U.S. Supreme Court takes up Delaware escheat case
The nation’s highest court will decide if Delaware’s abandoned property program can claim cash from unused MoneyGram orders instead of those funds reverting to the state in which it was bought.
The core of the argument is this: should a MoneyGram be legally classified as a money order or traveler's check – or are they in their own category entirely?
22 other states are suing Delaware because they see these transfers as money orders, the balance of which would head straight to their respective treasuries if not cashed within a few years.
Delaware argues they should come here since MoneyGram is incorporated in the First State. From May 2011 to March 2015, Delaware took in more than $160 million from abandoned MoneyGrams in all 50 states.
Despite the huge sum at stake, Delaware Law School professor Lawrence Hamermesh says the state won’t be in dire straits if the U.S. Supreme Court rules against it.
“If Delaware loses on this one, that’s going to put a dent in the revenues, but my guess would be it’s a one-time dent and where it goes from there is going to depend on the cyclicality of the economy and all that,” Hamermesh said.
In fiscal year 2016, state officials raked in $528.3 million from its abandoned property program, making up nearly 15 percent of the general fund budget that year.
A federal judge also recently ruled against Delaware’s escheat program for unnecessarily auditing companies and for how it calculates any money they owe the state. It was later settled out of court.
Still, Hamermesh says the future of the state’s program isn’t in jeopardy.
“I think the state has taken some steps to address those concerns and that might have a dampening effect, but maybe we’ve seen most of that already.”
Also, don’t expect a ruling any time soon.
Hamermesh says the process takes much longer when states sue each other – most likely ruling out a decision by the end of the court’s term in June.