American Express Travel Related Servs., Inc. v. Sidamon–Eristoff

Decision Date05 January 2012
Docket NumberNo. 10–4328.,10–4328.
Citation669 F.3d 359
PartiesAMERICAN EXPRESS TRAVEL RELATED SERVICES, INC., Appellant 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.
CourtU.S. Court of Appeals — Third Circuit

OPINION TEXT STARTS HERE

Philip R. Sellinger (Argued), Louis Smith, Greenberg Traurig, Florham Park, NJ, Richard M. Zuckerman (Argued), SNR Denton US, New York, NY, for Appellant.

Robert T. Lougy (Argued), Gregory A. Spellmeyer, Office of Attorney General of New Jersey, Trenton, NJ, for Appellees.

Before: SCIRICA, SMITH and FISHER, Circuit Judges.

OPINION OF THE COURT

FISHER, Circuit Judge.

American Express Travel Related Services (Amex) challenges 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 retroactively reduced the period after which travelers checks are presumed abandoned from fifteen years to three years.1 Amex 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 District Court on the grounds that Chapter 25's provision reducing the abandonment period for travelers checks violates the Due Process Clause, the Contract Clause, the Takings Clause, and the Commerce Clause of the United States Constitution. The District Court denied Amex's motion, holding that Amex failed to show a likelihood of success on the merits of its claims. Amex filed a timely appeal. For the reasons discussed below, we will affirm the District Court's order.

I. Background and Procedural History

Amex Travelers Cheques (“TCs”) 2 are preprinted checks for amounts ranging from $20 to $100. Each one is identifiable based on a unique serial number. Amex maintains that the TCs never expire, so they are contractually obligated to honor the TCs once they are issued. Amex sells TCs for the face value amount, normally through a third party bank or travel service. The third party can charge a small fee, which it retains, but Amex does not charge a fee beyond the face value of the TCs. Amex claims that it can sell TCs without charging a fee because its contractual relationship with TC owners gives Amex the right to retain, use, and invest funds from the sale of TCs from the date of sale until the date the TCs are cashed or used. Amex asserts that this right to invest the funds is integral to the contract between TC owners and Amex, and that it relies on these invested funds to remain profitable in the TC business.

When a TC is sold, the third party seller transmits the funds to Amex and provides Amex with the TC's serial number, its amount, and the date and place of sale. Generally, the seller does not provide the purchaser's name, address, or any other identifying information. When Amex sells TCs directly to consumers, it retains only the same information that it receives from third party sellers.

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 while 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.

However, travelers checks operate differently because issuers like Amex generally do not obtain the names or addresses of the purchasers. Thus, the requirement that holders send notice to the owner at the last known address before turning over such property to the State does not apply to travelers checks. Travelers check issuers are also exempted from the requirement to include the owner's name and last known address on unclaimed property reports. N.J. Stat. Ann. § 46:30B–47 (2002). Amex sends only the serial number, amount, and date of sale when TCs are sent to the State as unclaimed property. If Amex determines that a cashed TC has a serial number indicating that it has been paid to a state as unclaimed property, Amex seeks to reclaim those funds from that state. In New Jersey, when such claims are filed, the Treasurer returns the funds with interest.

Until recently, all fifty states had a fifteen-year abandonment period for travelers checks.3 But on June 24, 2010, the New Jersey Legislature passed Chapter 25, which shortened the abandonment period for travelers checks from fifteen years to three years. N.J. Stat. Ann. § 46:30B–11 (2010). The purpose of the statute was to “protect New Jersey consumers from certain commercial dormancy fee practices and to modernize New Jersey's unclaimed property laws.” State of N.J. Assemb. Budget Comm., Statement to Assembly, No. 3002, 214th Leg., at 1 (June 24, 2010). Under the State's unclaimed property law, after an issuer transfers the presumed abandoned property to the State, the property is then administered through New Jersey's unclaimed property system. The State preserves the property in perpetuity for the owner, N.J. Stat. Ann. § 46:30B–9 (2002), or for another state that can prove a superior right of escheat. N.J. Stat. Ann. § 46:30B–81 (2002).

On September 23, 2010, Amex filed a complaint in the United States District Court for the District of New Jersey, alleging that Chapter 25 violated the Due Process Clause, the Contract Clause, the Takings Clause, and the Commerce Clause of the Constitution. Amex also filed a motion for preliminary injunction, seeking to enjoin the State from enforcing Chapter 25. On November 13, 2010, the District Court denied Amex's motion for preliminary injunction with respect to travelers checks. Amex filed a timely appeal.

II. Standard of Review

We generally review a district court's [grant or] denial of a preliminary injunction for abuse of discretion[,] but review the underlying factual findings for clear error and examine legal conclusions de novo.” Brown v. City of Pittsburgh, 586 F.3d 263, 268 (3d Cir.2009) (citation omitted). We have jurisdiction to review the order [granting or] denying a preliminary injunction under 28 U.S.C. § 1292(a)(1).” Id. at 268 n. 6.

III. Discussion

A court must consider four factors when ruling on a motion for preliminary injunction: (1) whether the movant has shown a reasonable probability of success on the merits; (2) whether the movant will be irreparably injured by denial of the relief; (3) whether granting preliminary relief will result in even greater harm to the nonmoving party; and (4) whether granting preliminary relief will be in the public interest.” Crissman v. Dover Downs Entm't Inc., 239 F.3d 357, 364 (3d Cir.2001). The moving party's failure to show a likelihood of success on the merits “must necessarily result in the denial of a preliminary injunction.” In re Arthur Treacher's Franchisee Litig., 689 F.2d 1137, 1143 (3d Cir.1982). We evaluate the likelihood of success on the merits of Amex's four constitutional claims accordingly.

A. Substantive Due Process Clause

The Due Process Clause of the Fourteenth Amendment provides that no state shall “deprive any person of life, liberty, or property, without due process of law.” U.S. Const. Amend. XIV, § 1. It is well established that the Due Process Clause contains both a procedural and substantive component. Nicholas v. Pa. State Univ., 227 F.3d 133, 139 (3d Cir.2000) (citing Planned Parenthood of S.E. Pa. v. Casey, 505 U.S. 833, 846–47, 112 S.Ct. 2791, 120 L.Ed.2d 674 (1992)). Substantive due process contains two lines of inquiry: one that applies when a party challenges the validity of a legislative act, and one that applies to the challenge of a non-legislative action. Id. In a case challenging a legislative act, as here, the act must withstand rational basis review. Id. To do so, the defendant must demonstrate (1) the existence of a legitimate state interest that (2) could be rationally furthered by the statute. Id. (citation omitted). The rational basis test, although “not a toothless one,” Mathews v. Lucas, 427 U.S. 495, 510, 96 S.Ct. 2755, 49 L.Ed.2d 651 (1976), requires significant deference to the legislature's decision-making and assumptions. Sammon v. N.J. Bd. of Med. Exam'rs, 66 F.3d 639, 645 (3d Cir.1995). [T]hose attacking the rationality of the legislative classification have the burden ‘to negative every conceivable basis which might support it[.] FCC v. Beach Commc'ns, Inc., 508 U.S. 307, 315, 113 S.Ct. 2096, 124 L.Ed.2d 211 (1993) (quoting Lehnhausen v. Lake Shore Auto Parts Co., 410 U.S. 356, 364, 93 S.Ct. 1001, 35 L.Ed.2d 351 (1973)).

Amex argues that the sole purpose behind enacting Chapter 25 was to raise revenue for the State, which is not a legitimate state interest. But under rational basis scrutiny, a court's inquiry is limited to whether the law “rationally furthers any legitimate state objective.” Malmed v. Thornburgh, 621 F.2d 565, 569 (3d Cir.1980) (emphasis added). It is enough that the State offers a conceivable rational basis for its action, and ...

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