NO. 12-926

IN THE

Supreme Court of the United States ___________

DIRECTOR OF THE DEPARTMENT OF REVENUE OF THE STATE OF

MONTANA; TREASURER OF THE STATE OF KENTUCKY; TREASURER

OF THE STATE OF OKLAHOMA; ATTORNEY GENERAL OF THE STATE

OF MISSOURI; TREASURER OF THE STATE OF PENNSYLVANIA,

Petitioners,

v.

UNITED STATES DEPARTMENT OF THE TREASURY; SECRETARY OF

THE UNITED STATES TREASURY DEPARTMENT; BUREAU OF PUBLIC

DEBT, A DIVISION OF THE UNITED STATES TREASURY

DEPARTMENT; COMMISSIONER OF THE BUREAU OF PUBLIC DEBT,

Respondents.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Third Circuit

___________

BRIEF AMICI CURIAE OF THE STATES OF KENTUCKY,

MARYLAND, ALABAMA, ALASKA, ARIZONA,

ARKANSAS, CONNECTICUT, HAWAII, ILLINOIS,

KANSAS, LOUISIANA, MAINE, MICHIGAN,

MISSISSIPPI, MISSOURI, MONTANA, NEW

HAMPSHIRE, NEW MEXICO, NEW YORK, RHODE

ISLAND, UTAH, VERMONT, WASHINGTON, AND WEST

VIRGINIA

___________

JACK CONWAY DOUGLAS F. GANSLER

Kentucky Attorney General Maryland Attorney General

SEAN J. RILEY* 200 St. Paul Place

Deputy Attorney General Baltimore, MD 21202

700 Capitol Ave., Ste. 118 (410) 576-6300

Frankfort, KY 40601

(502) 696-5300 * Counsel of Record

Counsel for Amici States

[Additional Counsel on Inside Cover]

ADDITIONAL COUNSEL

LUTHER STRANGE JAMES D. CALDWELL

Attorney General Attorney General

State of Alabama State of Louisiana

MICHAEL C. GERAGHTY JANET T. MILLS

Attorney General Attorney General

State of Alaska State of Maine

THOMAS C. HORNE BILL SCHUETTE

Attorney General Attorney General

State of Arizona State of Michigan

DUSTIN MCDANIEL JIM HOOD

Attorney General Attorney General

State of Arkansas State of Mississippi

GEORGE JEPSEN CHRIS KOSTER

Attorney General Attorney General

State of Connecticut State of Missouri

DAVID M. LOUIE TIMOTHY C. FOX

Attorney General Attorney General

State of Hawaii State of Montana

LISA MADIGAN MICHAEL A. DELANEY

Attorney General Attorney General

State of Illinois State of New Hampshire

DEREK SCHMIDT GARY KING

Attorney General Attorney General

State of Kansas State of New Mexico

ADDITIONAL COUNSEL (cont’d)

ERIC T. SCHNEIDERMAN WILLIAM H. SORRELL

Attorney General Attorney General

State of New York State of Vermont

PETER F. KILMARTIN BOB FERGUSON

Attorney General Attorney General

State of Rhode Island State of Washington

JOHN E. SWALLOW PATRICK MORRISEY

Attorney General Attorney General

State of Utah State of West Virginia

i

QUESTIONS PRESENTED

1. Whether the federal savings bond statute and

regulations impliedly preempt longstanding state

unclaimed property laws, where the statute and

regulations are wholly silent on the treatment of

unclaimed bonds and where Congress has expressly

preempted state unclaimed property laws in

numerous other contexts.

2. Whether application of state unclaimed property

laws to unclaimed U.S. savings bonds owned by state

residents violates the intergovernment-al immunity

doctrine, where these laws reflect the States’ exercise

of constitutionally reserved escheat power.

ii

TABLE OF CONTENTS

QUESTIONS PRESENTED…………………………….i

TABLE OF AUTHORITIES…………........................iv

INTEREST OF AMICI CURIAE……..........................1

REASONS FOR GRANTING THE

PETITION…………………………………………………2

I. State Custody of Unclaimed Property Is

Grounded In Venerable History And Good

Public Policy……………………………………....2

A. State Escheat Is The Most Promising

Vehicle To Return Unclaimed Property To

Its Rightful Owners………………………….3

B. Treasury’s “Escheat Decision” Creates

Incentives For States To Alter Their

Escheat Regimes In Unproductive

Ways……………………………………………4

II. The Court of Appeals Decision Invades the

States Reserved Powers By Creating A De

Facto Federal Escheat Power………………......6

A. There Is No General Federal Escheat

Power; Instances Of Federal Escheat Must

Be Justified Under The Necessary And

Proper Clause…………………………………7

iii

B. The De Facto Escheat Power Created By

The Court Of Appeals’ Interpretation Of

Treasury’s Bond Regulations Perversely

Incentivizes Treasury’s Silence Towards

Bond Owners………………..........................9

C. This Court Should Avoid Tenth

Amendment Problems Presented By A

General Federal Escheat Power, By

Interpreting Extant Federal Law As

Consistent With State Escheat Of

Unclaimed U.S. Savings

Bonds…………………………………………11

III. The Court of Appeals’ Freewheeling Use of

Intergovernmental Immunity Principles

Renders State Regulatory Authority

Uncertain And Conflicts With This Court’s

Preemption Precedents………………………..13

A. Intergovernmental Immunity Rests On

Shaky And Outmoded Premises………….14

B. Intergovernmental Immunity Functions In

Practice As A Fuzzier, Less Constrained

Version Of Federal Preemption…………..17

C. The Broad But Ambiguous Doctrine Of

Intergovernmental Immunity Creates

Significant Uncertainty For State

Governments………...................................18

CONCLUSION………………………………………….20

iv

TABLE OF AUTHORITIES

Cases

Anderson Nat. Bank v. Luckett,

321 U.S. 233 (1944)…………………………………15

Arizona v. Bowsher,

935 F.2d 332 (D.C.Cir. 1991)………………………15

Atascadero State Hospital v. Scanlon,

473 U.S. 234 (1985)…………………………………12

Bates v. Dow Agrosciences LLC,

544 U.S. 431 (2005)…………………………………17

Clovis Nat. Bank v. Callaway,

364 P.2d 748 (1961)…………………………………15

Conn. Mutual Life Ins. Co. v. Moore,

333 U.S. 541 (1948)…………………………………13

Cuomo v. Clearing House Ass’n., LLC,

557 U.S. 519 (2009)…………………………………16

Delaware v. New York, 507 U.S. 490

(1993)…………………………………........................2

Edward J. DeBartolo Corp. v. Florida Gulf Coast

Bldg. & Constr. Trades Council,

485 U.S. 568 (1988)…………………………………12

First Nat’l. Bank v. Kentucky,

76 U.S. 353 (1869)…………………………………..15

v

Cases (cont’d)

First Nat’l. Bank in St. Louis v.

Missouri, 263 U.S. 640 (1924)……………………..15

Gregory v. Ashcroft, 501 U.S. 452 (1991)…………....12

In re Moneys Deposited,

243 F.2d 443 (3rd Cir. 1957)…………………..11, 12

McCulloch v. Maryland,

17 U.S. 316 (1819)…………………………...7, 14, 15

Nat’l Fed’n of Indep. Bus. V. Sebelius,

132 S. Ct. 2566 (2012)…………………………...7, 14

Penn Dairies, Inc. v. Milk Control Comm’n,

318 U.S. 261 (1943)………………………...16, 18, 19

Rice v. Santa Fe Elevator Corp.,

331 U.S. 218 (1947)…………………………………24

Solid Waste Agency of N. Cook Cnty. v. U.S. Army

Corps of Engineers, 531 U.S. 159 (2001)………...13

Standard Oil Co. v. New Jersey,

341 U.S. 428 (1951)…………………………………13

State v. First Nat. Bank of Portland,

123 P. 712 (1912)………………………………...15,16

State by Lord v. First Nat. Bank of St. Paul,

313 N.W.2d 390 (Minn. 1981)...............................15

vi

Cases (cont’d)

U.S. v. Philadelphia, 798 F.2d 81 (3rd Cir. 1986)…22

Wyeth v. Levine, 555 U.S. 555 (2009)……………17, 18

Constitutional Provisions

U.S. CONST. art. 1, § 8……………………………………7

U.S. CONST. amend. X………………………………14-16

Statutes

26 U.S.C. § 6408……………………….........................10

11 U.S.C. § 347………………………………………….10

Other Authorities

“Escheat Decision,” available at http://www.treasury

direct.gov/indiv/research/indepth/ebonds/

res_e_bonds_eefaq.htm………………………………5

General Accounting Office, Unclaimed Money:

Proposals for Transferring Unclaimed Funds to

States, GAO Report AFMD-89-44, May 1989…….4

John V. Orth, Escheat: Is the State the Last Heir,

13 Green Bag 2d 73(2009)……………………..2, 6, 8

vii

Other Authorities (cont’d)

Kentucky State Treasury, Unclaimed Property

Search, http://www.kytreas ury.com/Unclaimed+

Property+Search.htm………………………………..3

Laurence Tribe, American Constitutional Law

391 (1978)………………………………………..16, 19

MissingMoney.com, http://www.missingmoney.com/

Main/StateSites.cfm…............................................3

National Association of Unclaimed Property

Administrators, What is Unclaimed Property,

available at http://www.unclaimed.org/what/…....3

Susan T. Kelly, Note, Unclaimed Billions: Federal

Encroachment on States’ Rights in Abandoned

Property, 33 B.C. L. REV. 1037…........................3, 6

Uniform Law Commission, New Study Committee

on Uniform Unclaimed Property Act, Jan. 16,

2013, available at http://uniformlaws/org/

NewsDetail.aspx?title=New%20Study%20

Committee%20on%20Uniform%20Unclaimed

%20Property%20Act)………………………………...5

Uniform Law Commission, Unclaimed Property Act

Summary, available at http://uniformlaws.org/Act

Summary.aspx?title=Unclaimed%20Property%

20Act……………………………………………….9, 10

1

INTEREST OF THE AMICI STATES

The amici states have several profound

interests in this case: protecting and returning the

property of their citizens, preserving their common

law and statutory authority over the escheat of

property within their jurisdiction, and protecting

their sphere of sovereignty from the judicial creation

of new federal powers. An essential aspect of state

sovereignty is the right to preserve and return the

property of their citizens, as historically recognized

at common law, and preserved by their own statutes.

The invasion of state sovereignty over unclaimed

property through a judicially created federal power of

escheat threatens long-established state authority

and violates principles of federalism.

The Court should take this case to clarify the

relationship between state escheat law and federal

statutes where the statutes and regulations are

silent, and to clarify the relation between preemption

and intergovernmental immunity.

2

REASONS FOR GRANTING THE PETITION

I.

STATE CUSTODY OF UNCLAIMED

PROPERTY IS GROUNDED IN VENERABLE

HISTORY AND GOOD PUBLIC POLICY.

“States as sovereigns may take custody of or

assume title to abandoned personal property as bona

vacantia, a process commonly (though somewhat

erroneously) called escheat.” Delaware v. New York,

507 U.S. 490, 497 (1993). This power is older than

the Republic. As John Orth has observed, “[w]hen

the American colonies of Great Britain became

independent states in 1776, they succeeded to the

Crown’s right of escheat.” John V. Orth, Escheat: Is

the State the Last Heir, 13 Green Bag 2d 73, 75

(2009) (hereafter, “Orth”). State escheat laws are the

most promising vehicle for returning unclaimed

property to its rightful owners, while also allowing

benefit to the public if those owners cannot be

located.

The court of appeals decision enables Treasury

to retain billions of dollars belonging to absent

bondholders. Treasury has no credible program to

return this money to its owners; the states, on the

other hand, make extensive and quite successful

efforts in that regard. Forbidding escheat of

unclaimed bond money to the states thus makes

return of that money to its owners far less likely.

Finally, Treasury’s policy, upheld by the court

of appeals, purports to honor title-based escheat

regimes (where a state takes title to the property and

strips the rightful owner of any rights) while

3

disfavoring custody-based escheat (where a state

holds property in perpetuity for rightful owners).

However, this policy does not in fact permit escheat,

because as Treasury is well aware, no state currently

has a title-based escheat regime. And to the extent

that Treasury’s promise to honor title-based escheat

can be relied upon, it creates perverse incentives that

undermine protections for absent owners.

A. State Escheat Is The Most Promising

Vehicle To Return Unclaimed Property

To Its Rightful Owners.

State escheat statutes exist largely for

“protection of the missing owner’s rights.” Susan T.

Kelly, Note, Unclaimed Billions: Federal

Encroachment on States’ Rights in Abandoned

Property, 33 B.C. L. REV. 1037, 1047 (1992). In fiscal

year 2011, state unclaimed property programs paid

2.5 million claims totaling $2.25 billion to rightful

owners. National Association of Unclaimed Property

Administrators, What is Unclaimed Property.1 Each

of the states maintains an unclaimed property

website, see, e.g., Kentucky State Treasury,

Unclaimed Property Search,2 and thirty-eight states

(plus Puerto Rico and the Canadian province of

Alberta) participate in a common database for even

easier searching, see missingmoney.com.3

1 http://www.unclaimed.org/what/ (last visited Feb. 13, 2013).

2 http://www.kytreasury.com/Unclaimed+Prope rty+Search.htm

(last visited Feb. 13, 2013). 3http://www.missingmoney.com/Main/StateSites.cfm (last

visited Feb. 13, 2013).

4

The national government, by contrast, has no

credible program to return unclaimed property to its

owners, including holders of long forgotten

unclaimed savings bonds. A General Accounting

Office study concluded that Treasury officials made

no effort to contact owners of unclaimed series E

bonds when they matured and stopped earning

interest. See General Accounting Office, Unclaimed

Money: Proposals for Transferring Unclaimed Funds

to States, GAO Report AFMD-89-44, May 1989, at 27.

And the Treasury has not, in this litigation, asserted

that it has made any significant new efforts in this

regard. Forbidding escheat of these monies by states

thus significantly decreases the likelihood that this

unclaimed property will be returned to its owners.

And, whereas the States have venerable and

uncontested statutory authority to escheat

unclaimed property, no federal statute or regulation

authorizes the federal Treasury to retain unclaimed

savings bonds. The present case thus squarely

implicates this Court’s role as a referee in disputes

arising between national and state governments in

our federal system.

B. Treasury’s “Escheat Decision” Creates

Incentives For States To Alter Their

Escheat Regimes In Unproductive Ways.

Treasury’s official position on state escheat

law, posted on its website, states that “[t]he

Department of the Treasury will recognize claims by

States for payment of United States securities where

the States have succeeded to the title and ownership

of the securities pursuant to valid escheat

proceedings. The Department, however, does not

5

recognize claims for payment by a State acting

merely as custodian of unclaimed or abandoned

securities and not as successor in title and ownership

of the securities.”4 Treasury thus purports to honor

escheat statutes that actually extinguish the absent

owner’s title and vest it in the state (“title-based

escheat”), while not honoring escheat statutes that

leave title in the owner while transferring custody of

the property to the state (“custody-based escheat”).

This concession is far less than it appears. As

Treasury well knows, there are no title-based state

escheat regimes today. And because the Treasury

remains free to change its Escheat “Decision” at its

own discretion -- it is not, after all, a statutory

provision or even a legislative rule -- it is not at all

clear that Treasury would adhere to this policy were

one or more states in fact to adopt a title-based

escheat regime.

According to the Uniform Law Commission,

“[m]ost states have enacted one or more versions of

the Uniform Unclaimed Property Act. The 1995

version of UUPA was enacted in 16 states, while the

1981 version was enacted in 29 states.”5 All versions

of the UUPA are custodial statutes. The reason for

this is that such statutes better protect the rights of

absent owners. Unlike title-based escheat, which

extinguishes the owner’s title after a certain period

4 This statement, which the parties have referred to as the

“Escheat Decision,” is available at http://www.treasurydirect.

gov/indiv/research/indepth/ebonds/res_e_bonds_eefaq.htm (last

visited February 13, 2013). 5 Uniform Law Commission, New Study Committee on Uniform

Unclaimed Property Act, Jan. 16, 2013 (available at http://

uniformlaws.org/NewsDetail.aspx?title=New%20Study%20Com

mittee%20on%20Uniform%20Unclaimed%20Property%20Act).

6

of time, custody-based escheat preserves the owner’s

rights. Hence, “[a]ll statutes require the return of the

property (or its value, if it was sold) to the owner on

demand, regardless of how much time has elapsed.”

Orth at *80.6

Treasury’s purported position to honor title-

based escheats creates powerful incentives for states

to abandon their custody-based reforms and return

to the older approach. That would hardly be a

victory for absent owners who thereby lose interest

in their property forever. Treasury’s policy thus

creates strong and perverse incentives for states to

adopt a policy that narrows the rights of their

citizens.

II.

THE COURT OF APPEALS DECISION

INVADES THE STATES’ RESERVED POWERS

BY CREATING A DE FACTO FEDERAL

ESCHEAT POWER

The upshot of the court of appeals’ ruling in

this case is that Treasury retains custody of billions

of dollars in unclaimed U.S. savings bonds. No

federal statute, nor even an explicit Treasury

regulation, authorizes Treasury to retain this money

in the face of duly enacted state law governing

unclaimed funds. By preventing state escheat,

however, the court of appeals’ decision creates a de

6 See also Kelly, supra, at 1039 (“Unlike their early English

counterparts, almost all modern American escheat statutes are

custodial in nature. While states have possession of unclaimed

property, the true owner never loses title to the property and

thus can successfully reclaim it at any time”).

7

facto federal escheat power. That result is in tension

not only with Congress’s failure to authorize such a

power, but also with the Constitution’s reservation of

unenumerated governmental powers to the States.

This Court should settle this important

constitutional dispute by reading the relevant federal

legislation to avoid this invasion of the states’

reserved powers.

A. There Is No General Federal Escheat

Power; Instances of Federal Escheat

Must Be Justified Under The Necessary

And Proper Clause.

The federal government has no general power

of escheat. Article I confers power two specific

revenue powers: “to lay and collect taxes, duties,

imposts and excises,” Art. I, §8, cl. 1, and “[t]o borrow

money on the credit of the United States,” Art. I, §8,

cl. 2. Nor is a federal escheat power easily implied

under the Necessary and Proper Clause. That clause

“vests Congress with authority to enact provisions

‘incidental to the [enumerated] power, and conducive

to its beneficial exercise.”’ Nat'l Fed'n of Indep. Bus.

v. Sebelius, 132 S. Ct. 2566, 2591 (2012) (quoting

McCulloch v. Maryland, 17 U.S. 316, 418 (1819)).

But what it does not do is “license the exercise of any

great substantive and independent powers beyond

those specifically enumerated”. Id. (internal

quotations omitted). The Necessary and Proper

Clause therefore is not a grant of all implicit powers

that may be useful to an enumerated power; it does

not grant powers we would expect the Constitution to

separately deal with.

8

The history of escheat in this country confirms

that escheat is an independent revenue power

reserved to the states. “After the formation of the

federal union, the national government did not assert

a claim to escheated property, presumably on the

view that, as a government of delegated powers, it

had not been granted that aspect of sovereignty.

Even in states formed out of after-acquired

territories, such as those in the Old Northwest and

those acquired by the Louisiana Purchase, the

federal government never claimed a right to

escheats, presumably on the ground that new states

entered the union with the same legal rights as

earlier ones.” Orth at *75.

It may be that, in service of some end

specifically enumerated in the Constitution,

Congress may find it necessary to provide for the

retention of certain forms of unclaimed property that

wind up in federal custody pursuant to some federal

program. This case does not require the Court to

address that constitutional question. Congress has

not so provided, and the Treasury has never made

any effort to explain how its escheat of unclaimed

bonds is either “necessary” or even “conducive” to

exercise of the borrowing power (nor is it plausible

that frustrating payment to owners that forgot about

their bonds somehow assists federal efforts to sell

more). Instead, the Treasury has simply pressed its

right to keep the unclaimed monies as some sort of

default position, justified by nothing more than the

government’s need for the money. This use of federal

escheat as an instrument of general federal revenue

cannot be squared with a national government of

limited and enumerated powers.

9

B. The De Facto Escheat Power Created By

The Court Of Appeals’ Interpretation Of

Treasury’s Bond Regulations Perversely

Incentivizes Treasury’s Silence Towards

Bond Owners.

The court of appeals’ interpretation of the

federal regulations at issue in this case create what

the Uniform Law Commission has called a “lucrative

silence.”

Most kinds of valuable intangible personal

property interests are held in the owners’

names by other entities – the holders. The

assets in a bank account are not held by the

owner, but by the owner’s bank. Some entity

other than the owner actually possesses the

intangible property when and if it is

abandoned by its rightful owner. That entity

is in position to assume title to abandoned

intangible personal property virtually by doing

nothing except to continue to hold it. In fact, it

is possible to surmise that a holding

institution for intangible personal property

can find doing nothing with its customers’

property and communicating as little as

possible with its customers to be “lucrative

silence.”7

7 Uniform Law Commission, Unclaimed Property Act Summary,

available at

http://uniformlaws.org/ActSummary.aspx?title=Unclaimed%20

Property%20Act.

10

This problem was the impetus for the series of

uniform unclaimed property acts beginning in 1954.

See id.

For its part, Treasury has never seen fit to

notify bond owners that their instruments matured,

despite having ready access to their addresses. As

the Commission foresaw, Treasury “can find doing

nothing with its customers’ property and

communicating as little as possible with its

customers” to be highly lucrative for federal revenue.

This is a de facto federal escheat.

It is, moreover, a general escheat. No federal

statute or regulation authorizes the retention of

unclaimed funds. Moreover, as Petitioners have

noted, a variety of federal statutes specifically

preempt state escheat laws in the context of

particular programs, such as unclaimed federal tax

refunds or distributions from a federal bankruptcy

plan. See Petition for Certiorari at 17-18 (citing 26

U.S.C. § 6408 (federal tax refunds) and 11 U.S.C. §

347 (bankruptcy)). The Government’s position in

this case, by contrast, is that in the absence of such a

targeted federal statute, the default position should

be that federal entities may retain unclaimed

property, state escheat laws notwithstanding.

Treasury thus asserts an independent escheat power,

inconsistent with the command of Sebelius and

McCulloch that unenumerated powers may be

implied only as incidental to some specific

enumerated end.

11

C. This Court Should Avoid Tenth

Amendment Problems Presented By A

General Federal Escheat, By Interpreting

Extant Federal Law As Consistent With

State Escheat Of Unclaimed U.S. Savings

Bonds.

Amici do not understand the Government to

dispute the basic proposition that there is no federal

law of escheat. Accordingly, the importance of the

Tenth Amendment in this litigation is not to

challenge Congress’s action, but rather to guide an

appropriate judicial interpretation of what Congress

has, in fact, done.

The court of appeals used judicial

interpretation to avoid finding that a de facto federal

escheat ran afoul of the Tenth Amendment in In re

Moneys Deposited, 243 F.2d 443 (3d Cir. 1957).

There, the Escheator of Pennsylvania sued to escheat

certain unclaimed dividends that had been generated

by federal bankruptcy and equity proceedings,

deposited in the registry of the federal court, and

ultimately transferred to the U.S. Treasury. The

United States opposed escheat on the ground that a

new provision of the Bankruptcy Code explicitly

barred escheat. Pennsylvania, in turn, argued that

the federal bar was unconstitutional. “[B]y requiring

unclaimed bankruptcy funds to be held in the federal

treasury in perpetuity without the possibility of

escheat to the state if the missing claimant does not

appear,” the state said, the statute “has in practical

effect provided for the escheat of these funds to the

United States, thereby transferring the power to

escheat them from the Commonwealth of

12

Pennsylvania to the United States in violation of the

Tenth Amendment.” Id. at 447.

The circuit court thought that “a serious

question is presented as to the constitutional validity

of the ban imposed . . . upon the escheat by the states

of unclaimed bankruptcy funds.” Id. at 447-48. It

avoided deciding the question, however, by

interpreting the federal bar to operate purely

prospectively. In so doing, the court noted that “a

prospective construction is the more appropriate

where as here it will eliminate a serious question of

constitutional validity.” Id. at 448.

In the present case, this Court need not decide

whether Congress has constitutional authority to

preempt state escheat laws and, functionally

speaking, appropriate the use of unclaimed property

in federal hands to the benefit of the national

government. Congress has not done so with respect

to unclaimed savings bonds. In Gregory v. Ashcroft,

501 U.S. 452, 460 (1991), this Court held that “’if

Congress intends to alter the usual constitutional

balance between the States and the Federal

Government, it must make its intention to do so

unmistakably clear in the language of the statute.’”

(quoting Atascadero State Hospital v. Scanlon, 473

U.S. 234, 242 (1985)) (internal quotation marks

omitted). Interpreting the federal regime not to

substitute a federal escheat for the states’ unclaimed

property laws also respects the imperative to avoid

constitutionally doubtful constructions of federal law.

See Edward J. DeBartolo Corp. v. Florida Gulf Coast

Bldg. & Constr. Trades Council, 485 U.S. 568, 575

(1988). The Supreme Court has been particularly

reluctant to construe federal law to permit actions by

13

federal agencies that threaten to intrude on state

prerogatives. See, e.g., Solid Waste Agency of N.

Cook Cnty. v. U.S. Army Corps of Engineers, 531 U.S.

159, 174 (2001) (construing the Clean Water Act not

to authorize the Corps’ “migratory bird rule” on the

ground that the decision to press the outer limits of

the Commerce Power should be made by Congress,

not an agency). These principles apply with even

more force where even the agency has taken no

formal action -- e.g., in a legislative rule -- to

foreclose application of state unclaimed property

laws.

To avoid any question of constitutionality, this

Court can interpret extant and pertinent federal law,

bond redemption regulations, as consistent with

State escheat. As Petitioners urge, this federal law

governs ownership of bonds, and does not extend to

custodial care of unclaimed property, where the

escheat laws operate. See Petition for Certiorari at

19-20 and n.12 (citing Conn. Mutual Life Ins. Co. v.

Moore, 333 U.S. 541 (1948) and Standard Oil Co. v.

New Jersey, 341 U.S. 428 (1951), for proposition that

state escheat laws do not impinge on contract

requirements limiting payment to contract obligees).

III.

THE COURT OF APPEALS’ FREEWHEELING

USE OF INTERGOVERNMENTAL IMMU-NITY

PRINCIPLES RENDERS STATE

REGULATORY AUTHORITY UNCERTAIN AND

CONFLICTS WITH THIS COURT’S PRE-

EMPTION PRECEDENTS.

14

This Court does not frequently invoke the

doctrine of intergovernmental immunity, and in

many ways that doctrine is hard to square with the

modern doctrine of preemption. Intergovernmental

immunity remains a seemingly readily available but

ambiguous presence in the lower federal courts,

however, and its uncertain boundaries complicate

efforts by states to determine where federal law

preempts their regulatory activities and where it

does not. This Court should use the present case as

a vehicle to clarify the intergovernmental immunity

doctrine, ideally making clear that that doctrine adds

little or nothing to the doctrine of preemption.

A. Intergovernmental Immunity Rests on

Shaky And Outmoded Premises.

Intergovernmental immunity is said to derive

from the Supremacy Clause, but finds little support

in that clause’s text. In particular, it is difficult to

understand how the same language can support both

the doctrine of preemption, which invalidates state

laws that conflict with or are specifically foreclosed

by a valid Act of Congress, and some much broader

doctrine of intergovernmental immunity. After all, if

state law does not conflict with an Act of Congress,

what is the basis for invalidating that law under the

Supremacy Clause?

The principle of intergovernmental immunity

is also sometimes traced to this Court’s decision in

McCulloch v. Maryland, 17 U.S. 316 (1819).

McCulloch held that Maryland could not tax the

Bank of the United States. But that decision can no

longer be read -- if it ever could -- to signify some

general immunity of federal instrumentalities from

15

state regulation. By 1869, it was clear that “the

doctrine has its foundation in the proposition, that

[state legislation] may be so used in such cases [as

McCulloch] as to destroy the instrumentalities by

which the government proposes to effect its lawful

purposes in the States, and it certainly cannot be

maintained that banks or other corporations or

instrumentalities of the government are to be wholly

withdrawn from the operation of State legislation.”

First Nat’l Bank v. Kentucky, 76 U.S. 353, 361 (1869).

And just four years ago, this Court observed that:

States . . . have always enforced their general

laws against national banks—and have

enforced their banking-related laws against

national banks for at least 85 years, as

evidenced by [First Nat. Bank in St. Louis v.

Missouri, 263 U.S. 640 (1924)], in which we

upheld enforcement of a state anti-bank-

branching law, 263 U.S. at 656. See also

Anderson Nat. Bank. v. Luckett, 321 U.S. 233,

237, 248-49) (1944) (state commissioner of

revenue may enforce abandoned-bank-deposit

law against national bank through ‘judicial

proceedings’); State by Lord v. First Nat. Bank

of St. Paul, 313 N.W.2d 390, 393 (Minn. 1981)

(state treasurer may enforce general

unclaimed-property law with ‘specific

provisions directed toward’ banks against

national bank); Clovis Nat. Bank v. Callaway,

69 N.M. 119, 130-32, 364 P.2d 748, 756 (1961)

(state treasurer may enforce unclaimed-

property law against national bank deposits);

State v. First Nat. Bank of Portland, 61 Or.

16

551, 554-557, 123 P. 712, 714 (1912) (state

attorney general may enforce bank-specific

escheat law against national bank).

Cuomo v. Clearing House Ass’n, LLC, 557 U.S. 519,

534-35 (2009).

It is not surprising, then, that the same court

of appeals that decided the present case has

suggested that intergovernmental immunity claims

by the United States, “[w]hile ostensibly a question

of governmental immunity,” are “perhaps ‘best

understood as posing an issue essentially of federal

preemption.’” U.S. v. Philadelphia, 798 F.2d 81, 85-

86 (3d Cir. 1986) (quoting Laurence Tribe, American

Constitutional Law 391 (1978)). Relying on one of

this Court’s leading cases, that court said that the

immunity issue reduces to whether the state law in

question “‘conflicts with Congressional legislation or

with any discernible Congressional policy.’” Id. at 85

(quoting Penn Dairies, Inc. v. Milk Control Comm’n,

318 U.S. 261, 271 (1943)). And it suggested, again

following Penn Dairies, that a rule of construction

similar to this Court’s presumption against

preemption should apply in such cases. See id. at 86

(quoting Penn Dairies, 318 U.S. at 275).

Confusion persists, however. Both the panel

decision in this case and the D.C. Circuit in Bowsher

endorsed a version of intergovernmental immunity

that was considerably broader than contemporary

preemption doctrine. See Arizona v. Bowsher, 935

F.2d 332 (D.C. Cir. 1991). It is thus critical that this

Court clarify what, if anything, intergovernmental

immunity adds to preemption.

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B. Intergovernmental Immunity Functions

In Practice As A Fuzzier, Less

Constrained Version of Federal

Preemption.

This case illustrates the danger to state law

and policy posed by an amorphous doctrine of

intergovernmental immunity distinct from the

preemptive force of federal statutes and regulations.

None of the statutes governing the U.S. savings bond

program speak to the issue of escheat, nor do any of

the regulations promulgated by the Treasury. And

while Congress has enacted a number of statutes

forestalling the operation of state unclaimed property

laws in particular contexts, none of those statutes

applies here. Treasury’s claim for federal

preemption is thus a weak one, especially in light of

this Court’s well-established presumption against

preemption. See Wyeth v. Levine, 555 U.S. 555

(2009); Rice v. Santa Fe Elevator Corp., 331 U.S. 218

(1947).

In these circumstances, intergovernmental

immunity extends the force of federal preemption

beyond the expressed intent of Congress, the express

operation of any valid Treasury regulation, or any

specific conflict with federal policy. This extension

flies in the face of this Court’s command that “[p]re-

emption must turn on whether state law conflicts

with the text of the relevant federal statute or with

the federal regulations authorized by that text,”

Wyeth, 555 U.S. at 588, and that “[p]re-emption

analysis should not be ‘a freewheeling judicial

inquiry into whether a state statute is in tension

with federal objectives,’” id. (quoting Bates v. Dow

Agrosciences LLC, 544 U.S. 431, 459 (2005) (Thomas,

18

J., concurring in the judgment in part and dissenting

in part)).

These principles of preemption law derive

directly from the Supremacy Clause, which “requires

that pre-emptive effect be given only to those federal

standards and policies that are set forth in, or

necessarily follow from, the statutory text that was

produced through the constitutionally required

bicameral and presentment procedures.” Wyeth, 555

U.S. at 586 (Thomas, J., concurring in the judgment).

These requirements ought not be evaded simply by

changing the name of an argument from

“preemption” to “intergovernmental immunity.”

C. The Broad But Ambiguous Doctrine of

Intergovernmental Immunity Creates

Significant Uncertainty for State

Governments.

It is inevitable that state regulation will touch

upon federal instrumentalities and operations. This

Court said as much in Penn Dairies:

We have recognized that the Constitution

presupposes the continued existence of the

states functioning in coordination with the

national government, with authority in the

states to lay taxes and to regulate their

internal affairs and policy, and that state

regulation like state taxation inevitably

imposes some burdens on the national

government of the same kind as those imposed

on citizens of the United States within the

state’s borders. And we have held that those

19

burdens, save as Congress may act to remove

them, are to be regarded as the normal

incidents of the operation within the same

territory of a dual system of government, and

that no immunity of the national government

from such burdens is to be implied from the

Constitution which established the system.

Penn Dairies, 318 U.S. at 270-71 (internal citations

omitted); see also Tribe, supra, at 1223 (observing

that “immunity from ‘interference’ obviously cannot

include ‘a general immunity from state law’”). Given

the inevitability that state law will impinge on

federal operations, it is critical that the line between

permissible and impermissible state regulation be as

clear as possible.

That line is not clear under current law. As

the court of appeals’ decision in the current case

makes clear, lower courts remain willing to

invalidate state law on intergovernmental immunity

grounds wholly apart from whether the case would

satisfy ordinary preemption standards. This creates

a highly uncertain environment for state regulation.

Must federal construction projects comply with local

zoning regulations? Must federal attorneys comply

with state ethics requirements? A wide variety of

generally-applicable state regulations become

doubtful under the expansive view of

intergovernmental immunity. If state governments

are to develop coherent and consistent regulatory

schemes, they need a clearer standard for when they

may validly extend their regulation to federal

entities.

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CONCLUSION

For the foregoing reasons, the petition for a writ of

certiorari should be granted.

Respectfully submitted,

JACK CONWAY DOUGLAS F. GANSLER

Attorney General Attorney General

Commonwealth of Kentucky State of Maryland

SEAN J. RILEY 200 St. Paul Place

Deputy Attorney General Baltimore, MD 21202

(counsel of record) (410) 576-6300

700 Capitol Avenue, Suite 118

Frankfort, Kentucky 40601

(502) 696-5300