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Laturner v. United States

United States Court of Appeals for the Federal Circuit

August 13, 2019, Decided

2018-1509, 2018-1510

Opinion

 [*1357]  Dyk, Circuit Judge:

During the Great Depression, President Franklin D. Roosevelt signed legislation allowing the U.S. Department of Treasury ("Treasury") to issue savings bonds, a type of debt security designed to be affordable and attractive to even the inexperienced investor. Under longstanding federal law, savings bonds never expire and may be redeemed at any time after maturity. See, e.g., 31 U.S.C. § 3105(b)(2)(A); 31 C.F.R. § 315.35(c). Federal law also limits the ability to transfer bonds. 31 C.F.R. § 315.15. Kansas and Arkansas (the "States") passed so-called "escheat" laws providing that if bond owners do not redeem their savings bonds within five years after maturity, the bonds will be considered abandoned and title will transfer (i.e., "escheat") to the state two or three years thereafter. Kan. Stat. Ann. §§ 58-3935(a)(16), 58-3979(a) (2000); Ark. Code Ann. § 18-28-231(a)-(b) (2015).

Pursuant to these escheat laws, the States sought to redeem a large but unknown number of bonds, estimated to be worth hundreds of millions of dollars. When Treasury refused, the States filed suit in the Court of Federal Claims ("Claims Court"). The Claims Court agreed with the States, holding that Treasury must pay the proceeds of the relevant bonds—once it has identified those bonds—to [**3]  the States. The cases were certified for interlocutory appeal to this court.

We reverse for two independent reasons. First, we hold that federal law preempts the States' escheat laws. That means that the bonds belong to the original bond owners, not the States, and thus the States cannot redeem the bonds. Second, even if the States owned the bonds, they could not obtain any greater rights than the original bond owners, and, under Federal law, 31 C.F.R. § 315.29(c), a bond owner must provide the serial number to redeem bonds six years or more past maturity, which includes all bonds at issue here. Because the States do not have the physical bonds or the bond serial numbers, Treasury properly denied their request for redemption.

Background

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933 F.3d 1354 *; 2019 U.S. App. LEXIS 24025 **; 2019 WL 3788255

JAKE LATURNER, TREASURER OF THE STATE OF KANSAS, ANDREA LEA, IN HER OFFICIAL CAPACITY AS AUDITOR OF THE STATE OF ARKANSAS, Plaintiffs-Appellees v. UNITED STATES, Defendant-Appellant

Subsequent History: US Supreme Court certiorari denied by LaTurner v. United States, 2020 U.S. LEXIS 4072 (U.S., Oct. 5, 2020)

US Supreme Court certiorari denied by Lea v. United States, 2020 U.S. LEXIS 3850 (U.S., Oct. 5, 2020)

Prior History:  [**1] Appeals from the United States Court of Federal Claims in Nos. 1:13-cv-01011-EDK, 1:16-cv-00043-EDK, Judge Elaine Kaplan.

Lea v. United States, 132 Fed. Cl. 705, 2017 U.S. Claims LEXIS 931 (Aug. 8, 2017)Laturner v. United States, 133 Fed. Cl. 47, 2017 U.S. Claims LEXIS 932 (Aug. 8, 2017)

Disposition: REVERSED.

CORE TERMS

redeem, escheat, serial, savings, maturity, ownership, abandoned, redemption, preempted, holders, registration, discovery, custody, registered, unredeemed, deference

Constitutional Law, Supremacy Clause, Federal Preemption, Supreme Law of the Land, Governments, Federal Government, Claims By & Against, Federal Government, Estate, Gift & Trust Law, Estate Administration, Intestate Succession, Escheat, Administrative Law, Judicial Review, Standards of Review, Rule Interpretation, Evidence, Relevance, Relevant Evidence, Contracts Law, Contract Interpretation, Good Faith & Fair Dealing, Governmental Information, Freedom of Information, Courts, Courts of Claims, Civil Procedure, Discovery & Disclosure, Discovery, Business & Corporate Compliance, Contracts Law, Contract Conditions & Provisions, Waivers, Bill of Rights, Fundamental Rights, Procedural Due Process, Eminent Domain & Takings