Memo Money Order Co. Inc. v. Sidamon–eristoff

• Decision Date: 18 November 2010
• Docket Number: Civil No. 10–5460 (FLW).
• Citation: 754 F.Supp.2d 661
• Parties: MEMO MONEY ORDER CO., INC., Plaintiff,v.SIDAMON–ERISTOFF, et al., Defendants.
• Court: U.S. District Court — District of New Jersey

754 F.Supp.2d 661

MEMO MONEY ORDER CO., INC., Plaintiff,

v.SIDAMON–ERISTOFF, et al., Defendants.

Civil No. 10–5460 (FLW).

United States District Court, D. New Jersey.

Nov. 18, 2010.

Geoffrey B. Gompers, Moorestown, NJ, for Plaintiff.Robert T. Lougy, Livision of Law & Public Safety R.J. Hughes Justice Complex, Trenton, NJ, for Defendants.

OPINION

WOLFSON, District Judge:

Plaintiff MEMO Money Order Co., Inc. (“Plaintiff” or “MEMO”), moves before the Court to enjoin Defendants Andrew P. Sidamon–Eristoff (“the Treasurer”), Treasurer of the State of New Jersey and Steven R. Harris, Administrator of Unclaimed Property of the State of New Jersey (collectively, “Defendants” or “State”), from enforcing Section 3 of 2010 N.J. Laws Chapter 25 (“Chapter 25”), New Jersey's recent amendment to its Unclaimed Property Act, N.J.S.A. 46:30B–1 et seq. , which section modifies the presumptive abandonment period for money orders from seven years to three years.¹ In its Verified Complaint, Plaintiff raises federal and state constitutional challenges under, inter alia, the Contract Clause, the Takings Clause, and Substantive Due Process. Defendants oppose the motion and move to dismiss the Complaint on the grounds of immunity and abstention. Recently, the Court rendered decisions in four other related cases which all involve substantially similar issues regarding the constitutionality of Chapter 25. Thus, for the purposes of this matter, the Court will refer to its prior Opinion dated November 13, 2010, wherever appropriate. For the reasons set forth below, the Court denies Defendants' motion to dismiss and denies Plaintiff's motion for injunctive relief.

BACKGROUND AND PROCEDURAL HISTORY

The following facts are not in dispute unless otherwise noted. Plaintiff is a multi-state issuer of money orders licensed in New Jersey to issue money orders through authorized delegates in the state. MEMO's money orders can be used by a customer as a one-time check to pay sum certain bills. Consumers purchase MEMO money orders from third-party delegates that charge the consumers the face amount requested together with a fee. According to MEMO, the continued vitality of its business depends on earning small up-front fees from the sale of money orders, and state-authorized service fees assessed against money orders that are not redeemed. The assessment of service charges is printed on the back of each MEMO money order.

Prior to the enactment of Chapter 25, New Jersey's Unclaimed Property Act provided that “any sum payable on a money order or similar written instrument that has been outstanding for more than seven years after its issuance is presumed abandoned unless the owner, within seven years, has communicated in writing with the issuer concerning it ....” Under the Act, MEMO is a “holder” of money orders it issues, and the purchaser is the “owner,” “apparent owner,” or “remitter” of the money order. See N.J.S.A. 46:30B–6b, 46:30B–6k and 46:30B–6q. As a holder, MEMO is deemed “a person, wherever organized or domiciled, who is the original obligor indebted to another on an obligation.” N.J.S.A. 46:30B–6g.

Furthermore, the Unclaimed Property Act permits the holder of a money order to impose a dormancy fee. However, the pre-amendment version imposed two limitations: (1) “[a] holder may not deduct from the amount of a travelers check or money order any charge imposed by reason of the failure to present the instrument for payment unless there is a valid and enforceable written contract between the issuer and the owner of the instrument pursuant to which the issuer may impose a charge and the issuer regularly imposes the charges and does not regularly reverse or otherwise cancel them;” and (2) “[t]he amount of the deduction shall be limited to an amount that is not unconscionable.”

Chapter 25 amends N.J.S.A. 46:30B–13 by altering the limitation on allowable money order dormancy fees by replacing the word “unconscionable” with language which provides that such fees “shall be limited to an amount not to exceed $2.00 per month.” N.J.S.A. 46:30B–13. Significantly, Chapter 25 also shortened the presumptive abandonment period for money orders from seven years to three years. See N.J.S.A. 46:30B–12 (“... any sum payable on a money order or similar written instrument that has been outstanding for more than three years after its issuance is presumed abandoned unless the owner, within three years, has communicated in writing with the issuer concerning it or otherwise indicated an interest as evidenced by a contemporaneous memorandum or other record on file prepared by an employee of the issuer.”). According to MEMO, because this provision applies retroactively, MEMO is obligated under Chapter 25 to remit $910,000.00 to the State, rather than approximately $93,000.00 under the original Unclaimed Property Act.

Plaintiff filed its Verified Complaint on October 21, 2010, alleging that Chapter 25 violated several federal and state constitutional provisions and seeking declaratory and injunctive relief. Subsequently, the Court issued an Order to Show Cause. In addition to opposing Plaintiff's motion for injunctive relief, Defendants move to dismiss the Verified Complaint on immunity and/or abstention grounds. Prior to the filing of the instant action, various plaintiffs filed separate complaints challenging the constitutionality of Chapter 25, raising similar arguments made by Plaintiff here. Those plaintiffs also moved for preliminary injunction, and to address the motions, the Court held a hearing on October 21, 2010, the same day MEMO filed its Verified Complaint. On November, 13, 2010, the Court decided those motions.

DISCUSSION

I. Immunity and Abstention

As a preliminary matter, Defendants move to dismiss this case contending that they are immune under the Eleventh Amendment, and this Court should abstain, pursuant to Burford v. Sun Oil Co., 319 U.S. 315, 318, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943), from hearing this case because Plaintiff essentially challenges central components of New Jersey's policy with regard to abandoned property. In that connection, Defendants caution that federal review of Plaintiffs' claims will disrupt New Jersey's continued efforts to integrate Chapter 25 within a policy of protecting unclaimed property. Defendants take the same position in this regard as in the other related cases, and the Court discerns no distinction in the cases warranting different treatment. Because the Court has previously rejected Defendants' arguments here and explained at length in its Opinion dated November 13, 2010, that Defendants are not immune from suit and that the Court has no basis to abstain under Burford, the parties can refer to the Court's Opinion for those explanations. See Opinion dated November 13, 2010, Sections I, II.

The Court also notes that Plaintiff indicated in its Reply Brief that there are two companion state cases currently pending in the Appellate Division, captioned MEMO Money Order Co. Inc. v. State of New Jersey, wherein Plaintiff challenges the State's capping of dormancy fees for money orders. During a telephone conference with the parties on November 15, 2010, the Court confirmed that because these state proceedings do not relate to any of the constitutional challenges in this action, those cases do not provide a basis for the Court to abstain.

II. Standard of Review

Plaintiff moves to preliminarily enjoin the implementation of Chapter 25. The Third Circuit Court of Appeals has outlined four factors that a court ruling on a motion for a preliminary injunction must consider: (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 the preliminary relief will be in the public interest. Crissman v. Dover Downs Entertainment Inc., 239 F.3d 357, 364 (3d Cir.2001) vacated on other grounds by 254 F.3d 467 (3d Cir.2001). The above factors merely “structure the inquiry” and no one element will necessarily determine the outcome. The court must engage in a delicate balancing of all the elements, and attempt to minimize the probable harm to legally protected interests between the time of the preliminary injunction to the final hearing on the merits. Constructors Association of Western Pa. v. Kreps, 573 F.2d 811, 815 (3d Cir.1978). The movant bears the burden of establishing these elements. Adams v. Freedom Forge Corp., 204 F.3d 475, 486 (3d Cir.2000).

The Court will first turn to the parties' contention with respect to the first factor—likelihood of success.

III. Likelihood of SuccessA. Contracts Clause

The Contracts Clause, found in Article I, § 10, of the Constitution, states that “No State shall ... pass any ... Law impairing the Obligation of Contracts.” To ascertain whether there has been a Contract Clause violation, a court must first inquire whether the change in state law has “operated as a substantial impairment of a contractual relationship.” General Motors v. Romein, 503 U.S. 181, 186, 112 S.Ct. 1105, 117 L.Ed.2d 328 (1992) (quotation omitted); Nieves v. Hess Oil Virgin Islands Corp., 819 F.2d 1237, 1243 (3d Cir.1987); Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 411, 103 S.Ct. 697, 74 L.Ed.2d 569 (1983). See also Transport Workers Union of America, Local 290 By and Through Fabio v. Southeastern Pennsylvania Transp., 145 F.3d 619, 621 (3d Cir.1998). “Thus, Contract Clause analysis requires three threshold inquiries: (1) whether there is a contractual relationship; (2) whether a change in a law has impaired that contractual relationship; and (3) whether the impairment is substantial.” Transport Workers, 145 F.3d at 621.

In this connection, the Court focuses its inquiry upon existing contracts—prospective application of a statute does not implicate the Contract...