Laturner v. United States
133 Fed. Cl. 47
| Fed. Cl. | 2017Background
- Kansas (Treasurer Jake LaTurner) sued the United States after a Kansas state court entered a judgment of escheat vesting title in Kansas to numerous matured, unredeemed U.S. savings bonds whose owners’ last known addresses (per Treasury records) were in Kansas (“absent bonds”).
- Kansas lacks the physical bond certificates for most absent bonds; Treasury refused to redeem absent bonds or disclose identifying records, citing its regulations and privacy rules.
- Treasury historically stated it would recognize state title obtained by valid judicial escheat proceedings, but later took the position that it would not recognize escheat claims for bonds the state did not possess and promulgated a 2015 regulation adding a possession requirement.
- Kansas filed in the Court of Federal Claims alleging breach of contract, related fiduciary and declaratory claims, and a takings claim; cross-motions for summary judgment followed after targeted discovery.
- The Court (Judge Kaplan) held as a matter of law that (under the pre-2015 regulations) Treasury must recognize valid state escheat judgments as transfers of ownership under 31 C.F.R. § 315.20(b), and that Treasury breached the bond contracts by refusing to recognize Kansas’s title and by refusing to provide identifying information or treating lack of physical certificates as fatal to redemption.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Treasury must recognize state-court escheat judgments as valid "judicial proceedings" under 31 C.F.R. § 315.20(b) | Kansas: § 315.20(b) requires recognition of ownership conferred by valid state escheat judgments; Kansas submitted certified judgment so title passed. | U.S.: § 315.20(b) does not apply to escheat judgments (not specifically listed); Treasury’s later statements and regulation impose limits. | Court: Treasury must recognize title from valid state escheat judgments under § 315.20(b); Treasury's contrary litigating position conflicts with its longstanding interpretations. |
| Whether possession of physical bond certificates is a prerequisite to redemption or to recognition of title | Kansas: Physical certificates are not a prerequisite; regulations allow relief for lost/destroyed bonds and recognize judicial transfers via certified judgments. | U.S.: Without the paper bonds, Kansas cannot satisfy surrender/presentment rules and thus cannot redeem. | Court: Possession is not a categorical prerequisite; Treasury must provide identifying info and cannot refuse redemption solely because Kansas lacks certificates (resolution of redemption mechanics deferred). |
| Whether Kansas’s title-based escheat statute is preempted or invalid under intergovernmental immunity | Kansas: Title transfer under state law that complies with due process is consistent with federal regulations that recognize judicial transfers of ownership. | U.S.: State law conflicts with federal policy of indefinite owner redemption and would improperly commandeer federal funds/operations. | Court: No preemption or intergovernmental-immunity bar where title passes under valid judicial proceedings and federal regs contemplate such transfers. |
| Whether the state escheat proceedings met Fourteenth Amendment due process (in rem jurisdiction and notice) | Kansas: Proceedings complied with Mullane/Texas; publication and statutory notice were reasonable given absent owners and Treasury’s refusal to disclose records. | U.S.: State court lacked in rem basis and constitutionally adequate notice for absent owners. | Court: Proceedings satisfied due process (intangible property situs rules from Texas apply; publication notice was adequate under Mullane); judgment was valid. |
Key Cases Cited
- Free v. Bland, 369 U.S. 663 (U.S. 1962) (federal savings-bond regulatory scheme and owner rights)
- Treasurer of N.J. v. U.S. Dep’t of the Treasury, 684 F.3d 382 (3d Cir. 2012) (discussing interplay of state unclaimed-property acts and Treasury regulations)
- Texas v. New Jersey, 379 U.S. 674 (U.S. 1965) (last-known-address rule for escheat of intangible obligations)
- Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (U.S. 1950) (due process sufficiency of notice by publication for unknown claimants)
- Clearfield Trust Co. v. United States, 318 U.S. 363 (U.S. 1943) (federal supremacy over national instruments)