TREASURER OF THE STATE OF NEW JERSEY; TREASURER OF THE STATE OF NORTH CAROLINA; DIRECTOR OF THE DEPARTMENT OF REVENUE OF THE STATE OF MONTANA; TREASURER OF THE STATE OF KENTUCKY; TREASURER OF THE STATE OF OKLAHOMA; ATTORNEY GENERAL OF THE STATE OF MISSOURI; TREASURER OF THE STATE OF PENNSYLVANIA v. UNITED STATES DEPARTMENT OF THE TREASURY; SECRETARY OF THE UNITED STATES TREASURY DEPARTMENT; BUREAU OF PUBLIC DEBT, a Division of the United States Treasury Department; COMMISSIONER OF THE BUREAU OF PUBLIC DEBT
No. 10-1963
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
Filed: June 27, 2012
Argued April 11, 2012; BEFORE: HARDIMAN, GREENAWAY, JR., and GREENBERG, Circuit Judges; PRECEDENTIAL
On Appeal from the United States District Court for the District of New Jersey (D.C. Civ. No. 04-4368) Honorable Mary L. Cooper, District Judge
Carter G. Phillips (argued), Sidley Austin, 1501 K Street, N.W., Washington, DC 20005
Peter G. Angelos, M. Albert Figinski, Law Offices of Peter G. Angelos,
Randall K. Berger, Joanne M. Cicala, Roger W. Kirby, Kirby McInerney, 825 Third Avenue, 16th Floor, New York, NY 10022
William C. Cagney, Robert J. Luddy, Windels, Marx, Lane & Mittendorf, 120 Albany Street Plaza, 6th Floor, New Brunswick, NJ 08901
William H. Murphy, Jr., Andrew J. Toland, The Murphy Firm, 1 South Street, 23rd Floor, Baltimore, MD 21202
Ernest A. Young, 203 Strolling Way, Durham, NC 27707
Jeremiah J. Morgan, Sr., Joel A. Poole, Office of Attorney General of Missouri,
Gita F. Rothschild, McCarter & English, 100 Mulberry Street, Four Gateway Center, 14th Floor, Newark, NJ 07102-06552
Attorneys for Appellants
Alisa B. Klein (argued), Mark B. Stern, United States Department of Justice, Civil Division, 950 Pennsylvania Avenue, N.W., Washington, DC 20530
David E. Dauenheimer, Office of the United States Attorney, 970 Broad Street, Room 700, Newark, NJ 07102
Attorneys for Appellees
OPINION OF THE COURT
GREENBERG, Circuit Judge.
I. INTRODUCTION
II. FACTS AND PROCEDURAL HISTORY
A. The United States Savings Bond Program
Pursuant to his statutory authority, the Secretary has promulgated various regulations governing the savings bond program that the Supreme Court has held preempt conflicting state law. See United States v. Chandler, 410 U.S. 257, 262, 93 S.Ct. 880, 883 (1973) (citing Free 369 U.S. at 668, 82 S.Ct. at 1093) (“[A]bsent fraud, the regulations creating a right of survivorship in United States Savings Bonds . . . pre-empt[] any inconsistent state property law.“). In contrast to many other types of securities, “[s]avings bonds are not transferable and are
There are limited exceptions to the general rule precluding the transfer of savings bonds, including cases in which a third party attains an interest in a bond through valid judicial proceedings.
The redemption process is not complex, as the owner of a bond seeking to redeem it need only present the bond to an authorized payment agent for redemption,
B. The States’ Unclaimed Property Acts
All of the plaintiff States have enacted unclaimed property acts, most of which they have based on some version of the Uniform Unclaimed Property Act, which is rooted in the common-law doctrine of escheat. See Conn. Mut. Life Ins. Co. v. Moore, 333 U.S. 541, 547, 68 S.Ct. 682, 686 (1948) (“The right of appropriation by the state of abandoned property has existed for centuries in the common law.“). The plaintiff-appellant States of New Jersey, Kentucky, Montana, Oklahoma, Missouri and Pennsylvania claim that the unclaimed bonds are property of their residents within the meaning of their respective unclaimed property acts. See
The unclaimed property acts at issue in this case are “custody” escheat statutes rather than “title” escheat statutes in that under them the State does not take title to abandoned property, but, instead, obtains its custody and beneficial use pending identification of the property owner.7 Thus “[t]he
The unclaimed property acts contain specific provisions for presuming property to be “abandoned” when the United States either holds the property or is obligated to make payment for it to its owner. See
C. The States’ Efforts to Claim Proceeds of Matured
Over the last several decades, various states have sought to recover the proceeds from matured but unredeemed savings bonds. On February 27, 1952, the Treasury issued a bulletin reprinting a letter dated January 28, 1952, from the Secretary to the Comptroller of the State of New York in response to the Comptroller‘s inquiry regarding “the prospective right of the state of New York . . . to receive payment of certain United States securities of which it is not the registered owner.” App. at 134. The Secretary explained that the Federal Government would pay the proceeds of savings bonds to the State of New York if it actually obtained title to the bonds, but would not do so where the State merely obtained a right to the custody of the proceeds. The Secretary made this distinction because he believed that the effect of applying a custody-based escheat statute to savings bonds would
either provide the obligor with a discharge, valid within and without New York, or fail to provide such discharge. If the discharge is provided in the case of the ordinary debtor, then the other party to the contract has substituted for his right to pursue his obligor in any jurisdiction, a right merely to prosecute a claim against the State Comptroller of New York; if an effective discharge is not provided, the obligor is subject to suit outside the State of New York and the necessity of making double payment — in exchange he has a right to claim relief from the Comptroller under . . . [New York‘s] Abandoned Property Law.
To the best of our knowledge the Treasury last articulated its position with respect to the application of state escheat laws on savings bonds or their proceeds in 2000 on its Internet website, “EE/E Savings Bonds FAQs” (frequently asked questions). In particular, the Treasury posted an answer to the question: “In a state that has a permanent escheatment law, can the state claim the money represented by securities that the state has in its possession. For example, can a state cash savings bonds that it‘s gotten from abandoned safe deposit boxes?” The plaintiff States refer to the Treasury‘s answer to this question — which is consistent with the bulletin that the Treasury issued almost one half of a century earlier and that we have quoted — as the “Escheat Decision.” The Escheat Decision answered that:
The Department of the Treasury will recognize claims by States for payment of United States securities where the States have succeeded to the title and ownership of the securities pursuant to valid escheat proceedings. The Department, however, does not recognize claims for payment by a State acting merely as custodian of unclaimed or abandoned securities and not as successor in title and ownership of the securities.
In other words, the Treasury recognizes escheat statutes that provide that a State has succeeded to the legal ownership of securities because in such case payment of the securities results in full discharge of the Treasury‘s obligation and this discharge is valid in all jurisdictions.
But, payment of securities to a State claiming only as a custodian results in the substitution of one obligor, the Department of the Treasury, for another, the State. Not only is there serious question whether there is authority for a State to effect such a substitution, but also there seems to be no basis for believing that payment to a State custodian would discharge Treasury of its obligation. Even if the discharge were claimed effective in the State to which the payment is made, it is believed that the Treasury‘s obligation and liability would still remain in force in all other jurisdictions.8
In the District Court, the parties stipulated that the Escheat Decision “is defendants’ interpretation of federal savings bond
D. Procedural History
The Treasurer of the State of New Jersey filed this action on September 8, 2004, against the Treasury, the Secretary, the Bureau of Public Debt,9 and the Commissioner of the Bureau of Public Debt under the New Jersey Uniform Unclaimed Property Act. The Treasurer of the State of North Carolina joined the action shortly thereafter.10 The plaintiff States sought an order directing the Government to pay the proceeds of matured but unredeemed savings bonds to the plaintiff States according to the last known addresses of their owners and for an accounting of the amounts owed pursuant to their unclaimed property acts. It was and remains clear that if the unclaimed property acts are applied as written, by their terms they would entitle the States to substantially the relief that they seek in this action. Nevertheless, on February 5, 2005, the Government moved to dismiss or transfer the action to the United States Court of Federal Claims as it contended that only that court had subject
On June 15, 2006, the Court of Appeals for the Federal Circuit held that the Court of Federal Claims lacked jurisdiction over this case and the court of appeals accordingly remanded the case to the District Court for further proceedings. See McCormac v. U.S. Dep‘t of Treasury, 185 F. App‘x 954 (Fed. Cir. 2006). In briefs filed in the court of appeals, the United States acknowledged that it had erred in requesting the transfer and conceded that the case was not within the limited jurisdiction of the Court of Federal Claims. The court of appeals wrote that the Court of Federal Claims did not have
After the return of the case to the District Court the plaintiff States amended their complaint multiple times to add as plaintiffs officials of the States of Montana, Kentucky, Oklahoma, Missouri, and Pennsylvania, and to add claims that the Escheat Decision violated the Tenth Amendment11 and the notice and comment provisions of the APA contained in
After oral argument, the District Court denied the Government‘s motion without prejudice, but granted it leave to file a motion to dismiss pursuant to
The District Court began its analysis with the Government‘s arguments on the merits under
Next, addressing preemption, the District Court held that the States’ proposal for taking custody of the bonds pursuant to their escheat laws impermissibly would interfere with the contract between the bondholders and the United States, thus conflicting “with the narrow regulations governing redemption of the bonds.” Id. at 30-31. The Court also rejected the States’ Tenth Amendment reserved power claim that they had the right to enforce their unclaimed property acts to gain custody of the proceeds of the savings bonds. In this regard, the Court held because the States’ acts had been preempted, Congress had not infringed the States’ reserved powers by exercising powers not delegated to the United States. Finally, the Court held that the States’ notice and comment claim failed because the Escheat Decision concerns government contracts and thus the Decision explicitly was exempt from the requirements of
III. JURISDICTION AND STANDARD OF REVIEW
The question of whether the District Court had jurisdiction is at issue in this appeal. Accordingly, we will address its jurisdiction in our discussion below. We have appellate jurisdiction under
Our review of the dismissal in this case involving a facial challenge to the District Court‘s jurisdiction is plenary. In re Kaiser Grp. Int‘l Inc., 399 F.3d 558, 561 (3d Cir. 2005). Thus, in our jurisdictional determination we “accept all [the] well-pleaded allegations in the complaint as true and view them in the light most favorable to the [States].” Id.
We exercise plenary review of the District Court‘s order granting the Government‘s motion to dismiss under
IV. DISCUSSION
A. Subject Matter Jurisdiction
Without a waiver of sovereign immunity, a court is without subject matter jurisdiction over claims against federal agencies or officials in their official capacities. United States v. Mitchell, 445 U.S. 535, 538, 100 S.Ct. 1349, 1351 (1980) (“The United States, as sovereign, is immune from suit save as it consents to be sued.“) (alteration and citation omitted). A waiver of sovereign immunity must be express and unambiguous to confer subject matter jurisdiction on a court. United States v. Bein, 214 F.3d 408, 412 (3d Cir. 2000). As the Supreme Court said in United States v. United States Fidelity & Guaranty Co., 309 U.S. 506, 514, 60 S.Ct. 653, 657 (1940), “[c]onsent alone gives jurisdiction to adjudge against a sovereign. Absent that consent, the attempted exercise of judicial power is void.” Moreover, as the Court also has explained “a waiver of sovereign immunity must be strictly construed in favor of the sovereign,” Orff v. United States, 545 U.S. 596, 601-02, 125 S.Ct. 2606, 2610 (2005), and “[t]he terms of [the] waiver define the extent of the court‘s jurisdiction.” United States v. Mottaz, 476 U.S. 834, 841, 106 S.Ct. 2224, 2229 (1986) (citation omitted).
The States initially argue that the proposed application of their respective unclaimed property acts to the savings bonds or their proceeds does not implicate sovereign immunity because it does not create a context in which the Federal Defendants might be able to assert their sovereign immunity. The States predicate this argument on the circumstance that the United States does not assert an ownership interest in the proceeds of the unclaimed bonds or in the bonds themselves. We, however, conclude that this argument lacks merit. In rejecting the States’ argument we note that we have observed, rather unsurprisingly, that “sovereign immunity is implicated” when “a plaintiff [is] suing the United States.” Scheafnocker v. Comm‘r, 642 F.3d 428, 433 n.8 (3d Cir. 2011) (citing Becton Dickinson and Co. v. Wolckenhauer, 215 F.3d 340, 345 (3d Cir. 2000)); see S. Delta Water Agency v. U.S. Dep‘t of Interior, 767 F.2d 531, 536 (9th Cir. 1985) (noting that “[f]ederal agencies and instrumentalities, as well as federal employees acting in their official capacities within their authority are [also] immune from suit” absent a congressional waiver of sovereign immunity) (citation omitted).
The States next assert that even if sovereign immunity is implicated in this case, the APA provides for its waiver. We agree with the States’ APA argument and thus hold that the District Court erred to the extent it relied on sovereign immunity to dismiss the case under
A person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof. An action in a court of the United States seeking relief other than money damages and stating a claim that an agency or an officer or employee thereof acted or failed to act in an official capacity or under color of legal authority shall not be dismissed nor relief therein be denied on the ground that it is against the United States or that the United States is an indispensable party.
The States now contend that the District Court erred in holding that the scope of the waiver of sovereign immunity under section 702 is limited to “final agency action.”17 The
But the District Court‘s conclusion was at odds with opinions of several courts of appeals that have clarified that the waiver of sovereign immunity in section 702 extends to all non-monetary claims against federal agencies and their officers, regardless of whether or not the cases seek review of “agency action” or “final agency action” as set forth in section 704. For example, in Trudeau v. Federal Trade Commission, 456 F.3d 178, 187 (D.C. Cir. 2006), the United States Court of Appeals for the District of Columbia Circuit held that section 702‘s
In its opinion the Trudeau court dealt with the first
An action in a court of the United States seeking relief other than money damages and stating a claim that an agency or an officer or employee thereof acted or failed to act in an official capacity or under color of legal authority shall not be dismissed nor relief therein be denied on the ground that it is against the United States or that the United States is an indispensable party.
Id. at 185. The court of appeals emphasized that while the second sentence refers to a claim against an “agency,” and thus carries that limitation to the scope of the waiver of sovereign immunity, the sentence does not use the terms “agency action” or “final agency action.” Furthermore, the court of appeals observed that the House and Senate Reports accompanying the 1976 amendments reflected Congress‘s intent to waive immunity for “any” and “all” actions for non-monetary relief against an agency. Id. at 187 (citing H.R. Rep. No. 94-1656, at 3, S. Rep. No. 94-996, at 8, reprinted in 1976 U.S.C.C.A.N. at 6129). In sum, the court of appeals held that section 704‘s “final agency action” requirement only limited the viability of claims made under the APA, and because section 702 operated as a waiver for all non-monetary claims, including those claims not made under
The Court of Appeals for the Ninth Circuit recently agreed with Trudeau that section 702‘s waiver of sovereign immunity is not limited to actions brought under the APA. In Veterans for Common Sense v. Shinseki, 644 F.3d 845 (9th Cir. 2011), a veterans’ group claimed that the Department of Veterans Affairs’ dilatory processing of mental health claims violated the veterans’ constitutional right to benefits. Id. at 860-61. In Veterans for Common Sense the district court held that the “final agency action” limitation in section 704 restricted the waiver of sovereign immunity in section 702, and inasmuch as the delays in processing claims did not constitute “final agency action,” section 702 did not waive sovereign immunity. Id. at 863. The court of appeals reversed, concurring with Trudeau and holding that the first sentence of section 702 referred to a cause of action created by the APA, and not any jurisdictional limitation. Id. at 866 (“The first and second sentences of § 702 play quite different roles.“). Therefore, the court of appeals held that section 702 waived sovereign immunity for purposes of the plaintiff‘s request for injunctive relief based on the Constitution, even if judicial review did not involve “agency action” under section 704.
The Veterans for Common Sense court relied on its earlier decision in Presbyterian Church (U.S.A.) v. United States, 870 F.2d 518 (9th Cir. 1989), where the plaintiffs alleged that there had been First and Fourth Amendment violations when federal agencies secretly recorded church services. There, the court of appeals noted that while the original 1946 form of
Other courts of appeals have taken the same position as the Trudeau and Veterans for Common Sense courts. In Delano Farms Co. v. California Table Grape Commission, 655 F.3d 1337, 1344 (Fed. Cir. 2011), the Court of Appeals for the Federal Circuit held that grape growers could maintain a patent claim against the United States Department of Agriculture for declaratory relief because section 702 applied broadly to waive sovereign immunity for all claims not seeking money damages. The Courts of Appeals for the Seventh and First Circuits have viewed the waiver of sovereign immunity in the second sentence of section 702 similarly. See Michigan v. U.S. Army Corps of Eng‘rs, 667 F.3d 765, 775 (7th Cir. 2011) (“the conditions of § 704 affect the right of action contained in the first sentence of § 702, but they do not limit the waiver of immunity in § 702‘s second sentence“) (citing Veterans for Common Sense, 644 F.3d at 866-68); Blagojevich v. Gates, 519 F.3d 370, 372 (7th Cir. 2008) (holding that section 702 waives immunity for a lawsuit by a state governor alleging that the Department of Defense violated a statute requiring the governor‘s approval before moving a national guard unit from the state); Puerto Rico v. United States, 490 F.3d 50, 57-58 (1st Cir. 2007) (holding that
Although we acknowledge that section 702 is not a model of clarity, our independent review of our precedents and the statute‘s legislative history leads us to agree with the position taken by the courts of appeals in the opinions to which we have referred. In Specter v. Garrett, 995 F.2d 404 (3d Cir. 1993), rev‘d on other grounds sub nom. Dalton v. Specter, 511 U.S. 462, 114 S.Ct. 1719 (1994), we held that an action seeking an order enjoining the Secretary of the Navy from closing a naval shipyard could proceed under the Defense Base Closure and Realignment Act of 1990 despite the defendants’ invocation of sovereign immunity, stating that “the waiver of sovereign immunity contained in § 702 is not limited to suits brought under the APA.” Id. at 410. Although we did not address directly whether section 704 operates as a limitation on section 702‘s waiver of sovereign immunity, we recently clarified that the judicial review provisions of the APA such as section 704, are not jurisdictional, but rather “provide a limited cause of action for parties adversely affected by agency action.” Chehazeh v. Attorney Gen. of the United States, 666 F.3d 118, 125 n.11 (3d Cir. 2012) (quoting Oryszak v. Sullivan, 576 F.3d 522, 525 (D.C. Cir. 2009)). “Thus, if agency action is . . . not final agency action,
The House of Representatives Report accompanying the 1976 amendments confirms that Congress contemplated that the
But the House Report does not state that there is a fourth limitation limiting the waiver of sovereign immunity in section 702 to suits challenging “agency action” as defined in the APA. Rather, the Report indicates that “[t]he amendment made to section 702 of title 5 would eliminate the defense of sovereign immunity in any action in a federal court seeking relief other than money damages and stating a claim based on the assertion of unlawful official action by an agency or by an officer or employee of that agency.” Id. at 3, reprinted in 1976 U.S.C.C.A.N. at 6123 (emphasis added); see id. at 9, 1976 U.S.C.C.A.N. at 6129 (“[T]he time now [has] come to eliminate the sovereign immunity defense in all equitable actions for specific relief against a Federal agency or officer acting in an
Although the defense of sovereign immunity raises a claim constituting a jurisdictional limitation, even if, as we now hold here, the defense is unsuccessful, the court in which the plaintiff has brought the action cannot entertain the case unless it has jurisdiction under
Although we sometimes have referred to the APA as conferring “jurisdiction,” see, e.g., Pinho v. Gonzales, 432 F.3d 193, 200 (3d Cir. 2005), the Supreme Court has stated that “the APA does not afford an implied grant of subject-matter jurisdiction permitting federal judicial review of agency action.” Califano v. Sanders, 430 U.S. 99, 107, 97 S.Ct. 980, 985 (1977). Accordingly, we have recognized that ordinarily “the ‘federal question’ statute,
We thus must decide whether the States’ claims arise
Even though the States have brought this action with the intent ultimately to obtain relief under their laws there is no escape from the fact that this case largely involves the Government‘s claim that federal statutes and regulations preempt the States’ unclaimed property acts. That circumstance compels us to consider the long established well-pleaded complaint rule to the end that “federal courts have federal question jurisdiction only when a federal claim appears in the complaint, and not when a federal preemption defense may eventually be raised in litigation.” Levine v. United Healthcare Corp., 402 F.3d 156, 162 (3d Cir. 2005) (citation omitted). Yet the States not unreasonably cite Grable & Sons Metal Products, Inc. v. Darue Engineering and Manufacturing, 545 U.S. 308, 125 S.Ct. 2363 (2005), as support for their contention that the District Court did have jurisdiction. It is true that aspects of
Grable, however, insofar as the States advance it as support for their jurisdictional contentions, has its limitations. In Grable a federal taxpayer brought an action to quiet title in a state court against a purchaser of the property who acquired the property by a quitclaim deed from the Government. The Government sold the property to the purchaser to satisfy the taxpayer‘s tax delinquency. In the quiet title action the taxpayer asserted that the purchaser‘s title was invalid because the Government did not follow proper procedure in giving required notice when seizing the property. The purchaser removed the case to a federal court claiming that there was federal question jurisdiction even though the plaintiff-taxpayer sought to quiet title to its property in a state court, a classic state law procedure, and even though there was no suggestion in the case that there was diversity of citizenship between the parties. The taxpayer moved to remand the case to state court but the district court denied the motion and the court of appeals affirmed. The Supreme Court granted certiorari and affirmed.
The Supreme Court held that there was federal question jurisdiction in Grable principally because of the dominance of
In the end, however, we do not find it necessary to decide whether the District Court had jurisdiction by reason of the presence of the preemption issue in this case. We bypass the preemption jurisdictional question because it is clear that the Court had jurisdiction in light of the States having advanced a significant
The abuse of local governmental power, when of the constitutional magnitude in this case, is a power denied the States by the Constitution within the meaning of the tenth amendment. The power to remedy the unconstitutional wrong is one delegated to the United States by the Constitution. The Constitution expressly provides for federal court jurisdiction in claims arising under this Constitution (or) Laws of the United States.
U.S. Const. art. 3, § 2 . Congress has given the federal courts original jurisdiction over such claims.28 U.S.C. § 1331 .
Id. (internal quotation marks omitted); see also Hodges v. Shalala, 121 F. Supp. 2d 854, 863-64 (D.S.C. 2000) (federal question jurisdiction exists under
The Supreme Court at one time regarded the
The amendment states but a truism that all is retained which has not been surrendered. There is
nothing in the history of its adoption to suggest that it was more than declaratory of the relationship between the national and state governments as it had been established by the Constitution before the amendment or that its purpose was other than to allay fears that the new national government might seek to exercise powers not granted, and that the states might not be able to exercise fully their reserved powers.
United States v. Darby, 312 U.S. 100, 124, 61 S.Ct. 451, 462 (1941).
More recently, however, the Court has embraced the view that the states may invoke the
The Supreme Court in New York v. United States rejected the reasoning of Darby and, rather than regarding the
Of course, a court makes a different analysis when determining if it has jurisdiction over a claim than it makes when considering the merits of the claim. As the Supreme Court has stated, “[d]ismissal for lack of subject-matter jurisdiction because of the inadequacy of the federal claim is proper only when the claim is so insubstantial, implausible, foreclosed by prior decisions of [the Supreme] Court, or otherwise completely devoid of merit as not to involve a federal controversy.” Steel Co. v. Citizens for a Better Env‘t, 523 U.S. 83, 89, 118 S.Ct. 1003, 1010 (1998) (internal quotation marks
Inasmuch as the District Court had jurisdiction under
The Supreme Court in City of Chicago v. International College of Surgeons, 522 U.S. 156, 164-65, 118 S.Ct. 523, 529 (1997), indicated that a district court may exercise supplemental jurisdiction if the case before it involves claims “derive[d] from a common nucleus of operative fact such that the relationship
Though we do not predicate our result on this point we note that if the District Court could not exercise jurisdiction in this case it well may be that there would not be any court in which plaintiff States could have brought their claims against the Federal Defendants under their unclaimed property acts. After all, the New Jersey state courts are well aware that section 702 “does not waive sovereign immunity in actions in a state court” and thus they would not entertain an action seeking an order enjoining the Securities and Exchange Commission from prosecuting an administrative complaint against the plaintiff in the state court action. First Jersey Secs., Inc. v. Sec. Exch. Comm‘n, 476 A.2d 861, 867-68 (N.J. Super. Ct. App. Div. 1984). In view of First Jersey Securities we see no reason to believe that even without regard for federal court intervention through the exercise of removal jurisdiction or Supreme Court appellate review, the New Jersey courts would have entertained this action if the State of New Jersey had initiated the case in the New Jersey Superior Court and named the Federal Defendants as defendants. Of course, a result that the States did not have any forum in which to bring their claims surely would have been inconsistent with the intent of Congress in adopting the 1976 APA amendments.
B. State-Law Claims and the Supremacy Clause
Inasmuch as we have determined that sovereign immunity does not bar this action and that the District Court had constitutional and statutory jurisdiction we finally reach the substantive aspects of the case. We start this discussion by recognizing that although this case is essentially a dispute over the application of federal law, the States’ claims arise from their attempt to enforce their unclaimed property acts against the Federal Government. The Government asserts that these claims run afoul of the
1. Federal Preemption
Federal preemption doctrine “provid[es] Congress with the power to preempt state legislation if it so intends.” Roth v. Norfalco LLC, 651 F.3d 367, 374 (3d Cir. 2011) (internal quotation marks and citation omitted). There are three types of preemption: express preemption and two types of implied preemption, field preemption and conflict preemption. Farina v. Nokia Inc., 625 F.3d 97, 115 (3d Cir. 2010) (citing Hillsborough Cnty. v. Automated Med. Labs., Inc., 471 U.S. 707, 713, 105 S.Ct. 2371, 2375 (1985)). There is express preemption when a federal enactment contains language that is explicit about its preemptive effect. See St. Thomas-St. John Hotel & Tourism Ass‘n v. Gov‘t of the V.I., 218 F.3d 232, 238 (3d Cir. 2000). There is field preemption when Congress has regulated an area so pervasively that it has not left room for state regulation. See United States v. Locke, 529 U.S. 89, 111, 120 S.Ct. 1135, 1149 (2000). There is conflict preemption when compliance with both state and federal law is impossible, “or where state law erects an ‘obstacle to the accomplishment and execution of the full purposes and objectives of Congress.‘” Farina, 625 F.3d at 115 (internal quotation marks omitted). Moreover, “[w]here Congress has delegated the authority to regulate a particular field to an administrative agency, the agency‘s regulations issued pursuant to that authority have no less preemptive effect than federal statutes.” Fellner v. Tri-Union Seafoods, LLC, 539 F.3d 237, 243 (3d Cir. 2008). Although courts define the
There are two guiding principles of preemption jurisprudence. “‘First, the purpose of Congress is the ultimate touchstone in every pre-emption case.‘” Wyeth v. Levine, 555 U.S. 555, 565, 129 S.Ct. 1187, 1194 (2009) (quoting Medtronic, Inc. v. Lohr, 518 U.S. 470, 485, 116 S.Ct. 2240, 2259 (1996)). Second, we are guided by a “presumption against preemption,” Roth, 651 F.3d at 375 (citing Deweese v. Nat‘l R.R. Passenger Corp., 590 F.3d 239, 246 (3d Cir. 2009)), because we assume “that the historic police powers of the States [are] not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.” Levine, 555 U.S. at 565, 129 S.Ct. at 1194-95 (quoting Lohr, 518 U.S. at 485, 116 S.Ct. at 2250) (internal quotation marks omitted). However, the presumption against preemption does not apply where Congress has adopted the statute claimed to have preemptive effect to apply in a field that “the States have [not] traditionally occupied.” Buckman Co. v. Plaintiffs’ Legal Comm., 531 U.S. 341, 347-48, 121 S.Ct. 1012, 1017 (2001) (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 1152 (1947)).
We agree with the District Court that the federal statutes and regulations pertaining to United States savings bonds preempt the States’ unclaimed property acts insofar as the States
The States’ unclaimed property acts conflict with federal law regarding United States savings bonds in multiple ways. First, in advancing the goal of making the bonds “attractive to savers and investors,” see Free, 369 U.S. at 669, 82 S.Ct. at 1093, Congress has authorized the Secretary to implement regulations specifying that “owners of savings bonds may keep
The States assert that the “restrictions on ‘payment’ in these regulations foreclose only redemption of bonds by persons who are not owners, not application of historic laws governing disposition of property not redeemed by its owner.” Appellants’ br. at 29. In other words, the States argue that because they
This change in redemption procedures if the States obtain custody of the proceeds of the matured but unredeemed bonds might not be a small thing from the point of view of an owner of a bond seeking to redeem it. As we explained above, redemption of a matured savings bond is now an uncomplicated process involving little more than a trip to a bank, a venue likely to be familiar to the owner of the bond, with the bondholder
The Government also has expressed concerns that a substitution of the plaintiff States as obligors on the bonds could result in the United States being subject to multiple obligations on a single savings bond. Thus, the Government fears that bondholders still would have a contractual right to payment from the United States based on the terms of the bonds even though the various state unclaimed property acts would give bondholders the right to recover the proceeds of property deemed “abandoned” or “unclaimed” from the States. Although the States have indicated that they would indemnify the Federal Government if it was required to make payments on matured bonds to bondholders after the Government delivered the proceeds of the bonds to the States pursuant to their unclaimed property acts, the possible availability of indemnification does not change the fact that application of the States’ acts in the redemption process significantly would alter that process as
The States note that the federal statutes and regulations implementing the savings bond program do not include provisions for the disposition of abandoned property, and thus they argue that federal law leaves room for the operation of their unclaimed property acts in this field. However, the bond proceeds are not “abandoned” or “unclaimed” under federal law because the owners of the bonds may redeem them at any time after they mature, and thus Congress has not been silent with respect to the fate of the proceeds of unclaimed bonds. The States’ efforts to impose the status of “abandoned” or “unclaimed” on the Federal Government‘s obligations only underscores the conflict between federal and state law, in which federal law must prevail. 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 a state would do exactly that. Of course, in a preemption analysis
2. Intergovernmental Immunity
The Supreme Court‘s decision in McCulloch, 17 U.S. (4 Wheat.) at 322, established the bedrock principle that “the States have no power, by taxation or otherwise, to retard, impede, burden, or in any manner control, the operations of the constitutional laws enacted by Congress to carry into execution the powers vested in the national government.” Thus, that famous decision is the source of the doctrine of intergovernmental immunity. We agree with the District Court that the States’ desired application of their unclaimed property acts would violate the constitutional principles of intergovernmental immunity that “states may not directly regulate the federal government‘s operations or property.” See Arizona v. Bowsher, 935 F.2d 332, 334 (D.C. Cir. 1991) (citing Hancock v. Train, 426 U.S. 167, 178-80, 96 S.Ct. 2006, 2012-13 (1976)).
First, in this regard, the unclaimed property acts would interfere with Congress‘s “[p]ower to dispose of and make all
The plaintiff States also rely on In re Moneys Deposited, 243 F.2d 443 (3d Cir. 1957), where we addressed the status of
As did the District Court, we find Bowsher to be persuasive on this point. In Bowsher, 23 states sued the Comptroller General of the United States and the Secretary claiming the right to custody pursuant to their respective unclaimed property acts of money held by the Treasury pursuant to
The money here is federal money. That various persons have claims against the United States in amounts exactly matching the funds, and intended by Congress to be paid from these funds, does not give those individuals a property interest in the money. Thus, the states’ plan would amount to direct regulation of federal property. In extracting funds from the Treasury, the states would effectively subordinate federal property to their own laws and appropriate that property, at least for a period, for themselves.
Id. Accordingly, the court held that the states’ plan to take custody of the money violated the doctrine of intergovernmental immunity.
We recognize that the States argue that their unclaimed property acts come, in the words of Bowsher, “with a patina of ancient history,” see id. at 335, and that there is a presumption against preemption of laws of such origin. Nevertheless, we see no reason to reach a different result here from that reached in Bowsher. Although the United States must pay holders of matured bonds the sums due on the bonds when the owners present them for payment, until it does so the funds remain federal property, and the Government may use the proceeds from the sale of savings bonds “for expenditures authorized by [federal] law,”
For similar reasons, we hold that an order compelling the accounting that the plaintiff States request would violate the governmental immunity of the United States. As the District Court observed, the States’ unclaimed property acts impose “onerous record-keeping and reporting requirements, [and] civil and criminal penalties for failure to comply.” App. at 29; see, e.g.,
When Congress was considering legislation in the late 1980s that would have required the Federal Government to transfer unclaimed money obtained from various sources — including savings bonds — to the states, the General Accounting Office estimated that tracking owners of such property would cost over $23 million.27 See app. at 185. Although the States assert that they will not seek to enforce civil and criminal penalties in the event the Federal Government fails to comply with their respective acts, even if future State officials adhere to this policy, the fact remains that forcing the Federal Government
C. The Tenth Amendment
The
In considering the States’
V. CONCLUSION
Though the United States pursuant to
Notes
The Department of the Treasury will recognize a claim against an owner of a savings bond and conflicting claims of ownership of, or interest in, a bond between coowners or between the registered owner and the beneficiary, if established by valid, judicial proceedings, but only as specifically provided in this Subpart. Section 315.23 [or section 353.23] specifies the evidence required to establish the validity of the judicial proceedings.
(b) General notice of proposed rule making shall be published in the Federal Register, unless persons subject thereto are named and either personally served or otherwise have actual notice thereof in accordance with law. . . .
Except when notice or hearing is required by statute, this subsection does not apply—
(A) to interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice; or
(B) when the agency for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.
(c) After notice required by this section, the agency shall give interested persons an opportunity to participate in the rule making through submission of written data, views, or arguments with or without opportunity for oral presentation. . . .