uppo companion - revised (march 2012) - mnat.com · preface to morris nichols’ delaware unclaimed...

MORRIS NICHOLS’ DELAWARE UNCLAIMED PROPERTY LAW COMPANION

2012 - 2013

Courtesy of the Unclaimed Property Counseling Group

Morris, Nichols, Arsht & Tunnell LLP

Copyright © 2012 Morris, Nichols, Arsht & Tunnell LLP

Preface to

Morris Nichols’ Delaware Unclaimed Property Law Companion / 2012-2013

Morris Nichols’ Delaware Unclaimed Property Law Companion (the “Companion”) is a practical, 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 fi lers 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 identifi ed (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 / 2012-2013

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 - § 1176 Subchapter II. Abandoned or Unclaimed Property ....................... 14

§ 1180 - § 1194 Subchapter III. Unclaimed Life Insurance Funds ........................... 38

§ 1197 - § 1212 Subchapter IV. Other Unclaimed Property ...................................... 46

§ 1220 - § 1224 Subchapter V. Escheat of Postal Savings System Accounts ...... 58

REGULATIONS (R) ....................................................................................................................... 62

Abandoned or Unclaimed Property Voluntary Disclosure Agreement Program ........ 63

Policies and Procedures Regarding FOIA Requests ..................................................... 66

Regulation on Practices and Procedures for Appeals of Determinations

of the Audit Manager ................................................................................................... 71

Regulation on Practice and Procedure for Establishing Running of the

Full Period of Dormancy for Certain Securities Related Property .......................... 78

STATE MATERIALS (SM) ............................................................................................................. 82

Contact Information for Delaware AUP ........................................................................... 83

Delaware AUP Deadlines .................................................................................................. 83

Delaware AUP Holder Reporting Escheat Handbook .................................................... 84

FORMS (F) .…………………………………………………… ...................................................... 102

AP1 State of Delaware Report of Unclaimed or Abandoned Property ....................... 103

Instructions for Completing AP1 Form ......................................................................... 109

AP2 State of Delaware Report of Unclaimed or Abandoned Property

Detail Sheet ................................................................................................................ 111

Instructions for Completing AP2 Form ......................................................................... 112

TABLE OF CONTENTS MORRIS NICHOLS’ DELAWARE UNCLAIMED PROPERTY LAW COMPANION / 2012-2013

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

Property Law ......................................................................................................... 115

AP DE-2 Voluntary Self Disclosure Agreement ............................................................ 116

Publication Deadline Waiver Form ................................................................................ 120

State of Delaware Unclaimed Property Filing Extension Request ............................. 121

UNIFORM ACTS (UA) .................................................................................................................. 122

UNIFORM UNCLAIMED PROPERTY ACTS ...................................................................122

1981 UNIFORM ACT ........................................................................................................123

1995 UNIFORM ACT ........................................................................................................180

CASES (C) .....................................................................................................................................216

Texas v. New Jersey, 379 U.S. 674 (1965) ................................................................217

Pennsylvania v. New York, 407 U.S. 206 (1972) .......................................................223

Delaware v. New York, 507 U.S. 490 (1993) ..............................................................232

New Jersey Retail Merchants Association v. Sidamon-Eristoff,

Case No. 10-4551 (3d Cir. Jan. 5, 2012) .................................................................245

Am. Express Travel Related Services, Inc. v. Sidamon-Eristoff, No. 10-4328

(3d Cir. Jan. 5, 2012) ...............................................................................................290

Staples, Inc. v. Cook, et al. Del. Ch. C.A. No. 5447-VCS, Final Opinion re

Motion for Partial Judgment on Pleadings (February 2, 2012) ...........................313

CONTACT INFORMATION ........................................................................................................325

MORRIS NICHOLS’ DELAWARE UNCLAIMED PROPERTY LAW COMPANION

2012 - 2013

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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TITLE 12 § 1101–1116 MORRIS NICHOLS’ DELAWARE UNCLAIMED PROPERTY LAW COMPANION / 2012-2013

§ 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 fi led 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 fi ling 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 fi led 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 qualifi ed to inherit such property.

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


property of the decedent to fi le written notice of such claim with the Court of Chancery within 30 days of the date of the third and fi nal 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 fi nds 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 fi nds 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 fi nds 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 certifi ed 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 fi nds 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 benefi t 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 fi ling such certifi cate in the offi ce 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 fi le 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 satisfi ed that the grantee corporation is the proper successor to the body previously holding equitable or legal title to the property;

(2) A certifi ed copy of the recorded certifi cate 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. Defi nitions .................................................................................................. 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............................................ 17§ 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 ...................................................................... 19§ 1148. Verifi cation .................................................................................................. 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 defi ned ...................................................................... 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 defi ned ...................................................................... 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 ............................................................................................. 36§ 1175. Payment of abandoned property after receivership ................................... 37§ 1176. Reimbursement for instruments paid ......................................................... 37

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§ 1130. Defi nitions.

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 specifi ed 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 defi ned in this subchapter, nor affect any duty to fi le 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 fi ling 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 known addresses of the person or persons appearing to be entitled to abandoned property paid or delivered to the State Escheator pursuant to this subchapter. 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 confi dential 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 subchapter.

12 Del. C. 1953, § 1141; 50 Del. Laws, c. 507, § 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 classifi ed 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 classifi cation.

(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 offi ce 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 offi ce 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 the records in the State Escheator’s offi ce to be entitled to receive the same;

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

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(5) A statement:

a. That a public record is maintained in the offi ce 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 fi led with the State Escheator at the Escheator’s offi ce 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 benefi t 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 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

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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.

12 Del. C. 1953, § 1145; 50 Del. Laws, c. 507, § 1; 70 Del. Laws, c. 186, § 1.;

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

(a) Claim may be fi led 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. Verifi cation.

Any report required to be verifi ed by this subchapter shall be verifi ed 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 offi cer thereof if made by a public corporation, by the chief fi scal offi cer 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 in relation to the amount of abandoned property.


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§ 1152. Penalties and interest.

Repealed by 73 Del. Laws, c. 417, § 3, effective July 22, 2002, and effective for reports fi led or required to be fi led 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 insuffi cient 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 fi led by or on behalf of a holder (as defi ned 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 fi ndings and request for payment to the holder that fi led, or on whose behalf the report was fi led, or that was the subject of an examination. Sixty days after the date on which the Audit Manager mails a statement of fi ndings and request for payment, it shall constitute the Audit Manager’s fi nal determination of the amount of the holder’s liability, including interest and penalties, if any, for the abandoned or unclaimed property specifi ed in the statement of fi ndings and request for payment, excepting only the property types and amounts included in the statement of fi ndings and request for payment as to which the holder fi les a timely protest with the Audit Manager pursuant to subsection (b) of this section. The State Escheator may thereafter enforce any fi nal determination in accordance with subsection (k) of this section.

(b) Within 60 days after the date of the mailing of a statement of fi ndings and request for payment under subsection (a) of this section the holder may fi le with the Audit Manager a written protest of the statement of fi ndings 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 specifi c grounds upon which the protest is based. The protest is intended to allow the holder to have its objections to the fi nal request for payment reconsidered in the fi rst instance internally within the Department of Finance by the Audit Manager as a means of expediting resolution of any dispute. If the holder elects to fi le a protest and to have its objections to the fi nal 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.

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(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 fi ndings 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 fi nally found to be due and owing. Holders may remit the entire amount in the statement of fi ndings 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 fi nally 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 fi nal 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 fi ndings 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 certifi ed or registered mail at the address set forth in the holder’s protest.

(f) Thirty days after the date on which it is mailed, the determination by the Audit Manager of a holder’s protest shall be fi nal, unless within that time a holder fi les a notice of appeal with the Secretary of Finance. If the holder does not fi le a timely notice of appeal with the Secretary of Finance, the State Escheator may enforce any fi nal determination

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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 fi ndings 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 qualifi ed 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 fi ling 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 fi ndings 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 briefi ng requested by the independent reviewer, whichever is later. The independent reviewer shall assess costs, including the independent reviewer’s fee, against a party or between the parties in the independent reviewer’s discretion.

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(j) The Secretary of Finance may adopt or reject the independent reviewer’s determination in whole or in part. If the Secretary of Finance modifi es 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 modifi cation 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 certifi ed 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 fi nal 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 insuffi cient 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 offi cer 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 offi cer 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 fi nds that the report is not correct, the Escheator shall notify the holder in writing by certifi ed or registered mail of the amount of any underreported abandoned or unclaimed property due and owing. Notice of the proposed defi ciency in payment shall be mailed to the holder within 3 years from the date the report was fi led. A report fi led before the due date shall be deemed to have been fi led on the due date for purposes of this section. No suit to enforce the payment of a defi ciency in payment of abandoned or unclaimed property shall be brought under § 1156 of this title against a holder unless the notice of defi ciency 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 defi ciency in payment may be mailed to the holder within 6 years from the date the report was fi led.

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

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

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

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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 for the mailing of a notice of defi ciency 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 defi ciency in payment plus 60 days.

73 Del. Laws, c. 417, § 1.;

§ 1159. Penalties.

(a) In the case of the failure to fi le any report required by this chapter on or before the due date prescribed therefor (determined with regard to any extension of time for fi ling), 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 defi ciency 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 defi ciency 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 fi led and only to that part of the defi ciency 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 defi ned.

(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 certifi cation 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 certifi cation is made.

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(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 defi ned 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 offi cer).”

(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 classifi ed 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 fi le 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 offi cer on or before March 31 to persons establishing to the court’s or offi cer’s satisfaction their right to receive the same; and

c. 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 offi cer shall thereupon cease to be liable therefor.


§ 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 specifi ed 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 specifi ed 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 fi ling 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 verifi ed written report classifi ed 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

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


§ 1170. Abandoned property defi ned.

(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 fi le 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 offi ce 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 certifi ed 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.

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


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§ 1171. Annual report of abandoned property.

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

(b) Such report shall, with respect to amounts specifi ed 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


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



(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

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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 classifi ed 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 classifi cation.

(h) In case any banking organization shall on June 30 in any year neither hold nor owe any abandoned property specifi ed in § 1170 of this title, it shall on or before November 10 next succeeding make a verifi ed 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 classifi cation 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 specifi ed 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.

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.


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§ 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 certifi ed 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.



Subchapter III. Unclaimed Life Insurance Funds

§ 1180. Scope ............................................................................................. 39

§ 1181. Defi nitions ....................................................................................... 39

§ 1182. Annual report of unclaimed funds ................................................... 40

§ 1183. Publication of list of unclaimed funds ............................................. 40

§ 1184. Payment for publication .................................................................. 41

§ 1185. Payment to State Escheator ........................................................... 42

§ 1186. Custody of unclaimed funds in State; insurers

indemnifi ed .................................................................................... 42

§ 1187. Reimbursement for claims paid by insurers ................................... 42

§ 1188. Determination and review of claims ............................................... 42

§ 1189. Payment of allowed claims ............................................................. 43

§ 1190. Records required ............................................................................ 43

§ 1191. Other acts not applicable ................................................................ 44

§ 1192. Penalties and interest ..................................................................... 44

§ 1193. Penalty for false oath ...................................................................... 44

§ 1194. Effect of failure to report ................................................................. 44

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TITLE 12 § 1180 - 1194 MORRIS NICHOLS’ DELAWARE UNCLAIMED PROPERTY LAW COMPANION / 2012-2013

§ 1180. Scope.

(a) This subchapter shall apply to unclaimed funds, as defi ned 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 defi nite 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 defi ned 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.


§ 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 defi ned 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 offi cer 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 benefi ciary 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 fi rst 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.”

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(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 benefi ciary 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 fi led 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 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 fi le 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 indemnifi ed.

Upon the payment of such unclaimed funds to the State Escheator, the State shall assume, for the benefi t 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

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the State Escheator may fi le a claim at any time with such offi cial. 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 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 offi ce 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 benefi ciary 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 specifi cally 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 fi led or required to be fi led 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. .......................................................................47

§ 1198. Defi nitions. ...............................................................................................47

§ 1199. Report by holders of abandoned property. ..............................................51

§ 1200. [Reserved.] ..............................................................................................52

§ 1201. Payment or delivery of abandoned property. ...........................................52

§ 1202. Periods of limitation not a bar. .................................................................53

§ 1203. Effect of payment and delivery.................................................................53

§ 1204. Sale of abandoned property. ...................................................................54

§ 1205. Deposit and disbursement of funds. ........................................................55

§ 1206. Claims for abandoned property paid or delivered; determination of claims; appeals. ...........................................................55

§ 1207. Penalties and interest. .............................................................................55

§ 1208. Rules and regulations. .............................................................................55

§ 1209. [Reserved.] ..............................................................................................56

§ 1210. No private escheats. ................................................................................56

§ 1211. Limited exception, uninvoiced payables not reportable. ..........................56

§ 1212. No private escheat of gift certifi cates. ......................................................57

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§ 1197. Other property escheated.

Except as otherwise provided elsewhere in the Delaware Code all property, as hereinafter defi ned 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 defi ned, 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 defi nitions 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 offi cers 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 fi nancial intermediaries for unknown owners” means property as generally defi ned in paragraph (11) of this section, which consists of dividends, interest, stock and other distributions made by issuers of securities which are held by fi nancial intermediaries (including, by way of example and not limitation, banks, transfer agents, brokers and other depositories) for benefi cial 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 offi ce, a depository, a bailee, a trustee, a receiver or other liquidating offi cer, a fi duciary, a governmental department, institution or agency, a municipal corporation and the fi scal offi cers 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 certifi cate, 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 defi nition shall be construed as distinguishing the term “holder” of property from the term “owner” of property as hereinbefore defi ned 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 defi ned, 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 certifi cate or other certifi cate 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 fi nancial 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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specifi c date by which an owner may exercise a right, make a demand or fi le a claim, provided each extension is set forth in a separate order of the court referring specifi cally 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 specifi c period of inactivity, until the expiration of the contemplated period of inactivity. This defi nition 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 certifi cates shall be the shorter of:

1. 5 years, or

2. The expiration period, if any, of the gift certifi cate less 1 day. In the event the period of dormancy is determined by reference to the expiration period of the gift certifi cate, 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 fi nancial intermediaries for unknown owners” as that phrase is defi ned 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 defi ned, 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 certifi cate, 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 certifi cates which are unredeemed, or, in lieu of which the State Escheator may in the Escheator’s discretion and upon the specifi c request of the issuer, accept: (1) Gift certifi cates reissued at face value on the date on which they are tendered to the Escheator; or (2) where the gift certifi cates provide that they are redeemable for merchandise only, an amount in money representing the maximum cost to the issuer of merchandise represented by the certifi cate. The burden of proof as to the cost of merchandise shall be on the issuer of the certifi cate; (v) dividends, cash or stock; (vi) certifi cates of membership in a corporation or association; (vii) security deposits; (viii) funds deposited by holder with fi scal agents of fi duciaries 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 fi nal 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 certifi cates” shall not include amounts received in consideration for gift certifi cates 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 specifi cally enumerated above in paragraph (11) of this section including specifi cally and without limitation consideration received for unredeemed gift certifi cates, 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 defi ned 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 fi le 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 verifi ed 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 fi ling the report.

(c) The requirements of this section for fi ling an annual report shall not apply to municipal corporations or counties and the fi scal offi cers thereof.

(d) Verifi cation, if made by a partnership, shall be executed by a partner, if made by an unincorporated association or private corporation, by an offi cer and if made by a public corporation, by its chief fi scal offi cer.

(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 fi le with the report all prior known names and addresses of each holder of the property.

(f)(1) With respect to any stock or other certifi cate of ownership or any dividend, profi t, distribution, interest, payment on principal or other sum held owing by a corporation or other business association for or to a shareholder, certifi cate holder, member, bondholder or other security holder, the initial report fi led 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 certifi cates which, in the aggregate, for the reporting period have a face value of less than $5,000 or for gift certifi cates 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 fi rm 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 fi ling 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 specifi ed 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 fi le a verifi ed 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 certifi cated security as defi ned in §

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

(2) If such interest is an uncertifi cated security as defi ned in § 8-102(a) of Title 6 cause such uncertifi cated 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 specifi ed 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 fi le 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 certifi cated security to the State Escheator or the registration of an uncertifi cated 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 certifi cate or effectuating such registration, is relieved of all liability of every kind to every person, including any person acquiring the original of a certifi cated security or the duplicate of a certifi cated 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 certifi cated security or the registration to the holder’s name of an uncertifi cated 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 fi duciary 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

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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 fi le 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 fi led or required to be fi led 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


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 certifi cate 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 defi ned 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 defi ned in § 1198 of this title shall be deemed to exclude uninvoiced payables as more particularly defi ned in this section.

(b) “Uninvoiced payables” are amounts due between merchants as defi ned 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 specifi cally 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 certifi cates.

Any provision on or relating to any gift certifi cate the amount paid in consideration of which is defi ned 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 certifi cate within a certain period of time, the owner of the gift certifi cate shall lose rights with respect to the gift certifi cate 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 certifi cate, 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. ............................................................................59

§ 1221. Obtaining information on accounts. .........................................................59

§ 1222. Proceeding to adjudicate escheat. ..........................................................59

§ 1223. Notice. .....................................................................................................59

§ 1224. Collection and deposit of funds; indemnifi cation

of United States. .....................................................................................60

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§ 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 offi ces of this State whose accounts are unclaimed;

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

(3) The balance remaining in each account, as shown by the records of the Post Offi ce 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 fi rst-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 offi ce must be published once in each of 3 successive weeks in a newspaper published in the county in which the post offi ce 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; indemnifi cation of United States.

(a) The Secretary of State shall present a copy of each fi nal 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 indemnifi cation 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 .............................................................................................63 Policies and Procedures Regarding FOIA Requests ..............................................66

Regulation on Practices and Procedures for Appeals of Determinations of the Audit Manager ...............................................................................................71 Regulation on Practices and Procedures for Establishing Running of the Full Period of Dormancy for Certain Securities Related Property .............................78

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

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 fi le 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 fi le a VDA.

The Holder shall complete a review of its books and records and fi le 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 Identifi cation 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 fi le 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 fi le 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 examineselected Holders’ books and records for compliancewith the Abandoned Property Law. The audit will be assigned to an auditor in the Division of Revenue or to a third-party auditing fi rm that the State has retained for such purposes. At the request of a Holder the State’s third party auditor will enter into a confi dential-ity agreement with the Holder in a from approved by the State Escheator before any of the Holder’s confi dential records are produced.

Notifi cation of Audit:

An offi cial 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 fi rm. 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 fi eld 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 fi ndings to the Holder at an exit conference. These fi ndings are not fi nal. The auditor will allow the Holder reasonable time to complete required research and gather more records to address mat-ters raised in the preliminary fi ndings.

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 fi ndings letter from the Delaware’s Abandoned Property Audit Man-ager. This letter will outline the fi ndings 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 identifi ed 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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DEPARTMENT OF FINANCE OFFICE OF THE SECRETARY

Statutory Authority: 29 Delaware Code, Section 8303(7) (29 Del.C. §8303(7))

FINAL

ORDER

Policies and Procedures Regarding FOIA Requests

AND NOW, this 1st day of December, 2011 in accordance with 29 Del.C. §8303(7), for the reasons stated below, this ORDER is adopted promulgating regulations setting forth the Policies and Procedures regarding FOIA requests.

NATURE OF PROCEEDINGS

On October 20, 2011, the Governor of the State of Delaware signed Executive Order Number 31, directing each executive branch agency to implement and promulgate Uniform Freedom of Information Act policies that are substantially compliant with the form attached to the Executive Order. In accordance with 29 Del.C. §10113(b)(1), the Department of Finance is adopting fi nal regulations governing the Policies and Procedures regarding FOIA requests.

The purpose of these regulations is to prescribe procedures relating to the inspection and copying of public records retained by the Department of Finance pursuant to 29 Del.C. Ch. 100, the Freedom of Information Act. The regulations establish a reasonable fee structure for copying public records and streamlines procedures used to disseminate this information.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

1. The Department of Finance has developed procedures for responding to requests from the public for information as set forth in 29 Del.C. Ch. 100, the Freedom of Information Act. These regulations are in substan-tial compliance with, and necessary to, effectuate the Governor’s Executive Order. The regulations refl ect these procedures.

2. The Secretary of the Department of Finance has statutory authority to promulgate regulations governing the administration and operation of the Department of Finance pursuant to 29 Del.C. §8303(7).

3. Pursuant to 29 Del.C. §10113(b)(1), regulations describing an agency’s procedures for obtaining informa-tion are exempted from the notice and public comment requirements of 29 Del.C. Ch. 101.

DECISION AND ORDER CONCERNING THE REGULATIONS

NOW THEREFORE, under the statutory authority and for the reasons set forth above, the Secretary of the Department of Finance does hereby ORDER that the regulations be, and that they hereby are, adopted and promulgated as set forth below. The effective date of this Order is ten days from the date of its publication in the Delaware Register of Regulations, in accordance with 29 Del.C. §10118(g).

Thomas J. Cook, Secretary Department of Finance

Policies and Procedures Regarding FOIA Requests

1.0 Purpose 1.1 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 Infor-mation Act.


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“FOIA” means the Freedom of Information Act as established pursuant to Title 29, Chapter 100 of the Delaware Code. “FOIA Coordinator” shall mean the person designated by the Secretary to receive and process FOIA Requests. “FOIA Request” or “Request” means a request to inspect or copy Public Records pursuant to Chap-ter 29, Section 10003 of the Delaware Code and in accordance with the policy hereunder. “FOIA Request Form” means the form promulgated by the Offi ce of the Attorney General upon which requests for 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 fi ling a FOIA Request. “Secretary” means the Secretary of Finance.

3.0 Records Request, Response Procedures and Access 3.1 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 in accordance with the provisions hereunder. FOIA Requests may be submitted using the FOIA Re-quest Form promulgated by the Offi ce of the Attorney General; provided, however, that any FOIA Request that otherwise conforms with the policy hereunder shall not be denied solely because the request is not on the promulgated form. Copies of the FOIA Request Form may be obtained from the Agency’s website, or from the offi ce or website of any state agency.

3.1.2 All requests shall adequately describe the records sought in suffi cient detail to enable the Agency to locate such records with reasonable effort. The Requesting Party shall be as specifi c as possible when requesting records. To assist the Agency in locating the requested records, the Agency may request that the Requesting Party provide additional information known to the Requesting Party, such the types of records, dates, parties to correspondence, and subject mat-ter of the requested records.

3.2 Method of Filing Request 3.2.1 FOIA Requests may be made by mail or in person to the FOIA Coordinator at FOIA Coordinator,

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

3.3 FOIA Coordinator 3.3.1 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 identi-fi ed on the Agency’s website. The FOIA Coordinator may designate other Agency employees to perform specifi c duties and functions hereunder.

3.3.2 The FOIA Coordinator and/or his or her designee, working in cooperation with other Agency em-

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 specifi c exception applies. Exceptions shall be construed in a manner that shall further the ac-countability of the Agency and to comply with the policy that the public shall have reasonable access to Public Records.

2.0 Defi nitions The 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.


3.4.1 The Agency shall respond to a FOIA Request as soon as possible, but in any event within fi fteen (15) business days after the receipt thereof, either by providing access to the requested records; denying access to the records or parts of them; or by advising that additional time is needed because the request is for voluminous records, requires legal advice, or a record is in storage or archived. If access cannot be provided within fi fteen (15) business days, the Agency shall cite one of the reasons hereunder why more time is needed and provide a good-faith estimate of how much additional time is required to fulfi ll the request.

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

3.5 Requests for Email 3.5.1 Requests for email records shall be fulfi lled 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 fulfi ll all or any portion of such request, the Agency shall promptly request that the Department of Tech-nology and Information (“DTI”) provide the email records to the Agency. Upon receipt from DTI, the Agency may review 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 DTI to the Requesting Party, listing all charges expected to be incurred by DTI in retrieving such records. Upon receipt of the estimate, the Requesting Party may decide whether to proceed with, cancel or modify the request.

3.6 Requests for Other Non-Custodial Records 3.6.1 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 fulfi lled by the Agency with reasonable effort from records it possesses (collectively, the “Non-Custodial Records”), then the Agency shall promptly request that the relevant public body provide the Non-Custodial Records to the Agency. Prior to disclosure, records may be reviewed in accordance with §3.7 hereunder by the Agency, the public body fulfi lling 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

3.3.3 In addition to the foregoing responsibilities, beginning on January 1, 2012, tThe FOIA Coordinator shall maintain a document tracking all FOIA Requests for the then-current calendar year. For each FOIA Request, the document shall include, at a minimum: the Requesting Party’s contact infor-mation; 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 in connection 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 docu-ments were made available; the amount of copying and/or administrative fees assessed; and the date of fi nal disposition.

3.4 Agency Response to Requests

ployees and representatives, shall make every reasonable effort to assist the Requesting Party in identifying the records being sought, and to assist the Agency in locating and providing the requested records. The FOIA Coordinator and/or his or her designee will also work to foster coop-eration between the Agency and the Requesting Party. Without limitation, if a Requesting Party initiates a FOIA Request that would more appropriately be directed to another agency, the FOIA Coordinator shall promptly forward such request to the relevant agency and promptly notify the Requesting Party that the request has been forwarded. The Agency may close the initial request upon receipt of a written confi rmation from the FOIA Coordinator of the relevant agency that the relevant agency has received such request. The Agency shall provide the Requesting Party with the name and phone number of the FOIA Coordinator of the relevant agency.


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the Requesting Party, listing all charges expected to be incurred in retrieving such records. Upon receipt of the estimate, the Requesting Party may decide whether to proceed with, cancel or modify the request.

3.7 Review by Agency 3.7.1 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 applicable provision of law. In reviewing the records, all documents shall be considered Public Records unless 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 the Agency determines to disclose such records, except where such disclosure or access is otherwise prohibited by law or regulation.

3.8 Hours of Review 3.8.1 The Agency shall provide reasonable access for reviewing Public Records during regular business

hours.

4.0 Fees 4.1 Photocopying Fees

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

4.1.1.1 Standard Sized, Black and White Copies: The fi rst 20 pages of standard sized, black and white

copied material shall be provided free of charge. The charge for copying standard sized, black and white Public Records for copies over and above 20 shall be $0.10 per sheet (i.e., $0.10 for a single-sided sheet, $0.20 for a double-sided sheet). This charge applies to copies on the following standard 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:

18” x 22”: $2.00 per sheet 24” x 36”: $3.00 per sheet Documents larger than 24” x 36”: $1.00 per square foot

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

4.2 Administrative Fees 4.2.1 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 fi le reviews; and (c) generating computer records (electronic or print-outs). Administrative fees shall not include any cost associated with the Agency’s legal review of whether any portion of the requested records is exempt from FOIA. The Agency shall make every effort to ensure that administrative fees are mini mized, and may only assess such charges as shall be reasonably required to process FOIA Re quests. In connection therewith, the Agency shall minimize the use of non-administrative personnel in processing FOIA Requests, to the extent possible.

4.2.2 Prior to fulfi lling any request that would require a Requesting Party to incur administrative fees,the Agency shall provide a written cost estimate of such fees to the Requesting Party, listing all charges expected to be incurred in retrieving such records. Upon receipt of the estimate, the Requesting Party may decide whether to 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 at the current hourly pay grade (pro-rated for quarter hour increments) of the lowest-paid employee capable of performing the service. Administrative fees will be in addition to any other charges incurred under this Section 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 avoid incurring administrative charges, the Agency may in its discretion aggregate staff time for all such requests when computing fees hereunder.

4.3 Microfi lm and/or Microfi che Printouts: The fi rst 20 pages of standard sized, black and white material copied from microfi lm and/or microfi che shall be provided free of charge. The charge for microfi lm and/or microfi che printouts 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 be calculated by the material costs involved in generating the copies (including but not limited to DVD, CD, or other electronic storage costs) and administrative costs.

4.5 Payment 4.5.1 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 fulfi llment of any request for records

hereunder. 4.6 Appointment Rescheduling or Cancellation: Requesting Parties who do not reschedule or cancel

appointments to view fi les at least one full business day in advance of the appointment may be subject to the charges incurred by the Agency in preparing the requested records. The Agency shall prepare an itemized invoice of these charges and provide the same to the Requesting Party for payment.

5.0 Applicability To the extent any provision in this policy confl icts with any other law or regulation, such law or regula

tion shall control, and the confl icting provision herein is expressly superseded.

6.0 Agency-Specifi c Provisions 6.1 The defi nition of Public Record contains various specifi c exceptions to the general defi nition of what

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

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

6.1.2 Any records specifi cally exempted from public disclosure by statute or common law. The Agency is subject to several statutes that prohibit public disclosure of particular types of records. These statutes prohibit disclosure 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, and 6.1.2.3 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 is frequently involved in enforcement and other litigation. Accordingly, it creates and has custody of records that pertain to pending or potential litigation that are not records of any court in all areas over which it has administrative responsibility.

6.2 The Agency reserves the right to refuse Requests, in whole or in part, that seek disclosure of records that are not Public Records because of any exception to the statutory defi nition of Public Records, including those described 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 Escheator, Department 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.


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

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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.


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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DEPARTMENT OF FINANCEDIVISION OF UNCLAIMED PROPERTY

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.

Mark Udinski, State EscheatorDepartment of Finance

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],

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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].

15 DE Reg. 1330 (03/01/12) (Final)


Page 81

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SM State Materials

Contact Information For Delaware Abandoned and Unclaimed Property (AUP) . 83

Delaware AUP Deadlines ...............................................................................83

Delaware AUP Reporting Handbook ..................................................................84

STATE MATERIALS MORRIS NICHOLS’ DELAWARE UNCLAIMED PROPERTY LAW COMPANION / 2012-2013

CONTACT INFORMATION

For Claims [email protected]

For Holder Reporting [email protected]

For Voluntary Compliance [email protected]

General Questions 302-577-8220

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

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**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 fl oor

820 North French Street


Phone Number: 302-577-8782

Fax Number: 302-577-7179

E-Mail: [email protected]


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 prop-erty 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 verifi cation): must be provided by all Holders. The AP-1 must be completed, and contain An authorized, notarized signature affi rming 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 fi ling Unclaimed Property Reports:

1. ELECTRONIC REPORTING - Holders are required to electronically fi le reports (in NAU-PA format) when the owner count is greater than 10. All electronic fi lings must be accompa-nied 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 fi le contained. If reporting more than one company, please assign a separate fi le name for each. All electronic fi lings must be accompanied by the paper AP-1 form, AP-2 form, hard-copy documentation of owner details and securities state-ments (if remitting equity property).

*NOTE: MAGNETIC TAPES ARE NOT ACCEPTED*

2. PAPER REPORTING ONLY – Holders are permitted to fi le 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, sav-ings bank, private bank, credit union, building and loan, and savings and loan associa-tion, 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 fi ve (5) years or more. (12 Del Code, Chapter 11, Section 1181)

Corporation and other business entities include a post offi ce, a depository, a bailee, a trustee, a receiver or other liquidating offi cer, a fi duciary, a governmental department, institution or agency, a municipal corporation and the fi scal offi cers 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, Sec-tion 1198,(6))

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

WHEN TO REPORT AND REMIT PAYMENT

*Senate Bill 272 passed during the 145thGeneral Assembly eliminated preliminary reporting requirements for fi nancial 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 prop-erties from fi ve (5) years to three (3) years effective July 1, 2008. Investment type property includes stocks, bonds, and securities including fractional shares, interest, divi-dends, cash, coupon interest, liquidation value of stocks and bonds, funds to redeem stocks and bonds, and distributions held by fi nancial 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 fi ve (5) or more years after the date the owner should have received it or was entitled to claim it must be reported. Include all prop-erty that has gone unclaimed for fi ve (5) or more years as of the preceding December 31, for all holders except Financial Institutions. Financial Institutions include all prop-erty that has gone unclaimed for fi ve (5) years or more as of the preceding June 30.

Holders also must report and deliver all underlying share certifi cates 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 un-changed. 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 for-eign 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 Es-cheator will not accept property where the last known address of the owner is in another state. Please contact this offi ce 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 fi rst becomes inactive or a check remains un-cashed.

Financial institutions, courts, and life insurance companies are required by statute to pub-lish 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 affi davit from the newspaper attesting to the placement and cost of the advertise-ment to your fi nal 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 jurisdic-tion. Holders must report property directly to the State of Delaware.

Negative Reports

Required for fi nancial institutions only.

Aggregate Amounts

Only remit aggregate amounts when account or owner details are truly unknown.

Preliminary Reports

Required for Financial Institutions and Life Insurance companies only.

Claims and Owner Inquiries

All owner inquiries must be in writing. Submit written inquiries to:

Delaware State Escheator 820 N. French St. P.O. Box 8931


After receiving a claim form from our claims processing unit claimants may contact the Unclaimed Property Offi ce 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)

Verifi cation 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 fi ling a preliminary, fi nal or supplemental report, by check-ing the appropriate box. For fi nal reports, please indicate the date you fi led your pre-liminary report. For supplemental reports, please indicate the date of your previously fi led report.

Preliminary reports are required to be fi led by Banking organizations and Life Insurance com-panies only.

Holder Information:

Federal Employer Identifi cation 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 com-pany 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 incor-porated. 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 Classifi cation 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 defi ned as the aggregate number of prop-erty owners; Property count is defi ned 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 fi ling a fi nal or supplemental report, please indicate the Item Count, Cash Amount and Number of shares fi led with your previous report. Document all additions and/or deletions to these original fi gures 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 fi gures being reported. When fi ling the fi nal report, the names of owners listed on the preliminary report who have since been reimbursed should not be listed as “zero” dollar proper-ties on the fi nal AP2 report.

Advertising Expenses: bank and life insurance companies must indicate the total expens-es 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 confi rm 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, confi rm whether account statements or “proof of transfer” documentation is included with this report. Your full liability is not satisfi ed until this information is received.

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Verifi cation:

Verifi cation if made by a partnership shall be executed by a partner. If made by an unincorporated association or private corporation, by an offi cer. If made by a public corporation, by its Chief Financial Offi cer 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 identifi ed and grouped by the categories de-scribed on the Verifi cation 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, certifi cate number, account number, etc.).

Note regarding aggregate property: For refund effi ciency, 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 fi rst name, and middle initial, if available. List all information which would help with identifi cation, 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 fi rst word of the title. List the complete address, including zip code. If the address is unknown, insert “ad-dress unknown” in fi rst 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 own-ers 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 certifi cate 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 Identifi cation 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 State Escheator Unclaimed Property Division P.O. Box 8931 Wilmington, DE 19801

For ACH or Wire Transfers

Please contact the State of Delaware at (302) 577-8782 to receive payment instructions. Advance notifi cation of ACH and wire payments are required.

Holders must mail the signed and notarized AP 1 and CD/Diskettes to:

State of Delaware Delaware State Escheator Unclaimed Property Division P.O. Box 8931 Wilmington, DE 19801

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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 617-722-9654 to obtain delivery instructions and account information.

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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 fi ling. Do not total fractions for all owners and liquidate. Please include the proceed remittance check with your fi nal fi ling and payment.

For Physical Stock Certifi cates – Securities not eligible for DTC

To remit physical stock certifi cates, 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 certifi cates with your Form AP-1.


For Open End Mutual Fund Accounts

For Open End Mutual fund accounts contact ACS Unclaimed Property Clearinghouse at 617-722-9674 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 State Escheator PO Box 8931 Wilmington, DE 19801-8931

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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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F Forms

AP1 State of Delaware Report of Unclaimed or Abandoned Property ......................... 103

Instructions for Completing the Verifi cation and Checklist Report (AP1) ..................... 109

AP2 State of Delaware Report of Unclaimed or Abandoned Property - Detail Sheet ...111

Instructions for Completing AP2 Form ...........................................................................112

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

Property Law .......................................................................................................115

AP DE-2 Voluntary Self Disclosure Agreement .............................................................116

Publication Deadline Waiver Form ............................................................................... 120

State of Delaware Unclaimed Property Filing Extension Request ............................... 121

FORMS MORRIS NICHOLS’ DELAWARE UNCLAIMED PROPERTY LAW COMPANION / 2012-2013

FORM AP1 STATE OF DELAWARE Department of Finance REPORT OF UNCLAIMED Division of Revenue OR ABANDONED PROPERTY P O Box 8931 Wilmington DE 19899 Verifi cation For Report Year 20_____

REPORT INFORMATION Please Check One Media Submitted [ ] Final Report - Date preliminary report fi led ____________________ [ ] Paper [ ] Supplemental report - Date previous report___________________ [ ] Compact Disc [ ] Preliminary Report [ ] Diskette

Note: Preliminary reports are fi led 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 fi nal or supplemental report:

Preliminary Report: ____________________ ____________________ _____________________ Additions: ____________________ ____________________ _____________________ Deletions: ____________________ ____________________ _____________________ Grand Total: ____________________ ____________________ _____________________

Advertising Expenses (Bank & Insurance Holders Only): ____________________

REMITTANCE AMOUNT & SHARES: ____________________ _____________________

* Owner count is defi ned as the aggregate number of property owners; Property count is defi ned 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)

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FORM AP1 STATE OF DELAWARE Department of Finance REPORT OF UNCLAIMED Division of Revenue OR ABANDONED PROPERTY P O Box 8931 Wilmington DE 19899 Verifi cation 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 fi rst 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


Form AP-1 Checklist:

Please complete the checklist by indicating the total number of owners and cash/shareamount for each property type you are reporting.

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AP-1 CHECKLIST

ACCOUNT BALANCES AC01 Checking Accounts AC02 Savings Accounts AC03 Matured CD or Savings Certs. AC04 Christmas Club Accounts AC05 Money on Deposit to Secure Funds AC06 Security Deposits AC07 Unidentifi ed Deposits AC08 Suspense Accounts AC99 Aggregate TOTAL

UNCASHED CHECKS CK01 Cashiers Checks CK02 Certifi ed Checks CK03 Registered Checks CK04 Treasurers Checks CK05 Drafts CK06 Warrants CK07 Money Orders CK08 Travelers Checks CK09 Foreign Exchange Checks CK10 Expense Checks CK11 Pension Checks CK12 Credit Checks or Memos CK13 Vendor Checks CK14 Checks Written off to Income CK15 Other Offi cial Checks CK16 CD Interest Checks CK99 Aggregate TOTAL

MINERAL PROCEEDS & INTERESTS MI01 Net Revenue Interest MI02 Royalties MI03 Overriding Royalties MI04 Production Payments MI05 Working Interest MI06 Bonuses MI07 Delay Rentals MI08 Shut-in Royalties MI09 Minimum Royalties MI99 Aggregate TOTAL

SAFE DEPOSIT BOX (SAFEKEEPING) SD01 SD Box Net Proceeds SD02 Other Safekeeping

TOTAL

# OWNERS / # PROP. $ REPORTED # SHARES


MISC. CHECKS & INTANGIBLE PERSONAL PROPERTY MS01 Wages, Payroll, Salary MS02 Commissions MS03 Workers Compensation Benefi ts MS04 Payment for Goods & Services MS05 Customer Overpayments MS06 Unidentifi ed Remittances MS07 Unrefunded Overcharges MS08 Accounts Payable MS09 Credit Balances (Accounts Rec.) MS10 Discounts Due MS11 Refunds Due MS12 Unredeemed Gift Certifi cates MS13 Unclaimed Loan Collateral MS14 Pension & Profi t Sharing Plans MS15 Dissolution or Liquidation MS16 Misc Outstanding Checks MS17 Misc Intangible Property MS18 Suspense Liabilities MS99 Aggregate

TOTAL

AP-1 CHECKLIST - CONTINUED

COURT DEPOSITS CT01 Escrow Funds CT02 Condemnation Awards CT03 Missing Heirs’ Funds CT04 Suspense Accounts CT05 Other Court Deposits CT99 Aggregate TOTAL

TRUST, INVESTMENT & ESCROW ACCOUNTS TR01 Paying Agent Accounts TR02 Undelivered or Uncashed Dividends TR03 Funds Held In Fiduciary Capacity TR04 Escrow Accounts TR05 Trust Vouchers TOTAL

UTILITIES UT01 Utility Deposits UT02 Membership Fees UT03 Refunds or Rebates UT04 Capital Credit Distributions UT99 Aggregate TOTAL

# OWNERS / # PROP. $ REPORTED # SHARES

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AP-1 CHECKLIST - CONCLUDED

INSURANCE IN01 Indiv. Policy Benefi ts or Claims IN02 Group Policy Benefi ts or Claims IN03 Proceeds Due Benefi ciaries IN04 Proceeds From Matured Policies, Endowments or Annuities IN05 Premium Refunds IN06 Unidentifi ed Remittances IN07 Other Amounts Due Under Policy IN08 Agent Credit Balances IN99 Aggregate TOTAL

SECURITIES SC01 Dividends SC02 Interest (Bond Coupons) SC03 Principal Payments SC04 Equity Payments SC05 Profi ts SC06 Funds to Purchase Shares SC07 Funds for Stocks & Bonds SC08 Shares of Stock (Returned by P.O.) SC09 Cash For Fractional Shares SC10 Unexchanged Shares of Succes-sor Corp SC11 Other Certs. of Ownership SC12 Underlying Shares SC13 Funds for Liquadition/Redemption of unsurrendered Stock or bonds SC14 Debentures SC15 US Government Securities SC16 Mutual Fund Shares SC17 Warrants (Rights) SC18 Matured Bond Principal SC19 Dividend Reinvestment Plans SC20 Credit Balances SC99 Aggregate TOTAL

ALL OTHER PROPERTY NOT IDENTIFIED ABOVE

ZZZZ ALL OTHER PROPERTY TOTAL

GRAND TOTAL *

* Please total all property categories and enter grand total on front of form AP-1 in the Report Recapitulation section.

# OWNERS / #PROP. $ REPORTED # SHARES


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

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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.


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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


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.

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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 offi cer.

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 fi led any abandoned property reports as required by the State’s Abandoned Property Law for report year 19__, to the present; or [ ] the Holder has fi led 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 fi le 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 fi ling 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 fi ling 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 offi cer:

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 fi le 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 identifi ed 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 specifi cally 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 identifi ed, 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 fi le 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 identifi ed 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 confi dentiality 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 notifi ed 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 notifi cation 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 certifi cates, 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 certifi cate 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.



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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


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 ………………… .................................................................... 123

1995 UNIFORM ACT ………………… .................................................................... 180

UNIFORM ACTS (1981) MORRIS NICHOLS’ DELAWARE UNCLAIMED PROPERTY LAW COMPANION / 2012-2013

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 Offi cio)M. King Hill, Jr., Sixth Floor, 100 Light Street, Baltimore, MD 21202, Chairman,

Executive Committee (Member Ex Offi cio)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

Offi cio)

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 confl icting 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 refl ect 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 benefi t 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 diffi cult. 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 confl ict 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 confl icting 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 signifi cant “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 fi rst 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 benefi t 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 suffi cient 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 fi rst 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 signifi cant. 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 certifi cates. 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 specifi cally 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 fi rst 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 certifi cates issued in the state’s name. The issuer of the duplicate certifi cate 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 fi led a report to fi le a verifi ed 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 refl ects a tendency among state legislatures in recent years to reduce dormancy periods. The current high infl ation 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 fi nder’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 fi nders from the time property becomes reportable until a specifi ed time after it has been turned over to the state. Section 35 of the new Act prohibits heir fi nder 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 [Defi nitions 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 Certifi ed 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 Certifi cates 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; Clarifi cation 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. [Defi nitions 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 Certifi ed 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 Certifi cates 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; Clarifi cation 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. [Defi nitions 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 offi cer 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 defi ned 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 profi t, including a banking organization, fi nancial 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

benefi t organization, whether or not for profi t, which is engaged in providing insurance

coverage, including accident, burial, casualty, credit life, contract performance, dental,

fi delity, fi re, 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 certifi cates, security

deposits, refunds, credit memos, unpaid wages, unused airline tickets, and

unidentifi ed 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, profi t sharing, employee savings, supplemental unemployment insurance,

or similar benefi ts.

(11) “Last known address” means a description of the location of the apparent owner

suffi cient for the purpose of the delivery of mail.

(12) “Owner” means a depositor in the case of a deposit, a benefi ciary 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 defi nitions have been revised to refl ect, 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 identifi cation. 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 defi nition of “business association” in subsection (5) expressly includes non-profi t 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) defi nes “last known address” as the location of the apparent owner for the purpose of mail delivery, consistent with most state laws which have defi ned 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 specifi ed all intangible property which has remained unclaimed for more than 5 years is presumed abandoned. Sections 4-16 deal with specifi c 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 fi rst 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 fi nding 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 certifi cates.

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 indemnifi ed 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 certifi cate, 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 satisfi ed 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 refl ect 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 refl ect 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 fi rst 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. Reunifi cation 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 fi rst 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), affi rmed 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 affi rmed a lower court decision which overruled Sperry & Hutchinson’s motion to dismiss but did not reach the Texas v. New Jersey issue.

Gift certifi cates, 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 fi le 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 fi le 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 Certifi ed 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 fi nancial organization is directly liable, including a cashier’s check and

a certifi ed 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 fi nancial organization concerning it or otherwise

indicated an interest as evidenced by a memorandum or other record on fi le 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 certifi ed by banking and fi nancial organizations. Checks and other instruments issued by persons other than banking and fi nancial 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 fi nancial organization,


including a deposit that is automatically renewable, and any funds paid toward the purchase of a

share, a mutual investment certifi cate, or any other interest in a banking or fi nancial 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 fi nancial organization

concerning the property;

(3) otherwise indicated an interest in the property as evidenced by a

memorandum or other record on fi le prepared by an employee of the banking or

fi nancial organization;

(4) owned other property to which paragraph (1), (2), or (3) applies and if

the banking or fi nancial 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 fi nancial organization

concerning which the owner has

(i) communicated in writing with the banking or fi nancial

organization; or

(ii) otherwise indicated an interest as evidenced by a

memorandum or other record on fi le prepared by an employee of

the banking or fi nancial organization and if the banking or fi nancial

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 fi nancial organization or otherwise indicating consent as evidenced by a memorandum or

other record on fi le 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 fi nancial organizations which issue unifi ed 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 certifi cate 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 defi nite 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 specifi ed 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 fi le 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 benefi ciary 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 benefi ciary has not communicated with the insurer within 4 months after

the death, the company shall take reasonable steps to pay the proceeds to the benefi ciary.

(g) Commencing 2 years after the effective date of this Act, every change of benefi ciary 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 benefi ciary, or if a class of benefi ciaries is named, the

name of each current benefi ciary in the class;

(2) the address of each benefi ciary; and

(3) the relationship of each benefi ciary 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 benefi ciaries have otherwise become entitled to the proceeds of the policy.

Subsection (e) in certain instances imposes an affi rmative 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 benefi ciaries 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 benefi ciaries if the insured changes a benefi ciary designation. Most insurance companies do not request address information for benefi ciaries. Since in many instances the initial benefi ciary 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 benefi ciary occurs. This subsection will assist in locating this limited class of benefi ciaries. By making the commencement date of this subsection 2 years after enactment, insurers will be provided suffi cient 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 benefi t to the former subscriber raises a strong inference that it has been forgotten by the owner.

See Section 1(10) for the defi nition 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 fi nal determination or order providing for the refund, whether or not the fi nal 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 justifi ed 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 fi le 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 fi rst 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 certifi cates 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 certifi cates for the abandoned shares in Standard Oil were in the possession of the company or its transfer agent. However, the record clearly refl ects 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 affi rmed 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 specifi c provisions for the presumption of abandonment of underlying share certifi cates. 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 specifi c 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 fi rst 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 suffi cient 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 certifi cate is turned over to the administrator.

If the owner is not located, however, a duplicate certifi cate is issued to the administrator pursuant to Section 19(d) and the original certifi cate will be cancelled. Thereafter, if the owner appears, the duplicate certifi cate may be claimed from the administrator. The Act is designed to encourage the administrator to hold the certifi cate 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 certifi cate 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 fulfi ll his requirement of indemnity. If the administrator still has the duplicate certifi cate, 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 specifi ed for fi nal 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 fi duciary

capacity for the benefi t 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 fi le prepared by the fi duciary.

(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 fi duciary 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 fi duciary

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 fi duciary 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 Certifi cates and Credit Memos].

(a) A gift certifi cate 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 certifi cate, the amount presumed abandoned is the price paid by the

purchaser for the gift certifi cate. 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 certifi cates 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 certifi cates and credit memos. In the case of a gift certifi cate, 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 fi eld warehouses. Its coverage is limited to safe deposit boxes in banks and other fi nancial 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 verifi ed 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 benefi ciary 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 fi le with his report all known

names and addresses of each previous holder of the property.

(d) The report must be fi led before November 1 of each year as of June 30, next preceding,

but the report of any life insurance company must be fi led before May 1 of each year as of December

31 next preceding. On written request by any person required to fi le a report, the administrator may

postpone the reporting date.

(e) Not more than 120 days before fi ling 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 fi ling 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 notifi cations 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 fi ling 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 suffi cient.

§ 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 specifi ed 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 benefi ciary 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 fi led 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 specifi ed 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 notifi cation to the last known address of each owner. This section eliminates the requirement of the 1966 Act that a separate notifi cation be given by the administrator to the holder to establish when the fi nal report and remittance is required.


Subsections (c) and (d) have increased from $25 to $50 the minimum value required for advertising and notifi cation. The amounts were increased because the costs of publishing newspaper advertisements now range from $12 to $22 per name. Because most mailed notifi cations 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 fi le

a report under Section 17, within 6 months after the fi nal date for fi ling 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

fi le with the administrator a verifi ed 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 fi ling the report.

(d) The holder of an interest under Section 10 shall deliver a duplicate certifi cate or other

evidence of ownership if the holder does not issue certifi cates of ownership to the administrator.

Upon delivery of a duplicate certifi cate 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

certifi cate 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 certifi cate or the duplicate of the certifi cate

issued to the administrator, for any losses or damages resulting to any person by the issuance and

delivery to the administrator of the duplicate certifi cate.

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 fi ling the report. The notifi cation 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 certifi cate 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 certifi cate or the issuance of the duplicate certifi cate. 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 fi ling 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 fi ling 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 certifi cate 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 fi ling proof

that the owner has claimed the property from the holder.


(d) The administrator may accept the holder’s affi davit as suffi cient 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 fi duciary 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 defi nition 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 insuffi cient. 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 benefi ciary 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 certifi cates pursuant to Section 10, it is contemplated that the amount of the trust fund which it selects will refl ect 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 fi le with him a claim on a form prescribed by him and verifi ed by the claimant.

(b) The administrator shall consider each claim within 90 days after it is fi led 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 fi xed by each state enacting the Act and should fairly refl ect 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 refl ect 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 refl ected 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

refl ect 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 offi cers 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 insuffi cient 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 refl ect 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 indemnifi ed 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 fi ling 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 fi ling 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 notifi ed within [120] days after fi ling

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 offi cer 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 signifi cance 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 signifi cance.

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

specifi ed 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 fi le 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 fi rst 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 fi led a report to fi le a verifi ed

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 insuffi cient

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 fi ling 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 affi rmative consent of the business association was fi rst 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 fi le 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 confi rmed 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 fi rst instance obtain the address of the owner, a matter which each state may wish to consider as to specifi c types of property. For example, a record of the address of the purchaser or recipient of a gift certifi cate 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 fi rst 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 suffi cient 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 specifi ed 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 confl icts 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 effi ciently 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 fi le 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 effi cient.

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 justifi ed. 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 fi ne 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 fi nd 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 suffi cient 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; Clarifi cation 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 fi led 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, clarifi es 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 certifi cates unless they were held or owing by business associations. Underlying share certifi cates 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 confl icting legislation among the various States and several Supreme Court decisions in the late 1940’s and early 1950’s. In 1965, these confl icts 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 reaffi rmed 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 clarifi ed 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 defi ned 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 satisfi ed 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 offi cer].

(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], fi nancial organiza-tion, insurance company, mutual fund, utility, or other business entity consisting of one or more persons, whether or not for profi t.

(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 benefi t organization, whether or not for profi t, engaged in the business of providing life endowments, an-nuities, or insurance, including accident, burial, casualty, credit life, contract performance, dental, disability, fi delity, fi re, 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; fi ssionable and nonfi ssionable ores; colloidal and other clay; steam and other geothermal resource; or any other substance defi ned 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 fi nancial 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 benefi ciary 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, fi nancial 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 fi xed 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 certifi cate, security deposit, refund, credit memorandum, unpaid wage, unused ticket, mineral proceeds, or unidentifi ed remit-tance;

(iii) stock or other evidence of ownership of an interest in a business association or fi nancial 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, profi t sharing, employee savings, supplemental unemployment insurance, or similar benefi ts.

(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 defi ning public utility].


Comment

The defi nitions refl ect, 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 confi ned 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) defi nes “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 identifi cation. 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 defi nition of “business association” in paragraph (3) expressly includes mutual funds, which previously were covered in general terms.

The defi nition of “holder” in paragraph 5 is a clarifi cation. 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 satisfi ed 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 defi ned “last known address” as “a description of the location of the apparent owner suffi cient 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 defi nition was accompanied by a Commissioners’ Comment that appeared to be at odds with the defi nition 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 defi ned in the Act; instead, the sections dealing with the jurisdictional rules (Sections 4 and 14) are rewritten so that they defi ne, 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 reaffi rmed 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 suffi cient 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 defi nition of “money order” in paragraph (10) is designed to distinguish between per-sonal money orders issued by business entities which are not fi nancial organizations, which have a seven year holding period, and those issued by fi nancial organizations, which have a fi ve 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), defi ning 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, certifi cate 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 “fi xed and certain” excludes unliquidated claims from the coverage of the Act, such as disputed tort claims.

Many States already have laws that defi ne utilities. Paragraph (15) gives a State the option to adopt the Act’s defi nition of a utility, or another defi nition 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 fi nancial organization, including a security entitlement under [Article 8 of the Uniform Commercial Code], fi ve 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 notifi cation or communication that was returned as undeliverable or after the holder discon-tinued mailings, notifi cations, or communications to the apparent owner;

(4) debt of a business association or fi nancial organization, other than a bearer bond or an original issue discount bond, fi ve 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, fi ve 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 fi le 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 certifi cate, 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 certifi cate’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 fi nancial 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, defi ned benefi t plan, or other ac-count or plan that is qualifi ed 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, specifi ed 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, fi ve years after the owner’s right to demand the property or after the obligation to pay or distribute the property arises, whichever fi rst 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 refl ected 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 identifi ed 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 fi nancial 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 benefi ciary 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 unifi ed 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 fi ve 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 fi ve 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 certifi cate, provided such certifi cate 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 certifi cate 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 fi ve years after the issuer’s obligation to pay arises, i.e., fi ve 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 fi nding 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 specifi cally provided, which is a clarifi cation 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 modifi ed to shorten the period of presumed abandonment from fi ve 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 & Benefi ts 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 infl uence” 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 benefi t 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’ benefi ts. 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 fi nal 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 fi ve 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 certifi cates. With respect to gift certifi cates, see also Section 19(a), which invalidates private periods of limitation. Thus, gift certifi cates will be reportable notwithstanding language on the certifi cate 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 indemnifi ed 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 certifi cate, 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 fi ve 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 fi eld warehouses. Its coverage is limited to tangible property held in safe deposit boxes in banks and fi nancial 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 refl ect 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 refl ect 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 fi rst 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. Reunifi cation 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 reaffi rmed 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 confl icting 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 fi rst 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), affi rmed 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 affi rmed a lower court decision which overruled Sperry & Hutchin-son’s motion to dismiss but did not reach the Texas v. New Jersey issue.

Gift certifi cates, 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 specifi ed 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 specifi cally 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 satisfi ed by showing issuance of the instrument and passage of the requisite period of abandonment. Defenses of payment, satisfaction, discharge, and want of consideration are affi rma-tive defenses that must be established by the holder.

Comment

This provision clarifi es 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 indemnifi ed 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 verifi ed 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 identifi cation 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 benefi ciary;

(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 fi le 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 fi led 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 fi led 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 fi ling 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 fi ling the report, the holder of property presumed abandoned may request the administrator to extend the time for fi ling 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 fi le with the report an affi davit 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 fi ling 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 fl exibility 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 fi ling deadlines, or to accept less than a fi nal 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 fi ling 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 fi ling 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 certifi cated secu-rity, the administrator has the right to obtain a replacement certifi cate 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 indemnifi ed 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 certifi cated security, and hence does not have the original certifi cate to turn over to the administrator. Accordingly, subsection (b) provides that the administrator can invoke the provisions of UCC Article 8 governing replacement certifi cates, without an indemnity bond.

Subsection (d) indemnifi es a person causing a replacement certifi cate to be issued to the administrator from any claims that the person acted wrongfully in so doing. This indemnifi ca-

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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 fi led 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 fi led 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 benefi cial 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 specifi c time for the publication so that the administrator can choose a time that will provide the best expo-sure and fl exibility 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 specifi ed circumstances the value of the property is so slight as to negate the benefi ts 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 fi duciary 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 fi ling 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 fi ling 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 fi ling proof that the apparent owner has claimed the property from the holder.

(e) The administrator may accept a holder’s affi davit as suffi cient 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 defi nition 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 indemnifi cation 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 insuffi cient. 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 defi nition 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 benefi ciary 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 refl ect 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 refl ect 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 offi cers 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 insuffi cient 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 refl ect 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 indemnifi cation 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 fi le a claim on a form prescribed by the administrator and verifi ed by the claimant.

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(b) Within 90 days after a claim is fi led, 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 fi le 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 fi led or refi led 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 fi nal judgment may not thereafter by refi led 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 fi ling 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 offi cer 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 signifi cance 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 signifi cance.

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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 specifi ed by contract, statute, or court order, does not preclude the property from being presumed abandoned or affect a duty to fi le 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 specifi cally identifi ed the property in a report fi led 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 fi ling 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 fi rst reported or specifi cally placed in issue. The 1995 amendment clarifi es existing law and codifi es 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 fi ling 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) (fi ling 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 fi led a report, or a person who the administrator believes has fi led an inaccurate, incomplete, or false report, to fi le a verifi ed re-port in a form specifi ed 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 specifi cally 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 fi nancial 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 confi dential 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 offi ce 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 confi dential.

(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 fi nancial 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-fi cient 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 fi ling 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-fi cient to prepare a specifi c 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 clarifi es 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 fi le 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 fi les the report, unless a shorter period is provided by rule of the administrator.

(b) A business association or fi nancial 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 fi nancial 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 fi les the report.

Comment

This section does not require that the holder in the fi rst instance obtain the address of the owner. For example, a record of the address of the purchaser or recipient of a gift certifi cate 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 fi rst 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 suffi cient 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 confl icts 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 effi ciently 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 fi le 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 effi cient.

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 justifi ed. 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 diffi cult where the holder has failed to fi le 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 fi le a claim as to identifi ed 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 “fi nder’s fee.” In the past, it appears to have been the practice in many States for unclaimed property locators or heir fi nders to utilize the State’s lists of names and addresses of missing owners to contact them and propose to fi nd 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 confl ict with the State’s public records laws.

Subsections (b) and (d) apply to agreements entered into at any time. These subsections apply to all fi nders’ 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 fi led 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) ..................................................... 217

Pennsylvania v. New York, 407 U.S. 206 (1972) ............................................. 223

Delaware v. New York, 507 U.S. 490 (1993) ................................................... 232

New Jersey Retail Merchants Association v. Andrew P. Sidamon-Eristoff,

Case No. 10-4551 (3d Cir. Jan. 5, 2012) ...................................................... 245

American Express Travel Related Services, Inc. v. Andrew P.

Sidamon-Eristoff, Case No. 10-4328 (3d Cir. Jan 5, 2012) .......................... 290

Staples, Inc. v. Cook, et al. Del. Ch. C.A. No. 5447-VCS, Final Opinion re

Motion for Partial Judgment on Pleadings (February 2, 2012) .................... 313

CASES MORRIS NICHOLS’ DELAWARE UNCLAIMED PROPERTY LAW COMPANION / 2012-2013

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 offi ces 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 offi ces 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 fi le 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 fi led his report. Texas and New Jersey each have fi led 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 offi ces 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 offi ces.

(2) Amounts for which various offi ces 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 certifi cates resulting from stock dividends.

5 Texas’ motion for leave to fi le 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 signifi cant "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 confi dence. The issue before us is not whether a defendant has had suffi cient 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 fi eld 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 diffi cult, 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 Offi ce, 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 fi nd 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 offi ces are located, is more persuasive, since this State is probably foremost in giving the benefi ts 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 diffi cult question of where a company's "main offi ce" 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 fi xed situs is signifi cant 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 simplifi ed. 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 fi rst 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 confl icting 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 .

C


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., fi led 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, fi led 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 Greenfi eld, 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, fi led 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.

C


Pennsylvania and other States except to, and New York supports, 1 the Report of the Special Master fi led 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 offi ces 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 offi ce, fi lls 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 offi ce nearest to the payee directing that offi ce to pay the money order to the payee. The payee is then notifi ed 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 offi ce of destination notifi es the sending of-fi ce. This offi ce then notifi es 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 offi ces and bank accounts through-out the country." Id., at 72-73.

1 Of the remaining States party to this case, Florida has fi led exceptions as defendant, and Connecticut and Indiana as intervening plaintiffs. New Jersey has fi led a brief amicus curiae in support of Pennsylvania’s position. 2 We granted leave to fi le 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 offi ces. The Supreme Court of Pennsylvania affi rmed 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 fi nal, 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 signifi cant "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 diffi cult 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 fi led 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 confl icting 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 confl icting 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 fi xed 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 suffi cient 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 fi nding 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 fi ling 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 confl icts 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 fi nd, 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 fi rst 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 benefi cial justifi cations for that rule. Unlike the records of the numerous debts owed by Sun Oil, Western Union's records may refl ect 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 specifi cally 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 fi lled 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 offi ce 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 modifi cation is preferable, fi rst, 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 offi ce of destination are refl ected 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. Specifi cally, 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 diffi cult 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 fl exibility 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 justifi cation for the majority's Cinderella-like compulsion to accommodate this ill-fi tting prec-edential "slipper." From a result that seems both infl exible 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 benefi cial owners who cannot be identifi ed or located. New York escheated $360 million in such funds held by intermediaries doing business in that State, without regard to the benefi cial 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 fi led a report recommending that this Court award the right to escheat to the State in which the principal executive offi ces 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 benefi cial owners who cannot be identifi ed or located. Pp. 497-510.

(a) Under the primary and secondary rules adopted in Texas v. New Jersey, 379 U.S. 674, 680 -682, reaffi rmed in Pennsylvania v. New York, 407 U.S. 206 and reaffi rmed 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 defi ned 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 fi rst 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 identifi able benefi cial 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 benefi cial 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 benefi cial owner. Unlike an issuer, it remains liable should a "lost" benefi cial 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, effi ciency, 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 offi ces, 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 offi ces 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 offi ces in another jurisdiction, and there is no inequity in rewarding a State whose laws prove more attrac-tive to fi rms 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 dissatisfi ed 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., fi led 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, fi led briefs for intervenors State of Michigan et al.

A brief for intervenors State of Texas et al. was fi led 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 fi led 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 benefi cial owners who cannot be identifi ed or located. The Special Master proposed awarding the right to escheat such funds to the State in which the principal executive offi ces 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 benefi cial owners who cannot be identifi ed 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 fi nancial intermediaries such as banks, brokers, and depositories before they reach their benefi cial owners. By arrangement with the benefi cial owners, these intermediaries frequently hold securities in their own names, rather than in the names of the benefi cial 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 fi nancial 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 benefi cial 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 fi nancial 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 benefi cial owner authorizes the broker to use dividends to purchase ad-ditional shares and fractional shares.

C


ed through book entries, rather than the unwieldy physical transfer of securities certifi cates. 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 fi nancial 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 certifi cates in its possession by allowing its participants to trade securities without the physical transfer of certifi cates. 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 benefi cial 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 benefi cial 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 fi le the complaint, 486 U.S. 1030 (1988), and appointed a Special Master, 488 U.S. 990 (1988). We granted Texas' motion to fi le 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 fi led 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 fi le 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 benefi cial 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 fi led 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 reaffi rmed 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).

C


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 defi ned 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 fi rst 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 fi nding 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 identifi able benefi cial 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, fi rst, that the issuer of securities is the relevant "debtor" and, second, that the State in which the debtor's "principal executive offi ces" 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 fi led 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 defi ned "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 refl ected in the net worth of the entity in question," id., at 32. In its fi rst 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 fi rst 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 defi nitions 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 fi rst 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 defi nes the legal relationships under which certain parties ("debtors") must discharge obligations to oth-ers ("creditors").

To defi ne "debtor" as "the last person who ha[s] a claim to the funds as an asset that would ap-propriately be refl ected 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 defi ned the escheatable property at issue, but also carefully identifi ed 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 refl ect the traditional view of escheat as an exercise of sovereignty over persons and property owned by persons. The primary rule fl owed 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 defi ne 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 benefi ts 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 benefi ciary 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 benefi cial 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 benefi cial owner. Unlike an issuer, which discharges all liabilities upon payment to a record owner, an intermediary remains liable should a "lost" benefi cial 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 benefi cial 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 benefi cial 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 offi ces, 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 offi ces "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 defi ning 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 offi ces are located." 379 U.S., at 680 . Although we recognized that "this State is probably foremost in giving the benefi ts 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 diffi cult question of where a company's "main offi ce" 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 fi nd that determining the State of incorpora-

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tion is the most effi cient 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 offi ce 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 offi ces 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 redefi nition of a debtor's location, we doubt that his pro-posal could fulfi ll 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 offi ces" 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 offi ces. A company's arguably arbitrary decision to incorporate in one State bears no less on its business activities than its offi cers' equally arbitrary decision to locate their principal executive offi ces 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 fi rms that wish to incorporate.

Precedent, effi ciency, and equity all dictate the rejection of the Master's "principal executive of-fi ces" 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, fi nally, 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 benefi cial 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 defi ne 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 diffi culty 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 fi ndings. 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 effi cient 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 diffi culties 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

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so much expensive litigation that the States might fi nd that they would lose more in litigation expenses than they might gain in escheats." Texas, supra, at 679. If the States are dissatisfi ed 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 specifi c 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 fi ndings and conclusions, and issue a decree in accordance therewith. [507 U.S. 490, 511]


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PRECEDENTIAL

UNITED STATES COURT OF APPEALSFOR THE THIRD CIRCUIT

______

Nos. 10-4551, 10-4552, 10-4553, 10-4714,10-4715, 10-4716, 11-1141, 11-1164 and 11-1170

______

NEW JERSEY RETAIL MERCHANTS ASSOCIATION

v.

ANDREW P. SIDAMON-ERISTOFF, Treasurer of the State of New Jersey;

STEVEN R. HARRIS, Administrator ofUnclaimed Property of the State of New Jersey,

Appellants in 10-4551______

NEW JERSEY FOOD COUNCIL, a New Jersey Not-for-Profit Entity

v.

STATE OF NEW JERSEY;ANDREW P. SIDAMON-ERISTOFF, Treasurer of the State of New Jersey;

STEVEN R. HARRIS, Administrator ofUnclaimed Property of the State of New Jersey,

Case: 10-4551 Document: 003110767433 Page: 1 Date Filed: 01/05/2012



AMERICAN EXPRESS PREPAID CARD MANAGEMENT CORPORATION

v.

ANDREW P. SIDAMON-ERISTOFF, as Treasurer of the State of New Jersey;

STEVEN R. HARRIS, as Administrator ofUnclaimed Property of the State of New Jersey


NEW JERSEY RETAIL MERCHANTS ASSOCIATION,

Appellant in 10-4714

v.



______

NEW JERSEY FOOD COUNCIL, a New Jersey Not-for-Profit Entity,


Case: 10-4551 Document: 003110767433 Page: 2 Date Filed: 01/05/20


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v.


STEVEN R. HARRIS, Administrator ofUnclaimed Property of the State of New Jersey

______

AMERICAN EXPRESS PREPAID CARD MANAGEMENT CORPORATION,


v.



______

AMERICAN EXPRESS PREPAID CARD MANAGEMENT CORPORATION,


v.




______

NEW JERSEY FOOD COUNCIL, a New Jersey Not-for-Profit Entity,


v.


STEVEN R. HARRIS, Administrator ofUnclaimed Property of the State of New Jersey

______

NEW JERSEY RETAIL MERCHANTS ASSOCIATION,


v.



______

On Appeal from the United States District Courtfor the District of New Jersey

(D.C. Nos. 3-10-cv-05059,3-10-cv-05123 and 3-10-cv-05206)

District Judge: Honorable Freda L. Wolfson


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______

Argued September 12, 2011Before: SCIRICA, SMITH and FISHER, Circuit Judges.

(Filed: January 5, 2012)

Robert T. Lougy (Argued)Gregory A. SpellmeyerOffice of Attorney General of New Jersey25 Market StreetRichard J. Hughes ComplexTrenton, NJ 08625

Counsel for Andrew P. Sidamon-Eristoff, Steven R. Harris and the State of New Jersey

Jennifer BorekJames M. Burns (Argued)Genova Burns494 Broad Street, 6th FloorNewark, NJ 07102

Counsel for New Jersey Retail MerchantsAssociation

Edward T. Kole (Argued)Wilentz, Goldman & Spitzer90 Woodbridge Center DriveSuite 900, Box 10Woodbridge, NJ 07095

Counsel for New Jersey Food Council


Philip R. Sellinger (Argued)Louis SmithGreenberg Traurig200 Park AvenueP.O. Box 677Florham Park, NJ 07932

Edward J. ReichRichard M. Zuckerman (Argued)SNR Denton US1221 Avenue of the Americas, 24th FloorNew York, NY 10020

Counsel for American ExpressPrepaid Card Management Corporation

Joseph R. ScholzMcCarter & English100 Mulberry StreetFour Gateway Center, 14th FloorNewark, NJ 07102-0652

Counsel for Amicus Appellee, Limited Brands, Inc.

Paul J. WatfordHenry WeissmannMunger, Tolles & Olson355 South Grand Avenue, 35th FloorLos Angeles, CA 90071

Counsel for Amicus Appellee, Chamber ofCommerce of the United States


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Michael HoughtonMorris, Nichols, Arsht & Tunnell1201 North Market StreetP.O. Box 1347Wilmington, DE 19899

Counsel for Amicus Curiae, UnclaimedProperty Professionals Organization

______

OPINION OF THE COURT______

FISHER, Circuit Judge.

In this consolidated appeal, New Jersey Retail Merchants Association (“Retail Merchants”), New Jersey Food Council (“Food Council”), and American Express Prepaid Card Management Corporation (“Amex Prepaid”) (collectively, “SVC Issuers”) challenge the constitutionality of 2010 N.J. Laws Chapter 25 (“Chapter 25”), which amended New Jersey’s unclaimed property statute, N.J. Stat. Ann. § 46:30B (2002), and provided for the custodial escheat of stored value cards (“SVCs” or “gift cards”) for the first time.1

1 This opinion is limited to the challenge brought against 2010 N.J. Laws Chapter 25 (“Chapter 25”) with respect to stored value cards (“SVCs”). We discuss the companion case challenging Chapter 25 with respect to travelers checks, Am. Express Travel Related Services Co., Inc. v. Sidamon-Eristoff, No. 10-4328, in a separate opinion.

SVC Issuers filed a motion for preliminary injunction against New Jersey Treasurer Andrew P. Sidamon-Eristoff


(“Treasurer”) and New Jersey Unclaimed Property Administrator Steven R. Harris (collectively, “New Jersey” or “State”) in the United States District Court on the basis that Chapter 25 violates the Contract Clause, the Takings Clause, the Supremacy Clause, the Substantive Due Process Clause, and the Commerce Clause2

I. Background

of the United States Constitution. The District Court granted the motion in part and denied it in part. For the reasons discussed below, we will affirm.

SVCs, often called gift cards, are forms of electronic payment that come in two varieties: “closed loop” and “open loop” cards. Closed loop cards may be redeemed only for merchandise or services from the retailer that issued the card. Retail Merchants and Food Council issue only closed loop cards. Open loop cards may be redeemed at a variety of retail stores, including Internet sites, not affiliated with the issuer of

2 The District Court held that SVC Issuers failed to show a likelihood of success on the Commerce Clause claim. SVC Issuers do not raise this issue on appeal. The issue is only raised in an amicus brief filed by Limited Brands, Inc. “Although an amicus brief can be helpful in elaborating issues properly presented by the parties, it is normally not a method for injecting new issues into an appeal, at least in cases where the parties are competently represented by counsel.” Universal City Studios, Inc. v. Corley, 273 F.3d 429, 445 (2d Cir. 2001) (citation omitted); see also Olmstead v. Pruco Life Ins. Co. of N.J., 283 F.3d 429, 436 n.5 (2d Cir. 2002) (stating “an issue raised only by an amicus curiae is normally not considered on appeal”). Accordingly, we decline to address the Commerce Clause claim.


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the card. Amex Prepaid issues open loop cards. Some open loop cards are redeemable for cash, but most open loop cards issued by Amex Prepaid are only redeemable for merchandiseor services.

When the purchaser tenders payment for the face value of the SVC, the issuer, in exchange, “promises to provide to the bearer [of the gift card] merchandise of equal value to the remaining balance” on the card. N.J. Stat. Ann. 56:8-110c(2006). The funds for the SVCs are held in a bank account maintained by the card issuers or in a separate database. Some issuers issue the cards directly, while others use subsidiaries, vendors, or cooperatives to issue the cards. Once the SVC is redeemed for purchase, each issuer recognizes a profit based on the difference between the issuer’s cost of acquiring the goods or of offering the services and the retail price paid by the customer.

All fifty states, and the District of Columbia, have a set of unclaimed property laws (often called escheat laws), most of which are based on a version of the Uniform Unclaimed Property Act (“UUPA”). These laws require that once property has been deemed abandoned, the holder turn it over to the state; however, the original property owner still maintains the right to the property. The purpose of unclaimed property laws is to provide for the safekeeping of abandoned property and then to reunite the abandoned property with its owner. Usually, before turning over abandoned property to the state, the holder must attempt to return the property by contacting the owner, using the owner’s name and last known address. If the holder is unable to return the property to the owner and turns it over to the state, the holder provides the state with the name and last known address of the owner. The holder is no longer liable to the property owner once it turns


over the property to the state. The state then makes an effort to reunite the owner with the property. Under New Jersey’s custodial escheat statute, the rightful owner may file a claim to recover the property at any time after the 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 escheat statute. See In re November 8, 1996, Determination of the State of N.J., Dept. of the Treasury, Unclaimed Prop. Office, 706 A.2d 1177, 1179-81 (N.J. Super. Ct. App. Div. 1998). This was a departure from the UUPA, which did provide for the escheat of gift certificates. Id. at 1179. Thekey reason New Jersey did not escheat gift certificates was that they were not redeemable for cash. Id. at 1179-80. If the State were to escheat gift certificates, the issuers would have had to turn over the value of the gift certificates in cash to the State, when they were originally bound to turn over only merchandise or services to the owner. Id. at 1179. TheSuperior Court of New Jersey found that the State’s escheat law was not intended to “impose an obligation different from the obligation undertaken to the original owner” of the gift certificates. Id. at 1180.

Chapter 25 now provides for the escheat of SVCs, which include closed loop cards, open loop cards redeemable only for merchandise or services, and open loop cards redeemable only for cash. N.J. Stat. Ann. 46:30B-6t (2010). When an SVC is presumed abandoned, “the amount presumed abandoned is the amount credited to the recipient,” which is the entire remaining balance on the gift cards. N.J. Stat. Ann. 46:30B-43 (2002). Chapter 25 also authorizes the Treasurer to grant exemptions to certain classes of businesses based on good cause. N.J. Stat. Ann. 46:30B-42.1f (2010).


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Finally, the statute does not apply to SVCs “issued under a promotional or customer loyalty program or a charitable program for which no consideration has been tendered.” N.J. Stat. Ann. 46:30B-42.1e (2010). Neither does it apply to SVCs issued by an issuer that sold less than $250,000 worth of SVCs in the past year. Id.

Pertinent to this case, Chapter 25 presumes SVCs to be abandoned after two years of inactivity and requires issuers to transfer to the State the remaining value on the SVCs at the end of the two-year abandonment period. N.J. Stat. Ann. 46:30B-42.1a (2010) (Chapter 25, § 5a). Under Chapter 25, issuers “shall obtain the name and address of the purchaser or owner of each stored value card 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 (2010) (Chapter 25, § 5c). We will refer to this as the “data collection provision.” In addition, the same subsection provides that

[i]f the issuer of a stored value card does not have the name and address of the purchaser or owner of the stored value card, the address of the owner or purchaser of the stored value card shall assume the address of the place where the stored value card was purchased or issued and shall be reported to New Jersey if the place of business where the stored value card was sold or issued is located in New Jersey.

Id. This provision will be referenced as the “place-of-purchase presumption.”

Since Chapter 25 was enacted, the Treasurer has issued several guidances interpreting the statute. Notably, the


Treasury Guidance dated September 23, 2010 elaborates on the place-of-purchase presumption found in Chapter 5, § 5c:

If the issuer is domiciled in New Jersey, any unredeemed balances of stored value cards issued prior to the date of this announcement where the names and addresses or zip code of the purchasers or owners were notrecorded must be reported to New Jersey.

If the issuer is not domiciled in New Jersey, any unredeemed balances of stored value cards issued prior to the date of this announcement where the names and addresses or zip code of the purchasers or owners were not recorded should be reported to the state in which the issuer is domiciled in accordance with that state’s unclaimed property laws.

If the issuer is not domiciled in New Jersey and the issuer’s state of domicile exempts this type of property from its unclaimed property statute, any unredeemed balances of stored value cards issued prior to the date of this announcement where the names and addresses or zip code of the purchasers or owners were not recorded must be reported to New Jersey if the cards were issued or sold in New Jersey. In these instances, the issuer must maintain the address of the business where the stored value card was purchased or issued.


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Office of the State Treasurer, State of New Jersey, Treasury Announcement FY 2011-03, Guidance on Implementation and Notice of Exemption from Certain Provisions of L.2010, c.25, at 3 (September 23, 2010) (emphasis added) (“Treasury Guidance”).

Beginning in September 2010, Retail Merchants, Food Council, and Amex Prepaid filed separate complaints in the United States District Court for the District of New Jersey, seeking declaratory and injunctive relief. They challenged Chapter 25 under the Supremacy Clause, the Due ProcessClause, the Commerce Clause, the Contract Clause, and theTakings Clause of the Constitution. They also filed motionsfor preliminary injunction to prevent the State from enforcing Chapter 25 while the case was pending. In a consolidated November 13, 2010 opinion, the District Court preliminarily enjoined the retroactive application of Chapter 25 to SVCs redeemable for merchandise or services that were issued before the enactment of Chapter 25. The Court also enjoined the prospective 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 data collection provision found in the same subsection, holding that the provision was


severable.3

The State appeals the District Court’s grant of preliminary injunction with respect to the retroactive enforcement of Chapter 25 and the prospective enforcement of the place-of-purchase presumption and the accompanying Treasury Guidance. SVC Issuers cross-appeal the District Court’s denial of preliminary injunction as to the data collection provision and the two-year abandonment period.For the reasons discussed below, we will affirm the District Court’s orders.

Finally, the Court declined to prospectively enjoin the two-year abandonment period provision under Chapter 25, § 5a.

II. Standard of Review

“We generally review a district court’s [grant or]denial of a preliminary injunction for abuse of discretion[,]but review the underlying factual findings for clear error and

3 The District Court’s November 13, 2010 opinion stated that it was “preliminarily enjoin[ing the State] from enforcing subsection 5c of Chapter 25 and Treasury Guidance dated September 23, 2010, which apply a place-of-purchase presumption for all stored value cards . . . .” Am. Express Travel Related Servs. Co., Inc. v. Sidamon-Eristoff, 755 F. Supp. 2d 556, 616-17 (D. N.J. 2010). SVC Issuers filed a motion for clarification or construction of the November 13 order. On January 14, 2011, the District Court clarified that it was preliminarily enjoining the place-of-purchase presumption found in Chapter 25, §5c but not the data collection provision under the same subsection because the latter was severable. Id. at 619.


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examine legal conclusions de novo.” Brown v. City of Pittsburgh, 586 F.3d 263, 268 (3d Cir. 2009) (citation omitted). “We have jurisdiction to review the order [granting or] denying a preliminary injunction under 28 U.S.C. § 1292(a)(1).” Id. at 268 n.6.

III. Discussion

A court must consider four factors when ruling on a motion for preliminary injunction: “(1) whether the movant has shown a reasonable probability of success on the merits; (2) whether the movant will be irreparably injured by denial of the relief; (3) whether granting preliminary relief willresult in even greater harm to the nonmoving party; and (4) whether granting preliminary relief will be in the public interest.” Crissman v. Dover Downs Entm’t Inc., 239 F.3d 357, 364 (3d Cir. 2001). We will examine these factors with respect to each constitutional challenge.

A. Contract Clause

The Contract Clause under Article I, Section 10,Clause 1 of the U.S. Constitution provides that “[n]o State shall . . . pass any . . . Law impairing the Obligation of Contracts.” To ascertain whether there has been a Contract Clause violation, a court must first inquire whether the change in State law has “operated as a substantial impairment of a contractual relationship.” Gen. Motors Corp. v. Romein,503 U.S. 181, 186 (1992) (citations omitted); Nieves v. HessOil Virgin Islands Corp., 819 F.2d 1237, 1243 (3d Cir. 1987)(citations omitted). If this threshold inquiry is met, the court must then determine “whether the law at issue has a legitimate and important public purpose.” Transport Workers 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 of the parties to the contractual relationship was reasonable and appropriate in light of that purpose.” Id. Because the Contract Clause only protects existing contractual relationships and legitimate expectations based on the law in effect at the time of the contract, see Troy Ltd. v. Renna, 727 F.2d 287, 296-99 (3dCir. 1984), a preliminary injunction based on a ContractClause violation would only apply retroactively to SVCs issued before the enactment of Chapter 25. We hold that SVC Issuers showed a reasonable likelihood of success on themerits of their Contract Clause claim with respect to SVCs that are redeemable for merchandise or services.4

First, under the threshold inquiry, Chapter 25 operates a substantial impairment on the contractual relationships of SVC Issuers. In assessing substantial impairment, the court looks to “the legitimate expectations of the contracting parties,” U.S. Trust Co. of N.Y. v. New Jersey, 431 U.S. 1, 19 n. 17 (1977), and whether the modification imposes an obligation or liability that was unexpected at the time the

4 The District Court held that the SVC Issuers that sell prepaid SVCs redeemable for cash failed to show a reasonable likelihood of success on the merits of theirContract Clause claim because they did not point to “any express or implied contractual obligation between themselves and prepaid SVC purchasers that [was] impaired by Chapter 25.” Am. Express Travel Related Servs., 755 F. Supp. 2d at 609. On appeal, SVC Issuers raise no argument regarding this determination. As such, their Contract Clause claim with respect to SVCs redeemable for cash is waived. See Gonzalez v. AMR, 549 F.3d 219, 225 (3d Cir. 2008).


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parties entered into the contract and relied on its terms. Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 247 (1978). The contractual agreement between SVC Issuers and purchasers provides that the balance on the gift card may be redeemed only for merchandise or services; thus, Issuers of closed loop SVCs expected to realize a profit when the bearer redeemed the card for the Issuers’ merchandise or services,and the Issuers of open loop SVCs expected to realize a merchant fee, which is a fee Issuers like Amex retained from retailers, when the bearer redeemed the card from retailers that accept open loop SVCs. Decl. of Stefan Happ at 2, Am. Express Travel Related Servs. v. Sidamon-Eristoff, 755 F. Supp. 2d 556 (D. N.J. 2010) (No. 10-5206). Chapter 25 requires SVC Issuers to submit the value of the SVCs in cashto the State at the end of the abandonment period, even though the SVCs are not redeemable for cash under the SVCIssuers’ contract with the customer. Because the value of the SVCs includes the expected profit or merchant fee, requiring SVC Issuers to turn over the entire value of the SVC in cash effectively transfers their expected benefits to state custody. By imposing such an unexpected obligation on SVC Issuers, Chapter 25 impaired their contractual relationship.5

5 The State submits that even after the value of the SVCs have been turned over to the State, SVC Issuers that wish to profit from the gift card transactions can honor the card when presented and seek reimbursement from the State. However, if the owner never presents the card and insteaddirectly files a claim with the State, SVC Issuers are removed entirely from the transaction and are unable to collect their expected profits or merchant fee. The same result occurs if the owner does not present the card or file a claim with the State.

See


Allied Structural Steel, 438 U.S. at 247 (holding state law retroactively modifying compensation the company had agreed to pay to its employees impaired its contractual relationship by imposing a completely unexpected liability).

This impairment was substantial because SVC Issuers’ reliance on the expected profit or merchant fee was vital to its contractual relationship. In Allied Structural Steel,Minnesota’s Private Pension Benefits Protection Act retroactively modified the company’s statutory vesting requirement in the funding of a pension plan, such that “the company’s past contributions [to the pension plan] were adequate when made” but “not adequate when computed under the [new] statutory vesting requirement.” Id. at 246. Because the company’s reliance on such contribution requirement was vital to the contract, id., and the Minnesota law imposed a completely unanticipated retroactive obligation upon the company by “[e]ntering a field it had never before sought to regulate,” the Court held that the State law substantially impaired the company’s contractual relationship. Id. at 249. Similarly, SVC Issuers’ reliance on the expected profit or merchant fee was vital to their contractual relationships; the expected benefits supported the administrative cost of issuing and processing SVCs and allowed them to issue SVCs without charging the purchaser additional fees beyond the face value of the gift cards. Moreover, Chapter 25 imposed retroactive obligations on SVC Issuers that were unanticipated because New Jersey law never before provided for the escheat of SVCs. Therefore, Chapter 25 substantially impaired the SVC Issuers’ contractual relationship by imposing unexpected obligations in an area where reliance was vital.


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With respect to the second inquiry, it has been recognized that the custodial escheat of abandoned property is a significant and legitimate public purpose. See Anderson Nat’l Bank, 321 U.S. 233, 240 (1944) (“[I]t is no longer open to doubt that a state, by a procedure satisfying constitutional requirements, may compel surrender to it of deposit balances, when there is substantial ground for belief that they have been abandoned . . . .”). State escheat law works to remedy the “broad and general social . . . problem” of reuniting abandoned property with its owners. See Energy Reserves Grp. v. Kan. Power and Light Co., 459 U.S. 400, 412 (1983). Chapter 25 furthers this public purpose by requiring SVC Issuers to retain the name and address of the purchaser or owner and securing State custody of the abandoned funds in perpetuity for the owners to reclaim.

However, under the third inquiry, Chapter 25 does not reasonably accommodate the rights of the contracting parties in light of the State’s public purpose because it fails to allow SVC issuers to collect their bargained-for expected profits or merchant fees. See Transport Workers Union of Am., Local 290, 145 F.3d at 621. Unless the state is a contracting party, courts ordinarily “defer to legislative judgment as to the necessity and reasonableness of a particular measure.” Energy Reserves Grp., 459 U.S. at 413 (internal quotation marks and citation omitted). Although New Jersey is not a contracting party in the present case, “complete deference to a legislative assessment of reasonableness and 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.

Here, under the contractual relationship, SVC Issuershad an expectation of realizing a profit or merchant fee when the owner redeemed the gift card. Notably, the purchaser


implicitly accepted that the SVC Issuers had an expectation of realizing a profit or merchant fee when the purchaser agreed to redeem the gift card only in exchange for merchandise or services. Serving the State’s public purpose of reuniting abandoned property with owners did not require the State to entirely deprive SVC Issuers of this bargained-for benefit.Like many other states that escheat gift cards, New Jersey could have accommodated the SVC Issuers’ expectations by requiring them to turn over a percentage of the value of the abandoned gift card, reflecting a discount based on the expected profit or merchant fee, rather than the card’s entire remaining value. See, e.g., Ala. Code § 35-12-72(a)(17) (escheating 60% of value of gift cards redeemable only for merchandise). This would still allow the State to escheat the owner’s bargained-for value of the SVC in order to reunite the funds with the owner. Accordingly, SVC Issuers established there was a reasonable probability that the Stateviolated the Contract Clause by failing to make accommodations that were reasonable and appropriate in light of Chapter 25’s purpose.

Having shown a likelihood of success on the merits of their Contract Clause claim, SVC Issuers must also show that they will be irreparably injured by a denial of the preliminary injunction; granting the preliminary injunction will not result in even greater harm to the nonmoving party; and granting the preliminary injunction will be in the public interest. See Crissman, 239 F.3d at 364. SVC Issuers will suffer irreparable harm if the preliminary injunction is denied. If the State enforces Chapter 25, SVC Issuers must either face prosecution and fines for noncompliance or turn over, in cash, the remaining value of existing gift cards that have not been redeemed within two years. They would not be entitled to


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receive those funds back if Chapter 25 is later found to be unconstitutional, due to state sovereign immunity. See Edelman v. Jordan, 415 U.S. 651, 663 (1974) (stating “suit by private parties seeking to impose a liability which must be paid from public funds in the state treasury is barred by the Eleventh Amendment”). Granting the preliminary injunction would not result in a greater harm to the State because the State “does not have an interest in the enforcement of an unconstitutional law[.]” Am. Civil Liberties Union v. Ashcroft, 322 F.3d 240, 247 (3d Cir. 2003) (internal quotation marks and citation omitted). Finally, granting a preliminary injunction would be in the public’s interest, including those of retailers and customers, because “the public interest [is] not served by the enforcement of an unconstitutional law.” Id.All four preliminary injunction conditions having been met, the District Court did not abuse its discretion in enjoining the State from retroactively enforcing Chapter 25 with respect to existing SVCs redeemable for merchandise or services.6

6 Although the District Court held that “Chapter 25 could conceivably effect a taking of the gift card sale and redemption,” the Court did not need to “rest its decision to grant a preliminary injunction on the Takings claim in light of the . . . Contract[] Clause analysis” in favor of SVC Issuers. Am. Express Travel Related Servs., 755 F. Supp. 2d at 612. Because we affirm the District Court’s grant of preliminary injunction based on SVC Issuers’ Contract Clause claim, we need not reach the Takings Clause claim. For the same reasons, we do not reach Food Council’s argument that Chapter 25 violates the derivative rights rule and the manifest injustice rule under the New Jersey state constitution.


B. Federal statutory preemption under Credit CARD Act

Under the Supremacy Clause of the U.S. Constitution, “the Laws of the United States . . . shall be the supreme law of the Land,” and state law is invalid if federal law preempts state law. U.S. Const. art. VI, cl. 2. “Express preemption occurs when a federal law contains express language providing for the preemption of any conflicting state law.” Kurns v. A.W. Chesterton Inc., 620 F.3d 392, 395 (3d Cir. 2010) (citation omitted). “Implied conflict preemption occurs when it is either impossible for a private party to comply with both state and federal requirements, or where state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Id. at 395-96 (internal quotation marks and citations omitted). We address SVC Issuers’ arguments regarding express preemption and implied preemption in turn.

1. Express preemption

SVC Issuers failed to show a reasonable likelihood of success on the merits of their claim that Chapter 25’s two-year abandonment period is expressly preempted by the federal Credit CARD Act of 2009 (“CARD Act”). 15 U.S.C.§ 1693l-1(c). Under the CARD Act, a “State law is not inconsistent with this subchapter if the protection such law affords any consumer is greater than the protection afforded by this subchapter.” 15 U.S.C. § 1693q. The District Court found that “Chapter 25 affords consumers greater protection


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than that provided by the CARD Act’s expiration provision”7

SVC Issuers submit on appeal that the “greater protection” analysis inappropriately allows the District Court to weigh the relative benefits of different types of consumer protection mechanisms and rewrite the CARD Act, thus, depriving the consumer of the benefits Congress decided to provide and replacing them with different ones. However,ultimately, the controlling language in the CARD Act is clear: “[a] State law is not inconsistent with this subchapter if the protection such law affords any consumer is greater than the protection afforded by this subchapter.” 15 U.S.C. § 1693q. Congress authorized the weighing of relative consumer

because “Chapter 25 imposes no time restriction on the consumer’s right to recover his or her funds” and allows the consumer holding the SVC to receive “cash back after the abandonment period—a right the holder did not possess under his or her agreement with the SVC issuer.” Am. Express Travel Related Servs. v. Sidamon-Eristoff, 755 F. Supp. 2d 556, 592 (D. N.J. 2010). According to the District Court, “[w]hile Chapter 25 may make it a more cumbersome process for a consumer to access his/her funds once the funds are presumed abandoned, it ultimately provides greater protection to the consumer. . . .” Id.

7 Under the Credit CARD Act, “it shall be unlawful for any person to sell or issue a gift certificate, store gift card, or general-use prepaid card that is subject to an expiration date . . . [unless] the expiration date is not earlier than 5 years after the date on which the gift certificate was issued, or the date on which card funds were last loaded to a store gift card or general-use prepaid card; and . . . the terms of expiration are clearly and conspicuously stated.” 15 U.S.C. § 1693l-1(c).


benefits when it explicitly allowed state laws that provided greater protection than the Act to be shielded from federal preemption. See id.

In the alternative, SVC Issuers submit that even if the District Court had the authority to assess whether the State law provided greater consumer protection, Chapter 25 does not actually provide greater protection for consumers. We review the District Court’s factual findings for clear error. Brown, 586 F.3d at 268. Under this standard, we accept the District Court’s ultimate factual determinations unless “that determination either (1) is completely devoid of minimum evidentiary support displaying some hue of credibility, or (2) bears no rational relationship to the supportive evidentiary data.” Krasnov v. Dinan, 465 F.2d 1298, 1302 (3d Cir. 1972). Specifically, SVC Issuers argue that it is unclear how the State will use the zip code of the purchaser to reunite the owner with the escheated gift card funds. However, the data collection provision first and foremost requires SVC Issuers to retain the name and address of the purchaser or owner, which helps the State reunite the property with the owner. Chapter 25, § 5c. Moreover, even if the specific process the State uses to operate its escheat law is unclear, we do not believe that this negates the overall protection Chapter 25provides to consumers. First, the CARD Act only requires the funds to be available for five years whereas Chapter 25 protects the funds in perpetuity. Second, even with respect to non-expiring gift cards, Chapter 25 still provides greater protection because the consumer is able to reclaim the full cash value of the SVC under Chapter 25 after two years, whereas he would have been able to redeem only merchandise or services using the SVC. Thus, the District Court’s finding that Chapter 25 provides greater protection to


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consumers than the CARD Act was supported by a reasonable reading of the federal law and state law and was not clearly erroneous.

SVC Issuers’ reliance on the language of the Federal Reserve Board’s regulation is also misplaced. The Federal Reserve Board, which is responsible for “prescribe[ing]regulations to carry out the purposes of the Act,” 15 U.S.C. § 1693b(a), issued a regulation stating that “State law is inconsistent with the requirements of the [CARD Act] . . . if it (i) Requires or permits a practice or act prohibited by the federal law.” 12 C.F.R. § 205.12(b)(2). SVC Issuers argue that under Chapter 25, they are “permitted” to dishonor SVCs when the funds are escheated after the two-year abandonment period, and this is “a practice or act prohibited by [the CARD Act],” which requires a minimum five-year expiration period (unless certain disclosure requirements are met). Id. Thus,they submit that the two-year abandonment period is inconsistent with and preempted by the CARD Act. However, the Federal Reserve Board explicitly refused to make a general preemption determination based on abandonment periods, despite recognizing that many state laws provide for an abandonment period of shorter than five years. Board of Governors of the Federal Reserve System,Final Rule, Regulation E (12 CFR 205), Docket No. R-1377, at 69 (Aug. 22, 2010) (“certain state laws require issuers of unused gift cards to remit the remaining funds to the state . . . after a period of time – typically three to five years after the card is sold or used”). The Board reasoned that “state escheat laws vary significantly” and “the regulation provides that astate law is not inconsistent with any provision if it is more protective of consumers.” Id. at 70. Therefore, the Board recognized that a state law is not preempted simply because it


provides for an abandonment period shorter than five years, if the state law is ultimately more protective of consumers. This reading of the Board’s regulation and explanation supports the District Court’s “greater consumer protection” analysis.

2. Implied preemption

SVC Issuers also failed to show that Chapter 25 is likely to be impliedly preempted by the CARD Act. Implied conflict preemption occurs when state law “stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” English v. Gen. Elec. Co., 496 U.S. 72, 79 (1990) (citations omitted). SVC Issuers contend that Chapter 25 thwarts Congress’ consumer protection objective by preventing consumers from easily accessing the SVC funds from the retailer and instead requiring them to file a claim with the state after two years. We reject this argument. The five-year expiration provision was designed to ensure that consumers had access to their funds for at least the first five years after purchasing the gift cards. 15 U.S.C. § 1693l-1(c). Chapter 25’s two-year abandonment period furthers this interest by protecting the funds in perpetuity and allowing consumers to access those funds in cash by filing a claim with the State. SVC Issuers failed to present any evidence that Congress was concerned with the exact method by which consumers could access those funds.

In addition, SVC Issuers submit that the two-year abandonment period would deprive them of the economic incentive to adopt longer expiration periods because their expected profit would be turned over to the State at the end of the two-year period, regardless of the SVC’s expiration date. And because longer expiration periods benefit customers,


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they argue that Chapter 25’s effect on this incentive structure stands as an obstacle to the customer protection purpose of the CARD Act. But the new abandonment period renders longer expiration periods unnecessary because after two years from the date of purchasing or using the SVC, the customers can access the funds in cash in perpetuity. Thus, the two-year abandonment period does not stand as an obstacle to the congressional purpose of protecting customer interests.

Because we agree with the District Court that SVC Issuers failed to show a likelihood of success on their federal statutory preemption claim with respect to the two-year-abandonment period found in Chapter 25, Section 5a, we need not address the remaining preliminary injunction factors.

C. Federal common law preemption under Texas v. New Jersey

SVC Issuers submit that Chapter 25 and the Treasury Guidance are preempted by the escheat priority rules announced in Texas v. New Jersey (Texas), 379 U.S. 674,681-82 (1965), and reaffirmed in Pennsylvania v. New York(Pennsylvania), 407 U.S. 206, 217-18 (1972), and Delaware v. New York (Delaware), 507 U.S. 490, 499-500 (1993). The State contends that its implementation of Chapter 25 through the Treasury Guidance comports with the priority rules established by the Supreme Court. We agree with the District Court that SVC Issuers demonstrated a reasonable likelihood of success on their claim that Chapter 25’s place-of-purchase presumption as well as the Treasury Guidance are preempted under federal common law. The language of Chapter 25’splace-of-purchase presumption directly contradicts the second priority rule announced in Texas. And even if the Guidance


were a proper exercise of the Treasurer’s power8

1. Chapter 25

, it is also preempted under Texas. Moreover, we agree that the data collection provision is severable from the place-of-purchasepresumption; thus, the data collection provision may stand alone even if the place-of-purchase presumption is preempted under federal common law.

Under the Supremacy Clause of the U.S. Constitution, “the Laws of the United States . . . shall be the supreme law of the Land,” and state law is invalid if federal law preempts state law. U.S. Const. art. VI, cl. 2. It is undisputed that state law can be preempted by federal common law as well as federal statutes. Boyle v. United Techs. Corp., 487 U.S. 500, 518 (1988) (Brennan, J., dissenting) (stating federal common law can displace state law in limited instances, such as areas involving interstate disputes). “Implied conflict preemption occurs when it is either impossible for a private party to comply with both state and federal requirements, or where state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Kurns, 620 F.3d at 395-96 (internal quotation marks and citations omitted).

8 The District Court held that the Treasury Guidance was a proper exercise of the Treasurer’s power. Am. Express Travel Related Servs., 755 F. Supp. 2d at 602-03. We need not address this issue because we hold that SVC Issuers showed a likelihood of success on their claim that the Treasury Guidance is preempted under federal common law.


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In Texas, the Supreme Court established two priority rules to resolve conflicts among states over unclaimed intangible property. 379 U.S. at 680-82. When a property is deemed abandoned, the first opportunity to escheat the property belongs to “the State of the last known address of the creditor, as shown by the debtor’s books and records.” Id. at682. We refer to this as the primary rule. If the primary rule fails because there is no record of any address for a creditor or because the creditor’s last known address is in a State which does not provide for the escheat of abandoned property, the secondary rule gives the right to escheat to the State in which the debtor is incorporated until another state comes forward with proof that it has a superior right to escheat. Id.

Under Chapter 25’s place-of-purchase presumption, in all instances where the address of the purchaser is unknown, the address of the place of purchase is substituted for the address of the purchaser.9

9 Chapter 25’s place-of-purchase presumption provides that “[i]f the issuer of a stored value card does not have the name and address of the purchaser or owner . . . the address of the owner or purchaser of the stored value card shall assume the address of the place where the stored value card was purchased.” N.J. Stat. Ann. 46:30B-42.1c (Chapter 25, § 5c).

Then, in cases where the address of the purchaser for an SVC purchased in New Jersey is unknown, New Jersey would escheat the property under Chapter 25; however, under the secondary rule in Texas, the SVC Issuer’s state of incorporation would escheat the property. Therefore, when the SVC Issuer is not incorporated in New Jersey, it would be impossible for the Issuer to


comply with both Chapter 25’s place-of-purchase presumption and federal common law under Texas because two states cannot both escheat the same abandoned property. See Texas, 379 U.S. at 676 (citing W. Union Tel. Co. v. Pennsylvania, 368 U.S. 71, 82 (1961)) (“[T]he Due Process Clause of the Fourteenth Amendment prevents more than one State from escheating a given item of property. . . .”).Accordingly, the place-of-purchase presumption is preempted under Texas. See Kurns, 620 F.3d at 395-96.

2. Treasury Guidance

On appeal, the State contends that Chapter 25, asimplemented through the Treasury Guidance, comports with the Texas priority rules. For the following reasons, we hold that SVC Issuers met their burden of showing that both Chapter 25 and the Treasury Guidance are likely preempted under the Supreme Court precedent in Texas, Pennsylvania,and Delaware.

To evaluate SVC Issuers’ federal preemption claim regarding the Treasury Guidance, we find it helpful to first review the federal common law in question. In Texas v. New Jersey, the Supreme Court resolved a claim brought by Texas against New Jersey, Pennsylvania, and the Sun Oil Company for declaratory and injunctive relief regarding the right to claim abandoned intangible property through escheat. 379 U.S. at 675. Four different possible rules were submitted by the parties regarding the priority in which states should be allowed to escheat abandoned property. Id. at 678. Texasargued that the State with the “most significant ‘contacts’ with the debt” should be given the right to escheat, id., while Pennsylvania contended that the state in which the debtor’s principal office is located should have priority to escheat over


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other states. Id. at 680. The Supreme Court rejected both options because these tests created too much uncertainty and would inevitably have led the courts to make case-by-case determinations based on specific facts. Id. at 678-80. This result would directly contradict the Court’s intent to settle the escheat disputes “once and for all by a clear rule which [would] govern all types of intangible obligations like theseand to which all States may refer with confidence.” Id. at 678. In the end, the Court adopted Florida’s proposed rule,10

giving the state of the creditor’s last known address the first priority right to escheat, because this rule fairly recognized that the creditor, not the holder, was the owner of the property, and the “rule involves a factual issue simple and easy to resolve, and leaves no legal issue to be decided.” Id.at 681. The Court gave the debtor’s domiciliary state the second right to escheat the abandoned property, until another state proved its superior right to escheat, because this rule had the “obvious virtue of clarity and ease of application” that created the “needed certainty” in this area of dispute among states. 11

10 The Texas v. New Jersey Court permitted Florida to intervene “since it claimed the right to escheat the portion of Sun [Oil]’s escheatable obligations owing to persons whose last known address was in Florida.” Texas v. New Jersey, 379 U.S. 674, 677 (1965).

Id. at 680, 682.

11 However, the Court declined to give the debtor’s domiciliary state the first priority right to escheat, as proposed by New Jersey, because it would not have been fair to let such a “minor factor” allow a fortuitous state in which the debtor “happened to incorporate itself” to claim rights to abandoned property all over the country. Texas, 379 U.S. at 680.


As evidenced by the Texas Court’s rationale behind fashioning the priority rules, its primary concern was to unambiguously and definitively resolve disputes among states regarding the right to escheat abandoned property. Indeed, the Court explicitly recognized that the “case could have been resolved otherwise, for the issue here [was] not controlled by statutory or constitutional provisions or by past decisions.. . .” Id. at 683. The Court’s ultimate resolution was “fundamentally a question of ease of administration and of equity.” Id.

The Supreme Court reaffirmed the Texas priority rules in two subsequent cases: Pennsylvania v. New York, 407 U.S. at 214-15, and Delaware v. New York, 507 U.S. at 498-99. InPennsylvania, because Western Union did not keep records of the creditor’s identity or last known address, the debtor’s state of incorporation was positioned to claim a large portion of the unclaimed funds. 407 U.S. at 211-12. In response, Pennsylvania proposed that for cases involving transactions where the debtor does not keep records 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 abandoned property, rather than the state of the debtor’s domicile as was required under the second priority rule in Texas. Id. at 213-14. The Court rejected Pennsylvania’s request, recognizing that “the place-of-purchase . . . rule[] might permit intangible property rights to be ‘cut off or adversely affected by . . . a forum having no continuing relationship to any of the parties’” to the transaction. Id. at 213. In addition to finding that the state of purchase had insufficient ties to the creditor or debtor to justify giving it the right to escheat, the Court held that “the likelihood of a ‘windfall’ for [the state of the debtor’s


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domicile was not] a sufficient reason for carving out an exception to the Texas rule.” Id. at 214.

In the present case, New Jersey similarly adopts a place-of-purchase presumption, which, under the Treasury Guidance, allows the State to escheat abandoned property by virtue of the fact that the property was purchased in New Jersey.12

The State submits that without the place-of-purchase presumption, SVC Issuers that are incorporated in states that do not escheat abandoned property would unfairly have the

But New Jersey, as the state in which the SVC was purchased, does not have a sufficient connection with any of the parties to the transaction to claim a right to escheat the abandoned property. See Pennsylvania 407 U.S. at 213. As the Court denied Pennsylvania’s place-of-purchase rule because “only a [s]tate with a clear connection to the creditor or debtor may escheat,” Delaware, 507 U.S. at 504 (discussing Court’s holding in Pennsylvania), the District Court correctly enjoined New Jersey’s place-of-purchasepresumption that would have allowed the State to escheat SVCs when it lacked a clear connection to the owner or issuer.

12 Under the Treasury Guidance, the place-of-purchase assumption applies when the issuer does not have the name and address of the owner or purchaser, the issuer is not domiciled in New Jersey, and the state of domicile exempts the property from its unclaimed property statute. Office of the State Treasurer, State of New Jersey, Treasury Announcement FY 2011-03, Guidance on Implementation and Notice of Exemption from Certain Provisions of L.2010, c.25, at 3 (September 23, 2010) (“Treasury Guidance”).


right to retain the abandoned property. But the PennsylvaniaCourt held that “the likelihood of a ‘windfall’ for [the state of the debtor’s domicile was not] a sufficient reason for carving out an exception to the Texas rule.” 407 U.S. at 214. Likewise, the potential of a windfall for the SVC Issuers that are incorporated in states that do not escheat abandoned property does not merit departing from the established priority rules. To depart from the Texas priority rules here would require us “to do precisely what [the Supreme Court] 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 ever-developing new categories of facts.’” Id.at 215 (citing Texas, 379 U.S. at 679).

Our analysis is consistent with the Supreme Court’s recognition that a state’s power to escheat is derived from the principle of sovereignty. As the Delaware Court recognized, “the secondary rule protects the interests of the debtor’s [s]tate as sovereign over the remaining party to the underlying transaction.” 507 U.S. at 504 (emphasis added). The Supreme Court has long recognized that the sovereign maintains authority over abandoned property, including the right to escheat the property. See Texas, 379 U.S. at 675. The ability to escheat necessarily entails the ability not to escheat. To say otherwise could force a state to escheat against its will, leading to a result inconsistent with the basic principle of sovereignty. Various considerations might motivate states not to exercise custodial escheat. For example, because companies might find the absence of state custodial escheat attractive, states may want to incentivize companies to incorporate in their jurisdiction by choosing not to escheat abandoned property. In reaffirming the Texas rule, the Supreme Court “detect[ed] no inequity in rewarding a


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State whose laws prove[d] more attractive to firms that wish to incorporate.” Delaware, 507 U.S. at 507. Accordingly, the Court intended that a state’s decision, regarding the exercise of custodial escheat under the secondary rule, would be respected under the principle of sovereignty.

But the place-of-purchase presumption, executed in accordance with the Treasury Guidance, allows New Jersey to infringe on the sovereign authority of other states. Even when states decide not to exercise custodial escheat with the intent of allowing the holders to maintain custody of the property, the place-of-purchase presumption gives New Jersey the right to make the holder, SVC Issuers in this case, turn over the property to the State. When fashioning the priority rules, the Supreme Court did not intend such a result, which would give states the right to override other states’ sovereign decisions regarding the exercise of custodial escheat.

Finally, we must remember that the Texas Court’s primary concern was to clearly and definitively resolve disputes among states regarding the right to escheat abandoned property. 379 U.S. 678-83. However, allowing states to implement additional priority rules like the one proposed by New Jersey would result in competing state claims to abandoned property. If we assume that Chapter 25’s place-of-purchase presumption were to apply in New Jersey and that another state enacted a law that escheated property based on the issuer’s principal place of business, the two states’ laws would collide when an SVC issuer with its principal place of business in the other state sold an SVC in New Jersey. This would result in “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.” Texas, 379 U.S. at 679. Such conflict would offend the Supreme Court’s intent to use the two priority rules to resolve disputes among states with administrative ease and equity. See Texas, 379 U.S. at 683.Because the State law would stand as an obstacle to executing the purpose of the federal law, see Kurns, 620 F.3d at 395-96,SVC Issuers satisfied their burden of showing that Chapter 25’s place-of-purchase presumption and the Treasury Guidance are likely preempted under Texas, Pennsylvania,and Delaware. SVC Issuers also satisfied the remaining preliminary injunction factors for the same reasons set forthin our discussion of their Contract Clause claim. All four preliminary injunction conditions having been met, the District Court did not abuse its discretion in preliminarily enjoining Chapter 25’s place-of-purchase presumption.

3. Severability of the data collection provision

SVC Issuers moved for clarification or construction of the District Court’s November 13 Order, which provided that “the State is preliminarily enjoined from enforcing subsection 5c of Chapter 25 and Treasurer Guidance dated September 23, 2010, which apply a place-of-purchase presumption for all stored value cards . . . .” Am. Express Travel Related Servs., 755 F. Supp. 2d at 616-17. The District Court clarified that its order preliminarily enjoined the place-of-purchase presumption of subsection 5c of Chapter 25 but not


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the data collection provision13

The issue of severability of a state statute is a question of state law, Old Coach Dev. Corp. v. Tanzman, 881 F.2d 1227, 1234 (3d Cir. 1989), and requires an inquiry into legislative intent. Affiliated Distillers Brands Corp. v. Sills,289 A.2d 257, 258 (N.J. 1972) (per curiam). Under this inquiry, we must determine whether “the objectionable feature [can] be excised without substantial impairment of or conflict with the over-all legislative purpose . . . .” N.J.Chapter, Am. Inst. of Planners v. N.J. State Bd. of Prof’l Planners, 227 A.2d 313, 319 (N.J. 1967). To sever a part of a statute, “there must be such a manifest independence of the parts as to clearly indicate a legislative intention that the constitutional insufficiency of the one part would not render the remainder inoperative.” Affiliated Distillers Brands Corp., 289 A.2d at 259 (internal quotation marks and citations omitted).

under the same subsection because the latter was severable. Id. at 619. In addition, it concluded that SVC Issuers failed to meet their burden of showing that the data collection provision should be preliminarily enjoined. Id. at 623.

SVC Issuers submit that the data collection provision was not meant to be a stand-alone provision. They argue that

13 The data collection provision states that issuers “shall obtain the name and address of the purchaser or ownerof each stored value card 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 precedes the place-of-purchase presumption provision under the same subsection.


the State Legislature enacted the place-of-purchase presumption as a safe harbor to the data collection provision, thereby allowing SVC Issuers that find the data collection provision too onerous to opt-out and rely on the place-of-purchase presumption. We reject their argument because the consumer protection purpose of Chapter 25 evinces that the State Legislature intended the data collection provision to stand alone in case a related provision were struck down. Chapter 25 was enacted to ensure that SVC owners’ rights to the funds would be not forfeited by the passage of time and to reunite customers with their property. The data collection provision requiring issuers to maintain records of the purchaser or owner furthers this purpose by making it more likely that the State will be able to reunite the owner with the abandoned SVC funds. Thus, the Legislature did not intend the constitutional insufficiency of the place-of-purchase presumption to render the data collection inoperative.

When “different parts of the statute are not so intimately connected with and dependent upon each other so as to make the statute one composite whole[,]unconstitutional parts may be rejected and the constitutional parts may stand.” Lane Distr. v. Tilton, 81 A.2d 786, 796-97(N.J. 1951) (citations omitted). An example of the sort of dependency that makes the statute one composite whole is where a provision defining terms used in the statute cannot be severed from the remainder of the statute without rendering the statute meaningless or confusing. Id. at 797. However in the instant case, the data collection requirement is not so intimately connected with the place-of-purchase presumption. Although the latter works to override the Texas priority scheme by presuming that the address of the purchaser is that of the place of purchase, the former aids the State in


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determining what state is entitled to escheat the SVC in accordance with the Texas priority scheme.

SVC Issuers argue, in the alternative, that the data collection provision itself is preempted by federal common law because it does not further the Texas priority scheme. In their view, the Texas line of cases requires states to determine the last known address of the actual owner of the abandoned property in order to properly apply the first priority rule. They submit that retaining the zip code of the purchaser does nothing to reunite the abandoned property with the actual owner, often the recipient, of the gift card. We agree with the District Court’s rejection of this argument. Texas and its progeny “authorize [s]tates to require issuers of intangible property to collect the last known address of the purchaser and to rely on that address in reuniting the ‘owner’ with the abandoned property.” Am. Express Travel Related Servs.,755 F. Supp. 2d at 621. Moreover, the Supreme Court explained, “either a payee or a sender” may redeem a money order because either can be considered the creditor. Delaware, 507 U.S. at 503 (citing Pennsylvania, 407 U.S. at 213). Similarly, either the purchaser or recipient of the gift card may redeem the gift card because either can be considered the creditor. And the Supreme Court “has consistently permitted states to escheat based on the last known address of the purchaser.” Am. Express Travel Related Servs., 755 F. Supp. 2d at 621 (citing Pennsylvania,407 U.S. at 215 and Delaware, 507 U.S. at 503).

In sum, the District Court did not abuse its discretion in denying a preliminary injunction of the data collection provision. Analysis of the State Legislature’s intent suggests that Chapter 25’s data collection provision is severable from the place-of-purchase presumption. In addition, SVC Issuers


did not meet their burden of showing that the data collection provision on its own is likely preempted by federal common law. Accordingly, we affirm the District Court.

D. Substantive Due Process Claim

The Due Process Clause of the Fourteenth Amendment provides that no state shall “deprive any person of life, liberty, or property, without due process of law.” U.S. Const. Amend. XIV, § 1. It is well established that the Due Process Clause contains both a procedural and substantive component. Nicholas v. Pa. State Univ., 227 F.3d 133, 139 (3d Cir. 2000) (citing Planned Parenthood of S.E. Pa. v. Casey, 505 U.S. 833, 846-47 (1992)). Substantive due process contains two lines of inquiry, one that applies when a party challenges the validity of a legislative act, and one that applies to the challenge of a non-legislative action. Id. In a case challenging a legislative act, as here, the act will withstand scrutiny if (1) there is a legitimate state interest that (2) could be rationally furthered by the statute. Id. (citation omitted). The rational basis test, although “not a toothless one,” Mathews v. Lucas, 427 U.S. 495, 510 (1976), requires significant deference to the legislature’s decision-making and assumptions. Sammon v. N.J. Bd. of Med. Exam’rs, 66 F.3d 639, 645 (3d Cir. 1995). “[T]hose attacking the rationality of the legislative classification have the burden ‘to negative every conceivable basis which might support it[.]’” FCC v. Beach Commc’ns, Inc., 508 U.S. 307, 315 (1993) (quoting Lehnhausen v. Lake Shore Auto Parts Co., 410 U.S. 356, 364 (1973)).

We first address whether there is a legitimate state interest. The State identifies several legitimate interests relevant to our analysis. In general, taking custody of


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abandoned property is a legitimate state interest. See Delaware, 507 U.S. at 497 (“States as sovereigns may take custody of or assume title to abandoned personal property. . . .”). Specifically, the State has a legitimate interest in protecting New Jersey customers and modernizing its unclaimed property laws, which were the purposes explicitly identified by the State Legislature. Assemb. Budget Committee, Statement to Assemb. No. 3002, June 24, 2010 (stating that “the primary purposes of [Chapter 25] are to protect New Jersey consumers from certain commercial dormancy fee practices and modernize the State’s unclaimed property laws”).

SVC Issuers protest that the primary purpose ofenacting Chapter 25 was to raise revenue for the State, which is not a legitimate state interest. But even if revenue-raising was the primary purpose behind enacting Chapter 25, as long as it was not the only legitimate purpose underlying thelegislation, Chapter 25 will pass rational basis examination. See Malmed v. Thornburgh, 621 F.2d 565, 569 (3d Cir. 1980) (stating the “legitimate purpose justifying the provision need not be the primary purpose of the provision”). Here, the State has sufficiently identified several state interests, including protecting consumers and modernizing its unclaimed property laws. Thus, we now examine whether these purposes are rationally furthered by Chapter 25. See Nicholas, 227 F.3d at 139.

SVC Issuers submit that even if Chapter 25 wasenacted to further a legitimate state interest, the two-year abandonment period, the two exemptions to Chapter 25, and the data collection provision do not rationally relate to that goal. We review each challenged provision in turn.


SVC Issuers first argue that the two-year abandonment period is not rationally related to protecting consumers when consumers are better protected under a five-year abandonment period under the CARD Act. Thus, they contend that the State had no rational basis for choosing an abandonment period of two years rather than an abandonment period of at least five years. However, the District Court correctly found that “Chapter 25 affords consumers greater protection than that provided by the CARD Act’s expiration provision” because “Chapter 25 imposes no time restriction on the consumer’s right to recover his or her funds” and allows the consumer holding the SVC to receive “cash back after the abandonment period—a right the holder did notpossess under his or her agreement with the SVC issuer.” Am. Express Travel Related Servs., 755 F. Supp. 2d at 592. Although the SVC Issuers argue that there was no legislative finding regarding this two-year abandonment period, under rational basis review, “legislative choice . . . may be based on rational speculation unsupported by evidence or empirical data.” Beach Commc’ns, 508 U.S. at 315 (citations omitted).Thus, Chapter 25’s two-year abandonment period, even without specific legislative findings, rationally relates to the legitimate state interest of protecting consumers.

SVC Issuers next contend that Chapter 25’s two exemptions to New Jersey’s escheat laws are not rationally related to a legitimate state interest. Under the first exemption, single issuers that sell less than $250,000 in gift cards in any given year are exempt from Chapter 25. According to the SVC Issuers, small businesses that sell more than $250,000 in gift cards or that are franchised are not exempt from Chapter 25, so they are placed at a competitive disadvantage for no rational reason. This argument fails to


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defeat rational basis scrutiny, as it merely reflects SVC Issuers’ policy disagreement with the New Jersey Legislature. See Casey, 505 U.S. at 849 (holding that under the rational basis scrutiny for substantive due process, courts are not free to invalidate state law because they disagree with the underlying policy decisions). The State could conceivably want to protect smaller businesses and businesses that do notderive substantial revenue from gift cards. Requiring these businesses to implement procedures to retain the purchaser information in accordance with the data collection provision could be prohibitively expensive compared to the revenue generated from gift card sales and drive them out of business. Also, the State could have rationally decided to apply its escheat laws to small businesses operating as franchises under a common trade name; these businesses are able to market that trade name in selling SVCs redeemable at other locations, which allows them to be more profitable and tooperate without state protection offered by the exemption.

Under the second exemption, gift cards issued under a promotional or customer loyalty program or a charitable program, where the owner of the card did not tender any monetary or other consideration, are not subject to Chapter 25. SVC Issuers argue that this exemption irrationally applies only to issuers that do not receive any payment but does not apply to issuers that receive partial payment for the card. Again, this argument only reflects the SVC Issuers’ policy disagreement with the New Jersey Legislature and fails to defeat rational basis scrutiny. See Casey, 505 U.S. at 849. The Legislature could have rationally concluded that an issuer offering cards for charitable purposes in exchange for monetary or other consideration may seek to obtain a tax benefit for the difference between the payment received and


the full value of the card. In this case, the issuer would not need additional protection through Chapter 25’s exemption provision. The Legislature also may have rationally decided to encourage issuers to receive no consideration in exchange for cards issued under promotional, loyalty, or charitable programs.

Finally, SVC Issuers contend that the data collection provision does not rationally relate to the legitimate state interest of protecting consumers because retaining the zip code of the purchaser does not help the State reunite the property with the true owner of the gift card, which is usually the recipient of the card. However, retaining the zip code of the purchaser or owner rationally furthers the State’s legitimate interest in determining which state has the right to escheat the abandoned property under the first priority rule in Texas. See Papasan v. Allain, 478 U.S. 265, 289 (1986) (stating state has legitimate interest in taking steps to implement valid federal law); Delaware, 507 U.S. at 497-98 (holding, under the primary rule, “the power to escheat the debt should be accorded to the State of the creditor’s last known address”). Moreover, even when the property cannot be returned to the owner, the State’s unclaimed property law rationally relates to the goal of protecting the abandoned property by safeguarding it in a trust account and making it available for consumers to reclaim in perpetuity. For all the reasons stated, we agree with the District Court that SVC Issuers failed to establish a reasonable likelihood of success on their substantive due process claim. Thus, we need not address the remaining preliminary injunction factors.


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IV. Conclusion

We hold that SVC Issuers met their burden of showing a reasonable likelihood of success on the merits of their Contract Clause claim and satisfied the remaining preliminary injunction factors; accordingly, we affirm the District Court’s order preliminarily enjoining Chapter 25’s retroactive application with respect to existing SVCs redeemable for merchandise or services. SVC Issuers also successfullyestablished that the place-of-purchase presumption and the accompanying Treasury Guidance are likely preempted by federal common law; thus, we affirm the District Court’s grant of preliminary injunction with respect to the prospective application of the place-of-purchase presumption and the accompanying Treasury Guidance. We also hold that the data collection provision is severable from the place-of-purchasepresumption, so the District Court did not err in enjoining the latter without enjoining the former. Finally, we hold that SVC Issuers failed to show a reasonable likelihood of success on the merits of their federal statutory preemption claim and their substantive due process claim. For all the foregoing reasons, we will affirm the District Court’s orders.


PRECEDENTIAL

UNITED STATES COURT OF APPEALSFOR THE THIRD CIRCUIT

______

No. 10-4328______

AMERICAN EXPRESS TRAVEL RELATED SERVICES, INC.,

Appellant

v.

ANDREW P. SIDAMON-ERISTOFF,as Treasurer of the State of New Jersey;


______

On Appeal from the United States District Courtfor the District of New Jersey

(D.C. No. 3-10-cv-04890)District Judge: Honorable Freda L. Wolfson

______

Argued September 12, 2011Before: SCIRICA, SMITH and FISHER, Circuit Judges.

(Filed: January 5, 2012)


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Philip R. Sellinger (Argued)Louis SmithGreenberg Traurig200 Park AvenueP.O. Box 677Florham Park, NJ 07932

Richard M. Zuckerman (Argued)SNR Denton US1221 Avenue of the Americas, 24th FloorNew York, NY 10020

Counsel for Appellant

Robert T. Lougy (Argued)Gregory A. SpellmeyerOffice of Attorney General of New Jersey25 Market StreetRichard J. Hughes ComplexTrenton, NJ 08625

Counsel for Appellees

______

OPINION OF THE COURT______

FISHER, Circuit Judge.

American Express Travel Related Services (“Amex”) challenges the constitutionality of 2010 N.J. Laws Chapter 25 (“Chapter 25”), which amended New Jersey’s unclaimed property statute, N.J. Stat. Ann. § 46:30B (2002), and retroactively reduced the period after which travelers checks


are presumed abandoned from fifteen years to three years.1

I. Background and Procedural History

Amex filed a motion for preliminary injunction against New Jersey Treasurer Andrew P. Sidamon-Eristoff (“Treasurer”) and New Jersey Unclaimed Property Administrator Steven R. Harris (collectively, “New Jersey” or “State”) in the District Court on the grounds that Chapter 25’s provision reducing the abandonment period for travelers checks violates the Due Process Clause, the Contract Clause, the Takings Clause, and the Commerce Clause of the United States Constitution. The District Court denied Amex’s motion, holding that Amex failed to show a likelihood of success on the merits of its claims. Amex filed a timely appeal. For the reasons discussed below, we will affirm the District Court’s order.

Amex Travelers Cheques (“TCs”)2

1 This opinion addresses the challenge brought against 2010 N.J. Laws Chapter 25 (“Chapter 25”) with respect to travelers checks. We discuss the appeal filed by New Jersey Retail Merchants Association, New Jersey Food Council, and American Express Prepaid Card Management Corporation, seeking to enjoin Chapter 25 with respect to stored value cards (“SVCs”), in a separate opinion.

are preprinted checks for amounts ranging from $20 to $100. Each one is identifiable based on a unique serial number. Amex maintains that the TCs never expire, so they are contractually obligated to honor the TCs once they are issued. Amex sells TCs for the face value amount, normally through a third party

2 We use “TCs” to refer to Amex Travelers Cheques specifically, as opposed to travelers checks generally.


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bank or travel service. The third party can charge a small fee, which it retains, but Amex does not charge a fee beyond the face value of the TCs. Amex claims that it can sell TCs without charging a fee because its contractual relationship with TC owners gives Amex the right to retain, use, and invest funds from the sale of TCs from the date of sale until the date the TCs are cashed or used. Amex asserts that this right to invest the funds is integral to the contract between TC owners and Amex, and that it relies on these invested funds to remain profitable in the TC business.

When a TC is sold, the third party seller transmits the funds to Amex and provides Amex with the TC’s serial number, its amount, and the date and place of sale. Generally, the seller does not provide the purchaser’s name, address, or any other identifying information. When Amex sells TCs directly to consumers, it retains only the same information that it receives from third party sellers.

All fifty states, and the District of Columbia, have a set of unclaimed property laws (often called escheat laws), most of which are based on a version of the Uniform Unclaimed Property Act (“UUPA”). These laws require that once property has been deemed abandoned, the holder turn it over to the state while the original property owner still maintains the right to the property. The purpose of unclaimed property laws is to provide for the safekeeping of abandoned property and then to reunite the abandoned property with its owner. Usually, before turning over abandoned property to the state, the holder must attempt to return the property by contacting the owner, using the owner’s name and last known address. If the holder is unable to return the property to the owner and turns it over to the state, the holder provides the state with the name and last known address of the owner. The holder is no


longer liable to the property owner once it turns over the property to the state. The state then makes an effort to reunite the owner with the property. Under New Jersey’s custodial escheat statute, the rightful owner may file a claim to recoverthe property at any time after the property is turned over to the State.

However, travelers checks operate differently because issuers like Amex generally do not obtain the names or addresses of the purchasers. Thus, the requirement that holders send notice to the owner at the last known address before turning over such property to the State does not apply to travelers checks. Travelers check issuers are also exempted from the requirement to include the owner’s name and last known address on unclaimed property reports. N.J. Stat. Ann. § 46:30B-47 (2002). Amex sends only the serial number, amount, and date of sale when TCs are sent to the State as unclaimed property. If Amex determines that a cashed TC has a serial number indicating that it has been paid to a state as unclaimed property, Amex seeks to reclaim those funds from that state. In New Jersey, when such claims are filed, the Treasurer returns the funds with interest.


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Until recently, all fifty states had a fifteen-year abandonment period for travelers checks.3

On September 23, 2010, Amex filed a complaint in the United States District Court for the District of New Jersey, alleging that Chapter 25 violated the Due Process Clause, the Contract Clause, the Takings Clause, and the Commerce Clause of the Constitution. Amex also filed a motion for

But on June 24, 2010, the New Jersey Legislature passed Chapter 25, which shortened the abandonment period for travelers checks from fifteen years to three years. N.J. Stat. Ann. § 46:30B-11 (2010). The purpose of the statute was to “protect New Jersey consumers from certain commercial dormancy fee practices and to modernize New Jersey’s unclaimed property 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 presumed abandoned property to the State, the property is then administered through New Jersey’s unclaimed property system. The State preserves the property in perpetuity for the owner, N.J. Stat. Ann. § 46:30B-9 (2002), or for another state that can prove a superior right of escheat. N.J. Stat. Ann.§ 46:30B-81 (2002).

3 Recently, Kentucky also shortened its abandonment period for travelers checks from fifteen years to seven years. Although Amex successfully challenged Kentucky’s statute in federal district court on substantive due process grounds, Am. Express Travel Related Serv. v. Kentucky, 597 F. Supp. 2d 717 (E.D. Ky. 2009), the United States Court of Appeals for the Sixth Circuit reversed and remanded, holding that the statute withstood rational basis scrutiny. Am. Express Travel

Related Servs. v. Kentucky, 641 F.3d 685 (6th Cir. 2011).


preliminary injunction, seeking to enjoin the State from enforcing Chapter 25. On November 13, 2010, the District Court denied Amex’s motion for preliminary injunction with respect to travelers checks. Amex filed a timely appeal.

II. Standard of Review

“We generally review a district court’s [grant or]denial of a preliminary injunction for abuse of discretion[,]but review the underlying factual findings for clear error and examine legal conclusions de novo.” Brown v. City of

Pittsburgh, 586 F.3d 263, 268 (3d Cir. 2009) (citation omitted). “We have jurisdiction to review the order [granting or] denying a preliminary injunction under 28 U.S.C. § 1292(a)(1).” Id. at 268 n.6.

III. Discussion

A court must consider four factors when ruling on a motion for preliminary injunction: “(1) whether the movant has shown a reasonable probability of success on the merits; (2) whether the movant will be irreparably injured by denial of the relief; (3) whether granting preliminary relief will result in even greater harm to the nonmoving party; and (4) whether granting preliminary relief will be in the public interest.” Crissman v. Dover Downs Entm’t Inc., 239 F.3d 357, 364 (3d Cir. 2001). The moving party’s failure to show a likelihood of success on the merits “must necessarily result in the denial of a preliminary injunction.” In re Arthur

Treacher’s Franchisee Litig., 689 F.2d 1137, 1143 (3d Cir. 1982). We evaluate the likelihood of success on the merits of Amex’s four constitutional claims accordingly.


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A. Substantive Due Process Clause

The Due Process Clause of the Fourteenth Amendment provides that no state shall “deprive any person of life, liberty, or property, without due process of law.” U.S. Const. Amend. XIV, § 1. It is well established that the Due Process Clause contains both a procedural and substantive component. Nicholas v. Pa. State Univ., 227 F.3d 133, 139 (3d Cir. 2000) (citing Planned Parenthood of S.E. Pa. v.

Casey, 505 U.S. 833, 846-47 (1992)). Substantive due process contains two lines of inquiry: one that applies when a party challenges the validity of a legislative act, and one that applies to the challenge of a non-legislative action. Id. In a case challenging a legislative act, as here, the act must withstand rational basis review. Id. To do so, the defendant must demonstrate (1) the existence of a legitimate state interest that (2) could be rationally furthered by the statute. Id. (citation omitted). The rational basis test, although “not a toothless one,” Mathews v. Lucas, 427 U.S. 495, 510 (1976), requires significant deference to the legislature’s decision-making and assumptions. Sammon v. N.J. Bd. of Med.

Exam’rs, 66 F.3d 639, 645 (3d Cir. 1995). “[T]hose attacking the rationality of the legislative classification have the burden ‘to negative every conceivable basis which might support it[.]’” FCC v. Beach Commc’ns, Inc., 508 U.S. 307, 315 (1993) (quoting Lehnhausen v. Lake Shore Auto Parts Co.,410 U.S. 356, 364 (1973)).

Amex argues that the sole purpose behind enacting Chapter 25 was to raise revenue for the State, which is not a legitimate state interest. But under rational basis scrutiny, a court’s inquiry is limited to whether the law “rationally furthers any legitimate state objective.” Malmed v.

Thornburgh, 621 F.2d 565, 569 (3d Cir. 1980) (emphasis


added). It is enough that the State offers a conceivable rational basis for its action, and “[t]he court may even hypothesize the motivations of the state legislature to find a legitimate objective promoted by the provision under attack.” Id. (citation omitted). It is “constitutionally irrelevant whether this reasoning in fact underlay the legislative decision . . . .” Fleming v. Nestor, 363 U.S. 603, 612 (1960).

The State submits that Chapter 25 was enacted to modernize the State’s unclaimed property laws by making the abandonment period for travelers checks more consistent with that of other property. The State also argues that Chapter 25 provides greater protection for property owners. They reason that shortening the abandonment period will facilitate the transfer of the property from a private company to the State at an earlier time; this would provide greater protection for property owners because private companies are subject to greater economic instability compared to a perpetually solvent government entity. In general, taking custody of abandoned property is a legitimate state interest. See

Delaware v. New York, 507 U.S. 490, 497 (1993) (“States as sovereigns may take custody of or assume title to abandoned personal property. . . .”). We agree that, as a corollary, the State has a legitimate interest in protecting its property owners and modernizing its unclaimed property laws to promote consistency. Accordingly, we reject Amex’s contention that Chapter 25 lacks a legitimate state interest.

Amex contests that even if there are legitimate state interests, Chapter 25 fails to rationally further these goals. Because Amex has the burden of rebutting every conceivable rational basis, see Beach Commc’ns, 508 U.S. at 315, we examine each of Amex’s arguments in turn.


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Amex first argues that shortening the abandonmentperiod has no rational relationship to increasing property protection because 90% of travelers checks not used after three years are used within fifteen years. Thus, Amex contends, it is irrational to conclude that travelers checks can be presumed abandoned after three years. But the statistics also show that over 96% of all travelers checks are redeemed within three years. Decl. of Susan Helms at 3, Am. Express

Travel Related Servs., 755 F. Supp. 2d 556 (D. N.J. 2010) (No. 10-4328). Even if Amex disagrees with the State Legislature’s presumption that travelers checks unredeemed after three years are abandoned, the rational basis test does not require mathematical precision in the legislature’s decisions. See Heller v. Doe, 509 U.S. 312, 321 (1993). “[L]egislative choice . . . may be based on rational speculation unsupported by evidence or empirical data.” Beach Commc’ns, 508 U.S. at 315. Thus, Amex’s argument is insufficient to overcome rational basis scrutiny.

Amex next argues that shortening the abandonment period for travelers checks does not further Chapter 25’s stated purpose of modernizing the State’s unclaimed property laws. But the State has a conceivable legitimate interest in making its unclaimed property laws more consistent for ease of administration. Chapter 25 accomplishes this by making the abandonment period for travelers checks the same as checks, drafts, and other similar negotiable instruments. See

N.J. Stat. Ann. § 46:30B-16 (2002). Amex responds that unclaimed property laws require establishing different time periods based upon the nature of the property, so consistency is not a rational basis for selecting an abandonment period. But state laws cannot be invalidated based on mere policy disagreements. See Casey, 505 U.S. at 849 (holding that


under rational basis scrutiny, courts are not free to invalidate state law because they disagree with the underlying policy decisions). Because modernizing unclaimed property laws through consistent abandonment periods is a conceivable rational basis for enacting Chapter 25, Amex fails to overcome rational basis scrutiny.4

In addition, the State Legislature could have rationally believed that the shorter abandonment period better protected customers by giving custody of the property to the State at an earlier time. Conceivably, there are benefits to having property safeguarded by a perpetually-solvent sovereign instead of a private entity with a greater risk of insolvency. In addition, the State can hold the travelers check funds in perpetuity and must invest unclaimed property funds more conservatively than Amex is required to invest its TC funds. Compare N.J. Stat. Ann. § 17:15C-2 (2000) (permitting investment in “any investment which is rated in one of the three highest rating categories by a nationally recognized statistical rating organization”) with N.J. Stat. Ann. § 46:30B-75 (2000) (restricting investments of funds of Unclaimed Property Trust Fund to government bonds or interest-bearing notes or obligations). The State has offered several legitimate interests that justify shortening the abandonment period for travelers checks from fifteen years to three years. Chapter 25

4 Amex also contends that changing the abandonment period does not rationally further the statute’s purpose of reuniting property with its owners because the State does not have the names and addresses of travelers check purchasers. But, as discussed above, changing the abandonment period conceivably furthers other rational bases, which is sufficient for Chapter 25 to survive rational basis scrutiny.


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rationally furthers these interests, and Amex does not meet its burden of defeating every conceivable basis that might support Chapter 25’s enactment. See Beach Commc’ns, 508 U.S. at 315. Therefore, Amex fails to show a likelihood of success on the merits of its substantive due process claim.

B. Contract Clause

The Contract Clause under Article I, Section 10,Clause 1 of the U.S. Constitution provides that “[n]o State shall . . . pass any . . . Law impairing the Obligation of Contracts.” To ascertain whether there has been a Contract Clause violation, a court must first inquire whether the change in State law has “operated as a substantial impairment of a contractual relationship.” Gen. Motors Corp. v. Romein,503 U.S. 181, 186 (1992) (citations omitted); Nieves v. Hess

Oil Virgin Islands Corp., 819 F.2d 1237, 1243 (3d Cir. 1987)(citations omitted). If this threshold inquiry is met, the court must then determine “whether the law at issue has a legitimate and important public purpose.” Transport Workers

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 of the parties to the contractual relationship was reasonable and appropriate in light of that purpose.” Id. Where the contract is between private parties, courts may “defer to legislative judgment as to the necessity and reasonableness of a particular measure.” U.S. Trust Co. of N.Y. v. New Jersey, 431 U.S. 1, 23 (1977). But this review of legislative judgment is more exacting than the rational basis standard applied in the due process analysis. Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 733 (1984).


Amex fails to show that Chapter 25 imposes asubstantial impairment on Amex’s contractual relationships with TC owners. While Amex has the right to use and invest TC funds until the date the TC is cashed or sold, the duration of use is further subject to the lawful abandonment period set by unclaimed property laws. The Supreme Court has long established that

the contract of deposit does not give the banks a tontine right to retain the money in the event that it is not called for by the depositor. It gives the bank merely the right to use the depositor’s money until called for by him or some other person duly authorized. If the deposit is turned over to the state in obedience to a valid law, the obligation of the bank to the depositor is discharged.

Sec. Sav. Bank v. California, 263 U.S. 282, 286 (1923)(citation omitted). In Anderson National Bank v. Luckett, the Supreme Court again stated that “[s]ince the bank is a debtor to its depositors, it can interpose no due process or contract clause objection to payment of the claimed deposits to the state, if the state is lawfully entitled to demand payment . . . .” 321 U.S. 233, 242-43 (1944) (citation omitted). Like banks, Amex, as a debtor to the TC purchasers, only has the right to use the funds received from issuing a TC until either the owner or the State, under a valid law, claims the funds. Accordingly, a state’s ability to claim abandoned property in the travelers check context does not ordinarily substantially impair travelers check issuers’ contractual relationships or


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otherwise violate the Contract Clause.5

In assessing substantial impairment under the Contract Clause, we look to “the legitimate expectations of the contracting parties,” U.S. Trust Co. of N.Y., 431 U.S. at 19 n.17 (1977), and whether the modification imposes an obligation or liability that was unexpected at the time the parties entered into the contract and relied on its terms. See

Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 247 (1978). An important factor in determining the substantiality of any contractual impairment is whether the parties were operating in a regulated industry. See Energy Reserves Grp.,

Inc. v. Kansas Power and Light Co., 459 U.S. 400, 411 (1983) (citing Allied Structural Steel Co., 438 U.S. at 242 n.13). When a party enters an industry that is regulated in a particular manner, it is entering subject to further legislation in the area, and changes in the regulation that may affect its contractual relationships are foreseeable. See id. New Jersey has consistently regulated travelers checks, both generally under the Money Transmitter Law, N.J. Stat. Ann. § 17:15C (2000), and as abandoned property under the unclaimed property statute, N.J. Stat. Ann. § 46:30B-11 (2010). Given such consistent regulation, Chapter 25’s amendment of the abandonment period did not upset Amex’s legitimate

See Sec. Sav. Bank,263 U.S. at 285-86.

5 This analysis differs from the analysis with respect to issuers of SVCs because, unlike travelers checks or bank deposits, SVCs are not redeemable for cash. Thus, the relationship between SVC purchasers and their issuers is distinguishable from the relationship between depositors and banks, which are required to turn over the value of the deposit in cash upon the depositor’s demand.


expectations as the contracting party or impose an unexpected change in its contractual obligations. U.S. Trust, 431 U.S. at 19 n.17 (stating “a reasonable modification of statutes . . . is much less likely to upset expectations than a law adjusting the express terms of an agreement”).

Amex next claims that the fifteen-year abandonment period was an implied term of the contract for TCs that were sold prior to the enactment of Chapter 25. It is true that the terms of a contract often include the state law relating to the contract. See Farmers & Merchs. Bank of Monroe v. Fed.

Reserve Bank of Richmond, 262 U.S. 649, 660 (1923). But not all “state regulations are implied terms of every contract entered into while they are effective, especially when the regulations themselves cannot be fairly interpreted to require such incorporation.” Gen. Motors, 503 U.S. at 189. And “state laws are implied into private contracts regardless of the assent of the parties only when those laws affect the validity, construction, and enforcement of contracts.” Id. (citation omitted). Critically, the adjustment of the abandonment period merely shortens the time during which Amex can invest the TC funds, without affecting the validity, construction, and enforcement of the contract between Amex and its customers. Amex also fails to show how New Jersey law pertaining to unclaimed property can be interpreted to


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require incorporation into Amex’s contract with its customer.6

C. Takings Clause

Because Amex has not shown that Chapter 25 constitutes a substantial impairment on this contractual relationship, it did not succeed in showing a likelihood of success on its Contract Clause claim.

The Takings Clause of the Fifth Amendment prohibits the federal government from taking private property for public use without providing just compensation. U.S. Const. Amend. V. The Takings Clause applies to state action through the Fourteenth Amendment. Webb’s Fabulous

Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 160 (1980) (citing Chicago, B. & Q. R. Co. v. Chicago, 166 U.S. 226, 239 (1897) and Penn Cent. Transp. Co. v. New York City, 438 U.S. 104, 122 (1978)). When a state directly appropriates private property, it is considered a per se taking, and the state has a duty to compensate the owner. Tahoe-Sierra Pres.

6 Amex’s reliance on Nieves v. Hess Oil Virgin Is.

Corp., 819 F.2d 1237 (3d Cir. 1987) is misplaced. In Nieves,a 1986 amendment to the Virgin Island’s Workmen’s Compensation Act retroactively eliminated an employer’s immunity from tort actions. 819 F.2d at 1248. Because the employer had immunity under the law at the time of the contract, this amendment exposed the employer to significant additional tort liability that was unexpected. Id. Chapter 25, however, does not impose an unexpected liability on Amex that would “completely destroy[] its contractual expectations.” Id. at 1248. It only seeks to retroactively claim abandoned travelers checks that ultimately belong to the purchasers, not Amex.


Council v. Tahoe Reg’l Planning Agency, 535 U.S. 302, 322 (2002). Where, as here, a party asserts a regulatory taking, there is no set formula. Rather, courts must engage in a factual inquiry to determine whether a taking has been effected. New Jersey v. United States, 91 F.3d 463, 468 (3d Cir. 1996) (citing Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1015 (1992)).

To succeed on a takings claim, Amex must show that the State’s action affected a “legally cognizable property interest.” Prometheus Radio Project v. FCC, 373 F.3d 372, 428 (3d Cir. 2004) (citing Cleveland Bd. of Educ. v.

Loudermill, 470 U.S. 532, 538 (1985) and Webb’s, 449 U.S. at 160-61 (1980)). “Relevant considerations include ‘[t]he economic impact of the regulation on the claimant and . . . the extent to which the regulation has interfered with distinct investment-backed expectations.’” New Jersey v. United

States, 91 F.3d at 463 (quoting Penn Cent., 438 U.S. at 124).

The character of the state action is also relevant: unlike “a physical invasion of land[,] . . . a public program adjusting the benefits and burdens of economic life to promote the common good . . . ordinarily will not be compensable.” Id. (internal quotation marks and citation omitted). Thus, that a regulation “adversely affect[s] recognized economic values” is not enough to constitute a taking. Id. Even a regulation that prohibits the most beneficial use of property, or prevents an individual from operating an otherwise lawful business, does not necessarily violate the Takings Clause. Penn Cent., 438 U.S. at 125-26.

We agree with the District Court that Amex failed to show a likelihood of success on the merits of its takings claim. Amex maintains that it has both a right to invest the


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proceeds from the sale of TCs and a property interest in the income generated. Amex argues that the retroactive application of Chapter 25 constitutes a taking because it interferes with Amex’s investment-backed expectation that TCs already sold would have an abandonment period of fifteen years, which would have allowed Amex to invest the proceeds for fifteen years unless the owner redeemed the check.7

Lastly, the fact that Amex has a contractual right to invest TC funds does not necessarily render Chapter 25 an

However, Amex’s claim that Chapter 25 interferes with its investment-backed expectations cannot stand because Amex’s TC business has long been subject to regulation by New Jersey. The Supreme Court has established that “‘[t]hose who do business in the regulated field cannot object if the legislative scheme is buttressed by subsequent amendments to achieve the legislative end.’” Connolly v.

Pension Ben. Guar. Corp., 475 U.S. 211, 227 (1986) (quoting FHA v. The Darlington, Inc., 358 U.S. 84, 91 (1958)). SinceChapter 25 is a subsequent amendment to achieve the legislative end of assuming custody of abandoned property, Amex has no ground to claim interference with its investment-backed expectations.

7 Contrary to Amex’s contention, E. Enterp. v. Apfel,524 U.S. 498 (1998), is distinguishable from this case. In E.

Enterp., the Supreme Court held that the Coal Industry Retiree Health Benefit Act was an unconstitutional taking because it imposed on the employer retroactive pension liability for retired miners. Id. at 532. But here, Chapter 25 does not impose any further liability on Amex. It only requires that issuers like Amex turn over property owned by the travelers check owners to State custody.


unconstitutional taking. The State has considerable authority to enact legislation, including “the power to affect contractual commitments between private parties.” See E. Enterp., 524 U.S. 498, 528 (1998). Amex’s ability to utilize TC funds is constrained by the owner’s ability to redeem a TC on demand and by the terms of the State’s unclaimed property laws. See

Security Sav. Bank, 263 U.S. at 286. In Delaware v. New

York, the Supreme Court delineated the property right of debtors with regard to state escheat laws:

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. [Sec. Sav. Bank,263 U.S. at 285-86]; Provident Institution for

Sav. v. Malone, 221 U.S. 660, 665-66 (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, 321 U.S. at 241] (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 legal obligations inherent in property.


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[Standard Oil Co. v. New Jersey, 341 U.S. 428,436 (1951)].

507 U.S. 490, 502 (1993). Thus, Amex, as debtor to TCowners, has no right to retain the funds once they are deemed abandoned under the State’s unclaimed property laws. Accordingly, the District Court did not err in finding that Amex failed to show a reasonable probability of success on its Takings Clause claim.

D. Commerce Clause

Under the Commerce Clause, Congress has the power to “regulate Commerce . . . among the several States.” U.S. Const. Art. I, § 8, cl. 3. “This clause also has an impliedrequirement (often called the ‘negative’ or ‘dormant’ aspect of the clause) that the states not ‘mandate differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter.’” Cloverland-

Green Spring Dairies, Inc. v. Pa. Milk Mktg. Bd., 462 F.3d249, 261 (3d Cir. 2006) (citing Granholm v. Heald, 533 U.S. 460, 472 (2005)). Our inquiry as to whether a state law violates the dormant Commerce Clause is twofold: first, we determine whether heightened scrutiny applies, and, if not, then we determine whether the law is invalid under the Pike

v. Bruce Church, Inc., 397 U.S. 137 (1970), balancing test.Cloverland-Green, 462 F.3d at 261 (citation omitted). We apply heightened scrutiny when a law “discriminates against interstate commerce” in purpose or effect. C & A Carbone,

Inc. v. Town of Clarkstown, 511 U.S. 383, 390 (1994). Because Amex has not alleged that heightened scrutiny applies, we look to the Pike balancing test. Under this test, courts will uphold nondiscriminatory regulations that only incidentally affect interstate commerce unless “the burden


imposed on [interstate] commerce is clearly excessive in relation to the putative local benefits.” Pike, 397 U.S. at 142.

Amex contends that Chapter 25, if implemented, will violate the dormant Commerce Clause because its effects will be projected into other states. Specifically, Amex claims that it will be forced to choose between: (a) selling TCs in New Jersey at a marginal profit or at a loss; (b) not selling TCs in New Jersey; (c) charging a fee for selling TCs in New Jersey; or (d) charging a fee to sell TCs throughout the country so that it can maintain uniform conditions. If it chooses to charge a fee to sell TCs throughout the country, Amex argues, then Chapter 25 will have dictated commercial activity in other states.

Amex compares such a result to laws the Supreme Court struck down on dormant Commerce Clause grounds in Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth.,476 U.S. 573, 582 (1986) and Healy v. Beer Institute, Inc.,491 U.S. 324, 336 (1989). In Brown-Forman, the Supreme Court found that New York had “project[ed] its legislation into [other States]” by requiring distillers to seek the approval of the New York State Liquor Authority before lowering prices in other states. 476 U.S. 583-84 (internal quotation marks and citation omitted) (second alteration in original).Similarly, in Healy, the Supreme Court struck down a Connecticut statute that “require[d] out-of-state shippers of beer to affirm that their posted prices for products sold to Connecticut wholesalers [were] . . . no higher than the prices at which those products are sold in [neighboring states.]” 491 U.S. at 326. The Court held both statutes to be unconstitutional because “States may not deprive businesses and consumers in other States of ‘whatever competitive advantages they may possess based on the conditions of the


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local market.” Healy, 491 U.S. at 339 (quoting Brown-

Forman, 476 U.S. at 580).

Unlike these statutes, Chapter 25 does not directly regulate travelers checks sold in other states or force Amex to conform its out-of-state practices to less favorable in-state conditions. Nothing prevents other states from regulating travelers checks differently from the way New Jersey has chosen to do in Chapter 25. And by Amex’s own admission, the costs of compliance could be passed on to New Jersey travelers check customers or be absorbed by issuers like Amex.8

8 Amex argues that requiring it to change its TCbusiness so that it operates differently in New Jersey than it does in other jurisdictions (e.g., charging a fee in New Jersey)would substantially burden interstate commerce based on the Supreme Court’s decision in Bibb v. Navajo Freight Lines,

Inc., 359 U.S. 520, 529-30 (1959). But the Supreme Court acknowledged that Bibb was an exceptional case because the state law obstructed the literal movement of goods between states by requiring trucks to alter their safety equipment upon entering Illinois. Id. at 529. The Court maintained that states have “great leeway in providing safety regulations for all vehicles—interstate as well as local[,]” but in that case, the burden on the interstate movement of trucks passed “the permissible limits even for safety regulations.” Id. at 530. Amex has not shown that Chapter 25 imposes a similarly heavy burden for this to be considered an exceptional case.

Under the Pike balancing test, when the costs of a regulation may be born solely by those in the state enacting it, the burden imposed on interstate commerce is minimal, and not excessive in relation to the putative local benefits articulated by the State. See United Haulers Ass’n, Inc. v.


Oneida-Herkimer Solid Waste Mgmt. Auth., 550 U.S. 330, 345 (2007) (holding when “the very people who voted for the laws” bear the costs attributable to those laws, the costs of the regulation do not fall outside the state). Therefore, Amex failed to show a reasonable probability of success on the merits of its Commerce Clause claim.

E. Remaining preliminary injunction factors

Because Amex was unable to show a likelihood of success on the merits of its claims, we need not address the remaining preliminary injunction factors, see Crissman, 239 F.3d at 364 (listing preliminary injunction factors), and the District Court’s denial of Amex’s motion for preliminary injunction must be affirmed. See In re Arthur Treacher’s

Franchisee Litig., 689 F.2d at 1143.

IV. Conclusion

We hold that Amex failed to show a likelihood of success on the merits of its Due Process Clause, Contract Clause, Takings Clause, and Commerce Clause claims. Thus, the motion for preliminary injunction of Chapter 25 must be denied. For the foregoing reasons, we will affirm the order of the District Court.


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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE STAPLES, INC., ) ) Plaintiff/Counterclaim- ) Defendant, ) ) v. ) C.A. No. 5447-CS ) THOMAS COOK, in his capacity as the ) Secretary of Finance for the State of ) Delaware; PATRICK T. CARTER, in his ) capacity as the Director of Revenue for the ) State of Delaware; MARK UDINSKI, in his ) capacity as the Director/State Escheator of ) the State of Delaware; and the ) DEPARTMENT OF FINANCE, DIVISION ) OF REVENUE FOR THE STATE OF ) DELAWARE, ) ) Defendants/Counterclaim- ) Plaintiffs. ) OPINION Date Submitted: December 19, 2011 Date Decided: February 2, 2012

Brian M. Rostocki, Esquire, REED SMITH LLP, Wilmington, Delaware; Diane Green-Kelly, Esquire, REED SMITH LLP, Chicago, Illinois, Attorneys for Plaintiff/Counterclaim-Defendant. Stuart M. Grant, Esquire, Michael J. Barry, Esquire, Ned C. Weinberger, Esquire, GRANT & EISENHOFER P.A., Wilmington, Delaware; John S. McDaniel, III, Esquire, DELAWARE DEPARTMENT OF JUSTICE, Wilmington, Delaware, Attorneys for Defendants/Counterclaim-Plaintiffs. STRINE, Chancellor.


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I. Introduction

The plaintiff, Staples, Inc., sued the State of Delaware to challenge a demand for

payment made by the State under Delaware’s escheat law, 12 Del. C. §§ 1101, et seq.

(the “Escheat Statute”). The State countersued, seeking a declaration that the sums

demanded from Staples were proper and authorized under the Statute.1 Both parties

moved for partial judgment on the pleadings.

My decision on these cross-motions depends on the answer to the following

question: do unclaimed rebates issued by Staples as “rebate checks”2 to business

customers that purchased a minimum volume of inventory take the form of any of the

“specifically enumerated” items set forth in the definition of “property” under § 1198(11)

of the Escheat Statute?3 If they do, they are properly subject to escheatment as

“abandoned property” under the terms of the Statute after a “dormancy” period of five

years has run against them.4 If they do not, they are not escheatable because, when a type

of property is not “specifically enumerated” in § 1198(11) of the Escheat Statute and a

statute of limitations applicable to the owner’s right to recover such property elapses

before five years, the holder of the property does not become liable to the State.5

1 The defendants/counterclaim-plaintiffs in this action are Thomas Cook, in his capacity as the Secretary of Finance for the State of Delaware, Patrick T. Carter, in his capacity as the Director of Revenue for the State of Delaware, Mark Udinski, in his capacity as the Director/State Escheator for the State of Delaware, and the Department of Finance, Division 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).


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I find that the rebates at issue here fit comfortably within two of the “specifically

enumerated” items of property listed in § 1198(11) – “bills of exchange” and “credits”6 –

and I therefore grant the State’s motion for partial judgment on the pleadings and deny

Staples’s cross-motion. Although the pleadings did not paint a clear picture of the form

in which the rebates were issued by Staples to its customers, Staples’s counsel conceded

at oral argument that the rebates were issued as either negotiable “checks” (i.e., bills of

exchange) or “credits.”7 As such, the rebates consist of specifically enumerated items of

property under § 1198(11), and the State’s claims cannot be barred by any statute of

limitations.

II. Factual Background

These are the undisputed facts as they emerge from the pleadings.8

In October 2005, the State began an audit under 12 Del. C. § 1155 of unclaimed

and abandoned property held by Staples. As part of that audit, the State sought records

from Staples relating to several different categories of property. The State completed its

audit of two of those property types – accounts payable and payroll – in early 2010. On

March 31, 2010, the State sent Staples a letter demanding payment of sums purportedly 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 a motion for judgment on the pleadings under Court of Chancery Rule 12(c) when there are no material issues of fact and the moving party is entitled to judgment as a matter of law. McMillan v. Intercargo Corp., 768 A.2d 492, 499 (Del. Ch. 2000). When considering a Rule 12(c) motion, the court is required to accept the non-moving party’s well-pled facts as true and to view the inferences to be drawn from such facts in the light most favorable to the non-moving party. Desert Equities, Inc. v. Morgan Stanley Leveraged Equity Fund, II, L.P., 624 A.2d 1199, 1205 (Del. 1993). The court need not, however, “blindly accept” all allegations as true, nor must it draw unreasonable inferences in the non-moving party’s favor. West Coast Mgmt. & Capital, LLC v. Carrier Access Corp., 914 A.2d 636, 641 (Del. Ch. 2006) (citation omitted).


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representing Staples’s abandoned and unclaimed accounts payable and payroll liability

for the years 1995 to 2003.

Some of the accounts payable property included in the State’s calculation of

Staples’s liability consists of unclaimed rebates that were issued in connection with the

sale of inventory to Staples’s business customers. Many business customers entered into

supply contracts with Staples whereby Staples agreed to give the customer a reduction in

price, or a “rebate,” if it purchased a minimum volume of inventory from Staples during a

one-year period.9 The State claims that these rebates, once they have remained

unclaimed for the statutorily-prescribed time period, are subject to escheatment.

Staples disagrees. Instead of paying the State, Staples filed its complaint in this

action on April 30, 2010, seeking, among other things, a declaratory judgment that

“rebates, refunds and other items related to the sale of goods are not unclaimed property”

under the Escheat Statute.10 Central to Staples’s position was its contention that the

statute of limitations as to the rebates had run against the rightful owners, and that the

Escheat Statute does not allow the State to escheat property as to which a claim by the

rightful owner is time-barred.

9 Compl. ¶ 89. 10 Id. ¶ 112; see also id. at 34 (Prayer for Relief).


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III. Analysis

A. The Relevant Provisions Of The Escheat Statute And The Parties’ Contentions

The Escheat Statute governs the “reversion of both real and personal property” to

the State of Delaware.11 Under § 1155 of the Escheat Statute, the State has the power to

audit and claim “abandoned property,” which is defined in § 1198(1) of the Statute as

“property against which [the] full period of dormancy has run.”12 The “period of

dormancy” is defined, in relevant part, as “the full and continuous period of 5

years … 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 ….”13 The parties do not dispute that the requisite period of

dormancy has run against the rebates at issue.

Candidly, the reasoning behind Staples’s argument that the unclaimed rebates are

not escheatable unclaimed property was not clearly spelled out in Staples’s complaint,

and the parties filed confusing and meandering briefs in support of their cross-motions.

These briefs raised a host of issues that turned out to be tangential to the core question

that the State and Staples now agree determines whether the rebates are escheatable. As

it turns out, both the State and Staples are in accord that the issue of whether the statute 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 abandoned property is defined as “any person holding or possessing property by virtue of title or ownership.” Id. § 1198(7). A “holder” of abandoned property, by contrast, is any person having “possession, custody or control of the property of another person” and includes every legal entity “incorporated or created under the laws of [Delaware] or doing business in [Delaware].” Id. Here, Staples is the “holder” of the unclaimed rebates that the State seeks to escheat.


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of limitations ran for claims belonging to the business customers given rebates is relevant

only if the rebates do not fit within certain specifically enumerated categories set forth in

the definition of “property” under the Escheat Statute.

This reality is made clear by § 1198(11) of the Escheat Statute, which states as

follows:

‘Property’ means … personal property…of every kind or description, tangible or intangible, … [including], but not by way of limitation, (i) money; (ii) bills of exchange; … (iv) credits …; and (xiii) all other liquidated choses in action of whatsoever kind or character…. The word ‘property’ does not include … any property, except the items specifically enumerated above in paragraph (11) of this section … , the right to recover which in a proceeding brought by the owner would be barred by any statute of limitations ….14

In other words, if a type of property does not fall within any of the “specifically

enumerated” categories set forth in § 1198(11) of the Escheat Statute, and the statute of

limitations applicable to the owner’s claim to that property is less than the five-year

dormancy period, the property will not count as “property” for escheatment purposes and

the holder of such property will not be required to deliver it to the State. But, the

opposite is also true, rendering the running of the statute of limitations against the owner

irrelevant when the property at issue is one of the specifically enumerated types set forth

in § 1198(11).15

14 Id. § 1198(11) (emphasis added). 15 The parties’ circuitous journey is in part explained by the Escheat Statute itself. The State stressed that the general rule is that the running of the statute of limitations against the owner of property has no effect on the State’s right to escheat. The State correctly bases this argument on § 1202 of the Statute, which says:

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


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As a result, Staples’s arguments regarding the expiration of the statute of

limitations as to the rebates need not be answered if, as I next find, the rebates took the

form of property specifically enumerated 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 no need for judicial interpretation, and the

plain meaning of the statutory language controls.”17 Thus, I take into account the “plain

meaning” of the items listed in § 1198(11) of the Escheat Statute. I find that the rebates

at issue here are either “bills of exchange” or “credits,” and are therefore properly subject

to escheatment by the State.18

Although the briefing distilled the legal dispute between the parties into the single

question of whether the rebates were specifically enumerated property items within the

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.

Id. § 1202. But Staples was also correct to point out that § 1202 is far from a comprehensive statement, because § 1198(11) narrows it greatly by rendering the running of the statute of limitations against the owner a defense against escheat as to categories of property not specifically enumerated in that subsection. It took time for the State and Staples to parse the interaction of these two provisions of the Escheat Statute and then to land on the central question at issue on these cross-motions. 16 Staples argues that the rebates were subject to a statute of limitations shorter than the five-year dormancy period under the Escheat Statute. Specifically, Staples contends that any claims by owners of the unclaimed rebates are limited by § 2-725 of the Delaware Uniform Commercial Code (the “UCC”), which provides that “[a]n action for breach of any contract for sale must be commenced within 4 years after the cause of action has accrued,” 6 Del. C. § 2-725, because the rebates at issue were given to business customers under supply contracts. I need not and thus do not determine whether this is so. 17 Dir. of Revenue v. CNA Holdings, Inc., 818 A.2d 953, 957 (Del. 2003) (citing Eliason v. Englehart, 733 A.2d 944, 946 (Del. 1999)). 18 Because I find that the rebates are either bills of exchange or credits, I do not reach the State’s arguments that the rebates constitute “money” and/or “liquidated choses in action,” which are also items specifically enumerated in § 1198(11).


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meaning of § 1198(11), the briefs left me with somewhat of a factual dilemma. Despite

being the master of its own complaint, Staples was less than clear in that complaint about

the form in which it gave its customers rebates. In one paragraph of its complaint,

Staples referred to the rebates as “rebate checks” that its customers had not “cash[ed].”19

But, it remained unclear on the pleadings whether all of the rebates included in Staples’s

alleged unclaimed and abandoned property liability took the form of checks, and whether

they were in fact negotiable checks, which would mean they were bills of exchange, or

simply something that gave the customers a right to go to Staples and get cash.20 In order

to issue the ruling on undisputed facts that both parties sought, the court desired to get

clarity at oral argument so that it understood that the parties were both talking about the

same thing.

When questioned about the form of the rebates, Staples’s counsel conceded that

the rebates were issued as either checks or credits. The following exchange took place:

Q. The way this works is you send them – in my hypothetical, Chancery [meets the minimum volume requirement for a rebate], gets [a] $1,000 rebate eligibility. [Staples] send[s] me a check that I can then take to a bank and get $1,000 from.

A. Yes. Usually what happens is the salesperson takes a check … and if they’ve met their requirement, they’ll hand it to them.

Q. It’s a check. 19 Compl. ¶ 90 (“Business customers that do not cash their rebate checks can no longer make a claim against Staples for such rebates after the 4-year statute of limitations in the UCC passes.”) (emphasis added). 20 A “check” is defined in § 3-104(f) of the UCC as “a draft … payable on demand and drawn on a bank.” 6 Del. C. § 3-104(f). The comments to Article 3 of the UCC clarify that “[t]he term ‘bill of exchange’ is not used in Article 3. It is generally understood to be a synonym for the term ‘draft.’” 6 Del. C. § 3-104 cmt. n.4. The comments go on to state that the term “draft” includes a “check” as defined in § 3-104(f). Id.


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A. But it’s a check. It can be a check or it can be an offset to amounts

owed …. Q. An offset to amounts owed, that’s a credit. A. [State’s counsel] It’s called a credit. A. [Staples’s counsel] It can sometimes be a credit, it can sometimes be a

check. It’s a rebate….21

To the extent that the rebates could be satisfied by Staples’s giving one of its

business customers an “offset to amounts owed,” such rebates would, as Staples’s

counsel admitted, constitute “credits,”22 and would obviously fall within the specifically

enumerated item of “credits” under § 1198(11) of the Escheat Statute.23

Staples’s counsel also conceded at oral argument that to the extent that the rebates

were issued as checks, they were negotiable checks that the business customer could cash

at the bank or sign over to a transferee, i.e., “bills of exchange,” another item specifically

enumerated in § 1198(11).24 This concession is shown by the exchange quoted below:

Q. I just want to know that I can – for the purposes of the motion, you concede that when the customer hits the level of discount, Staples … hand-delivers a rebate in the form of a check, which is as good as any check you would get from anyone with a credit rating as good as Staples in terms of your ability to sign it over to anyone, take it to a bank, and the only risk that you have is that Staples goes insolvent before the check is negotiated?

21 Staples, Inc. v. Cook, C.A. No. 5447, at 107 (Del. Ch. Dec. 19, 2011) (TRANSCRIPT) (emphasis added). 22 Id. 23 See 12 Del. C. § 1198(11). Black’s Law Dictionary defines a “credit” as “[a] deduction from an amount due.” Black’s Law Dictionary (9th ed. 2009). 24 See 12 Del. C. § 1198(11).


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A. You can either get a check or you can get an offset against your outstanding invoices…. You can get a credit.25

Staples tried to insist at oral argument that a “rebate” is not itself a check or a

credit just because it might be paid with a check or issued as a credit, and that instead the

court must look to the “underlying property” – the rebate.26 But, Staples’s argument does

not address the statutory question at hand, which is about the what, not the why. The

relevant inquiry is what the property is and whether it fits within one of the categories

specifically enumerated in § 1198(11) of the Escheat Statute. The reason why the

property was given is irrelevant. In this case, Staples gave its customers a check as a

rebate. In other situations, Staples doubtless issues checks for other reasons, such as to

pay for services, to effect a refund, or in the myriad other circumstances that lead to

payments to customers, vendors, or other parties. Nothing in the words of the Escheat

Statute remotely suggests that the reason why a kind of property specifically enumerated

was created or given to another party bears on whether that property is specifically

enumerated. If the General Assembly had intended to carve out from escheat categories

of otherwise specifically enumerated property because of the reasons for their creation,

the General Assembly would have done so with words, and not have left it to the

judiciary to, in the first instance, invent for itself the authority to carve out certain

categories on the basis of the why, and then to determine what reasons why justified

exclusion from escheat.

25 Staples, Inc. v. Cook, C.A. No. 5447, at 111-12. 26 Id. at 109-10.


C

The undisputed reality of record here is that Staples provided to its business

customers two forms of property as part of its relationship with those customers. One

was a “rebate in the form of a check” that was negotiable at a bank.27 A check is a

quintessential example of a bill of exchange and thus a specifically enumerated item

under the Escheat Statute. The other form of property given was an “offset[]” against the

customer’s “outstanding invoices.”28 That is, these customers were given “credits.”29

Thus, as clarified by Staples’s own illumination of the rebates addressed in its complaint,

the rebates all involve property specifically enumerated within § 1198(11).30

IV. Conclusion

For the foregoing reasons, the State’s motion for judgment on the pleadings to

dismiss Staples’s claim in Count I of its complaint for a declaratory judgment that the

rebates are not escheatable is GRANTED, and Staples’s cross-motion on that Count is

DENIED. Count I of Staples’s complaint is therefore dismissed. IT IS SO ORDERED.

27 Id. at 112. 28 Id. 29 Id. 30 It may be that all of the rebates picked up in the State’s audit were in the form of checks, see id. at 113, but the key point for now is that Staples admits that they were either in the form of a check or a credit, both of which are items specifically enumerated in § 1198(11).

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