment and execution of the full pur-poses and objectives of Congress.’’Kurns, 620 F.3d at 395–96 (internal quota-tion marks and citations omitted).

[26] In Texas, the Supreme Court es-tablished two priority rules to resolve con-flicts among states over unclaimed intangi-ble property. 379 U.S. at 680–82, 85 S.Ct.626. When a property is deemed aban-doned, the first opportunity to escheat theproperty belongs to ‘‘the State of the lastknown address of the creditor, as shownby the debtor’s books and records.’’ Id. at682, 85 S.Ct. 626. We refer to this as theprimary rule. If the primary rule fails be-cause there is no record of any address fora creditor or because the creditor’s lastknown address is in a State which does notprovide for the escheat of abandoned prop-erty, the secondary rule gives the right toescheat to the State in which the debtor isincorporated until another state comes for-ward with proof that it has a superior rightto escheat. Id.

Under Chapter 25’s place-of-purchasepresumption, in all instances where theaddress of the purchaser is unknown, theaddress of the place of purchase is substi-tuted for the address of the purchaser.9

8. The District Court held that the TreasuryGuidance was a proper exercise of the Trea-surer’s power. Am. Express Travel RelatedServs., 755 F.Supp.2d at 602–03. We neednot address this issue because we hold thatSVC Issuers showed a likelihood of success

on their claim that the Treasury Guidance ispreempted under federal common law.

9. Chapter 25’s place-of-purchase presumptionprovides that ‘‘[i]f the issuer of a stored valuecard does not have the name and address of



Then, in cases where the address of thepurchaser for an SVC purchased in NewJersey is unknown, New Jersey would es-cheat the property under Chapter 25;however, under the secondary rule in Tex-as, the SVC Issuer’s state of incorporationwould escheat the property. Therefore,when the SVC Issuer is not incorporatedin New Jersey, it would be impossible forthe Issuer to comply with both Chapter25’s place-of-purchase presumption andfederal common law under Texas becausetwo states cannot both escheat the sameabandoned property. See Texas, 379 U.S.at 676, 85 S.Ct. 626 (citing W. Union Tel.Co. v. Pennsylvania, 368 U.S. 71, 82 S.Ct.199, 7 L.Ed.2d 139 (1961)) (‘‘[T]he DueProcess Clause of the Fourteenth Amend-ment prevents more than one State fromescheating a given item of propertyTTTT’’)Accordingly, the place-of-purchase pre-sumption is preempted under Texas. SeeKurns, 620 F.3d at 395–96.

2. Treasury Guidance

[27] On appeal, the State contends thatChapter 25, as implemented through theTreasury Guidance, comports with theTexas priority rules. For the followingreasons, we hold that SVC Issuers mettheir burden of showing that both Chapter25 and the Treasury Guidance are likelypreempted under the Supreme Court prec-edent in Texas, Pennsylvania, and Dela-ware.

To evaluate SVC Issuers’ federal pre-emption claim regarding the TreasuryGuidance, we find it helpful to first reviewthe federal common law in question. InTexas v. New Jersey, the Supreme Court

resolved a claim brought by Texas againstNew Jersey, Pennsylvania, and the Sun OilCompany for declaratory and injunctiverelief regarding the right to claim aban-doned intangible property through es-cheat. 379 U.S. at 675, 85 S.Ct. 626.Four different possible rules were submit-ted by the parties regarding the priority inwhich states should be allowed to escheatabandoned property. Id. at 678, 85 S.Ct.626. Texas argued that the State with the‘‘most significant ‘contacts’ with the debt’’should be given the right to escheat, id.,while Pennsylvania contended that thestate in which the debtor’s principal officeis located should have priority to escheatover other states. Id. at 680, 85 S.Ct. 626.The Supreme Court rejected both optionsbecause these tests created too much un-certainty and would inevitably have led thecourts to make case-by-case determina-tions based on specific facts. Id. at 678–80, 85 S.Ct. 626. This result would direct-ly contradict the Court’s intent to settlethe escheat disputes ‘‘once and for all by aclear rule which [would] govern all types ofintangible obligations like these and towhich all States may refer with confi-dence.’’ Id. at 678, 85 S.Ct. 626. In theend, the Court adopted Florida’s proposedrule,10 giving the state of the creditor’s lastknown address the first priority right toescheat, because this rule fairly recognizedthat the creditor, not the holder, was theowner of the property, and the ‘‘rule in-volves a factual issue simple and easy toresolve, and leaves no legal issue to bedecided.’’ Id. at 681, 85 S.Ct. 626. TheCourt gave the debtor’s domiciliary statethe second right to escheat the abandoned

the purchaser or owner TTT the address of theowner or purchaser of the stored value cardshall assume the address of the place wherethe stored value card was purchased.’’ N.J.Stat. Ann. 46:30B–42.1c (Chapter 25, § 5c).

10. The Texas v. New Jersey Court permittedFlorida to intervene ‘‘since it claimed theright to escheat the portion of Sun [Oil]’sescheatable obligations owing to personswhose last known address was in Florida.’’Texas v. New Jersey, 379 U.S. 674, 677, 85S.Ct. 626, 13 L.Ed.2d 596 (1965).


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property, until another state proved itssuperior right to escheat, because this rulehad the ‘‘obvious virtue of clarity and easeof application’’ that created the ‘‘neededcertainty’’ in this area of dispute amongstates.11 Id. at 680, 682, 85 S.Ct. 626.

As evidenced by the Texas Court’s ratio-nale behind fashioning the priority rules,its primary concern was to unambiguouslyand definitively resolve disputes amongstates regarding the right to escheat aban-doned property. Indeed, the Court explic-itly recognized that the ‘‘case could havebeen resolved otherwise, for the issue here[was] not controlled by statutory or consti-tutional provisions or by past deci-sionsTTTT’’ Id. at 683, 85 S.Ct. 626. TheCourt’s ultimate resolution was ‘‘funda-mentally a question of ease of administra-tion and of equity.’’ Id.

The Supreme Court reaffirmed the Tex-as priority rules in two subsequent cases:Pennsylvania v. New York, 407 U.S. at214–15, 92 S.Ct. 2075, and Delaware v.New York, 507 U.S. at 498–99, 113 S.Ct.1550. In Pennsylvania, because WesternUnion did not keep records of the credi-tor’s identity or last known address, thedebtor’s state of incorporation was posi-tioned to claim a large portion of the un-claimed funds. 407 U.S. at 211–12, 92S.Ct. 2075. In response, Pennsylvaniaproposed that for cases involving transac-tions where the debtor does not keep rec-ords showing the address of the creditor,‘‘the [s]tate of origin of the transaction,’’

i.e., the state of the place of purchase,should have the right to escheat the aban-doned property, rather than the state ofthe debtor’s domicile as was required un-der the second priority rule in Texas. Id.at 213–14, 92 S.Ct. 2075. The Court re-jected Pennsylvania’s request, recognizingthat ‘‘the place-of-purchase TTT rule[ ]might permit intangible property rights tobe ‘cut off or adversely affected by TTT aforum having no continuing relationship toany of the parties’ ’’ to the transaction. Id.at 213, 92 S.Ct. 2075. In addition to find-ing that the state of purchase had insuffi-cient ties to the creditor or debtor to justi-fy giving it the right to escheat, the Courtheld that ‘‘the likelihood of a ‘windfall’ for[the state of the debtor’s domicile was not]a sufficient reason for carving out an ex-ception to the Texas rule.’’ Id. at 214, 92S.Ct. 2075.

In the present case, New Jersey similar-ly adopts a place-of-purchase presumption,which, under the Treasury Guidance, al-lows the State to escheat abandoned prop-erty by virtue of the fact that the propertywas purchased in New Jersey.12 But NewJersey, as the state in which the SVC waspurchased, does not have a sufficient con-nection with any of the parties to thetransaction to claim a right to escheat theabandoned property. See Pennsylvania,407 U.S. at 213, 92 S.Ct. 2075. As theCourt denied Pennsylvania’s place-of-pur-chase rule because ‘‘only a [s]tate with a

11. However, the Court declined to give thedebtor’s domiciliary state the first priorityright to escheat, as proposed by New Jersey,because it would not have been fair to letsuch a ‘‘minor factor’’ allow a fortuitous statein which the debtor ‘‘happened to incorporateitself’’ to claim rights to abandoned propertyall over the country. Texas, 379 U.S. at 680,85 S.Ct. 626.

12. Under the Treasury Guidance, the place-of-purchase assumption applies when the issuer

does not have the name and address of theowner or purchaser, the issuer is not domi-ciled in New Jersey, and the state of domicileexempts the property from its unclaimedproperty statute. Office of the State Treasur-er, State of New Jersey, Treasury Announce-ment FY 2011–03, Guidance on Implementa-tion and Notice of Exemption from CertainProvisions of L.2010, c. 25, at 3 (September23, 2010) (‘‘Treasury Guidance’’).



clear connection to the creditor or debtormay escheat,’’ Delaware, 507 U.S. at 504,113 S.Ct. 1550 (discussing Court’s holdingin Pennsylvania ), the District Court cor-rectly enjoined New Jersey’s place-of-pur-chase presumption that would have al-lowed the State to escheat SVCs when itlacked a clear connection to the owner orissuer.

The State submits that without theplace-of-purchase presumption, SVC Is-suers that are incorporated in states thatdo not escheat abandoned property wouldunfairly have the right to retain the aban-doned property. But the PennsylvaniaCourt held that ‘‘the likelihood of a ‘wind-fall’ for [the state of the debtor’s domicilewas not] a sufficient reason for carving outan exception to the Texas rule.’’ 407 U.S.at 214, 92 S.Ct. 2075. Likewise, the poten-tial of a windfall for the SVC Issuers thatare incorporated in states that do not es-cheat abandoned property does not meritdeparting from the established priorityrules. To depart from the Texas priorityrules here would require us ‘‘to do precise-ly what [the Supreme Court] said shouldbe avoided—that is, ‘to decide each escheatcase on the basis of its particular facts orto devise new rules of law to apply to ever-developing new categories of facts.’ ’’ Id.at 215, 92 S.Ct. 2075 (citing Texas, 379U.S. at 679, 85 S.Ct. 626).

Our analysis is consistent with the Su-preme Court’s recognition that a state’spower to escheat is derived from the prin-ciple of sovereignty. As the DelawareCourt recognized, ‘‘the secondary rule pro-tects the interests of the debtor’s [s]tate assovereign over the remaining party to theunderlying transaction.’’ 507 U.S. at 504,113 S.Ct. 1550 (emphasis added). The Su-preme Court has long recognized that thesovereign maintains authority over aban-doned property, including the right to es-cheat the property. See Texas, 379 U.S. at

675, 85 S.Ct. 626. The ability to escheatnecessarily entails the ability not to es-cheat. To say otherwise could force astate to escheat against its will, leading toa result inconsistent with the basic princi-ple of sovereignty. Various considerationsmight motivate states not to exercise cus-todial escheat. For example, because com-panies might find the absence of statecustodial escheat attractive, states maywant to incentivize companies to incorpo-rate in their jurisdiction by choosing not toescheat abandoned property. In reaffirm-ing the Texas rule, the Supreme Court‘‘detect[ed] no inequity in rewarding aState whose laws prove[d] more attractiveto firms that wish to incorporate.’’ Dela-ware, 507 U.S. at 507, 113 S.Ct. 1550.Accordingly, the Court intended that astate’s decision, regarding the exercise ofcustodial escheat under the secondary rule,would be respected under the principle ofsovereignty.

But the place-of-purchase presumption,executed in accordance with the TreasuryGuidance, allows New Jersey to infringeon the sovereign authority of other states.Even when states decide not to exercisecustodial escheat with the intent of allow-ing the holders to maintain custody of theproperty, the place-of-purchase presump-tion gives New Jersey the right to makethe holder, SVC Issuers in this case, turnover the property to the State. Whenfashioning the priority rules, the SupremeCourt did not intend such a result, whichwould give states the right to overrideother states’ sovereign decisions regardingthe exercise of custodial escheat.

Finally, we must remember that theTexas Court’s primary concern was toclearly and definitively resolve disputesamong states regarding the right to es-cheat abandoned property. 379 U.S. at678–83, 85 S.Ct. 626. However, allowingstates to implement additional priority


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rules like the one proposed by New Jerseywould result in competing state claims toabandoned property. If we assume thatChapter 25’s place-of-purchase presump-tion were to apply in New Jersey and thatanother state enacted a law that escheatedproperty based on the issuer’s principalplace of business, the two states’ lawswould collide when an SVC issuer with itsprincipal place of business in the otherstate sold an SVC in New Jersey. Thiswould result in ‘‘so much uncertainty andthreaten so much expensive litigation thatthe States might find that they would losemore in litigation expenses than theymight gain in escheats.’’ Texas, 379 U.S.at 679, 85 S.Ct. 626. Such conflict wouldoffend the Supreme Court’s intent to usethe two priority rules to resolve disputesamong states with administrative ease andequity. See Texas, 379 U.S. at 683, 85S.Ct. 626. Because the State law wouldstand as an obstacle to executing the pur-pose of the federal law, see Kurns, 620F.3d at 395–96, SVC Issuers satisfied theirburden of showing that Chapter 25’splace-of-purchase presumption and theTreasury Guidance are likely preemptedunder Texas, Pennsylvania, and Dela-ware. SVC Issuers also satisfied the re-maining preliminary injunction factors forthe same reasons set forth in our discus-sion of their Contract Clause claim. Allfour preliminary injunction conditions hav-ing been met, the District Court did notabuse its discretion in preliminarily enjoin-ing Chapter 25’s place-of-purchase pre-sumption.

3. Severability of the datacollection provision

[28] SVC Issuers moved for clarifica-tion or construction of the District Court’s

November 13 Order, which provided that‘‘the State is preliminarily enjoined fromenforcing subsection 5c of Chapter 25 andTreasurer Guidance dated September 23,2010, which apply a place-of-purchase pre-sumption for all stored value cardsTTTT’’Am. Express Travel Related Servs., 755F.Supp.2d at 616–17. The District Courtclarified that its order preliminarily en-joined the place-of-purchase presumptionof subsection 5c of Chapter 25 but not thedata collection provision 13 under the samesubsection because the latter was severa-ble. Id. at 619. In addition, it concludedthat SVC Issuers failed to meet their bur-den of showing that the data collectionprovision should be preliminarily enjoined.Id. at 623.

[29–31] The issue of severability of astate statute is a question of state law, OldCoach Dev. Corp. v. Tanzman, 881 F.2d1227, 1234 (3d Cir.1989), and requires aninquiry into legislative intent. AffiliatedDistillers Brands Corp. v. Sills, 60 N.J.342, 289 A.2d 257, 258 (1972) (per curiam).Under this inquiry, we must determinewhether ‘‘the objectionable feature [can]be excised without substantial impairmentof or conflict with the over-all legislativepurposeTTTT’’ N.J. Chapter, Am. Inst. ofPlanners v. N.J. State Bd. of Prof’l Plan-ners, 48 N.J. 581, 227 A.2d 313, 319 (1967).To sever a part of a statute, ‘‘there mustbe such a manifest independence of theparts as to clearly indicate a legislativeintention that the constitutional insufficien-cy of the one part would not render theremainder inoperative.’’ Affiliated Distill-ers Brands Corp., 289 A.2d at 259 (internalquotation marks and citations omitted).

13. The data collection provision states thatissuers ‘‘shall obtain the name and address ofthe purchaser or owner of each stored valuecard issued or sold and shall, at a minimum,maintain a record of the zip code of the

owner or purchaser.’’ N.J. Stat. Ann.46:30B–42.1c (Chapter 25, § 5c). It precedesthe place-of-purchase presumption provisionunder the same subsection.



SVC Issuers submit that the data collec-tion provision was not meant to be a stand-alone provision. They argue that theState Legislature enacted the place-of-pur-chase presumption as a safe harbor to thedata collection provision, thereby allowingSVC Issuers that find the data collectionprovision too onerous to opt-out and relyon the place-of-purchase presumption.We reject their argument because the con-sumer protection purpose of Chapter 25evinces that the State Legislature intendedthe data collection provision to stand alonein case a related provision were struckdown. Chapter 25 was enacted to ensurethat SVC owners’ rights to the fundswould be not forfeited by the passage oftime and to reunite customers with theirproperty. The data collection provisionrequiring issuers to maintain records ofthe purchaser or owner furthers this pur-pose by making it more likely that theState will be able to reunite the ownerwith the abandoned SVC funds. Thus, theLegislature did not intend the constitution-al insufficiency of the place-of-purchasepresumption to render the data collectioninoperative.

[32] When ‘‘different parts of the stat-ute are not so intimately connected withand dependent upon each other so as tomake the statute one composite whole[,]unconstitutional parts may be rejected andthe constitutional parts may stand.’’ LaneDistr. v. Tilton, 7 N.J. 349, 81 A.2d 786,796–97 (1951) (citations omitted). An ex-ample of the sort of dependency thatmakes the statute one composite whole iswhere a provision defining terms used inthe statute cannot be severed from theremainder of the statute without renderingthe statute meaningless or confusing. Id.at 797. However in the instant case, thedata collection requirement is not so inti-mately connected with the place-of-pur-chase presumption. Although the latter

works to override the Texas priorityscheme by presuming that the address ofthe purchaser is that of the place of pur-chase, the former aids the State in deter-mining what state is entitled to escheat theSVC in accordance with the Texas priorityscheme.

SVC Issuers argue, in the alternative,that the data collection provision itself ispreempted by federal common law becauseit does not further the Texas priorityscheme. In their view, the Texas line ofcases requires states to determine the lastknown address of the actual owner of theabandoned property in order to properlyapply the first priority rule. They submitthat retaining the zip code of the purchas-er does nothing to reunite the abandonedproperty with the actual owner, often therecipient, of the gift card. We agree withthe District Court’s rejection of this argu-ment. Texas and its progeny ‘‘authorize[s]tates to require issuers of intangibleproperty to collect the last known addressof the purchaser and to rely on that ad-dress in reuniting the ‘owner’ with theabandoned property.’’ Am. Express Trav-el Related Servs., 755 F.Supp.2d at 621.Moreover, the Supreme Court explained,‘‘either a payee or a sender’’ may redeem amoney order because either can be consid-ered the creditor. Delaware, 507 U.S. at503, 113 S.Ct. 1550 (citing Pennsylvania,407 U.S. at 213, 92 S.Ct. 2075). Similarly,either the purchaser or recipient of the giftcard may redeem the gift card becauseeither can be considered the creditor.And the Supreme Court ‘‘has consistentlypermitted states to escheat based on thelast known address of the purchaser.’’Am. Express Travel Related Servs., 755F.Supp.2d at 621 (citing Pennsylvania, 407U.S. at 215, 92 S.Ct. 2075 and Delaware,507 U.S. at 503, 113 S.Ct. 1550).

In sum, the District Court did not abuseits discretion in denying a preliminary in-


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junction of the data collection provision.Analysis of the State Legislature’s intentsuggests that Chapter 25’s data collectionprovision is severable from the place-of-purchase presumption. In addition, SVCIssuers did not meet their burden of show-ing that the data collection provision on itsown is likely preempted by federal com-mon law. Accordingly, we affirm the Dis-trict Court.

D. Substantive Due Process Claim

[33–37] The Due Process Clause of theFourteenth Amendment provides that nostate shall ‘‘deprive any person of life,liberty, or property, without due process oflaw.’’ U.S. Const. Amend. XIV, § 1. It iswell established that the Due ProcessClause contains both a procedural and sub-stantive component. Nicholas v. Pa. StateUniv., 227 F.3d 133, 139 (3d Cir.2000) (cit-ing Planned Parenthood of S.E. Pa. v.Casey, 505 U.S. 833, 846–47, 112 S.Ct.2791, 120 L.Ed.2d 674 (1992)). Substan-tive due process contains two lines of in-quiry, one that applies when a party chal-lenges the validity of a legislative act, andone that applies to the challenge of a non-legislative action. Id. In a case challeng-ing a legislative act, as here, the act willwithstand scrutiny if (1) there is a legiti-mate state interest that (2) could be ration-ally furthered by the statute. Id. (citationomitted). The rational basis test, although‘‘not a toothless one,’’ Mathews v. Lucas,427 U.S. 495, 510, 96 S.Ct. 2755, 49L.Ed.2d 651 (1976), requires significantdeference to the legislature’s decision-mak-ing and assumptions. Sammon v. N.J.Bd. of Med. Exam’rs, 66 F.3d 639, 645 (3dCir.1995). ‘‘[T]hose attacking the rational-ity of the legislative classification have theburden ‘to negative every conceivable basiswhich might support it[.]’ ’’ FCC v. BeachCommc’ns, Inc., 508 U.S. 307, 315, 113S.Ct. 2096, 124 L.Ed.2d 211 (1993) (quot-ing Lehnhausen v. Lake Shore Auto Parts

Co., 410 U.S. 356, 364, 93 S.Ct. 1001, 35L.Ed.2d 351 (1973)).

We first address whether there is alegitimate state interest. The State identi-fies several legitimate interests relevant toour analysis. In general, taking custody ofabandoned property is a legitimate stateinterest. See Delaware, 507 U.S. at 497,113 S.Ct. 1550 (‘‘States as sovereigns maytake custody of or assume title to aban-doned personal propertyTTTT’’). Specifi-cally, the State has a legitimate interest inprotecting New Jersey customers andmodernizing its unclaimed property laws,which were the purposes explicitly identi-fied by the State Legislature. Assemb.Budget Committee, Statement to Assemb.No. 3002, June 24, 2010 (stating that ‘‘theprimary purposes of [Chapter 25] are toprotect New Jersey consumers from cer-tain commercial dormancy fee practicesand modernize the State’s unclaimed prop-erty laws’’).

SVC Issuers protest that the primarypurpose of enacting Chapter 25 was toraise revenue for the State, which is not alegitimate state interest. But even if reve-nue-raising was the primary purpose be-hind enacting Chapter 25, as long as it wasnot the only legitimate purpose underlyingthe legislation, Chapter 25 will pass ration-al basis examination. See Malmed v.Thornburgh, 621 F.2d 565, 569 (3d Cir.1980) (stating the ‘‘legitimate purpose jus-tifying the provision need not be the pri-mary purpose of the provision’’). Here,the State has sufficiently identified severalstate interests, including protecting con-sumers and modernizing its unclaimedproperty laws. Thus, we now examinewhether these purposes are rationally fur-thered by Chapter 25. See Nicholas, 227F.3d at 139.

[38] SVC Issuers submit that even ifChapter 25 was enacted to further a legiti-



mate state interest, the two-year abandon-ment period, the two exemptions to Chap-ter 25, and the data collection provision donot rationally relate to that goal. We re-view each challenged provision in turn.

[39] SVC Issuers first argue that thetwo-year abandonment period is not ra-tionally related to protecting consumerswhen consumers are better protected un-der a five-year abandonment period underthe CARD Act. Thus, they contend thatthe State had no rational basis for choos-ing an abandonment period of two yearsrather than an abandonment period of atleast five years. However, the DistrictCourt correctly found that ‘‘Chapter 25affords consumers greater protection thanthat provided by the CARD Act’s expira-tion provision’’ because ‘‘Chapter 25 impos-es no time restriction on the consumer’sright to recover his or her funds’’ andallows the consumer holding the SVC toreceive ‘‘cash back after the abandonmentperiod—a right the holder did not possessunder his or her agreement with the SVCissuer.’’ Am. Express Travel RelatedServs., 755 F.Supp.2d at 592. Althoughthe SVC Issuers argue that there was nolegislative finding regarding this two-yearabandonment period, under rational basisreview, ‘‘legislative choice TTT may bebased on rational speculation unsupportedby evidence or empirical data.’’ BeachCommc’ns, 508 U.S. at 315, 113 S.Ct. 2096(citations omitted). Thus, Chapter 25’stwo-year abandonment period, even with-out specific legislative findings, rationallyrelates to the legitimate state interest ofprotecting consumers.

[40] SVC Issuers next contend thatChapter 25’s two exemptions to New Jer-sey’s escheat laws are not rationally relat-ed to a legitimate state interest. Underthe first exemption, single issuers that sellless than $250,000 in gift cards in anygiven year are exempt from Chapter 25.

According to the SVC Issuers, small busi-nesses that sell more than $250,000 in giftcards or that are franchised are not ex-empt from Chapter 25, so they are placedat a competitive disadvantage for no ra-tional reason. This argument fails to de-feat rational basis scrutiny, as it merelyreflects SVC Issuers’ policy disagreementwith the New Jersey Legislature. SeeCasey, 505 U.S. at 849, 112 S.Ct. 2791(holding that under the rational basis scru-tiny for substantive due process, courts arenot free to invalidate state law becausethey disagree with the underlying policydecisions). The State could conceivablywant to protect smaller businesses andbusinesses that do not derive substantialrevenue from gift cards. Requiring thesebusinesses to implement procedures to re-tain the purchaser information in accor-dance with the data collection provisioncould be prohibitively expensive comparedto the revenue generated from gift cardsales and drive them out of business.Also, the State could have rationally decid-ed to apply its escheat laws to small busi-nesses operating as franchises under acommon trade name; these businesses areable to market that trade name in sellingSVCs redeemable at other locations, whichallows them to be more profitable and tooperate without state protection offered bythe exemption.

[41] Under the second exemption, giftcards issued under a promotional or cus-tomer loyalty program or a charitable pro-gram, where the owner of the card did nottender any monetary or other consider-ation, are not subject to Chapter 25. SVCIssuers argue that this exemption irration-ally applies only to issuers that do notreceive any payment but does not apply toissuers that receive partial payment forthe card. Again, this argument only re-flects the SVC Issuers’ policy disagree-ment with the New Jersey Legislature and


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fails to defeat rational basis scrutiny. SeeCasey, 505 U.S. at 849, 112 S.Ct. 2791.The Legislature could have rationally con-cluded that an issuer offering cards forcharitable purposes in exchange for mone-tary or other consideration may seek toobtain a tax benefit for the difference be-tween the payment received and the fullvalue of the card. In this case, the issuerwould not need additional protectionthrough Chapter 25’s exemption provision.The Legislature also may have rationallydecided to encourage issuers to receive noconsideration in exchange for cards issuedunder promotional, loyalty, or charitableprograms.

[42] Finally, SVC Issuers contend thatthe data collection provision does not ra-tionally relate to the legitimate state inter-est of protecting consumers because re-taining the zip code of the purchaser doesnot help the State reunite the propertywith the true owner of the gift card, whichis usually the recipient of the card. How-ever, retaining the zip code of the purchas-er or owner rationally furthers the State’slegitimate interest in determining whichstate has the right to escheat the aban-doned property under the first priorityrule in Texas. See Papasan v. Allain, 478U.S. 265, 289, 106 S.Ct. 2932, 92 L.Ed.2d209 (1986) (stating state has legitimate in-terest in taking steps to implement validfederal law); Delaware, 507 U.S. at 497–98, 113 S.Ct. 1550 (holding, under the pri-mary rule, ‘‘the power to escheat the debtshould be accorded to the State of thecreditor’s last known address’’). More-over, even when the property cannot bereturned to the owner, the State’s un-claimed property law rationally relates tothe goal of protecting the abandoned prop-erty by safeguarding it in a trust accountand making it available for consumers toreclaim in perpetuity. For all the reasonsstated, we agree with the District Court

that SVC Issuers failed to establish a rea-sonable likelihood of success on their sub-stantive due process claim. Thus, we neednot address the remaining preliminary in-junction factors.

IV. Conclusion

We hold that SVC Issuers met theirburden of showing a reasonable likelihoodof success on the merits of their ContractClause claim and satisfied the remainingpreliminary injunction factors; according-ly, we affirm the District Court’s orderpreliminarily enjoining Chapter 25’s retro-active application with respect to existingSVCs redeemable for merchandise or ser-vices. SVC Issuers also successfully es-tablished that the place-of-purchase pre-sumption and the accompanying TreasuryGuidance are likely preempted by federalcommon law; thus, we affirm the DistrictCourt’s grant of preliminary injunctionwith respect to the prospective applicationof the place-of-purchase presumption andthe accompanying Treasury Guidance.We also hold that the data collection provi-sion is severable from the place-of-pur-chase presumption, so the District Courtdid not err in enjoining the latter withoutenjoining the former. Finally, we holdthat SVC Issuers failed to show a reason-able likelihood of success on the merits oftheir federal statutory preemption claimand their substantive due process claim.For all the foregoing reasons, we will af-firm the District Court’s orders.

, Reprinted with permission of Thomson Reuters from the Federal Reporter, 3d Series.


359AMERICAN EXP. TRAVEL v. SIDAMON–ERISTOFFCite as 669 F.3d 359 (3rd Cir. 2012)

id. (testimony of Lori Swanson, MinnesotaAttorney General, at 3) (‘‘Under the Con-sent Judgment, [NAF] is barred from thebusiness of arbitrating credit card and oth-er consumer disputes and must stop ac-cepting any new consumer arbitrations orin any manner participate [sic] in the pro-cessing or administering of new consumerarbitrations.’’); see also App. at A273–76.It cannot be insignificant that Dell namedNAF as the exclusive forum in its arbitra-tion clauses. It followed that the DistrictCourt refused Dell’s request to designate asubstitute arbitrator. It was certainly noterror for the District Court in this case todeny substitution at the behest of Dell.Even assuming that in the usual case,substitution of a neutral arbitrator wouldbe an acceptable alternative, it is evidentthat this is not an ordinary case and weshould affirm the District Court’s denial ofDell’s motion.

,

AMERICAN EXPRESS TRAVELRELATED SERVICES,

INC., Appellant

v.

Andrew P. SIDAMON–ERISTOFF, asTreasurer of the State of New Jersey;Steven R. Harris, as Administrator ofUnclaimed Property of the State ofNew Jersey.

No. 10–4328.

United States Court of Appeals,Third Circuit.

Argued Sept. 12, 2011.

Filed: Jan. 5, 2012.

Background: Issuer of travelers checkschallenged constitutionality of amendment

to New Jersey’s unclaimed property stat-ute that retroactively reduced presumptiveabandonment period for travelers checksfrom 15 to three years, contending thatamendment violated Due Process Clause,Contract Clause, Takings Clause, andCommerce Clause. The United States Dis-trict Court for the District of New Jersey,Freda L. Wolfson, J., 755 F.Supp.2d 556,denied issuer’s motion for preliminary in-junction seeking to enjoin state’s enforce-ment of amendment. Issuer appealed.

Holdings: The Court of Appeals, Fisher,Circuit Judge, held that:

(1) amendment served legitimate state in-terest, as required to withstand chal-lenge on substantive due processgrounds;

(2) issuer did not show likelihood that itwould prevail on merits of its substan-tive due process claim;

(3) issuer failed to establish likelihood ofsuccess on the merits of its ContractClause claim;

(4) issuer failed to establish reasonableprobability of success on the merits ofits takings claim; and

(5) issuer did not show reasonable proba-bility of success on the merits of itsdormant Commerce Clause claim.

Affirmed.

See also 669 F.3d 374.

1. Federal Courts O776, 815, 862

Court of Appeals generally reviewsdistrict court’s grant or denial of prelimi-nary injunction for abuse of discretion, butreviews the underlying factual findings forclear error and examines legal conclusionsde novo.


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2. Injunction O1092

Court must consider four factors whenruling on a motion for preliminary injunc-tion: (1) whether the movant has shown areasonable probability of success on themerits, (2) whether the movant will beirreparably injured by denial of the relief,(3) whether granting preliminary relief willresult in even greater harm to the non-moving party, and (4) whether grantingpreliminary relief will be in the publicinterest.

3. Injunction O1096

Moving party’s failure to show a likeli-hood of success on the merits must neces-sarily result in the denial of a preliminaryinjunction.

4. Constitutional Law O3867, 3893

Due Process Clause contains both aprocedural and substantive component.U.S.C.A. Const.Amend. 14.


Substantive due process contains twolines of inquiry: one that applies when aparty challenges the validity of a legisla-tive act, and one that applies to the chal-lenge of a non-legislative action. U.S.C.A.Const.Amend. 14.


In substantive due process case chal-lenging a legislative act, the act must with-stand rational basis review. U.S.C.A.Const.Amend. 14.

7. Constitutional Law O3894, 3895

For legislative act challenged on sub-stantive due process grounds to withstandrational basis review, defendant must dem-onstrate (1) the existence of a legitimatestate interest that (2) could be rationallyfurthered by the statute. U.S.C.A. Const.Amend. 14.

8. Constitutional Law O3895Rational basis test applicable to sub-

stantive due process challenges to legisla-tive acts, while not a toothless standard,requires significant deference to the legis-lature’s decision-making and assumptions.U.S.C.A. Const.Amend. 14.

9. Constitutional Law O1039Those attacking the rationality of leg-

islative classification on substantive dueprocess grounds have the burden to nega-tive every conceivable basis which mightsupport it. U.S.C.A. Const.Amend. 14.


Amendment to New Jersey’s un-claimed property statute that retroactivelyreduced period after which travelerschecks were presumed abandoned from 15years to three years furthered legitimatestate interest of protecting state’s propertyowners and modernizing state’s unclaimedproperty laws to promote consistency, asrequired for statute to withstand challengeon substantive due process grounds.U.S.C.A. Const.Amend. 14; N.J.S.A.46:30B–11.

11. Constitutional Law O3895Under rational basis scrutiny applied

to substantive due process challenge tolegislative act, court’s inquiry is limited towhether the law rationally furthers anylegitimate state objective. U.S.C.A. Const.Amend. 14.

12. Constitutional Law O3895Under rational basis review of sub-

stantive due process challenge to legisla-tive act, it is enough that the state offers aconceivable rational basis for its action,and court may even hypothesize the moti-vations of the state legislature to find alegitimate objective promoted by the pro-vision under attack; it is constitutionallyirrelevant whether this reasoning in fact



underlay the legislative decision. U.S.C.A.Const.Amend. 14.

13. Injunction O1212

Issuer of travelers checks failed todefeat every conceivable basis that mightsupport enactment of amendment to NewJersey’s unclaimed property statute thatretroactively reduced period after whichtravelers checks were presumed aban-doned from 15 years to three years, andthus did not show likelihood of prevailingon merits of its substantive due processclaim in seeking preliminary injunctionbarring statute’s enforcement; moderniz-ing unclaimed property laws through con-sistent abandonment periods was conceiva-ble rational basis for enacting amendment,and state legislature also could have ra-tionally believed that shorter abandonmentperiod better protected customers of is-suers of travelers checks by giving custodyof property to state at earlier time.U.S.C.A. Const.Amend. 14; N.J.S.A.46:30B–11.


Rational basis test applicable to sub-stantive due process challenges to legisla-tive acts does not require mathematicalprecision in the legislature’s decisions.U.S.C.A. Const.Amend. 14.


Under rational basis review of sub-stantive due process challenge to legisla-tive act, legislative choice may be based onrational speculation unsupported by evi-dence or empirical data. U.S.C.A. Const.Amend. 14.


State laws cannot be invalidated onsubstantive due process grounds based onmere policy disagreements. U.S.C.A.Const.Amend. 14.

17. Constitutional Law O2671, 2672To ascertain whether there has been a

Contract Clause violation, a court mustfirst inquire whether the change in statelaw has operated as a substantial impair-ment of a contractual relationship, and ifthis threshold inquiry is met, the courtmust then determine whether the law hasa legitimate and important public purpose.U.S.C.A. Const. Art. 1, § 10, cl. 1.

18. Constitutional Law O2671, 2672If, in determining whether there has

been Contract Clause violation, court findsthat change in state law operated as sub-stantial impairment of contractual relation-ship, it must ascertain whether adjustmentof rights of parties to contractual relation-ship was reasonable and appropriate inlight of that purpose. U.S.C.A. Const.Art. 1, § 10, cl. 1.

19. Constitutional Law O2672Where contract is between private

parties, court may defer to legislativejudgment as to the necessity and reason-ableness of a particular measure in decid-ing claim alleging Contract Clause viola-tion, but review of legislative judgment ismore exacting than the rational basis stan-dard applied in substantive due processanalysis. U.S.C.A. Const. Art. 1, § 10, cl.1; U.S.C.A. Const.Amend. 14.

20. Injunction O1212In seeking preliminary injunction bar-

ring enforcement of amendment to NewJersey’s unclaimed property statute thatretroactively reduced period after whichtravelers checks were presumed aban-doned from 15 years to three years, issuerof travelers checks failed to show thatamendment imposed substantial impair-ment on its contractual relationships andthus did not establish likelihood of successon the merits of its Contract Clause claim;issuer’s right to use and invest owners’funds until travelers checks were cashed


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or sold was subject to lawful abandonmentperiod set by unclaimed property laws,state’s regulation of travelers checksmeant that change in abandonment perioddid not upset issuer’s legitimate expecta-tions or impose unexpected change in itscontractual obligations, and amendmentdid not affect validity, construction, or en-forcement of issuer’s contracts with checkowners. U.S.C.A. Const. Art. 1, § 10, cl.1; N.J.S.A. 17:15C–1 et seq., 46:30B–11.


In assessing substantial impairmentunder the Contract Clause, courts look tolegitimate expectations of contracting par-ties and whether modification of state lawimposes obligation or liability that was un-expected at the time parties entered intocontract and relied on its terms. U.S.C.A.Const. Art. 1, § 10, cl. 1.


An important factor in determiningthe substantiality of any contractual im-pairment for claim alleging ContractClause violation is whether the partieswere operating in a regulated industry.U.S.C.A. Const. Art. 1, § 10, cl. 1.


When a party enters an industry thatis regulated in a particular manner, it isentering subject to further legislation inthe area, and changes in the regulationthat may affect its contractual relation-ships are foreseeable for purposes of al-leged Contract Clause violations.U.S.C.A. Const. Art. 1, § 10, cl. 1.

24. Contracts O167

Not all state regulations are impliedterms of every contract entered into whilethey are effective, especially when the reg-ulations themselves cannot be fairly inter-preted to require such incorporation.

25. Contracts O167State laws are implied into private

contracts regardless of the assent of theparties only when those laws affect thevalidity, construction, and enforcement ofcontracts.

26. Eminent Domain O69, 122Takings Clause of the Fifth Amend-

ment prohibits the federal governmentfrom taking private property for public usewithout providing just compensation.U.S.C.A. Const.Amend. 5.

27. Constitutional Law O3855Takings Clause applies to state action

through the Fourteenth Amendment.U.S.C.A. Const.Amends. 5, 14.

28. Eminent Domain O2.1, 69When a state directly appropriates

private property, it is considered a per setaking, and the state has a duty to com-pensate the owner. U.S.C.A. Const.Amend. 5.

29. Eminent Domain O2.1Where a party asserts a regulatory

taking, court must engage in a factualinquiry to determine whether a taking hasbeen effected. U.S.C.A. Const.Amend. 5.

30. Eminent Domain O274(1)In seeking preliminary injunction bar-

ring enforcement of amendment to NewJersey’s unclaimed property statute thatretroactively reduced period after whichtravelers checks were presumed aban-doned from 15 years to three years, issuerof travelers checks failed to show that ithad right to retain and invest funds ofcheck owners once checks were deemedabandoned under state’s unclaimed proper-ty laws, such that amendment interferedwith its investment-backed expectationthat checks already sold would have aban-donment period of 15 years, and thus didnot show reasonable probability of success



on the merits of its Fifth Amendment tak-ings claim. U.S.C.A. Const.Amend. 5;N.J.S.A. 46:30B–11.

31. Eminent Domain O2.1

To succeed on regulatory takingsclaim, claimant must show that the state’saction affected a legally cognizable proper-ty interest, and relevant considerations in-clude economic impact of regulation onclaimant and extent to which regulationhas interfered with distinct investment-backed expectations. U.S.C.A. Const.Amend. 5.

32. Eminent Domain O2.1Character of challenged state action is

relevant in determining whether regulato-ry taking has occurred; unlike physicalinvasion of land, public program adjustingbenefits and burdens of economic life topromote the common good ordinarily willnot be compensable. U.S.C.A. Const.Amend. 5.

33. Eminent Domain O2.1That a regulation adversely affects

recognized economic values is not enoughto constitute a taking; even a regulationthat prohibits the most beneficial use ofproperty, or prevents an individual fromoperating an otherwise lawful business,does not necessarily violate the TakingsClause. U.S.C.A. Const.Amend. 5.

34. Commerce O54.1, 56Commerce Clause has an implied re-

quirement that the states not mandate dif-ferential treatment of in-state and out-of-state economic interests that benefits theformer and burdens the latter. U.S.C.A.Const. Art. 1, § 8, cl. 3.

35. Commerce O12Court’s inquiry as to whether a state

law violates the dormant CommerceClause is twofold: first, court determineswhether heightened scrutiny applies, and,

if not, then determines whether the law isinvalid under Pike balancing test.U.S.C.A. Const. Art. 1, § 8, cl. 3.

36. Commerce O12, 54.1Under dormant Commerce Clause

analysis, court applies heightened scrutinywhen a law discriminates against inter-state commerce in purpose or effect.U.S.C.A. Const. Art. 1, § 8, cl. 3.

37. Commerce O13.5Under Pike balancing test, courts will

uphold against dormant Commerce Clausechallenge nondiscriminatory regulationsthat only incidentally affect interstate com-merce unless burden imposed on interstatecommerce is clearly excessive in relation tothe putative local benefits. U.S.C.A.Const. Art. 1, § 8, cl. 3.

38. Injunction O1212Issuer of travelers checks did not

show reasonable probability of success onthe merits of its dormant CommerceClause claim in seeking preliminary in-junction against enforcement of amend-ment to New Jersey’s unclaimed propertystatute that retroactively reduced periodafter which travelers checks were pre-sumed abandoned from 15 years to threeyears; amendment did not directly regu-late travelers checks sold in other states orforce issuer to conform its out-of-statepractices to less favorable in-state condi-tions, and costs of compliance could bepassed on to New Jersey travelers checkcustomers or be absorbed by issuers.U.S.C.A. Const. Art. 1, § 8, cl. 3; N.J.S.A.46:30B–11.

39. Commerce O13.5Under the Pike balancing test, applied

in deciding dormant Commerce Clauseclaims not implicating heightened scrutiny,when costs of regulation may be bornesolely by those in state enacting it, burdenimposed on interstate commerce is mini-


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mal, and not excessive in relation to puta-tive local benefits articulated by state.U.S.C.A. Const. Art. 1, § 8, cl. 3.

Philip R. Sellinger (Argued), LouisSmith, Greenberg Traurig, Florham Park,NJ, Richard M. Zuckerman (Argued),SNR Denton US, New York, NY, for Ap-pellant.

Robert T. Lougy (Argued), Gregory A.Spellmeyer, Office of Attorney General ofNew Jersey, Trenton, NJ, for Appellees.

Before: SCIRICA, SMITH andFISHER, Circuit Judges.

OPINION OF THE COURT

FISHER, Circuit Judge.

American Express Travel Related Ser-vices (‘‘Amex’’) challenges the constitution-ality of 2010 N.J. Laws Chapter 25(‘‘Chapter 25’’), which amended New Jer-sey’s unclaimed property statute, N.J.Stat. Ann. § 46:30B (2002), and retroac-tively reduced the period after which trav-elers checks are presumed abandonedfrom fifteen years to three years.1 Amexfiled a motion for preliminary injunctionagainst New Jersey Treasurer Andrew P.Sidamon–Eristoff (‘‘Treasurer’’) and NewJersey Unclaimed Property AdministratorSteven R. Harris (collectively, ‘‘New Jer-sey’’ or ‘‘State’’) in the District Court onthe grounds that Chapter 25’s provisionreducing the abandonment period for trav-elers checks violates the Due ProcessClause, the Contract Clause, the Takings

Clause, and the Commerce Clause of theUnited States Constitution. The DistrictCourt denied Amex’s motion, holding thatAmex failed to show a likelihood of successon the merits of its claims. Amex filed atimely appeal. For the reasons discussedbelow, we will affirm the District Court’sorder.

I. Background and Procedural History

Amex Travelers Cheques (‘‘TCs’’) 2 arepreprinted checks for amounts rangingfrom $20 to $100. Each one is identifiablebased on a unique serial number. Amexmaintains that the TCs never expire, sothey are contractually obligated to honorthe TCs once they are issued. Amex sellsTCs for the face value amount, normallythrough a third party bank or travel ser-vice. The third party can charge a smallfee, which it retains, but Amex does notcharge a fee beyond the face value of theTCs. Amex claims that it can sell TCswithout charging a fee because its contrac-tual relationship with TC owners givesAmex the right to retain, use, and investfunds from the sale of TCs from the dateof sale until the date the TCs are cashedor used. Amex asserts that this right toinvest the funds is integral to the contractbetween TC owners and Amex, and that itrelies on these invested funds to remainprofitable in the TC business.

When a TC is sold, the third party sellertransmits the funds to Amex and providesAmex with the TC’s serial number, itsamount, and the date and place of sale.Generally, the seller does not provide thepurchaser’s name, address, or any other

1. This opinion addresses the challengebrought against 2010 N.J. Laws Chapter 25(‘‘Chapter 25’’) with respect to travelerschecks. We discuss the appeal filed by NewJersey Retail Merchants Association, New Jer-sey Food Council, and American Express Pre-paid Card Management Corporation, seeking

to enjoin Chapter 25 with respect to storedvalue cards (‘‘SVCs’’), in a separate opinion.

2. We use ‘‘TCs’’ to refer to Amex TravelersCheques specifically, as opposed to travelerschecks generally.



identifying information. When Amex sellsTCs directly to consumers, it retains onlythe same information that it receives fromthird party sellers.

All fifty states, and the District of Co-lumbia, have a set of unclaimed propertylaws (often called escheat laws), most ofwhich are based on a version of the Uni-form Unclaimed Property Act (‘‘UUPA’’).These laws require that once property hasbeen deemed abandoned, the holder turn itover to the state while the original proper-ty owner still maintains the right to theproperty. The purpose of unclaimed prop-erty laws is to provide for the safekeepingof abandoned property and then to reunitethe abandoned property with its owner.Usually, before turning over abandonedproperty to the state, the holder mustattempt to return the property by contact-ing the owner, using the owner’s name andlast known address. If the holder is un-able to return the property to the ownerand turns it over to the state, the holderprovides the state with the name and lastknown address of the owner. The holderis no longer liable to the property owneronce it turns over the property to thestate. The state then makes an effort toreunite the owner with the property. Un-der New Jersey’s custodial escheat statute,the rightful owner may file a claim torecover the property at any time after theproperty is turned over to the State.

However, travelers checks operate dif-ferently because issuers like Amex gener-ally do not obtain the names or addressesof the purchasers. Thus, the requirementthat holders send notice to the owner atthe last known address before turning over

such property to the State does not applyto travelers checks. Travelers check is-suers are also exempted from the require-ment to include the owner’s name and lastknown address on unclaimed property re-ports. N.J. Stat. Ann. § 46:30B–47 (2002).Amex sends only the serial number,amount, and date of sale when TCs aresent to the State as unclaimed property.If Amex determines that a cashed TC hasa serial number indicating that it has beenpaid to a state as unclaimed property,Amex seeks to reclaim those funds fromthat state. In New Jersey, when suchclaims are filed, the Treasurer returns thefunds with interest.

Until recently, all fifty states had a fif-teen-year abandonment period for travel-ers checks.3 But on June 24, 2010, theNew Jersey Legislature passed Chapter25, which shortened the abandonment peri-od for travelers checks from fifteen yearsto three years. N.J. Stat. Ann. § 46:30B–11 (2010). The purpose of the statute wasto ‘‘protect New Jersey consumers fromcertain commercial dormancy fee practicesand to modernize New Jersey’s unclaimedproperty laws.’’ State of N.J. Assemb.Budget Comm., Statement to Assembly,No. 3002, 214th Leg., at 1 (June 24, 2010).Under the State’s unclaimed property law,after an issuer transfers the presumedabandoned property to the State, the prop-erty is then administered through NewJersey’s unclaimed property system. TheState preserves the property in perpetuityfor the owner, N.J. Stat. Ann. § 46:30B–9(2002), or for another state that can prove

3. Recently, Kentucky also shortened its aban-donment period for travelers checks from fif-teen years to seven years. Although Amexsuccessfully challenged Kentucky’s statute infederal district court on substantive due pro-cess grounds, Am. Express Travel Related Serv.v. Kentucky, 597 F.Supp.2d 717 (E.D.Ky.

2009), the United States Court of Appeals forthe Sixth Circuit reversed and remanded,holding that the statute withstood rationalbasis scrutiny. Am. Express Travel RelatedServs. v. Kentucky, 641 F.3d 685 (6th Cir.2011).


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a superior right of escheat. N.J. Stat.Ann. § 46:30B–81 (2002).

On September 23, 2010, Amex filed acomplaint in the United States DistrictCourt for the District of New Jersey, al-leging that Chapter 25 violated the DueProcess Clause, the Contract Clause, theTakings Clause, and the Commerce Clauseof the Constitution. Amex also filed amotion for preliminary injunction, seekingto enjoin the State from enforcing Chapter25. On November 13, 2010, the DistrictCourt denied Amex’s motion for prelimi-nary injunction with respect to travelerschecks. Amex filed a timely appeal.

II. Standard of Review

[1] ‘‘We generally review a districtcourt’s [grant or] denial of a preliminaryinjunction for abuse of discretion[,] butreview the underlying factual findings forclear error and examine legal conclusionsde novo.’’ Brown v. City of Pittsburgh,586 F.3d 263, 268 (3d Cir.2009) (citationomitted). ‘‘We have jurisdiction to reviewthe order [granting or] denying a prelimi-nary injunction under 28 U.S.C.§ 1292(a)(1).’’ Id. at 268 n. 6.

III. Discussion

[2, 3] A court must consider four fac-tors when ruling on a motion for prelimi-nary injunction: ‘‘(1) whether the movanthas shown a reasonable probability of suc-cess on the merits; (2) whether the mov-ant will be irreparably injured by denial ofthe relief; (3) whether granting prelimi-nary relief will result in even greater harmto the nonmoving party; and (4) whethergranting preliminary relief will be in thepublic interest.’’ Crissman v. DoverDowns Entm’t Inc., 239 F.3d 357, 364 (3dCir.2001). The moving party’s failure toshow a likelihood of success on the merits‘‘must necessarily result in the denial of apreliminary injunction.’’ In re Arthur

Treacher’s Franchisee Litig., 689 F.2d1137, 1143 (3d Cir.1982). We evaluate thelikelihood of success on the merits ofAmex’s four constitutional claims accord-ingly.

A. Substantive Due Process Clause

[4–9] The Due Process Clause of theFourteenth Amendment provides that nostate shall ‘‘deprive any person of life,liberty, or property, without due process oflaw.’’ U.S. Const. Amend. XIV, § 1. It iswell established that the Due ProcessClause contains both a procedural and sub-stantive component. Nicholas v. Pa. StateUniv., 227 F.3d 133, 139 (3d Cir.2000) (cit-ing Planned Parenthood of S.E. Pa. v.Casey, 505 U.S. 833, 846–47, 112 S.Ct.2791, 120 L.Ed.2d 674 (1992)). Substan-tive due process contains two lines of in-quiry: one that applies when a party chal-lenges the validity of a legislative act, andone that applies to the challenge of a non-legislative action. Id. In a case challeng-ing a legislative act, as here, the act mustwithstand rational basis review. Id. To doso, the defendant must demonstrate (1) theexistence of a legitimate state interest that(2) could be rationally furthered by thestatute. Id. (citation omitted). The ra-tional basis test, although ‘‘not a toothlessone,’’ Mathews v. Lucas, 427 U.S. 495, 510,96 S.Ct. 2755, 49 L.Ed.2d 651 (1976), re-quires significant deference to the legisla-ture’s decision-making and assumptions.Sammon v. N.J. Bd. of Med. Exam’rs, 66F.3d 639, 645 (3d Cir.1995). ‘‘[T]hose at-tacking the rationality of the legislativeclassification have the burden ‘to negativeevery conceivable basis which might sup-port it[.]’ ’’ FCC v. Beach Commc’ns, Inc.,508 U.S. 307, 315, 113 S.Ct. 2096, 124L.Ed.2d 211 (1993) (quoting Lehnhausenv. Lake Shore Auto Parts Co., 410 U.S.356, 364, 93 S.Ct. 1001, 35 L.Ed.2d 351(1973)).



[10–12] Amex argues that the sole pur-pose behind enacting Chapter 25 was toraise revenue for the State, which is not alegitimate state interest. But under ra-tional basis scrutiny, a court’s inquiry islimited to whether the law ‘‘rationally fur-thers any legitimate state objective.’’Malmed v. Thornburgh, 621 F.2d 565, 569(3d Cir.1980) (emphasis added). It isenough that the State offers a conceivablerational basis for its action, and ‘‘[t]hecourt may even hypothesize the motiva-tions of the state legislature to find alegitimate objective promoted by the pro-vision under attack.’’ Id. (citation omit-ted). It is ‘‘constitutionally irrelevantwhether this reasoning in fact underlay thelegislative decisionTTTT’’ Flemming v. Ne-stor, 363 U.S. 603, 612, 80 S.Ct. 1367, 4L.Ed.2d 1435 (1960).

The State submits that Chapter 25 wasenacted to modernize the State’s un-claimed property laws by making theabandonment period for travelers checksmore consistent with that of other proper-ty. The State also argues that Chapter 25provides greater protection for propertyowners. They reason that shortening theabandonment period will facilitate thetransfer of the property from a privatecompany to the State at an earlier time;this would provide greater protection forproperty owners because private compa-nies are subject to greater economic insta-bility compared to a perpetually solventgovernment entity. In general, takingcustody of abandoned property is a legiti-mate state interest. See Delaware v. NewYork, 507 U.S. 490, 497, 113 S.Ct. 1550, 123L.Ed.2d 211 (1993) (‘‘States as sovereignsmay take custody of or assume title toabandoned personal propertyTTTT’’). Weagree that, as a corollary, the State has alegitimate interest in protecting its proper-ty owners and modernizing its unclaimedproperty laws to promote consistency. Ac-cordingly, we reject Amex’s contention

that Chapter 25 lacks a legitimate stateinterest.

[13] Amex contests that even if thereare legitimate state interests, Chapter 25fails to rationally further these goals. Be-cause Amex has the burden of rebuttingevery conceivable rational basis, see BeachCommc’ns, 508 U.S. at 315, 113 S.Ct. 2096,we examine each of Amex’s arguments inturn.

[14, 15] Amex first argues that shor-tening the abandonment period has no ra-tional relationship to increasing propertyprotection because 90% of travelers checksnot used after three years are used withinfifteen years. Thus, Amex contends, it isirrational to conclude that travelers checkscan be presumed abandoned after threeyears. But the statistics also show thatover 96% of all travelers checks are re-deemed within three years. Decl. of Su-san Helms at 3, Am. Express Travel Re-lated Servs., 755 F.Supp.2d 556 (D.N.J.2010) (No. 10–4328). Even if Amex dis-agrees with the State Legislature’s pre-sumption that travelers checks unre-deemed after three years are abandoned,the rational basis test does not requiremathematical precision in the legislature’sdecisions. See Heller v. Doe, 509 U.S. 312,321, 113 S.Ct. 2637, 125 L.Ed.2d 257(1993). ‘‘[L]egislative choice TTT may bebased on rational speculation unsupportedby evidence or empirical data.’’ BeachCommc’ns, 508 U.S. at 315, 113 S.Ct. 2096.Thus, Amex’s argument is insufficient toovercome rational basis scrutiny.

[16] Amex next argues that shorteningthe abandonment period for travelerschecks does not further Chapter 25’s stat-ed purpose of modernizing the State’s un-claimed property laws. But the State hasa conceivable legitimate interest in makingits unclaimed property laws more consis-tent for ease of administration. Chapter


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25 accomplishes this by making the aban-donment period for travelers checks thesame as checks, drafts, and other similarnegotiable instruments. See N.J. Stat.Ann. § 46:30B–16 (2002). Amex respondsthat unclaimed property laws require es-tablishing different time periods basedupon the nature of the property, so consis-tency is not a rational basis for selectingan abandonment period. But state lawscannot be invalidated based on mere policydisagreements. See Casey, 505 U.S. at849, 112 S.Ct. 2791 (holding that underrational basis scrutiny, courts are not freeto invalidate state law because they dis-agree with the underlying policy deci-sions). Because modernizing unclaimedproperty laws through consistent abandon-ment periods is a conceivable rational basisfor enacting Chapter 25, Amex fails toovercome rational basis scrutiny.4

In addition, the State Legislature couldhave rationally believed that the shorterabandonment period better protected cus-tomers by giving custody of the propertyto the State at an earlier time. Conceiv-ably, there are benefits to having propertysafeguarded by a perpetually-solvent sov-ereign instead of a private entity with agreater risk of insolvency. In addition,the State can hold the travelers checkfunds in perpetuity and must invest un-claimed property funds more conservative-ly than Amex is required to invest its TCfunds. Compare N.J. Stat. Ann.§ 17:15C–2 (2000) (permitting investmentin ‘‘any investment which is rated in one ofthe three highest rating categories by anationally recognized statistical rating or-ganization’’) with N.J. Stat. Ann.§ 46:30B–75 (2000) (restricting invest-ments of funds of Unclaimed Property

Trust Fund to government bonds or inter-est-bearing notes or obligations). TheState has offered several legitimate inter-ests that justify shortening the abandon-ment period for travelers checks from fif-teen years to three years. Chapter 25rationally furthers these interests, andAmex does not meet its burden of defeat-ing every conceivable basis that might sup-port Chapter 25’s enactment. See BeachCommc’ns, 508 U.S. at 315, 113 S.Ct. 2096.Therefore, Amex fails to show a likelihoodof success on the merits of its substantivedue process claim.

B. Contract Clause

[17–20] The Contract Clause under Ar-ticle I, Section 10, Clause 1 of the U.S.Constitution provides that ‘‘[n]o State shallTTT pass any TTT Law impairing the Obli-gation of Contracts.’’ To ascertain wheth-er there has been a Contract Clause viola-tion, a court must first inquire whether thechange in State law has ‘‘operated as asubstantial impairment of a contractual re-lationship.’’ Gen. Motors Corp. v. Romein,503 U.S. 181, 186, 112 S.Ct. 1105, 117L.Ed.2d 328 (1992) (citations omitted);Nieves v. Hess Oil Virgin Islands Corp.,819 F.2d 1237, 1243 (3d Cir.1987) (citationsomitted). If this threshold inquiry is met,the court must then determine ‘‘whetherthe law at issue has a legitimate and im-portant public purpose.’’ Transport Work-ers Union of Am., Local 290 v. S.E. Pa.Transp. Auth., 145 F.3d 619, 621 (3d Cir.1998). If so, the court must ascertain‘‘whether the adjustment of the rights ofthe parties to the contractual relationshipwas reasonable and appropriate in light ofthat purpose.’’ Id. Where the contract is

4. Amex also contends that changing the aban-donment period does not rationally furtherthe statute’s purpose of reuniting propertywith its owners because the State does nothave the names and addresses of travelers

check purchasers. But, as discussed above,changing the abandonment period conceiv-ably furthers other rational bases, which issufficient for Chapter 25 to survive rationalbasis scrutiny.



between private parties, courts may ‘‘deferto legislative judgment as to the necessityand reasonableness of a particular meas-ure.’’ U.S. Trust Co. of N.Y. v. New Jer-sey, 431 U.S. 1, 23, 97 S.Ct. 1505, 52L.Ed.2d 92 (1977). But this review oflegislative judgment is more exacting thanthe rational basis standard applied in thedue process analysis. Pension BenefitGuar. Corp. v. R.A. Gray & Co., 467 U.S.717, 733, 104 S.Ct. 2709, 81 L.Ed.2d 601(1984).

Amex fails to show that Chapter 25 im-poses a substantial impairment on Amex’scontractual relationships with TC owners.While Amex has the right to use and in-vest TC funds until the date the TC iscashed or sold, the duration of use is fur-ther subject to the lawful abandonmentperiod set by unclaimed property laws.The Supreme Court has long establishedthat

the contract of deposit does not give thebanks a tontine right to retain the mon-ey in the event that it is not called for bythe depositor. It gives the bank merelythe right to use the depositor’s moneyuntil called for by him or some otherperson duly authorized. If the depositis turned over to the state in obedienceto a valid law, the obligation of the bankto the depositor is discharged.

Sec. Sav. Bank v. California, 263 U.S. 282,286, 44 S.Ct. 108, 68 L.Ed. 301 (1923)(citation omitted). In Anderson NationalBank v. Luckett, the Supreme Court againstated that ‘‘[s]ince the bank is a debtor toits depositors, it can interpose no due pro-cess or contract clause objection to pay-ment of the claimed deposits to the state,if the state is lawfully entitled to demand

paymentTTTT’’ 321 U.S. 233, 242–43, 64S.Ct. 599, 88 L.Ed. 692 (1944) (citationomitted). Like banks, Amex, as a debtorto the TC purchasers, only has the right touse the funds received from issuing a TCuntil either the owner or the State, undera valid law, claims the funds. Accordingly,a state’s ability to claim abandoned proper-ty in the travelers check context does notordinarily substantially impair travelerscheck issuers’ contractual relationships orotherwise violate the Contract Clause.5

See Sec. Sav. Bank, 263 U.S. at 285–86, 44S.Ct. 108.

[21–23] In assessing substantial im-pairment under the Contract Clause, welook to ‘‘the legitimate expectations of thecontracting parties,’’ U.S. Trust Co. ofN.Y., 431 U.S. at 19 n. 17, 97 S.Ct. 1505(1977), and whether the modification im-poses an obligation or liability that wasunexpected at the time the parties enteredinto the contract and relied on its terms.See Allied Structural Steel Co. v. Span-naus, 438 U.S. 234, 247, 98 S.Ct. 2716, 57L.Ed.2d 727 (1978). An important factorin determining the substantiality of anycontractual impairment is whether the par-ties were operating in a regulated indus-try. See Energy Reserves Grp., Inc. v.Kansas Power and Light Co., 459 U.S.400, 411, 103 S.Ct. 697, 74 L.Ed.2d 569(1983) (citing Allied Structural Steel Co.,438 U.S. at 242 n. 13, 98 S.Ct. 2716).When a party enters an industry that isregulated in a particular manner, it is en-tering subject to further legislation in thearea, and changes in the regulation thatmay affect its contractual relationships areforeseeable. See id. New Jersey has con-sistently regulated travelers checks, both

5. This analysis differs from the analysis withrespect to issuers of SVCs because, unliketravelers checks or bank deposits, SVCs arenot redeemable for cash. Thus, the relation-ship between SVC purchasers and their is-

suers is distinguishable from the relationshipbetween depositors and banks, which are re-quired to turn over the value of the deposit incash upon the depositor’s demand.


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generally under the Money TransmitterLaw, N.J. Stat. Ann. § 17:15C (2000), andas abandoned property under the un-claimed property statute, N.J. Stat. Ann.§ 46:30B–11 (2010). Given such consistentregulation, Chapter 25’s amendment of theabandonment period did not upset Amex’slegitimate expectations as the contractingparty or impose an unexpected change inits contractual obligations. U.S. Trust,431 U.S. at 19 n. 17, 97 S.Ct. 1505 (stating‘‘a reasonable modification of statutes TTT

is much less likely to upset expectationsthan a law adjusting the express terms ofan agreement’’).

[24, 25] Amex next claims that the fif-teen-year abandonment period was an im-plied term of the contract for TCs thatwere sold prior to the enactment of Chap-ter 25. It is true that the terms of acontract often include the state law relat-ing to the contract. See Farmers’ &Merchs.’ Bank of Monroe v. Fed. ReserveBank of Richmond, 262 U.S. 649, 660, 43S.Ct. 651, 67 L.Ed. 1157 (1923). But notall ‘‘state regulations are implied terms ofevery contract entered into while they areeffective, especially when the regulationsthemselves cannot be fairly interpreted torequire such incorporation.’’ Gen. Mo-tors, 503 U.S. at 189, 112 S.Ct. 1105.And ‘‘state laws are implied into privatecontracts regardless of the assent of theparties only when those laws affect thevalidity, construction, and enforcement ofcontracts.’’ Id. (citation omitted). Criti-cally, the adjustment of the abandonmentperiod merely shortens the time during

which Amex can invest the TC funds,without affecting the validity, construc-tion, and enforcement of the contract be-tween Amex and its customers. Amexalso fails to show how New Jersey lawpertaining to unclaimed property can beinterpreted to require incorporation intoAmex’s contract with its customer.6 Be-cause Amex has not shown that Chapter25 constitutes a substantial impairment onthis contractual relationship, it did notsucceed in showing a likelihood of successon its Contract Clause claim.

C. Takings Clause

[26–30] The Takings Clause of theFifth Amendment prohibits the federalgovernment from taking private propertyfor public use without providing just com-pensation. U.S. Const. Amend. V. TheTakings Clause applies to state actionthrough the Fourteenth Amendment.Webb’s Fabulous Pharmacies, Inc. v.Beckwith, 449 U.S. 155, 160, 101 S.Ct. 446,66 L.Ed.2d 358 (1980) (citing Chicago, B.& Q.R. Co. v. Chicago, 166 U.S. 226, 239,17 S.Ct. 581, 41 L.Ed. 979 (1897) and PennCent. Transp. Co. v. New York City, 438U.S. 104, 122, 98 S.Ct. 2646, 57 L.Ed.2d631 (1978)). When a state directly appro-priates private property, it is considered aper se taking, and the state has a duty tocompensate the owner. Tahoe–SierraPres. Council v. Tahoe Reg’l PlanningAgency, 535 U.S. 302, 322, 122 S.Ct. 1465,152 L.Ed.2d 517 (2002). Where, as here, aparty asserts a regulatory taking, there isno set formula. Rather, courts must en-

6. Amex’s reliance on Nieves v. Hess Oil VirginIs. Corp., 819 F.2d 1237 (3d Cir.1987) is mis-placed. In Nieves, a 1986 amendment to theVirgin Island’s Workmen’s Compensation Actretroactively eliminated an employer’s immu-nity from tort actions. 819 F.2d at 1248.Because the employer had immunity underthe law at the time of the contract, thisamendment exposed the employer to signifi-

cant additional tort liability that was unex-pected. Id. Chapter 25, however, does notimpose an unexpected liability on Amex thatwould ‘‘completely destroy[ ] its contractualexpectations.’’ Id. at 1248. It only seeks toretroactively claim abandoned travelerschecks that ultimately belong to the purchas-ers, not Amex.



gage in a factual inquiry to determinewhether a taking has been effected. NewJersey v. United States, 91 F.3d 463, 468(3d Cir.1996) (citing Lucas v. S.C. CoastalCouncil, 505 U.S. 1003, 1015, 112 S.Ct.2886, 120 L.Ed.2d 798 (1992)).

[31] To succeed on a takings claim,Amex must show that the State’s actionaffected a ‘‘legally cognizable property in-terest.’’ Prometheus Radio Project v.FCC, 373 F.3d 372, 428 (3d Cir.2004) (cit-ing Cleveland Bd. of Educ. v. Loudermill,470 U.S. 532, 538, 105 S.Ct. 1487, 84L.Ed.2d 494 (1985) and Webb’s, 449 U.S. at160–61, 101 S.Ct. 446 (1980)). ‘‘Relevantconsiderations include ‘[t]he economic im-pact of the regulation on the claimant andTTT the extent to which the regulation hasinterfered with distinct investment-backedexpectations.’ ’’ New Jersey v. UnitedStates, 91 F.3d at 463 (quoting Penn Cent.,438 U.S. at 124, 98 S.Ct. 2646).

[32, 33] The character of the state ac-tion is also relevant: unlike ‘‘a physicalinvasion of land[,] TTT a public programadjusting the benefits and burdens of eco-nomic life to promote the common goodTTT ordinarily will not be compensable.’’Id. (internal quotation marks and citationomitted). Thus, that a regulation ‘‘ad-versely affect[s] recognized economic val-ues’’ is not enough to constitute a taking.Id. Even a regulation that prohibits themost beneficial use of property, or pre-vents an individual from operating an oth-erwise lawful business, does not necessari-ly violate the Takings Clause. Penn Cent.,438 U.S. at 125–26, 98 S.Ct. 2646.

We agree with the District Court thatAmex failed to show a likelihood of successon the merits of its takings claim. Amexmaintains that it has both a right to investthe proceeds from the sale of TCs and aproperty interest in the income generated.Amex argues that the retroactive applica-tion of Chapter 25 constitutes a takingbecause it interferes with Amex’s invest-ment-backed expectation that TCs alreadysold would have an abandonment period offifteen years, which would have allowedAmex to invest the proceeds for fifteenyears unless the owner redeemed thecheck.7 However, Amex’s claim thatChapter 25 interferes with its investment-backed expectations cannot stand becauseAmex’s TC business has long been subjectto regulation by New Jersey. The Su-preme Court has established that ‘‘ ‘[t]hosewho do business in the regulated fieldcannot object if the legislative scheme isbuttressed by subsequent amendments toachieve the legislative end.’ ’’ Connolly v.Pension Ben. Guar. Corp., 475 U.S. 211,227, 106 S.Ct. 1018, 89 L.Ed.2d 166 (1986)(quoting FHA v. The Darlington, Inc., 358U.S. 84, 91, 79 S.Ct. 141, 3 L.Ed.2d 132(1958)). Since Chapter 25 is a subsequentamendment to achieve the legislative endof assuming custody of abandoned proper-ty, Amex has no ground to claim interfer-ence with its investment-backed expecta-tions.

Lastly, the fact that Amex has a con-tractual right to invest TC funds does notnecessarily render Chapter 25 an unconsti-tutional taking. The State has considera-ble authority to enact legislation, including‘‘the power to affect contractual commit-

7. Contrary to Amex’s contention, E. Enterp. v.Apfel, 524 U.S. 498, 118 S.Ct. 2131, 141L.Ed.2d 451 (1998), is distinguishable fromthis case. In E. Enterp., the Supreme Courtheld that the Coal Industry Retiree HealthBenefit Act was an unconstitutional takingbecause it imposed on the employer retroac-

tive pension liability for retired miners. Id. at532, 118 S.Ct. 2131. But here, Chapter 25does not impose any further liability on Amex.It only requires that issuers like Amex turnover property owned by the travelers checkowners to State custody.


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ments between private parties.’’ See E.Enterp., 524 U.S. 498, 528, 118 S.Ct. 2131(1998). Amex’s ability to utilize TC fundsis constrained by the owner’s ability toredeem a TC on demand and by the termsof the State’s unclaimed property laws.See Security Sav. Bank, 263 U.S. at 286,44 S.Ct. 108. In Delaware v. New York,the Supreme Court delineated the proper-ty right of debtors with regard to stateescheat laws:

Funds held by a debtor become subjectto escheat because the debtor has nointerest in the funds—precisely the op-posite of having ‘‘a claim to the funds asan asset.’’ We have recognized as muchin cases upholding a State’s power toescheat neglected bank deposits. Char-ters, bylaws, and contracts of deposit donot give a bank the right to retain aban-doned deposits, and a law requiring thedelivery of such deposits to the Stateaffects no property interest belonging tothe bank. [Sec. Sav. Bank, 263 U.S. at285–86, 44 S.Ct. 108]; Provident Insti-tution for Sav. v. Malone, 221 U.S. 660,665–66, 31 S.Ct. 661, 55 L.Ed. 899(1911). Thus, ‘‘deposits are debtor obli-gations of the bank,’’ and a State may‘‘protect the interests of depositors’’ ascreditors by assuming custody over ac-counts ‘‘inactive so long as to be pre-sumptively abandoned.’’ [AndersonNat. Bank, 321 U.S. at 241, 64 S.Ct. 599](emphasis added). Such ‘‘disposition ofabandoned property is a function of thestate,’’ a sovereign ‘‘exercise of a regula-tory power’’ over property and the pri-vate legal obligations inherent in proper-ty. [Standard Oil Co. v. New Jersey,341 U.S. 428, 436, 71 S.Ct. 822, 95 L.Ed.1078 (1951) ].

507 U.S. 490, 502, 113 S.Ct. 1550, 123L.Ed.2d 211 (1993). Thus, Amex, as debt-or to TC owners, has no right to retain thefunds once they are deemed abandonedunder the State’s unclaimed property laws.

Accordingly, the District Court did not errin finding that Amex failed to show areasonable probability of success on itsTakings Clause claim.

D. Commerce Clause

[34–38] Under the Commerce Clause,Congress has the power to ‘‘regulate Com-merce TTT among the several States.’’U.S. Const. Art. I, § 8, cl. 3. ‘‘This clausealso has an implied requirement (oftencalled the ‘negative’ or ‘dormant’ aspect ofthe clause) that the states not ‘mandatedifferential treatment of in-state and out-of-state economic interests that benefitsthe former and burdens the latter.’ ’’ Clo-verland–Green Spring Dairies, Inc. v. Pa.Milk Mktg. Bd., 462 F.3d 249, 261 (3dCir.2006) (citing Granholm v. Heald, 544U.S. 460, 472, 125 S.Ct. 1885, 161 L.Ed.2d796 (2005)). Our inquiry as to whether astate law violates the dormant CommerceClause is twofold: first, we determinewhether heightened scrutiny applies, and,if not, then we determine whether the lawis invalid under the Pike v. Bruce Church,Inc., 397 U.S. 137, 90 S.Ct. 844, 25 L.Ed.2d174 (1970), balancing test. Cloverland–Green, 462 F.3d at 261 (citation omitted).We apply heightened scrutiny when a law‘‘discriminates against interstate com-merce’’ in purpose or effect. C & A Car-bone, Inc. v. Town of Clarkstown, 511 U.S.383, 390, 114 S.Ct. 1677, 128 L.Ed.2d 399(1994). Because Amex has not allegedthat heightened scrutiny applies, we lookto the Pike balancing test. Under thistest, courts will uphold nondiscriminatoryregulations that only incidentally affect in-terstate commerce unless ‘‘the burden im-posed on [interstate] commerce is clearlyexcessive in relation to the putative localbenefits.’’ Pike, 397 U.S. at 142, 90 S.Ct.844.

Amex contends that Chapter 25, if im-plemented, will violate the dormant Com-



merce Clause because its effects will beprojected into other states. Specifically,Amex claims that it will be forced tochoose between: (a) selling TCs in NewJersey at a marginal profit or at a loss; (b)not selling TCs in New Jersey; (c) charg-ing a fee for selling TCs in New Jersey; or(d) charging a fee to sell TCs throughoutthe country so that it can maintain uniformconditions. If it chooses to charge a fee tosell TCs throughout the country, Amexargues, then Chapter 25 will have dictatedcommercial activity in other states.

Amex compares such a result to laws theSupreme Court struck down on dormantCommerce Clause grounds in Brown–For-man Distillers Corp. v. N.Y. State LiquorAuth., 476 U.S. 573, 582, 106 S.Ct. 2080, 90L.Ed.2d 552 (1986) and Healy v. Beer In-stitute, Inc., 491 U.S. 324, 336, 109 S.Ct.2491, 105 L.Ed.2d 275 (1989). In Brown–Forman, the Supreme Court found thatNew York had ‘‘project[ed] its legislationinto [other States]’’ by requiring distillersto seek the approval of the New YorkState Liquor Authority before loweringprices in other states. 476 U.S. at 583–84,106 S.Ct. 2080 (internal quotation marksand citation omitted) (second alteration inoriginal). Similarly, in Healy, the Su-preme Court struck down a Connecticutstatute that ‘‘require[d] out-of-state ship-pers of beer to affirm that their postedprices for products sold to Connecticutwholesalers [were] TTT no higher than theprices at which those products are sold in

[neighboring states.]’’ 491 U.S. at 326, 109S.Ct. 2491. The Court held both statutesto be unconstitutional because ‘‘States maynot deprive businesses and consumers inother States of ‘whatever competitive ad-vantages they may possess based on theconditions of the local market.’ ’’ Healy,491 U.S. at 339, 109 S.Ct. 2491 (quotingBrown–Forman, 476 U.S. at 580, 106 S.Ct.2080).

[39] Unlike these statutes, Chapter 25does not directly regulate travelers checkssold in other states or force Amex to con-form its out-of-state practices to less favor-able in-state conditions. Nothing preventsother states from regulating travelerschecks differently from the way New Jer-sey has chosen to do in Chapter 25. Andby Amex’s own admission, the costs ofcompliance could be passed on to NewJersey travelers check customers or beabsorbed by issuers like Amex.8 Under thePike balancing test, when the costs of aregulation may be born solely by those inthe state enacting it, the burden imposedon interstate commerce is minimal, and notexcessive in relation to the putative localbenefits articulated by the State. SeeUnited Haulers Ass’n, Inc. v. Oneida–Herkimer Solid Waste Mgmt. Auth., 550U.S. 330, 345, 127 S.Ct. 1786, 167 L.Ed.2d655 (2007) (holding when ‘‘the very peoplewho voted for the laws’’ bear the costsattributable to those laws, the costs of theregulation do not fall outside the state).

8. Amex argues that requiring it to change itsTC business so that it operates differently inNew Jersey than it does in other jurisdictions(e.g., charging a fee in New Jersey) wouldsubstantially burden interstate commercebased on the Supreme Court’s decision inBibb v. Navajo Freight Lines, Inc., 359 U.S.520, 529–30, 79 S.Ct. 962, 3 L.Ed.2d 1003(1959). But the Supreme Court acknowl-edged that Bibb was an exceptional case be-cause the state law obstructed the literalmovement of goods between states by requir-

ing trucks to alter their safety equipmentupon entering Illinois. Id. at 529, 79 S.Ct.962. The Court maintained that states have‘‘great leeway in providing safety regulationsfor all vehicles—interstate as well as local[,]’’but in that case, the burden on the interstatemovement of trucks passed ‘‘the permissiblelimits even for safety regulations.’’ Id. at 530,79 S.Ct. 962. Amex has not shown thatChapter 25 imposes a similarly heavy burdenfor this to be considered an exceptional case.


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Therefore, Amex failed to show a reason-able probability of success on the merits ofits Commerce Clause claim.

E. Remaining preliminary injunc-tion factors

Because Amex was unable to show alikelihood of success on the merits of itsclaims, we need not address the remainingpreliminary injunction factors, see Criss-man, 239 F.3d at 364 (listing preliminaryinjunction factors), and the District Court’sdenial of Amex’s motion for preliminaryinjunction must be affirmed. See In reArthur Treacher’s Franchisee Litig., 689F.2d at 1143.

IV. Conclusion

We hold that Amex failed to show alikelihood of success on the merits of itsDue Process Clause, Contract Clause, Tak-ings Clause, and Commerce Clause claims.Thus, the motion for preliminary injunc-tion of Chapter 25 must be denied. Forthe foregoing reasons, we will affirm theorder of the District Court.

,

NEW JERSEY RETAIL MERCHANTSASSOCIATION

v.

Andrew P. SIDAMON–ERISTOFF,Treasurer of the State of New Jersey;Steven R. Harris, Administrator ofUnclaimed Property of the State ofNew Jersey, Appellants in 10–4551.

New Jersey Food Council, a NewJersey Not–for–Profit Entity

v.

State of New Jersey; Andrew P. Sida-mon–Eristoff, Treasurer of the Stateof New Jersey; Steven R. Harris, Ad-ministrator of Unclaimed Property ofthe State of New Jersey, Appellants in10–4552.

American Express Prepaid CardManagement Corporation

v.

Andrew P. Sidamon–Eristoff, as Trea-surer of the State of New Jersey; Ste-ven R. Harris, as Administrator of Un-claimed Property of the State of NewJersey, Appellants in 10–4553.


10–4714

v.




v.


Reprinted with permission of Thomson Reuters from the Federal Reporter, 3d Series.


421Del.STAPLES, INC. v. COOKCite as, Del.Ch., 35 A.3d 421 (2012)

STAPLES, INC.,Plaintiff/Counterclaim–Defendant,

v.

Thomas COOK, in his capacity as theSecretary of Finance for the State ofDelaware; Patrick T. Carter, in hiscapacity as the Director of Revenuefor the State of Delaware; MarkUdinski, in his capacity as the Di-rector/State Escheator of the State ofDelaware; and the Department of Fi-nance, Division of Revenue for theState of Delaware, Defendants/Coun-terclaim–Plaintiffs.

C.A. No. 5447–CS.

Court of Chancery of Delaware.

Submitted: Dec. 19, 2011.

Decided: Feb. 2, 2012.

Background: Office supply store broughtaction against the State to challenge ademand for payment made by the Stateunder Delaware’s escheat law, and theState countersued. Both parties moved forsummary judgment.

Holding: The Court of Chancery, Strine,Chancellor, held that unclaimed rebatesissued by office supply store as rebatechecks to business customers were subjectto escheatment as abandoned property.

Ordered accordingly.

1. Escheat O3

If a type of property does not fallwithin any of the specifically enumeratedcategories set forth in escheat statute, andthe statute of limitations applicable to theowner’s claim to that property is less thanthe five-year dormancy period, the proper-ty will not count as ‘‘property’’ for escheat-ment purposes and the holder of such

property will not be required to deliver itto the State. 12 West’s Del.C. § 1198(11).

See publication Words and Phrasesfor other judicial constructions anddefinitions.

2. Escheat O3

Unclaimed rebates issued by officesupply store as rebate checks to businesscustomers that purchased a minimum vol-ume of inventory constituted ‘‘bills of ex-change’’ or ‘‘credits’’ under the escheatstatute, and thus, were subject to escheat-ment as abandoned property under theterms of the statute after a dormancy peri-od of five years had run against them. 12West’s Del.C. § 1198(11).

See publication Words and Phrasesfor other judicial constructions anddefinitions.

Brian M. Rostocki, Esquire, Reed SmithLLP, Wilmington, Delaware; DianeGreen–Kelly, Esquire, Reed Smith LLP,Chicago, Illinois, Attorneys for Plain-tiff/Counterclaim–Defendant.

Stuart M. Grant, Esquire, Michael J.Barry, Esquire, Ned C. Weinberger, Es-quire, Grant & Eisenhofer P.A., Wilming-ton, Delaware; John S. McDaniel, III, Es-quire, Delaware Department of Justice,Wilmington, Delaware, Attorneys for De-fendants/Counterclaim–Plaintiffs.

OPINION

STRINE, Chancellor.

I. Introduction

The plaintiff, Staples, Inc., sued theState of Delaware to challenge a demandfor payment made by the State under De-laware’s escheat law, 12 Del. C. §§ 1101, etseq. (the ‘‘Escheat Statute’’). The Statecountersued, seeking a declaration that thesums demanded from Staples were proper


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422 35 ATLANTIC REPORTER, 3d SERIESDel.

and authorized under the Statute.1 Bothparties moved for partial judgment on thepleadings.

My decision on these cross-motions de-pends on the answer to the followingquestion: do unclaimed rebates issued byStaples as ‘‘rebate checks’’ 2 to businesscustomers that purchased a minimum vol-ume of inventory take the form of any ofthe ‘‘specifically enumerated’’ items setforth in the definition of ‘‘property’’ under§ 1198(11) of the Escheat Statute? 3 Ifthey do, they are properly subject to es-cheatment as ‘‘abandoned property’’ underthe terms of the Statute after a ‘‘dorman-cy’’ period of five years has run againstthem.4 If they do not, they are not es-cheatable because, when a type of proper-ty is not ‘‘specifically enumerated’’ in§ 1198(11) of the Escheat Statute and astatute of limitations applicable to theowner’s right to recover such propertyelapses before five years, the holder of theproperty does not become liable to theState.5

I find that the rebates at issue here fitcomfortably within two of the ‘‘specificallyenumerated’’ items of property listed in

§ 1198(11)—‘‘bills of exchange’’ and‘‘credits’’ 6—and I therefore grant theState’s motion for partial judgment onthe pleadings and deny Staples’s cross-motion. Although the pleadings did notpaint a clear picture of the form in whichthe rebates were issued by Staples to itscustomers, Staples’s counsel conceded atoral argument that the rebates were is-sued as either negotiable ‘‘checks’’ (i.e.,bills of exchange) or ‘‘credits.’’ 7 As such,the rebates consist of specifically enumer-ated items of property under § 1198(11),and the State’s claims cannot be barredby any statute of limitations.

II. Factual Background

These are the undisputed facts as theyemerge from the pleadings.8

In October 2005, the State began anaudit under 12 Del. C. § 1155 of unclaimedand abandoned property held by Staples.As part of that audit, the State soughtrecords from Staples relating to severaldifferent categories of property. TheState completed its audit of two of thoseproperty types—accounts payable andpayroll—in early 2010. On March 31,

1. The defendants/counterclaim-plaintiffs inthis action are Thomas Cook, in his capacityas the Secretary of Finance for the State ofDelaware, Patrick T. Carter, in his capacity asthe Director of Revenue for the State of Dela-ware, Mark Udinski, in his capacity as theDirector/State Escheator for the State of Dela-ware, and the Department of Finance, Divi-sion of Revenue for the State of Delaware.

2. Compl. ¶ 90.

3. See 12 Del. C. § 1198(11).

4. Id. §§ 1198(1), 1198(9)a.

5. Id. § 1198(11).

6. Id.

7. Staples, Inc. v. Cook, C.A. No. 5447, at 107(Del. Ch. Dec. 19, 2011) (TRANSCRIPT).

8. Ct. Ch. R. 12(c). This court will grant amotion for judgment on the pleadings underCourt of Chancery Rule 12(c) when there areno material issues of fact and the movingparty is entitled to judgment as a matter oflaw. McMillan v. Intercargo Corp., 768 A.2d492, 499 (Del.Ch.2000). When considering aRule 12(c) motion, the court is required toaccept the non-moving party’s well-pled factsas true and to view the inferences to be drawnfrom such facts in the light most favorable tothe non-moving party. Desert Equities, Inc. v.Morgan Stanley Leveraged Equity Fund, II,L.P., 624 A.2d 1199, 1205 (Del.1993). Thecourt need not, however, ‘‘blindly accept’’ allallegations as true, nor must it draw unrea-sonable inferences in the non-moving party’sfavor. West Coast Mgmt. & Capital, LLC v.Carrier Access Corp., 914 A.2d 636, 641 (Del.Ch.2006) (citation omitted).



2010, the State sent Staples a letter de-manding payment of sums purportedlyrepresenting Staples’s abandoned and un-claimed accounts payable and payroll lia-bility for the years 1995 to 2003.

Some of the accounts payable propertyincluded in the State’s calculation of Sta-ples’s liability consists of unclaimed re-bates that were issued in connection withthe sale of inventory to Staples’s businesscustomers. Many business customers en-tered into supply contracts with Stapleswhereby Staples agreed to give the cus-tomer a reduction in price, or a ‘‘rebate,’’ ifit purchased a minimum volume of invento-ry from Staples during a one-year period.9

The State claims that these rebates, oncethey have remained unclaimed for the stat-utorily-prescribed time period, are subjectto escheatment.

Staples disagrees. Instead of payingthe State, Staples filed its complaint in thisaction on April 30, 2010, seeking, amongother things, a declaratory judgment that‘‘rebates, refunds and other items relatedto the sale of goods are not unclaimedproperty’’ under the Escheat Statute.10

Central to Staples’s position was its con-tention that the statute of limitations as tothe rebates had run against the rightfulowners, and that the Escheat Statute doesnot allow the State to escheat property asto which a claim by the rightful owner istime-barred.

III. Analysis

A. The Relevant Provisions Of TheEscheat Statute And The

Parties’ Contentions

The Escheat Statute governs the ‘‘rever-sion of both real and personal property’’ tothe State of Delaware.11 Under § 1155 ofthe Escheat Statute, the State has thepower to audit and claim ‘‘abandoned prop-erty,’’ which is defined in § 1198(1) of theStatute as ‘‘property against which [the]full period of dormancy has run.’’ 12 The‘‘period of dormancy’’ is defined, in rele-vant part, as ‘‘the full and continuous peri-od of 5 years TTT during which an ownerhas ceased, failed or neglected to exercisedominion or control over property or toassert a right of ownership or possessionor to make presentment and demand forpayment and satisfaction or to do any oth-er act in relation to or concerning suchpropertyTTTT’’ 13 The parties do not dis-pute that the requisite period of dormancyhas run against the rebates at issue.

Candidly, the reasoning behind Staples’sargument that the unclaimed rebates arenot escheatable unclaimed property wasnot clearly spelled out in Staples’s com-plaint, and the parties filed confusing andmeandering briefs in support of theircross-motions. These briefs raised a hostof issues that turned out to be tangentialto the core question that the State andStaples now agree determines whether therebates are escheatable. As it turns out,both the State and Staples are in accord

9. Compl. ¶ 89.

10. Id. ¶ 112; see also id. at 34 (Prayer forRelief).

11. A.W. Fin. Servs., S.A. v. Empire Res., Inc.,981 A.2d 1114, 1124 (Del.2009).

12. 12 Del. C. § 1198(1).

13. Id. § 1198(9)a. An ‘‘owner’’ of abandonedproperty is defined as ‘‘any person holding orpossessing property by virtue of title or own-

ership.’’ Id. § 1198(7). A ‘‘holder’’ of aban-doned property, by contrast, is any personhaving ‘‘possession, custody or control of theproperty of another person’’ and includes ev-ery legal entity ‘‘incorporated or created un-der the laws of [Delaware] or doing businessin [Delaware].’’ Id. Here, Staples is the‘‘holder’’ of the unclaimed rebates that theState seeks to escheat.


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that the issue of whether the statute oflimitations ran for claims belonging to thebusiness customers given rebates is rele-vant only if the rebates do not fit withincertain specifically enumerated categoriesset forth in the definition of ‘‘property’’under the Escheat Statute.

[1] This reality is made clear by§ 1198(11) of the Escheat Statute, whichstates as follows:

‘Property’ means TTT personal propertyTTT of every kind or description, tangi-ble or intangible, TTT [including], but notby way of limitation, (i) money; (ii) billsof exchange; TTT (iv) credits TTT; and(xiii) all other liquidated choses in actionof whatsoever kind or characterTTTT Theword ‘property’ does not include TTT anyproperty, except the items specificallyenumerated above in paragraph (11) ofthis section TTT, the right to recoverwhich in a proceeding brought by theowner would be barred by any statute oflimitations TTTT 14

In other words, if a type of property doesnot fall within any of the ‘‘specifically enu-

merated’’ categories set forth in § 1198(11)of the Escheat Statute, and the statute oflimitations applicable to the owner’s claimto that property is less than the five-yeardormancy period, the property will notcount as ‘‘property’’ for escheatment pur-poses and the holder of such property willnot be required to deliver it to the State.But, the opposite is also true, renderingthe running of the statute of limitationsagainst the owner irrelevant when theproperty at issue is one of the specificallyenumerated types set forth in § 1198(11).15

As a result, Staples’s arguments regard-ing the expiration of the statute of limita-tions as to the rebates need not be an-swered if, as I next find, the rebates tookthe form of property specifically enumerat-ed in § 1198(11) of the Escheat Statute.16

B. The Rebates Are ‘‘Bills of Exchange’’Or ‘‘Credits’’ Under the Escheat Statute

And Are Therefore Escheatable

‘‘If a statute is unambiguous, there is noneed for judicial interpretation, and theplain meaning of the statutory language

14. Id. § 1198(11) (emphasis added).

15. The parties’ circuitous journey is in partexplained by the Escheat Statute itself. TheState stressed that the general rule is that therunning of the statute of limitations againstthe owner of property has no effect on theState’s right to escheat. The State correctlybases this argument on § 1202 of the Statute,which says:

The expiration of any period of time speci-fied by statute or court order, during whichan action or proceeding may be com-menced or enforced to obtain payment of aclaim for money or recovery of property,shall not prevent the money or propertyfrom being deemed abandoned propertynor affect any duty to file a report requiredby this subchapter or to pay or deliverabandoned property to the State Escheator.

Id. § 1202. But Staples was also correct topoint out that § 1202 is far from a compre-hensive statement, because § 1198(11) nar-

rows it greatly by rendering the running ofthe statute of limitations against the owner adefense against escheat as to categories ofproperty not specifically enumerated in thatsubsection. It took time for the State andStaples to parse the interaction of these twoprovisions of the Escheat Statute and then toland on the central question at issue on thesecross-motions.

16. Staples argues that the rebates were sub-ject to a statute of limitations shorter than thefive-year dormancy period under the EscheatStatute. Specifically, Staples contends thatany claims by owners of the unclaimed re-bates are limited by § 2–725 of the DelawareUniform Commercial Code (the ‘‘UCC’’),which provides that ‘‘[a]n action for breach ofany contract for sale must be commencedwithin 4 years after the cause of action hasaccrued,’’ 6 Del. C. § 2–725, because the re-bates at issue were given to business custom-ers under supply contracts. I need not andthus do not determine whether this is so.



controls.’’ 17 Thus, I take into account the‘‘plain meaning’’ of the items listed in§ 1198(11) of the Escheat Statute. I findthat the rebates at issue here are either‘‘bills of exchange’’ or ‘‘credits,’’ and aretherefore properly subject to escheatmentby the State.18

Although the briefing distilled the legaldispute between the parties into the singlequestion of whether the rebates were spe-cifically enumerated property items withinthe meaning of § 1198(11), the briefs leftme with somewhat of a factual dilemma.Despite being the master of its own com-plaint, Staples was less than clear in thatcomplaint about the form in which it gaveits customers rebates. In one paragraphof its complaint, Staples referred to therebates as ‘‘rebate checks’’ that its custom-ers had not ‘‘cash[ed].’’ 19 But, it remainedunclear on the pleadings whether all of therebates included in Staples’s alleged un-claimed and abandoned property liabilitytook the form of checks, and whether theywere in fact negotiable checks, whichwould mean they were bills of exchange, orsimply something that gave the customersa right to go to Staples and get cash.20 Inorder to issue the ruling on undisputedfacts that both parties sought, the courtdesired to get clarity at oral argument sothat it understood that the parties wereboth talking about the same thing.

[2] When questioned about the form ofthe rebates, Staples’s counsel concededthat the rebates were issued as eitherchecks or credits. The following exchangetook place:

Q. The way this works is you sendthem—in my hypothetical, Chancery[meets the minimum volume require-ment for a rebate], gets [a] $1,000 rebateeligibility. [Staples] send[s] me a checkthat I can then take to a bank and get$1,000 from.

A. Yes. Usually what happens is thesalesperson takes a check TTT and ifthey’ve met their requirement, they’llhand it to them.

Q. It’s a check.

A. But it’s a check. It can be a checkor it can be an offset to amountsowedTTTT

Q. An offset to amounts owed, that’s acredit.

A. [State’s counsel] It’s called a credit.

A. [Staples’s counsel] It can sometimesbe a credit, it can sometimes be a check.It’s a rebate TTTT 21

To the extent that the rebates could besatisfied by Staples’s giving one of its busi-ness customers an ‘‘offset to amountsowed,’’ such rebates would, as Staples’s

17. Dir. of Revenue v. CNA Holdings, Inc., 818A.2d 953, 957 (Del.2003) (citing Eliason v.Englehart, 733 A.2d 944, 946 (Del.1999)).

18. Because I find that the rebates are eitherbills of exchange or credits, I do not reach theState’s arguments that the rebates constitute‘‘money’’ and/or ‘‘liquidated choses in ac-tion,’’ which are also items specifically enu-merated in § 1198(11).

19. Compl. ¶ 90 (‘‘Business customers that donot cash their rebate checks can no longermake a claim against Staples for such rebatesafter the 4–year statute of limitations in theUCC passes.’’) (emphasis added).

20. A ‘‘check’’ is defined in § 3–104(f) of theUCC as ‘‘a draft TTT payable on demand anddrawn on a bank.’’ 6 Del. C. § 3–104(f). Thecomments to Article 3 of the UCC clarify that‘‘[t]he term ‘bill of exchange’ is not used inArticle 3. It is generally understood to be asynonym for the term ‘draft.’ ’’ 6 Del. C. § 3–104 cmt. n. 4. The comments go on to statethat the term ‘‘draft’’ includes a ‘‘check’’ asdefined in § 3–104(f). Id.

21. Staples, Inc. v. Cook, C.A. No. 5447, at 107(Del. Ch. Dec. 19, 2011) (TRANSCRIPT) (em-phasis added).


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counsel admitted, constitute ‘‘credits,’’ 22

and would obviously fall within the specifi-cally enumerated item of ‘‘credits’’ under§ 1198(11) of the Escheat Statute.23

Staples’s counsel also conceded at oralargument that to the extent that the re-bates were issued as checks, they werenegotiable checks that the business cus-tomer could cash at the bank or sign overto a transferee, i.e., ‘‘bills of exchange,’’another item specifically enumerated in§ 1198(11).24 This concession is shown bythe exchange quoted below:

Q. I just want to know that I can—forthe purposes of the motion, you concedethat when the customer hits the level ofdiscount, Staples TTT hand-delivers a re-bate in the form of a check, which is asgood as any check you would get fromanyone with a credit rating as good asStaples in terms of your ability to sign itover to anyone, take it to a bank, andthe only risk that you have is that Sta-ples goes insolvent before the check isnegotiated?A. You can either get a check or youcan get an offset against your outstand-ing invoicesTTTT You can get a credit.25

Staples tried to insist at oral argumentthat a ‘‘rebate’’ is not itself a check or acredit just because it might be paid witha check or issued as a credit, and that in-stead the court must look to the ‘‘underly-ing property’’—the rebate.26 But, Sta-ples’s argument does not address thestatutory question at hand, which is aboutthe what, not the why. The relevant in-quiry is what the property is and whetherit fits within one of the categories specifi-

cally enumerated in § 1198(11) of the Es-cheat Statute. The reason why the prop-erty was given is irrelevant. In this case,Staples gave its customers a check as arebate. In other situations, Staplesdoubtless issues checks for other reasons,such as to pay for services, to effect arefund, or in the myriad other circum-stances that lead to payments to custom-ers, vendors, or other parties. Nothing inthe words of the Escheat Statute remote-ly suggests that the reason why a kind ofproperty specifically enumerated was cre-ated or given to another party bears onwhether that property is specifically enu-merated. If the General Assembly hadintended to carve out from escheat cate-gories of otherwise specifically enumerat-ed property because of the reasons fortheir creation, the General Assemblywould have done so with words, and nothave left it to the judiciary to, in the firstinstance, invent for itself the authority tocarve out certain categories on the basisof the why, and then to determine whatreasons why justified exclusion from es-cheat.

The undisputed reality of record here isthat Staples provided to its business cus-tomers two forms of property as part of itsrelationship with those customers. Onewas a ‘‘rebate in the form of a check’’ thatwas negotiable at a bank.27 A check is aquintessential example of a bill of ex-change and thus a specifically enumerateditem under the Escheat Statute. The oth-er form of property given was an ‘‘off-set[ ]’’ against the customer’s ‘‘outstanding

22. Id.

23. See 12 Del. C. § 1198(11). Black’s LawDictionary defines a ‘‘credit’’ as ‘‘[a] deduc-tion from an amount due.’’ Black’s Law Dic-tionary (9th ed.2009).

24. See 12 Del. C. § 1198(11).

25. Staples, Inc. v. Cook, C.A. No. 5447, at111–12.

26. Id. at 109–10.

27. Id. at 112.



invoices.’’ 28 That is, these customers weregiven ‘‘credits.’’ 29 Thus, as clarified byStaples’s own illumination of the rebatesaddressed in its complaint, the rebates allinvolve property specifically enumeratedwithin § 1198(11).30

IV. Conclusion

For the foregoing reasons, the State’smotion for judgment on the pleadings todismiss Staples’s claim in Count I of itscomplaint for a declaratory judgment that

the rebates are not escheatable isGRANTED, and Staples’s cross-motion onthat Count is DENIED. Count I of Sta-ples’s complaint is therefore dismissed.IT IS SO ORDERED.

,

28. Id.

29. Id.

30. It may be that all of the rebates picked upin the State’s audit were in the form of

checks, see id. at 113, but the key point fornow is that Staples admits that they wereeither in the form of a check or a credit, bothof which are items specifically enumerated in§ 1198(11).

Reprinted with permission of Thomson Reuters from the Atlantic Reporter, 3d Series.


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