American Express Travel Relate v. Commonwealth of Kentucky, Kent, et al

Filing

OPINION and JUDGMENT filed: VACATED and REMANDED, decision for publication pursuant to local rule 206. Cornelia G. Kennedy (AUTHORING), Boyce F. Martin, Jr., Circuit Judges; Stephen J. Murphy III, U.S. District Judge for the Eastern District of Michigan.

Case: 09-5898 Document: 006110947594 Filed: 05/05/2011 Page: 1
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 11a0113p.06

UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
X
AMERICAN EXPRESS TRAVEL RELATED
SERVICES COMPANY, INC.,
Plaintiff-Appellee, -No. 09-5898
>
v.
,
COMMONWEALTH OF KENTUCKY, KENTUCKY DEPARTMENT OF THE TREASURY,
Defendant, TODD HOLLENBACH, Treasurer, in his official capacity,
Defendant-Appellant. N
Appeal from the United States District Court
for the Eastern District of Kentucky at Frankfort.
No. 08-00058—Danny C. Reeves, District Judge.

Argued: March 11, 2011
Decided and Filed: May 5, 2011
Before: KENNEDY and MARTIN, Circuit Judges; MURPHY, District Judge.*
_________________
COUNSEL
ARGUED: Stuart W. Cobb, OFFICE OF THE KENTUCKY ATTORNEY GENERAL,
Frankfort, Kentucky, for Appellant. Walter L. Sales, STOLL KEENON OGDEN PLLC,
Louisville, Kentucky, for Appellee. ON BRIEF: Stuart W. Cobb, Tad Thomas,
OFFICE OF THE KENTUCKY ATTORNEY GENERAL, Frankfort, Kentucky, for
Appellant. Walter L. Sales, Timothy J. Eifler, David S. Sullivan, STOLL KEENON
OGDEN PLLC, Louisville, Kentucky, for Appellee.

*

The Honorable Stephen J. Murphy III, United States District Judge for the Eastern District of
Michigan, sitting by designation.

1

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_________________
OPINION
_________________
CORNELIA G. KENNEDY, Circuit Judge.

Defendant-Appellant Todd

Hollenbach, the Treasurer of Kentucky, appeals the district court’s order declaring
unconstitutional an amendment to section 393.060 of the Kentucky Revised
Statutes.

The amendment shortens the period after which state law imposes a

presumption of abandonment on traveler’s checks, thereby accelerating the date at which
the issuer of an unclaimed traveler’s check must remit the outstanding funds to the state.
The district court determined that the amendment violated the Fourteenth Amendment
Due Process Clause because it lacked a rational basis. Accordingly, the district court
granted declaratory and injunctive relief to Plaintiff-Appellee American Express Travel
Related Services Co. (“American Express”). Because we hold that the amendment does
not violate the Due Process Clause, we VACATE the district court’s decision and
REMAND the case for consideration of American Express’s remaining constitutional
claims.
FACTUAL AND PROCEDURAL BACKGROUND
American Express is in the business of issuing traveler’s checks, which are
preprinted “checks” in fixed dollar amounts ranging from $20-100. Upon the sale of a
traveler’s check, either by American Express directly or through a third-party vendor,
American Express receives the funds tendered for the check and records the serial
number of the check, its amount, and the date and place of sale; thereafter, American
Express will honor the check in its full amount upon presentation by a holder in due
course. American Express sells traveler’s checks to its customers at face value, that is,
free of any service charges or fees. It profits from this business by investing the funds
it receives from the sale of traveler’s checks, which it retains until the checks are
redeemed. Traveler’s checks have no expiration date, and although the majority of
purchasers cash their traveler’s checks within one year, American Express relies on a

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small percentage of traveler’s checks remaining uncashed for several years. It can
therefore invest some funds from outstanding traveler’s checks in long-term, high-yield
investments, up until state property law imposes a presumption of abandonment on
uncashed traveler’s checks. At that point, American Express must remit the outstanding
funds to the state. Until recently, all fifty states followed the presumption that a
traveler’s check was abandoned if still outstanding more than fifteen years after
issuance, as recommended in the Uniform Unclaimed Property Act.
In 2006, the Kentucky General Assembly shortened the presumptive
abandonment period for traveler’s checks to seven years as part of its budget legislation
for fiscal years 2007 and 2008 (the “2006 amendment”).1 American Express claims that
the legislation will render its traveler’s check business in Kentucky unprofitable, as the
shorter presumptive abandonment period curtails its ability to place the funds from
uncashed traveler’s checks in long-term investments. Consequently, American Express
challenged the 2006 amendment in Kentucky state court under both the Kentucky
Constitution and the Federal Constitution. The Franklin Circuit Court invalidated the
enactment for failure to comply with the procedure for amending legislation required by
Section 51 of the Kentucky Constitution, but it did not consider American Express’s
other claims of unconstitutionality. An appeal of this decision was dismissed on
procedural grounds by the Kentucky Court of Appeals, Lassiter v. Am. Express Travel
Related Servs. Co., Nos. 2007-CA-000908, 2007-CA-000973, 2008 WL 7448204 (Ky.
Ct. App. Oct. 3, 2008), and then reinstated by the Kentucky Supreme Court, Lassiter v.
Am. Express Travel Related Servs. Co., 308 S.W.3d 714 (Ky. 2010); the Kentucky Court
of Appeals is currently holding the case in abeyance pending disposition of this appeal.

1

After the passage of the Kentucky legislation, New Jersey also departed from the presumption
that traveler’s checks are abandoned after fifteen years. See 2010 N.J. Laws 25 (amending the New Jersey
Unclaimed Property Law to reflect a three-year presumptive abandonment period for traveler’s checks).
American Express has also challenged that legislation in the United States District Court for the District
of New Jersey. The district court’s denial of a preliminary injunction against the legislation, Am. Express
Travel Related Servs. Co. v. Sidamon-Eristoff, --- F. Supp. 2d ----, 2010 WL 4722209 (D.N.J. Nov. 13,
2010), is currently on appeal to the United States Court of Appeals for the Third Circuit.

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In 2008, the Kentucky General Assembly again passed legislation amending
section 393.060 to reflect a seven-year presumptive abandonment period for traveler’s
checks (the “2008 amendment”). The enactment was incorporated into the budget
legislation for fiscal years 2009 and 2010, as well as a separate bill designed to cure the
procedural defects identified by the Franklin Circuit Court with respect to the 2006
amendment. In response, American Express filed suit in the United States District Court
for the Eastern District of Kentucky against the Commonwealth of Kentucky, the
Kentucky Department of Treasury, and Todd Hollenbach, in his official capacity as
Treasurer of Kentucky. American Express requested declaratory and injunctive relief,
asserting that the 2008 amendment violates the Due Process Clause of the Fourteenth
Amendment, the Contracts Clause of Article I, Section 10, and the Takings Clause of the
Fifth and Fourteenth Amendments, as well as provisions of the Kentucky Constitution.
The district court dismissed American Express’s state-law claims based on abstention
principles and dismissed as defendants the Commonwealth and the Department of
Treasury based on sovereign immunity. Am. Express Travel Related Servs. v. Kentucky,
597 F. Supp. 2d 717 (E.D. Ky. 2009).
Both American Express and the Treasurer moved for summary judgment on
American Express’s federal constitutional claims, and the district court granted summary
judgment to American Express. The district court concluded that, because the 2008
amendment was intended as a revenue-raising measure, it did not satisfy rational basis
review and it therefore violated substantive due process principles. Am. Express Travel
Related Servs. Co. v. Hollenbach, 630 F. Supp. 2d 757, 760-64 (E.D. Ky. 2009). Though
the district court expressed doubt about the viability of American Express’s challenges
under the Contracts Clause and the Takings Clause, it declined to rule on these claims
given its holding that the 2008 amendment violated the Due Process Clause. Id. at 76466. After the district court denied the Treasurer’s motion for reconsideration, Am.
Express Travel Related Servs. Co. v. Hollenbach, No. 08-58, 2009 WL 2382407 (E.D.
Ky. July 30, 2009), the Treasurer timely filed the instant appeal.

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STANDARD OF REVIEW
“This Court reviews de novo a district court’s grant of summary judgment.”
Lenscrafters, Inc. v. Robinson, 403 F.3d 798, 802 (6th Cir. 2005) (citing Gribcheck v.
Runyon, 245 F.3d 547, 550 (6th Cir. 2001)). Summary judgment is proper where “there
is no genuine dispute as to any material fact and the movant is entitled to judgment as
a matter of law.” Fed. R. Civ. P. 56(a). “A court considering a summary judgment
motion considers the facts in the light most favorable to the nonmoving party and draws
all reasonable inferences in favor of the nonmoving party.” Lenscrafters, 403 F.3d at
802 (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587
(1986)). “The constitutionality of a state statute is a question of law which this Court
reviews de novo.” Cherry Hill Vineyards, LLC v. Lilly, 553 F.3d 423, 431 (6th Cir.
2008) (citing Cmtys. for Equity v. Mich. High Sch. Athletic Ass’n, 459 F.3d 676, 680 (6th
Cir. 2006)).
ANALYSIS
I.

Substantive Due Process Claim
In analyzing American Express’s substantive due process claim, the district court

used “a two-part analysis” involving the determination of whether American Express’s
interest in the unclaimed funds from issued traveler’s checks constitutes “a protected
liberty or property interest under the Fourteenth Amendment.” Hollenbach, 630 F. Supp.
2d at 760-61 (relying on Wojcik v. City of Romulus, 257 F.3d 600, 609 (6th Cir. 2001).
Though a plaintiff must demonstrate a deprivation of a constitutionally protected liberty
or property interest in order to establish a due process violation based on discretionary
conduct of government officials, see Prater v. City of Burnside, Ky., 289 F.3d 417, 43132 (6th Cir. 2002), such a showing is not necessary to establish that a state law is
unconstitutional, see, e.g., Craigmiles v. Giles, 312 F.3d 220, 223-24 (6th Cir. 2002)
(evaluating plaintiffs’ due process challenge to a Tennessee statute governing licensure
of funeral directors by considering only whether the statute survived rational basis
scrutiny). An individual or entity with constitutional standing to challenge legislation

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on due process grounds has at stake the “right not to be subject to ‘arbitrary or
capricious’ action by a state either by legislative or administrative action.” Pearson v.
City of Grand Blanc, 961 F.2d 1211, 1217 (6th Cir. 1992). Accordingly, we consider
only whether the 2008 amendment “is judicially voidable on its face [because] it
necessarily compels results in all cases which are ‘arbitrary and capricious, bearing no
relation to the police power.’” Sam & Ali, Inc. v. Ohio Dep’t of Liquor Control, 158
F.3d 397, 402-03 (6th Cir. 1998) (quoting Eastlake v. Forest City Enters., Inc., 426 U.S.
668, 676 (1976)).
“‘[L]egislation that does not proscribe fundamental liberties . . . violates the Due
Process Clause’ where it imposes burdens without any ‘rational basis’ for doing so.”
Sheffield v. City of Fort Thomas, Ky., 620 F.3d 596, 613 (6th Cir. 2010) (quoting United
States v. Comstock, --- U.S. ----, 130 S. Ct. 1949, 1966 (2010) (Kennedy, J.,
concurring)). Such legislation is “‘endowed with a presumption of legislative validity,
and the burden is on [the challenger] to show that there is no rational connection’
between the enactment and a legitimate government interest.” Id. (alteration in original)
(quoting Harrah Indep. Sch. Dist. v. Martin, 440 U.S. 194, 198 (1979)). This rational
basis test, though “not ‘toothless,’” Berger v. City of Mayfield Heights, 154 F.3d 621,
625 (6th Cir. 1998) (quoting Mathews v. Lucas, 427 U.S. 495, 510 (1976)), “is highly
deferential; courts hold statutes unconstitutional under this standard of review only in
rare or exceptional circumstances,” Doe v. Mich. Dep’t of State Police, 490 F.3d 491,
501 (6th Cir. 2007).

Furthermore, “plaintiffs bringing substantive due process

challenges to [economic] statutes must traverse unusually inhospitable legal terrain
because the Supreme Court has not invalidated an economic statute on substantive due
process grounds since . . . 1935.” Blue Diamond Coal Co. v. Sec’y of Health & Human
Servs. (In re Blue Diamond Coal Co.), 79 F.3d 516, 521 (6th Cir. 1996) (internal
quotation marks omitted) (referencing R.R. Ret. Bd. v. Alton R.R., 295 U.S. 330 (1935)).
Rather, the Supreme Court has since made clear that “regulatory legislation affecting
ordinary commercial transactions is not to be pronounced unconstitutional unless in the
light of the facts made known or generally assumed it is of such a character as to

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preclude the assumption that it rests upon some rational basis within the knowledge and
experience of the legislators.” United States v. Carolene Prods. Co., 304 U.S. 144, 152
(1938).
The Treasurer argues on appeal that the district court misapplied the rational
basis test under which we evaluate American Express’s substantive due process claim.
Specifically, the Treasurer asserts that the district court improperly looked to the General
Assembly’s actual legislative purpose in passing the 2008 amendment when, in fact, “the
courts must affirm the constitutionality of a legislative enactment if it is rationally related
to any conceivable legitimate state purpose, regardless of what the ‘real’ intent of the
legislature may have been in passing the legislation.” The Treasurer contends that, upon
consideration of his proffered purpose for the 2008 amendment, the legislation passes
constitutional muster. We agree that the district court erroneously applied a stricter form
of rational basis review. We further hold that the district court erred in granting
summary judgment to American Express on its substantive due process challenge.
A.

The Scope of Rational Basis Review

In his motion for summary judgment, the Treasurer argued that the 2008
amendment survives rational basis scrutiny because: (1) Kentucky has a legitimate
interest in taking possession of abandoned property; and (2) this purpose is rationally
related to the seven-year presumptive abandonment period for traveler’s checks. The
district court found that this interest cannot be considered a legislative purpose behind
the 2008 amendment. Instead, the district court determined that, in light of the 2008
amendment’s legislative history and the Franklin Circuit Court’s factual findings relating
to the 2006 amendment, “it is clear that the state’s objective [in passing the 2008
amendment] was to raise revenue rather than to reunite citizens with lost property.”
Hollenbach, 630 F. Supp. 2d at 764. The district court then concluded that “[s]hortening
the presumptive abandonment period from fifteen to seven years is not ‘rationally
related’ to raising revenue for the state, even if revenue raising were a legitimate state
purpose or objective.” Id.

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The district court erred in deciding that it could not consider Kentucky’s interest
in assuming possession of unclaimed property as a purpose supporting the 2008
amendment. As the Supreme Court often has reiterated, the party challenging a
legislative enactment subject to rational basis review must “‘negative every conceivable
basis which might support it.’” See, e.g., Lehnhausen v. Lake Shore Auto Parts Co., 410
U.S. 356, 364 (1973) (quoting Madden v. Kentucky, 309 U.S. 83, 88 (1940)). “Under
rational basis review, it is ‘constitutionally irrelevant [what] reasoning in fact underlay
the legislative decision.’” Craigmiles, 312 F.3d at 224 (alteration in original) (quoting
R.R. Ret. Bd. v. Fritz, 449 U.S. 166, 179 (1980)). “[W]e will be satisfied with the
government’s ‘rational speculation’ linking the regulation to a legitimate purpose, even
‘unsupported by evidence or empirical data.’” Id. (quoting FCC v. Beach Commc’ns,
Inc., 508 U.S. 307, 313 (1993)). Thus, if a statute can be upheld under any plausible
justification offered by the state, or even hypothesized by the court, it survives rationalbasis scrutiny. See Berger, 154 F.3d at 624-26 (speculating as to the City Council’s
possible motivations for passing the challenged ordinance).
In concluding that the 2008 amendment should not be evaluated under this “very
permissive rational basis test,” the district court relied on the following statement in
United States Trust Co. of New York v. New Jersey, 431 U.S. 1, 26 (1977): “[C]omplete
deference to a legislative assessment of reasonableness and necessity is not appropriate
because the State’s self-interest is at stake. A governmental entity can always find a use
for extra money, especially when taxes do not have to be raised.” See Hollenbach, 630
F. Supp. 2d at 763. However, in United States Trust Co., the Court was considering a
Contracts Clause challenge to New Jersey legislation abrogating the state’s contractual
obligations, not a substantive due process challenge to a statute premised on the state’s
general interest in raising revenue. Applying heightened scrutiny to every law that
generated revenue for the state would affect the constitutionality of a wide range of
legislation, contravening Supreme Court precedent applying the standard rational basis
test to such measures. See, e.g., Fitzgerald v. Racing Ass’n of Cent. Iowa, 539 U.S. 103,
106-10 (2003) (applying rational basis review in Equal Protection challenge to Iowa’s

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tax on adjusted revenues from slot machines); Nordlinger v. Hahn, 505 U.S. 1, 11 (1992)
(stating that rational basis review “is especially deferential in the context of
classifications made by complex tax laws”). For these reasons, there is “no basis to
import the heightened scrutiny standard, delineated in U.S. Trust Co., to the substantive
due process claim here.” Am. Express Travel Related Servs. Co. v. Sidamon-Eristoff, --F. Supp. 2d ----, 2010 WL 4722209, at *19 (D.N.J. Nov. 13, 2010) (declining to follow
Hollenbach when addressing the likelihood that American Express will succeed on its
substantive due process challenge to New Jersey legislation shortening the presumptive
abandonment period for traveler’s checks to three years).
The district court also read Anderson National Bank v. Luckett, 321 U.S. 233
(1944), as imposing “specific standards” for the validity of a state’s presumptive
abandonment period. Hollenbach, 630 F. Supp. 2d at 762. It drew these standards from
two of the Court’s statements in Anderson National Bank: first, that “it is no longer open
to doubt that a state, by a procedure satisfying constitutional requirements, may compel
surrender to it of deposit balances, when there is substantial ground for belief that they
have been abandoned or forgotten,” 321 U.S. at 240 (emphasis added); and second, that
“[w]ith respect to the statutory rebuttable presumption of abandonment[,] . . . we are
unable to say that the legislative determination is without support in experience,” id. at
241 (emphasis added). To the extent that these statements are inconsistent with the
permissive rational basis test employed by this Court and the Supreme Court, the
Supreme Court’s numerous and more recent articulations of the parameters of rational
basis review should control. “There was a time when the Due Process Clause was used
by [the Supreme] Court to strike down laws which were thought unreasonable, that is,
unwise or incompatible with some particular economic or social philosophy.” Ferguson
v. Skrupa, 372 U.S. 726, 729 (1963). Now, the Court “ha[s] returned to the original
constitutional proposition that courts do not substitute their social and economic beliefs
for the judgment of legislative bodies, who are elected to pass laws.” Id. at 730; see also
Williamson v. Lee Optical of Okla., Inc., 348 U.S. 483, 488 (1955) (“The day is gone
when this Court uses the Due Process Clause of the Fourteenth Amendment to strike

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down state laws, regulatory of business and industrial conditions, because they may be
unwise, improvident, or out of harmony with a particular school of thought.”).
American Express offers a third argument in support of the district court’s
heightened rational basis scrutiny, citing past cases from the Supreme Court and this
Court rejecting the government’s proffered legitimate objectives when the challenged
legislation appeared to be based on an illegitimate purpose. See City of Cleburne, Tex.
v. Cleburne Living Ctr., 473 U.S. 432, 447-50 (1985); Zobel v. Williams, 457 U.S. 55,
61-64 (1982); U.S. Dep’t of Agric. v. Moreno, 413 U.S. 528, 533-38 (1973); Craigmiles,
312 F.3d at 224-29; Berger, 154 F.3d at 624-26; Burstyn v. City of Miami Beach, 663 F.
Supp. 528, 533-37 (S.D. Fla. 1987); see also Romer v. Evans, 517 U.S. 620, 631-35
(1996). While the review applied in the cases on which American Express relies seems
less deferential than the traditional rational basis standard associated with cases like
Carolene Products and Lee Optical, see, e.g., Kenji Yoshino, The New Equal Protection,
124 Harv. L. Rev. 747, 759-60 (2011) (noting that the level of scrutiny applied by the
Court in Cleburne, Moreno, and Romer “depart[s] from the usual deference associated
with rational basis review” and “commentators have correctly discerned a new rational
basis with bite standard in such cases”), there is an outcome-determinative distinction
between those “rational basis with a bite” decisions and the instant matter. In each of
the former, the Supreme Court or this Court concluded that the legislation at issue was
in fact intended to further an improper government objective.2 In contrast, “[r]evenue
raising is certainly a legitimate legislative purpose.” United States v. Carlton, 512 U.S.
26, 40 (1994) (Scalia, J., concurring in judgment) (citing U.S. Const. art. I, § 8, cl. 1).
2

See Romer, 517 U.S. at 635 (concluding that Colorado constitutional amendment prohibiting all
governmental action designed to protect homosexuals from discrimination was motivated by animus
towards homosexuals); Cleburne, 473 U.S. at 450 (finding that zoning ordinance requiring special use
permit for operation of a group home for the mentally retarded was premised on an “irrational prejudice
against the mentally retarded”); Zobel, 457 U.S. at 63-64 (invalidating Alaska’s dividend distribution
scheme based on length of in-state residency because rewarding citizens for past tax contributions is an
illegitimate state purpose); Moreno, 413 U.S. at 534 (determining that an amendment to the Food Stamp
Act “was intended to prevent socalled ‘hippies’ and ‘hippie communes’ from participating in the food
stamp program”); Craigmiles, 312 F.3d at 224 (declaring unconstitutional an economic regulation aimed
at “protecting a discrete interest group from economic competition”); Berger, 154 F.3d at 622-23
(overturning ordinance governing the maintenance of vacant lots that was targeted specifically to plaintiff);
see also Burstyn, 663 F. Supp. at 536-37 (compiling evidence that provisions of zoning ordinance
regulating “adult congregate living facilities” were intended to discriminate against the elderly).

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American Express attempts to demonstrate that, despite this general proposition, revenue
raising is an illegitimate legislative objective in the context of the 2008 amendment,
which is an escheat law enacted pursuant to the General Assembly’s police powers.3
This argument must fail; not only has the Supreme Court clarified that a state may “use
its legislative power to dispose of property within its reach, belonging to unknown
persons,” it has sanctioned this practice, reasoning that “[s]uch property thus escapes
seizure by would-be possessors and is used for the general good rather than for the
chance enrichment of particular individuals or organizations.” Standard Oil Co. v. New
Jersey ex rel. Parsons, 341 U.S. 428, 436 (1951). “Accordingly, the mere fact that
[Kentucky] generates revenue by escheating abandoned property does not run afoul of
any substantive due process safeguards.” Sidamon-Eristoff, 2010 WL 4722209, at *19.
The 2008 amendment will pass constitutional muster if it survives scrutiny under the
traditional, deferential rational basis standard. See, e.g., Carolene Prods., 304 U.S. at
152 (“[T]he existence of facts supporting the legislative judgment is to be
presumed . . . .”).
B.

Application to the 2008 Amendment

We are required to entertain the Treasurer’s rational speculation that the 2008
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.4
3

American Express also claims that the Treasurer’s proffered purpose violates Section 51 of the
Kentucky Constitution and is therefore illegitimate. The district court correctly dismissed this contention,
along with the rest of American Express’s state law claims, because federal courts lack the power to enjoin
a violation of state law. See Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89 (1984). Whether
or not the 2008 amendment complies with the procedural requirements dictated by the Kentucky
Constitution does not affect the legislation’s validity under the federal Constitution.
4

American Express argues, for the first time on appeal, that “the doctrine of judicial estoppel bars
the Treasurer from taking the inconsistent position here that the purpose of the Legislation is to reunite
owners and their property.” According to American Express, the Treasurer’s claims are “clearly
inconsistent with his earlier, successful argument [to the Franklin Circuit Court] that the Legislation is a
revenue raiser.” However, as discussed in the previous section, rational basis review allows the
government to proffer “rational speculation” as to a statute’s purpose, regardless of actual or admitted
legislative objectives. Craigmiles, 312 F.3d at 224. The fact that the Treasurer may have argued in a prior
proceeding that the 2006 amendment was intended to raise revenue for the state has no bearing on the
Treasurer’s current contention—specifically, that the 2008 amendment can survive rational basis scrutiny

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Because this objective constitutes a legitimate state purpose and the seven-year
presumptive abandonment period is rationally related to that purpose, the 2008
amendment does not violate substantive due process guarantees.
It cannot be doubted that Kentucky has a legitimate interest in enacting
legislation that allows the state to take custody of property that is presumed
abandoned. See Anderson Nat’l Bank, 321 U.S. at 240 (“[I]t is no longer open to doubt
that a state, by a procedure satisfying constitutional requirements, may compel surrender
to it of deposit balances, when there is substantial ground for belief that they have been
abandoned or forgotten . . . .”); see also Sec. Savs. Bank v. California, 263 U.S. 282,
285-86 (1923).

American Express unsuccessfully attempts to refute the 2008

amendment’s presumption of validity by asserting that the General Assembly has
adopted irrational means to advance this interest. In particular, American Express
maintains that the General Assembly had no grounds to conclude that traveler’s checks
are lost or abandoned after seven years, given the district court’s finding that between
a quarter and a third of traveler’s checks still outstanding at the seven-year point are
cashed before the fifteen-year point. Hollenbach, 630 F. Supp. 2d at 762.
Nevertheless, the General Assembly rationally could have concluded that
traveler’s checks are no less likely to be abandoned after being unredeemed for seven
years, as opposed to fifteen years. Cf. Cunnius v. Reading Sch. Dist., 198 U.S. 458, 477
(1905) (holding that the seven-year time period after which Pennsylvania law presumed
an absent person dead and allowed for the administration of his or her estate “certainly
cannot be said to be unreasonable”). “The legislature need not produce ‘mathematical
precision in the fit between justification and means’ when enacting economic
legislation.” Blue Diamond, 79 F.3d at 521 (quoting Concrete Pipe & Prods. of Cal.,
Inc. v. Constr. Laborers Pension Trust, 508 U.S. 602, 639 (1993)); see also Lee Optical,
348 U.S. at 487-88 (“[A] law need not be in every respect logically consistent with its

because it is rationally related to Kentucky’s interest in taking possession of abandoned property. Cf. R.R.
Ret. Bd. v. Fritz, 449 U.S. 166, 181 (1980) (Stevens, J., concurring in judgment) (noting that legislation
is often “the product of multiple and somewhat inconsistent purposes that led to certain compromises”).

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aims to be constitutional. It is enough that there is an evil at hand for correction, and that
it might be thought that the particular legislative measure was a rational way to correct
it.”). Indeed, the legislature need not support its enactments with empirical evidence at
all. Sheffield, 620 F.3d at 614 (“[T]o pass rational-basis scrutiny, ordinances need not
be supported by scientific studies or empirical data; nor need they be effective in
practice.”). It falls to American Express to demonstrate that a seven-year presumptive
abandonment period is irrational, and the evidence American Express presented to the
district court fails to satisfy this burden. In fact, American Express’s own statistics
indicate that between 99.60% and 99.68% of traveler’s checks are cashed before the
seven-year mark, and the rate at which purchasers redeem traveler’s checks after seven
years declines considerably.
Because American Express has not carried its “heavy burden of ‘negativ[ing]
every conceivable basis which might support [the 2008 amendment],’” Hadix v.
Johnson, 230 F.3d 840, 843 (6th Cir. 2000) (alteration in original) (quoting Heller v. Doe
ex rel. Doe, 509 U.S. 312, 320 (1993)), we will not overturn the General Assembly’s
legislative judgment that a seven-year presumptive abandonment period is appropriate
for traveler’s checks. We may not invalidate the 2008 amendment simply because we
think it unwise to deviate from the fifteen-year presumptive abandonment period
recommended in the Uniform Unclaimed Property Act and adhered to in forty eight
states, or because we are inclined to think that, in general, traveler’s checks are not lost
or abandoned after only seven years. The district court erred in holding that the 2008
amendment violated the Fourteenth Amendment guarantee of substantive due process.
II.

Remaining Constitutional Claims
American Express asserts that we may affirm the district court’s judgment

invalidating the 2008 amendment on alternative grounds, namely that it violates the
Takings Clause, it violates the Contracts Clause, or its retroactive application to
traveler’s checks already sold violates the Due Process Clause. The district court denied
the Treasurer’s motion to dismiss these claims on the pleadings, American Express v.

Case: 09-5898 Document: 006110947594 Filed: 05/05/2011 Page: 14

No. 09-5898

Am. Express Travel Related Servs. Co. v.
Commonwealth of Kentucky

Page 14

Kentucky, 597 F. Supp. 2d at 726-29, but it declined to decide them in its order granting
summary judgment, see Hollenbach, 630 F. Supp. 2d at 764-66. We are hesitant to
decide these potentially meritorious claims without the benefit of a definitive ruling from
the district court, which can expand the evidentiary record or request additional briefing
or argument from the parties if needed. Therefore, remand is appropriate for the
determination of whether the 2008 amendment effects an unconstitutional taking,
unconstitutionally impairs American Express’s contractual obligations, or is
unconstitutionally retroactive in application.
CONCLUSION
For the foregoing reasons, we VACATE the judgment of the district court
invalidating the 2008 amendment to section 393.060 of the Kentucky Revised Statutes
on substantive due process grounds. We REMAND the case to the district court for
consideration of American Express’s remaining constitutional challenges in proceedings
consistent with this opinion.