Wednesday, October 10, 2012

Two Different Traveler's Check Stories, Same Ending

Two long-running judicial disputes over traveler's checks ended recently, both with the same result: shortened dormancy periods.

Travelers' checks have always been something of an outlier in the context of unclaimed property laws, as they generally have a relatively long dormancy period (about 15 years, as opposed to 3 or 5 years for most items) before they are eligible for reporting and delivery to state custodians.  These longer periods are arguably justified by the fact that travelers' checks are usually purchased by travelers for future use (hence, the name "traveler's check").  In recent years, states have begun to question the necessity for these longer dormancy periods, and have been amending their unclaimed property laws to bring the dormancy periods for traveler's check in line with those of other property types.  Two states where this was done recently are Kentucky and New Jersey.

In both instances, traveler's check issuers did not take the change lightly.  In both states, lawsuits were filed challenging the states' decision to shorten the dormancy period.  The suits originally garnered mixed results:  in New Jersey, a trial court upheld the state's amendments, but a trial court in Kentucky ruled in favor of check issuers and ordered that the dormancy period remain 15 years.  The issuers' success was fleeting, however, as a federal appellate court reversed that ruling last year.  In the New Jersey case, a federal appeals court affirmed the district court's decision upholding the New Jersey legislation.

Both of those stories are now (probably) concluded.  In Kentucky, after reversing the trial court's ruling, the U.S. Court of Appeals for the Sixth Circuit sent the case back to the trial court for further proceedings.  On September 12, the trial court issued an opinion granting Kentucky summary judgment  regarding the issuer's remaining claims, and dismissed the case.  Thus, absent further proceedings the Kentucky law will stand.

Separately, the Supreme Court of the United States denied American Express's request that the court review the New Jersey law.  Thus, the district court's decision upholding the shortened dormancy period will be allowed to stand.

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