LEGAL ALERT
January 18, 2012
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U.S. Court of Appeals Holds New Jersey’s Retroactive Escheatment of Gift
Card Abandoned Funds Unconstitutional and its Priority Rules Preempted
by Federal Law
On January 5, 2012, the U.S. Court of Appeals for the Third Circuit found that New Jersey’s recently
enacted unclaimed property laws requiring retroactive escheatment of abandoned amounts from stored
value cards (SVC or gift cards) violated the U.S. Constitution. Additionally, the court held that New
Jersey’s priority rules for the escheatment of SVC abandoned funds were preempted by federal common
law. The court, however, sustained the new requirement that issuers obtain the name and address of the
purchaser or owner of each SVC issued or sold and maintain, at a minimum, a record of the zip code of
the owner or purchaser. New Jersey Retail Merchants Assoc. v. Sidamon-Eristoff, Nos. 10-4551,
10-4552, 10-4553, 10-4714, 10-4715, 10-4716, 11-1141, 11-1164 & 11-1170 (3d Cir. Jan. 5, 2012);
Am. Express Travel Related Servs. Co. v. Sidamon-Eristoff, No. 10-4328 (3d Cir. Jan. 5, 2012).
Escheatment of SVCs
New Jersey’s Unclaimed Property Amendment
With the enactment of 2010 N.J. Laws Chapter 25 (Chapter 25), New Jersey amended its unclaimed
property statute, N.J. Stat. Ann. § 46:30B, to provide for the escheatment of SVCs for the first time. SVCs
are forms of electronic payment by which a purchaser, by tendering payment for the face value of the
SVC, may obtain merchandise or services equal to the remaining balance of the SVC. Once the SVC is
redeemed for purchase, the SVC issuer recognizes a profit based on (i) the difference between the
issuer’s cost of acquiring the goods or offering the services and the retail price paid by the customer when
the customer purchases the goods or services from the issuer; or (ii) a merchant fee paid by third-party
retailers when the issuer purchases the goods or services from a retailer other than the issuer. The
unclaimed property statute, as amended by Chapter 25, provides that an SVC is presumed abandoned
after two years of inactivity, and requires issuers to transfer to New Jersey the remaining value on the
SVCs (i.e., the abandoned amount) at the end of the two-year abandonment period.1 In addition, Chapter
25 requires SVC issuers to obtain the name and address of the purchaser or owner of each SVC issued
or sold, and, “at a minimum,” maintain a record of the zip code of the owner or purchaser (the data
collection provision).2 In addition, Chapter 25 provides that if the issuer of an SVC does not have the
purchaser’s or owner’s name or address, the place where the SVC is purchased or issued will be
presumed to be the address of the SVC’s purchaser or owner, and the issuer will be required to escheat
the abandoned amount to New Jersey if the place of business where the SVC is sold or issued is located
in New Jersey (place of purchase presumption).3
1 N.J. Stat. Ann § 46:30B-42.1a.
2 Chapter 25, § 5c.
3 Id.
