Laturner v. United States, No. 18-1509 (Fed. Cir. 2019)Annotate this Case
The U.S. Department of Treasury issues savings bonds, a type of debt security that never expires and may be redeemed at any time after maturity, 31 U.S.C. 3105(b)(2)(A). Federal law limits the ability to transfer bonds. Kansas and Arkansas passed “escheat” laws providing that if bond owners do not redeem their savings bonds within five years after maturity, the bonds are considered abandoned and title will transfer (escheat) to the state two or three years thereafter. The states sought to redeem an unknown number of bonds, estimated to be worth hundreds of millions of dollars. When Treasury refused, they filed suit. The Court of Federal Claims held that Treasury must pay the proceeds of the relevant bonds, once identified, to the states. The Federal Circuit reversed. Federal law preempts the states’ escheat laws, so the bonds belong to the original bond owners, not the states. Even if the states owned the bonds, they could not obtain any greater rights than the original bond owners, and, under federal law, 31 C.F.R. 315.29(c), a bond owner must provide the serial number to redeem bonds six years or more past maturity, which includes all bonds at issue. The states do not have the physical bonds or their serial numbers.