Pennsylvania sued Delaware and MoneyGram in U.S. District Court for the Middle District of Pennsylvania in February 2016. Both Delaware and MoneyGram have filed Motions to Dismiss the case, saying that the U.S. Supreme Court has original and exclusive jurisdiction over the controversy.
The controversy is which state jurisdiction certain "official checks" without owner name or address should be escheated to - the state of incorporation or the state of transaction. To determine the proper state, one must determine the type of property - if the official checks are in fact money orders, then federal law dictates that the checks are escheated to the state of transaction. If the official checks are not money orders, then the checks go to the state of incorporation, under common law precedent previously established by the U.S. Supreme Court. The property at stake is more than the $10.3 million claimed by Pennsylvania, as MoneyGram has reported tens of millions of uncashed official checks to Delaware over the years.
MoneyGram's Motion to Dismiss sheds more light on the origins of the dispute over the "official checks." The dispute began with Arkansas, which demanded that MoneyGram remit to Arkansas the checks which had already been remitted to Delaware. Delaware had previously instructed, by written letter, MoneyGram that it was properly reporting the official checks to Delaware and to continue to do so. MoneyGram declined Arkansas' demand and requested that the states work it out among themselves. Arkansas responded instead by initiating an audit, to be conducted by Treasury Services Group ("TSG") with approximately twenty participating states, including Pennsylvania. MoneyGram then requested indemnification from Delaware, who failed to respond. Instead, Delaware notified MoneyGram that it, the State of Delaware, intended to conduct its own audit. MoneyGram says that it will comply with any order from a court with appropriate jurisdiction over the issue; MoneyGram's only interest is to ensure that it does not escheat the same property more than once.
Both Delaware and MoneyGram argue that the Court lacks subject matter over the controversy. The Defendants say that the case is a case between two states, subject to the original and exclusive jurisdiction of the United States Supreme Court. Pennsylvania filed the case against the State Escheator David Gregor and not the state itself. Delaware argues that, regardless of "how Plaintiff styled the caption in this matter," the case is in fact between the states and not state officials. Further, Delaware says that this escheat case implicates core sovereign interests because interstate escheat controversies "implicate fundamental state fiscal concerns and can affect property having substantial value" that should be heard by the Supreme Court. Finally, Delaware relies on the 11th Amendment state sovereignty as the basis for dismissing the district court case.
Delaware argues that it is an essential party in this controversy, which means that dismissing it but leaving MoneyGram as the sole defendant will not work. Delaware says that the only way that Pennsylvania can "secure a valid judgment of escheat if the judgment can provide the private defendant assurance that it will not be at risk for double recovery by another state. . . . Since Pennsylvania is seeking from MoneyGram property that it has escheated to Delaware in the past and that will be subject to escheat to Delaware in the future, Pennsylvania has to join Delaware as a party to the suit in order to remedy the due process flaw...." MoneyGram expands on this by arguing that dual claims by states that would force a holder to pay a single debt more than once violates due process, as established by the U.S. Supreme Court in Western Union Telegraph Co. v. Pennsylvania. In the instant case, MoneyGram has already relinquished its rights to the property, and now the dispute is between the states as to the proper custodian.
Further, Delaware argues that the Pennsylvania District Court cannot exercise personal jurisdiction over Delaware or its officials as they do not have sufficient minimum contacts to satisfy due process. Gregor is a Delaware employee, enforcing Delaware law against a Delaware incorporated entity with its headquarters in Texas. As such, there were no connections to Pennsylvania that would establish minimum contacts.
The Court stayed all discovery pending its decision on the Motions to Dismiss.