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Court Stalls New Jersey's Efforts to Seize Unused Gift Cards
In an effort to ameliorate its budget woes, New Jersey has tried to make a grab for what is estimated to be over $80 million by seizing unused stored value card funds and travelers checks. A recent federal district court decision may have temporarily blocked those efforts, but the New Jersey state treasurer has indicated that the fight is not over.
In American Express Travel Related Services Company, Inc. v. Sidamon-Eristoff, Nos. 10-4890, 10-5059, 10-5123, 10-5206, 2010 WL 4722209 (D.N.J. Nov. 13, 2010), the court temporarily enjoined portions of the state's recent amendments to its Unclaimed Property Law. The amendments modified the presumptive abandonment period for travelers checks from fifteen to three years and, for the first time, provided for the custodial escheat of stored value cards upon the expiration of a two-year abandonment period. Specifically, the court preliminarily enjoined the state from enforcing a place of purchase presumption when the last address or ZIP code of a stored value card purchaser/owner is unknown. The court concluded that such a presumption was preempted by priority rules established by the U.S. Supreme Court in Texas v. New Jersey, 379 U.S. 674 (1965) and its progeny, which dictate what state is entitled to escheat abandoned, intangible property in the case of a transaction involving more than one state. The court further temporarily enjoined the state from enforcing the amendments retroactively against issuers of stored value cards with existing stored value card contracts that obligate the issuers to redeem the cards solely for merchandise or services, concluding that the plaintiffs demonstrated a likelihood of success with respect to their contention that this provision violated the Contracts Clause.
The state has signaled that it plans to appeal the decision.