JAKE LATURNER, TREASURER OF THE STATE OF KANSAS, ANDREA LEA, IN HER OFFICIAL CAPACITY AS AUDITOR OF THE STATE OF ARKANSAS, Plaintiffs-Appellees
UNITED STATES, Defendant-Appellant
Appeals from the United States Court of Federal Claims in
Nos. 1:13-cv-01011-EDK, 1:16-cv-00043-EDK, Judge Elaine
Charles Frederick, Kellogg, Huber, Hansen, Todd, Evans &
Figel, PLLC, Washington, DC, argued for all
plaintiffs-appellees. Plaintiff-appellee Jake LaTurner also
represented by Scott H. Angstreich, Katherine Cooper,
Benjamin Softness; Jonathan Brett Milbourn, Horn Aylward
& Bandy, LLC, Kansas City, MO.
Thompson, Cooper & Kirk, PLLC, Washington, DC, for
plaintiff-appellee Andrea Lea. Also represented by John David
Ohlendorf, Peter A. Patterson; Joseph H. Meltzer, Melissa L.
Troutner, Kessler Topaz Meltzer & Check, LLP, Radnor, PA.
Beth Klein, Appellate Staff, Civil Division, United States
Department of Justice, Washington, DC, argued for
defendant-appellant. Also represented by Mark B. Stern,
Joseph H. Hunt.
W. Neville, Office of the Mississippi Attorney General,
Jackson, MS, for amici curiae State of Florida, State of
Mississippi, State of Georgia, State of Indiana, State of
Iowa, Commonwealth of Kentucky, State of Louisiana,
Commonwealth of Pennsylvania, State of Ohio, State of South
Carolina, State of Rhode Island, State of South Dakota.
Dyk, Chen, and Hughes, Circuit Judges.
the Great Depression, President Franklin D. Roosevelt signed
legislation allowing the U.S. Department of Treasury
("Treasury") to issue savings bonds, a type of debt
security designed to be affordable and attractive to even the
inexperienced investor. Under longstanding federal law,
savings bonds never expire and may be redeemed at any time
after maturity. See, e.g., 31 U.S.C. §
3105(b)(2)(A); 31 C.F.R. § 315.35(c). Federal law also
limits the ability to transfer bonds. 31 C.F.R. §
315.15. Kansas and Arkansas (the "States")
passed so-called "escheat" laws providing that if
bond owners do not redeem their savings bonds within
five years after maturity, the bonds will be considered
abandoned and title will transfer (i.e.,
"escheat") to the state two or three years
thereafter. Kan. Stat. Ann. §§ 58-3935(a)(16),
58-3979(a) (2000); Ark. Code Ann. §
to these escheat laws, the States sought to redeem a large
but unknown number of bonds, estimated to be worth hundreds
of millions of dollars. When Treasury refused, the States
filed suit in the Court of Federal Claims ("Claims
Court"). The Claims Court agreed with the States,
holding that Treasury must pay the proceeds of the relevant
bonds-once it has identified those bonds-to the States. The
cases were certified for interlocutory appeal to this court.
reverse for two independent reasons. First, we hold that
federal law preempts the States' escheat laws. That means
that the bonds belong to the original bond owners, not the
States, and thus the States cannot redeem the bonds. Second,
even if the States owned the bonds, they could not obtain any
greater rights than the original bond owners, and, under
Federal law, 31 C.F.R. § 315.29(c), a bond owner must
provide the serial number to redeem bonds six years or more
past maturity, which includes all bonds at issue here.
Because the States do not have the physical bonds or the bond
serial numbers, Treasury properly denied their request for
case concerns the ability of states to acquire U.S. savings
bonds through escheat, the centuries-old right of the states
to "take custody of or assume title to abandoned
personal property." Delaware v. New York, 507
U.S. 490, 497 (1993). A savings bond is a contract between
the United States and the bond owner, and Treasury
regulations are incorporated into the bond contract.
See Treasurer of New Jersey v. U.S. Dep't of the
Treasury, 684 F.3d 382, 387 (3d Cir. 2012), cert.
denied, 569 U.S. 1004 (2013).
"regulations do not impose any time limits for bond
owners to redeem the[se] savings bonds." Id. at
388; see also 31 U.S.C. § 3105(b)(2)(A)
(authorizing Treasury to adopt regulations providing that
"owners of savings bonds may keep the bonds after
maturity"). In addition, Treasury regulations provide
that savings bonds are generally "not transferable and
are payable only to the owners named on the bonds." 31
C.F.R. § 315.15. When the sole owner of a bond dies,
"the bond becomes the property of that
decedent's estate." 31 C.F.R. § 315.70(a).
Federal law imposes no time limit on the redemption of
savings bonds, and numerous savings bonds in the country
have matured but have not yet been redeemed by their owners.
Generally, in order to redeem bonds not in the physical
possession of the owner-for example, bonds that have been
lost or destroyed-the owner must supply the serial numbers of
the bonds to Treasury. 31 C.F.R. §§ 315.25,
315.26(a), 315.29(c). The States do not have the serial
numbers of the bonds in question.
case is related to an earlier litigation that resulted in a
decision by the Third Circuit. In the 2000s, several states
attempted to acquire the proceeds of unredeemed savings bonds
through so-called "custody escheat" laws. See
New Jersey, 684 F.3d at 389–90. These laws
provided that if bond owners with last known addresses in the
state did not redeem their bonds within a certain time after
maturity (such as five years), the bonds would be deemed
abandoned property. The state could then obtain legal
custody of (but not title to) the bonds. When several
states asked Treasury to redeem bonds obtained through these
custody escheat laws, Treasury refused. Treasury
explained that for the bonds to be paid, a state
"must have possession of the bonds" and
"obtain title to the individual bonds"-neither of
which the states had. J.A. 507 (2004 letter to North
Carolina); accord J.A. 509 (letter to Illinois);
J.A. 511 (letter to D.C.); J.A. 513 (letter to Kentucky);
J.A. 515 (letter to New Hampshire); J.A. 517 (letter to South
Dakota); J.A. 519 (letter to Connecticut); J.A. 521 (letter
number of states filed suit in the District of New
Jersey, seeking an order directing the government to pay
the bond proceeds. The district court upheld Treasury's
denial of payment, holding that the states' custody
escheat laws were preempted. See New Jersey, 684
F.3d at 394. The Third Circuit affirmed, explaining that the
states' laws "conflict[ed] with federal law
regarding United States savings bonds in multiple
ways." Id. at 407. The court reasoned that
unredeemed bonds are "not 'abandoned' or
'unclaimed' under federal law because the owners of
the bonds may redeem them at any time after they
mature." Id. at 409. "The plaintiff
States' unclaimed property acts, by contrast, specify
that matured bonds are abandoned and their proceeds are
subject to the acts if not redeemed within a [certain] time
period" after maturity. Id. at 407–08.
"There simply is no escape from the fact that the
Federal Government does not regard matured but unredeemed
bonds as abandoned even in situations in which [state law]
would do exactly that." Id. at 409. However,
the Third Circuit declined to address whether the
outcome would be different if states obtained
title to savings bonds, as opposed to mere custody.
Id. at 413 n.28 ("We simply are not faced with
that possibility and thus we do not address it.").
the New Jersey litigation, Kansas and Arkansas acted
to obtain title to the bonds using "title escheat"
laws-precisely the circumstance the Third Circuit's
New Jersey decision did not reach. Kansas's
title escheat law provides that a savings bond will be
considered "abandoned" if it is not redeemed
within five years of maturity. Kan. Stat. Ann. §
58-3935(a)(16). If the bond remains unredeemed for three
more years-that is, for a total of eight years after
maturity-Kansas may obtain a state court judgment that title
to the bond has escheated to the state. Id. §
58-3979(a). Arkansas's law is similar, providing that
savings bonds will be considered abandoned five years
after maturity and that the state can obtain title to
the bonds two years after that. Ark. Code Ann. §
and Arkansas obtained state court judgments purporting to
give them title to the category of bonds deemed abandoned
under these title escheat laws-that is, all unredeemed bonds
that were sufficiently past maturity and were registered to
owners with last known addresses in Kansas or
Arkansas. See J.A. 251 (Kansas); J.A. 1244
(Arkansas). These bonds were not in the States'
possession. Kansas and Arkansas estimated that the
allegedly abandoned bonds were worth $151.8 million and $160
States then attempted to redeem these bonds, asking
Treasury to redeem bonds whose registered owners had last
known addresses in the state, relying on its general
authority to escheat debts owed to individuals whose last
known addresses were in the state. See generally Texas v.
New Jersey, 379 U.S. 674, 680–81 (1965) (holding
that as to abandoned intangible property-there, various
debts- "the right and power to escheat the debt should
be accorded to the State of the creditor's last known
address"). Treasury declined, stating that
"[u]nless some exception or waiver in [its] regulations
applies, Treasury is only authorized to redeem a savings
bond to the registered owner," J.A. 368, who retains the
right "to redeem their savings bonds at any time, even
after maturity," J.A. 369.
States sued for damages under the Tucker Act, 28 U.S.C.
§ 1491, alleging that the States were the owners of the
absent bonds and that the government had breached the terms
of the savings-bonds contracts by refusing to redeem the
bonds. On cross-motions for summary judgment, the Claims
Court sided with the States, holding that Treasury was
liable to the States and had an obligation to identify
the absent bonds. The Claims Court reasoned that there was no
preemption because "federal law itself (i.e., 31 C.F.R.
§ 315.20(b)) requires Treasury to recognize claims of
ownership based on title-based escheatment statutes."
Laturner v. United States, 133 Fed. Cl. 47, 71
court also concluded that the States have the "right
as an owner of the bonds to make a claim for their proceeds
based on the theory that they are 'lost.'"
Id. at 70. It determined that "Treasury
breached the [bond] contract when it refused to provide [the
States] with information about the bonds and demanded that
[the States] produce the bond certificates as a condition of
redeeming their proceeds." Id. at 65.
Thus, the Claims Court held that the States were
"entitled to receive from the government the information
necessary to allow it to make a request to redeem the
bonds," including the serial numbers of the absent
bonds. Id. at 77; see also id. at 70;
Laturner v. United States, 135 Fed. Cl. 501, 505
Claims Court certified its summary judgment orders for
interlocutory appeal under 28 U.S.C. §
1292(d)(2),noting that identifying the absent bonds
would be time-intensive and expensive and that there are
eight other pending cases in which other states are
asserting similar claims. The court also stayed the
proceedings pending appeal.
granted the government's petitions for leave to
appeal and consolidated the appeals. We have