Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Memo Money Order Co., Inc. v. Sidamon-Eristoff

November 18, 2010

MEMO MONEY ORDER CO., INC., PLAINTIFF,
v.
SIDAMON-ERISTOFF, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Wolfson, District Judge

FOR PUBLICATION

OPINION

Plaintiff MEMO Money Order Co., Inc. ("Plaintiff" or "MEMO"), moves before the Court to enjoin Defendants Andrew P. Sidamon-Eristoff ("the Treasurer"), Treasurer of the State of New Jersey and Steven R. Harris, Administrator of Unclaimed Property of the State of New Jersey (collectively, "Defendants" or "State"), from enforcing Section 3 of 2010 N.J. Laws Chapter 25 ("Chapter 25"), New Jersey's recent amendment to its Unclaimed Property Act, N.J.S.A. 46:30B-1 et seq., which section modifies the presumptive abandonment period for money orders from seven years to three years.*fn1 In its Verified Complaint, Plaintiff raises federal and state constitutional challenges under, inter alia, the Contract Clause, the Takings Clause, and Substantive Due Process. Defendants oppose the motion and move to dismiss the Complaint on the grounds of immunity and abstention. Recently, the Court rendered decisions in four other related cases which all involve substantially similar issues regarding the constitutionality of Chapter 25. Thus, for the purposes of this matter, the Court will refer to its prior Opinion dated November 13, 2010, wherever appropriate. For the reasons set forth below, the Court denies Defendants' motion to dismiss and denies Plaintiff's motion for injunctive relief.

BACKGROUND AND PROCEDURAL HISTORY

The following facts are not in dispute unless otherwise noted. Plaintiff is a multi-state issuer of money orders licensed in New Jersey to issue money orders through authorized delegates in the state. MEMO's money orders can be used by a customer as a one-time check to pay sum certain bills. Consumers purchase MEMO money orders from third-party delegates that charge the consumers the face amount requested together with a fee. According to MEMO, the continued vitality of its business depends on earning small up-front fees from the sale of money orders, and state-authorized service fees assessed against money orders that are not redeemed. The assessment of service charges is printed on the back of each MEMO money order.

Prior to the enactment of Chapter 25, New Jersey's Unclaimed Property Act provided that "any sum payable on a money order or similar written instrument that has been outstanding for more than seven years after its issuance is presumed abandoned unless the owner, within seven years, has communicated in writing with the issuer concerning it . . . ." Under the Act, MEMO is a "holder" of money orders it issues, and the purchaser is the "owner," "apparent owner," or "remitter" of the money order. See N.J.S.A. 46:30B-6b, 46:30B-6k and 46:30B-6q. As a holder, MEMO is deemed "a person, wherever organized or domiciled, who is the original obligor indebted to another on an obligation." N.J.S.A. 46:30B-6g.

Furthermore, the Unclaimed Property Act permits the holder of a money order to impose a dormancy fee. However, the pre-amendment version imposed two limitations: (1) "[a] holder may not deduct from the amount of a travelers check or money order any charge imposed by reason of the failure to present the instrument for payment unless there is a valid and enforceable written contract between the issuer and the owner of the instrument pursuant to which the issuer may impose a charge and the issuer regularly imposes the charges and does not regularly reverse or otherwise cancel them;" and (2) "[t]he amount of the deduction shall be limited to an amount that is not unconscionable."

Chapter 25 amends N.J.S.A. 46:30B-13 by altering the limitation on allowable money order dormancy fees by replacing the word "unconscionable" with language which provides that such fees "shall be limited to an amount not to exceed $2.00 per month." N.J.S.A. 46:30B-13. Significantly, Chapter 25 also shortened the presumptive abandonment period for money orders from seven years to three years. See N.J.S.A. 46:30B-12 (". . . any sum payable on a money order or similar written instrument that has been outstanding for more than three years after its issuance is presumed abandoned unless the owner, within three years, has communicated in writing with the issuer concerning it or otherwise indicated an interest as evidenced by a contemporaneous memorandum or other record on file prepared by an employee of the issuer."). According to MEMO, because this provision applies retroactively, MEMO is obligated under Chapter 25 to remit $910,000.00 to the State, rather than approximately $93,000.00 under the original Unclaimed Property Act.

Plaintiff filed its Verified Complaint on October 21, 2010, alleging that Chapter 25 violated several federal and state constitutional provisions and seeking declaratory and injunctive relief. Subsequently, the Court issued an Order to Show Cause. In addition to opposing Plaintiff's motion for injunctive relief, Defendants move to dismiss the Verified Complaint on immunity and/or abstention grounds. Prior to the filing of the instant action, various plaintiffs filed separate complaints challenging the constitutionality of Chapter 25, raising similar arguments made by Plaintiff here. Those plaintiffs also moved for preliminary injunction, and to address the motions, the Court held a hearing on October 21, 2010, the same day MEMO filed its Verified Complaint. On November, 13, 2010, the Court decided those motions.

DISCUSSION

I. Immunity and Abstention

As a preliminary matter, Defendants move to dismiss this case contending that they are immune under the Eleventh Amendment, and this Court should abstain, pursuant to Burford v. Sun Oil Co., 319 U.S. 315, 318 (1943), from hearing this case because Plaintiff essentially challenges central components of New Jersey's policy with regard to abandoned property. In that connection, Defendants caution that federal review of Plaintiffs' claims will disrupt New Jersey's continued efforts to integrate Chapter 25 within a policy of protecting unclaimed property. Defendants take the same position in this regard as in the other related cases, and the Court discerns no distinction in the cases warranting different treatment. Because the Court has previously rejected Defendants' arguments here and explained at length in its Opinion dated November 13, 2010, that Defendants are not immune from suit and that the Court has no basis to abstain under Burford, the parties can refer to the Court's Opinion for those explanations. See Opinion dated November 13, 2010, Sections I, II.

The Court also notes that Plaintiff indicated in its Reply Brief that there are two companion state cases currently pending in the Appellate Division, captioned MEMO Money Order Co. Inc. v. State of New Jersey, wherein Plaintiff challenges the State's capping of dormancy fees for money orders. During a telephone conference with the parties on November 15, 2010, the Court confirmed that because these state proceedings do not relate to any of the constitutional challenges in this action, those cases do not provide a basis for the Court to abstain.

II. Standard of Review

Plaintiff moves to preliminarily enjoin the implementation of Chapter 25. The Third Circuit Court of Appeals has outlined four factors that a court ruling on a motion for a preliminary injunction must consider: (1) whether the movant has shown a reasonable probability of success on the merits; (2) whether the movant will be irreparably injured by denial of the relief; (3) whether granting preliminary relief will result in even greater harm to the nonmoving party; and (4) whether granting the preliminary relief will be in the public interest. Crissman v. Dover Downs Entertainment Inc., 239 F.3d 357, 364 (3d Cir. 2001) vacated on other grounds by 254 F.3d 467 (3d Cir. 2001). The above factors merely "structure the inquiry" and no one element will necessarily determine the outcome. The court must engage in a delicate balancing of all the elements, and attempt to minimize the probable harm to legally protected interests between the time of the preliminary injunction to the final hearing on the merits. Constructors Association of Western Pa. v. Kreps, 573 F.2d 811, 815 (3d Cir.1978). The movant bears the burden of establishing these elements. Adams v. Freedom Forge Corp., 204 F.3d 475, 486 (3d Cir. 2000).

The Court will first turn to the parties' contention with respect to the first factor-likelihood of success.

III. Likelihood of Success

A. Contracts Clause

The Contracts Clause, found in Article I, § 10, of the Constitution, states that "No State shall ... pass any ... Law impairing the Obligation of Contracts." To ascertain whether there has been a Contract Clause violation, a court must first inquire whether the change in state law has "operated as a substantial impairment of a contractual relationship." General Motors v. Romein, 503 U.S. 181, 186 (1992) (quotation omitted); Nieves v. Hess Oil Virgin Islands Corp., 819 F.2d 1237, 1243 (3d Cir. 1987); Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 411 (1983). See also Transport Workers Union of America, Local 290 By and Through Fabio v. Southeastern Pennsylvania Transp., 145 F.3d 619, 621 (3d Cir. 1998). "Thus, Contract Clause analysis requires three threshold inquiries: (1) whether there is a contractual relationship; (2) whether a change in a law has impaired that contractual relationship; and (3) whether the impairment is substantial." Transport Workers, 145 F.3d at 621.

In this connection, the Court focuses its inquiry upon existing contracts-prospective application of a statute does not implicate the Contract Clause. See Troy Ltd. v. Renna, 727 F.2d 287, 296-99 (3d Cir. 1984) (describing contract clause as impairing existing contracts). If the court concludes that the challenged statute works a substantial impairment, the court must then engage in a careful examination of "whether the law at issue has a legitimate and important public purpose." Transport Workers, 145 F.3d at 621. Finally, the court must consider "whether the adjustment of the rights of the parties to the contractual relationship was reasonable and appropriate in light of that purpose." Id.

MEMO's Contract Clause argument is two-fold. First, MEMO argues that it has a contractual right to charge a monthly dormancy fee*fn2 on unredeemed money orders for seven years, and that Chapter 25 substantially impairs that right by retroactively shortening the abandonment period to three years. Second, MEMO argues that its contracts with its retail agents are impaired by Chapter 25 because, by shortening the abandonment period, the statute undermines the business model upon which MEMO's agency contracts were negotiated.

At the outset, the Court notes that the Unclaimed Property Act grants money order licensees like MEMO the right to withhold dormancy or service fees from the amount transferred to the State upon abandonment. That provision states that a money order holder

may not deduct from the amount of a . . . money order any charge imposed by reason of the failure to present the instrument for payment unless there is a valid and enforceable written contract between the issuer and the owner of the instrument pursuant to which the issuer may impose a charge and the issuer regularly imposes the charges and does not regularly reverse or otherwise cancel them.

N.J.S.A. 46:30B-13 (emphasis added). Another provision of the Unclaimed Property Act generally provides that a holder may "deduct from the amount due a person who has a legal or equitable interest in any property subject to [the Unclaimed Property Act] any charges due to dormancy or inactivity [where] there is an enforceable written contract between the holder and the owner of the property pursuant to which the holder may impose a charge; and the holder regularly imposes charges ...." N.J.S.A. 46:30B-7.2. Although the parties have not discussed the import of these provisions, the Court finds these provisions critical to its analysis of whether MEMO has a contractual right to collect service charges on its existing contracts.

It is the Court's view that the foregoing statutory language grants MEMO the right to withhold from the amounts it submits to the State those service fees it has already charged. So, for example, on a money order sold in October 2004, MEMO has presumably charged a per-month service fee for five of the past six years.*fn3 Under N.J.S.A. 46:30B-13, MEMO is entitled to retain the fees it has already charged as long as it had a valid and enforceable written contract, and it regularly imposed the charge. In this hypothetical, the prospective effect of Chapter 25 is that MEMO will not be permitted to recover the last year of service charges that it could have recovered under the pre-Chapter 25 law if the payee did not cash the money order within seven years. Similarly, for a money order sold in October 2008, MEMO would be permitted to retain the service fees already charged. But, because the 2008 money order will now be subject to the three-year abandonment period, MEMO will never recover any service fees beyond that three-year period.

My view on the retroactive application of Chapter 25 is buttressed by the absence of any indication by the Legislature that it intended to require money order licensees to disgorge fees it already realized. When MEMO charges its monthly service fee, it contemporaneously deducts and realizes that fee. There is no indication in the language, structure, or sparse legislative history of Chapter 25 of a retroactive intent with respect to these already-realized fees. Indeed, that the Legislature did not disturb either N.J.S.A. 46:30B-13 or N.J.S.A. 46:30B-7.2 when enacting Chapter 25 suggests that it intended for those provisions to retain their full force and effect.*fn4 See DePalma v. Building Inspection Underwriters, 350 N.J.Super. 195, 226 (App. Div. 2002) (suggesting that when the Legislature intends to supercede a provision it expressly amends or deletes that existing provision). To the contrary, Chapter 25 amends N.J.S.A. 46:30B-13's language to add a $2.00 monetary cap on the service fee, and precludes the imposition of fees "within the twelve ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.