The Sixth Circuit issued an opinion yesterday in American Express Travel Related Services Co., Inc. v. Kentucky, Case No. 12-6249, upholding a Kentucky statute which imposes a shorter abandonment period on traveler’s checks. American Express, as the world’s largest issuer of traveler’s checks, sued the Kentucky Treasurer, arguing that this statutory amendment violated the Due Process Clause, the Takings Clause, the Contract Clause, and the dormant Commerce Clause. AmEx makes its money on traveler’s checks by selling the checks and then investing the proceeds until the traveler’s checks are actually redeemed. Until recently, every state imposed a presumption of abandonment on traveler’s checks after fifteen years, meaning that the issuer, like AmEx, was required to transfer possession of the funds used to purchase the traveler’s check to the state after fifteen years. Kentucky recently amended its abandonment statute to shorten the period from fifteen years to seven years.
The Sixth Circuit first determined that the amendment only applied prospectively because 1) it did not expressly declare that it was intended to apply retroactively, and 2) it was a substantive, not remedial, enactment. The court’s determination that the statute did not apply retroactively obviated the need to analyze all of AmEx’s constitutional claims other than its dormant Commerce Clause claim. The court then found that the amended statute did not violate the dormant Commerce Clause because AmEx was not practically or legally required to treat sales of traveler’s checks differently in Kentucky and the amendment did not control commerce outside of Kentucky. Furthermore, the court found that the state’s goal of generating revenue was sufficient to pass muster under the dormant Commerce Clause.