On May, 5, 2011, the Sixth Circuit reversed a decision from the District Court for the Eastern District of Kentucky that had held unconstitutional a Kentucky statute shortening the period after which state law imposes a presumption on abandonment on traveler’s checks. American Express Travel Related Services Company, Inc. v. Commonwealth of Kentucky, et al., No. 09-5898 (6th Cir. May 5, 2001).
Until recently, all 50 states followed the presumption that a traveler’s check was abandoned if still outstanding more than 15 years after issuance, as recommended in the Uniform Unclaimed Property Act. In an apparent attempt to increase revenue since abandoned funds must be remitted to the state, Kentucky became the first state to reduce the 15-year period – to 7 years.
The District Court had determined that the Amendment violated the Fourteenth Amendment’s Due Process Clause because it lacked a rational basis. On appeal, the Sixth Circuit held that the Amendment did not violate the Due Process Clause and vacated the District Court’s decision. The Court entertained the Treasurer’s “rational speculation that the [Amendment] was intended to facilitate Kentucky’s interest in assuming possession of abandoned property, even though, as the district court found, the legislative history does not reflect whether this goal was actually considered by the General Assembly.” Because American Express could not demonstrate that a 7-year presumptive period is irrational, the Sixth Circuit held that the District Court erred in finding a due process violation.
The Court withheld, however, consideration of whether the Amendment violates the Takings Clause or the Contract Clause, remanding to the District Court for consideration of American Express’s remaining constitutional challenges.