New Jersey Retail Merchants Ass'n v. Sidamon–Eristoff

• Decision Date: 05 January 2012
• Docket Number: Nos. 10–4551,10–4716,11–1141,10–4715,10–4714,10–4553,11–1170.,10–4552,11–1164,s. 10–4551
• Parties: NEW JERSEY RETAIL MERCHANTS ASSOCIATION v. Andrew P. SIDAMON–ERISTOFF, Treasurer of the State of New Jersey; Steven R. Harris, Administrator of Unclaimed Property of the State of New Jersey, Appellants in 10–4551.New Jersey Food Council, a New Jersey Not–for–Profit Entity v. State of New Jersey; Andrew P. Sidamon–Eristoff, Treasurer of the State of New Jersey; Steven R. Harris, Administrator of Unclaimed Property of the State of New Jersey, Appellants in 10–4552.American Express Prepaid Card Management Corporation v. Andrew P. Sidamon–Eristoff, as Treasurer of the State of New Jersey; Steven R. Harris, as Administrator of Unclaimed Property of the State of New Jersey, Appellants in 10–4553.New Jersey Retail Merchants Association, Appellant in 10–4714 v. Andrew P. Sidamon–Eristoff, as Treasurer of the State of New Jersey; Steven R. Harris, as Administrator of Unclaimed Property of the State of New Jersey.New Jersey Food Council, a New Jersey Not–for–Profit Entity, Appellant in 10–4715 v. State of New Jersey; Andrew P. Sidamon–Eristoff, Treasurer of the State of New Jersey; Steven R. Harris, Administrator of Unclaimed Property of the State of New Jersey.American Express Prepaid Card Management Corporation, Appellant in 10–4716 v. Andrew P. Sidamon–Eristoff, as Treasurer of the State of New Jersey; Steven R. Harris, as Administrator of Unclaimed Property of the State of New Jersey.American Express Prepaid Card Management Corporation, Appellant in 11–1141 v. Andrew P. Sidamon–Eristoff, as Treasurer of the State of New Jersey; Steven R. Harris, as Administrator of Unclaimed Property of the State of New Jersey.New Jersey Food Council, a New Jersey Not–for–Profit Entity, Appellant in 11–1164 v. State of New Jersey; Andrew P. Sidamon–Eristoff, Treasurer of the State of New Jersey; Steven R. Harris, Administrator of Unclaimed Property of the State of New Jersey.New Jersey Retail Merchants Association, Appellant in 11–1170 v. Andrew P. Sidamon–Eristoff, as Treasurer of the State of New Jersey; Steven R. Harris, as Administrator of Unclaimed Property of the State of New Jersey.
• Court: U.S. Court of Appeals — Third Circuit

669 F.3d 374

NEW JERSEY RETAIL MERCHANTS ASSOCIATION

v.Andrew P. SIDAMON–ERISTOFF, Treasurer of the State of New Jersey; Steven R. Harris, Administrator of Unclaimed Property of the State of New Jersey, Appellants in 10–4551.New Jersey Food Council, a New Jersey Not–for–Profit Entity

v.State of New Jersey; Andrew P. Sidamon–Eristoff, Treasurer of the State of New Jersey; Steven R. Harris, Administrator of Unclaimed Property of the State of New Jersey, Appellants in 10–4552.American Express Prepaid Card Management Corporation

v.Andrew P. Sidamon–Eristoff, as Treasurer of the State of New Jersey; Steven R. Harris, as Administrator of Unclaimed Property of the State of New Jersey, Appellants in 10–4553.New Jersey Retail Merchants Association, Appellant in 10–4714

v.Andrew P. Sidamon–Eristoff, as Treasurer of the State of New Jersey; Steven R. Harris, as Administrator of Unclaimed Property of the State of New Jersey.New Jersey Food Council, a New Jersey Not–for–Profit Entity, Appellant in 10–4715

v.State of New Jersey; Andrew P. Sidamon–Eristoff, Treasurer of the State of New Jersey; Steven R. Harris, Administrator of Unclaimed Property of the State of New Jersey.American Express Prepaid Card Management Corporation, Appellant in 10–4716

v.Andrew P. Sidamon–Eristoff, as Treasurer of the State of New Jersey; Steven R. Harris, as Administrator of Unclaimed Property of the State of New Jersey.American Express Prepaid Card Management Corporation, Appellant in 11–1141

v.Andrew P. Sidamon–Eristoff, as Treasurer of the State of New Jersey; Steven R. Harris, as Administrator of Unclaimed Property of the State of New Jersey.New Jersey Food Council, a New Jersey Not–for–Profit Entity, Appellant in 11–1164

v.State of New Jersey; Andrew P. Sidamon–Eristoff, Treasurer of the State of New Jersey; Steven R. Harris, Administrator of Unclaimed Property of the State of New Jersey.New Jersey Retail Merchants Association, Appellant in 11–1170

v.Andrew P. Sidamon–Eristoff, as Treasurer of the State of New Jersey; Steven R. Harris, as Administrator of Unclaimed Property of the State of New Jersey.

Nos. 10–4551

10–4552

10–4553

10–4714

10–4715

10–4716

11–1141

11–1164

11–1170.

United States Court of Appeals, Third Circuit.

Argued Sept. 12, 2011.Filed: Jan. 5, 2012.

Preempted

N.J.S.A. 46:30B–42.1(c)

Robert T. Lougy (Argued), Gregory A. Spellmeyer, Office of Attorney General of New Jersey, Trenton, NJ, for Andrew P. Sidamon–Eristoff, Steven R. Harris and the State of New Jersey.

Jennifer Borek, James M. Burns (Argued), Genova Burns, Newark, NJ, for New Jersey Retail Merchants Association.Edward T. Kole (Argued), Wilentz, Goldman & Spitzer, Woodbridge, NJ, for New Jersey Food Council.Philip R. Sellinger (Argued), Louis Smith, Greenberg Traurig, Florham Park, NJ, Edward J. Reich, Richard M. Zuckerman (Argued), New York, NY, for American Express Prepaid Card Management Corporation.Joseph R. Scholz, McCarter & English, Newark, NJ, for Amicus Appellee, Limited Brands, Inc.Paul J. Watford, Henry Weissmann, Munger, Tolles & Olson, Los Angeles, CA, for Amicus Appellee, Chamber of Commerce of the United States.Michael Houghton, Morris, Nichols, Arsht & Tunnell, Wilmington, DE, for Amicus Curiae, Unclaimed Property Professionals Organization.

OPINION OF THE COURT

FISHER, Circuit Judge.

In this consolidated appeal, New Jersey Retail Merchants Association (“Retail Merchants”), New Jersey Food Council (“Food Council”), and American Express Prepaid Card Management Corporation (“Amex Prepaid”) (collectively, “SVC Issuers”) challenge the constitutionality of 2010 N.J. Laws Chapter 25 (“Chapter 25”), which amended New Jersey's unclaimed property statute, N.J. Stat. Ann. § 46:30B (2002), and provided for the custodial escheat of stored value cards (“SVCs” or “gift cards”) for the first time.¹ SVC Issuers filed a motion for preliminary injunction against New Jersey Treasurer Andrew P. Sidamon–Eristoff (“Treasurer”) and New Jersey Unclaimed Property Administrator Steven R. Harris (collectively, “New Jersey” or “State”) in the United States District Court on the basis that Chapter 25 violates the Contract Clause, the Takings Clause, the Supremacy Clause, the Substantive Due Process Clause, and the Commerce Clause ² of the United States Constitution. The District Court granted the motion in part and denied it in part. For the reasons discussed below, we will affirm.

I. Background

SVCs, often called gift cards, are forms of electronic payment that come in two varieties: “closed loop” and “open loop” cards. Closed loop cards may be redeemed only for merchandise or services from the retailer that issued the card. Retail Merchants and Food Council issue only closed loop cards. Open loop cards may be redeemed at a variety of retail stores, including Internet sites, not affiliated with the issuer of the card. Amex Prepaid issues open loop cards. Some open loop cards are redeemable for cash, but most open loop cards issued by Amex Prepaid are only redeemable for merchandise or services.

When the purchaser tenders payment for the face value of the SVC, the issuer, in exchange, “promises to provide to the bearer [of the gift card] merchandise of equal value to the remaining balance” on the card. N.J. Stat. Ann. 56:8–110c (2006). The funds for the SVCs are held in a bank account maintained by the card issuers or in a separate database. Some issuers issue the cards directly, while others use subsidiaries, vendors, or cooperatives to issue the cards. Once the SVC is redeemed for purchase, each issuer recognizes a profit based on the difference between the issuer's cost of acquiring the goods or of offering the services and the retail price paid by the customer.

All fifty states, and the District of Columbia, have a set of unclaimed property laws (often called escheat laws), most of which are based on a version of the Uniform Unclaimed Property Act (“UUPA”). These laws require that once property has been deemed abandoned, the holder turn it over to the state; however, the original property owner still maintains the right to the property. The purpose of unclaimed property laws is to provide for the safekeeping of abandoned property and then to reunite the abandoned property with its owner. Usually, before turning over abandoned property to the state, the holder must attempt to return the property by contacting the owner, using the owner's name and last known address. If the holder is unable to return the property to the owner and turns it over to the state, the holder provides the state with the name and last known address of the owner. The holder is no longer liable to the property owner once it turns over the property to the state. The state then makes an effort to reunite the owner with the property. Under New Jersey's custodial escheat statute, the rightful owner may file a claim to recover the property at any time after the property is turned over to the State.

Prior to the enactment of Chapter 25, gift certificates (the predecessors to SVCs) were not covered by New Jersey's escheat statute. See In re November 8, 1996, Determination of the State of N.J., Dept. of the Treasury, Unclaimed Prop. Office, 309 N.J.Super. 272, 706 A.2d 1177, 1179–81 (1998). This was a departure from the UUPA, which did provide for the escheat of gift certificates. Id. at 1179. The key reason New Jersey did not escheat gift certificates was that they were not redeemable for cash. Id. at 1179–80. If the State were to escheat gift certificates, the issuers would have had to turn over the value of the gift certificates in cash to the State, when they were originally bound to turn over only merchandise or services to the owner. Id. at 1179. The Superior Court of New Jersey found that the State's escheat law was not intended to “impose an obligation different from the obligation undertaken to the original owner” of the gift certificates. Id. at 1180.

Chapter 25 now provides for the escheat of SVCs, which include closed loop cards, open loop cards redeemable only for merchandise or services, and open loop cards redeemable only for cash. N.J. Stat. Ann. 46:30B–6t (2010). When an SVC is presumed abandoned, “the amount presumed abandoned is the amount credited to the recipient,” which is the entire remaining balance on the gift cards. N.J. Stat. Ann. 46:30B–43 (2002). Chapter 25 also authorizes the Treasurer to grant exemptions to certain classes of businesses based on good cause. N.J. Stat. Ann. 46:30B–42.1f (2010). Finally, the statute does not apply to SVCs “issued under a promotional or customer loyalty program or a charitable program for which no consideration has been tendered.” N.J. Stat. Ann. 46:30B–42.1e (2010). Neither does it apply to SVCs issued by an issuer that sold less than $250,000 worth of SVCs in the past year. Id.

Pertinent to this case, Chapter 25 presumes SVCs to be abandoned after two years of inactivity and requires issuers to transfer to the State the remaining value on the SVCs at the end of the two-year abandonment period. N.J. Stat. Ann. 46:30B–42.1a (2010) (Chapter 25, § 5a). Under Chapter 25, issuers “shall obtain the name and address of the purchaser or owner of each stored value card issued or sold and shall, at a minimum, maintain a record of the zip code of the owner or purchaser.” N.J. Stat. Ann. 46:30B–42.1c (2010) (Chapter 25, § 5c). We will refer to this as the “data collection provision.” In addition, the same subsection provides that

[i]f the issuer of a stored value card does not have the name and address of the purchaser or owner of the stored value card, the address of the owner or purchaser of the stored value card shall assume the address of the place where the stored value card was purchased or issued and shall be reported to New Jersey if the place of business where the stored value card was sold or issued is located in New Jersey.

Id. This provision will be referenced as the “place-of-purchase presumption.”

Since Chapter 25 was enacted, the Treasurer...