PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______
No. 10-4328
______
AMERICAN 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
______
On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 3-10-cv-04890)
District Judge: Honorable Freda L. Wolfson
______
Argued September 12, 2011
Before: SCIRICA, SMITH and FISHER, Circuit Judges.
(Filed: January 5, 2012)
Philip R. Sellinger (Argued)
Louis Smith
Greenberg Traurig
200 Park Avenue
P.O. Box 677
Florham Park, NJ 07932
Richard M. Zuckerman (Argued)
SNR Denton US
1221 Avenue of the Americas, 24th Floor
New York, NY 10020
Counsel for Appellant
Robert T. Lougy (Argued)
Gregory A. Spellmeyer
Office of Attorney General of New Jersey
25 Market Street
Richard J. Hughes Complex
Trenton, NJ 08625
Counsel for Appellees
______
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
2
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
1
This opinion addresses the challenge brought against
2010 N.J. Laws Chapter 25 (“Chapter 25”) with respect to
travelers checks. We discuss the appeal filed by New Jersey
Retail Merchants Association, New Jersey Food Council, and
American Express Prepaid Card Management Corporation,
seeking to enjoin Chapter 25 with respect to stored value
cards (“SVCs”), in a separate opinion.
2
We use “TCs” to refer to Amex Travelers Cheques
specifically, as opposed to travelers checks generally.
3
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
4
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.
5
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
3
Recently, Kentucky also shortened its abandonment
period for travelers checks from fifteen years to seven years.
Although Amex successfully challenged Kentucky’s statute
in federal district court on substantive due process grounds,
Am. Express Travel Related Serv. v. Kentucky, 597 F. Supp.
2d 717 (E.D. Ky. 2009), the United States Court of Appeals
for the Sixth Circuit reversed and remanded, holding that the
statute withstood rational basis scrutiny. Am. Express Travel
Related Servs. v. Kentucky, 641 F.3d 685 (6th Cir. 2011).
6
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.
7
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 (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 (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
(1993) (quoting Lehnhausen v. Lake Shore Auto Parts Co.,
410 U.S. 356, 364 (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
8
added). It is enough that the State offers a conceivable
rational basis for its action, and “[t]he court may even
hypothesize the motivations of the state legislature to find a
legitimate objective promoted by the provision under attack.”
Id. (citation omitted). It is “constitutionally irrelevant
whether this reasoning in fact underlay the legislative
decision . . . .” Fleming v. Nestor, 363 U.S. 603, 612 (1960).
The State submits that Chapter 25 was enacted to
modernize the State’s unclaimed property laws by making the
abandonment period for travelers checks more consistent with
that of other property. The State also argues that Chapter 25
provides greater protection for property owners. They reason
that shortening the abandonment period will facilitate the
transfer of the property from a private company to the State at
an earlier time; this would provide greater protection for
property owners because private companies are subject to
greater economic instability compared to a perpetually
solvent government entity. In general, taking custody of
abandoned property is a legitimate state interest. See
Delaware v. New York, 507 U.S. 490, 497 (1993) (“States as
sovereigns may take custody of or assume title to abandoned
personal property. . . .”). We agree that, as a corollary, the
State has a legitimate interest in protecting its property
owners and modernizing its unclaimed property laws to
promote consistency. Accordingly, we reject Amex’s
contention that Chapter 25 lacks a legitimate state interest.
Amex contests that even if there are legitimate state
interests, Chapter 25 fails to rationally further these goals.
Because Amex has the burden of rebutting every conceivable
rational basis, see Beach Commc’ns, 508 U.S. at 315, we
examine each of Amex’s arguments in turn.
9
Amex first argues that shortening the abandonment
period has no rational relationship to increasing property
protection because 90% of travelers checks not used after
three years are used within fifteen years. Thus, Amex
contends, it is irrational to conclude that travelers checks can
be presumed abandoned after three years. But the statistics
also show that over 96% of all travelers checks are redeemed
within three years. Decl. of Susan Helms at 3, Am. Express
Travel Related Servs., 755 F. Supp. 2d 556 (D. N.J. 2010)
(No. 10-4328). Even if Amex disagrees with the State
Legislature’s presumption that travelers checks unredeemed
after three years are abandoned, the rational basis test does
not require mathematical precision in the legislature’s
decisions. See Heller v. Doe, 509 U.S. 312, 321 (1993).
“[L]egislative choice . . . may be based on rational
speculation unsupported by evidence or empirical data.”
Beach Commc’ns, 508 U.S. at 315. Thus, Amex’s argument
is insufficient to overcome rational basis scrutiny.
Amex next argues that shortening the abandonment
period for travelers checks does not further Chapter 25’s
stated purpose of modernizing the State’s unclaimed property
laws. But the State has a conceivable legitimate interest in
making its unclaimed property laws more consistent for ease
of administration. Chapter 25 accomplishes this by making
the abandonment period for travelers checks the same as
checks, drafts, and other similar negotiable instruments. See
N.J. Stat. Ann. § 46:30B-16 (2002). Amex responds that
unclaimed property laws require establishing different time
periods based upon the nature of the property, so consistency
is not a rational basis for selecting an abandonment period.
But state laws cannot be invalidated based on mere policy
disagreements. See Casey, 505 U.S. at 849 (holding that
10
under rational basis scrutiny, courts are not free to invalidate
state law because they disagree with the underlying policy
decisions). Because modernizing unclaimed property laws
through consistent abandonment periods is a conceivable
rational basis for enacting Chapter 25, Amex fails to
overcome rational basis scrutiny. 4
In addition, the State Legislature could have rationally
believed that the shorter abandonment period better protected
customers by giving custody of the property to the State at an
earlier time. Conceivably, there are benefits to having
property safeguarded by a perpetually-solvent sovereign
instead of a private entity with a greater risk of insolvency. In
addition, the State can hold the travelers check funds in
perpetuity and must invest unclaimed property funds more
conservatively than Amex is required to invest its TC funds.
Compare N.J. Stat. Ann. § 17:15C-2 (2000) (permitting
investment in “any investment which is rated in one of the
three highest rating categories by a nationally recognized
statistical rating organization”) with N.J. Stat. Ann. § 46:30B-
75 (2000) (restricting investments of funds of Unclaimed
Property Trust Fund to government bonds or interest-bearing
notes or obligations). The State has offered several legitimate
interests that justify shortening the abandonment period for
travelers checks from fifteen years to three years. Chapter 25
4
Amex also contends that changing the abandonment
period does not rationally further the statute’s purpose of
reuniting property with its owners because the State does not
have the names and addresses of travelers check purchasers.
But, as discussed above, changing the abandonment period
conceivably furthers other rational bases, which is sufficient
for Chapter 25 to survive rational basis scrutiny.
11
rationally furthers these interests, and Amex does not meet its
burden of defeating every conceivable basis that might
support Chapter 25’s enactment. See Beach Commc’ns, 508
U.S. at 315. Therefore, Amex fails to show a likelihood of
success on the merits of its substantive due process claim.
B. Contract Clause
The Contract Clause under Article I, Section 10,
Clause 1 of the U.S. Constitution provides that “[n]o 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.” Gen. Motors Corp. v. Romein,
503 U.S. 181, 186 (1992) (citations omitted); Nieves v. Hess
Oil Virgin Islands Corp., 819 F.2d 1237, 1243 (3d Cir. 1987)
(citations omitted). If this threshold inquiry is met, the court
must then determine “whether the law at issue has a
legitimate and important public purpose.” Transport Workers
Union of Am., Local 290 v. S.E. Pa. Transp. Auth., 145 F.3d
619, 621 (3d Cir. 1998). If so, the court must ascertain
“whether the adjustment of the rights of the parties to the
contractual relationship was reasonable and appropriate in
light of that purpose.” Id. Where the contract is between
private parties, courts may “defer to legislative judgment as to
the necessity and reasonableness of a particular measure.”
U.S. Trust Co. of N.Y. v. New Jersey, 431 U.S. 1, 23 (1977).
But this review of legislative judgment is more exacting than
the rational basis standard applied in the due process analysis.
Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467 U.S.
717, 733 (1984).
12
Amex fails to show that Chapter 25 imposes a
substantial impairment on Amex’s contractual relationships
with TC owners. While Amex has the right to use and invest
TC funds until the date the TC is cashed or sold, the duration
of use is further subject to the lawful abandonment period set
by unclaimed property laws. The Supreme Court has long
established that
the contract of deposit does not give the banks a
tontine right to retain the money in the event
that it is not called for by the depositor. It gives
the bank merely the right to use the depositor’s
money until called for by him or some other
person duly authorized. If the deposit is turned
over to the state in obedience to a valid law, the
obligation of the bank to the depositor is
discharged.
Sec. Sav. Bank v. California, 263 U.S. 282, 286 (1923)
(citation omitted). In Anderson National Bank v. Luckett, the
Supreme Court again stated that “[s]ince the bank is a debtor
to its depositors, it can interpose no due process or contract
clause objection to payment of the claimed deposits to the
state, if the state is lawfully entitled to demand payment . . . .”
321 U.S. 233, 242-43 (1944) (citation omitted). Like banks,
Amex, as a debtor to the TC purchasers, only has the right to
use the funds received from issuing a TC until either the
owner or the State, under a valid law, claims the funds.
Accordingly, a state’s ability to claim abandoned property in
the travelers check context does not ordinarily substantially
impair travelers check issuers’ contractual relationships or
13
otherwise violate the Contract Clause. 5 See Sec. Sav. Bank,
263 U.S. at 285-86.
In assessing substantial impairment under the Contract
Clause, we look to “the legitimate expectations of the
contracting parties,” U.S. Trust Co. of N.Y., 431 U.S. at 19
n.17 (1977), and whether the modification imposes an
obligation or liability that was unexpected at the time the
parties entered into the contract and relied on its terms. See
Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 247
(1978). An important factor in determining the substantiality
of any contractual impairment is whether the parties were
operating in a regulated industry. See Energy Reserves Grp.,
Inc. v. Kansas Power and Light Co., 459 U.S. 400, 411
(1983) (citing Allied Structural Steel Co., 438 U.S. at 242
n.13). When a party enters an industry that is regulated in a
particular manner, it is entering subject to further legislation
in the area, and changes in the regulation that may affect its
contractual relationships are foreseeable. See id. New Jersey
has consistently regulated travelers checks, both generally
under the Money Transmitter Law, N.J. Stat. Ann. § 17:15C
(2000), and as abandoned property under the unclaimed
property statute, N.J. Stat. Ann. § 46:30B-11 (2010). Given
such consistent regulation, Chapter 25’s amendment of the
abandonment period did not upset Amex’s legitimate
5
This analysis differs from the analysis with respect to
issuers of SVCs because, unlike travelers checks or bank
deposits, SVCs are not redeemable for cash. Thus, the
relationship between SVC purchasers and their issuers is
distinguishable from the relationship between depositors and
banks, which are required to turn over the value of the deposit
in cash upon the depositor’s demand.
14
expectations as the contracting party or impose an unexpected
change in its contractual obligations. U.S. Trust, 431 U.S. at
19 n.17 (stating “a reasonable modification of statutes . . . is
much less likely to upset expectations than a law adjusting the
express terms of an agreement”).
Amex next claims that the fifteen-year abandonment
period was an implied term of the contract for TCs that were
sold prior to the enactment of Chapter 25. It is true that the
terms of a contract often include the state law relating to the
contract. See Farmers & Merchs. Bank of Monroe v. Fed.
Reserve Bank of Richmond, 262 U.S. 649, 660 (1923). But
not all “state regulations are implied terms of every contract
entered into while they are effective, especially when the
regulations themselves cannot be fairly interpreted to require
such incorporation.” Gen. Motors, 503 U.S. at 189. And
“state laws are implied into private contracts regardless of the
assent of the parties only when those laws affect the validity,
construction, and enforcement of contracts.” Id. (citation
omitted). Critically, the adjustment of the abandonment
period merely shortens the time during which Amex can
invest the TC funds, without affecting the validity,
construction, and enforcement of the contract between Amex
and its customers. Amex also fails to show how New Jersey
law pertaining to unclaimed property can be interpreted to
15
require incorporation into Amex’s contract with its customer. 6
Because Amex has not shown that Chapter 25 constitutes a
substantial impairment on this contractual relationship, it did
not succeed in showing a likelihood of success on its Contract
Clause claim.
C. Takings Clause
The Takings Clause of the Fifth Amendment prohibits
the federal government from taking private property for
public use without providing just compensation. U.S. Const.
Amend. V. The Takings Clause applies to state action
through the Fourteenth Amendment. Webb’s Fabulous
Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 160 (1980)
(citing Chicago, B. & Q. R. Co. v. Chicago, 166 U.S. 226,
239 (1897) and Penn Cent. Transp. Co. v. New York City, 438
U.S. 104, 122 (1978)). When a state directly appropriates
private property, it is considered a per se taking, and the state
has a duty to compensate the owner. Tahoe-Sierra Pres.
6
Amex’s reliance on Nieves v. Hess Oil Virgin Is.
Corp., 819 F.2d 1237 (3d Cir. 1987) is misplaced. In Nieves,
a 1986 amendment to the Virgin Island’s Workmen’s
Compensation Act retroactively eliminated an employer’s
immunity from tort actions. 819 F.2d at 1248. Because the
employer had immunity under the law at the time of the
contract, this amendment exposed the employer to significant
additional tort liability that was unexpected. Id. Chapter 25,
however, does not impose an unexpected liability on Amex
that would “completely destroy[] its contractual
expectations.” Id. at 1248. It only seeks to retroactively
claim abandoned travelers checks that ultimately belong to
the purchasers, not Amex.
16
Council v. Tahoe Reg’l Planning Agency, 535 U.S. 302, 322
(2002). Where, as here, a party asserts a regulatory taking,
there is no set formula. Rather, courts must engage in a
factual inquiry to determine whether a taking has been
effected. New Jersey v. United States, 91 F.3d 463, 468 (3d
Cir. 1996) (citing Lucas v. S.C. Coastal Council, 505 U.S.
1003, 1015 (1992)).
To succeed on a takings claim, Amex must show that
the State’s action affected a “legally cognizable property
interest.” Prometheus Radio Project v. FCC, 373 F.3d 372,
428 (3d Cir. 2004) (citing Cleveland Bd. of Educ. v.
Loudermill, 470 U.S. 532, 538 (1985) and Webb’s, 449 U.S.
at 160-61 (1980)). “Relevant considerations include ‘[t]he
economic impact of the regulation on the claimant and . . . the
extent to which the regulation has interfered with distinct
investment-backed expectations.’” New Jersey v. United
States, 91 F.3d at 463 (quoting Penn Cent., 438 U.S. at 124).
The character of the state action is also relevant:
unlike “a physical invasion of land[,] . . . a public program
adjusting the benefits and burdens of economic life to
promote the common good . . . ordinarily will not be
compensable.” Id. (internal quotation marks and citation
omitted). Thus, that a regulation “adversely affect[s]
recognized economic values” is not enough to constitute a
taking. Id. Even a regulation that prohibits the most
beneficial use of property, or prevents an individual from
operating an otherwise lawful business, does not necessarily
violate the Takings Clause. Penn Cent., 438 U.S. at 125-26.
We agree with the District Court that Amex failed to
show a likelihood of success on the merits of its takings
claim. Amex maintains that it has both a right to invest the
17
proceeds from the sale of TCs and a property interest in the
income generated. Amex argues that the retroactive
application of Chapter 25 constitutes a taking because it
interferes with Amex’s investment-backed expectation that
TCs already sold would have an abandonment period of
fifteen years, which would have allowed Amex to invest the
proceeds for fifteen years unless the owner redeemed the
check. 7 However, Amex’s claim that Chapter 25 interferes
with its investment-backed expectations cannot stand because
Amex’s TC business has long been subject to regulation by
New Jersey. The Supreme Court has established that
“‘[t]hose who do business in the regulated field cannot object
if the legislative scheme is buttressed by subsequent
amendments to achieve the legislative end.’” Connolly v.
Pension Ben. Guar. Corp., 475 U.S. 211, 227 (1986) (quoting
FHA v. The Darlington, Inc., 358 U.S. 84, 91 (1958)). Since
Chapter 25 is a subsequent amendment to achieve the
legislative end of assuming custody of abandoned property,
Amex has no ground to claim interference with its
investment-backed expectations.
Lastly, the fact that Amex has a contractual right to
invest TC funds does not necessarily render Chapter 25 an
7
Contrary to Amex’s contention, E. Enterp. v. Apfel,
524 U.S. 498 (1998), is distinguishable from this case. In E.
Enterp., the Supreme Court held that the Coal Industry
Retiree Health Benefit Act was an unconstitutional taking
because it imposed on the employer retroactive pension
liability for retired miners. Id. at 532. But here, Chapter 25
does not impose any further liability on Amex. It only
requires that issuers like Amex turn over property owned by
the travelers check owners to State custody.
18
unconstitutional taking. The State has considerable authority
to enact legislation, including “the power to affect contractual
commitments between private parties.” See E. Enterp., 524
U.S. 498, 528 (1998). Amex’s ability to utilize TC funds is
constrained by the owner’s ability to redeem a TC on demand
and by the terms of the State’s unclaimed property laws. See
Security Sav. Bank, 263 U.S. at 286. In Delaware v. New
York, the Supreme Court delineated the property right of
debtors with regard to state escheat laws:
Funds held by a debtor become subject to
escheat because the debtor has no interest in the
funds – precisely the opposite of having “a
claim to the funds as an asset.” We have
recognized as much in cases upholding a State’s
power to escheat neglected bank deposits.
Charters, bylaws, and contracts of deposit do
not give a bank the right to retain abandoned
deposits, and a law requiring the delivery of
such deposits to the State affects no property
interest belonging to the bank. [Sec. Sav. Bank,
263 U.S. at 285-86]; Provident Institution for
Sav. v. Malone, 221 U.S. 660, 665-66 (1911).
Thus, “deposits are debtor obligations of the
bank,” and a State may “protect the interests of
depositors” as creditors by assuming custody
over accounts “inactive so long as to be
presumptively abandoned.” [Anderson Nat.
Bank, 321 U.S. at 241] (emphasis added). Such
“disposition of abandoned property is a function
of the state,” a sovereign “exercise of a
regulatory power” over property and the private
legal obligations inherent in property.
19
[Standard Oil Co. v. New Jersey, 341 U.S. 428,
436 (1951)].
507 U.S. 490, 502 (1993). Thus, Amex, as debtor to TC
owners, has no right to retain the funds once they are deemed
abandoned under the State’s unclaimed property laws.
Accordingly, the District Court did not err in finding that
Amex failed to show a reasonable probability of success on
its Takings Clause claim.
D. Commerce Clause
Under the Commerce Clause, Congress has the power
to “regulate Commerce . . . among the several States.” U.S.
Const. Art. I, § 8, cl. 3. “This clause also has an implied
requirement (often called the ‘negative’ or ‘dormant’ aspect
of the clause) that the states not ‘mandate differential
treatment of in-state and out-of-state economic interests that
benefits the former and burdens the latter.’” Cloverland-
Green Spring Dairies, Inc. v. Pa. Milk Mktg. Bd., 462 F.3d
249, 261 (3d Cir. 2006) (citing Granholm v. Heald, 533 U.S.
460, 472 (2005)). Our inquiry as to whether a state law
violates the dormant Commerce Clause is twofold: first, we
determine whether heightened scrutiny applies, and, if not,
then we determine whether the law is invalid under the Pike
v. Bruce Church, Inc., 397 U.S. 137 (1970), balancing test.
Cloverland-Green, 462 F.3d at 261 (citation omitted). We
apply heightened scrutiny when a law “discriminates against
interstate commerce” in purpose or effect. C & A Carbone,
Inc. v. Town of Clarkstown, 511 U.S. 383, 390 (1994).
Because Amex has not alleged that heightened scrutiny
applies, we look to the Pike balancing test. Under this test,
courts will uphold nondiscriminatory regulations that only
incidentally affect interstate commerce unless “the burden
20
imposed on [interstate] commerce is clearly excessive in
relation to the putative local benefits.” Pike, 397 U.S. at 142.
Amex contends that Chapter 25, if implemented, will
violate the dormant Commerce Clause because its effects will
be projected into other states. Specifically, Amex claims that
it will be forced to choose between: (a) selling TCs in New
Jersey at a marginal profit or at a loss; (b) not selling TCs in
New Jersey; (c) charging a fee for selling TCs in New Jersey;
or (d) charging a fee to sell TCs throughout the country so
that it can maintain uniform conditions. If it chooses to
charge a fee to sell TCs throughout the country, Amex argues,
then Chapter 25 will have dictated commercial activity in
other states.
Amex compares such a result to laws the Supreme
Court struck down on dormant Commerce Clause grounds in
Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth.,
476 U.S. 573, 582 (1986) and Healy v. Beer Institute, Inc.,
491 U.S. 324, 336 (1989). In Brown-Forman, the Supreme
Court found that New York had “project[ed] its legislation
into [other States]” by requiring distillers to seek the approval
of the New York State Liquor Authority before lowering
prices in other states. 476 U.S. 583-84 (internal quotation
marks and citation omitted) (second alteration in original).
Similarly, in Healy, the Supreme Court struck down a
Connecticut statute that “require[d] out-of-state shippers of
beer to affirm that their posted prices for products sold to
Connecticut wholesalers [were] . . . no higher than the prices
at which those products are sold in [neighboring states.]” 491
U.S. at 326. The Court held both statutes to be
unconstitutional because “States may not deprive businesses
and consumers in other States of ‘whatever competitive
advantages they may possess based on the conditions of the
21
local market.” Healy, 491 U.S. at 339 (quoting Brown-
Forman, 476 U.S. at 580).
Unlike these statutes, Chapter 25 does not directly
regulate travelers checks sold in other states or force Amex to
conform its out-of-state practices to less favorable in-state
conditions. Nothing prevents other states from regulating
travelers checks differently from the way New Jersey has
chosen to do in Chapter 25. And by Amex’s own admission,
the costs of compliance could be passed on to New Jersey
travelers check customers or be absorbed by issuers like
Amex. 8 Under the Pike balancing test, when the costs of a
regulation may be born solely by those in the state enacting it,
the burden imposed on interstate commerce is minimal, and
not excessive in relation to the putative local benefits
articulated by the State. See United Haulers Ass’n, Inc. v.
8
Amex argues that requiring it to change its TC
business so that it operates differently in New Jersey than it
does in other jurisdictions (e.g., charging a fee in New Jersey)
would substantially burden interstate commerce based on the
Supreme Court’s decision in Bibb v. Navajo Freight Lines,
Inc., 359 U.S. 520, 529-30 (1959). But the Supreme Court
acknowledged that Bibb was an exceptional case because the
state law obstructed the literal movement of goods between
states by requiring trucks to alter their safety equipment upon
entering Illinois. Id. at 529. The Court maintained that states
have “great leeway in providing safety regulations for all
vehicles—interstate as well as local[,]” but in that case, the
burden on the interstate movement of trucks passed “the
permissible limits even for safety regulations.” Id. at 530.
Amex has not shown that Chapter 25 imposes a similarly
heavy burden for this to be considered an exceptional case.
22
Oneida-Herkimer Solid Waste Mgmt. Auth., 550 U.S. 330,
345 (2007) (holding when “the very people who voted for the
laws” bear the costs attributable to those laws, the costs of the
regulation do not fall outside the state). Therefore, Amex
failed to show a reasonable probability of success on the
merits of its Commerce Clause claim.
E. Remaining preliminary injunction factors
Because Amex was unable to show a likelihood of
success on the merits of its claims, we need not address the
remaining preliminary injunction factors, see Crissman, 239
F.3d at 364 (listing preliminary injunction factors), and the
District Court’s denial of Amex’s motion for preliminary
injunction must be affirmed. See In re Arthur Treacher’s
Franchisee Litig., 689 F.2d at 1143.
IV. Conclusion
We hold that Amex failed to show a likelihood of
success on the merits of its Due Process Clause, Contract
Clause, Takings Clause, and Commerce Clause claims. Thus,
the motion for preliminary injunction of Chapter 25 must be
denied. For the foregoing reasons, we will affirm the order of
the District Court.
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