123 Fed. Cl. 74
Fed. Cl.2015Background
- Kansas (Treasurer Ron Estes) sought matured value (~$151.8M) of U.S. savings bonds whose last known addresses were in Kansas after a Kansas state-court escheat judgment declared title to those bonds vested in the State under Kan. Stat. Ann. § 58-3979.
- Treasury redeemed bonds physically delivered to Kansas ("Bonds in Possession") but denied payment for "Absent Bonds" (lost/stolen/destroyed) on the ground that Treasury regulations allow redemption only to the registered owner except in limited, specified judicial circumstances.
- Kansas sued in the Court of Federal Claims asserting breach of contract, equitable estoppel, declaratory relief, Fifth Amendment takings, accounting, and related claims seeking the matured value of the Absent Bonds and identifying information for those bonds.
- Central legal dispute: whether 31 C.F.R. § 315.20(b) and related subpart provisions require Treasury to recognize a state-court escheat judgment (including for absent bonds) as a "valid, judicial proceeding" that transfers ownership for redemption purposes.
- Treasury historically (1952 onward) took the position that it will pay a state that has succeeded to title via valid escheat proceedings; but in this litigation Treasury adopted a narrower reading, arguing Subpart E enumerates the only types of judicial proceedings that permit third-party redemption and suggesting possession may be required.
- The Court held it has Tucker Act jurisdiction over Kansas’s contract and takings claims, denied jurisdictional dismissal, upheld the breach-of-contract and takings claims as plausible, denied deference to Treasury’s new litigation position (giving weight to Treasury’s longstanding, prior interpretation), but dismissed Kansas’s third-party-beneficiary claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Court of Federal Claims has Tucker Act jurisdiction over Kansas’s contract claims | Kansas alleged existence of contracts (savings bonds and governing Treasury regulations) and that it acquired ownership by state-court escheat; that pleads a nonfrivolous contract claim | Treasury contended Kansas is not a party to the bond contracts because its escheat judgment did not create ownership under Treasury regulations | Court: jurisdiction exists; 12(b)(1) denial — privity/practical merits go to the merits, not jurisdiction |
| Whether 31 C.F.R. § 315.20(b) requires Treasury to recognize title-based state escheat judgments (including for absent bonds) | §315.20(b) is a catchall: Treasury must recognize claims established by valid judicial proceedings (subject to evidentiary rules in §315.23); subsections that address divorce, bankruptcy, etc., are not exhaustive | Treasury: "but only as specifically provided in this subpart" limits recognition to categories enumerated in §§315.21–315.22; possession of bonds or other constraints preclude payment for Absent Bonds | Court: sided with Kansas — §315.20(b) covers valid judicial proceedings including title-based escheat when §315.23 requirements are met; Kansas stated a breach-of-contract claim |
| Whether Treasury’s contrary interpretation of its regulations is entitled to deference | Kansas relied on Treasury’s longstanding statements (1952 Escheat Decision, later letters, website FAQs, litigation briefs) that title-based escheat judgments suffice | Treasury urged deference to its current litigation position and proposed rulemaking requiring states to possess bonds | Court: declined to defer to Treasury’s current litigating position (Auer inapplicable here because prior, consistent Treasury position existed and current position appeared post-hoc); gave weight to Treasury’s long-standing earlier interpretation |
| Whether Kansas’s takings claim is barred because remedies are contractual/proprietary | Kansas alternatively pleaded a Fifth Amendment taking for denial of bond proceeds after escheat/title | Treasury argued the dispute is proprietary/contractual so takings claim should be treated as breach of contract | Court: declined to dismiss takings claim at pleading stage; allowed both breach and takings claims to proceed (no early disposition) |
Key Cases Cited
- Free v. Bland, 369 U.S. 663 (U.S. 1962) (Congressional authority for Treasury to issue and regulate savings bonds)
- Treasurer of N.J. v. U.S. Dep’t of Treasury, 684 F.3d 382 (3d Cir. 2012) (prior litigation addressing state claims for savings-bond proceeds)
- Delaware v. New York, 507 U.S. 490 (U.S. 1993) (states’ escheat authority and sovereign appropriation of abandoned property)
- Auer v. Robbins, 519 U.S. 452 (U.S. 1997) (deference to agency interpretation of its own regulations)
- Christopher v. SmithKline Beecham Corp., 132 S. Ct. 2156 (U.S. 2012) (limits on Auer deference where agency interpretation is not its considered judgment)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility standard for Rule 12(b)(6))
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (application of plausibility pleading standard)
- Stockton East Water Dist. v. United States, 583 F.3d 1344 (Fed. Cir. 2009) (permitting alternative pleadings for breach and takings and discussion of sequencing constitutional claims)
- U.S. Trust Co. of N.Y. v. New Jersey, 431 U.S. 1 (U.S. 1977) (contract rights are property for Fifth Amendment takings analysis)