State loses bid to claim checks

By Brett Barrouquere - Associated Press

LOUISVILLE — A federal judge barred Kentucky on Monday from seizing old traveler's checks as abandoned property after seven years instead of 15, saying the state changed the law in an effort to raise money instead of to reunite citizens with lost goods.

It marks the second time in three years that a court has rejected efforts by the legislature to shorten the waiting time before the state can seize old checks and cash them.

Traveler's check issuer American Express challenged the changes both times, winning in state court in 2007, then it challenged a revised law passed later that year in federal court. American Express challenged the statute in 2008, saying the law allowed Kentucky to improperly take the uncashed checks.

"Because it is clear that the state's objective was to raise revenue rather than to reunite citizens with lost property, (the law) does not satisfy rational basis review," U.S. District Judge Danny C. Reeves wrote in a 15-page opinion.

Reeves' ruling affects only the part of a law on abandoned property that deals with traveler's checks sold in Kentucky.

Allison Gardner Martin, a spokeswoman for Attorney General Jack Conway, said the office received the ruling Monday and was reviewing it.

Joanna Lambert, a spokeswoman for American Express, said the company is pleased with the ruling.

American Express tracks when traveler's checks are sold in each state, then it turns over to state treasurers the amount paid for any uncashed check 15 years old or older. Should someone try to cash an old traveler's check after that, American Express then negotiates with the state treasurer to pay the checkholder.

Forty-nine states and the District of Columbia have 15-year waiting periods before traveler's checks can be seized. American Express said that, nationally, 67 percent of traveler's checks outstanding after seven years were eventually cashed in before the 15 years were up. In Kentucky, that figure is 66 percent, American Express said.

American Express contends that it would have lost $113,972 with the seven-year law in effect because the company would have gotten a lower interest rate on the money invested that pays for the traveler's checks.

Altering the deadline when checks could be seized might cause the company to charge higher fees to people buying the checks in Kentucky, American Express said.

In challenging the law, American Express said Kentucky's law violated the constitutional guarantee of due process, as well as the ban on the government's taking property without just compensation.

Reeves wrote that because American Express' due-process rights were violated, there was no need to decide the other issues raised by the company.