Delaware to pay states $120M for unclaimed property seizures

(The Center Square) — Delaware will pay over $120 million to a coalition of 30 states as part of a new legal settlement to resolve nearly a decade-old claim that it improperly held onto the states' unclaimed money.

The settlement stems from a lawsuit filed in 2016 by Pennsylvania, which targeted Delaware's seizure of unclaimed checks sold by MoneyGram, a Delaware-headquartered wire transfer company.

Delaware had claimed dibs on hundreds of millions of dollars in unclaimed MoneyGram checks, arguing the state was entitled to the money because of where the company is incorporated. However, 30 states led by Pennsylvania sued over the MoneyGram payments, seeking to cut Delaware off from making claims across the country. The case went all the way to the U.S. Supreme Court, which in February 2023 issued a ruling in favor of the plaintiffs.

“Delaware is pleased to bring this matter to a close with the signing of this historic interstate settlement agreement," Brenda R. Mayrack, the state's escheator and director of the Office of Unclaimed Property, said in a statement. “Going forward, we look forward to working cooperatively and constructively with our sister states to focus on reuniting owners with their property and improving holder compliance with state unclaimed property laws."

Under the settlement, MoneyGram will be distributing another $89 million, plus interest, to all 50 states based on place of purchase. The states that signed onto the lawsuit will share a portion of nearly $55 million plus interest from that tranche of funds.

MoneyGram is one of the nation's largest wire service companies and allows its customers to purchase checks that can be used to pay off bills or transfer money to other people, such as prison inmates. But if no one cashes those electronic checks, they become unclaimed property.

The lawsuit challenged Delaware's claims that MoneyGram's unclaimed check seizures were allowed under the common-law principle of escheatment, which holds that a state can claim property when it is physically under their jurisdiction. However, the Supreme Court sided with the plaintiffs, saying the MoneyGram checks should be sent back to Pennsylvania and other states where they were purchased, not where the company was incorporated.

“This is a huge win for Pennsylvania consumers, and the right standard has been set for the future," Pennsylvania Treasurer Stacy Garrity said in a statement. "The U.S. Supreme Court agreed with us that these checks should be returned to the states where they were purchased, and this settlement is the first step in getting that money back into the right hands."

Delaware is more aggressive than other states when it comes to seizing unclaimed property, ranging from life insurance policies to settlement money or uncashed checks and gift cards.

The seizures contributed an estimated $400 million to Delaware's coffers in the fiscal year that ended July 1, according to state data. That's more than 6% of the state government's overall revenue for that year.

Delaware is also known as America's corporate capital, with hundreds of Fortune 500 companies headquartered in the business-friendly state. That gives it broader access to unclaimed property that passes through some of those corporations.